Malawi tobacco exports value surge

Malawi has this year, between April and June, exported semi-processed tobacco to the international market worth $121.5 million (about K30 billion).

This represents about 190 percent higher than last year’s exports value, according the Tobacco Control Commission’s (TCC) latest statistics.

Last year, between April and June last year, processed tobacco exports had wired in foreign currency worth $42.9 million (about K10.7 billion based on the ruling exchange rate) from 13 million kilogrammes of tobacco, according to Malawi’s Tobacco Control Commission (TCC) figures.

The surge implies that Malawi’s tobacco merchants directly involved in exporting semi-processed tobacco should be smiling as they carted home increased kwacha earnings from each kilogramme of semi-processed leaf exported.

In the aftermath of the devaluation and the subsequent floatation of the kwacha, the US dollar now trades above the mid-rate of K250 which is significantly higher than the K167 exchange rate before the devaluation.

Thus, the increase in the exports value may likely sustain the current availability of foreign currency in the formal financial market and help the country meet its import needs of critical goods and services such as pharmaceuticals, fuel and fertiliser.

Putting import bills aside, it would also mean government’s ability to easily service its foreign debt obligations and pay expenditures overseas which will diminish pressure on the country’s balance of payments (BoP) position and in the longrun improve Malawi’s credit worthiness globally.

Improved inflow of foreign currency from tobacco exports also comes at a time some of Malawi’s major donors under the Common Approach to Budget Support (Cabs) have resumed their aid which may ease foreign exchange shortages that suffocated the real sector.

Tobacco is Malawi’s major foreign currency earner, accounting for over 60 percent of the country’s total annual earnings. It also accounts for roughly 13 percent of the economy as measured by gross domestic product (GDP).

Last year, the average export price of tobacco declined from K595.9 per kilogramme to K556.2 per kilogramme in 2011 mainly due to the relatively low quality of the leaf coupled with the global financial crisis which continued to hit most tobacco buying countries, according to a 2012 government annual economic report.

“The improvement in the tobacco exports value this year is also due to improved fuel supplies and that the image of our country is now,” said TCC chief executive officer Dr. Bruce Munthali in an interview.

He also attributed the increase in the tobacco exports value to the huge demand for Malawi tobacco on the international market which he said is due to the local leaf’s “very good nicotine levels”.

He also touted Malawi tobacco as having good flavour and aroma characteristics which he said is highly appreciated by the tobacco merchants.

“Devaluation has also had very big positive impact on the take home earnings by our farmers this year, which has also reduced the smuggling of the leaf to neighboring countries,” added Munthali.

At auction floors level, as at July 11, 2012, Malawi realised $152 million against $72 million during the same period last year, according to TCC.

Meanwhile, Malawi’s biggest auction floor in Lilongwe is scheduled to close on July 20 while sales in Mzuzu are expected to end on July 23 2012.