Produce commodities on demand—Economists
Economists have spoken on the need to grow crops that are on demand on the global market to improve the country’s export sector which has recorded a negative trade balance for a long time.
Malawi has over a period of time been dependent on a narrow range of traditional agricultural commodities that constantly face declining prices on the global market in addition to being volatile to weather changes.
The country continues to have a narrow export base where it exports the same products in spite of the changing global demand. For example, the country has depended on tobacco and few other crops for a long time and has struggled to diversify.
In an interview on Monday, University of Malawi’s Chancellor College economics professor Ben Kaluwa advises on shifting the country’s focus to crops that have a high income elasticity of demand—goods whose demand increases by a higher percentage than the increase in the global income.
He said: “Tobacco, tea and sugar are the major export commodities of the country. In Malawi, tea used to be of high quality and the demand was high. However, we are still producing a variety of tea that is no longer on high demand globally. The global market has now moved to herbal tea.
“The primary products we produce do not have a high income elasticity of demand because people will not consume more even when their incomes increase.”
In a separate interview, Catholic University dean of social sciences Gilbert Kachamba said the world demand is changing, but the country has not diversified much with the products it supplies.
“The notion of being an agro-based economy has overstayed and its time we find another song. Our export base is getting narrower in terms of volume and value.
“The terms of trade are working against us as our exports are mainly raw materials” he said.
The country continues to run large and unsustainable deficits on the current account besides experiencing a declining trade competitiveness and market share in a number of key products. n
