Soaring imports Worsen trade deficit

 

Malawi’s growing appetite for imported products continues to negatively affects trade performance, with recent figures from the Reserve Bank of Malawi (RBM) projecting a worsened trade deficit.

In its fourth quarter financial and economic review, the central bank said a  growth of 9.9 percent in imports against an increase of 6.3 percent in exports is projected to worsen the country’s trade deficit to $413.2 million (about K301.5 billion) during the fourth quarter of 2017.

This is an increase from a deficit of $368.3 million ( about K268.4 billion) projected in the preceding quarter against a deficit of $408.7 million (about K298.6 billion) in the corresponding quarter of 2016.

In 2017, Malawi produced more than 30 percent surplus in maize owing to good climatic conditions after two successive years of low output due to drought and floods.

However, earnings from its main export commodity, tobacco, dropped.

During the 2015/16 season, Malawi earned $276 million from 195 million kilogrammes of tobacco while during the 2016/17, the earnings dropped to $212 million from 106 million kilogrammes of tobacco, according to the Tobacco Control Commission (TCC).

Government, on the other hand, projects to narrow the trade balance in the next five years with figures from the final draft of the Malawi Growth and Development Strategy (MGDS) III projecting trade balance to decline by 0.5 percentage points to two percent of GDP in 2022, from 2.5 percent in 2018.

During the same period, exports of goods and services expected to decline from 28.3 percent of GDP in 2018 to 27.2 percent of GDP in 2022 while imports of goods and services expected to decline to 36.9 percent of GDP in 2022 from 41.4 percent in 2018.

Chancellor College economics professor Ben Kaluwa argues that it will be hard for the country to narrow the trade balance because of the nurture of commodities the country relies on as exports as well as increased imports.

“We are failing to make strides on the export market because we depend on primary commodities for exports. The danger with these primary commodities is that consumption does not double in most cases even if incomes in the affected areas double. The only way out of this is to just get out of the primary exports,” he said.

In an earlier interview, finance and corporate governance expert James Kamwachale Khomba said there is need to make radical strides in the economy by propagating for a revolutionary approach to enable the country to progress socio-economically.

Agricultural products continue to dominate Malawi’s export basket, accounting for about 80 percent of Malawi’s exports.n

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