Trade deficit is projected to narrow by 24.7 percent between January and March 2026 due to improved exports and weak imports observed from the February.
According to the Reserve Bank of Malawi (RBM) first Monetary Policy Report for 2026, the trade gap for the first quarter (2026Q1) that ended on March 31 is expected to drop by $100 million compared to 2025Q4 but predicts fluctuations in Q2 and Q3 going forward.
Reads the report: “The current account deficit is projected to narrow to $427.6 million in 2026Q1 from $533.4 million in 2025Q4, supported by an improved secondary income position. The deficit, however, is projected to widen in 2026Q2 before easing again in the third quarter of 2026.”
The projected improvement of trade deficit comes at a time the National Statistical Office (NSO) preliminary merchandise trade report shows dropping imports and improving exports in February 2026.
According to the NSO report, exports jumped 98.3 percent from $32.6 million in February 2025 to $64.6 million while imports dropped five percent from $293.7 million in February 2025 to $279.1 million, cooling monthly trade deficit by 17.8 percent to $214.5 million in February 2026.
Speaking in an interview, trade expert Paul Kwengwere said while this helps the accounts look good in the short-term, it can be a double-edged sword since Malawi’s manufacturing and agriculture rely heavily on imported raw materials.
To sustain the trend, he recommended strategic areas that include prioritising mining investment, value addition and import substitution, especially investing on high value imports like organic fertiliser plants.
Said Kwengwere: “Accelerate fast yielding projects like Kayelekera Uranium, Kasiya Rutile/Graphite to diversify away from tobacco. Minerals provide a more stable, year-round forex stream other than seasonal crops.
“Moving from exporting raw products like soya and cotton to exporting refined oil and textiles. This increases the ‘value per kilogramme’ of exports, effectively multiplying forex earnings without needing more land.”
However, University of Malawi economics lecturer Edward Leman noted that the trade gap remains high and attributed it to Malawi’s over-riliance on tobacco as its main source of export revenue, with limited and inconsistent efforts towards diversification.
On his part, Mzuzu University economics lecturer Christopher Mbukwa said Malawi’s trade gap remains wide and it signals both structural and transactional weaknesses in the economy.
“The reason for the increased trade deficit is the drop in sales of tobacco, groundnuts and tea. The rise in this deficit can be attributed to transactions that were done in kwacha this year as opposed to the traditional dollar transactions over the years,” he said.
Earlier, Ministry of Industrialisation, Business, Trade and Tourism spokesperson Patrick Botha said the terms of trade are in line with the ministry’s National Export Strategy (NES II) which targets competitiveness and diversity of export base beyond traditional crops such as tobacco and tea.
Malawi launched NES II in 2021 to achieve export competitiveness focusing on increasing made-in-Malawi products in regional markets which aspires to increase exports of ‘Made-in-Malawi’ goods to regional and global markets and improve export readiness.
