Low crop output to affect exports—RBM

The Reserve Bank of Malawi (RBM) has projected low export performance this year due to subdued agricultural output.

In its second Monetary Policy Committee (MPC) Statement for this year, the central bank said in the first quarter, trade deficit widened $507 million (about K887 billion), a jump from the previous quarter’s $495.8 million (K868 billion).

However, this is a drop from the corresponding quarter in 2022 when the country’s trade deficit was recorded at $598 million (K1 trillion).

Reads the statement in part: “The outturn was on account of a wider drop in exports which outweighed a decline in imports.”

Economist Wesley Mkandawire, in an interview on Tuesday, warned that in view of the kwacha devaluation, there is need to increase exports so that the country does not continue to suffer exchange rate shocks.

He said: “If our currency is overvalued, our exports are expensive to the outside market and we accumulate less reserves.

“But if we devalue our currency, exports become cheaper and attractive to the outside market. Hence, we get more forex flowing in.”

Meanwhile, RBM figures indicate that the month of May has started with improved foreign exchange reserves at $603 million (K1 trillion) or 2.4 months import cover from $553 million (about K968 billion) or 2.2 months of import cover.

With the El Nino weather affecting agricultural output, the central bank sees slower than earlier anticipated economic growth in 2024.

“The MPC observes that the projected growth is subject to downward adjustment due to the impact of the El Nino weather conditions on agriculture production and underperformance on the export sector,” reads the statement.

Initially, the 2024 gross domestic product projection was put at 3.2 percent supported by increased construction and manufacturing activities, but the World Bank cut the projection to two percent following the effects of long dry spells and limited availability of farm inputs.

On trade performance, Malawi Investment and Trade Centre chief executive officer Paul Kwengwere said the outlook is not clear at this time, but acknowledged expected low productivity.

“In terms of exports this year, we should be doing fine. The only hiccup is the productivity levels are still on the lower side,” he said.

Malawi’s trade deficit in 2023 rose to $2.18 billion (K3.8 trillion), an increase of about $800 million (K1.4 trillion) over the previous year’s deficit.

The RBM initial projection shows that in 2024, the deficit will be at $2.2 billion (K3.8 trillion).

Total exports last year were pegged at $1.1 billion (K1.9 trillion) against imports valued at $3 billion (K5.7 trillion.