The sustainability of the country’s external position hangs in the balance following the continued widening of the trade deficit as reported by the Reserve Bank of Malawi (RBM) pointing to low exports that continue to be dwarfed by increasing imports.
RBM data contained in the latest Monthly Economic Review shows that trade balance worsened to $261.1 million (about K457 billion) in February this year from $206.8 million (about K362 billion) in January.
The February trade deficit also exceeded the $128.5 million (about K225 billion) recorded during the same month last year, according to the report.
The report further said the widening deficit was driven by a sharp drop in export earnings coupled with a rise in imports.
“Merchandise exports fell by 51.2 percent to $32.6 million [about K52 billion], down from $66.8 million [K117 billion] in January and $55.2 million [96 billion] in February 2024, largely due to seasonally low tobacco sales,” reads the report in part.
Tobacco export earnings dropped to $11.3 million (about K18 billion) in February from $45.3 million (about K79 billion) the previous month, according to the report, with other major exports also underperforming although tea, macadamia nuts and pulses registered modest gains.
On the import side, the report shows that imports rose by 7.3 percent to $293.7 million (about K514 billion) in February from $273.6 million (about K479 billion) in January and substantially higher than the $183.7 million (K322 billion) recorded in February 2024.
The RBM attributed the imports surge to increased purchases of key commodities such as fuel, which increased to $58.8 million (about K103 billion) from $47 million (about K82 billion), printed books and newspapers, whose imports climbed to $35.5 million (about K62 billion) from $19.6 million (about K34 billion).
Other imports included machinery and equipment, including nuclear reactors and boilers, which increased to $21.4 million (about K34 billion) from $0.8 million (about K1.4 billion) while cereal imports jumped to $8.5 million (about K15 billion) from $2 million (about K3.5 billion) during the period under review.
On the other hand, some essential imports declined, including fertiliser, which dropped to $20.8 million (about K36 billion) from $43.7 million (about K77 billion), plastics imports dropped to $11.3 million (about K20 billion) from $16.5 million (about K29 billion) while pharmaceuticals dropped to $9.5 million (about K17 billion) from $20.8 million (about K36 billion).
February’s trade performance coupled with a sluggish start to the 2025 Tobacco Marketing Season has intensified calls to diversify the country’s export base and invest in higher-value sectors, according to economists.
Said Christone Nyondo, a research fellow at the Mwapata Institute: “We must diversify our export base into less volatile, higher-value crops like macadamia and avocado while also investing in agro-processing and non-agricultural sectors such as tourism and information and communications technology.”
Agriculture development policy expert Tamani Nkhono-Mvula urged the government to create structured markets for emerging value chains to support transition from traditional crops and boost exports.
“If we want to motivate farmers to transition to other value chains such as macadamia and bananas, then there should be a deliberate policy and structures to ensure farmers have access to inputs and markets,” he said.
During the review period, foreign exchange reserves stood at $569.5 million, equivalent of 2.3 months of import cover, marginally lower from January’s $570.6 million, but higher than the $533.1 million recorded in February 2024.
However, the gains in gross official reserves were offset by a decline in private sector foreign exchange holdings, resulting in a net fall in total reserves.
National Statistical Office data shows that Malawi exports goods valued at roughly $1 billion against imports at $3 billion, creating a negative trade balance.
