Malawi trade deficit narrows to $490.1m
Malawi’s 2013 merchandise trade deficit is projected to narrow to $490.1 million (K166.6 billion) from $658.2 million (K223.8 bilion) in 2012, indicates an International Monetary Fund (IMF) Malawi country report.
The report, published on May 20 by the IMF indicates that Malawi will import a total of $1.96 billion (K669.6 billion) worth of goods and will export $1.42 billion (K502.9 billion) which is $490.1 million (K166.6 billion) short of exports, by the end of this year.
The report, however, projects that Malawi’s trade deficit will worsen in 2015 to $535.6 (K182.1 billion), and worsen further to $554.6 million (K188.6 billion) in 2015.
The above trend clearly shows that in the next three years, Malawi’s imports will increase more than exports which will result in the worsening trade balance.
The report, however, cautions that Malawi’s exports may suffer from spillovers from the global economy, specifically growth stagnation of the euro area and the rest of the world.
“Slower world growth would adversely affect demand for Malawi’s exports mainly tobacco, but the overall impact on Malawi’s growth is expected to be low. A substantial fall in tobacco prices would adversely affect export proceeds, the income of farmers and dampen growth. Given the size of tobacco in the economy, the expected impact would be moderate,” reads the report in part.
In an interview on Friday, National Working Group on Trade Policy chairperson Geoff Mkandawire said the country needed a policy adjustment that would favour production of more exports.
“Of course we have strategies and policies that are aimed at promoting exports, but we need their serious implementation. We need to focus on the implementation part otherwise we will not achieve any improvement in our trade balance.
“The liberalisation of the exchange rate and other monetary policies that have recently been implemented must be matched by fiscal discipline otherwise the industry will lose gains and hence fail to export more,” said Mkandawire.
Last year, Malawi launched the National Export Strategy (NES) whose goal is to match long-term export and import trends. The strategy targets to raise exports as a share of imports from 51.5 percent in 2010 to 75.7 percent in 2017 and 93.4 percent in 2022.
The NES is aimed at providing a clearly prioritised road map for building Malawi’s productive base to generate sufficient exports to match the upward pressure on Malawi’s imports. The NES further aims to maximise the direct contribution of exports to economic and social development.
The NES is also set to achieve the an increase in exports through the development of the private sector in a manner that is balanced with the economic empowerment of the rural and urban poor, smallholder farmers, youths and women.
It prioritises three export-oriented clusters for diversification: oil seeds products, sugar cane and manufacturers. It includes support plans to stakeholder efforts in other major existing clusters: tobacco, mining, tea, tourism and services.
The strategy also envisages to develop an environment that is conducive to economic competitiveness and economic empowerment of youth, women, farmers, by prioritising key actions in seven priority issues.
