NSO says July trade deficit narrows
The National Statistical Office (NSO) has reported a 2.4 percent narrower trade deficit in Malawi’s international merchandise trade in July as compared to May.
The July trade figures by NSO show total value of imports reached K527.9 billion (about $301.4 million), an increase from K505.8 billion (about $288.8 million) the NSO reported in June.
The total value of exports rose to K146.6 billion (about $83.7 million) in July 2024 from K97.8 billion (about $55.8 million) in June.
This leaves a trade deficit of a minimum K381.3 billion ($217.5 million), from the K408 billion ($223 million) deficit in May.
Meanwhile, Malawi’s international merchandise trade in the first six months of 2024 registered lower exports amounting to $260.2 million from $321.9 million in the same period last year.
While exports of goods reduced by 19.2 percent, imports had a marginal decline of 3 percent to $1.4 billion, leaving a trade balance of $1.16 billion, which is just $11 billion shy of the deficit during the same period in the previous year.
Economic expert Bond Mtembezeka recently expressed worry over high levels of trade deficit, saying this will continue to cause macroeconomic imbalances.
“This trend has severe implications on national efforts on production and macroeconomic stability,” said Mtembezeka on the first-half trade figures.
He further explained that a widening trade deficit suggests that Malawi is not producing enough to meet local demand, leading to reliance on imports and he called for more investments in the primary production and manufacturing.
He explained that increased imports lead to a higher demand for foreign currency, potentially causing shortages and depreciation of the local currency while excessive imports can fuel inflation, as higher demand for foreign goods increases prices.
“Allocate resources to sectors with high growth potential, such as agriculture, manufacturing, and infrastructure development. By implementing these strategies, Malawi can reduce its trade deficit, promote domestic production, and achieve macroeconomic stability,” he said.
Authorities are hopeful this trend will revert soon due to several initiatives that aim at creating a better environment for production of goods that should be competitive on the international market.
Speaking during the re-launch of a train carrying fuel for the National Oil Company of Malawi (Nocma), Minister of Trade Sosten Gwengwe admitted that the high cost of production in Malawi affects competitiveness on the international market.
However, he assured that with the revamp of the railway transportation, there will be a reduction in cost of importing and exporting goods hence contributing to the overall efforts of reducing the cost of production in Malawi.
Malawi Investment and Trade Centre (Mitc) chief executive officer Paul Kwengwere banks on the Magwero and Chigumula industrial parks in Lilongwe and Blantyre, respectively, and others in the pipeline, as major steps in boosting manufacturing in the country for exports.
He said the facilities, under Special Economic Zone framework, will provide a very competitve environment as businesses will operate under special tax regime and efficient infrastructure to ensure they produce high quality products at low cost to compete well on the export market.
Other initiatives such as mega farms are also mentioned as efforts towards increasing productivity although some experts think there is slow pace to match the growing needs.
The country’s total exports $1.1 billion against $3.6 billion of imports in 2023, as trade deficit has been on the steady increase since 2018, from $1.3 billion to $2.5 billion in 2023.
