RBM positive on trade balance
The Reserve Bank of Malawi (RBM) says the country’s trade balance is expected to retreat in the coming months on account of the start of markets in the country which are expected to boost exports.
During the first quarter, Malawi’s trade deficit widened to $283.5 million (about K293 billion) from a deficit of $15.7 million (about K16 billion) during the fourth quarter of last year, according to the RBM data.
But the RBM in its second Monetary Policy Committee Statement for 2023 issued last week, said the trade deficit, the gap between the monetary value of a nation’s exports and imports, recorded in the first quarter (Q1), was seasonally expected as quantity of traditional exports is usually down while imports are usually on the rise.
Reads the report in part: “In the second quarter of this year, the deficit is expected to narrow. The reopening of main markets for the country’s major exports in the second quarter of this year is expected to improve export inflows during that period.”
Analysts have encouraged diversification of exports to boost the country’s trade and close the balance which has been a norm where imports outweigh exports.
Speaking in an interview on Sunday, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni observed that diversification is key to growing the export base.
He said: “Mining, exports of animal husbandry, manufacturing and others is the sure way to widen our exports.”
National Working Group on Trade and Policy Frederick Changaya said thee is nee for the country to replace traditional exports with high-value added products to penetrate and make the most of existing markets to close the trade gap.
He said: “We export cheap produce and import high-value commodities. Malawi needs to help factories to grow to a level where we can substitute imports.
“No country develops when its people are excluded from value-added goods.”
Meanwhile, due to the country’s underperformance of trade, Malawi’s gross official foreign exchange reserves have been under pressure due to the country’s rising demand for imports.
The gross official foreign exchange reserves under the direct control of the RBM have continued to fall and now reported at $280.66 million (K291 billion), an equivalent of 1.12 months of import cover as of February from $385.4 million (about K399 billion), an equivalent of 1.54 months of import cover during the same period last year, according to RBM Financial Markets Development Report.
Such a development has in turn continued to strain the exchange rate, with the kwacha depreciating against all major currencies in recent times.
Meanwhile, government has indicated that it will strive to strengthen the balance of payment position as well as promoting local manufacturing close to the trade balance.
Minister of Finance Economic Affairs Sosten Gwengwe earlier admitted that the trade balance remains a challenge, but said government will continue to address issues of export diversification. n
