The Reserve Bank of Malawi (RBM) is projecting this year’s tobacco revenue to be 11 percent lower than last year due to poor prices being offered by buyers.
RBM Monetary Policy Report released on Friday projects this year’s tobacco revenue at $303.5 million (about K225 billion), which is lower compared to $337.5 million (about K250 billion) earned last year.
This year’s second round of crop estimate projected a production of 205.5 million kilogrammes (kg) compared to last year’s 202 million kg.
Tobacco Commission (TC)figures released on Friday show that as of week 15, the country sold 123 million kg of tobacco, raking in $183 million (K139 billion) compared to last year’s $257 million (about K195 billion) from 147 million kg of tobacco.
This represents 16 percent drop in volumes sold and 29 percent decline in revenue.
So far, the average price this year is at $1.49 (K1 132) per kg, a drop from last year’s $1.74 (K1332) per kg, representing 15 percent price decline.
In an interview on Monday, TC corporate planning and development manager Hellings Nason said RBM’s projection is not a true reflection of what may come out as the central bank has used second-round estimates.
He, however, said the commission would ably comment on RBM’s projections after third-round official estimates are out.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said this should be a wake-up call for Malawi to intensify diversification efforts to off-set revenue deficit from tobacco.
He said if nothing is done, Malawi would likely face imported inflation as there would be inadequate foreign exchange for the importation of the country’s essential commodities such as fertiliser and fuel, among others.
Said Kalilombe: “Currently, tobacco doesn’t give us much confidence as in previous years. What has happened, so far, is giving us fears that the season may not be as favourable as anticipated.
“If the cash crop prices from the combined threshold will go down then there may be pressure on our currency.”
This year, the country has over produced the leaf by about 35 percent to 205.5 million kg against 152 million kg initial buyer demand.
The $303.5 million to be realised from tobacco is equivalent to slightly over one month of import cover as the country needs around $209 million monthly to ensure sustained imports of goods and services.
Last year, according to RBM, the country earned $478 million (K363 billion) from tobacco exports. However, the bank projected this year’s tobacco exports would decrease by 1.9 percent to $468.9 million (K355 billion) largely due to the slowing global demand as well as supply problems in Malawi.