A marked jump in tobacco and uranium output this year will push up Malawi’s exports which will help to increase the inflows of foreign exchange, the Economist Intelligence Unit (EIU) has said.
Coming from a record low output in 18 years of 79 million kilogrammes in 2012 to 156 million kilogrammes, tobacco, Malawi’s principal foreign exchange earner, is expected to bring in about $300 million in revenue, according to the Tobacco Control Commission (TCC) projections.
Output at Kayelekera Mine (KM), Malawi’s only uranium-producing mine in Karonga, is expected to be higher than the 1 300 tonnes produced in 2012, figures from the dual-listed miner have shown.
“Export growth will be robust in 2014 to 2017, underpinned by favourable tobacco prices, strengthening uranium prices and a pick-up in economic activity,” says the EIU in its first quarter report [January to March] for Malawi.
But it says imports are expected to increase in 2013, reflecting a boost to food and fuel imports by measures to cover essential imports in the wake of the currency adjustment.
However, the EIU says in 2014 imports will rise slightly owing to election-related spending and will continue to pick up on the back of increased economic activity and slightly higher global commodity prices.
A larger export base will help in the inflow of much-need foreign exchange which would later cushion the negative effects of the country’s economic downturn.
It will encourage domestic production and thus promote self-reliance among local farmers, helping to stimulate the country’s economic growth.
The value of the kwacha, which was devalued last year and later floated, will also be supported by a larger export base; hence, lowering the rate of depreciation.
Analysts say improved foreign exchange availability will eventually lead to increase foreign exchange transactions and improved performance for banks which trade in hard cash.
In its quarterly activities report, Paladin Energy Limited, the owners of KM said the mine is in a good position to achieve its production target.
The mine has maintained ‘self sufficiency on acid requirements’ and a safety milestone of 365 lost time injury free days achieved.
“The financial year 2013 production guidance of 8.0 to 8.5 million pounds … remains well on target,” said the report.
TCC chief executive officer Bruce Munthali has projected that this year will be one of the best in terms of revenue.
“The prices have remained firm this year and we hope the trend will continue going forward,” he said.
The pick-up in tobacco and uranium exports is also expected to help the growth of the economy from a decline in 2012 despite power supply continuing to be intermittent and economic adjustments which may damage productivity in the short term.
Gross Domestic Product (GDP) growth is expected to peak at 4.1 percent this year, according to EIU, while the International Monetary Fund (IMF) is forecasting growth of 5.5 percent.
The Malawi Government is targeting annual GDP growth of 5.7 percent by December 2013.
However, risks to economic growth in 2013 are the high inflation rates, which have eased by 1.5 percentage points in March to 34.6 percent and high interest rates hovering above 50 percent set to slow down economic growth as they reduce private sector activity.
Growth in 2013 will be supported by the recovery in aid, the expansion of agricultural subsidies, fiscal discipline and improved investor sentiment as well as innovations in the mining sector which will boost donor and investor confidence thereby increasing private sector activity.
