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Covid-19 worsens MW trade balance

Malawi’s trade balance—the difference between the value of a country’s imports and its exports—widened further last year as the country imported more Covid-19 related supplies, Reserve Bank of Malawi (RBM) records show.

The RBM’s economic review report said trade volumes continued to decline as the Covid-19 pandemic persisted.

According to the RBM, the country’s trade balance, thus, worsened to a deficit of $629.6 million during the fourth quarter of 2020 following another deficit of $620.1 million recorded in the previous quarter.

The trade balance recorded in the last quarter of 2020 is in contrast to a lower trade balance which the country recorded in the corresponding period in 2019 at $446.5 million (K73.4 billion).

The report shows that domestic exports were estimated at $204.0 million, which was lower than $223.7 million estimated in the preceding quarter and $296.2 million in the fourth quarter of 2019.

Similarly, imports decreased to $833.6 million in the fourth quarter of 2020 from $843.8 million reported in the third quarter of 2020, but were higher than $742.8 million recorded in a corresponding period in 2019.

Chancellor College economics professor Ben Kaluwa while indicating that the development is not new as the country’s export basket is not diversified pointed out that Covid-19 did have a hand in the widening trade balance. 

Malawi’s economy is largely affected by external economic developments which experts partly blame on trade imbalances as imports outweigh exports, a development which contributes to economic vulnerability.

In addition, in Malawi agricultural products continue to dominate the county’s export basket accounting for about 80 percent of Malawi’s export basket as such the country’s exports also depend on seasonality factors.

Economics Association of Malawi (Ecama) president Lauryn Nyasulu in an earlier interview also urged authorities to ensure the country addresses underlying structural constraints the economy has and have strategies in place that will minimise the trade balance and improve the Balance of  Payment (BoP) position.

She said: “What is needed for countries like Malawi with a wide trade balance is to promote production of goods and services for export.

“The country needs to address its weak manufacturing base and ensure industrial policies aimed at preferential treatment especially those concerning SMEs and manufacturing are in place.”

Trade experts and the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) also previously advised that Malawi trade has to be backed up by increased productive capacity, enhanced regional value chains and removing internal obstacles to the growth of small and medium enterprises so that African countries, including Malawi, can compete well in a liberalised regional market.

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