Malawi’s exports set to rise

Malawi’s exports are expected to notch up this year as tobacco output recovers from a drastic drop in 2012 and prices remain buoyant.

The jump in exports is also expected to be supported by the growth in uranium exports as output is increased at Kayelekera Mine in Karonga, according to the Economist Intelligence Unit (EIU).

A rise in exports is good news for Malawi because it also entails a reciprocal jump in foreign exchange earnings that could help government and the private sector to meet its import needs such as fuel, fertiliser and raw materials for industries and also cushion the negative effects of the country’s economic downturn.

A larger export base will encourage domestic production and promote self-reliance among local farmers, helping to stimulate economic growth of the country and support for the value of the kwacha resulting in lower depreciation.

Malawi’s export base has always been narrow with tobacco, the country’s principal export commodity raking in more than half of the country’s foreign exchange.

“Export growth will be robust underpinned by favourable tobacco prices, strengthening uranium prices and a pick-up in economic activity,” says the UK-based economic think tank and an independent business within the Economist Group.

But the EIU, however, says exports are subject to be volatile due to the ongoing currency wars set to cheapen domestic goods of foreign countries.

On the other, the EIU 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.

“In 2014 imports will rise slightly owing to election-related spending, although a weaker currency will constrain demand. Thereafter, imports will continue to pick up on the back of increased economic activity and slightly higher global commodity prices,” the EIU country report for February.

Over the years, Malawi’s imports have always surpassed export. For instance, available figures indicate that in 2010 Malawi imported $2.3 billion worth of goods and services, about 43 percent of gross domestic product (GDP), but only exported $1.2 billion, about 22 percent of GDP.

This is an unsustainable structural trade deficit and if maintained, has the potential to affect the overall economic growth and development.

In view of this, government last year launched the five-year National Export Strategy (NES) to help the country build its productive capacity to ensure that exports match imports in the long-term.

Analysts say benchmarking Malawi’s capacity to export against its import bill is essential because, as experienced with the foreign exchange and aid crisis in 2011, Malawi’s structural trade deficit may lead to a reduction in Malawi’s ability to export and undermine the emergence of the productive base of the economy.

Government says NES is central to accomplishing Malawi’s desired move into the export of high value goods and services and to reducing Malawi’s reliance on the export of raw or semi-raw commodities.