Despite a number of interventions, Malawi’s trade gap with the rest of the world continues to widen, a development analysts attribute to policy failure.
National Working Group on Trade Policy chairperson Frederick Changaya said in an interview yesterday that with no multiplier effect in Malawi and a heavily subsidised manufacturing of food products in other countries, the country needs to revisit its trade policies.
He said: “The policies are not working. Malawi requires a 180 degrees turn on its policies. Energy is a nightmare. Cost of finance remains one of the highest in the region. The borders are porous; hence, cheaper imports.
“Government subsidises agriculture which has diminishing returns instead of subsidising local manufacturing which has increasing returns. Not that Fisp [Farm Input Subsidy Programme] should be removed, but emphasis should not be on agriculture.”
Changaya said for the policies to work effectively, there is need to focus on industrialisation to grow incomes for all, observing that no country has grown while focusing on agriculture alone even when it is mechanised.
Malawi trade balance with the rest of the world has been widening over the years despite various policy interventions to narrow the trade deficit—a negative balance of trade in which a country’s imports exceed its exports.
The situation is despite having policies, strategies and efforts to implement programmes in several key areas in support of trade, industry and the private sector, including the draft private sector strategy, National Investment Policy, National Export Strategy (NES), an updated micro small and medium enterprise (MSME) policy and the Buy Malawi Strategy.
Published figures from the Reserve Bank of Malawi (RBM) indicate that exports were projected to decline by 3.2 percent to $255.2 million (about K186 billion) in fourth quarter of 2018 due to a seasonal downtick in agricultural export commodities.
In contrast, imports were projected to increase to $725.3 million (about K531 billion) during the same period from $708.8 million (about K520 billion) in the preceding period.
The increase in imports was partially attributable to an increased demand for farm inputs in the quarter under review.
Consequently, the country was projected to register a trade deficit of $470.1 million (about K345 billion) compared to a deficit of $427.1 million (about K313 billion) in the preceding quarter.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said while on paper interventions to reduce deficit have existed on paper, increasing export base and embracing culture of import substitution takes time, especially in an environment where there are several structural issues such as power challenges and a volatile economic environment.
Consumers Association of Malawi (Cama) executive director John Kapito said Malawi needs to have programmes and policies that speak to each other, and the need for mindset change and investment in quality.