Malawi imports are set to increase next year on account of a likely jump in expenditure towards the tripartite elections, Nico Asset Managers have projected.
“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,” says the investment management firm in its April economic report.
The projection by the Blantyre-based firm means the country’s foreign exchange market risks mounting pressure as it implies that demand for foreign currency next year will likely be high on election-related spending.
The situation would put the kwacha, which has now gained ground against other international currencies, under pressure on account of a likely mismatch between supply and demand for foreign reserves on the market.
A country’s larger export base helps provide support for the value of the country’s currency and lowers the pace of depreciation.
The likely surge in election-related expenditure as foreseen by Nico Asset Managers comes barely a month after the Electoral Commission (EC) has said the 2014 tripartite elections will cost about K18 billion (about $45m)
The K18 billion budget is more than triple the budget for the elections in 2009 when government approved a K5.3 billion (about $13.2m) budget.
According to Nico Asset Managers, imports are also expected to increase this year, reflecting a boost to food and fuel imports by measures to cover essential imports in the wake of the currency adjustment.
Over the years, Malawi’s trade gap-the gap between monetary value between imports and exports-has been widening as appetite for foreign products has grown, a situation which has been blamed for worsening foreign exchange scarcity.
Despite a projected jump in imports, the firm has also said Malawi exports are also set to increase this year as tobacco production recovers following a sharp decline in 2012 and prices remain buoyant.
“The increase [in exports] will also be supported by growth in uranium exports as production is optimised at the Kayelekera mine in the Northern Region,” it says.
According to Nico Asset Managers, export growth will be robust between 2014 and 2017, underpinned by favourable tobacco prices, strengthening uranium prices and a pick-up in economic activity.
Ministry of Industry and Trade spokesperson Wiskes Nkombezi told Business News in a recent interview in Lilongwe that government expects Malawi exports to surpass imports in the medium to long-term, especially in the wake of the implementation of the National Export Strategy (NES), which seeks to double exports in the next five years.