Malawi is still struggling to add value to its products as manifested by the revelation that almost 99 percent of the countryâ€™s exports to the European Union (EU) constitute raw agricultural products.
This is according to a fact sheet highlighting the composition and structure of Malawi trade with EU for the past two years and made available to Business News on Wednesday by EU Malawi press and information officer Christophe Legrand.
EU is Malawi’s largest world-trade partner for exports and second largest for imports.
Legrand said primary products currently dominating Malawiâ€™s exports to the EU include food stuff, such as fish and raw materials.
â€œRaw materials and tobacco in themselves make up approximately 67 percent of Malawiâ€™s exports to the EU, followed by food and live animal products which constitute close to 32 percent of the exports,â€ said Legrand.
The exportation of raw and semi-processed products to the international market has over the years dealt Malawi, a net importer, a heavy blow as it has stakeholders to inject much-needed foreign exchange into the system cannot be over-emphasised,” it says.
Alliance Capital has also argued that it is likely that most development partners will wait until the budget is presented before making any commitments “despite the much-talked about Letter of Comfort expected from the IMF.”
It says some donors are concerned about public finance management and transparency issues in Malawi and that they will only disburse substantial amounts upon implementation of systems and assurances that their money will be properly accounted for.
“Therefore, significant inflows may only be witnessed towards the end of the year to allow for the usual bureaucratic processes,” it adds.
So far, it is only Britain that has announced aid injection into the Malawi Government since the IMF nod.
Last week, British Secretary of State Andrew Mitchell announced that London on Thursday released Â£33 million (K13.5 billion at the present official exchange rate) even before the 2012/13 national budget is in place.
The funds will be used to finance programmes in health, education, agriculture and support drug procurement. The Reserve Bank of Malawi is already set to pump these hard currency resources into the financial system and ease forex supply pressures somewhat.
Common Approach to Budget Support (Cabs) co-chairperson Andrew Mwaba, who is also the African Development Bank (AfDB) resident representative for Malawi, could not be drawn to comment on Capital Alliance Limited’s fears of aid disbursement delays and their implications on the speed at which the local economy recovers.
Mwaba is reportedly attending AfDB annual meetings in Arusha, Tanzania.
Malawi receives a harmonised general budget support, which is crucial to the stability of the economy-, from Cabs group of donors consisting of the United Kingdom (UK), Norway, the AfDB, the European Union (EU), the World Bank and Germany.
But in an exclusive interview with Business News last week, Mwaba said prospects of turning around the Malawi economy appear rosy.
He explained that in few months’ time, donors are hopeful that Malawi will have foreign currency inflows which, according to him, will boost capacity for the manufacturing sector.
Finance Minister Dr. Ken Lipenga said during pre-budget consultations in Lilongwe a few weeks ago that he was pleased that Malawi has re-engaged the IMF and explore the possibility of negotiating and formulating a new economic programme.