Malawi’s trade balance—the gap between the monetary value of a nation’s exports and imports—slightly narrowed by 1.3 percent in the third quarter (Q3) as exports outweighed imports, figures from the Reserve Bank of Malawi (RBM) show.
The data, contained in the RBM Monetary Policy Committee meeting statement issued on Wednesday, indicate that the trade deficit narrowed to $484 million (about K397.84 billion) from a deficit of $490.7 million (about K403.35 billion) in the preceding quarter.
According to the bank, the drivers of the growth in exports recorded in the review period were mainly a result of a seasonal increase in tobacco and sugar exports.
Says the report: “ The outcome followed a growth of 23.2 percent in exports to $338.4 million (about K276.16 billion) which was stronger than an increase in imports of 7.4 percent to $822.4 million (about K676 billion). “
The central bank is upbeat that trade balance would continue to narrow owing to the looming economic recovery.
Says the bank: “Prospects for the near-term suggest that trade balance could improve, mainly anchored by increased global demand as the global economy returns to normalcy, which is expected to induce a gradual rise in domestic exports.”
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 country’s export basket—accounting for about 80 percent of Malawi’s export basket—as such, the country’s exports also depend on seasonality factors.
According to University of Malawi’s Chancellor College economics professor Ben Kaluwa, it will be hard for the country to narrow trade balance because of the nature of commodities it relies on as exports.
In a recent interview, Kalua observed that the trade balance issue is a long-term trend which the country can improve if it only reduces imports by investing in local production of some ‘petty’ goods that the country imports.
He said: “The country is having difficulties narrowing the trade balance because of what we depend on as exports. Most of these commodities are seasonal and once off in a season, the trade balance widens as we see the case presently.”
Economics Association of Malawi president Lauryn Nyasulu, in an earlier interview, also urged authorities to ensure that the country addresses underlying structural constraints the economy has and have strategies in place that will improve exports.
She said: “What is needed for countries such as Malawi 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.”
Ministry of Industry and Trade spokesperson Mayeso Msokera also admitted earlier that trade balance has become an issue of concern, but government continues to implement policies and strategies to narrow the trade gap.
He said the main focus is to build the export readiness of Malawi exporters and develop regional and global value chains, promoting entrepreneurship with emphasis on micro, small and medium enterprises and addressing critical enablers related to exports such as energy, transport, market intelligence and trade facilitation.