Malawi’s trade deficit improves in June

Malawi’s trade deficit-an amount by which the cost of a country’s imports exceeds its exports-slightly improved in June by 2.8 percent, Reserve Bank of Malawi (RBM) report has shown.

In its June Monthly Economic Report, RBM said merchandise trade balance stood at minus $140.6 (K104 billion) million in June 2020 from minus $144.7 million (K108 billion) registered in May 2020.

As compared to the same period the previous year, trade balance stood at $117.6 million (K87 billion).

Reads the report in part: “The worsening trade balance was explained by a drop of 36.5 percent in exports to $63.4 million [K47 billion] in the reviewed month. The outturn was attributed to a decline in global demand paired with logistical challenges caused by the Covid-19 pandemic.

“Minor exports were largely affected while traditional agricultural commodities remained resilient.”

Meanwhile, imports registered a marginal decline of 0.9 percent to $204.4 million (K151 billion) in June 2020 from $213.7 million (K158 billion) recorded in a corresponding month in 2019.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) figures show that an estimated 52.7 percent of firms are now operating at below 50 percent compared to the 10.5 percent of firms that were producing at below 50 percent before the pandemic.

This follows global travel restrictions instituted in the wake of the Covid-19 pandemic.

MCCCI director of business environment and policy advocacy Madalitso Kazembe said earlier that with most manufacturing firms relying on imported raw materials for production, restrictions in other countries have impacted the sector.

“Others are facing delays to receive their cargo and some cannot even access the raw materials at all, especially those that rely on cargo flights,” she said.

Malawi aspires to increase exports as a percentage of gross domestic product (GDP) from 14.6 percent to 18 percent through the second National Export Strategy (NES II), which will cover the period between 2020 and 2025.

The NES II draft outlines that this will be attained by, among others, reducing the trade deficit by 25 percent from negative $1 827 060 in 2018 as well as the cost of doing business by 10 percent from 32. 4 percent of income per capita in 2018.

At $1.8 million, the trade gap is equivalent to about 26 percent of the country’s total wealth as measured by GDP valued at $7 billion.