The European Union (EU) says trade is key to attaining stable macroeconomic fundamentals and improved welfare of the people in the country.
Speaking during the African Continental Free Trade Area (AfCFTA) Malawi National Implementation Strategy validation workshop on Monday in Blantyre, EU Delegation in Malawi team leader for economic, trade and public sectorJose Medina Navarro observed that when the country embraced multi-party democracy in 1993, the local unit traded at K2.55 to the dollar.
Today, he said, it trades at around K791 against the dollar.
He said: “This means that in 27 years, the currency has lost 99.7 percent of its value.In short, should Malawi not be
able to redress this pattern, the balance of payments position would be in peril, and Malawi’s macroeconomic fundamentals would be significantly affected, with the knock-on effects on an already impoverished population.
“The AfCFTA, if correctly implemented, would constitute a definite part of the solution to closing the trade imbalance. The key will be to attract, protect and nurture foreign direct investments and industrialisation to Malawi whilst profiting from a more open market of 1.2 billion people.”
EU figures show that over the past decade, Malawi trade deficit has more than doubled to nearly $2 billion, thus putting massive pressure on the balance of payments position.
Meanwhile, the country continues to record a deficit current account balance (CAB) with Treasury figures indicating that in 2020, the current account deficit was $1.4 billion representing 12.7 percent of the gross domestic product (GDP).
The African Trade Policy Centre (ATPC), a unit of the Economic Commission for Africa (ECA), in collaboration with the Ministry of Trade, has began the review and validation of the country’s national implementation strategy of the AfCFTA.
Speaking during the validation exercise in Blanrtyre on Monday, ECA management officer Batanai Chikwene indicated that government will have to provide an environment in which exporters and importers can do business and set up firms that can compete globally.
“The importance of mutually reinforcing fiscal, monetary, industrial and trade and trade promotion policies cannot be overemphasised,” he said.
Ministry of Trade director of trade Clement Kumbemba said the strategy is, among others, addressing the issue of energy, transport, connectivity and raw materials value addition, “as we engage in implementation of the strategy starting next month, we need to look at how we address these challenges so that the common man on the street can benefit”.
The AfCFTA is set to create the biggest free trade area in the World with a market of more than 1.2 billion people and a combined GDP of more than $2.5 trillion.