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Malawi trade deficit seen narrowing

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Malawi’s trade deficit reduced in August this year to minus $129.4 million (K134.5 billion) from minus $178.3 million (K185.1 billion) in July 2022.

This shows there’s still more work to be done when compared to minus $154.3 million (K127.0 billion) that was recorded in August 2021.

This is according to figures contained in the August 2022 Reserve Bank of Malawi (RBM)’s Monthly Economic Review.

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According to the report, although the trade deficit reduced, total imports rose to $299.4 million (K310.2 billion) from $266.3 million (K275.9 billion) registered in July 2022 and compared to $266.1 million (K218.4 billion) recorded in August 2021, explained by increases in imports of fertilizer, pharmaceuticals, fuel and vehicles.

The narrowed trade deficit has been attributed to a 93.2 percent increase in exports, which outweighed the 12.4 percent increase in imports.

“Total merchandise exports increased to $169.9 million (K175.7 billion) in August 2022 from $87.9 million (K90.8 billion) registered in July 2022 and compared to $111.8 million (K91.3 billion) recorded in August 2021,” reads the report.

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While admitting that seasonality of the economy caused Malawi higher exports in August, Indigenous Customs and Forwarding Association President Kumbuka Kalua said foreign exchange scarcity could be another contributing factor.

He said most businesses plan importation of farm inputs and other festival season-related merchandize in August, hence a slow down on importation.

“Looking ahead, the trade deficit will widen until the government becomes strict and regulates huge importation of things such as used cars because they are eating too much into the import cover while we can still survive if they are imported in minimal amounts,” he said.

The seasonality of the Malawi economy puts months from April to October full of economic activities because of agricultural activities which are the backbone of the country’s economy.

The trade deficit has been improving since June this year when it moved to minus $200.0 million from minus $232.1 million in May 2022 and in July it went to minus $178.3 million (K185.2 billion).

Current figures indicate that Malawi’s annual trade deficit hovers at $2 billion as its exports amount to $1 billion while imports amount to $3 billion.

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