Reserve Bank of Malawi (RBM) Governor Wilson Banda has lamented rising import bill in the country, saying the situation continues to pile pressure on the forex situation.
Figures he provided show that, for instance, the country was spending about $1 million (about K816.3 million) worth of fuel per day.
Addressing journalists recently, Banda said there remain mismatches between forex demand and supply in the country.
“For example, importation of fuel through Nocma [National Oil Company] is probably supported by the reserve bank 100 percent while importation of fuel through PIL [Petroleum Importers Limited], even though has been done through it commercial banks, has also been leaning on the Reserve Bank to provide that fuel.
“Importation of fertiliser is landed on the door steps of the central bank. Importation of medicine is also coming to us. In normal terms, that is the responsibility of commercial banks,” Banda said.
Available figures show that annual import bill stands at above $2.5 billion or $210 million per month and main imports include fuel, fertiliser and medicines.
However, main forex earner for the country remains tobacco, which last year alone earned the country about $179 million, which falls short of the monthly import bill.
Banda said the prevailing mismatches between forex demand and supply remains a challenge for the country and that, going forward, there was a need for intensified effort towards import substitution.
He said demand for forex has already shot up and, to compound the problem, the central bank needed to move fast in addressing the problem, hence the recent 25 percent Kwacha devaluation.
“All those things put together have resulted in a situation where supply of forex to the market falls way short of the demand. Demand remains very high and supply went down. And we did not have support from the development partners and others,” Banda said.
In an interview Wednesday, University of Malawi economics professor Ben Kaula rated the situation as unsustainable.
He said the country needed to move fast with the import substitution agenda while managing the fiscal space to minimise borrowing.
“It has not been sustainable for a long time. We have trade imbalance and we know what needs to be done. Two major issues; first is to sort out our export base, in terms of value and diversity. We have primary exports which can never sustain any economy anywhere. So we need to get out of that.
“Import dependence is very high in Malawi, at about 42 percent of GDP. The problem is that the economy is not integrated inwards; there is insufficient domestic activity. So, we have to tackle these together,” Kalua said.