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Negative trade deficit worsens

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Sosten Gwengwe

Growing appetite for imported goods among Malawians and failure by the country to advance the imports substitution agenda continue to affect Malawi’s trade competitiveness.

The country continues to experience negative trade balance with petroleum products, automobiles, fertiliser and medicines topping the imports list.

Tobacco, tea, sugar, oil cake and soya beans are among export products, and most are ferried outside the country in their raw form.

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Latest figures contained in the Reserve Bank of Malawi (RBM)’s Monitory Policy Committee (MPC) Report show that from January to September 2020, trade deficit stood at $1.5 billion, compared to a deficit of $1.1 billion recorded in the corresponding period of 2019.

During the months under review, exports earnings amounted to $0.5 billion against imports value of $2.0 billion.

The government blames the widening trade gap on a booming population, among other factors.

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Minister of Trade, Sosten Gwengwe, said souring production costs had affected Malawi’s competitiveness on the international market and turn into reality its long time ambition of becoming a predominantly producing and exporting nation.

“For example, we might discourage people from importing building materials but if the local market cannot supply, people will have nowhere to get them,” Gwengwe said.

He then said the government is working towards creating an environment conducive for productivity and enhancing the industrilisation of the agriculture sector to ensure value-addition of local products.

In a separate interview, Minister of Industry, Roy Kachale, addressing the challenge needs a multi-sectoral approach.

He said the ministry has been in talks with private sector players to find a lasting remedy.

“We are looking at strengthening SMEs as well as cooperatives to venture into value addition because we are exporting more raw materials than finished products.

“We are also looking at attracting foreign direct investment in fertilizer manufacturing and setting up pharmaceutical plants in the country,” Kachale explained.

Malawi remains an agrarian economy with Tobacco still the top export crop.

The private sector has been lamenting high cost of production, high taxes and power woes among major constraints to business growth in the country.

But in an interview, Economics Association of Malawi president, Lauryn Nyasulu, said the government should consider putting waivers on sectors that matter to industrialisation.

“We need to identify our priority sectors. Based on that, we should have incentives that can motivate investors and even encourage potential investors,” Nyasulu explained.

The World Bank has, however, projected that remittances are expected to fall by 7.2 percent in 2020 and slightly higher at 7.5 percent in 2021.

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