Merchandise trade deficit—the difference between exports and imports—continues to narrow as seen at K113.0 billion in October this year from K126.9 billion recorded in September.
The country recorded a K149.3 billion deficit during a similar period last year, according to figures contained in the October 2021 Malawi Economic Review released on Friday by the Reserve Bank of Malawi (RBM).
According to the report, the improvement is a result of a 34.1 percent increase in exports to K102.3 billion, which outweighed imports, which grew by 5.8 percent to K215.2 billion.
The report singles out sugar as the main contributor to the improvement as its exports in the month doubled to K5.4 billion and was complemented by increases of 9.1 percent and 4.2 percent in tobacco and tea exports to K45.6 billion and K4.6 billion, respectively.
“Meanwhile, the growth in imports was largely on account of increases of 60.6 percent in fuel imports to K28.3 billion, 14.9 percent in importation of vehicles to K14.3 billion, and 20.3 percent in fertiliser imports to K19.9 billion,” reads the report.
The improvement comes from a further narrowing of the deficit in the third quarter of 2021 as seen at K318.7 billion from K466.9 billion in the preceding quarter.
In its recently published Malawi Economic Monitor, the World Bank says trade is rebounding but Malawi’s trade balance remains pronouncedly negative.
After contracting in 2020, exports are expanding due to increases in tobacco, soya, and other cash crops, according to the Britton Woods institution.
“However, imports are also increasing due to rising commodity prices and increasing demand. The trade deficit is largely financed through foreign aid and is supported by remittances, which have fully recovered from the pandemic and exceed 2019 levels,” the report reads.
Earlier this month, President Lazarus Chakwera launched the National Export Strategy II, which is touted as a path towards improving exports while cutting on imports.
In his address, Chakwera said the goal of the strategy was to make Malawi a producer of competitive products, make Malawi compliant with regional and international standards, diverse Malawi’s economy and make Malawi a sustainable sourcing destination.
“I am confident that, once we do this, the trade balance will tilt in our favour, leading to the creation of jobs and wealth, enhancement of our revenue collection, the unlocking of foreign currency inflows and lifting millions of rural people of abject poverty,” he said.
Speaking in an interview, National Planning Commission Communications Specialist Thom Khanje said, in the medium and long terms, if the country could adhere to the Malawi 2063 agenda, the trade deficit would be narrowed further.
The Malawi 2063, a long-term development blueprint, is designed to facilitate the commercialisation of the agriculture sector and industrialisation.
Malawi remains a predominantly importing and consuming nation.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.