By Kingsley Jassi:
Malawi’s trade deficit is expected to widen to $2.3 billion this year as imports continue to outpace exports, according to the latest World Bank Malawi Economic Monitor (MEM).
A trade deficit occurs when a country imports more goods and services than it exports.
The bank projects Malawi’s exports to reach $1.79 billion in 2025, up from $1.4 billion recorded in 2024.
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However, imports are forecast to surge to $4 billion, creating a substantial gap in the country’s trade balance.
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The report shows that Malawi’s trade performance weakened in 2024, with total exports, including goods and services, declining to $1.4 billion from $1.56 billion in 2023.
Imports also decreased to $3.58 billion from $3.9 billion during the same period.
Despite the expected increase in exports, the World Bank warns that foreign exchange challenges will persist throughout 2025.
It says that while tobacco sales in the second quarter may provide temporary relief, they would not be sufficient to address the underlying trade imbalance.
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Furthermore, the report identifies continued public expenditure as a key driver of imports, currently stand at 2.5 times the value of exports, highlighting the need for structural reforms to address the country’s trade imbalance.
“Persistently high fiscal expenditures amplify the demand for foreign goods and services, deepening the trade imbalance. This has led to substantial external liabilities, which are financed through official reserves, exacerbating the country’s acute foreign-exchange shortage,” the MEM reads.
Meanwhile, the country’s goods exports, as reported by the National Statistical Office (NSO), totalled just $947 million in 2024 while goods imports grew to $3.2 billion.
With the goods trade deficit recorded at $2.2 billion, it means for every 1 dollar the country made in international goods trade, $3.4 was spent on goods imports.
In a recent interview, Industry and Trade Minister Sosten Gwengwe admitted that the country’s industry had slowed production, worsening the balance of payment position, but was quick to say current interventions were aimed at reversing the situation.
“The forex situation continues to hamper importation of raw materials and even expansion of existing industries,” Gwengwe said.
During the launch of the report, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) Chief Executive Officer Daisy Kambalame said the authorities had been short of action after discussions and agreements on the needed actions to ease the situation for the business sector.
The MCCCI chief expects things to worsen this year, especially on the forex situation, a point that is in agreement with the World Bank’s observation.
In an earlier interview, Economics Association of Malawi President Bertha Chikadza said such developments highlighted one of the core challenges facing the Malawian economy; that is, over-reliance on a limited range of export commodities, particularly tobacco, and a high but also insatiable demand for imported goods, which oftentimes strain foreign exchange reserves.
“The significant trade deficit emphasises the need to diversify exports and enhance the economy’s integration into global and regional value chains to stabilise the trade balance while taming our appetite for imports, which is becoming detrimental amidst the declining inflow of foreign exchange,” Chikadza said.
