Trade deficit unsustainable

The Ministry of Finance, Economic Planning and Development says Malawi’s over-reliance on donor grants to finance its trade deficit is not sustainable.

The country’s trade balance is estimated at a deficit of US$1.4 billion last year but this was offset by donor inflow and significant Foreign Direct Investment (FDI).

This resulted onto country’s registering an overall Balance of Payments (BOP) surplus of US$298.6 million last year from US$185.8 million the previous year, the Reserve Bank of Malawi (RBM) figures show.

Finance Ministry spokesperson, Nations Msowoya, said this continues to expose the country to external shocks, expressing the need to expand the export base through export diversification.

“It’s not a sustainable situation as it is subjected to policies in the giving countries and this situation continues to expose the country to external shocks,” said Msowoya.

Financial Account net inflows are estimated at US$997.2 million last year compared to US$981.3 million in 2013.

Of the total inflows, the central bank estimates net foreign direct investment at US$643.8 million, whereas net portfolio investment and other investments is projected at US$8.4 million and US$345.0 million, respectively.

However, the Finance Ministry says it has financed several projects to help improve the doing business environment and trade facilitation to increase forex from trade.

“We negotiated for the project that the World Bank has just endorsed to finance trade facilitation through [four] One Stop Border posts and we are investing in the improvement of doing business environment and all these efforts are to help improve the country’s trade,” said Msowoya.

He expressed optimism that with investments made in sugar industry under the Greenbelt Initiative, things will improve in exports.