By Chimwemwe Mangazi:
Malawi’s trade deficit — a negative difference between exports and imports— reached $2.18 billion in 2023, increasing by about $800 million from $2.10 billion in 2022, figures from the Reserve Bank of Malawi (RBM) show.
An RBM Monetary Policy Committee (MPC) report published on Monday shows that merchandise trade balance improved to a deficit of $495.8 million in the fourth quarter of 2023 from a deficit of $528.6 million in the third quarter and compared to a deficit of $532.5 million recorded in the fourth quarter of 2022.
“The MPC observed that the outturn emanated from a sharper decline in imports compared to a decrease in exports during the fourth quarter of 2023.
“In 2023, the trade deficit stood at $2.18 billion, compared to $2.10 billion in the previous year. In 2024, merchandise trade deficit is projected to remain unchanged at US$2.2 billion,” the report reads.
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In an interview, economist Francis Chanthunya said the trade situation is worrisome as the trade balance deficit remains.
He, however, attributed the marginal decrease in the trade gap to a decrease in exports, and an even greater magnitude decrease in imports.
“What this suggests is that the country has not only reduced capacity to import but reduced capacity to produce goods locally. It would therefore not be surprising to find that overall economic output has stagnated.
“This needs to serve as a wakeup call to Malawians to be more involved in the supply side of the economy. The only way to reduce the trade deficit is to produce more goods to serve as both import substitutes and as exports,” Chanthunya said.
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But in a separate interview, another economist Velli Nyirongo said the decline in imports suggests that Malawi may be taking steps to curb unnecessary spending, potentially improving foreign exchange reserves.
“Despite the narrowing in the fourth quarter, the overall trade deficit remains substantial at $2.18 billion, indicating Malawi still imports significantly more than it exports. Diversifying exports beyond traditional goods like tobacco and promoting value-added products could increase export earnings.
“There is also a need to create an investor-friendly environment that can attract foreign capital, boosting production and exports,” Nyirongo said.
Nyirongo called on the government to consider policies that encourage domestic production of essential goods to reduce import dependence and strategically manage the exchange rate to make exports more competitive and incentivise domestic production.
Catholic University – b a s e d economist Greenson Nyirenda said Malawi should devise policies that focus on production in the light, medium and heavy industries that will curb importation of goods that can be locally produced.
Malawi, an agrarian economy, remains a net importer and its insatiable appetite for foreign goods keeps piling pressure on forex reserves.
