The World Bank has indicated that Malawi’s trade and industrial policy is central to its weak trade performance, citing prevalence of non-tariff barriers (NTBs) which constrain export growth.
This is contained in the recent Country Economic Memorandum titled ‘A Narrow Path to Prosperity’.
The publication indicates that Malawi has thicker borders which illuminate greater price differences between producer and consumer prices, implying higher trade costs and potential barriers to trade for the nation.
“Many of these policies yield unintended consequences that are at odds with the government’s goals of improving economic diversification and resilience. Examples include administratively burdensome import and export licences for numerous goods, export permits, mandatory conversion of export proceeds, and an onerous regime of mandatory standards.
“The presence of further NTBs at the border and in neighbouring transit countries such as Mozambique, Tanzania, and Zambia add to the costs of trade for Malawian exporters and importers. Central to this is the lack of coordination between Malawi and its neighbours to address barriers encountered by traders. Such policies are likely to reduce both the number of firms exporting and the total value of exported goods,” the publication reads.
It adds: “Malawi must break the vicious cycle in which structural factors and restrictive trade policies reinforce each other, perpetuating a low-level equilibrium. Large policy distortions and forex rationing not only reduce access to inputs but also to essential goods like health and food products. The economy also suffers from a lack of investment and high trade costs due to poor logistics and infrastructure.
“These issues, compounded by the structural barriers of being a small, landlocked country, reduce overall economic resilience and negatively impact Malawi’s macroeconomic environment through low levels of foreign exchange earnings resulting from low export levels. Consequently, Malawi requires an export-oriented strategy to stimulate economic development and overcome the country’s structural challenges. By diversifying the economy, capitalising on opportunities in key sectors, and addressing long-standing issues, Malawi can unlock its full potential and position itself for sustainable and inclusive growth.”
In a WhatsApp response, Principal Secretary in the Ministry of Trade and Industry Christina Zakeyo asked for more time to study the publication before responding.
“We need to study the CEM and check on issues you have raised above,” She said.
The 2023 Malawi Business Climate Survey published by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), indicates that there was poor business performance in the year due to shortage of foreign currency with which to import raw materials, high levels of inflation and fuel scarcity which affected business operations especially in the transportation and construction sectors.
The report further shows that subdued demand for goods and services by consumers, and high cost of loanable funds for investment also had an impact on business performance, among others.
However, the report shows that the performance of businesses in 2023 was better than the previous year, according to results of the survey.
“In the year under review, 27 percent of businesses rated their performance as good and 35 percent as fair while in 2022, 18 percent of businesses rated their performance as good and 25 percent as fair.
