Malawi international trade position since year 2000 has not been geared towards minimising forex challenges—Chief Economist Chifipa Mhango

Chifipa Mhango

* The problem is turning into a “generational curse”, therefore, an urgent economic turnaround strategy is required

* It is very disturbing that since the year 2000, Malawi has never had a positive monthly trade balance

* Except for November 2009, when it was only MK4.9 billion

By Duncan Mlanjira

Chief Economist Chifipa Mhango says “Malawi international trade position since year 2000 has not been geared towards minimising the forex challenges in the country — and this problem is turning into a “generational curse”, therefore, “an urgent economic turnaround strategy is required”.

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Mhango, who is Director of Economic Research & Strategy for South Africa-based Don Consultancy Group (DCG) further said in a statement that: “It is very disturbing that since the year 2000, Malawi has never had a positive monthly trade balance — except for November 2009 when it was only MK4.9 billion.

“Latest data shows that Malawi recorded a trade deficit of MK318.4 billion in April of 2024. Balance of Trade (exports-imports) has averaged a negative MK60.4 billion from 2000 until 2024 — with December 2023 being the lowest level at negative MK368 billion — as sourced from Reserve Bank of Malawi (RBM).

“In fact, Malawi trade balance position has aggressively deteriorated since April 2020, from a negative MK71.1 billion.”

Mhango shared a table that indicates Malawi’s top five imports in 2023, as sourced from United Nations COMTRADE database on international trade, of mineral fuels, oils, distillation products, which remain Malawi’s forex drainer with total value of US$603.2 million in 2023, followed by fertilizer imports at US$337.22 million.

The DCG Chief Economist expressed further concern on how Malawi “continues to import products that — with a strong commitment towards an economic turn-around strategy — the country would be able to manufacture the products locally”.

“This can easily be done through an import substitution strategy, that focus on a utilisation of trade remedies or instruments, encouraging of foreign direct investment from countries of import origin, revival of an industrial financing development agency such as Malawi Development Corporation (MDC) that can be an equity participant with international firms or direct lender on import substitution investments among others.

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“I also continue to advocate for a proper economic strategy around fertilizer importation, through direct procurement from suppliers, as a short-term measure while the country seeks direct investment through local manufacturing, as presented in my statement around this subject in 2023.

“If we consider the amount of forex being drained through this strategic import, Malawi would have had three or five fertilizer manufacturing firms since year 2000, if its various government administrations were committed to a new economic trajectory process for Malawi.”

Mhango also shared Annexure 1, as sourced from United Nations COMTRADE database on international trade, which the public “can reflect on how the country’s forex is being lost through our international trade position”.

“It should really be disheartening that we claim to be an agriculture-based economy and yet we imported vegetable, fruit, nut food preparations to the value of US$7.47 million in 2023.

“US$8.27 million was spent on dairy products, eggs, honey, edible products in 2023; US$3.3 million on edible fruits, nuts, peel of citrus fruit, melons in 2023 and US$10.84 million in sugar and sugar confectionery in 2023.

“This has more less been the Malawi import trend since year 2000 at product category level despite of weather conditions.

On imports by country of origin, China is the dominant country, with a value of US$546.12 million in 2023. We are also seeing Tanzania among the top five countries as per list in Table 2 below, with import value of US$210.99 million. A detailed list of import origin by country for Malawi is in Annexure 2 below.

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“In closing, I thought it is important that Malawians are openly informed of what is the real landscape of the Malawi economy around international trade.

“The weak industrialisation base of the Malawi economy and lack of much needed foreign & domestic direct investment to support import substitution, will continue to put the country on a currency devaluation path for years to come.

“We must consolidate our efforts as a nation to commit towards an economic renewal process that takes industrialisation of the Malawi economy at a centre of any government’s economic policy, as the country cannot to continue importing certain products that are listed in Annexure 1,” advised Mhango in the statement copied to Minister of Finance & Economic Development; Minister of Trade & Industry and Malawi media houses.