Trade Performance Review 2005: Malawi

Year of publication: 
2005
Author(s): 
Kelvin Banda
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Malawi's trade balance with the rest of the world has been sharply worsening since 1999 when the only positive balance was registered. The positive balance in 1999 was on account of a generally good agricultural season for most of the traditional export crops. However, the situation could not be sustained despite the continued depreciation of the Malawi Kwacha (MK) against the USA Dollar over those years and consequent increase in export earnings. The trade balance was worsened by a sharp increase in imports for two main reasons. Malawian importers took advantage of the depreciating South African Rand to import more goods and commodities while also taking advantage of the trade liberalisation policies adopted by Malawi. Hence the Malawi economy was slowly turning into a market place of finished imported goods. On the domestic side, agricultural inputs became expensive due to the depreciation of the Kwacha that made agricultural imports expensive for farmers hence imports grew faster than exports at 62.3% to 21.4% during the period, respectively.

                                                                                                                                                                                                                                                  This translated into a worsening trade balance with South Africa from 1999 to 2003. During this period Malawi's exports and imports to South Africa accounted for 10.9% and 39.9% of total exports and imports to the rest of the world, respectively.  Malawi's trade balance with the rest of SADC countries has not been satisfactory over the period under review either. Malawi registered positive balances in 1999 and in 2001 against negative balances in 2000, 2002 and 2003. These variations were largely due to inconsistent agricultural output because of variable weather patterns - changes which leave Malawi vulnerable as its agriculture is basically rain-fed. This negatively affected exports of major commodities, while at the same time the country imported relief maize on a massive scale following poor food crop harvests. This worsened the trade balance as imports grew faster than exports at an average of 115.4% compared to 26.5%. As a share of total exports and imports, exports to and imports from SADC accounted for 18.1% and 12.8%, respectively, during the period 1999 to 2003. It is evident that Malawi's imports from SA alone were higher than those from the rest of SADC.

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