During the last three months, the country’s trade balance has doubled which could lead to inflationary pressures. The trade deficit could exert more pressure on the demand for foreign exchange weakening Kwacha, experts warn.
Malawi’s widening trade deficit is a matter of worry cautioned economists. During the last three months, the country’s trade balance has doubled, which could lead to inflationary pressures. The trade deficit could exert more pressure on the demand for foreign exchange weakening Kwacha, experts warn. Importers will be compelled to pass on to customers the rising cost of foreign exchange.
The Reserve Bank of Malawi (RBM) data shows that the merchandise trade deficit increased to $417.9 million in the third quarter of this year from $252.2 million recorded in the second quarter of this year. The imports grew to $803.2 million against $385.3 million during the review period. The primary reason of the high growth in imports has been attributed to the high costs of fertilisers. Import substitution is also not an option as the imports are critical products that are not manufactured in the country.
Experts warn that unless the country increases its exports on a war footing, the country will get caught in a vicious cycle of widening trade balances and foreign exchange shortages. The major exports of Malawi are tobacco, tea, coffee, pulses, and oil seeds. Malawi must urgently work toward improving its manufacturing sector.
According to RBM Financial Markets Development Report, the gross official reserves have continued to fall. Currently, it is reported at $357.18 million, an equivalent of 1.43 months of import cover in September 2022. Kwacha is now trading at K1 036 to the dollar and is projected to continue depreciating.
It is hoped that through the recently launched National Export Strategy II (NES II) (2021–2026), Malawi will be able to improve its trade balance.
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https://trendsnafrica.com/malawis-foreign-reserves-dip-as-earnings-from-sugar-plunges/
https://trendsnafrica.com/malawis-foreign-reserves-dip-as-earnings-from-sugar-plunges/
