Figure 1: Merchandise Trade Balance in Malawi (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Malawi have increased to USD 2.8 billion in 2018, from an annual average of USD 2.4 billion from 2015 to 2017[1]. Exports have remained largely unchanged at USD 1.0 billion in 2018, which is equal to the annual average from 2015 to 2017[2]. The stronger growth in imports has worsened Malawi’s merchandise trade balance which deteriorated to a deficit of -USD 1.8 billion in 2018 from a deficit averaging -USD 1.4 billion from 2015 to 2017[3]. The growth in imports has had a short-term negative impact on gross official reserves supported by depreciation of the MWK.
Figure 2: Gross Official Reserves in Malawi (2016-2022)
Sources: IMF 2018, Malawi First Review Under the Three-Year Extended Credit Facility Agreement; IMF 2017, Malawi Ninth Review Under the Extended Credit Facility Agreement. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
Gross official foreign exchange reserves decreased to USD 695.3 million in 2018 from an annual average of USD 877.6 million from 2015 to 2017[4]. During this period, the MWK depreciated by -0.2% in 2018 to MWK 726.8 per USD (2017: -1.6%)[5]. Imports have grown in spite of the depreciation in the currency because the depreciation had slowed down after more significant depreciation in 2015 and 2016. The MWK depreciated by an annual average of -22.6% in 2015 and 2016 from MWK 424.3 per USD in 2014 to MWK 714.1 per USD in 2016[6]. Gross official reserves are projected to increase to USD 790.7 million in 2019, which is equivalent to 3.2 months’ import cover[7]. In the forward-looking medium-term from 2020 to 2022, gross official reserves are projected to increase to an annual average of USD 1.1 billion (approx. 3.9 months’ import cover)[8]. The slower growth in exports and growing imports has not affected Malawi’s current account balance in 2018 but in the forward-looking medium-term the current account balance is projected to return to its persistent current account deficit.
Malawi’s current account balance improved to a deficit of -USD 637.0 million in 2018, from a deficit averaging -USD 667.2 million from 2015 to 2017[9]. Apart from the growth in merchandise imports, which deteriorated the current account balance, the balance of services trade has improved and Malawians’ income from abroad increased which slowed the deterioration of the current account balance. The balance of services trade is projected to have improved to a deficit of -USD 408.0 million in 2018 from a deficit averaging -USD 424.6 million from 2015 to 2017[10]. Malawians’ income from abroad increased to USD 354.4 million in 2018 from an annual average of USD 320.7 million from 2015 to 2017[11]. The current account balance is projected to deteriorate to a deficit of -USD 553.3 million (approx. -7.6% of GDP) in 2019[12]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to deteriorate further to annual average deficit of -USD 634.3 million (approx. -7.8% of GDP)[13].
Figure 3: Current Account Balance in Malawi (2016-2022)
Sources: IMF 2018, Malawi First Review Under the Three-Year Extended Credit Facility Agreement; IMF 2017, Malawi Ninth Review Under the Extended Credit Facility Agreement. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
However, Malawi is still is still dependent on agricultural exports which have made exports earnings volatile due to exports being vulnerable to the adverse impact of climate change. For example, Malawi has faced a number of climate-change related natural disasters affecting agricultural production. In December 2016 and January 2017 Malawi faced the severe aftermath of the armyworm infestation which affected some 17,000 hectares of maize[14]. In addition, Malawi is still dealing with anomalous rainfall and the destruction of crops by hurricanes Idai and Kenneth which left more than 3.4 million Malawians in severe or crisis-level food insecurity[15]. From January to March 2019, Malawi was faced with the challenge of sporadic rains and flooding which affected over 730,000 people who were displaced in 15 of the 28 counties[16]. The top agricultural exports such as tobacco, tea and mate, sugarcane products, vegetables, oil seeds and animal feed constituted 81.4% of Malawi’s total export earnings in 2018 which has increased from the average of 79.9% from 2015 to 2017 (2014: 71.2% of exports)[17]. In spite of this concentration of exports, Malawi is well integrated in terms of regional trade with neighbouring countries in COMESA and the SADC but its trade is unbalanced.
The top-five exports from Malawi to COMESA are tobacco, oil seeds, animal feed, sugarcane products and glassware which constituted 8.6% of total exports in 2018 (2015-‘17: 8.7% of total exports)[18]. The value of the top-five exports from Malawi to COMESA increased to USD 87.4 million in 2018 from an annual average of USD 86.9 million from 2015 to 2017[19].
The value of total exports from Malawi to COMESA decreased to USD 137.5 million (approx. 13.6% of total exports) in 2018 from an average of USD 143.5 million (approx. 14.4% of total exports)[20]. These are moderate or average levels of intra-regional trade given that the COMESA average intra-regional exports level was 11.9% of total exports in 2018. The COMESA intra-regional exports, meaning total exports amongst COMESA countries, as a share of total exports to the world increased from an average of 10.5% from 2015 to 2017[21]. Given Malawi’s balance of merchandise trade in the region, there is room to increase its exports to COMESA countries.
Figure 4: Nominal Exchange Rate in Malawi (2015-2018)
Sources: RBM 2019, Exchange Rates.
Malawi’s top-five imports from COMESA are tobacco, maize, cement, fertilizers and soap. Although these imports are diversified they constituted only 5.9% of total imports to Malawi in 2018 (2015-‘17: 5.9% of total imports)[22]. The value of the top-five imports from COMESA to Malawi increased to USD 167.3 million in 2018 from an annual average of USD 138.4 million from 2015 to 2017[23].
The value of Malawi’s total imports from COMESA increased to USD 284.6 million (approx. 10.1% of total imports) in 2018 from an annual average of USD 235.8 million (approx. 10.0% of total exports) from 2015 to 2017[24]. These are relatively high or above-average levels of intra-regional trade given that the COMESA average intra-regional imports level was 6.5% of total imports in 2018[25]. The COMESA intra-regional imports, meaning total imports amongst COMESA countries, as a share of total imports from the world increased only from an average of 5.5% from 2015 to 2017[26].
Table 1: COMESA Regional Trade for Malawi (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Malawi maintains a persistent and growing merchandise trade deficit in COMESA which increased to a deficit of -USD 147.1 million in 2018 (2015-’17: -USD 92.2 million). Hence, there is room to increase Malawi’s exports to COMESA countries. This would make Malawi’s intra-regional trade balance in COMESA more equitable.
The top-five exports from Malawi to the SADC are tea and mate, animal feed, oil seeds, sugarcane products and alcoholic beverages, which constituted 11.7% of total exports in 2018 (2015-‘17: 10.7% of total exports)[27]. The value of the top-five exports from Malawi to SADC increased to USD 118.5 million in 2018 from an annual average of USD 106.4 million from 2015 to 2017[28].
The value of total exports from Malawi to the SADC decreased to USD 225.4 million (approx. 22.3% of total exports) in 2018 from an average of USD 228.5 million (approx. 23.0% of total exports)[29]. These are relatively good or above-average levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[30]. Given Malawi’s balance of merchandise trade in the region, there is room to increase its exports to SADC countries.
Table 2: SADC Regional Trade for Malawi (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Malawi’s top-five imports from SADC are tobacco, maize, cement, petroleum and soaps. Although these imports are diversified they constituted only 7.4% of total imports to Malawi in 2018 (2015-‘17: 7.5% of total imports)[31]. The value of the top-five imports from SADC to Malawi increased to USD 209.0 million in 2018 from an annual average of USD 176.0 million from 2015 to 2017[32].
The value of Malawi’s total imports from SADC increased to USD 876.5 million (approx. 31.0% of total imports) in 2018 from an annual average of USD 746.2 million (approx. 31.7% of total exports) from 2015 to 2017[33]. These are very high levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[34]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[35].
Malawi maintains a persistent and growing merchandise trade deficit in SADC which increased to a deficit of -USD 651.1 million in 2018 (2015-’17: -USD 517.7 million). Malawi is quite reliant on the SADC for its imports and there is significant room to increase its exports to SADC countries. This would make Malawi’s intra-regional trade balance in SADC more equitable.
In addition, Malawi might want to reassess the balance of benefits to its COMESA and SADC membership given that it received greater benefit from COMESA on the account of its relatively more favourable merchandise trade balance. Therefore, there is room to rebalance the Malawi’s imports towards COMESA and increase Malawi’s exports to both regions. This would also make Malawi’s intra-regional trade balance with COMESA and SADC more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019]; IMF 2017. Malawi Ninth Review Under the Extended Credit Facility Agreement, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019].
[5] RBM 2019. Exchange Rates, Reserve Bank of Malawi: Lilongwe. Available At: https://www.rbm.mw/ [Last Accessed: 15 October 2019].
[6] RBM 2019. Exchange Rates, ibid.
[7] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.
[8] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.
[9] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.; IMF 2017. Malawi Ninth Review Under the Extended Credit Facility Agreement, ibid.
[10] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.; IMF 2017. Malawi Ninth Review Under the Extended Credit Facility Agreement, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.
[13] IMF 2018. Malawi First Review Under the Three-Year Extended Credit Facility Agreement, ibid.
[14] RW n.d. Southern Africa: Armyworm Infestation – Jan 2017, on the ReliefWeb Website, viewed on 10 October 2019, from https://reliefweb.int/.
[15] RW n.d. Southern Africa: Drought – Nov 2018, on the ReliefWeb Website, viewed on 10 October 2019, from https://reliefweb.int/.
[16] RW 2019. 2019 Flood Response Plan and Appeal, ReliefWeb: New York. Available At: https://reliefweb.int/ [Last Accessed: 10 October 2019].
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
[28] UNCTAD 2019. UNCTADStat Database, ibid.
[29] UNCTAD 2019. UNCTADStat Database, ibid.
[30] UNCTAD 2019. UNCTADStat Database, ibid.
[31] UNCTAD 2019. UNCTADStat Database, ibid.
[32] UNCTAD 2019. UNCTADStat Database, ibid.
[33] UNCTAD 2019. UNCTADStat Database, ibid.
[34] UNCTAD 2019. UNCTADStat Database, ibid.
[35] UNCTAD 2019. UNCTADStat Database, ibid.
