Date Of Article: 3/19/2003
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Trade balance to worsen
By: Ayam Maeresa
Malawi’s trade balance with Zimbabwe, which for many years has tilted in favour of the latter, will worsen as ripple effects of last month’s sharp plunge of the Zim dollar start taking effect, the Commercial Bank of Malawi has said. The bank said in its latest economic report the falling of the Zim dollar following a decision by Harare to loosen its grip on the once overvalued currency makes it cheaper for small-scale entrepreneurs to import goods from there. This is going to further widen the trade gap, which Malawi has unsuccessfully fought to bridge over the years, said the bank. Zimbabwe devalued its dollar overnight to Z$800 against the US dollar from the Z$55 it has maintained since its economic crisis started three years ago. This depreciated the Zim dollar to 11 cents to a kwacha from K1.63. The bank said while the move will improve competitiveness of Zimbabwe’s exports, it will wet the appetite of importers here. “This could mean an imminent increase in cross-border import trade, especially involving small-scale entrepreneurs that could ultimately worsen our terms of trade with Zimbabwe,” said the bank. The imbalance, standing close to half a million kwacha a couple of years ago, was largely blamed on Zimbabwe’s non-tariff barriers that gave no worthwhile meaning to the two countries’ preferential bilateral trade agreement. Two years ago government officials from both camps met in Blantyre to discuss a possible review of the agreement in a bid to increase Malawi’s share of the trade in the spirit of cooperation. Economic analysts say a thriving parallel market in Zimbabwe, where the US dollar is selling at more than Z$2000 because of persistent foreign exchange shortages Harare is experiencing, will compound the trade problem for Malawi. The government has put in place import controls to block a flood of lowly priced goods from Zimbabwe. On the other hand Zimbabwe tightened border controls in response to concerns from regional trading partners, who complained of suffering the brunt of her economic problems. A report of a survey by Agriculture Policy Analysis of the Bunda College of Agriculture revealed that Malawi’s informal traders import more from all but one of its three neighbours Mozambique, Tanzania and Zambia. Malawi sells goods worth about K1.2 billion (US$13.7 million) a year through informal channels, while the neighbours sell K2.7 billion (US$30 million) worth of goods. Only trade with Tanzania favours Malawi, according to the report. The National Bank of Malawi (NB) said in January that the country’s trade balance with its major trading partners worsened to K19 billion (US$210.5 million) from about K16 billion (US$175 million) last year.
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