LILONGWE, Sept 12 (The African Portal) – Malawi kicked off the third quarter of 2025 on a relatively positive note, posting a $173 million (about K303 billion) trade deficit, the lowest in many months, driven by a surge in tobacco export and softer import demand, latest data show.
Data from the Reserve Bank of Malawi (RBM) Monthly Economic Review for July 2025 indicate that deficit stood at $173 million (about K303 billion), a drop from $237.9 million (about K416.6 billion) in June and better than the $218.3 million (about K382.5 billion) recorded in the corresponding period last year.
The improvement in trade deficit was largely attributed to a 59.1 percent surge in exports to $117.1 million (about K204.9 billion), a rise from $73.6 million (about K129 billion) in June, boosted by tobacco sales which rose sharply to $86.6 million (K151.6 billion) from $52.3 million the previous month while pulses climbed to $5.8 million from $2.1 million during the review period.
During the same period, the data show that imports fell by 6.9 percent to $290.1 million (about K507.9 billion) compared to $311.5 million in June. The drop was driven by reduced spending on fuel, vehicles, cereals and printed materials. Fuel imports, for example, declined to $49.2 million (K86.1 billion) in July from $60.2 million in June, while vehicle imports eased to $16.4 million from $19.9 million.
Cumulatively, Malawi’s trade deficit between January to date stands at $1.6 billion (about K2.8 trillion), a 15 percent rise from minus $1.38 billion (about K2.4 trillion) recorded during the same period last year.
RBM said the narrowing trade gap supported the country’s foreign exchange position, with foreign exchange reserves rising to $607.7 million in July, equivalent to 2.4 months of import cover from $555.9 million or 2.2 months of import cover in June.
The increase reflected higher earnings from tobacco, which hit $522.2 million (about K914.3 billion) alongside improved private sector reserves.
In an interview, Scotland-based Malawian economist Velli Nyirongo said the improvement in trade deficit is welcome, but warned against complacency.
He said: “This is temporary relief. Tobacco continues to dominate Malawi’s export basket and once the season ends, the trade gap may widen again.
“What the numbers show us is not structural change, but seasonal dependence. Without diversifying into legumes, manufactured goods and services, Malawi will keep facing the same cycle every year.”
Nyirongo said the decline in imports while easing short-term foreign exchange pressure, may reflect deeper weaknesses.
“Reduced demand for fuel and vehicles is not always good news, it can be a signal of economic slowdown and constrained investment,” he said.
Mzuzu University economist Christopher Mbukwa said foreign exchange shortages could also have played a part in reduction in trade deficit as imports were subdued.
“The drop in vehicle imports might be a result of the prevailing foreign exchange shortage. The way local authorities have been managing the scarce resources means there is not a lot of foreign exchange left to go around for those activities,” he said.
Mbukwa expects the imports to rise again when the foreign exchange situation stabilises.
The Ministry of Finance and Economic Affairs prioritises fertiliser and fuel imports when allocating foreign exchange often leaving less available for other imports with the monthly imports value for the country pegged at $250 million (about K437 billion).
The July data come at a time the Malawi Government is pushing for export diversification under the African Continental Free Trade Area (AfCFTA), a market of 1.2 billion people and a combined gross domestic product of $2.5 trillion, covering 55 African countries.
In a press statement last week, Secretary for Trade Christina Zakeyu said Malawi will target international trade fairs such as the 2025 Intra-African Trade Fair, currently underway in Algiers, Algeria.
Available data show that Malawi annually exports goods valued at $1 billion against imports at $3 billion, creating a deficit of $2 billion.
Credit: Nation Online
