Economy of Malawi

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Economy - overview: Landlocked Malawi ranks among the world's least developed countries. The economy is predominantly agricultural, with about 90% of the population living in rural areas. Agriculture accounts for 37% of GDP and 85% of export revenues. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. The government faces strong challenges, e.g., to spur exports, to improve educational and health facilities, to face up to environmental problems of deforestation and erosion, and to deal with the rapidly growing problem of HIV/AIDS.

Malawi has few exploitable mineral resources. Its two most important export crops are tobacco and tea. Tea was introduced in 1878. Most of it is grown in Mulanje and Thyolo. Traditionally Malawi has been self-sufficient in its staple food, maize (corn), and during the 1980s exported substantial quantities to its drought-stricken neighbors. Agriculture represents 36% of the GDP, accounts for over 80% of the labor force, and represents about 80% of all exports. Nearly 90% of the population engages in subsistence farming. Smallholder farmers produce a variety of crops, including maize, beans, rice, cassava, tobacco, and groundnuts (peanuts). Financial wealth is generally concentrated in the hands of a small elite. Malawi's manufacturing industries are situated around the city of Blantyre.

Malawi's economic reliance on the export of agricultural commodities renders it particularly vulnerable to external shocks such as declining terms of trade and drought. High transport costs, which can comprise over 30% of its total import bill, constitute a serious impediment to economic development and trade. Malawi must import all its fuel products. Paucity of skilled labor; difficulty in obtaining expatriate employment permits; bureaucratic red tape; corruption; and inadequate and deteriorating road, electricity, water, and telecommunications infrastructure further hinder economic development in Malawi. However, recent government initiatives targeting improvements in the road infrastructure, together with private sector participation in railroad and telecommunications, have begun to render the investment environment more attractive.

Malawi has undertaken economic structural adjustment programs supported by the World Bank (IBRD), the International Monetary Fund (IMF), and other donors since 1981. Broad reform objectives include stimulation of private sector activity and participation through the elimination of price controls and industrial licensing, liberalization of trade and foreign exchange, rationalization of taxes, privatization of state-owned enterprises, and civil service reform. Malawi qualified for Heavily Indebted Poor Country (HIPC) debt relief and is in the process of refining its Poverty Reduction Strategy.

Real GDP grew by 3.6% in 1999 and 2.1% in 2000. The government's monetary policy has been expansionary, and the average annual inflation has hovered around 30% in 2000 and 2001, keeping discount and commercial bank rates high (the discount rate was 47% in December 2000). In the second half of 2001, the Kwacha strengthened sharply against the U.S. dollar, moving from 80 to 60.

Malawi has bilateral trade agreements with its two major trading partners, South Africa and Zimbabwe, both of which allow duty-free entry of Malawian products into their countries. The government faces challenges such as the improvement of Malawi's educational and health facilities--particularly important because of the rising rates of HIV/AIDS--and environmental problems like deforestation, erosion, and overworked soils.

GDP: purchasing power parity - $7.364 billion (2005 est.)

GDP - real growth rate: 1.9% (2005 est.)

GDP - per capita: purchasing power parity - $600 (2005 est.)

GDP - composition by sector:
agriculture: 34.2%
industry: 15.8%
services: 49.9% (2005 est.)

Population below poverty line: 55% (2004 est.)

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Distribution of Family Income-Gini Index 50.3

Inflation rate (consumer prices): 15.4% (2005)

Labor force: 4.5 million (2001 est.)

Labor force - by occupation: agriculture 90%, industry and services 10% (2003 est.)

Unemployment rate: NA%

Budget:
revenues: $844.6 million
expenditures: $913.9 million, including capital expenditures of $NA (FY 2005 est.)

Public Debt 195.9% of GDP (2005 est.)

Industries: tobacco, tea, sugar, sawmill products, cement, consumer goods

Industrial production growth rate: 7.9% (2005 est.)

Electricity - production: 1.296 TWh (2003)

Electricity - production by source:
fossil fuel: 2.39%
hydro: 97.61%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 1.206 TWh (2003)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Oil Production 0 bbl/day (2003 est.)

Oil Consumption 5,450 bbl/day (2003 est.)

Agriculture - products: tobacco, sugar cane, cotton, tea, maize, potatoes, cassava (tapioca), sorghum, pulses; cattle, goats

Exports: $364 million (f.o.b., 2005)

Exports - commodities: tobacco, tea, sugar, cotton, coffee, peanuts, wood products

Exports - partners: US 18%, South Africa 12.2%, Egypt 7.6%, Germany 7%, Netherlands 6.9%, Japan 4.8%, Russia 4.6%, UK 4.2%, Mozambique 4% (2005)

Imports: $645 million (f.o.b., 2005)

Imports - commodities: food, petroleum products, semimanufactures, consumer goods, transportation equipment

Imports - partners: South Africa 37.9%, Zambia 8.7%, Mozambique 7.8%, Zimbabwe 7.3%, India 6.4%, Tanzania 4.6% (2005)

Current Account Balance -$218 million (2005 est.)

Debt - external: $3.287 billion (2005 est.)

Economic aid - recipient: $401.5 million (2001)

Currency: 1 Malawian kwacha (MK) = 100 tambala

Exchange rates: Malawian kwachas (MK) per US$1 - 149.4325 (July 2006), 108.894 (2005), 108.898 (2004), 97.433 (2003), 76.687 (2002), 72.197 (2001)

Fiscal year: 1 July - 30 June