Economy of Malawi

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Lilongwe market.
The economy of Malawi is predominantly agricultural, with about 90% of the population living in rural areas. The landlocked country in south central Africa ranks among the world's least developed countries. 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: 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 in Africa.

Malawi was ranked the 118th safest investment destination in the world in the March 2011 Euromoney Country Risk rankings.[1]

Agriculture

See also: Tobacco industry

Agriculture represents 37% of GDP, accounts for over 80% of the labor force, and represents about 80% of all exports. Its most important export crop is tobacco, which accounts for about 70% of export revenues. In 2000 the country was the tenth largest producer in the world (See table). The United Nations Food and Agriculture Organization estimates the following production of unprocessed tobacco by country in 2009 (figures are in thousands of tonnes.)

Country Production in thousands of tonnes
China 3,067.9
Brazil 863
India 620
United States 373.1
Malawi 208.1
Indonesia 181.3
Argentina 135.5
Italy 119.1
Pakistan 105
Zimbabwe 96.3

The country's heavy reliance on tobacco places a heavy burden on the economy as world prices decline and the international community increases pressure to limit tobacco production. Malawi's dependence on tobacco is growing, with the product jumping from 53% to 70% of export revenues between 2007 and 2008.[2][3]

A Malawi tea estate
The country also relies heavily on tea, sugarcane and coffee, with these three plus tobacco making up more than 90% of Malawi's export revenue. Tea was first introduced in 1878. Most of it is grown in Mulanje and Thyolo. Other crops include cotton, corn, potatoes, sorghum, cattle and goats. Tobacco and sugar processing are notable secondary industries.

Traditionally Malawi has been self-sufficient in its staple food, maize (corn), and during the 1980s it exported substantial quantities to its drought-stricken neighbors. 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 has few exploitable mineral resources. 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. Other challenges include a paucity of skilled labor, difficulty in obtaining expatriate employment permits, bureaucratic red tape, corruption, and inadequate and deteriorating road, electricity, water, and telecommunications infrastructure which 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.

Roadside vendor in Blantyre

The following are Malawi's top 20 agricultural production values and volumes for 2009. (Unofficial figures derived from FAO statistics)

Commodity Production in International dollars (1000) Production in tonnes FAO source
Maize 462,330 3,582,500
Casava 404,764 3,823,240
Tobacco 331,542 208,155
Groundnuts 116,638 275,176
Bananas (Excluding Plantains) 95,152 400,000 F
Sugar Cane 82,093 2,500,000 F
Indigenous Cattle Meat 80,688 0
Pigeon Peas 80,274 184,156
Beans, Dry 75,706 164,712
Fresh Fruit 74,456 213,321 Im
Plantains 72,634 351,812 Im
Indigenous Pig Meat 68,788 0
Tea 55,895 52,559 P
Indigenous Goat Meat 53,512 0
Mangoes, mangosteens & guavas 49,527 82,659 Im
Cotton Lint 39,017 27,300 F
Paddy Rice 36,896 135,988
Fresh Vegetables 30,530 162,012 Im
Indigenous Chicken Meat 25,713 0
Cow Peas 18,073 72,082

Key: F : FAO estimate, Im: FAO data based on imputation methodology, P : Provisional official data

Pharmaceutical companies

Malawi has four pharmaceutical companies that are actively engaged in the manufacture. They manufacture a limited range of drugs, particularly those that are in great demand on the local market.[4] These are Pharmanova Ltd.[4] and its sister company SADM, Malawi Pharmacies (Pharmaceuticals Limited) and Kentam Products Limited.[4]

International support

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 including deforestation, erosion, and overworked soils.

Former President Bingu wa Mutharika of Malawi spoke about the country's recent unilateral agricultural reforms at the World Economic Forum on Africa at the United Nations, September 2008

Move towards economic independence

In 2006, in response to disastrously low agricultural harvests, Malawi, through an initiative by the late President Bingu Mutharika,an economist by profession, began a program of fertilizer subsidies that were designed to re-energize the land and boost crop production. It has been reported that this program, championed by the country's president, is radically improving Malawi's agriculture, and causing Malawi to become a net exporter of food to nearby countries.[5]

Economic grievances though took a downward slide during Mutharikas second term. Economic grivences was a catalyst that resulted in the 2011 economic protests in Malawi in July.

Economic indicators

[citation needed] GDP: purchasing power parity - $8.272 billion (2006 est.)

Interest rates advertised by Malawi Savings Bank in Nchalo, Malawi on 30 September 2008
Exchange rates advertised by a currency trader in Lilongwe on 7 October 2008
Reserve Bank of Malawi Mzuzu Branch under construction in Mzuzu, a fast-growing city. July 2008.

GDP - real growth rate: 8.5% (2006 est.)

GDP - per capita: purchasing power parity - $800 (2007 est.)

GDP - composition by sector:
agriculture: 36.1%
industry: 18.8%
services: 45.1% (2006 est.)

Population below poverty line: 53% (2004 est.)

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

Distribution of Family Income-Gini Index 39 (2004)

Inflation rate (consumer prices): 14% (2006 est.)

Labor force: 4.5 million (2001 est.)

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

Unemployment rate: NA%

Budget:
revenues: $1.016 billion
expenditures: $1.097 billion; including capital expenditures of $NA (2006 est.)

Public Debt 39.4% of GDP (2006 est.)

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

Industrial production growth rate: 6.4% (2006 est.)

Electricity - production: 1.397 billion kWh (2005)

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

Electricity - consumption: 1.299 billion kWh (2005)

Electricity - exports: 0 kWh (2005)

Electricity - imports: 0 kWh (2005)

Oil Production 0 bbl/d (0 m3/d) (2003 est.)

Oil Consumption 5,500 bbl/d (870 m3/d) (2004 est.)

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

Exports: $560.3 million f.o.b. (2006 est.)

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

Exports - partners: South Africa 12.6%, Germany 9.7%, Egypt 9.6%, US 9.5%, Zimbabwe 8.5%, Russia 5.4%, Netherlands 4.4% (2006)

Imports: $832 million f.o.b. (2006 est.)

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

Imports - partners: South Africa 34.6%, India 8.1%, Zambia 7.8%, US 6.4%, Tanzania 5.8%, Germany 4.6%, China 4.3% (2006)

Current Account Balance -$209 million (2006 est.)

Debt - external: $468 million (2006 est.)

Economic aid - recipient: $575.3 million (2005)

Currency: 1 Malawian kwacha (MK) = 100 tambala

Exchange rates: Malawian kwachas per US dollar - 360.00 (6/Feb/2013), 165.961 (1/Sep/2011), 145.179 (2009), 135.96 (2006), 108.894 (2005), 108.898 (2004), 97.433 (2003), 76.687 (2002)

Fiscal year: 1 July - 30 June

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See also

References

  1. ↑ "Euromoney Country Risk". Euromoney Country Risk. Euromoney Institutional Investor PLC. Retrieved 15 August 2011. 
  2. ↑ CIA World Factbook
  3. ↑ J. Tyler Dickovick, Africa 2008, 43rd edition, Harpers Ferry, WV: Stryker-Post Publications, 2008. p. 278
  4. ↑ 4.0 4.1 4.2 http://www.who.int/hiv/amds/countries/mwi_SurveyUseTRIPs.pdf
  5. ↑ Dugger, Celia W. (December 2, 2007). "Ending Famine, Simply by Ignoring the multilateral organisation 'Experts'". New York Times. Retrieved 2008-08-05. 

 This article incorporates public domain material from websites or documents of the CIA World Factbook.

Further reading

  • Anthony and Doreen Young, A Geography of Malawi, Second edition. Evans Brothers, Limited, London (1978) ISBN 0-237-50296-8

External links

Sovereign states
  • Sahrawi Arab Democratic Republic
  • Somaliland
Dependencies and
other territories
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