Economy of Malawi
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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.
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[edit] Agriculture
Agriculture represents 36% of the 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 Foreign Agricultural Office estimates the following production of unprocessed tobacco by country in 2000 (figures are in thousands of tonnes.)
| Country | Production in thousands of tonnes |
|---|---|
| China | 2,298.8 |
| India | 595.4 |
| Brazil | 520.7 |
| United States | 408.2 |
| European Union | 314.5 |
| Zimbabwe | 204.9 |
| Turkey | 193.9 |
| Indonesia | 166.6 |
| Former Soviet Union | 116.8 |
| Malawi | 108.0 |
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.[1][2]
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 pucity 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.
[edit] 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.
[edit] Move towards economic independence
In 2006, in response to disastrously low agricultural harvests, Malawi 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.[3]
[edit] Economic Indicators
GDP: purchasing power parity - $8.272 billion (2006 est.)
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/day (2003 est.)
Oil Consumption 5,500 bbl/day (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
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 - 135.96 (2006), 108.894 (2005), 108.898 (2004), 97.433 (2003), 76.687 (2002)
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[edit] Notes
- ^ The World Factbook. CIA
- ^ J. Tyler Dickovick, Africa 2008, 43rd edition, Harpers Ferry, WV: Stryker-Post Publications, 2008. p. 278
- ^ Dugger, Celia W. (December 2, 2007). "Ending Famine, Simply by Ignoring the Experts", New York Times. Retrieved on 5 August 2008.
[edit] References
- Anthony and Doreen Young, A Geography of Malawi, Second edition. Evans Brothers, Limited, London (1978) ISBN 0-237-50296-8
- This article contains material from the CIA World Factbook which, as a U.S. government publication, is in the public domain.
[edit] See also
[edit] External links
- Official site - Ministry of Finance of Malawi
- Economy of Malawi at the Open Directory Project
- MBendi Malawi overview
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