Malawi recorded a Balance of Payments (BoP) deficit of US$98.9 million (K71.7 billion) in the first quarter of 2018, statistics from the Reserve Bank of Malawi (RBM) have shown.
This is compared to a BoP surplus of US$18.1 million (K13.2 billion) the country recorded in the quarter ended December 31, 2017.
The deficit represents a jump of 84 percent from US$53.8 million (K38.8 billion) deficit recorded in the first quarter of 2017.
The BoP of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period.
It is a summary of all monetary transactions between a country and rest of the world. These transactions are made by individuals, firms and government bodies.
BoP provides detailed information concerning the demand and supply of a country’s currency. It may also signal a country’s potential as a business partner for the rest of the world.
For example, i f a country is grappling with a major balance of payments difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to impose measure store strict imports and discourage capital outflows in order to improve the balance of payments.
On the other hand, a country with a significant balance-of-payment surplus would be more likely to expand imports, offering marketing opportunities for foreign enterprises, and less likely to impose foreign exchange restrictions.
In its Financial and Economic Review for the first quarter of 2018, RBM says gross official reserves declined to US$663.2 million as at end of the 2018 first quarter from US$758.3 million in the previous quarter but were higher than US$550.0 million recorded in the 2017 first quarter.
The decline in reserves was explained by relatively higher outflows than inflows, as foreign expenses increased against a seasonal drop in purchases from the market.
“Resultantly, import coverage slightly dropped to 3.2 months from 3.4 months in the preceding quarter. However, it is expected that in the second quarter of 2018, reserves will pick up on the back of seasonal agriculture marketing inflows.
“Foreign exchange inflows declined to US$247.8 million during the reviewed quarter from US$253.2 million in the preceding quarter. The decline was on account of a decrease in the purchase of foreign exchange from the market. Sources of foreign exchange in the quarter under review comprised purchases from authorized dealer banks and various projects amounting to US$239.4 million,” reads the report in part.
The report says Malawi’s trade deficit was projected to slightly improve to US$412.9 million during the first quarter of 2018 from a deficit of US$413.2 million projected in the preceding quarter and US$415.0 million in a corresponding quarter of 2017.
It further said official capital inflows decreased to US$20. 4 million during the 2018 first quarter from US$25.5 million in the preceding quarter. The total amount was earmarked for miscellaneous projects.