LILONGWE—Inflation, which is defined as a rise in the general level of prices of goods and services in an economy over a period of time, is likely going to go up this year following an expected dismal performance by the country’s top foreign exchange earner tobacco, says Eliam Kadewere, an economist at the ministry of finance.
Kadewere told this reporter that tobacco accounts for 70% of the country’s total foreign exchange (forex) earnings and its poor performance at the market is bad news for Malawians.
Malawi is already experiencing a forex crunch - donors unhappy with the policies of the Mutharika administration cut off aid - which forced companies and producers that rely on imported raw materials to increase their production costs. That increase, Kadewere said, will continue since producers will be to buy forex from the black market at higher prices.
"From the suppliers’ point of view, this will drive inflation up hence making living tough and expensive,’’ the economist said.
The Tobacco Association of Malawi has said the decrease in tobacco production this season is due to low prices offered by buyers last season which discouraged farmers.
‘’As you know, a tobacco farmer like any other producer is profit oriented, which has a positive relationship with prices. So with the low prices offered last year, many farmers were discouraged and reduced their efforts on the product,’’ he said.
At the opening of the tobacco market this year, the Executive Director of Tobacco Control Commission, Dr Bruce Munthali, said orders for Malawi’s tobacco this year have gone down to 160 million kilograms from 180 million kilograms last year.
On this, Kadewere said that the future of tobacco trade in the country doesn’t look bright.
"First you should look at the global tobacco market; it is going down, partly because of the anti-smoking campaign,” he said. “By and by, farmers are diversifying, going into cotton, legumes and other productions. Therefore, tobacco production in the country will drastically fall in the long run.’’
He said there has to be a concerted effort to diversify the economy.
It’s estimated that about 2 million of the country’s 13 million people depend on tobacco and related industries for their livelihood. In the 2011/2012 tobacco season, Malawi is expecting to produce 218 million kilograms of tobacco, 7 million kilograms less than that produced in the previous season.
Malawi has a new government following the death of Pres Bingu wa Mutharika on April 5. New Malawi Pres Joyce Banda is reaching out to donors for assistance.
----The author is a student at the Malawi Institute of Journalism. ©2012 The Maravi Post. Reproduction authorised, with usual acknowledgment