January 28, 2014
International Trade in Malawi
Malawi is a landlocked country in Africa established in 1891. With an estimated population of close to 17 million, Malawi is ranked one of the most densely populated nations as well as one of the least developed. The economy relies heavily on agricultural resources while also being dependent on a substantial amount of economic assistance from agencies like the World Bank, the International Monetary Fund, and individual donor countries (The World Factbook, 2014). Since this nation is so heavily reliant on agriculture, I would elect to export fertilizer products to Malawi which would be beneficial to both parties involved in the trading.
Malawi has been a multi-party democratic system of government since June, 1993 due to domestic unrest brought forth from the previous one-party rule. The current government system consisting of executive, legislative, and judicial branches came into effect per an overwhelming vote of the Malawian people. The executive branch of government is comprised of a president elected every five years, a first and possible second vice president, and an appointed cabinet consisting of an unlimited number of members (Mwele, 2006).
The legislative branch is made up of a unicameral National Assembly of 193 seats held by elected members of popular vote serving five year terms. The Supreme Court of Appeal stands at the highest level of the judicial branch while various subordinate courts such as magistrate, district, and city courts serve the local jurisdictions. Malawi is divided into three administrative regions separated into 28 districts forming the base for the local government in rural areas (Country Profile: Malawi, 2013).
President Joyce Banda faced overwhelming economic challenges when she stepped into power following the untimely death of former President Bingu Wa Mutharika. These challenges are a direct result of inappropriate policies which caused an ever growing fiscal deficit, the steady rise of inflation, and heavy depletion of gross reserves per the overvalued exchange rate (African Development Bank Group: Malawi, 2014). Currently, Malawi is profoundly dependent on economic assistance and was granted eligibility status in 2007 to receive financial aid under the Millennium Challenge Corporation (MCC) initiative. The Malawian government continues to struggle while steadily making progress towards goals that include the creation of a better market economy, improving education, and obtaining a better grasp of fiscal discipline (The World Factbook, 2014).
To better understand the level of poverty Malawi faces, one may refer to the amount of external debt the nation faces. External debt is reported as the entire international obligations a country has in the form of a percentage of gross domestic product (GDP). In general, a debt less than 60 percent of GDP is not an issue because the country is capable of paying off the debt without strain but there are negative effects on the economy when debt levels reach 80-90 percent (The Global Economy, 2012). In 2006, the total debt was measured at 150 percent of GDP meaning the debt had reached unsustainable levels. Luckily, Malawi qualified for Debt Relief under the Highly Indebted Poor Country (Hipc) Multilateral debt relief Initiative reducing the debt from $2.97 billion to $488.3 million bringing the debt to 32.4 percent of GDP (Helema, 2013).
Perhaps one of the principal causes of such widespread poverty is due to lack of education. In Malawi, primary education, which is equivalent to 1st through 8th grade, is mandatory and free to citizens although students are still responsible to pay for their uniforms and any required school supplies. Since most of the population resides in rural areas, it has been difficult to establish and maintain a solid educational structure as there isn’t transportation available for students and the number of…