Revenue Implications of Continental Free Trade Area: A Short-run Perspective of Malawi

The study estimates, in the short run, the tax revenue implications of Malawi joining the African Continental Free Trade Area (AfCFTA) using liberalization approaches and the SMART Model. The results show that Malawi is likely to benefit from joining the AfCFTA through trade creation. However, revenue losses are imminent and more pronounced for capital goods. The study recommends that Malawi should join the AfCFTA and liberalize while keeping a substantial portion of tariff lines for sensitive products and excluded products over a longer period of liberalization. The exclusion list should contain a significant amount of capital goods to minimize short-run negative revenue impacts.