Tobacco is the major export.
Income is unequally distributed, and about half of the population lives below the poverty line. Subsequently, however, inflation picked up and growth slowed. Although external shocks, in the form of periodic droughts and fluctuations in tobacco prices, played a part in these variations in economic performance, problems have been compounded by occasional weakening in the implementation of macroeconomic policies. Subsequently, control over fiscal and monetary developments improved, although the accumulation of domestic spending arrears, and sharp changes in the real exchange rate, continued to hinder economic management. Developments in Malawi's external current account have been influenced largely by the effect of exchange rate movements on import demand and the performance of the tobacco sector.