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BizDay Zimbabwe

Trade deficit declines

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The country’s trade deficit in the five months to May was at $1,47 billion, narrowing by about 17,9 percent from the comparable period last year reflective of the tight liquidity situation and the lack of competitiveness on the exports market. According to the latest data from ZimStat, imports in the period were at $2,46 billion and exports amounted to $990,32 million.

Exports were down 23,93 percent from $1,3 billion this time last year as the country’s industries continue to lose competitiveness due to high costs and antiquated production processes.

Manufactured exports are now under nine percent of the country’s exports and with the declining capacity utilisation within the sector, it is clear that exports will be much lower at year end.

Imports fell 23,03 percent from $3,2 billion last year with most industries’ capacity to pay was severely limited.
The fall in imports in turn affects the country’s customs duties thereby adding to fiscal pressure.

Economic analyst Dr Erich Bloch said the continued decline in trade deficit was mainly due to the improvement in foreign currency inflows generated during this tobacco selling season.

“As you know when the country is liquid, exports certainly decrease because there is enough disposable income for people to purchase locally produced goods regardless of the prices hence leading to the decline of the imports as well,” said Dr Bloch.

Economic analyst Dr John Robertson said the decline in trade deficit coupled with a decline in imports and exports shows a massive shrinkage in the local business environment.

“The shrinkage in business mean reduced tax revenues that eventually puts pressure on Government expenditure towards social services such as education and health,” said Dr Robertson.

He said the country must attract foreign direct investment through introducing flexible investment policies.
Other economic analysts are of the view that lower tax revenue does not only apply to falling imports but also affected by a drop in mineral exports as Government end up getting less in royalties.

The total value of mineral production excluding diamonds in the four months to April dropped 8,54 percent to $596,42 million against the same period last year, weighed down by the weaknesses in international gold prices and low investment in the sector.

According to latest figures from the Chamber of Mines availed by the Finance Ministry; gold production was 4 484,5kg with a total value of $183,122 million.

This is below the 4 500,21kg produced last year with a total value of $224,73 million.
Cumulative royalties in the four months to April were at $41,01 million against a target of $46,16 million.

South Africa remained the largest trading partner accounting for $1,04 billion of imports and $609,12 million of exports.
Economists are forecasting the trade deficit to close the year lower at $3,2 billion from $3,5 billion last year and to continue narrowing to around $2,66 billion.

Imports are forecast to close the year at $7,06 billion and exports at $3,81 billion.
The current account position is projected to end at a deficit of $3,64 billion an improvement from $3,72 billion.

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