There are several problems associated with Zimbabwe’s seriously negative balance of trade (BOT). The first is the sheer size of the deficit in that it represents the largest share of the overall balance of payments (BOP).
Last year, the trade deficit was a massive US$3 billion. In the first three months of 2012, Finance minister Tendai Biti said we exported US$900 million worth of goods and services whilst imports have gobbled US$1,8 billion. This suggests US$900 million worth of “official” imports have been funded from other sources. Projecting the trend so far to year-end easily gives us a trade deficit of US$5 billion this year.
Clearly, we should not be worried about just the sheer magnitude of the trade gap, but also need to be informed about the more serious issues. For instance, are we sure how the trade deficit is being financed? And what are the economic implications of such funding?
As a country, we also need to worry about what is being imported. Are we allocating the scarce foreign currency efficiently? If our policy makers start looking at some of these questions, an ominous picture will quickly unfold.
Biti innocently suggested last week that the local banking sector is funding the BOT and this simple assertion does ring true. The banks are indeed mobilising foreign lines of credit and most of this money is funding imports of one thing or another.
Recently, Sakunda Energy got US$23 million from the PTA Bank to fund imports of petroleum products. CBZ similarly obtained US$60 million to support the SME sector; and we all know what the major business activity of our SME sector is? You guessed right!, it is commodity broking, ie, importing goods in small quantities that the big guys can’t be bothered to import themselves. And, of course, quite a chunk of this goes to importing motor cars.
If this is true, then we are all watching a national crisis unfold. Why? Zimbabwe has become a net importer across virtually all economic sectors. With the exception of the mining sector, which remains the country’s net foreign currency earner, all others including agriculture are net importers at the moment. Mining is a particularly interesting in the sense that heavy investment into capacity is required today to generate exports in future, and the machinery and equipment is all imported; consumables such as fuel, explosives, oils and energy are also imported.
However, the mining sector has also been accused of importing banking services, shipping out all export revenues to offshore accounts and only localising the little they need to pay local taxes and other expenses. Agriculture is a net importer when one tries to balance agricultural exports against the fertiliser and agro-chemical imports. It’s a gloomy picture if we add food and power imports to the agriculture equation.
How are our imports being funded? Is it transfer payments from the diaspora and “other offshore sources” of funds. Therein lies a real possibility for the country’s import sector to be exposed to money laundering syndicates. Should the authorities not request importers to declare their source of funding? Should we not at least attempt to curb unnecessary imports?
One shudders to think how much of the US$2,5 billion in the banking sector loans are funding consumptive imports.