Zim’s BOP position set to improve

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THE country’s balance of payments (BOP) position remains precarious, with latest data from the Finance ministry showing that the position is expected to end the year in the red.

Report by Staff Writer

However, Treasury expects the position to narrow down to US$438,2 million at the close of the year from US$789,7 million in 2011.

According to notes contained in the pre-budget strategy paper for 2013, the anticipated decline in the BOP deficit position is on the back of some gains in export of commodities and slight improvement on the capital account.

Reserves are currently a marginal proportion of import cover, while the current account deficit is unsustainably wide, estimated at about 20% of the gross domestic product (GDP).

Against the backdrop of a waning growth momentum and continued low confidence, real GDP is expected to stagnate going forward after the downward revision in the growth forecast to 5,4% from 9,4%.

According to figures from Zimstats, total exports in the year to August amounted to US$2,97 billion while imports were at US$4,58 billion leading to a trade deficit of US$1,608 billion.

In the same period, the country imported diesel worth US$579,72 million and leaded petrol US$246,6 million and unleaded petrol worth US$48,94 million.

The country’s exports were skewed towards minerals, with industrial diamonds at US$468,37 million, nickel matte amounting to US$307,25 million and nickel ores and concentrates of US$210,77 million.

Economists do not foresee an improvement in the trade deficit in the short- to medium-term as industry continues to be under-capitalised.

Continued policy uncertainty, particularly over the implementation of indigenisation and concerns over the positioning of Zimbabwe as a predictable foreign direct investment destination ,keeps investors away.

Zimbabwe’s low sovereign risk rating is blocking the flow of capital into the economy as potential financiers remain sceptical of providing long-term funding for the economy.

The low levels of foreign direct investment have further compounded the liquidity challenges in the economy. This has affected the economy’s potential aggregate supply and overall economic performance.

Annual inflation dropped to 3,24% in September from 3,64% in August due to a lack of real demand for goods and services largely because of low disposable income in the majority of the public.

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