ZIMBABWE’S bourgeoning trade deficit is a ticking time bomb; a disaster waiting to happen. While ominous signs abound, the real tragedy is that policymakers are pussyfooting only mentioning it in passing through fleeting references to a crisis whenever an opportunity arises.
Finance minister Tendai Biti this week again rang the alarm bells, saying the massive grain imports would be adding further strain on the already depleted liquidity in the market.
Out of the total US$1,3 billion in imports for the first two months of 2013, US$980 million was on consumptive imports comprising US$494 million in manufactured goods for distribution and retail sectors, US$383 million in services and US$103 million in imports by individuals.
According to Biti’s, imports continue to outpace exports. As at February 22, cumulative exports and imports since the beginning of the year amounted to US$523,7 million and US$1,297 billion, respectively, giving an aggregate trade gap of US$773 million for the period. We dare not extrapolate this to the end of 2013.
Last year Biti raised fears the deficit is potentially being funded by loans from the banking sector, a scenario not too far-fetched, but which also highlights the fact that Zimbabwe’s imports are being largely funded from unknown sources.
As far as we know, there are no requirements to declare the source of funding for imports at our ports, making the country a potential target for money laundering syndicates. Such is the magnitude of the problem that it goes beyond the burden of negative financial flows from the system, but potentially open up the economy to other abuses. While the authorities should worry and deal with the size of the hole being dug, they should equally query how this massive gap is being financed. How can a country go for so long spending what it doesn’t have? Clearly, something must and will give.
Economic analyst Tony Hawkins raised the red flag last month, saying the ballooning import bill was in large part due to the fact that Zimbabwe is over-consuming, generating excess demand that was being met by imports.
He said the consumption level of over 90% of the gross domestic product was being sustained in part by the accumulation of arrears and foreign capital inflows.
The flip side of the problem and the real calamity is that the country continues to export jobs. About US$383 million paid for “services” in just under two months is as counter-productive as the US$494 million in consumptive imports by the “retail and distribution sector”. Ironically, the productive sectors accounted for 24% of total imports. With so much being said about the trade deficit, what authorities have been doing is woefully inadequate to resolve the problem which needs serious policy interventions as part of holistic measures to address current economic problems. While the country is obsessed with political processes, including the referendum tomorrow and general elections later, the economy is once again taking a severe battering.