HomeBusiness DigestZim’s trade deficit to worsen

Zim’s trade deficit to worsen

Zimbabwe’s trade deficit will worsen to over US$3 billion by the end of this year after the balance of trade in the four months to April widened to US$1,6 billion as the country’s reliance on imported goods and services grows, latest statistics show.

Staff Writer

According to the figures released by the Zimbabwe National Statistics Agency (Zimstat) this week, total imports recorded between January and April 2013 were US$2,6 billion against exports of US$1 billion giving rise to a cumulative trade deficit of US$1,6 billion.

The latest Zimstats figures show that imports are heavily weighted towards motor vehicles and foodstuffs.

According to the World Bank’s Interim Strategic Note (ISN) released this week, Zimbabwe’s imports will rise to 63% of GDP in 2013 from 55% in 2009, while import cover is now down to 20% of a month or roughly six days.

Exports are only expected to be 46% of GDP, an overestimate by local economists’ standards who assert that Zimbabwe’s burgeoning trade deficit, which they repeatedly warn is a ticking time bomb, will widen further to over US$3 billion by the end of this year.

Recently Finance minister Tendai Biti, who has been accused of paying lip service to the deficit, rang the alarm bells, saying the massive grain imports anticipated this year will be adding further strain on the already depleted liquidity in the market.

Analysts say it is unsound for the authorities to continue to failing to act to plug unnecessary consumptive imports, which represent a major drain on domestic liquidity.

For instance, out of the total US$1,3 billion in imports for the first two months of this year, US$980 million were 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.

This represented a deterioration of over 71% from statistics recorded in the same period last year.

Economists say the magnitude of the balance of trade problem goes beyond the burden of negative financial flows it imposes on the financial system but potentially opens up the economy for other abuses.

As the authorities worry about the size of the hole being dug, attention should also be directed to finding out exactly how the deficit is being funded.

Last year Biti raised fears that the deficit was potentially being funded by loans from the banking sector, a scenario not too far-fetched, but which also highlights the fact that the country’s imports are being funded largely from unknown sources.

Prominent economist, Tony Hawkins last week raised the red flag, saying the ballooning import bill was in large part due to the fact that the country was over-consuming, generating excess demand that was being met by imports.

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