Trade deficit declines

HARARE - Zimbabwe's trade deficit with the rest of the world declined to $2,3 billion last year compared to $3 billion in 2015, latest data show.

Figures released by the national statistics agency, Zimstat, on Friday showed that the country imported goods valued at $5,2 billion in 2016 compared to $2,8 billion exports.

Zimbabwe’s balance of trade has remained in negative territory in the last few years fuelled by economic decline that has hit on productivity while promoting imports.

In 2014, the country recorded a trade deficit of $3, 3 billion with the Reserve Bank of Zimbabwe citing in part the retreat in international commodity prices and lack of competitiveness.

The country’s main exports are still dominated by commodities such as gold, platinum, chrome and tobacco which are more vulnerable to international price fluctuations.

Market experts said the decline in imports was mainly as a result of low aggregate demand emanating from an economic slowdown and lack of pro-business policies rather than the country’s protectionist strategies.

To curtail the thirst for imports, government last year put in place measures including banning the importation of certain products through Statutory Instrument 64 of 2016.

However, the local manufacturing industry, once a major contributor to the country’s exports is currently struggling due to high labour costs, clogged cheap capital inflows, antiquated equipment and stiff competition from imports. As a result, its contribution to exports is now minimal.

The release of the trade figures came at time Old Mutual has projected that Zimbabwe’s economy would slump further this year due to continued decline in global commodity prices, fiscal challenges, and possible difficulties in policy implementation.

“Notwithstanding the improved trend in capacity utilisation, unless supportive measures are implemented to ensure that foreign currency generation improves, a reversal of the gains already achieved may result,” the insurance giant said in its latest economic outlook report.

Old mutual noted that signs of this are already popping up as some reports suggests that retailers have begun resorting to buying foreign currency at premium rates on the black market in order to restock and passing on the premium incurred to customers.

“This, if left unchecked is likely to result in internal inflation and resultantly less competitive products that could otherwise potentially earn export receipts.

That said, we are of the opinion that gross domestic product is unlikely to register positive growth if the foreign currency shortages persist,” the integrated financial services firm added.

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