Zimbabwe's trade deficit narrows to $1,76bn

Zimbabwe's trade deficit narrows to $1,76bn
Published: 21 July 2014
The country's trade deficit narrowed to $1,76 billion in the six months to June from $2,37 billion last year, a decrease of 25,74 percent.

Latest data from ZimStat shows that imports amounted to $2,99 billion from $3,92 billion last year same period. Exports were at $1,22 billion from $1,54 billion last June.

No improvement in the trade deficit is anticipated in the short to medium term as industry continues to be under-capitalised, continued economic uncertainty and concerns over the attraction of Zimbabwe as a predictable foreign direct investment destination.

Economists are forecasting the trade deficit to close the year lower at $3,2 billion from $3,5 billion last year and to continue narrowing to around $2,66 billion.

Imports are forecast to close the year at $7,06 billion and exports at $3,81 billion. The current account position is projected to end at a deficit of $3,64 billion an improvement from -$3,72 billion.

At less than one month of import cover, usable international reserves are currently well below the standard 3-month threshold and the Low-Income Country (LIC) metric which indicates that Zimbabwe's foreign reserves should cover 6 to 16 months of imports.

Imports are now heavily skewed towards consumption as there has been a drop in the importation of raw material as industries capacity to pay remains constrained.

In the period, the country imported $92,38 million worth of maize from just $36,152 million last year in spite of reports the local harvest is expected to be much higher than previous years, $5,4 million worth of cooking oil of soya bean oil was imported and $4,24 million worth of cane or beet sugar. The country brought in $6,34 million in sweet biscuits, $3,44 million worth of juices and $7,97 million of animal feed.

Unleaded petrol imports were at $207,87 million and diesel at $452,11 million. Ammonium nitrate imports were at $17,52 million.

The fall in imports in turn affects the country's customs duties thereby adding to fiscal pressure. Already Government in the five months to May reported revenues which were below expectations.

Economists say lower tax revenue does not only apply to falling imports but is also affected by a drop in mineral exports as Government will get less royalties.

Exports were mostly made up of $71,87 million cane sugar, $181,48 million flue-cured tobacco, $168,51 million nickel concentrates, $135 million ferro-chrome, $248,62 million gold, $62,89 million platinum and $11,91 million hides and skin of reptiles. Manufacturing exports have continued to shrink reflecting the sector's declining competitiveness.
- Fiona Chigwida I The Herald
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