Trade deficit shoots up 16% to US$1,2 billion

Economists push for production incentives

ZIMBABWE registered a negative trade balance of US$1,24 billion during the seven months to July, up 16% compared to the prior period, as the effects of government’s relaxation of basic commodity imports filtered through, data from the Zimbabwe National Statistics Agency (Zimstat) showed this week.

e trade deficit stood at US$1,07 billion during the same period last year.

is means Zimbabwe is spending more foreign currency to import goods and services than it is exporting.

e data indicates that Zimbabwe exported goods and services worth US$3,83 billion during the review period, compared to US$5,07 billion imports, resulting in a US$1,24 billion trade deficit. On Tuesday, leading economists said Zimbabwe’s overreliance on primary commodities will not be sustainable.

“ e concern there is that, the global and Zimbabwe-south Africa trade deficit have widened, which I think is a concern,” Prosper Chitambara, chief economist at the Labour and Economic Research Institute of Zimbabwe, said.

“ e exports have increased but not very significantly while we see imports have actually increased quite significantly overall.

“So I think it points to our huge appetite for imports. Well, I am not sure of the composition of those imports. If there are inputs or machinery or plant and equipment, I think that will be positive, which means we are importing things that can help us to enhance our productive capacity, which will positively affect our exports going forward.

“But the deficit is not a good thing. I think we need to close the deficit. We need to be producing more obviously and of course also exporting more. Our post-election policies must incentivise production and investments,” Chitambara said.

Imports outpaced exports during the review, rising by 6%.

Zimbabwe imports a wide-range of products, including machinery and mechanical appliances, raw materials, food products, fuels, minerals, textiles and clothing, footwear, electricity, chemicals, metals and intermediate products, among others. Exports, which increased by 3%, were dominated by commodities. For decades, Zimbabwe’s exports have been dominated by primary commodities, such as nickel ores and concentrates, nickel mattes, gold, tobacco, platinum and diamonds.

One of the challenges of relying on primary product exports is that the country might run out of its finite resources.

South Africa continued to be Zimbabwe's biggest trading partner, exporting goods worth US$1,93 billion to the country. ferro-chromium,

Trade between the two countries is in favour of South Africa.

Other significant trading partners during the review period included China, Mozambique, United Arab Emirates, Belgium, Zambia, Singapore and Mauritius.

In his 2023 national budget, Finance and Investment Promotion minister Mthuli Ncube predicted that the country’s external sector would remain relatively strong, with a surplus current account, albeit, at a much-lower level of US$85,2 million.

He, however, said the external sector’s performance may be dampened by softening global commodity prices and moderating global economic growth, against rising domestic imports.

“In 2023, merchandise exports are projected to marginally decrease by 2,4%, to US$7,2 billion on account of anticipated lower mineral export receipts, as the global economy slows down and the fall in commodity prices,” Ncube said.

Merchandise imports are projected to increase further to US$8,4 billion in 2023, in line with expected domestic economic growth, the finance minister said.

“Enhanced import substitution through local production of products such as wheat and soya beans is envisaged to dampen imports,” Ncube added.

Services exports are projected to increase from US$370,2 million in 2022 to US$425 million this year.