Foreign dependence spurs trade deficit

via Foreign dependence spurs trade deficit – NewsDay Zimbabwe December 3, 2015

The country’s over-reliance on foreign foodstuffs and pharmaceutical products is mainly to blame for the huge trade deficit retarding economic growth, Finance and Economic Development minister Patrick Chinamasa has said.

By Simon Phiri

The remark follows an increase in trade deficit to $2,9 billion this year up from $2,7 billion recorded last year.

From January to October this year, the country’s export bill stood at $2 billion while imports recorded $5 billion, a development that impedes resuscitation of the local industries and the consequent economic growth.

Presenting the National Budget last week, Chinamasa said the huge trade deficit mainly reflected the country’s over-reliance on imported goods.

“Subdued exports in 2015 will culminate in a trade deficit of $2,9 billion, against $2,7 billion in 2014,” he said.

“The large trade deficit reflects, among other factors, the country’s over-reliance on foreign goods, most of which can be produced locally. These goods include grains, foodstuffs, chemicals and pharmaceutical products.”

According to the Zimbabwe National Statistics Agency (Zimstat), fuel – diesel and unleaded petrol – worth $1,165 billion found its way into the country this year, while pharmaceuticals worth $138 million were also imported in the same period.

Imports of foodstuffs such as maize, wheat, rice and crude soya bean oil added up to $387,2 million, highlighting the high extent of foreign goods consumption at the expense of the local industry.

Chinamasa also blamed the continued depreciation of the rand against the US dollar for the low performance of the country’s exports account.

“Furthermore, the continued depreciation of the rand against the US dollar has undermined the competitiveness of our exports.

“The rand lost over 13% of its value against the US dollar since January 2015, a development that has seen Zimbabweans increasingly preferring the US dollar over the rand in conducting business transactions and as a store of value,” he said.

The South African rand, following its continued depreciation against the US dollar, is fast disappearing on the local market as the majority now prefers bond coins and the dollar.

Exports are, however, expected to record a marginal increase to $3,7 billion in 2016 up from $3,4 billion projected in 2015, while imports are projected to record a slight decline to give a fringe fall in the country’s trade deficit.

The positive change in the exports bill is primarily due to expected improved performances in the mining and agriculture sectors, while the drop on the imports account banks on tightening the country’s borders.

“The projected increase is on account of the expected improved performance of minerals, namely gold, nickel, diamonds and ferrochrome, chrome ore and fines, tobacco and horticultural produce.

“Imports are projected to marginally decline to $6,2 billion from $6,3 billion, attributed to the measures that were put in place to manage the unfair playing field imposed by some cheap foreign products,” Chinamasa said.