via AfDB urges Zimbabwe to reduce trade deficit by Kudzai Chimhangwa The Standard September 29, 2013
ZIMBABWE must limit imports as the year progresses to reduce the current high trade deficit, the African Development Bank (AfDB) has recommended in its latest Zimbabwe Monthly Economic Report.
The reduction would result in more foreign currency retention and provide local industry with an opportunity to recuperate.
The report says the trade deficit for the first half of the year stood at US$2,4 billion, an increase of about 53,6% compared to the same period last year.
Exports would have to perform exceptionally well for such a downward trend in comparison to 2012, to become positive.
“Given that total imports already constitute about 52% of their projected value in 2013, there is need to contain them as the year progresses to ensure that the targeted value is achieved,” the bank report reads.
Exports have not improved in 2013 from their position in 2012. Total exports for the first half of 2013 were about US$5,5 billion, a marginal decrease of about 1% compared to the same period in 2012.
The fall in exports was most pronounced in March and April 2013, when they hit levels below those of 2012.
The bank observed that to date, only about 34,2% of projected 2013 exports have been realised, with not many policy responses on the ground suggesting they can recover to their projected levels.
“Based on the performance of both exports and imports for the first half of the year, however, this may be difficult to attain,” the bank said.
Zimbabwe has been experiencing a recurrent trade deficit as it has, over the years, continued to import far more than it exports.
The bank observed that imports during the period 2013 were mostly dominated by fertilizer, which constituted about 17,2%, followed by fuel at about 16,7%.
Unprocessed mineral products as well as tobacco continued to dominate exports.
“Strategies that can use the availability of these raw materials as leverage need to be explored in the quest to increase exports of processed products,” the bank said in its Zimbabwe monthly economic review.
The sluggish performance of exports in 2013 occurred at a time when imports were rising significantly, thereby negatively affecting the country’s balance of payment position.
Total imports during the first half of 2013 were about US$3,9 billion, an increase of about 26,2% compared to the same period in 2012.
Imports increased most steeply in April 2013 and significantly during this month, they climbed about 96,6% compared to the same period in 2012.
A Zimstat report indicates that June was also a strong import month as they increased by about 47,7%.
The 2013 Mid-Year Fiscal Policy statement projected that the current account deficit would marginally improve in 2013 compared to 2012, pushed by a slight improvement in exports performance.