Home » Industry » High Import Bill Prompts Trade Deficit

ZIMBABWE’s exports amounted to US$625,92 million in the first quarter against imports of US$1,45 billion as deindustrialisation takes its toll, statistics availed by the Buy Zimbabwe campaign show.

Experts contend that the country’s widening import bill against exports is a major contributory factor towards the increasing trade deficit.

A trade deficit is basically an economic measure of a negative balance of trade, where a country’s imports exceed exports, representing a net outflow.

Despite the inception of a multi-currency trading regime, Zimbabwe’s business environment remains uncompetitive owing to high operating costs, low foreign direct investment and an uncertain investment climate accentuated by lack of policy consistency.

Zimbabwe’s total trade in the first quarter of 2014 decreased marginally compared to comparative periods.

“However, the trade gap was almost constant generally, this is due to the fact that imports decreased from US$1, 6 billion in 2013 to US$1, 4 and billion in 2014 due to liquidity challenges but unfortunately at the same time exports are declining,” Buy Zimbabwe said in an analysis.

Under a trade deficit situation, any envisaged economic growth is difficult to achieve.

The unabated closure of businesses in the country by the month owing to low spending by consumers, who have little disposable incomes, is partially contributing to the country’s increasing imports.

Experts contend that the continued increase in imports is accelerating de-industrialisation.

The persistent supply gaps are being occasioned by local industrial under capacity utilisation.

During the period under review, imports and exports declined by averages of 12% and 23% respectively while the overall trade deficit declined marginally.

The manufacturing sector’s performance remains weak in the face of an influx of imports, tight liquidity conditions, declining competitiveness pressures, low investment and tightening of credit conditions.

The African Development Bank last year recommended that Zimbabwe should limit its imports so as to reduce the increasing trade deficit.

Adhering to this recommendation would result in Zimbabwe retaining more foreign currency as well as providing local industry with an opportunity to recuperate and operate more competitively on the external trading front.

The country has been experiencing a repeated trade deficit as it has continued to import far more than it exports incrementally every year.

Low Foreign Direct Investment (FDI) capital inflows owing largely to policy uncertainty have continued to remain inadequate to finance the country’s escalating current account deficit.

During the first quarter, South Africa remained the major trading partner accounting for 43% of total imports.

Zimbabwean exports in the first quarter of 2014 continued to land mostly in South Africa.

“In nominal terms South Africa is exporting total Zimbabwean exports to all other regions as the total exports is US$625 922 466. Its share of import markets rose drastically in Zimbabwe and South Africa and is constituting 58% of Zimbabwe’s total exports,” the analysis reads.

South Africa also accounted for 43,2% of the import bill in the period under review.

Singapore accounted for 15,2% followed by the United Kingdom with 7,5% while the other countries completing the list of the top five sources of Zimbabwe’s imports were China at 5,6% and Zambia at 2,6%.

Source : Zimbabwe Standard