Zimbabwe’s trade balance position keeps improving, as imports continued falling while exports grew between January and August 2020, a trend stretching from last year and good for efforts to stabilise the economy.
Dependency on imports, due to constrained local production capacity, has been one of the major structural flaws of Zimbabwe’s economy, which has created an acute shortage of US dollars thereby piling pressure on the domestic currency.
Government is, however, working on a cocktail of interventions, including boosting investment, production, and productivity, giving incentives and developing value chains under the Zimbabwe National Industrial Development Policy (ZNIDP) (2019 –2023) that envisions a contribution of 30 percent to the gross domestic product (GDP) from the manufacturing sector.
Statistics from the Zimbabwe National Statistics Office (Zimstat), show that the value of imported goods and services in the period under review, declined by 3,6 percent to US$2,96 billion compared to the same period in 2019.
Over the same period, Zimbabwe exported goods and services worth about US$2,54 billion, which represents an increase of about 3,8 percent compared to the same period the prior year, bettering the trade balance.
Trade experts say the balance of trade in Zimbabwe averaged minus US$233,94 million from 1991 to 2019, reaching an all time high of US$293 million in December of 2000 and a record low of minus US$3,95 billion in December of 2009.
Given that, there was a noticeable decline in imports at a time when exports registered an increase, the trade deficit improved to about US$427,2 million in 2020, from US$719,9 million recorded over a similar period in 2019.
The Zimbabwe Economic Policy Analysis and Research Unit (Zeparu), says an improvement in the trade balance is positive news for the Zimbabwe economy, as it implies that the rate of forex outflows to finance the excess of imports over exports has declined.
“However, there is still over-reliance on the foreign markets for goods and services, since the trade deficit is still significant, demonstrating the need for more efforts towards import substitution,” Zeparu said.
The quasi-Government economic research unit said the period under review also includes the time when the Covid-19 induced lockdown also took effect, affecting patterns in both exports and imports.
Trade is affected by reduced global demand as well as the broken supply chains as restrictions are imposed on the free movement of goods and people.
“Thus, it is also possible to assess whether the Covid-19 pandemic has greatly affected the country’s ability to import and export, especially in comparison to previous periods when there were no restrictions.
“The lockdown in Zimbabwe was imposed in late March 2020. A look at the import trends between 2017 and 2020 over the period March to August, would be expected to reflect the extent to which the import capacity was affected by the lockdown,” Zeparu said.
It is apparent that there was a shock in April 2020 when the lockdown was at its most strict level, but the shock reduced between May and June and by July 2020, the effect of the pandemic on imports was no longer visible.
By June 2020, exports were above the levels recorded in 2019, which means that the nature of the main products exported in Zimbabwe is not very sensitive to lockdowns.
This is understandable, given that it is mainly unprocessed mining products that constitute the bulk of Zimbabwe’s exports.
Thus, Zeparu said the effects of the pandemic are expected to be felt more on the imports than the exports, which also explains why the period January to August 2020 saw imports decreasing but not exports.
In recent years, Zimbabwe has run systemic trade deficits due to a decline in exports.
Zimbabwe is a net importer of fuel and capital goods. The main exports are gold and tobacco. Other key exports comprise nickel, chrome, diamonds, and platinum. – Sunday Mail