Trade deficit widens

By Daniel Chigundu

THE gap between imports and exports continues to widen on the back of the country’s collapsing industrial production capacity and poor exports, Zimbabwe Statistical Agency (ZimStat) has revealed.

“Zimbabwe imported goods worth US$6.55 billion against exports of US$2.78 billion in the ten months to October 2013.

“Resultantly, the trade deficit widened by 25 percent to US$3.77 billion from US$3.02 billion recorded in August,”

ZimStat added that South Africa remained the largest trading partner accounting for 48 percent (US$3.17 billion) of the imports and 73 percent (US$2.04 billion) of exports mainly driven by the country's mineral outputs.

Since the land exercise Zimbabwe has been importing food from South Africa and neighbouring countries due to poor farming methods employed by the new farmers, coupled with erratic rains.

Late last year MDC-T shadow finance minister Tendai Biti said the problems facing the country cannot be patched up overnight and that the situation is set to worsen on the back of an under-funded agricultural season.

“I have move around the country and there has not been much in terms of land preparation, it means we are going to experience food deficit, agriculture has been underfunded, inputs distributed under the presidential scheme are too little and banks have only lent less than US$200million.

“Economic indicators show that there will be a serious shrink of 23 percent in the agricultural sector, 32 percent in mining while the economy will grow by between 1.5 percent to 1.8 percent next year,” said Biti.

Capacity utilisation is said to have deteriorated to below 39 percent owing to a cocktail of challenges chief among them expensive but unreliable water and power supplies, lack of spare parts and unavailability of cheap funds for recapitalisation.

The situation has also resulted in retrenchments of at least 300 workers per week with many companies downsizing or folding operations.

Seasoned market watchers Tetrad Securities said the situation is not health and requires immediate attention.

“Solutions are also needed for the widening trade deficit. We remain a net importer owing to capacity constraints in industry. The further 25 percent increase in the deficit to US$3.77billion shows that the situation continues to deteriorate which is not healthy.

“Furthermore, the deficit was mainly affected by the low exports that have been recorded this year. Value from exports was low owing to softening global commodity prices but what is worrying is the fact that production in most minerals has remained very low due to funding issues and this has made Zimbabwe extremely vulnerable,” said Tetrad.