The Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) is studying the balance of payment deficit and expects to publish the results in the coming weeks.
Speaking at the launch of The Zeparu Economic Barometer, a publication that seeks to gauge the pulse of the economy, executive director Gibson Chigumira said the recurring and unsustainable balance of payments deficits have been principally financed by the continued accumulation of external payment arrears to both bilateral and multilateral creditors.
Trade balances for the first half of 2011 widened to $1,4 billion from $1,3 billion last year due to depressed exports as a result of suppressed economic activity.
The country’s current account deficit is expected to rise to $1,6 billion this year from $1,9 billion in 2010.
“We will be carrying out a study on the balance of payment situation which should be out in the next few weeks,” said Chigumira.
“Against the background of recurring balance of payments deficits, the country’s foreign exchange reserves remain depleted at less than one month import cover over 2007-2009.
“The country is unable to resort to the running down of foreign currency reserves in the event of adverse external shocks. The external position thus makes the country vulnerable to exogenous shocks which may grind the economy to a halt given high import dependency.”
He said the country should strive to maintain at least a three-month import cover as this was the benchmark.
“Zimbabwe’s reserves position compares unfavourably. As such, the resolution of Zimbabwe’s unsustainable debt situation will help the country to attain reserve adequacy and align itself with internationally-recommended benchmarks,” he said
The publication noted that despite favourable economic developments realised in the last six months, downside risks in respect of underlying banking sector vulnerabilities as well as the indigenisation and empowerment drive should be handled with utmost care in view of the fragile nature of the country’s embryonic recovery.
“Swift measure to address the power supply situation will undoubtedly spur industrial recovery and growth through improved productivity and enhanced capacity utilisation,” he said.
Permanent secretary in the Ministry of Economic Planning and Investment Promotion Desire Sibanda said the publication would go a long way in providing information from independent sources.
Bankers’ Association of Zimbabwe president John Mushayavanhu also attended the launch.
Zeparu said it sought to undertake research and capacity building in policy analysis on socio-economic issues in the country and offer stakeholders relevant information on macroeconomic issues.