Current account deficit widens

The country recorded a current account deficit of $2,6 billion in the first eight months of the year reflecting the continued absorption of substantial imports by the country from South Africa and the United States of America, a report by African Development Bank (AfDB) has shown.

During the period January to August this year, the country spent $5,3 billion on imports against exports receipts of $2 697 billion.

Current account deficit occurs when a country’s total goods, services and transfers is greater than the country’s exports in goods, services and transfers.

“The widening trade balance in August is attributed to imports which increased by 142% from $517,9 million in July 2011 on account of increased fertiliser imports from South Africa ahead of the forthcoming farming season,” reads part of the report.

“The widening trade balance continues to exert adverse pressure on the sustainability of the current account particularly on the back of depressed capital inflows.”

AfDB said the widening trade balance was recorded in August in imports that increased by 142% to $1 254,6 billion from $517,9 million.

The country imported goods from South Africa, the US, Kuwait, United Kingdom, Mauritius and Zambia while exports were destined for South Africa, China, United Arab Emirates, Belgium, Mozambique, Italy and Zambia.

“The country’s exports were largely destined for the South African market, which accounted for 61% of exports. China and the United Arab Emirates are favourable exports destinations for the country’s products,” said AfDB.

AfDB said the country sourced 74% of its imports from the Sadc region and this showed Zimbabwe remained exposed to developments in the region.

“This notwithstanding, Zimbabwe remains exposed to developments in the US$/rand exchange rate, particularly in view of the fact that South Africa remains the country’s major trading partner,” said AfDB.

Imports are expected to increase by 8,5% this year from 2010 levels as the country continues to absorb raw materials, intermediate goods and crude oil in a move to put the industry on the growth trajectory. The trade balance has been widening due to the little economic activity in the economy at the moment due to liquidity problems.

Meanwhile AfDB said there was a hovering threat to banking sector stability depending on the manner in which the Indigenisation and Economic Empowerment Act would be implemented in that sector.

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