ZIMBABWE’S trade deficit widened sharply in May as imports continued to outpace exports on the back of a sluggish economic performance, Finance minister Tendai Biti has said.
Presenting the Mid-Term Policy review last week in Harare, Biti said cumulative exports as at May declined to $1,301 billion from $1,328 billion recorded during the same period last year while imports continued to balloon.
This represents a 2% decline in exports, which also reflects the overall slowdown in the real economy. Imports, on the other hand, rose to $3,2 billion from $2,6 billion recorded last year reflecting a 3:1 ratio.
Biti said although exports were expected to reach $4,5 billion by year end, the recovery of the exports would be constrained by limited foreign direct investment.
Biti said by the end of 2013, the current account deficit was expected to marginally improve as a result of a slight improvement in export performance.
The current account deficit to gross domestic product (GDP) ratio, he said, was projected to slightly improve from 21% in 2012 to 18% by the end of 2013.
South Africa, Zimbabwe major trading partner, accounted for 73% of total exports, followed by Mozambique at 8% and the United Arab Emirates at 7% while the rest of the world accounted for 1%.
Biti said exports to South Africa mainly included unprocessed mineral resources.
“Over-reliance on primary commodities, of which the prices are influenced by international developments, is unsustainable in the medium to long term. Thus, the beneficiation of primary commodities will also go a long way to increase the value of exports,” Biti said.
“The manufacturing sector growth has remained sluggish over the period as a result of such factors as liquidity constraints, high cost of borrowing, power outages, old technology and equipment.
Furthermore, a depreciating rand has also contributed in reducing the country’s manufactured exports competitiveness.”
Biti said since 2009, the country’s external position had remained precarious, characterised by persistent current account deficits which could not be offset by capital account inflows.
“These unsustainable current account deficits are also a reflection of the country’s over-reliance on foreign savings to finance domestic investment,” Biti said.
“Due to the depleted foreign currency reserves, the import cover has remained on average below one month since 2009, which falls far below the Sadc threshold of three months.”