ZIMBABWE’S import bill is expected to continue on an upwards trend due to the fast growth in imports against the sluggish growth in exports, Finance minister Patrick Chinamasa said last week.
By Business Reporter
Presenting a budget statement in Parliament, Chinamasa said imports continued to grow faster than exports, totalling $6,6 billion by October 2013, against $6,1 billion realised during the same period in 2012.
Chinamasa said total imports for the year 2013 were expected to reach $7,7 billion, while in 2014 they are projected to reach $8,3 billion.
He said due to the fast growth in imports against the slow growth in exports, the current account deficit continued to widen to $3,8 billion and has already surpassed the 2013 projected deficit of $2,5 billion.
“The country is, therefore, experiencing a competitiveness gap. The appreciation of the real exchange rate suggests that the price structure of the economy has shifted against tradable products, as capacity constraints are hampering the domestic supply response to the strong spike in domestic demand that followed 2009 stabilisation,” Chinamasa said.
“The distribution sector has filled the gap instead, supplying imported goods, keeping prices of tradables at low levels and contributing to a widening current account deficit. This is contributing to the continued de-industrialisation in the economy,”he said.
Since 2009, the import bill has been higher than the export bill as the country has not been producing many goods due to the low performance of the manufacturing sector.Capacity utilisation of the sector is at 39,4%.
Chinamasa said as dollarisation prevents an exchange rate policy, the response should focus on support to increased productivity in the private sector and facilitation of entry of new firms.
He said short-term protectionist measures can lead to short-term gains at the expense of the medium-term recovery.
He, however, said the effectiveness of such measures can also be affected by the lack of capacity on the part of the firms to respond to price-changes, due to broader production challenges which include ageing equipment and machinery, power outages, high cost of borrowing and weak linkages with domestic suppliers.
Chinamasa said the total exports for the period January to October 2013 stood at $2,8 billion, against $3,2 billion realised during the same period in 2012.
“The declining growth in exports is a reflection of the overall slowdown in the real economic activities. By the end of 2013, exports are projected to reach $4,430 billion,” he said.
He said in 2014, growths in exports are hinged on the overall performance of the economy and exports were projected to reach $5 billion.