Zim’s net trading position best in 12yrs

By The NewsDay | Dec. 11, 2019 | 3 Min read

Zimbabwe’s net trade position recorded further improvement in October, posting its best performance in 12 years. At $83 million, the net trade position was the best since 2008 and outstanding given that the country has posted a net positive monthly trade position only two times since 2008. Besides October 2019, Zimbabwe registered a net positive trade position in November 2017 during which a net positive total of $71 million was achieved. The firming trade balance is as a result of default import suppression brought about by the Zimdollar devaluation since liberalisation.

Purchasing power has drastically eroded, thus, reducing the demand for imports. Likewise, government has forgone a number of subsidies on select imports which has impacted affordability and demand. A shrinking national purse, in real terms, given the Zimdollar depreciation, has also forced government to tame back its own demand, thereby dragging overall imports.

A sustained improved trade performance since the beginning of the year set Zimbabwe on a path to achieve the most improved trade balance position in 12 years. On average Zimbabwe has recorded an annual trade deficit level of -$2,5 billion between 2009 and 2018. A more improved trade balance position shows an economy which is either growing exports at a faster rate to imports or an economy suppressing imports or holding exports stable. In the case of Zimbabwe, imports have sharply declined not on substitution, but demand suppression, while exports have largely been tepid on reduced mineral production.

The cumulative performance year to date performance is by far the most improved outturn since 2009 and has largely been driven by austerity measures which have stifled demand. For a historical perspective, since 2000, Zimbabwe has reported successive annual trade deficits, to date. In 2017, Zimbabwe recorded the most improved trade position while 2011 was the worst year as the deficit level widened to -$5 billion.

The narrowest trade gap achieved to date, that of 2017, was achieved on the backdrop of increased import controls and forex rationing which was coupled with the propagation of local industry support measures. On the backdrop of supply shortages across a number of products earlier in October 2018, government reversed some of the import restriction measurers so as to stabilise the supply side and re-equilibrate the market, consequently exerting more forex demand pressure on the market. The plummeting exchange rate has given passage to exorbitant price gains across most commodities on the market.

Monthly exports came in at $483 million which is the second highest level in 12 years, coming second after the November 2017 performance. The performance in exports was spurred by tobacco, whose exports are cyclical in nature and normally occur in the final three months of the year.

Accrued stocks over the selling season is normally shipped later in the year from October onwards to destination such as China. The surge is, therefore, not reflective of production, given that the current season under-performed in value terms compared to last year. Nickel has emerged as a force posting consistently firm performances throughout 2019 and was instrumental in driving the month’s outturn. Gold remains under pressure given side marketing and disruptions in the sector caused by power outages and economic instability.

Gold exports have slowly recovered since July, largely as a result of price recovery in global markets. The bullion is presently trading at a six-year high on averages of about $1 600/ounce from year opening prices of about $1 200/ounce.