BY MTHANDAZO NYONI
ZIMBABWE’S trade deficit narrowed by 81% to US$474 million between February and December last year compared to the same period in 2018, mainly due to shortages of foreign currency for imports.
Trade deficit represents an outflow of domestic currency to foreign markets.
Figures released by the Zimbabwe National Statistics Agency (ZimStat) show that between February and December, the country imported goods and services worth US$4,45 billion against exports of US$3,98 billion.
Trade figures for January 2018 are still not available because the Zimbabwe Revenue Authority, which is the source of merchandise trade data, has not produced them, according to ZimStat.
In the same period in 2018, imports stood at US$6,5 billion and exports at US$4,04 billion, giving a trade deficit of US$2,46 billion.
Exports dropped by 2% on the prior year figures, while imports fell by 32%.
Economic analyst Godfrey Kanyenze attributed the decline in the import bill to foreign currency shortages.
“Adverse weather conditions like drought affected exports negatively. Then on the import side, it was mainly due to foreign currency shortages. It curtailed demand for imports,” he said.
In the period under review, all import drivers like electricity, fuel, maize, rice and soyabeans recorded a drop.
For instance, the electricity bill dropped by 23% to US$117 million, diesel by 22% to US$800 million, petrol 34% to US$325 million, while soyabeans fell by 45% to US$67 million.
Maize and rice also dropped by 29% and 64%, respectively.
Major foreign currency earners like gold, tobacco, nickel mattes and ferrochromium also fell. Only nickel ores and diamond recorded an increase of 78% and 23% respectively.
In his latest monetary policy statement, central bank governor John Mangudya attributed import compression to expenditure-switching effects of the introduction of the exchange rate.
He said in response to the fiscal and monetary reforms, the country witnessed an improvement in the current account balance during the first half of 2019, due to import compression following the expenditure-switching effects of the introduction of the exchange rate, which has seen consumption moving away from imported products to domestically-produced goods.
The central bank boss said the current account deficit narrowed from a peak of US$2,7 billion in 2011 to US$1,4 billion in 2018 and was projected to further contract to US$597,2 million in 2019.