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Desire Sibanda

The Government is anticipating a 35 percent decline in the country’s trade deficit to $1,537 billion by the end of this year.

The 2016 trade deficit figure reached $2,833 billion, which was higher than previously  estimated despite a number of interventionist measures implemented during the course of last year.

The Ministry of Macroeconomic Planning and Investment Promotion says the improved rains this season, industry supportive measures and an anticipated growth in beneficiation will boost export receipts this year.

“In terms of trade deficit outlook, a trade deficit of $1,537 billion is projected for 2017.

“In order to reach the projected trade deficit in 2017, an increase in value added exports has to be fostered, the good rains that the country is experiencing should result in increased tobacco output — a major export commodity, as well as reduction in grain imports as Zimbabwe strives to achieve food self-sufficiency,” said the ministry’s permanent secretary Dr Desire Sibanda.

“In addition, the new tax proposals to support industry by offering rebates on selected raw materials to enhance competitiveness of domestic                     production is expected to result in creased value added exports.”

The local economy has continued to be affected by sustained mismatches between export receipts and imports as evidenced by the disproportionate import absorption relative to exports especially over the last seven years.

Some economic analysts opine that trade deficits — such as Zimbabwe’s prolonged one — is  negative to the extent that the country is forced to borrow from abroad or selling off capital assets finance current purchases of goods and services.

Zimbabwe is already over-borrowed and any disposal of long-term assets to finance current consumption undermines future   production.

Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya in his latest Monetary Policy Statement, highlighted such concerns.

“The current account deficit continues to be mainly financed through private sector offshore loans against the backdrop of subdued direct and portfolio investment in the economy.

“While private sector foreign loans have continued to be a major source of liquidity in the economy since the adoption of the multicurrency system in 2009, they also continue to increase the country’s gearing or leveraging ratio,” he said.

— BH24