Breaking News

Zimbabwe: The tale of an economy plagued by a chronic trade deficit

by Perry Munzwembiri
12 February 2013 | 2930 Views

The basic fundamentals of economics dictate that one consumes what they produce. Zimbabwe however, has been an exception to this basic principle since the turn of the new millennium. Persistent Current Account deficits have left the country with a series of negative Balance of Payments positions. According to ZimStats, for the period January to December 2012, including Insurance and freight charges, Zimbabwe's total exports totalled US$3, 884 million against a backdrop of US$7, 484 million worth of imports. This has left the country with a chronic Balance of Payments position of US$3,600 million, which is unsustainable as the country effectively, is living beyond its means.

With capacity utilisation in local industries remaining subdued, on the back of liquidity constraints, obsolete machinery and poor supply of basic utilities like electricity and water, this trend is likely to continue unless drastic measures are taken. Non concessional debt flows and diaspora remittances have been financing Zimbabwe's ever increasing trade deficits, but questions arise as to their sustainability going forward. It would appear that the most logical step to redress this anomaly would be to promote Foreign Direct Investment and Portfolio Investment, both of which are examples of Non-debt creating flows. However this has not been possible as foreign investors have been reluctant to invest in the country due to the uncertain political climate as well as some inauspicious policies pursued by the country, which have dented investor sentiment.

Various analysts concur that whichever way the pendulum swings, with regard s to the outcome in the forthcoming elections; the economic environment will be expected to improve, as focus will be shifted to addressing the attendant economic problems that have perennially plagued the economy.  The argument, is that the government of the day will have to focus more on progressive economic policy development and implementation, as other issues that have dominated the political landscape in the past, like the Land redistribution exercise and more recently, the indigenisation policy, have all but been done with, albeit contentiously so. The resultant effect is that, with all resources being channelled towards constructive policy formulation, economic growth is likely to be stimulated, thus there is a cautiously optimistic outlook on the country's future prospects post the national elections.

To dig ourselves out of our present predicament, focus has to be placed on reducing the country's overreliance on imports of mainly finished goods, and boost the country's exports. Presently, the easiest way to do so is through the mining sector. It is estimated that the mining sector is set to grow by 17%, and contribute at least 67% of the economy's total exports in 2013, far surpassing the agricultural and mining sector's contribution to exports. Furthermore, with firming prices of the country's main mineral exports (Gold and Platinum) spurred on by signs of nascent recovery in the global economy, and as in the case of platinum, rising demand in the auto industry , dominated by China, the mining sector is thus crucial in rectifying the country's negative Balance of Payments position.

As the mining industry performance begins to gain traction, there is likely going to be positive spin-offs which will trickle down to the rest of the other sectors. Increased levels of liquidity will potentially reduce the cost of borrowing which will in turn contribute to an increase in local demand for Zimbabwe's manufacturing output. This however is not the most ideal way to tackle the problem of our economy√¢‚Ǩ‚Ñ¢s Current account deficit. Often, the volatility in commodity prices leads to severe shocks in an economy, and Zimbabwe can ill afford such shocks as it does not have sufficient buffers to withstand these economic shocks.  It is imperative therefore, for Zimbabwe's sustainable economic growth to be hinged upon vibrant performance by all of the country's sectors to ensure that external shocks do in one sector do not cripple the entire economy.




Lines of credit are essential to any economy as they augment funding deficits in an economy. Zimbabwe has however been starved of the much needed funding, thereby undermining any prospects for economic recovery. With conservative estimates pegging the national unemployment rate somewhere in the region of 80%, this implies that the informal sector has taken a more substantial role in the country's economic activity. Yet, this shortage of credit lines from multilateral institutions will stifle economic activity in this sector, and ultimately lead to a decline in economic welfare for the vast number of Zimbabweans without formal employment. An active informal sector can contribute immensely to an economy's export base as can be seen in Kenya, thus more attention should be directed at shoring up this sector, especially at a time when the mainstream industries are not operating at full capacity. Policies that attract and retain foreign lines of credit, as well as dispel the actual or perceived risk Zimbabwe has, must be pursued.

Though notable gains have been witnessed in the economy, following the adoption of the multicurrency system, Zimbabwe's perilous external position will reverse those gains if not addressed. It is simply not sustainable for us a nation to have an import bill which is disproportionately larger than our exports. With the elections fast approaching, the elected government should focus on reviving our manufacturing industry, currently in comatose. As our manufacturing industry mends, complimented by the agricultural and mining sectors, Zimbabwe will be in line to establish itself as one of the powerhouse economies in Sub-Saharan Africa.

economy


Disclaimer:
All articles and letters published on Bulawayo24 have been independently written by members of Bulawayo24's community. The views of users published on Bulawayo24 are therefore their own and do not necessarily represent the views of Bulawayo24. Bulawayo24 editors also reserve the right to edit or delete any and all comments received.

Source: Perry Munzwembiri

Should Zimbabweans be deported from the UK?

Yes
27.31%
No
70.85%
Not sure
1.85%
271

Comments

News Updates

Email:

Latest News

Zifa, Gorowa in talks of Warriors coaching job - ZIFA have revived the...

by Petros Kausiyo | 23 April 2014 | 58 Views

Zimsec board to draft Zimbabwe-centric curriculum - Zimbabwe heritage...

by Staff reporter | 23 April 2014 | 143 Views

Top cop up for fines theft - Zimbabwe Republic Police Matapi officer-i...

by Fungai Lupande | 23 April 2014 | 264 Views

Kombi runs over toddler - According to a reader, the confrontation bet...

by Staff reporter | 23 April 2014 | 486 Views

Man infects wife with HIV, dumps her for a girlfriend - A WOMAN on Tue...

by Staff reporter | 23 April 2014 | 493 Views

'Army wields influence on Mugabe succession matrix' - ZIMBABWE'S milit...

by Staff reporter | 23 April 2014 | 582 Views

Man rapes, infects juvenile with STI - A 24-YEAR-OLD Silobela man in t...

by Staff reporter | 23 April 2014 | 514 Views

'I'm now broke,' says Tsvangirai - FORMER Prime Minister Morgan Tsvang...

by Staff reporter | 23 April 2014 | 924 Views

Granny axes hubby to death over sex

by Staff reporter | 23 April 2014 | 983 Views

Chiyangwa gives striking guards a banana and $2 each - Phillip Chiyang...

by Staff reporter | 23 April 2014 | 874 Views

ZCTU to intervene in MDC-T fiasco - The Zimbabwe Congress of Trade Uni...

by Staff reporter | 23 April 2014 | 410 Views

'Mugabe out to destroy me,' says Tsvangirai - MDC-T leader Morgan Tsv...

by Staff reporter | 23 April 2014 | 694 Views

US returns to ZITF after long absence - The number of countries partic...

by Staff reporter | 23 April 2014 | 315 Views

Ndebele defends controversial Jaure decision - THE Premier Soccer Leag...

by Sikhumbuzo Moyo | 23 April 2014 | 483 Views

Bev confirms return to the dance floor

by Staff reporter | 23 April 2014 | 808 Views

Man stabbed over extra-marital affair

by Sukulwenkosi Dube | 23 April 2014 | 733 Views

Zimbabweans imported 206k cars worth over $606 million

by Zvamaida Murwira | 23 April 2014 | 629 Views

Party turns into a funeral - A PARTY turned into a funeral recently wh...

by Angeline Mpofu | 23 April 2014 | 1077 Views

Man kept $700,000 in kitchen, maids stole it - THREE Harare housemaids...

by Staff reporter | 23 April 2014 | 937 Views

Man steals from Judge to pay lobola

by Lovemore Meya | 23 April 2014 | 583 Views

SuperSport hit back on Prophet Angel lawsuit - South African media com...

by Daniel Nemukuyu | 23 April 2014 | 554 Views

Steward Bank to close 8 branches - Steward Bank intends to close about...

by Tinashe Makichi | 23 April 2014 | 647 Views

Govt dismisses Majome ZBC's licence fees application - GOVERNMENT has ...

by Daniel Nemukuyu | 23 April 2014 | 384 Views

Headmasters not happy that teachers earn more, demands for review - T...

by Zvamaida Murwira | 23 April 2014 | 712 Views

Prophetess falls into a 'trance', drown at Church Ceremony - A self-pr...

by Prosper Dembedza | 23 April 2014 | 594 Views

ZITF marred by power cuts - The opening day of the Zimbabwe Internatio...

by Staff Reporter | 22 April 2014 | 1161 Views

19 countries exhibiting at ZITF - Nineteen countries are exhibiting at...

by Staff Reporter | 22 April 2014 | 966 Views

Pedestrian knocked down at Nkulumane complex - WhatsApp update

by Concerned Citizen | 22 April 2014 | 2237 Views

Entertainment

Rising reggae star Matty Julius comes to Zim Achievers Awards

by Arts Correspondent | 23 April 2014 | 181 Views

Tuku Recalls Picky for Greatest Hits Concert

by Staff Reporter | 22 April 2014 | 1328 Views

Oskido, Big Nuz in no show - SCORES of revellers were baying for South...

by Thupeyo Muleya | 22 April 2014 | 806 Views

Hosiah Chipanga likens self to biblical Noah - VETERAN musician-cum-pr...

by Liberty Dube | 20 April 2014 | 2912 Views

SA based Chimurenga musician release album

by Staff Reporter | 23 April 2014 | 2360 Views

Deborah Fraser jets in

by Staff Reporter | 19 April 2014 | 2711 Views

All-white party for Dongo - Soulful singer Trevor Dongo is set perform...

by Jonathan Mbiriyamveka | 18 April 2014 | 2725 Views

Tuku Greatest Hits Concert postponed - Oliver Mtukudzi's Greatest Hits...

by Staff reporter | 16 April 2014 | 1826 Views

'Corruption is betrayal of the values of the liberation struggle' says...

by Jonathan Mbiriyamveka | 16 April 2014 | 2281 Views

Stand Up comedian to record one man show in Zimbabwe - Daliso Chaponda...

by Staff reporter | 16 April 2014 | 1605 Views

L'Vovo Derrango billed for Bulawayo show - THOSE attending the Zimbabw...

by Bongani Ndlovu | 16 April 2014 | 1778 Views
iBlog

Enemy Within Zimbabwe

zimbabwe is a country measuring approximately 390,757 sq. km with an estimated population of nearly 13.5 million people. the country is made up of 16 different tribes and authorised spoken languages as enshrined in the constitution. the truth is ... Read More
NativeAfrica 30 December 2013 ago

Can Too Much Masturbation Hurt Women’s Sex Life? Why Is Excessive Masturbation Bad?

both men and women often enjoy masturbation, and it is a natural sexual action for many people. however, when a woman masturbates too often, she may become concerned that it can hurt her sex life. this question is actually a valid concern, as there ... Read More
adoniadennis 01 March 2014 ago