ZIMBABWE’S merchandise trade deficit widened by 40% to US$354 million in the first quarter of 2021, despite a 5% increase in exports of key goods, the Ministry of Finance and Economic Development (MOFED) has revealed.
According to the first quarter treasury bulletin, the trade deficit for the period under review increased from US$254 million recorded during the same period last year, as merchandise imports increased by 12% to US$1.4 billion, outstripping exports of US$1.1 billion.
The MOFED said imports rose due to purchases of crude soya bean oil, fertilisers, medicaments and wheat.
“Favourable rainfall received during the 2020/21 season resulted in increased demand for top dressing fertilisers, with urea and ammonium nitrate registering a huge jump, while Covid-19 pandemic has resulted in increased demand for medicaments and PPEs,” Treasury said in its latest bulletin.
The country’s imports were mainly sourced from South Africa, China and Singapore, which accounted for 69% of goods brought into Zimbabwe.
The MOFED noted a decline in imports of maize, which have been on the rise due to the last two consecutive droughts.
The decline comes amid expectations of a bumper harvest. The treasury bulletin also shows a drop in fuel imports, mainly from lockdown measures and depressed economic activity.
On the other hand, exports increased from US$1 billion recorded during the first quarter of last year.
“Mineral exports dominated in the top 20 exports products at 84%, with nickel ores and mates, ferro-chromium, industrial diamonds, platinum, coal products registering growth.On the downside were gold, flue cured tobacco and other tobacco products, ”Treasury said.
The country’s exports were mainly destined for South Africa, which absorbed 34%, followed by the United Arab Emirates and Mozambique, which absorbed 23% and 10% respectively, while the rest of the world imported 33% of Zimbabwe’s products.
According to a Zimbabwean economist Elias Thilli, although a trade deficit can be improve foreign investment in a country, it is still harmful for developing countries like Zimbabwe as it leads to reduction in currency value.
A survey by BusinessMail has proven that a lower-valued currency makes a country’s imports more expensive and its exports less expensive in foreign markets which is the case with Zimbabwe.
“If a developing country has been importing more goods than exporting for a prolonged period, it would have a balance of payment deficit which causes huge debts.
“Foreign currency shortages in Zimbabwe has caused a deindustrialization trend as large scale business closes and the country lacks foreign currency for importing goods and services,” Thilli said.
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