According to Zimstat, the trade deficit in Zimbabwe saw a massive decline in the months of February to May 2019. The decline is unfortunately not a source of good news for the economy as it comes from a massive tumble in imports due to foreign currency shortages. While some amongst us may be quick to celebrate the reduction in imported cooking oil, baked & biscuits we also need to remember that this is a reduction in imports of critical drugs and machinery components leaving the country ultimately poorer and more vulnerable.
Between February and May 2019 imports were recorded at US$1.59 billion with exports at US1.27 billion resulting in a trade deficit US$325 million. Contrast that with the same period last year where Zimbabweans imported US$2.34 billion while exporting US$1.23 billion resulting in a trade deficit of US$1.11 billion. So while exports registered a minor change the import position is responsible for all the movement.
As the graph above shows the trade balance started narrowing in In 2018 and has continued to do so. The peaks and troughs in the graph represent cyclical nature of some of our trade such as tobacco and other agriculture which we only export at a certain time of year while our greatest imports such as fuel are largely continuous in demand.
You might question the reason for my disdain at the reduction of imports and would be right in doing so. The specific problem in Zimbabwe is a lack of production. If our own industries were up and running they could easily fill the demand gap. The evidence is on the street, we do not have local industries that can step in and demand is suppressed due to loss of purchasing power. We have imported less fuel, Liquid petroleum gas and of course, electricity. We have imported less flour and drugs.
So the present situation is not one to be celebrated. Confederation of Zimbabwe retailers had previously highlighted that our foreign currency and the inflationary situation was affecting aggregate demand. The top imports were Diesel, petrol and Soya bean meal. Top exports were gold, nickel and tobacco.