The Sunday Mail
Business Reporter
ZIMBABWE’S trade deficit narrowed in February this year, according to latest statistics released by the Zimbabwe National Statistics Agency (ZimStat) in a development watchers say could significantly ease pressure on foreign currency reserves.
The country’s trade deficit narrowed to US$81,4 million, translating to a marked 44,6 percent decrease from a deficit of US$147 million in January 2024.
Market analysts say this development contributes to a more stable exchange rate .
If everything else is constant, a narrowing trade deficit could lead to slower price increases for imported goods.
Trigrams Investment analyst Mr Walter Mandeya said the narrowing trade deficit suggests a lesser strain on the exchange rate.
“When a country imports more than it exports, it needs to spend its foreign currency reserves to cover the difference and if it does not have reserves, as in our case, then there is pressure on the exchange rate,” he said.
Mr Mandeya, however, said Zimbabwe is in a unique position as demand for foreign currency is not restricted to imports only, but also as a store of value and hedge against inflation, a situation that needs reversal.
“The narrowing trade deficit is a positive sign, but it’s a single data point in a complex economic picture.
“So, the trade deficit is narrowing, but that might not mean strengthening of the local currency and we are seeing that now, with the continued depreciation of the Zimbabwe dollar,” he said.
The data from ZimStat shows that the country is importing more food and beverages while its share of food and beverage exports is coming off.
Mr Mandeya said sustainable trade growth hinges on Zimbabwe boosting its exports and finding ways to produce more goods locally to facilitate import substitution.
“This will lessen dependence on imports and strengthen the overall trade balance,” he said.
The trade deficit comes as exports increased by 19,3 percent from US$539,9 million in January 2024 to US$644 million in February 2024, while imports rose by 5,6 percent from US$686,9 million in January 2024 to US$725,4 million in February 2024.
The main driver of the export growth were industrial supplies, which comprised 92,8 percent of the goods exported in February 2024.
This category increased from US$491,2 million in January 2024 to US$597,9 million in February 2024.
On the other hand, food and beverage exports declined from US$23 million in January 2024 to US$15,1 million in February 2024.
The largest import category were industrial supplies, which accounted for 36,5 percent of the total value of imports in February 2024. This group increased from US$244,8 million in January 2024 to US$264,5 million in February 2024.
Capital goods imports rose from US$133.1 million in January 2024 to US$148.2 million in February 2024.
Mr Mandeya said despite the narrowing of the trade deficit, Zimbabwe’s trade performance remains fragile.
“The continued increase in imports suggests that domestic demand is recovering, but it also highlights the country’s reliance on foreign goods.
“The Government will need to focus on promoting exports and import substitution in order to achieve sustainable trade growth,” he said.
Major export destinations included South Africa (28,8 percent of total exports), China (27,5 percent) and the United Arab Emirates (22,5 percent).
South Africa was the major source of imports for Zimbabwe in February 2024, accounting for 39,2 percent of the total import value.
China was the second major source, accounting for 15,1 percent of total imports.
