Zimbabwe's trade deficit has fallen by close to 70%. In May, it stood at $400 million compared to 1.35 billion in the same period in 2018. The Zimbabwean trade deficit has fallen, but a closer look at the numbers shows that it isn't necessarily a good thing. A closer look at Zimbabwe's trading data suggests an economy in decline, both imports and exports are falling.
Gold deliveries have shrunk in terms of weight. This could be due to the Reserve Bank's foreign exchange retention policy. The policy forces gild exporters to change their gold export revenues into the local currency immediately. Gold exporters have found the policy to be counterproductive as the local currency is in decline and doesn't enable the exporters to buy inputs that have to be imported. The local currency is also in decline, so it is not considered an asset to hold.
Tobacco deliveries were also affected by a similar foreign exchange retention policy. Tobacco farmers could only sell their produce at the local currency even though almost all of the tobacco leaf is exported — this created anger and dismay among the farmers who now found that their season was unprofitable. Many farmers chose to withhold their harvest rather than sell assets to the local currency.
Imports were initially lowered through a government policy (SI 64) to restrict all imports of goods that could be locally manufactured. The policy had a positive impact on the manufacturing industry as it's capacity grew under the protective measure.
Unfortunately, the manufacturing industry hit hard times when they struggled to access foreign currency for inputs. Gold and tobacco exports are Zimbabwe's most significant exports, and so the depressed revenues had an impact on the broader economy. This lead to shortages in the market, especially of foodstuffs. The government had to reverse its protective measures as the shortages caused unrest. Nonetheless, the damage was done, and the Zimbabwean economy did not have the purchasing power or foreign currency to import what it needed.
Zimbabwe faces a situation that requires it to increase local production, exports, and imports to spur growth. The most critical of these would be its exports, Zimbabwe desperately needs to earn foreign currency to grow.
Exports News will continue to provide information on this developing story. Stay tuned for more on this subject and more informative articles about the import/export world.
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