eBusiness Weekly
Business Writer
Zimbabwe’s trade deficit narrowed in February 2024, according to the latest statistics released by the Zimbabwe National Statistics Agency (ZimStat).
The country’s trade deficit narrowed to US$81,4 million translating to a 44,6 percent decrease from a deficit of US$147 million in January 2024.
Market watchers say a smaller trade gap could potentially ease pressure on foreign currency reserves, which could contribute 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, 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.
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.
“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.
The data from ZimStat shows that the country is importing more food and beverages while its share of food and beverages exports is also coming off.
Mandeya said sustainable trade growth hinges on Zimbabwe boosting its exports and finding ways to produce more goods domestically (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$644.0 million in February 2024 while imports also 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 was 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 beverages exports declined from US$23.0 million in January 2024 to US$15.1 million in February 2024.
The largest import category was industrial supplies, which accounted for 36.5 percent of the total value of imports in February 2024. This category increased from US$244.8 million in January 2024 to US$264.5 million in February 2024. Capital goods imports also rose from US$133.1 million in January 2024 to US$148.2 million in February 2024.
Commenting on the latest data, Trigrams Investments analyst Walter 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,” said Mandeya.
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.
