Zimbabwe current account still under pressure

Published: 01 October 2013

The country's current account remained precarious for the first half of the year against the background of declining export performance, increased imports and declining capital inflows.

The contraction in economic activity and rising domestic costs has been leading to a decline in export earnings. Consequently frequent droughts, higher energy imports, increased humanitarian assistance and the influx of finished consumer goods largely from South Africa and China led to an increase in imports.

The current account remains under tremendous pressure even after the economic crisis, with the country recording a deficit of $620 million in 2011. The half year trade deficit stood at $2,4 billion a 54 percent increase the $1,1 billion that was recorded during the same time last year.

The increase in the negative ratio shows that the trade deficit is still widening and there is need for Government to seriously intervene in reducing this gap by improving the exports of domestic products and reducing the importing of commodities that can be produced locally.

The question is how can Government improve the current account position and reduce the importation of basic commodities.

The Government needs to introduce import quarters that discourage the importation of products that are produced in the country.

There is need to critically analyze the external costs that firms are incurring that have been making their products uncompetitive against imports and globally.

Government also needs to work with the private sector, in particular the manufacturing sector to discuss on how the parties can boost economic activity and meet domestic demand.

The Government should also encourage the consumption of local produced products but should first implement policies that promote the consumption of local products.

Government should also lead by example and curtail the importation of foreign goods for example foreign produced motor vehicles to encourage people to buy cars from the local industry. This has been the case in most emerging countries such as China, where the Government only uses locally produced goods and services for all their activities.

Government can also formulate policies in line with the indigenisation policy that promote the engagement of foreign investors with local partners in the provision of inputs. For example when an investor wants to build some offices, there should be a procurement policy that states that all the inputs that is the cement, bricks, work force, pipes all the building materials should be from a local producers. Such policies not only reduce imports but also promote local businesses.

But the Government cannot do this on its own therefore there is need for the Government and the private sector to work together for the betterment of the economy.
- herald