Call to address negative BoP

estimates that by the end of last year, the country’s balance of payments position had resulted in a current account deficit of US$2 billion.
“Balance of payments” basically refers to a statistical compilation formulated by a country of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year.
Professor Hawkins attributed the present economic problems, especially the liquidity crisis, to the poor state of balance of payments.
“It is critical that the authorities focus on addressing the balance of payments situation because therein lies the real problem. Some of the proposed measures to address the economic malaise are tantamount to treating symptoms.
“For instance, the decision to compel banks to release part of their funds locked in nostro accounts into the local market, as well as borrowing from the Reserve Bank of Zimbabwe’s frozen assets will only increase liquidity by a mere 7 percent,” he said.
The professor was speaking at a recent tax seminar  in Harare.
The “treating of symptoms” as indicated by Professor Hawkins include — among others — recent announcements by Finance Minister Tendai Biti that come into  effect today.
These include requiring banking institutions to maintain a maximum of 25 percent of their nostro accounts balances offshore to meet their day-to-day international payment obligations.
It was also indicated that the RBZ would issue Discountable and Tradable Instruments to willing participant banks against RBZ statutory reserve liabilities of approximately US$83,6 million.
These are, however, seen to have limited impact on the broader capital requirements of the local economy.
A steep rise in imports has been one of the major drivers of the negative balance of payments position as local industry’s productive capacities are still very low on average.
An analysis of the nature of Zimbabwe’s imports shows that finished consumption goods (food, passengers, fuels and machinery among others) continue to account for a larger share of total imports which call for policies that encourage value addition and at the same time curb consumption.
Another contributing factor is the volatility in global commodity prices.
Professor Hawkins contends that the Zimbabwean economy is “heavily externally dependent”.
“A greater part of our revenue comes from exports, which should be a concern because growth in the global economy is projected to be slower this year at between 3 and 4 percent, while commodity prices could fall by 14 percent.
“Some 80 percent of the country’s exports will in the outlook period be subject to weaker prices,” he said.
Comesa Business Council secretary-general Trust Chikohora the solution to the country’s negative balance of payments position, arising from our imports exceeding our exports by about US$2 billion, lies in all stakeholders coming up with strategies that increase exports significantly while reducing imports.
“The level of export growth should far exceed simports growth. To achieve this we need to focus on the areas in which we have distinctive competencies and deliberately develop and promote them further in order to create sustainable competitive advantage.
“This will enable us to boost exports in those areas significantly. We need to exploit fully the vast mineral resources that we have as a country,” he said.
He added that there is need to process the minerals further in Zimbabwe in order to significantly enhance the value of exports.
“In agriculture we also need to process our produce to a level where value is significantly improved, and also prioritise preserving fresh produce for longer periods by methods such as canning in order to reduce wastage.
“Further beneficiation strategies are also needed in selected areas of manufacturing. Tourism needs to be revitalised by continuing to rebrand the country and creating a positive image of Zimbabwe in all we do,” he said.
In addition, he said the re-engagement process needs to be taken seriously and a debt management plan needs to be implemented so that the country can move to a position where it can access balance of payments support as soon as possible.
In the 2012 National Budget Statement, Minister  Biti projected a decline in the negative balance of payments position.
“Import growth is estimates to decelerate from 23,3 percent in 2011 to 6,8 in 2012.
“This accounts for total imports of about US$6,4 billion in 2011 and US$6,8 billion in 2012, implying a trade and respective current account deficit of US$2 billion in 2011 and US$1,7 billion in 2012,” he said.