Import-export mismatch impeding economic growth — MEFMI

current account was a millstone as it contributed to a general lack of fiscal space.
“The current account remained unfavourable due to relatively high import demand against the backdrop of a slow recovery in the export sector,” noted MEFMI.
Observers believe that Zimbabwe’s negative balance-of-payments position has contributed to the pervasiveness of the country’s liquidity challenges.
They contend that increased importation of products, especially from the South African market, has drained the local economy of much needed liquidity.
Said local economist Mr James Wadi: “Since dollarisation, the country has shown an insatiable desire to consume imported goods. The resultant current account deficit entails that the country has been experiencing a net outflow of foreign exchange, thereby worsening the liquidity situation in the banking system.
“In this regard, targeted measures should aim to promote export-led industries while on the other hand dampen consumption of imported non-essential commodities.”
Under the current multi-currency system, the major source of Zimbabwe’s liquidity is export receipts.
However, due to the negative current account position, there is very limited medium- to long-term capital to replace antiquated equipment in industry or for general infrastructure refurbishment, which is constraining the performance of the local industry and resultantly the goods produced thereof.
Reserve Bank of Zimbabwe Governor Dr Gideon Gono recently lamented the uncompetitiveness of locally manufactured products due to limited electricity supplies.
“Over the past decade, Zimbabwe’s products significantly lost competitiveness in the domestic, regional and international markets.
“This negative development is largely attributed to relatively high production costs as a result of various factors. In addition to high utility tariffs, production processes in Zimbabwe are hamstrung by erratic supplies of water and electricity,” he said.
“Some producers are forced to utilise generators to power their plants and other operations. As a consequence, production costs incurred ends up more than trebling when compared to costs otherwise incurred when power supplies are reliable.”
It is to this extent that the country has experienced significant de-industrialisation, with the manufacturing sector’s contribution to the Gross Domestic Product contracting significantly from 25 percent in the 1990s to present levels of around 15 percent.