- Zimbabwe continues importing things like maize and wheat
- Deficit was widened by decreased PGMS prices and lower gold output
- Trade balance widened by 26%, from a deficit of US$491 million to US$621.8 million
Harare-Zimbabwe’s trade balance widened by 26%, from a deficit of US$491 million recorded in the last quarter of 2022 to US$621.8 million during the quarter to March 2023.
The country exported goods worth US$1.4 billion during the first quarter of 2023, a decrease of 23.8% from US$1.8 billion recorded in the previous quarter.
“The worsening of the trade balance was a result of declining exports driven by decline in international commodity prices for some minerals such as PGMs combined with declining export volumes for gold and tobacco, among others,” said Treasury in its first quarter bulletin.
The international commodity prices were on a downward trend due to global economic headwinds and the desire to shift from fossils. The decline was despite China opening up its industry.
While platinum prices gained during the quarter owing to strong industrial demand for auto catalysts during the first quarter of 2023 as China reopened its industry from Covid-19 induced lockdowns, the price remain relatively low from a peak of US$1200 in 2020. Demand for palladium as an auto catalyst has been eroded during the quarter as compared to the same period in 2022, as auto manufacturers are substituting the highly priced palladium with platinum.
Rhodium, which is in the family of platinum and palladium, mainly used in catalytic converters, has been on a downward trend as the automotive industry is in race to meet emission norms as prescribed by international legislative frameworks.
The decreasing trends which were witnessed in the rhodium prices during the quarter is a reflection of increased supply versus the absorption capacity of the industry.
Meanwhile, data released by Treasury shows that South Africa remained the country’s major exporting partner having exported 44.3% followed by Singapore at 27.7%.
China, Mozambique, United Arab Emirates, Mauritius and Zambia trailed at 10%, 4.2%, 2.3%, 1.6% and 1.4%, respectively.
However, merchandise imports decreased by 13.1% to US$2 billion from US$2.3 billion spent during the fourth quarter of 2022. The reduction in imports on quarterly basis is attributed to seasonality as the imports increased by 1.9% relative to the comparable period the previous year.
What it Means
The trade deficit was a result of declined output from mainly gold. Gold was heavily affected by power deficits leading to reduced production and high production costs.
A continued trade deficit means Zimbabwe will continue facing foreign currency challenges as forex is earned through exports. This means exchange rate disparities and price distortions will remain as the black market will remain the key source for the much-needed greenback.
Despite government talking of high industry capacity utilisation, the latest data during the period under review shows that Zimbabwe remained a net importer in products such as maize, wheat, and rice, which can be produced locally.
Data shows that imports were driven by fuel, electricity, maize and wheat whilst dairy produce, crude soya-bean oil and palm oil declined. This makes government’s that 80% of goods in shelves problematic.
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