Zim’s trade balance likely to fall
By Roadwin Chirara, Staff Writer
Friday, 06 May 2011 16:00
HARARE – Zimbabwe’s the trade balance is likely to deteriorate by more than
three percent of gross domestic product (GDP) in 2011, the International
Monetary Fund (IMF) has said.
According to the Bretton Woods institution’s regional economic outlook
sub-Saharan Africa, global commodity price movements will have a negative
effect on the country’s trade account.
“In terms of the impact on external accounts, work done for the World
Economic Outlook suggests that commodity price movements observed through
December 2010 are likely to affect adversely the trade accounts of a number
of countries in the region fairly significantly,” the report said.
However, the global financier said increased capital inflows in the country
were being driven by the country’s vast platinum reserves and where most of
the funds were being channelled.
“FDI is mainly driven by one large investment in platinum production,” the
report said.
“Higher commodity prices — copper in Zambia and gold and platinum in
Zimbabwe — were expected to boost economic conditions and may have
contributed to higher inflows to these countries,” it added.
The report said the introduction of stabilising measures such as the
government of national unity and a multi-currency system had encouraged a
surge in funds targeting the stock exchange.
“As a result, portfolio flows have resumed, and market capitalisation
rapidly increased from US$1,5 billion in February 2009 to US$5 billion in
October 2010,” the IMF said.
“All categories of capital inflows have surged, and have exceeded pre-crisis
levels.
“Following the implementation of an economic stabilisation programme in
2009, Zimbabwe has recorded a sharp increase in portfolio equity investment
and foreign currency deposit inflows,” according to the report.
The report also said despite several countries still struggling in the
aftermath of the global economic downturn, Zimbabwe had put in place sound
macroeconomic policies in place.
“Macroeconomic policies have improved in a number of countries, most notably
Zimbabwe,” according to the IMF fundings.
External borrowings by countries, according to the IMF, partly reflect the
need to finance current account deficits.
“For instance, Zimbabwe relies on capital flows to finance current account
deficits of about 20 percent of GDP and support liquidity in the fully
dollarised banking system,” the report said.
The report said banking systems in several countries were strained by the
global slowdown or by domestic factors which were compounded further
tightening of banking regulations in the case of Zimbabwe.
“In some countries, such as Zimbabwe, a tightening of banking regulations
for prudential reasons correspondingly may constrain net capital inflows,”
according to the IMF.
The Fund reiterated its forecast of 5,5 percent GDP growth for the region in
2011 and 5,9 percent in 2012, with low-income countries making up the bulk
of the continent’s fastest recovering regions.
With an average oil price of U$107 per barrel this year compared to US$80
per barrel in 2010, an increase of more than a third which would result in
higher import bills for most countries in the region, it said.