Mr Sam Malaba

Business Reporter
PROCESSED food imports have surpassed the $1 billion mark each year from 2012 negatively contributing to the trade deficit, which reached $3,4 billion last year.

Bankers Association of Zimbabwe president Mr Sam Malaba said processed food imports contribute a significant part of the current account deficit.

Presenting a paper on Containment of Inflationary Pressures on Food Prices and Funding of the Entire Value Chain at the inaugural Zimbabwe Food Conference Expo, Mr Malaba said the major driver of overall inflation deceleration has been food inflation – now in consecutive decline for over a year.

“Local firms in the food sub sectors increasingly face thinning margins against the background of intense competition from imports. Processed food imports constitute a dominant share of the manufactured imports – in excess of $1,1 billion per year since 2012,” said Mr Malaba.

He said the current account deficit is still large and unsustainable, particularly as growth in imports will likely persist in light of the strengthening of the US dollar and further depreciation of the rand over the near and medium term. This will further impact downward price pressures.

“Weak domestic aggregate demand, emanating from depressed economic activity, a weak rand against the US dollar, declining international oil prices and general depression remain major drivers of the current negative inflation environment,” said Mr Malaba.

Typically prone to transitory shocks, annual food inflation declined from -2,9 percent in April to -3 percent in May largely weighed down by declines in the prices of vegetables, bread and cereals, meat and oils and fats, among food items, he said.

He forecasts that inflation will remain in the negative until the first half of next year.

“Quite evidently, inflation will remain negative for the rest of 2015 and much of the first half of 2016. Preliminary estimates show, that aside from a major price shock, the balance of probabilities is that headline inflation is forecast to remain negative through to May-June 2016,’ said Mr Malaba.