Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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Zim’s balance of trade likely to fall

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 

“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.


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