Trade deficit stalls liquidity

The persistent liquidity crunch has compromised the country’s ability to sustain the relatively robust economic growth achieved since dollarization.

Increased liquidity is central to the transformation of the Zimbabwean economy. However, in an economy where the central bank cannot turn to printing notes, the country’s liquidity is largely sourced from export earnings, diaspora remittances, offshore credit lines and foreign direct and portfolio investment inflows.

Had these sources been able to sufficiently meet the economy’s liquidity requirements, we would not be having this discussion. In view of the publicly known challenges relating to other liquidity sources, the development of the export sector front appears to be the most viable source of liquidity for us.

It is disheartening to realise that our exports are currently much lower than imports, and the trade deficit has continued to worsen. Zimbabwe’s export earnings are mainly comprised of mineral exports which constitute about 60 percent of total exports. We also have a very concentrated export market, as 72 percent of the country’s exports are going to three countries: South Africa, United Arab Emirates and China.

Concentrated exports

Further to that, the predominance of unprocessed primary goods, the massive deterioration in general infrastructure and quality control management has constrained our capacity to maximize export earnings.

High imports mean that we are withdrawing money from the economy and paying it to other countries, which reduces our liquidity levels. This type of liquidity leakage should be countered through import substitution and initiatives such as the Buy Zimbabwe Campaign.

On the other hand, increasing exports means that we are being paid by other countries and this is an injection which boosts liquidity in the economy. This means that we should be careful about what we import.


The main challenge at the moment is that Zimbabwean enterprises lack export readiness, apart from having what I call exportophobia. The introduction of dollarization has resulted in many manufacturing companies abandoning the export market, since they can still get foreign currency by selling locally. Local prices are higher than regional and international ones, giving them the incentive to sell domestically. It appears that the domestic market offers comfort and security to these enterprises. However, this is a huge slap for liquidity injection prospects in the economy. It has to be noted that dollarization is not a permanent thing, as one day a local currency is going to be introduced. It would be difficult for those companies that have abandoned their export markets to reclaim them, as other countries would be servicing them.

Defining moment

As industrial capacity utilisation continues on a growth trajectory, it is only a matter of time before exporting goods will be a natural compelling factor. This is because the domestic market will be saturated, and firms will be producing surpluses, not to mention increased home competition, changes in operational environment and the need to exploit the product life cycles for their products entering the decline stage.

This is our defining moment and decisions we make ought to be inspired by our economic aspirations for the foreseeable future. For those willing to participate in the export market, the main challenge is lack of knowledge about the many complex challenges involved in marketing abroad. International marketing is a much more complicated process than marketing and selling in the domestic economy.

I have seen tomatoes belonging to a farmer from Benzi rotting, because no-one in the village could buy them. This is in spite of the fact the there is a huge demand for tomatoes in markets abroad.

The Benzi farmer’s tomatoes will continue to rot, as long as the above matter is not addressed. Acknowledging the initiatives of the National Trade Policy, it is imperative for the government to step in and provide enterprises support and incentives that encourage them to export their products.

However, it should be noted that subsidies are regulated by the World Trade Organisation.

Our aim, as pronounced in the National Trade Policy, is to grow our exports from the current $4.3 billion to $7 billion by 2016.

We are also aiming at increasing the manufacturing sector’s contribution to export earnings from the current 16 percent to 50 percent by 2016.

Export earnings, which are currently very low, are our only hope for boosting liquidity. We need to start boosting exports in order to build our economy.

Post published in: Business

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