A research company is predicting the exceeding gap between the value of goods and services imported into Zimbabwe and the exported, also known as account deficit, to widen in 2018 as the supply of hard currency from foreign investment circulating the economy increases.
Business Monitor International (BMI) Africa Monitor states the widening account deficit as Zimbabwe’s trade deficit of the first quarter of this year increased to US$ 784.3 million for US$ 274.0 million recorded in the fourth quarter of 2017.
“Higher investment inflows, amid signs of reform under new President Emmerson Mnangagwa, will drive demand for imports,” BMI says.
“Given that we believe investors’ re-engagement will remain tentative until the new government builds up a track record of implementing reform, the current account shortfall (account deficit) will remain low relative to recent years.”
BMI also says that tentative (attempt on) foreign investor and donor re-engagement will boost imports into Zimbabwe.
“Increased foreign investor and donor inflows will boost FX liquidity (speed in accessing foreign currency) in the economy, leading to increased import demand and a widening of the current account deficit,” the Africa Monitor says.
“The new government of President Emmerson Mnangangwa has made re-engaging with foreign investors and donor partners a major priority in its plans to revive the economy, and we believe that inflows are likely to increase on bets that his government’s talk of reform will be put into action.”
The Zimbabwe President has been using the “Zimbabwe is open for business” to reengage with the international community.
The inflows are however likely to remain relatively small in magnitude until the government has built up a track record of reform implementation according to BMI.
BMI also says that the Zimbabwean government’s commitment to reform will come at in July in the event that the country passes credible and peaceful elections.