Illicit trading exaggerates trade deficit

ZIMBABWE's persistent trade deficit has been magnified by unstated foreign trade activity, the country's national statistical agency has said.

In recent years, the southern African country has run systemic trade deficits due to decline in exports, mostly as a result of ailing industry.

"Trade deficit says that you are importing things that cost more than your export earnings, the question is who is funding that difference," Douglas Hoto, a Zimbabwe National Statistics Agency (Zimstat) board member told delegates at the Institute of Internal Auditors Zimbabwe annual conference last week.

"We can try to account for it by saying there is FDI, diaspora remittances and so on but when you add these things together, there is still a gap which speaks to a section of the economy that is not accounted for when we do our national accounts," he said.

"It simply means that the significant part of the economy is not in the equation or the exports are understated to the extent that they go out in the grey market and comeback as imports in the formal market."

The country's cumulative trade deficit since dollarisation in 2009, breached the $20 billion mark this year.

Meanwhile, the cumulative total deficit for January to July, in 2018 stood at $1,71 billion.

"When we wanted to interrogate this further from a Zimstat point of view, we asked the Zimbabwe Revenue Authority (Zimra) to tag the imports by source of funding, if we do that we might narrow the deficit, but no one is keen to do that, so that remains another thing that we still need to take care of if the situation is to improve," Hoto said

The First Mutual Holdings Limited chief executive said a significant portion of the discrepancy could be attributed to illicit gold trades.

"Most of the gold produced is not going to Fidelity, it is going through the black market, that is why we are importing things that we do not know who paid for them. That gold is actually going to buy things that come back to Zimbabwe, we see then coming through the imports.

"So if we increase the incentive and allow the people who produce gold to receive US dollars in their FCAs, they will not need to sell their gold to smugglers," he said.

Over the years, gold has remained the country's single biggest export. Over the period February to July this year alone, the country exported $669 million worth of bullion, representing 34 percent of the $1,96 billion worth of goods and services exported during this period.