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Alba Iulia
Tuesday, August 4, 2020

Zambia’s Trade Deficit Trend Worrying-JCTR

Economy Zambia’s Trade Deficit Trend Worrying-JCTR

A look back at 2016 shows that for the whole 12 months period, Zambia’s trade balance was in deficit. This trend, began at the end of 2015 and has been persistent since with the worst cases noted in 2015 (with the deficit at K2, 585 million).

A trade deficit for Zambia means we are importing more than we are exporting in nominal terms. The Jesuit Centre for Theological Reflection is concerned with this trend because of the cost of taking resources outside the country that could be spent locally. Apart from this key challenges exist for developing countries that have prolonged deficits.

These include currency depreciation due to higher demand for foreign currency used to import goods and promoting foreign production at the expense of local production which has an adverse impact on maintaining low prices of commodities.

As at December 2016, the Zambian Kwacha stood at K9.92 per USD 1 while the trade deficit stood at K758.5 million (CSO, 2017) a reduction from K1, 476.4 million in November 2016.

Zambia has continually depended on copper, and other metals, for export earnings. The decline in copper prices has resulted in reduced foreign earnings to the country and consequently increased trade deficit.

At this point when government has openly alluded to diversifying the economy towards agriculture, the JCTR encourages that there should be clear policies that improve the countries productive base so that the nation begins to trade in agricultural commodities on a large scale also.

Policies that govern the sector such as the new National Agricultural Policy are yet to be launched after the last policy whose period of implementation ended in 2015.

Improvements in local productivity in the agricultural sector do not only have a positive impact on trade balance through foreign exchange earnings but domestically could lead to sustained lowering in the cost of living through reducing food prices.

The January 2017 JCTR’s Basic Needs Basket (BNB) for a family of five living in Lusaka stood at K4, 935.46 which is K41.21 less than the December Basic Needs Basket which was at K4, 976.67.

Despite the decrease in the BNB, a detailed look at the BNB however showed that the cost of basic food items for a family of five had increased from K1, 431.94 in December 2016 to K1, 459.01 in January. Top among these increases was the cost of Mealie meal which had on average increased by K8.53 in Lusaka.

This was mainly attributed to seasonal pressures on the maize commodity because it is least available just before the maize harvest season. Also, the sale of maize and mealie meal to other countries where it tends to fetch a higher price. All this is in spite of the signed agreement between government and millers and grain traders on January 17th 2017 for reduced prices.

Emphasis in improving the productivity in the agricultural sector to be able to produce for export is thus key. Strides to improve credit for SMEs in agriculture, aquaculture and value addition by Finance Minister Felix Mutati are thus seen as positive.

More however needs to be done to ensure that these loans are not abused by cadres and end up as gifts from the state. It is important that these funds are used to enhance the targeted sectors to meet targets of increased productivity, positive trade balance and poverty alleviation.

Aspiring to minimise Zambia’s trade deficit or even achieve a trade surplus is a noble goal for any government especially one that has reiterated time and again that diversification and job creation are top on their priority list.

Addressing the trade deficit with these priorities in mind would ensure that value addition is done locally which would in tell provision of jobs for the local people. Further, deterrents could be instituted such as increased taxes for imported products that can ably be produced locally. JCTR thus urges government to consider this in its future plans as well as in the implementation of current ones.

5 COMMENTS

  1. Ati working government kikiki even my dog snoopy can do better than pf government

  2. It’s borrowing, corruption and stealing daily that occupy PF. There are a few good people in PF but the majority are theives who drag down the few good.

    If the head is bad the whole body is bad. Lungu goes around provinces seeing failure and does nothing but promises haphazard development. We should have a system in place to stop that failure and hold people accountable.

  3. Chickens and eggs are still being imported. Some 4 years after PF said that should stop.
    These guys don’t even know what is being imported.

  4. Statistics don’t lie. Please tell the vision less one the meaning of these deficits and their impact on the economy in the long run. Its seems that he is preoccupied with travelling to other countries with a begging bowl instead of sitting home and attending to these important challenges. What have we done to deserve this type of leadership?

  5. K 4935.46 how many people in Lusaka make this amount of money per month? This is a very high cost of living in marginal terms.

Comments are closed.

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