Zambia’s trade deficit continues

Lusaka, August 30, 2018

According to the Central Statistics Office July Monthly Bulletin,Zambia recordedyet again a trade deficit bringing Zambia’s total trade balance this year to – K8 092.1 million. It is important to note that Zambia has been experiencing trade deficits snice 2015 which means that the country hasbeen spending more money annually on imports than it has been receiving from its exports. For a country facing different economic setbacks this is undesirable.

The Consumer Unity and Trust Society (CUTS) is of the view that the Government needs to focus on achieving a favourable trade balance in order to help better position itself to achieve economic stability.

The high trade deficit has also come at a time when the country’s national budget has been put under severe pressure due to its high debt accumulation. The country is already spending a lot of foreign exchange on debt repayment costs.The need for increased export earnings cannot be overemphasized given this high cost.

The situation is even worse given the country’s international reserves are heavily eroded due to debt servicing costs. International reserves are now recorded at US$1.8billion from US $2.3 billion in 2017. Low foreign exchange earnings could lead to further dwindling of the country’s reserves to finance debt repayments which will put pressure on the Kwacha causing it to depreciate. Zambia’s debt position which is putting a strain on national revenues calls for urgent measures for the country to diversify its export base in order to facilitate receipts of foreign exchange.

CUTS therefore recommends that for the country to deal with the growing debt position and eroding international reserves the Government should prioritize increasing export receipts. The decline in the trade balance has been attributed to a decline in both traditional and non-traditional exports. Traditional exports accounted for 75.2% of exports while non-traditional exports account for 24.6% of exports. Thesepercentages show that there is still a lot of potential for Zambia to earn foreign exchange away from traditional exports which mainly consist of copper. The government needs to create an environment that will lead to increased revenues through increased non-traditional exports such as sugar, cotton, soybeans, maize and tobacco.

Unfortunately due to the high debt repayment and wage bill, insufficient resources are being directed towards the productive sectors of the economy which are necessary to facilitate the growth of Zambia’s exports. At present only less than a quarter of the Government’s budget is currently being directed towards both the economic and social sectors of the economy.

More export earnings would be helpful in providing sufficient revenues the country needs to drive economic growth and carry out development projects.

For more information contact
Ms Chenai Mukumba, Centre Coordinator, CUTS International, Lusaka