Gold, tobacco lead growth in export receipts
Zimbabwe’s export revenues will post positive growth over the short-term outlook to 2019 on the back of firming gold prices and tobacco production, a leading research firm has said.
According to BMI Research, a subsidiary of Fitch Group, although this would help narrow the country’s current account deficit, the country’s external position remains highly constrained by the ongoing shortage of hard currency.
“Rising gold prices and tobacco production will see Zimbabwe’s export revenues post positive growth for the first time in five years over our short-term outlook to 2019,” it said.
Gold and tobacco are the country’s major foreign currency earners raking in $913,4 million and $933 million respectively in 2016.
On the increase in tobacco production Zimbabwe Tobacco Association chief executive officer Rodney Ambrose told NewsDay that the country is projected to yield more than 200 million kilogrammes this forthcoming season from 188 million last season.
“Supply still largely remains above demand and although there is forecasted to be a decline in Brazil to 580 million kg from a record 630 million kg in 2017, Zimbabwe is forecast to move up to +200 million kilogrammes from the 188 million kg in 2017 along with India increasing from 204 million to 246 million kg. Most other major exporters’ production levels are expected to remain relatively stable,” Ambrose said.
The central bank expects gold deliveries to Fidelity Printers and Refiners to reach 25 tonnes by year end. Deliveries were 10 tonnes in the first half of the year.
BMI said limited resources would constrain the size of the country’s budget deficit and hamstring government efforts to stimulate economic growth. Treasury is projecting a budget deficit of $1,8 billion this year on the back of expansionary fiscal policies where the bulk of the revenue generated is going towards recurrent expenditure like salaries for the civil service.
BMI cautioned the central bank from doubling the amount of bond notes in circulation saying this would fuel inflation.
“The Reserve Bank of Zimbabwe’s decision to more than double the size of its bond note programme will see inflation move more firmly into positive territory over the coming months as the money supply increases further. The effect will be compounded by the likelihood of shortages of imported goods as the supply of hard currency with which to access foreign goods continues to fall,” it said.
The central bank expects to inject $300 million in bond notes. This brings the total to $500 million following the $200 million export incentive facility unveiled last year.
BY FIDELITY MHLANGA
