Reserve Bank of Zimbabwe governor John Mangudya served up his first monetary policy speech of the year on Monday in typical fashion; over-optimistic bluster topped with a pious sermon explaining away his policies.
Beneath all that, there were five key sets of numbers in his statement that showed the deep hole that the economy has to climb out of.
- FDI is down. Way down
How is the “Open for Business” campaign going? The numbers tell the story.
Foreign direct investment fell from US$717.1 million in 2018 to US$259 million in 2019.
There was an even sharper drop in the inflows of portfolio investment, a class of investments that includes assets such as shares. These dropped from US$54.7 million in 2018 to US$3.7 million in 2019. According to RBZ, “the decline in both FDI and portfolio investment was, in large part, due to heightened perceived country risk”.
- We have a good trade balance, and this is bad news
News that a country is exporting more than it is importing would normally be good news. Not so much in Zimbabwe’s case. The numbers show why.
The current account – the balance between what we export and what we import – swung from a deficit of US$1.387 billion in 2018 to a surplus of US$311.2 million in 2019. This would be a good thing, if this change was not because of the sharp fall in critical imports due to the country’s forex crisis. The current account also improved because we did not export enough; production of gold, the country’s biggest forex earner, was down 17%, while agriculture exports also fell.
In total, merchandise exports for 2019 were estimated at US$4.5 billion, some 3% down from US$4.7 billion in 2018.
RBZ acknowledges that “some of the hardest hit imports…are key inputs into the domestic production process, such as chemicals and electricity”. In other words, our factories couldn’t import the raw materials they need to produce, while the country imported less power.
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