Categories: Business

Trade Deficits concerns CUTS

The Consumer Unit Trust Society (CUTS) International Zambia has encouraged the government to focus on achieving a favourable trade balance in order to help better position itself to achieve economic stability.

According to the Central Statistics Office July Monthly Bulletin, Zambia recorded yet again a trade deficit bringing Zambia’s total trade balance this year to K8 092.1 million.

CUTS Zambia Center Coordinator Chenai Mukumba says it is important to note that Zambia has been experiencing trade deficits since 2015 which means that the country has been spending more money annually on imports than it has been receiving from its exports.

She says for a country facing different economic setbacks this is undesirable.

Ms Mukumba says 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,” she said.

She states that the situation is even worse given the country’s international reserves are heavily eroded due to debt servicing costs.

She notes that international reserves are now recorded at US$1.8 billion from US $2.3 billion in 2017 and that 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.

Ms Mukumba further states that 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,” Ms Mukumba said.

Ms Mukumba says the decline in the trade balance has been attributed to a decline in both traditional and non-traditional exports with traditional exports accounted for 75.2 % of exports while non-traditional exports account for 24.6% of exports.

She says these percentages show that there is still a lot of potential for Zambia to earn foreign exchange away from traditional exports which mainly consist of copper.

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