Figure 1: Current Account Balance in Zimbabwe (2016-2022)
Sources: IMF 2019, Zimbabwe Staff-Monitored Program; IMF 2017, Zimbabwe 2017 Article IV Consultation. Notes: (*) Figures from 2018 to 2020 are projections from the IMF, 2019; (**) Figures from 2021 onwards are projections from the IMF, 2017.
Total merchandise imports to Zimbabwe increased to USD 4.1 billion in 2018, from an annual average of USD 3.9 billion for 2015 to 2017[1]. Exports increased to USD 4.0 billion in 2018, from an annual average of USSD 3.3 billion for 2015 to 2017[2]. The faster growth in exports has not been sufficient to improve Zimbabwe’s current account balance, which improved from a deficit averaging of -USD 679.0 billion (approx. -3.1% of GDP) for 2016 to 2018, to a deficit of -USD 493.0 million (approx. -2.2% of GDP) in 2019[3]. The faster growth in export earnings has not been sufficient to improve Zimbabwe’s balance of payments and gross official reserves have decreased due to the narrowing capital and financial account surplus.
Figure 2: Capital and Financial Account Balance in Zimbabwe (2016-2022)
Sources: IMF 2019, Zimbabwe Staff-Monitored Program; IMF 2017, Zimbabwe 2017 Article IV Consultation. Notes: (*) Figures from 2018 to 2020 are projections from the IMF, 2019; (**) Figures from 2021 onwards are projections from the IMF, 2017.
Zimbabwe’s capital and financial account balance deteriorated from a surplus (net inflows) averaging USD 1.3 billion (approx. 6.1% of GDP) for 2016 to 2018, to a surplus of USD 219.0 million (approx. 1.0% of GDP) in 2019[4]. As a result, Zimbabwe’s balance of payments deteriorated from a deficit averaging -USD 262.0 million (approx. -1.2% of GDP) for 2016 to 2018, to a deficit of -USD 273.0 million (approx. -1.2% of GDP) in 2019[5]. Gross official reserves decreased from USD 310.0 million in 2016 to USD 87.0 million in 2018, before recovering to USD 137.0 million in 2019[6]. During this period, Zimbabwe experienced persistent inward FDI inflows.
Inward FDI inflows decreased from USD 421.7 million in 2015 to USD 349.4 million in 2017, before recovering to USD 744.6 million in 2018[7]. As a result, Zimbabwe’s inward FDI stock increased from an average of USD 4.3 billion for 2015 to 2017, to USD 5.4 billion in 2018[8]. Zimbabweans’ investments abroad have increased as inward FDI to the country persisted.
Figure 3: Gross Official Reserves and Balance of Payment in Zimbabwe (2016-2022)
Sources: IMF 2019, Zimbabwe Staff-Monitored Program; IMF 2017, Zimbabwe 2017 Article IV Consultation. Notes: (*) Figures from 2018 to 2020 are projections from the IMF, 2019; (**) Figures from 2021 onwards are projections from the IMF, 2017.
Outward FDI outflows increased from USD 22.0 million in 2015 to USD 42.2 million in 2017, before decreasing to USD 26.8 million in 2018[9]. As a result, Zimbabwe’s outward FDI stock increased from an average of USD 542.6 million for 2015 to 2017, to USD 607.1 million in 2018[10]. These capital flows have improved Zimbabwe’s balance of payment but the country’s net international FDI position deteriorated.
Figure 4: Inward Foreign Direct Investment in Zimbabwe (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Zimbabwe’s balance of payment has been supported by the narrowing current account deficit despite the deteriorated capital and financial account surplus in the period from 2015 to 2018. Outward FDI flows have been volatile as inward FDI inflows persisted. Zimbabwe’s net international FDI position deteriorated from net liabilities amounting to an average of -USD 4.1 billion (approx. -19.8% of GDP) for 2015 to 2017, to net liabilities amounting -USD 5.5 billion (approx. -20.4% of GDP) in 2018[11].
Figure 5: Outward Foreign Direct Investment from Zimbabwe (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
At these levels Zimbabwe’s foreign liabilities remain sustainable as a proportion of GDP. Given the narrow domestic capital markets, Zimbabwe should focus on attracting inward FDI in sectors that will expand its productive capacity and increase its exports because the country is facing a foreign exchange and domestic liquidity crisis. Nevertheless, Zimbabwe’s balance of payments deficit is projected to recover to a surplus from 2021 onwards, which is projected to support growth of gross official reserves in the medium-term.
Figure 6: International Foreign Direct Investment Position in Zimbabwe (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Improvements in the capital and financial account surplus should support a recovery in Zimbabwe’s balance of payments despite the widening current account deficit in the forward-looking medium-term. The current account deficit is projected to widen from a deficit of -USD 493.0 million (approx. -2.2% of GDP) in 2019 to an average of -USD 672.7 million (approx. -2.9% of GDP) from 2020 to 2022[12]. Zimbabwe’s capital and financial account balance is projected to improve to a surplus (net inflows) averaging USD 530.3 million (approx. 2.4% of GDP) from 2020 to 2022[13]. Therefore, the balance of payment is projected to recover from a deficit of -USD 476.0 million in 2020 to a surplus of USD 47.0 million in 2022, which is equivalent to an average deficit of -USD 132.3 million (approx. -0.6% of GDP)[14]. Thus, Zimbabwe’s gross official reserves are projected to decrease from USD 387.0 million in 2020, to USD 141.0 million in 2022[15].
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2019. Zimbabwe Staff-Monitored Program, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020]; IMF 2018. Zimbabwe 2017 Article IV Consultation, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.; IMF 2018. Zimbabwe 2017 Article IV Consultation, ibid.
[5] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.; IMF 2018. Zimbabwe 2017 Article IV Consultation, ibid. There are relatively significant errors and omissions in Zimbabwe’s balance of payments data equivalent to USD 522.0 million in 2016, USD 1.4 billion in 2017, and USD 879.0 million in 2018.
[6] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.; IMF 2018. Zimbabwe 2017 Article IV Consultation, ibid.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] UNCTAD 2019. UNCTADStat Database, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.
[13] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.
[14] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.
[15] IMF 2019. Zimbabwe Staff-Monitored Program, ibid.
