In his recent budget announcement for the fiscal year 2021, Minister of Finance Dr. Bwalya Ngandu stated that Zambia had experienced a trade surplus during the year 2020. However, it’s not the trade surplus that many would have hope for. Covid-19 had done its part in disenfranchising domestic and global supply chains, therefore, impacting imports and exports into the country.
“Sir, in the first half of this year, imports of goods declined to US$2.3 billion from US$3.3 billion in the corresponding period in 2019”, read the statement from Hon. Dr. Bwalya Ngandu on 25th September 2020 when he delivered the 2021 national budget to parliament in Lusaka. “This represented a decline of 30 percent”. A substantial drop that exposed the impact of closed borders of Zambia’s trading partners.
The minister placed the blame on a number of factors. “Subdued domestic economic activity, depreciation of the Kwacha and supply chain disruptions due to the COVID-19 pandemic largely underpinned the decline in imports”.
However, by comparison, the magnitude drop in exports was approximately 50% of the fall in imports. “Similarly, export earnings were US$3.2 billion compared to US$3.8 billion realised over the same period in 2019, representing a decline of 15.8 percent”.
Trade surpluses are often a means by which countries gain foreign currency. This is where the much-needed forex comes from that balances the equation of supply and demand hence leading to a more stable currency. However, in a recession, the contraction of the economy has meant that value creation has been eroded on both ends of the import versus export equation. Furthermore, the debt obligations persistently chase after the strained resources.
Under different circumstances, Dr. Ngandu would have lauded the trade surplus. But with a mask on, he can only frown upon Covid-19.