Yesterday, responding to a Bloomberg article which claimed that Zimbabwe’s ‘trade surplus’ is evidence of progress, I pointed out that a trade deficit is not necessarily a bad thing. Indeed, it is not. 1/20

I illustrated this with FDI, which can result in trade imbalance. FDI is good but it can create temporary import pressures, a ‘healthy’ trade imbalance. A trade surplus in and of itself is not a measure of economic performance. 2/20

A number of people could not understand how FDI could in any way be related to imports. This thread is for their benefit i.e., @tafadzwamerere, @PatsDaMan, @sabepe83, @AlekeMukunga, @mkhwananzivusa, @muzekepwa and @DzeShe88. 3/20

The first point is that FDI is not limited to financial flows. To grow productive capacity of a country, it can lead to growth of imports of capital and intermediate inputs for industry. Zimbabwe has few industries producing these. 4/20

Those asset and intermediate inputs flows are recorded as imports. A simple example below: 5/20