Zimbabwe expects higher tobacco output, could improve liquidity

HARARE, March 21 (Reuters) - Zimbabwe expects output of its second biggest export earner tobacco to rise 5.8 percent to 200 million kilogramme this year, an industry group said on Wednesday, as farmers started selling their crop at the country's auctions.

The southern African nation is desperately short of dollars due to its strugling economy, although traditionally liquidity improves during the tobacco-selling season as cash is brought into the country.

Zimbabwe exports its tobacco mostly to China, South Africa and Belgium, earning the country $1.2 billion between May 2016 and December 2017 compared with $1.3 billion from gold, central bank data showed.

The Tobacco Industry and Marketing Board said tobacco production should increase from 189 million kg to 200 million kg this year.

Over the last five years, more companies have been financing farmers to produce tobacco, helping to boost production.

"Government appreciates the coming on board of the tobacco contracting companies where they financed 82 percent of the crop in the 2017/18 agricultural season," Vice President Constantino Chiwenga told farmers at the start of the auction season.

Chiwenga said the government was extending the tobacco funding model to other crops like wheat and soybean, whose production has remained depressed because farmers lack money to buy seed, fertiliser and pesticides. (Reporting by MacDonald Dzirutwe; Editing by Mark Potter)