According to the Bank of Tanzania (BoT), widening of the current account deficit by nearly 51.6 per cent during the period contributed to deterioration of the October international trade and financial transactions.
During the period, Tanzania spent a good fortune to import mostly transport equipment as well as building and construction materials leading to the non-capital transactions deficit broadening to about $2.11 billion from nearly $1.4 billion a year earlier.
“The overall balance of payments recorded a deficit of $171.6 million in the year ending October 2018 compared to a surplus of $1,601.8 million in the year to October 2017, partly on account of widening of the current account deficit,” the central bank notes in the new Monthly Economic Review (MER) published yesterday.
“The current account balance was a deficit of $2,113.6 million compared with a deficit of $1,394.2 million in the year ending October 2017, largely explained by increase in imports, particularly transport equipment, and building and construction materials,” reads the November MER.
The report says gross official reserves amounted to $5,277.8 million as at end October 2018, sufficient to cover 5.2 months of projected imports of goods and services, excluding foreign direct investment related imports. The import cover was well above the country and EAC benchmarks of four months and 4.5 months, respectively.
Meanwhile, foreign assets of banks were $998.1 million in October 2018. While imports rose by 8.8 per cent during the one-year period to about $10.3 billion, exports increased only by 1.2 per cent to around $8.7 billion that led to a trade balance deficit of $1.61 billion.
BoT says that exports of goods and services increased to $8,742 million in the year ending October 2018 from $8,638.9 million in the corresponding period in 2017, supported by good performance of traditional goods exports and increase in service receipts. The value of traditional goods exports rose by 38.4 per cent to $1,115.1 million following an increase in export values of all traditional crops, save for coffee and tea.
“The increase in export value of cotton, sisal, tobacco and cloves was on account of volume, while for cashew nuts was due to both volume and export price. The decline in export value of coffee and tea was mostly due to a fall in export prices,” the central bank explains in the new MER.
Non-traditional exports value dropped to $3,200.4 million in the year ending October 2018 from $3,575.9 million. All categories of non-traditional goods exports recorded declines during the year, save for horticultural products.
“It is worth noting that the decrease in export value of gold—the leading non-traditional good—was on account of a decline in volume,” BoT notes in the report.
Foreign exchange earnings from services amounted to $3,994.9 million in the year ending October 2018 compared with $3,819.0 million in the year ending October 2017, driven by travel and transport receipts. Travel receipts, which are dominated by tourism, rose by 7.3 per cent to $2,406.1 million owing to increase in number of tourist arrivals.
Transport receipts went up by 10.9 per cent to $1,237.7 million on account of increase in the volume of transit goods to/and from neighbouring countries particularly Zambia, Democratic Republic of the Congo and Burundi, following improvement of operations at the Dar es Salaam port, including removal of value added tax on auxiliary services of transit cargo and reduced road blocks.
The MER says that the goods and services import bill increased by 8.8 per cent from the amount paid in the year ending October 2017 to $10,357.4 million in the year ending October 2018. Goods import amounted to $8,143.3 million compared with $7,528.5 million in the year to October 2017, with all the import categories recording increases.
“A notable increase was observed in capital and intermediate goods that is much associated with the on-going infrastructural development projects, including construction of standard gauge railway, roads and bridges, airports, and ports.
Meanwhile, the rise in intermediate goods import bill was largely explained by an increase in the value of oil imports,” BoT explains.
Oil imports—the second largest in goods imports—went up by 3.4 per cent to $1,916.8 million following increase in both volume and price, consistent with global market price developments.
By contrast, importation of food and food stuff substantially declined in the year ending October 2018 on account of adequate supply of food across the country following good harvest during 2017/18 food crop-season.
Services payment increased to $2,214.1 million in the year to October 2018 from $1,988.0 million in the previous year, largely following increase in transport and other business services payments.
Payments with respect to transport, particularly freight, which accounted for the largest share of services payment, rose by 7.5 per cent in line with increase in goods imports.