According to the data released by the central bank late last week, the increase of non-capital transactions by over $1 billion was mostly the result of a 3.2 per cent decline in export earnings to $8.38 billion and the import bill rising by over seven per cent to $10.33 billion.
While the current account deficit widened 70.8 per cent to about $2.68 billion, the posted balance of payments deficit was $516.5 million more than what it was in 2015.Bank of Tanzania (BoT) records show that in 2016, the BOP significantly improved to a surplus of $305.5 million before faring much better the following year.
“The overall balance of payments was a deficit of $774.9 million in the year ending December 2018 compared to a surplus of $1,669.6 million in the corresponding period in 2017, on account of widening of current account deficit,” BoTnotes in its latest review of the economy.
“Current account deficit widened to $2,686.3 million from $1,572.5 million in the year ending December 2017 due to increase in imports coupled with a decline in exports,” it adds in the January 2019 Monthly Economic Review (MER), which covers last December and the year ending that month.
In 2016, the deficit in the current account substantially narrowed to $2,054.8 million, which was almost a half of the deficit recorded in the preceding year. BoT said the outturn resulted from a substantial decline in imports, particularly services; together with an increase in exports of both goods and services.
During the year ending December 2015, the current account deficit had narrowed to $3,130.2.8 million compared with a deficit of $5,017.5 million in the corresponding period in 2014. The central bank attributed the improvement to increased export of goods and services coupled by shrinking of the import bill.
Exports generated less foreign exchange last year due to decrease in goods exports, which dropped by 9.5 per cent. On the other hand, spending on imports went up nearly eight per cent mostly on account of rise in the importation of capital goods to cater for investment in mega development projects being undertaken by the fifth phase government.
“The value of exports of goods and services declined by 3.2 per cent to $8,386.2 million in the year ending December 2018 compared to the corresponding period in 2017, largely explained by decrease in goods export,” reads the new MER.
The value of goods exports slumped by almost 10 per cent mostly because of fall in the foreign exchange earnings generated by both non-traditional and traditional goods. Apart from gold and re-exports, all other non-traditional exports performed poorly leading to total earnings declining to $3,260.3 million from $3,372.6 million in 2017.
Gold, the main non-traditional export, fetched $1,549.2 million, which was a slight increase over the previous year’s earnings of $1,541.1 million. Decline in exports of textile, cement, footwear and edible vegetable cut export earnings from manufactured goods by 1.9 per cent to $829.6 million, on account of a decline in exports of textile, cement, footwear and edible vegetable.
Travel trade, which is dominated by tourism, continued topping the export proceeds chart after it generated $2,449.4 million that was more than half of all the receipts from service exports. The additional $199.1 million generated by the hospitality industry emanated from rise in the number of tourist arrivals.
The $1,227.5 million transport receipts were another decisive factor in the increase earnings from services, which went up by $182.8 million to $4014.7 million in 2018. BoT says the transport earnings rose due to growth in volume of transit goods to and from neighbouring countries particularly Zambia, DRC, Rwanda and Burundi.
And this had much to do with the improved competitiveness at the Dar es Salaam port, including removal of VAT on auxiliary services of transit cargo.
“Goods (fob) and services import bill increased by 7.8 per cent to $10,338.2 million in the year ending December 2018 from the amount in the year ending December 2017,” the central bank notes in the MER adding that goods import increased by 8.2 per cent to $8,174.9 million from what was spent in 2017.
BoT said all major categories of imported goods recorded increases last year. Oil imports, which account for the largest share of goods import, increased by 1.1 per cent from $1,850.6 million to $1,871.5 million.
The value of imports from food and foodstuff declined substantially on account of adequate food supply across the country following good harvest during 2017/18 crop-season. Declining by 35.3 per cent, the import bill here was cut from $405.3 million to $262.0 million.
“The increase in import bill for capital goods was associated with the ongoing infrastructural development in the country, including construction of standard gauge railway, roads and bridges, airports, and ports,” it explains.