According to the November 2018 Monthly Economic Review (MER), the deterioration of the current account in the isles’ balance of payment was triggered by two factors.
The major factor behind the decline emanated from increased importation of goods and services compared to the foreign exchange generated from exports. The other key aspect was slump in official current transfers mostly aid from development partners.
Current Account Balance
“Current account balance recorded a deficit of $24.7 million in the year ending October 2018 compared to a surplus of $25.2 million in the corresponding period in 2017, mainly on account of increase in imports coupled with decline in official current transfers,” the central bank notes in the latest MER.
“Import of goods and services increased by 37.8 per cent to $281.9 million, while current transfer inflows shrunk by 9.0 per cent to $30.3 million,” it adds. According to BoT and Tanzania Revenue Authority computations, the import bill during the year ending October 2017 amounted to $ 204.6 million while the value of current transfer inflows was $33.3 million.
The current account surplus during the year ending October 2017 was smaller than the one recorded in October 2016, which amounted to $80.1 million, mainly due to a decline in goods exports that was also coupled with increase in import of goods and services. The goods and services account last year worsened to a deficit of $24.2 million compared to a surplus of $56.6 million in the year ending October 2016, following decline in goods exports and increase in imports.
The November 2018 MER says exports of goods and services increased to $224.7 million from $186.2 million in the year ending October 2017. The report attributes the increase to mainly rise in the services receipts, particularly earnings from tourism related activities, and cloves exports.
Earnings from cloves exports rose to $38.3 million from $28.1 million in the year ending October 2017, on account of increase in volume following bumper harvest in the 2017/18 season. Manufactured goods exports and re-exports, which also account for substantial share of goods exports, increased by 23.4 per cent to $7.0 million.
Similarly, proceeds from seaweeds exports more than doubled to $4.7 million from $1.7 million in the year ending October 2017, while fish and fish products exports rose due to expanding markets, especially in neighbouring countries. Services receipts during the review period went up 14.5 per cent from $150.1 million to $171.9 million.
“Value of goods and services imports (fob) was $281.9 million during the year to October 2018 compared with $204.6 million in the year ending October 2017, with much increases observed in goods imports. All major categories of goods imports increased with intermediate goods recording the highest growth,” reads the new MER.
Zanzibar spent most of its foreign exchange on intermediate goods whose import bill during the year ending October 2018 was $100.9 million with oil imports contributing most of the procurement after increasing by 37.6 per cent to $67.6 million. The cost of importing capital goods that rose 46.8 per cent to $61.6 per cent, while $69.4 million was used to import consumer goods whereby foodstuffs cost the most at $27 million.