Tanzania’s transactions with the rest of the world deteriorated by US$208.1 million in the year ending August to adversely affect the current account, which had improved remarkably compared to the performance in the corresponding period last year.
In the period under review, the current account, which are a country’s non-capital transactions improved after the previous deficit narrowed by 16.6 per cent to US$4.34 billion.
“This development was on account of increase in exports of goods and services coupled with a decline in imports,” the Bank of Tanzania (BoT) said in its latest review of the economy, which was released yesterday.
During the year ending July 2015, the current account balance narrowed by 16.2 per cent to a deficit of US$4.44 billion compared with the corresponding period in 2014.
The balance of payment in the year ending July 2015 recorded an overall deficit of US$292.8 million. During the same period in 2014, Tanzania’s transactions with the outside world had a surplus of US$280.8 million.“The overall balance of payments recorded a deficit of US$233.1 million (in the year ending August 2015) compared to a surplus of US$25 million in the year ending August 2014,” the central bank said in the September monthly economic review (MER).
The deficit means that the government’s foreign exchange reserves were depleted by US$208.1 during the period, which is the difference between the surplus recorded in the year ending August 2014 and the US$233.1 million deficit.
BoT attributes the deterioration to the capital and financial accounts.
The former is all international capital transfers recorded during the review period. This refers to the acquisition or disposal of non-financial assets (for example, a physical asset such as land) and non-produced assets, which are needed for production but have not been produced, like a mine used for the extraction of diamonds.
On the other hand, the financial account refers to international monetary flows related to investment in business, real estate, bonds and stocks. It also includes government-owned assets such as foreign reserves, gold, special drawing rights (SDRs) held with the International Monetary Fund (IMF), private assets held abroad and direct foreign investment.
“Gross official reserves amounted to USD$4,191.9 million as at the end of August 2015, sufficient to cover 4.0 months of projected imports of goods and services, excluding those financed by foreign direct investment.
Meanwhile, gross foreign assets of banks stood at US$1,199.9 million,” BoT noted in the MER.
At the end of July 2015, the foreign exchange which Tanzania had for meeting its external obligations such as debt service and importations amounted to US$4,229.3 million. The amount was enough to cover smooth importation of goods and services for four months.
The MER has it that the value of export of goods and services was US$9,363.8 million in the year ending August 2015, an increase by 9.8 per cent from the corresponding period in 2014.
The import bill decreased to US$13,478.1 million from US$13,733.4 million in the year ending August 2014.
The improved export trade performance was mainly on account of increase in travel (tourism) receipts, export of manufactured goods as well as traditional exports. Travel trade brought in US$2.21 billion against the previous year’s earnings of US$1.96 billion.
In the year ending July 2015, it injected the same amount of foreign exchange into the national economy.
Manufactured goods raked in US$1.31 billion compared to the previous earnings of US$1.16 billion. Foreign exchange earned from traditional exports improved slightly to US$858.4 million from US$835.6 million.
Former cash cow gold continued to perform dismally. Whereas in the year ending August 2013, it accounted for 47.7 per cent of all the non-traditional exports, this year the share has slipped to 31.9 per cent.
The export of the precious metal fetched US$1.29 billion compared to US$1.39 billion in the year ending August 2014, where its share of non-traditional export earnings was 38.2 per cent.
Gold earnings have been declining because of decrease in both exported volumes and world market prices. Yesterday, the metal was quoted at US$1,171.75 an ounce in the morning, after losing about 1.2 per cent in the past three sessions.
Reuters reported that it struggled after three days of losses yesterday, hurt by a stronger dollar and fears the Federal Reserve could still raise US interest rates this year.
Gold touched a 3-1/2-month high last week on bets the Fed would not raise US rates amid concerns about the global economy.
“The value of goods import declined by 3.0 per cent to US$10,753.3 million, mainly driven by a decrease in import value of intermediate goods, particularly oil,” BoT notes in the MER. “Despite the decline, oil remained dominant accounting for about 29 per cent of goods import.”
SOURCE: THE GUARDIAN
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