Panafrican News Agency

Tanzania: Decline in export prices, volume widen deficit in current account

Dar es Salaam, Tanzania (PANA) - Mainland Tanzania’s current account deficit widened to US$4.8 billion during February 2014, compared to US$3.6 billion in the corresponding period a year before due to a decline in major commodity export prices, the volume of gold exported as well as an increase in oil imports, the central bank here said Thursday.

“Despite the widening of the current account deficit, the overall balance of payments registered a surplus of US$608.8 million, which was more than double the surplus recorded in the year ended February 2013, mainly due to increase in inflows in the form of capital grants, external borrowing and foreign direct investments,” the Bank of Tanzania revealed in its Monthly Economic Review for March 2014.

According to the bank, average world market prices for Tanzania’s principal commodities went down with the exception of cotton, cloves and sisal.

The price of cotton rose mainly due to a drop of cotton production in the US and India, coupled with high demand from India’s textile manufacturing industry.

Sisal price increased largely on account of improvement in global demand for the fibre, but the fall in the prices of coffee was prompted by excessive supply of the commodity, following the improvement in weather condition in Brazil and Indonesia.

Also, prices of tea declined mainly due to an increase in production in Kenya, India and Australia, following favourable weather conditions.

Likewise, the report attributed the fall in the price of gold to a change in investors’ preference in favour of the more attractive equities and shares.

At end February, the bank said the country’s stock of gross official reserves amounted to US$4.5 billion, sufficient to cover slightly over four months of projected imports of goods and services, excluding those financed by foreign direct investment.

In the meantime, the current account of the offshore Zanzibar Isles recorded a deficit of US$90.1 million, compared with a deficit of US$37.2 million registered in the year ended February 2013, mainly on account of increase in imports of goods coupled with a decrease in tourism related receipts

During the year ending February 2014, the islands’ exports of goods and services declined to US$180.8 million from US$189.7 million recorded the previous year.

According to the bank’s report, Zanzibar exported goods worth US$77.5 million, an increase of 78.6 percent from US$43.4 million recorded in the corresponding period in 2013.

“The surge was mainly driven by cloves exports following a spike in both average export price and volume,” the report said.

On Tanzania’s external debt stock at the end of February 2014, the bank reported that it stood at US$13.6 billion, a decrease of US$76.1 million from the amount recorded at the end of preceding month.

“The decrease was mainly on account of debt service payments and exchange rate fluctuations.

“However, when compared to the corresponding period in 2013, the debt increased by US$2.7 billion, on account of new disbursements and accumulation of interest arrears,” the bank explained.
-0- PANA AR/SEG 1May2014