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Tanzania: Low export prices widen current account deficit

Tanzania registered a widened current account deficit of about US$ 5 billion during the year ended January 2014, a reflection of the combined effects of decline in volumes and prices of some exports, increase in volume of oil imports and decrease in official transfers, the Bank of Tanzania said Wednesday.

For the same period in January 2013, the country had recorded a current account deficit of US$ 3.6 billion.

“Despite the widening of the current account deficit, the overall balance of payments was US$534.8 million in surplus compared to a surplus of US$316.6 million recorded in the year ended January 2013,” the central bank said in its January 2014 Monthly Economic Review.

According to the report, the value of Tanzania’s exports of goods and services declined by 1.3 percent to US$ 8.6 billion in the year ended January 2014, compared to the amount recorded in the corresponding period of 2013.

“All major exports declined except for travel and manufactured goods,” the bank said, noting that the value of traditional exports went down by 7.6 percent to US$890.9 million compared with the level of January 2013.

The decline was driven by a slump in both export volumes and unit prices of some crops, but mainly due to lower production, except for coffee, tea and cloves.

The Bank of Tanzania explained that the fall in the unit prices for coffee, cotton, tea and cashew nuts was consistent with the general movement of commodity prices in the world market.

Also, the value of non-traditional exports during the same period declined to US$3.8 billion, compared with the US$4 billion recorded the previous year.

The report attributed the decline to low export value of all non-traditional goods with the exception of manufactured goods, diamond and other minerals.

Much of the decline was recorded in gold — the country’s leading non-traditional export which tumbled by nearly 17 percent to US$ 1.7 billion following a fall in export volume, coupled with the decline in unit export price by 17.7 percent to an average of US$1,375.9 per troy ounce.

“Despite the decline, gold continued to dominate non-traditional exports albeit at a smaller share of 46.3 percent compared with 50.4 percent recorded in the preceding year,” the report said.

On services export, the report said that receipts increased by 13.9 percent to US$3.2 billion with the amount recorded in the preceding year.

Travel receipts — the leading foreign exchange earner in the services account — increased by 10.1 percent to US$1.8 billion. The increase was partly associated with a growing number of tourist arrivals in Tanzania.

Meanwhile, transport receipts, which rank second in foreign exchange earnings in the services account, recorded rose by 23.3 percent to US$793.3 million as the volume of transit goods to and from land-locked Zambia, DR Congo and Rwanda alone grew by about 13 percent to 1,438,594 tonnes.

On inflation, the report said that annual headline inflation increased to 6.0 percent in January 2014 compared to 5.6 percent in December 2013, mainly on account of the rise in fuel prices and a 42.6 percent increase in electricity tariffs for domestic consumption.

Month-to-month headline inflation rate increased to 1.8 percent in January 2014 from
1.3 percent in December 2013.

Food and non-alcoholic beverages inflation remained unchanged at 6.0 percent in January 2014 as it was in December 2013.

However, month-to-month food inflation increased to 2.5 percent in January 2014 from 2.0 percent in December 2013, mainly due to marginal price increases of some food items including maize grains, meat, vegetables, fresh fish and fruits

Non-food inflation increased to 6.7 percent in January 2014 from 5.5 percent in December 2013, on account of items associated with housing, water, electricity, gas and other fuels.

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