Current account deficit shrinks on export

DAR ES SALAAM: THE current account deficit narrowed in the year ending July, supported by stronger exports of goods and services relative to imports.

The deficit fell to 2.08 billion US dollars, down from 2.71 billion US dollars during the same period last year, reflecting the impact of rising export earnings on the country’s external balance.

The shift suggests an improving external sector performance, reflecting both enhanced export competitiveness and a moderation in import demand that together contribute to a more sustainable trade balance.

Bank of Tanzania (BoT) latest Monthly Economic Review attributes this improvement to effective export promotion policies and possibly a tightening of domestic consumption patterns that have slowed import growth

“This rebalancing reduces pressure on foreign exchange reserves and the need for external borrowing, which in turn supports macroeconomic stability and exchange rate resilience,” the Bank report said.

The stock of foreign exchange reserves rose to 6.24 billion US dollars at the end of July, up from 5.32 billion US dollars a year earlier, reflecting a strengthening external position and enhanced capacity to meet external obligations.

Such a comfortable reserves buffer enhances the country’s ability to manage external shocks, maintain exchange rate stability and support import financing.

ALSO READ: Why value addition is still Tanzania’s most important subject?

It also signals improved investor confidence and macroeconomic resilience, particularly important in the context of global economic uncertainties.

The central bank said sustaining or further growing these reserves will be critical to safeguarding economic stability in the medium term.

If these trends continue, they could improve investor confidence and create a more favourable environment for sustained economic growth.

During the year ending July, exports of goods and services increased by 14 per cent to 16.66 billion US dollars driven by growth across multiple sectors.

The rise was particularly evident in travel receipts, non-traditional exports such as gold and traditional export commodities, indicating a broad-based improvement in export performance that supports external sector resilience.

The exports of goods rose by 19.7 per cent to 9.48 billion US dollars in the year to July contributed gold, cashew nuts, horticultural products, coffee and cereals, particularly maize and rice.

In terms of values, gold exports increased to 3.97 billion US dollars from 3.15 billion US dollars supported by favourable global market prices and central bank purchases.

Traditional exports were 1.48 billion US dollars compared with 1.07 billion US dollars with main drivers being cashew nuts and coffee, on account of both price and volume effects.

The exports of cereals more than doubled to 382.3 million US dollars dominated by maize and rice due to increased demand from neighbouring countries.

On a monthly basis, goods exports stood at 551.3 million US dollars in July compared with 847.1 million US dollars in July last year.

Service receipts grew to 7.17 billion US dollars up from 6.64 billion US dollars in the year ending July last year largely driven by travel and transportation receipts.

The travel (tourism) receipts rose by 3.8 per cent to 3.87 billion US dollars consistent with the increase in the number of international tourists to 2,249,387 from 2,026,378 in the previous year.