Z’bar current account surplus widens on tourism gains

ZANZIBAR: Zanzibar’s current account surplus has strengthened markedly, signalling a sustained improvement in the external sector as strong growth in services exports driven by rising tourism receipts has more than offset import pressures and the decline in traditional goods exports.

The latest Bank of Tanzania Monthly Economic Review shows that the current account surplus widened sharply, rising by 42.8 per cent to 928.2 million US dollars in the year ending October, up from 649.9 million US dollars recorded a year earlier.

Service receipts, especially from tourism, have been the principal contributor to export growth, even as traditional goods exports such as cloves have declined sharply.

This sustained improvement in the current account reflects the growing importance of tourism in Zanzibar’s external sector and a relative moderation in imports.

Tourist arrivals rose sharply by 27.9 per cent to 902,265 visitors in the year ending October, reinforcing the strong recovery in the tourism sector and underscoring its growing role as a key driver of foreign exchange earnings and external sector performance.

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Exports of goods and services surged by 30.4 per cent to US$1.56 billion in the year ending October, reflecting a broad-based recovery in external demand and highlighting the growing contribution of services particularly tourism to Zanzibar’s export earnings.

Notably, the value of clove exports plunged 50.7 per cent to 10.9 million US dollars, down from last year’s level, reflecting the crop’s cyclical production pattern and underscoring the volatility inherent in Zanzibar’s traditional goods sector.

The contrasting trends between robust growth in services exports, particularly tourism, and the sharp decline in traditional goods like cloves highlight a structural shift in Zanzibar’s external sector.

While the tourism sector increasingly drives foreign exchange earnings and supports the current account surplus, reliance on cyclical agricultural exports exposes the economy to seasonal fluctuations and underscores the need for diversification.

On a monthly basis, exports of goods and services increased to 151.8 million US dollars in October, up from 126.6 million US dollars a year earlier, reflecting sustained demand for both goods and services and signaling continued momentum in Zanzibar’s external sector.

Imports of goods and services climbed by 17.0 percent to 555.6 million US dollars in the year ending October compared to the same period last year reflecting stronger domestic demand and the rising cost of imported inputs amid a recovering economy.

The increase was largely driven by increased imports of capital, consumer and intermediate goods.

Imports of capital goods surged 49.8 per cent to 76.4 million US dollars fueled by increased inflows of machinery and mechanical appliances, highlighting ongoing investment in productive capacity and infrastructure development.

The rise in consumer goods imports was primarily driven by non-industrial transport equipment, while growth in intermediate goods reflected higher imports of industrial supplies, signaling increased household demand and expanded production activity in the economy.

The contrasting drivers of imports consumer goods for household use and intermediate goods for production illustrate the dual dynamics shaping Zanzibar’s import growth.

While rising consumer imports point to strengthening domestic demand, the increase in industrial supplies underscores ongoing business activity and investment, suggesting a gradual shift toward a more diversified and production-oriented economy.

On a month-to-month basis, imports of goods and services fell to 48.4 million US dollars in October, down from 63.1 million US dollars a year earlier, reflecting a moderation in short-term demand and a potential slowdown in seasonal import activity.

The month-to-month decline in imports suggests a temporary easing of external pressures on Zanzibar’s current account, providing a buffer to the growing surplus.

Coupled with strong export performance, particularly in services, this moderation points to a more balanced external sector, though sustained monitoring is needed to assess whether the trend reflects structural shifts or seasonal fluctuations.