Tanzania's budget deficit is expected to grow to 5.3 per cent of GDP this year, fuelled by a rise in the import bill, according to BMI, the research arm of Fitch Ratings.
While exports are likely to grow because of improved harvests and a likely increase in gold production, a substantial import bill — mainly due capital goods and services import to supply infrastructure projects — will outweigh any increase in foreign revenue inflows.
“We forecast a current account deficit of 5.3 per cent and 5.4 per cent of GDP in 2018 and 2019 respectively, from a projected 5.0 per cent in 2017,” BMI notes.
Foreign loans and direct investment will finance much of this shortfall. But FDI is likely to decline on the back of a more hostile business environment.
In the 2018/19 budget presented to Parliament last month, Finance and Planning Minister Dr Philip Mpango said the overall deficit as a per percentage of GDP at the end of December 2017 was 3.8 per cent, from 4.5 per cent in 2016/17.
BMI expects an overall boost in exports in coming months, but a ban on mineral concentrates exports will hurt revenue from this avenue, leading to greater receipts from gold and other metals.
“Although crop production was badly hit by drought in the fourth quarter of 2016 and the first half of 2017, it is expecte this to be a key driver of export growth,” the report notes.