High commodity prices, import bill hurt Tanzania’s forex reserves

Wednesday August 17 2022
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Forex reserves in Tanzania amounted to $5,110.3 million at the end of June 2022. PHOTO | FILE


Tanzania is facing pressure to balance its expenditure as price shocks occasioned by global economic crises eat into its current account.

The current account measures how much the country spends, or saves on its foreign exchange. And according to the Monthly Economic Review released by the Bank of Tanzania (BoT), the deficit more than doubled during the year ending June 2022. It reached $3.8 billion compared with $1.8 billion in the corresponding period in 2021.

BoT said the deficit was caused by shocks emanating from high commodity prices, tight financial conditions, and resurgence of Covid-19 in China. China is a key import source but whose ports and factories have remained underutilised during the pandemic season.

It added that those “global challenges have been aggravated by the Russia-Ukraine conflict, which has caused supply disruptions.”

As a result, imports of goods and services rose by 44 percent to $14.135 billion in the year ending June 2022 up from $9.841 billion.

“Much of the rise emanated from imports of intermediate goods particularly white petroleum products, iron and steel and plastic products,” it said.


Imports of white petroleum products surged to $2.447 billion from $1.459 billion, on account of both volume and price effects. “The war in Ukraine has been a driving factor — adding on to the already rising energy prices which also led to higher prices of other commodities including edible oil, wheat grain and fertilisers,” it further said.

Ukraine had been Tanzania’s biggest foreign source of wheat. Tanzania also imported fertilizer. But after Russia invaded Ukraine in February, exports from Ukraine were blocked due to mined ports. The war has also caused price hikes for basic commodities like petroleum products. Shippers also reported high costs of ferrying goods.

In Tanzania, services payments rose to $2.422 billion from $1.295 billion in the period under review due to a rise in freight payments.

Month-on-month services payments amounted to $270.8 million in June 2022 compared with $124.3 million in June 2021. Other services payments were made to cater for construction, insurance, financial, telecommunication, computer and information, government, personal and other business services.

The primary income account deficit grew to $1.364 billion in the year to June 2022, from $1.247 billion, due to a rise in interest payments. On monthly basis, a $143.9 million deficit was recorded compared with $119.6 million in June 2021.

The secondary income account had a surplus of $633.8 million up from $50.8 million, largely on account of a rise in private transfers. On a monthly basis, a surplus of $123.8 million was recorded in June 2022 compared with $37.7 million in June 2021.

However, the overall balance of payments was a surplus of $75.6 million up from a deficit of $132.7 million, on account of loan receipts and grants. Forex reserves amounted to $5,110.3 million at the end of June 2022.

Exports of goods and services hit $11.1 billion in the year ending June 2022 from $8.85 million in the corresponding period of 2021, driven by non-traditional exports and services receipts.

Export of goods increased by 11.7 percent to reach $7.203 billion with non-traditional exports rising by 27.6 percent.

The rise was largely in the exports of manufactured goods particularly iron and steel, textiles, horticultural products, fish and fish products as well as cereals in particular maize and rice. Gold exports which accounted for 37.4 percent of exports were $2.7 billion, down from $3.03 billion.

Other exports include mineral concentrates, tanzanite and diamond; and other non-traditional exports like oilseed, beans, cocoa, raw hides and skins, and wood. Exports of traditional goods amounted to $737.8 million compared to $578.4 million.

Exports of all traditional crops increased save for cashew nuts. The increase was on account of price rises in the global markets. On a monthly basis, traditional exports doubled to $30.9 million from $14.1 million in June 2021, while non-traditional exports were $607.1 million in June 2022 compared with $522.4 million in June 2021.