The external sector showed signs of improvement, driven by increased exports and a reduction in the current account deficit, despite a slight increase in imports.
- Current Account Deficit:
- The current account deficit narrowed to USD 902.8 million in the quarter ending June 2024, down from USD 977.8 million in the same quarter in 2023. This improvement was largely due to strong export performance and favorable global commodity prices.
- Exports:
- Total exports of goods and services increased to USD 3,377.1 million in the quarter ending June 2024, up from USD 2,998.3 million in the corresponding quarter of 2023.
- Traditional Exports: Increased to USD 115.5 million from USD 80.2 million.
- Non-Traditional Exports: Reached USD 1,639.7 million, up from USD 1,554.8 million.
- Gold Exports: Rose to USD 774.3 million from USD 759.1 million in the same period in 2023.
- Key contributors to the export growth include tourism, gold, and tobacco.
- Imports:
- The total imports of goods and services saw a slight increase to USD 3,747.6 million in the quarter ending June 2024, compared to USD 3,754 million in the same period in 2023.
- Foreign Exchange Reserves:
- Tanzania's foreign exchange reserves remained robust at USD 5,345.5 million, covering 4.4 months of projected imports. This is in line with both national and East African Community (EAC) benchmarks.
The external sector performance with economic development
The external sector's performance reflects Tanzania's ongoing efforts toward economic development. The improvements in export performance, reduction in the current account deficit, and stable foreign reserves indicate a positive trajectory, contributing to overall economic growth, stability, and resilience against external shocks.
- Export Growth:
- The increase in total exports of goods and services, from USD 2,998.3 million to USD 3,377.1 million, indicates a strengthening of Tanzania's productive capacity and global competitiveness. The growth in traditional and non-traditional exports, particularly in gold, tourism, and agricultural products like tobacco, reflects diversification and resilience in the country's economy. This export performance is crucial for generating foreign exchange, supporting the Tanzanian shilling, and contributing to economic stability.
- Reduction in Current Account Deficit:
- The narrowing of the current account deficit from USD 977.8 million to USD 902.8 million is a positive sign. It suggests that Tanzania is improving its balance of payments position, likely due to increased export earnings and potentially more sustainable levels of import consumption. A lower deficit reduces reliance on external borrowing, enhancing the country’s financial stability and fostering a more favorable environment for investment.
- Stable Foreign Exchange Reserves:
- Tanzania's foreign exchange reserves, covering 4.4 months of imports, reflect a strong buffer against external shocks. This level of reserves provides confidence in Tanzania’s ability to meet its international obligations and protect the economy from volatile external conditions, such as fluctuating commodity prices or global financial instability. Stable reserves are also crucial for maintaining investor confidence and ensuring the smooth operation of trade.
- Implications for Economic Growth:
- The positive performance in the external sector is generally associated with stronger economic growth. Increased exports, especially in high-value sectors like gold and tourism, can lead to higher GDP growth. Moreover, the ability to manage the current account deficit and maintain stable foreign reserves suggests that the government’s economic policies are effectively supporting sustainable economic development.
- Sectoral Development:
- The growth in specific sectors like tourism, agriculture, and mining indicates progress in diversifying the economy, which is critical for reducing dependency on any single industry. This diversification helps mitigate risks and ensures more balanced and inclusive economic growth.
