Tanzania Economic Review – September 2022: Travel Receipts Doubled

The Bank of Tanzania (BOT) released its Monthly Economic Review-October 2022 which covers key macroeconomic indicators for the year ending September 2022.

Inflation

Inflation remained elevated in most of Tanzania’s trading partners and high commodity prices in the world market persisted in September 2022.

Because of this unpleasant external environment and domestic supply-side constraints, inflation continued to trend upward, reaching 4.8% in September 2022.

The pace of increase, however, was gradual, and the inflation rate remained consistent with the target of 5.4% for 2022-2023 and the medium-term target of 3-7%.

In addition, it was in line with EAC and SADC convergence criteria.

Money Supply

BOT continued with its cautious monetary policy approach of balancing between growth and inflation in the current unpleasant global environment, which has negative spillover effects on the economy.

The implementation of this policy approach contributed to increasing the growth of money supply and credit to the private sector, broadly consistent with the targets for 2022-2023, set forth in the Monetary Policy Statement issued in June 2022.

Specifically, extended broad money supply (M3) grew at 13.6% year-on-year compared with 12.7% in September 2021.

Interest Rates

Interest rates charged on loans by banks decreased marginally, as the overall lending rate averaged 16.07% in September 2022, compared with 16.09% in the preceding month and 16.55 percent in the corresponding month in 2021.

The lending rate for prime borrowers also eased somewhat to 13.92%, from 14.24% and 14.07%.

The interest rate spread narrowed, following a slight increase in the interest rate on deposits to 7.54% in September 2022 from 7.49% in the preceding month and 6.60% in the corresponding period in 2021.

The deposit rate offered to prime customers (negotiated deposit rate) also rose to 9.67% from 9.59% in both August 2022 and September 2021.

Government Revenues

Domestic revenue collection amounted to TZS 2,333.8 billion in September 2022, of which central government collections comprising tax and non-tax revenue were TZS 2,278.5 billion, representing a performance of 99.7% against the target for the month and an increase of 21.3% over the amount collected in the similar period in 2021.

Tax revenue amounted to TZS 1,978.5 billion, which is 2.8% and 24.1% higher than the estimate for the month and collections in September 2021, respectively.

Taxes on imports, Value Added Tax (VAT), and excise on local goods and services, performed beyond the target for the period, reflecting an increased importation of excisable products, successful implementation of the VAT e-filing system, and steady recovery of the private sector.

External loans and grants worth TZS 207 billion and TZS 26.2 billion, respectively, were received by the Government in September 2022. Collections from Local Government Authorities’ (LGAs) own sources amounted to TZS 55.3 billion.

National and External Debt

The stock of national debt, which comprises public (external and domestic) debt and private sector external debt was USD 38,442.7 million at the end of September 2022, a monthly decrease of USD 125.4 million, largely on account of the appreciation of the US dollar against other currencies in which debt is denominated.

Specifically, total external debt accounted for 71.1% of the national debt stock.

External debt stock (public and private sector) amounted to USD 27,322.7 million at the end of September 2022, a decrease of USD 274.6 million from the preceding month.

Disbursements amounted to USD 94 million, all in favor of the central government. Debt service totaled USD 48.8 million, of which USD 37.9 million was principal repayment and the balance was interest payments.

Central government debt continued to dominate the portfolio of external debt.

Imports

Imports of goods and services amounted to USD 15,768.6 million in the year ending September 2022, higher than USD 10,420.2 million in the year ending September 2021.

The rise in imports bill is largely explained by imports of refined white petroleum products, machinery, iron and steel and plastic items.

Imports of refined white petroleum products rose by 97.2% to USD 3,166.7 million, on account of both price and volume effects.

The war in Ukraine has largely impacted on prices of energy and other commodities particularly edible oil, wheat grain and fertilizers.

However, a notable decline in the prices of these commodities has been observed in recent months, explained by additional supply prospects and lower demand, particularly for fertilizers.

Even so, the price of wheat rebounded in September 2022 over uncertainty about the continuation beyond November 2022, of the Black Sea agreement that was meant to allow exports from Ukraine.

Services payments also rose to USD 2,244.5 million from USD 1,440.5 million in the year to September 2021, explained by higher freight payments consistent with the rise in imports bill.

On monthly basis, services payments amounted to USD 199.8 million, up from USD 128.3 million in September 2021.

Exports

Exports of goods and services amounted to USD 11,671.8 million during the year to September 2022, up from USD 9,445.3 million in the similar period of 2021.

The increase was largely driven by non-traditional goods and services receipts. Exports of goods increased by 7.4% to USD 7,195.3 million, with non-traditional exports rising by 6.6%.

Much of the rise in non-traditional exports was recorded in diamond, textiles, iron and steel, fish and fish products and maize grain.

Noticeable improvements have been registered in the exports of diamonds, with the value surging to USD 45.8 million from USD 3.1 million recorded in the corresponding period in 2021. The development is largely explained by the resumption of production at Williamson Mines after a closure and maintenance period.

Meanwhile, gold, which accounted for 38.7% of goods exports fell to USD 2,781 million, from USD 2,886 million in the previous year due to a slowdown in production.

The value of exports of traditional goods amounted to USD 749.5 million, up from USD 681.8 million, supported by the increase in the exports of tobacco, cotton and sisal.

On a monthly basis, traditional exports fell to USD 78.2 million from USD 83.5 million in September 2021, while nontraditional exports were USD 613.9 million in September 2022, slightly higher than USD 537.6 million in September 2021.

Services receipts increased to USD 4,476.5 million in the year ending September 2022 from USD 2,746.6 million in the year to September 2021, boosted by higher travel and transport receipts.

Travel receipts rose more than twofold to USD 2,243.8 million from USD 1,106 million, consistent with the rise in the number of tourist arrivals by 63.5% to 1,332,476.

On a monthly basis, service receipts were USD 429.8 million, higher than USD 279.9 million in September 2021.