Tanzania recorded a surplus of $620.4 million (Sh825.1 billion) in its balance of payments in the year ending September from a deficit of $115.1 million (Sh153 billion) during the same period in 2008.

The Bank of Tanzania (BoT) has attributed the reduction in the current account deficit to increased exports, a lower import bill and increase in external funding.

"The development is largely attributed to the reduction in the current account deficit, which resulted from an increase in export of goods coupled with decline in import bill," BoT notes in the October monthly economic review (MER).

"Moreover, there was a surge in official current transfers to $832.7 million (Sh1.1 trillion) from $432.8 million (Sh575.6 billion) recorded in the corresponding period, which resulted into improved performance in the current account."

The trend also contributed to the rising of the gross international reserves to about $3.56 billion (Sh4.7 trillion) at the end of the review period from the $2.69 billion (Sh3.5 trillion) recorded during the year ending September 2008. This level of reserves was enough to cover about almost six months of imports of goods and services.

BoT says the other factor is the IMF's intervention to help Tanzania cope with the global recession under the Exogenous Shock Facility.

Though the balance of payment surplus is a positive development because it results in increased gross reserves, it is, however, not sustainable.

A prominent financial expert told The Citizen yesterday that surplus in the balance of payment should not be banked upon as it was mainly a result of the budgetary financial support from donors, something that was not viable on a long-term basis.

"The surplus we observe in the balance of payment would have been sustainable had it resulted from a net surplus in exports. But, as the BoT report indicates, the exports/import deficit is still so huge at $2.8 billion," Dr Elinami Minja, a lecturer and head of the Department of Finance at the University of Dar es Salaam's Business School, said in a telephone interview in Dar es Salaam yesterday.

Dr Minja said the unsustainability of the surplus of balance of payments was also reflected by the fact that national reserves would suffer if donors stopped their remissions.

In fact, the reason for the balance of payment deficit in the year ending September 2008 was due to reluctance by donors to release funds early last year due to governance issues that were not resolved by the Government of Tanzania.

He noted that balance of payments surpluses due to exports surpluses in countries such as China were much more sustainable.

The BoT report released yesterday indicated that the deficit between exports and imports had decreased from $3.4 billion (Sh4.5 trillion) in September 2008 to $2.8 billion (Sh3.7 trillion) in September 2009.

This is because export of goods and services increased to $4.6 billion (Sh6.1 trillion) in September 2009 from $4.4 billion (Sh5.8 trillion) in the corresponding period in the previous year while imports of goods and services in the year ending September 2009 decreased to$7.4 billion (Sh9.78 trillion) from $7.8 billion (Sh1.03 trillion) recorded last September.

Experts attribute the decrease in the import bill to falling commodity prices in the global market, notably oil, due to the global financial and economic crises that reduced demand for commodities.

"With all the adverse consequences of the crisis on Tanzania, it should be appreciated that the decline in world commodity prices has also reduced the cost of imported intermediate goods. This reduces cost of production and ease pressure on domestic inflation," says Dr Joe Masawe, director of Economic Research and Policy at BoT.

Dr Minja said the balance of payments consisted of the current account and the capital account. The current account is made up of export and import bills as well as official transfers from donors.

The BoT report said in the year under review the export of goods rose by 7.9 per cent to $2.67 billion (Sh3.55 trillion), largely due to increase in export of traditional goods that went up by 32.2 per cent to $492.5 million (Sh655 billion).

Improved exports performance was also recorded in manufactured goods, horticultural products, fish and fish products.

Services receipt, however, decreased by 2.6 per cent to $1.9 billion (Sh2.5 trillion) in September this year from the level recorded during the corresponding period last year following a notable decline in transportation receipts from $391.7 million (Sh520.9 billion) during the previous year to $321.0 million (Sh426 billion) this year.

"The value of goods imports, on the other hand, declined to $5.76 billion in September this year from $6.25 billion recorded in the previous year largely due to a drop in imports of intermediate goods particularly oil imports," the BoT report said.

Service payments on its part rose by 10.2 per cent to $1.7 billion in the year ending September 2009. The rise in services payment was largely explained by a surge in payment for travel and other business services.

On monthly basis exports of goods and services also increased to $488.1 million (Sh649.1 billion) in September this year from $458.1 million (Sh610.6 billion) in August of the same year.

Imports of goods and services also increased to $691.7 million (Sh919.9 billion) in September from $ 638.7 million (Sh849.4 billion) in August of the same year.

"In September 2009, the value of traditional exports increased to $45.0 million from $37.5 million recorded in the previous month mainly on account of a rise in the export volumes of cotton, coffee and cloves.

The increase is largely attributed to seasonality factors reflecting the onset of the export season for traditional exports," the BoT report said.

The central bank added that import of goods went up by 8.5 per cent to $535.8 million (Sh712.6 billion) during September 2009, from the amount that was recorded in August 2009 due to an increase in imports of capital and intermediate goods.