PESA
Trade and Regional Integration in Tanzania: FY2019/20

Trade and Regional Integration in Tanzania: FY2019/20

Tanzanian merchandise trade imports have been decrease faster than exports during the period from 2015 to 2018. This has improved Tanzania’s gross official reserves supported by depreciation of the TZS. The faster decrease in merchandise trade imports has been undermined by rising services imports deteriorating Tanzania’s current account balance. Tanzania is still dependent on mineral commodity and agriculture-based exports which are also its top traded goods with its neighbours in the East African Community (EAC) and the Southern African Development Community (SADC). However, Tanzania is poorly integrated in both EAC and SADC and its trade is unbalanced due to the persistent merchandise trade surplus in both regions. This suggests that there is significant room to increase Tanzania’s trade to both regions and Tanzania might want to rebalance its trade towards greater reliance on EAC in order to reduce its stronger reliance on SADC.

 

Figure 1: Merchandise Trade Balance in Tanzania (2015-2018)

Merchandise Trade Balance in Tanzania (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

Total merchandise imports to Tanzania have decreased to USD 8.8 billion in 2018, from an annual average of USD 9.8 billion from 2015 to 2017[1]. Exports also decreased to USD 3.7 billion in 2018, from an annual average of USD 4.6 billion from 2015 to 2017[2]. The stronger decrease in imports has improved Tanzania’s merchandise trade balance to a deficit of -USD 5.1 billion in 2018 from a deficit averaging -USD 5.2 billion from 2015 to 2017[3]. The decrease in merchandise imports has improved Tanzania’s gross official reserves supported by depreciation of the TZS.

 

Figure 2: Gross Official Reserves in Tanzania (2016/17-2022/23)

Gross Official Reserves in Tanzania (2016/17-2022/23)

Source: IMF 2018, Tanzania Financial Sector Assessment Program. Note: (*) Figures from 2018/19 onwards are projections from the IMF, 2018.

 

Gross official foreign exchange reserves increased to USD 5.7 billion in 2018/19 from an annual average of USD 4.8 billion from 2015/16 to 2017/18[4]. During this period, the TZS depreciated by -1.7% in 2018 to TZS 2292.8 per USD (2017: -1.9%)[5]. Total imports have grown in spite of the decrease in merchandise imports and depreciation in the currency because the depreciation had slowed down after more significant depreciation in 2015. The TZS depreciated by -18.0% in 2015/16 from TZS 1779.0 per USD in 2014/15 and an additional -1.8% depreciation to TZS 2170.0 per USD in 2017/18[6]. Gross official reserves are projected to increase to USD 5.8 billion in 2019/20, which is equivalent to 4.6 months’ import cover[7]. In the forward-looking medium-term from 2020/21 to 2022/23, gross official reserves are projected to increase to an annual average of USD 6.6 billion (approx. 4.5 months’ import cover)[8]. The positive impact of the faster decrease in merchandise imports has been undermined by the increase in services imports which deteriorated Tanzania’s current account balance.

 

Tanzania’s current account balance is projected to have deteriorated to a deficit of -USD 2.5 billion in 2018/19, from a deficit averaging -USD 2.0 billion from 2015/16 to 2017/18[9]. Apart from the decrease in merchandise imports, which improved the current account balance, services imports have increased which led to deterioration of the current account balance. Services imports increased to USD 2.6 billion in 2018/19 from an annual average of USD 2.4 billion from 2015/16 to 2017/18[10]. The current account balance is projected to deteriorate further to a deficit of -USD 3.0 billion (approx. -4.8% of GDP) in 2019/20[11]. In the forward-looking medium-term from 2020/21 to 2022/23, the current account balance is projected to deteriorate further to annual average deficit of -USD 3.9 billion (approx. -5.2% of GDP)[12].

 

Figure 3: Current Account Balance in Tanzania (2016/17-2022/23)

Current Account Balance in Tanzania (2016/17-2022/23)

Source: IMF 2018, Tanzania Financial Sector Assessment Program. Note: (*) Figures from 2018/19 onwards are projections from the IMF, 2018.

 

However, Tanzania is still heavily dependent on mineral commodity exports which have been affected by commodity price volatility and the general decline in commodity prices since 2014. For example, Gold prices have been volatile having declined by an annual average of -9.3% in 2015 and 2016 to USD 1160.1 per ounce in 2015, before recovering to its medium-term average of USD 1258.2 per ounce from in 2016 to 2018[13]. Brent crude oil prices declined by an annual average of -24.0% from USD 98.9 per barrel in 2014 to USD 44.0 per barrel in 2016, before recovering to USD 54.4 per barrel in 2017[14].  In addition, Tanzania is also dependent on agricultural exports which have made exports earnings volatile due to exports being vulnerable to the adverse impact of climate change. For example, although Tanzania is food secure at a national level there are localised deficits in food security at a regional, district and household level due to reliance on rain-fed agriculture and lack of modern farming techniques[15]. Gold, fruits and nuts, tobacco, vegetables and metallic ores constituted 53.3% of Tanzania’s total export earnings in 2018 which has increased slightly from the average of 52.4% from 2015 to 2017 (2014: 45.8% of exports)[16]. In addition to this concentration of exports, Tanzania is poorly integrated in terms of regional trade with neighbouring countries in EAC and the SADC and its trade is unbalanced.

 

The top-five exports from Tanzania to EAC are television receivers, animal feed, clothing and textiles and paperware which constituted 3.5% of total exports in 2018 (2015-‘17: 4.1% of total exports)[17]. The value of the top-five exports from Tanzania to EAC decreased to USD 120.0 million in 2018 from an annual average of USD 195.7 million from 2015 to 2017[18].

 

The value of total exports from Tanzania to EAC decreased to USD 305.6 million (approx. 8.3% of total exports) in 2018 from an average of USD 436.0 million (approx. 9.5% of total exports)[19]. These are poor levels of intra-regional trade given that the EAC average intra-regional exports level was 18.7% of total exports in 2018. The EAC intra-regional exports, meaning total exports amongst EAC countries, as a share of total exports to the world increased from an average of 20.2% from 2015 to 2017[20]. Given Tanzania’s low levels of intraregional trade in the region, there is room to increase its exports to EAC countries.

 

Figure 4: Nominal Exchange Rate in Tanzania (2015/16-2018/19)

Nominal Exchange Rate in Tanzania (2015/16-2018/19)

Source: BoT 2019, Interbank Foreign Exchange Market (IFEM) Summaries.

 

Tanzania’s top-five imports from EAC are pharmaceuticals, soaps, plastics, fabricated steel and sugar confectionaries. Although these imports are diversified they constituted only 0.9% of total imports to Tanzania in 2018 (2015-‘17: 1.0% of total imports)[21]. The value of the top-five imports from EAC to Tanzania decreased to USD 82.2 million in 2018 from an annual average of USD 95.9 million from 2015 to 2017[22].

 

The value of Tanzania’s total imports from EAC decreased to USD 257.7 million (approx. 2.9% of total imports) in 2018 from an annual average of USD 290.3 million (approx. 3.0% of total exports) from 2015 to 2017[23]. These are relatively poor or below-average levels of intra-regional trade given that the EAC average intra-regional imports level was 7.7% of total imports in 2018[24]. The EAC intra-regional imports, meaning total imports amongst EAC countries, as a share of total imports from the world increased only from an average of 6.9% from 2015 to 2017[25].

 

Table 1: EAC Regional Trade for Tanzania (2015-2018)

EAC Regional Trade for Tanzania (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

Tanzania maintains a persistent merchandise trade surplus in the EAC which decreased to a surplus of USD 47.9 million in 2018 (2015-’17: USD 145.6 million). Hence, there is room to increase Tanzania’s trade with EAC countries. This would improve Tanzania’s intra-regional trade and make Tanzania’s trade more sustainable.

 

The top exports from Tanzania to the SADC are gold, glassware, wheat flour, tobacco and cement and limestone, which constituted 10.3% of total exports in 2018 (2015-‘17: 10.4% of total exports)[26]. The value of the top-five exports from Tanzania to SADC decreased to USD 377.8 million in 2018 from an annual average of USD 480.6 million from 2015 to 2017[27].

 

The value of total exports from Tanzania to the SADC decreased to USD 680.5 million (approx. 18.6% of total exports) in 2018 from an average of USD 860.5 million (approx. 18.7% of total exports)[28]. These are moderate or average levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[29].

 

Table 2: SADC Regional Trade for Tanzania (2015-2018)

SADC Regional Trade for Tanzania (2015-2018)

Source: UNCTAD 2019, UNCTADStat Database.

 

Tanzania’s top-five imports from SADC are copper, fabricated steel, scrap metals, essential oils and commercial vehicles. Although these imports are diversified they constituted only 1.8% of total imports to Tanzania in 2018 (2015-‘17: 1.4% of total imports)[30]. The value of the top-five imports from SADC to Tanzania increased to USD 154.3 million in 2018 from an annual average of USD 138.6 million from 2015 to 2017[31].

 

The value of Tanzania’s total imports from SADC decreased to USD 649.4 million (approx. 7.4% of total imports) in 2018 from an annual average of USD 691.7 million (approx. 7.1% of total exports) from 2015 to 2017[32]. These are very low levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[33]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only from an average of 20.7% from 2015 to 2017[34].

 

Tanzania maintains a persistent merchandise trade surplus in SADC which decreased to a surplus of USD 31.1 million in 2018 (2015-’17: USD 168.8 million). Tanzania is quite reliant on the SADC for its exports and there is significant room to increase its imports from SADC countries. This would make Tanzania’s intra-regional trade balance in SADC more equitable.

 

In addition, Tanzania might want to reassess the balance of benefits to its EAC and SADC membership given that it received greater benefit from SADC on the account of its relatively higher levels of intraregional trade and more favourable merchandise trade balance. Therefore, there is room to rebalance the Tanzania’s trade towards EAC and increase Tanzania’s imports from SADC. This would also increase Tanzania’s intra-regional trade in the EAC and make its trade in SADC more equitable.

 


[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2018. Tanzania Financial Sector Assessment Program, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019].
[5] BoT 2019. Interbank Foreign Exchange Market (IFEM) Summaries, Bank of Tanzania: Dar es Salaam. Available At: https://www.bot.go.tz/ [Last Accessed: 15 October 2019].
[6] BoT 2019. Interbank Foreign Exchange Market (IFEM) Summaries, ibid.
[7] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[8] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[9] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[10] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[11] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[12] IMF 2018. Tanzania Financial Sector Assessment Program, ibid.
[13] IMF 2019b. IMF Primary Commodity Prices, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 4 October 2019].
[14] IMF 2019b. IMF Primary Commodity Prices, ibid.
[15] WFP 2019. WFP Tanzania Country Brief: August 2019, World Food Programme: Rome. Available At: https://reliefweb.int/ [Last Accessed: 10 October 2019].
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
[28] UNCTAD 2019. UNCTADStat Database, ibid.
[29] UNCTAD 2019. UNCTADStat Database, ibid.
[30] UNCTAD 2019. UNCTADStat Database, ibid.
[31] UNCTAD 2019. UNCTADStat Database, ibid.
[32] UNCTAD 2019. UNCTADStat Database, ibid.
[33] UNCTAD 2019. UNCTADStat Database, ibid.
[34] UNCTAD 2019. UNCTADStat Database, ibid.

 


Siya Biniza

Role: Executive Director
Contact: siya@politicaleconomy.org.za
Siya is a Political Economist specialising in Development Finance, Industrial Development, and Regional Integration...

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