Current account dips as imports outpace exports

Brian Benza
Staff Writer | Friday November 14, 2008 00:00

According to figures released by the Bank of Botswana, in the second quarter of 2008, the current account surplus recorded a 42.6 percent decline from P4.8 billion in the first quarter to P2.7 billion.

'This is largely explained by a decline in the merchandise trade surplus which fell from P2.6 billion in the first quarter of 2008 to P1 billion, as well as a decline in exports of services, which recorded a decline of 72.9 percent,' a BoB report says.

'The narrowing trade balance is jointly explained by a decline in exports and import growth over the period. Data on direct investment has not been published in this round of the publication due to the problems with the response rate and coverage of the quarterly survey.'

There was an overall surplus of P995.4 million during the quarter, down from P5.3 billion in the first quarter Economic consultant Dr Keith Jefferis believes that between the second and first quarters, the substantial rise in import was caused by firming food and oil prices, leading to the decline in the current account surplus.

'Export figures did not drastically go down in the second quarter,' Jefferis says. 'Therefore, the only reason for such weakening in the current account was the huge size of imports which I can only attribute to food and oil prices which were at their peak during that period.'

The BoB report also shows that in the month of July, foreign exchange reserves decreased by P0.5 billion from P65.3 billion to P64.8 billion.

Jefferis says there is no need to read much into the P500 million fall in forex reserves, adding foreign exchange reserves vary from month to month historically.

'In March this year, the reserves fell by more than a billion pula and these fluctuations are mainly due to exchange rate movements and nothing else,' he explains. 'It is more useful to look at the foreign reserves figures either in US dollar terms or in SDR terms. The reserves are not kept in the pula currency and the figures actually went up in SDR or dollar terms.'

In US dollar and SDR terms, Botswana's forex reserves increased by $0.3 billion and 0.3 billion to 10.3 billion and 6.4 billion respectively. BoB's preliminary estimates for 2007/08 also indicate that the country's Gross Domestic Product(GDP) grew by 3.3percent, as compared to 5.3 percent in 2006/07.

The slowdown in growth was attributed to the mining sector which contracted by 3.3percent, while non-mining GDP growth accelerated to 8.0percent from 5.7 percent in 2006/07.

Other than mining and agriculture, both of which recorded declines, all sectors showed positive growth. Transport and communications had the highest growth rate at 12.7percent, followed by construction's 11.6percent and financial and business services' 11.1percent.

The budget outcome for the first quarter of 2008/09 shows a deficit of P979.0 million, compared to a surplus of P557.2 million recorded in the same period a year ago.

Government revenue was P6.2 billion while expenditure stood at P7.2 billion with recurrent expenditure accounting for P5.9 billion. Compared to the annual budgets, the major cause of the deficit during the first quarter was low collections of domestic tax revenues.

'In July, net foreign assets went up by P364.1 million (0.5 percent) from P68.2 billion in June to P68.6 billion,' says the report. 'While claims on non-residents by depository corporations fell by P119.6 million (0.2 percent), this was more than offset by a fall of P483.8 million (21.3 percent) in liabilities to non-residents.

'While the net foreign assets of the Bank of Botswana fell by P584.7 million, those of the other depository corporations increased by P948.8 million as claims on non-residents rose by P461.3 million (9.0 percent) while liabilities to non-residents fell by P487.5 million (28.6 percent).'