Slump in diamond exports widens trade deficit

MBONGENI MGUNI
Staff Writer | Tuesday November 2, 2010 00:00

 

Latest figures from the Central Statistics Office (CSO) indicate that while imports over August remained generally flat compared to previous months, exports declined due largely to a 44-percent month-on-month drop in diamond exports.

In July, the CSO pegged diamond sales at P2.23 billion or 67.5 percent of total exports, while in August, the figures dropped to P1.24 billion and 58.4 percent of total exports. In total, imports for August 2010 were valued at P2.78 billion against exports of P2.12 billion, according to the CSO.  

However, it is expected that the CSO's continuous data revisions will result in a lower trade deficit for August, as Bank of Botswana figures for the same period reflect comparatively higher levels of diamond exports.

While the CSO pegged diamond exports at P1.24 billion for the period, BoB valued them at P1.99 billion, the difference between the two figures surpassing the P655.8 million trade deficit measured for August. The CSO explains: 'As CSO is compiling external trade using the United Nations Statistics Division Guidelines whereby foreign trade is recorded at the time the consignment crosses the border, whereas the Bank of Botswana compiles balance of payments from actual receipts in respect of sales made on exported commodities, users (of trade statistics) can expect differences in figures reported by CSO and those reported by the Bank of Botswana.

'This is because the two reports may not necessarily be reporting on the same consignment, even though the same variable names and period of reporting are used.' In addition, CSO data for August 2010 is from automated borders only and constitutes about 95 percent of total monthly trade.

Botswana has recorded running trade deficits since October 2008, mainly due to the contraction of the mining sector that makes up more than a third of GDP. The string of deficits was broken in June 2010 due to a spike in diamond exports before the trade balance returned to negative in July and August 2010. The P655.8 trade deficit recorded for August is the heaviest since April when the country's trade imbalance was pegged at P1.4 billion.

Continual trade deficits could have negative effects on the value of the Pula as foreign exchange flows out of the economy faster than it is generated, as well as on public revenues through the financing of the deficit.