BoB projects narrower current account deficit

Brian Benza
Staff Writer | Tuesday June 4, 2013 00:00

 Estimates for 2012 indicate a current account deficit of P5.3 billion compared to the smaller revised figure of P251 million in 2011 largely driven by the widening merchandise trade deficit.  A country incurs a current account deficit when its total imports of goods, services and transfers is greater than its total exports. The merchandise trade deficit was P15.9 billion in 2012, up from the revised deficit of P5 billion in 2011, representing the fifth year of rolling deficits.

However significantly higher receipts from SACU helped lower the current account deficit as net current transfers increased to a surplus of P12.7 billion in 2012 from P7.5 billion in 2011.In the 2012 Annual Report, BoB says higher exports of goods and services are likely to cut the country's current account deficit on improved demand from international markets as global economy recovers.'Additional value added associated with diamond aggregation and sales activities moving to Botswana will also boost service exports, although additional imports of services can also be expected in the short-term. However, the continued dependence on a narrow export base, albeit supplying increasingly diverse markets, makes the economy vulnerable to any renewed economic downturn.Moreover, net outflows are likely to increase in the short term because of the expected lower SACU revenues and higher cost of fuel,' says the report.

The IMF projects global output growth at 3.5 percent in 2013, slightly higher than the 3.2 percent estimate for 2012 leading to improved demand for Botswana exports. Already, preliminary figures from Statistics Botswana (SB) show that the trade balance for March this year recorded a surplus of over P1 billion as increased diamond sales powered exports up by 17 percent against a modest three percent rise in imports.

In 2012, total exports rose by 4.1 percent compared to an increase of 21.3 percent in imports leading to the revised P16 billion trade deficit. In particular, exports of diamonds produced in Botswana fell by 15.1 percent, from P33.7 billion to P28.6 billion, due to both lower volumes and falling prices. Exports of copper and nickel declined marginally by 0.7 percent, while exports of beef, soda ash and gold increased by 13.1 percent, 23.4 percent and 17.9 percent, respectively.

In the period, sales of cut and polished diamonds increased by 10.8 percent from P4.9 billion in 2011.The pattern of merchandise trade in Botswana was fundamentally altered when the De Beers Diamond Trading Company transferred aggregation activities from the United Kingdom to Botswana in mid- 2012. As a result, large additional volumes of rough diamonds from other countries where De Beers operates are imported into Botswana before being re-exported.