Tanzania’s current account gap for the year to end-June narrowed by 22.5% y/y to $4.09bn on the back of rising exports and shrinking imports, the country’s central bank said in its latest monthly economic review.

Exports of goods and services grew 9.4% y/y to $9.4bn in the 12-month period, whereas imports fell 4.3% y/y to $13.37bn, resulting in a 26.1% contraction of the deficit on the goods and services account to $3.97bn.

Tourism remained the country’s main source of foreign exchange earnings, with travel receipts of $2.2bn, up 11.5% y/y on the back of growing number of tourist arrivals. Exports of manufactured products rose 14% y/y to $1.32bn and that of traditional exports, which include tobacco, coffee, cotton, cashew nuts, and tea, among others, increased 8.6% y/y to $907.7mn. On the other hand, the value of gold exports dropped 16.8% y/y to $1.23bn amid weak bullion prices and lower volumes.

The improvement in the trade and services balance was partly offset by a 7.2% expansion of the primary income deficit and a 22.7% contraction in the secondary income surplus. Inflows to the government, which comprise grants and loans, remained significantly lower y/y, reflecting smaller program grants from development partners. Tanzania is one of Africa's biggest per-capita aid recipients. A group of 12 international donors withheld in October 2014 budget support pledges worth nearly $500mn following a corruption scandal in the energy sector.

In June alone, Tanzania recorded a current account gap of $546.1mn, up 58% m/m, but down 13% y/y. The data suggests that some donors have restored budget support.

The Bank of Tanzania disclosed also that its gross official foreign exchange reserves widened 13.7% m/m to $4.4bn at end-June, sufficient to cover 4.2 months of projected imports of goods and services excluding those financed by foreign direct investment (3.7 month at end-May). At the same time, the gross foreign assets of banks stood at $1.04bn, up 4% from end-May.