External Sector Performance
The economy’s external sector was still affected by the lingering impacts of previous shocks, such as the Ukraine war and the Covid-19 pandemic, which greatly affected global commodity prices.
This resulted in a significant increase in the current account deficit due to high import costs. The balance of payments also showed a deficit of USD 874.2 million, a significant decline compared to the USD 990 million surpluses recorded in the previous year up to March 2022.
Consequently, the country’s stock of foreign reserves decreased to USD 5,012.5 million by the end of March 2023, down from USD 5,581.6 million in the same period in 2022. Despite the decline, the foreign reserves remained adequate and covered 4.5 months of expected goods and services imports, which met the country’s and EAC’s benchmarks of at least 4 and 4.5 months, respectively.
Exports of goods and services amounted to USD 12,497.6 million in the year to March 2023, up by +21.1% from USD 10,318.6 million in the previous year, driven mainly by non-traditional exports, particularly manufactured goods and services receipts.
The export of non-traditional goods increased by 7.6% annually, with minerals (such as gold, coal, and diamonds) and manufactured goods being the main drivers. Iron and steel, fertilizer, and cement were the main drivers of the increase in the export of manufactured goods.
Coal exports surged by 601.5% to USD 223.8 million, attributed to the growing demand for alternative energy due to supply challenges caused by the war in Ukraine.
Diamond exports also increased by 200% to USD 57.6 million following the resumption of production at Mwadui Williamson mines.
Gold exports rose by 7.7% to USD 2,877.3 million due to an increase in volume.
Exports of traditional goods rose to USD 758.4 million from USD 697.5 million, driven by all traditional crops except clove and tea, primarily due to price effects.
Traditional exports amounted to USD 42.6 million on a monthly basis, compared with USD 32.8 million in March 2022. Meanwhile, non-traditional exports increased to USD 520.6 million from USD 510.3 million.
Services receipts amounted to USD 5,090 million in the year ending March 2023, higher by 47.8% than USD 3,443.6 million in the corresponding period in 2022, largely explained by the increase in travel (tourism) and transport receipts.
Travel receipts almost doubled to USD 2,787.1 million associated with the increase in the number of tourist arrivals to 1,574,630, higher than the pre-pandemic levels, following the lifting of travel restrictions globally, coupled with promotional efforts for the sector by the Government.
On a monthly basis, service receipts were USD 417.4 million compared with USD 353.3 million in March 2022.