Tanzania external gap to widen to 15 pct: Govt

By BUSINESS REPORTER

TANZANIA’S current account deficit is projected to increase to around 15 percent of national output in the 2011/2012 (July-June) fiscal year due to a surge in oil and gas imports, the government said in a letter to the International Monetary Fund.

Tanzania, which discovered huge amounts of gas this year, struggled with soaring inflation and weakness of its currency against the dollar for most of last year, similarly to neighbouring Kenya and Uganda.

With chronic power shortages during the period due to a shortfall in hydroelectric generation, firms were forced to crank up their fuel-powered generators and turn to thermal generation, raising oil and gas imports.

The 2010/2011 current account deficit was around 9.5 percent of gross domestic product, according to the letter dated 21 June. The letter was made public by the IMF late on Wednesday.

"Despite power shortages, real GDP grew by 6.4 percent in 2011. With rapid growth in foreign direct investments in the offshore gas sector, even stronger growth is projected for 2012 and beyond," the Tanzanian government said.

It said in the letter that the external shortfall would come back down to around 14.5 percent of GDP in the 2012/13 fiscal year, banking on new hydro-electric power generation to slash fuel imports in subsequent years.

The IMF approved a $224.9 million standby credit line for Tanzania earlier this month, after the government said any worsening of the global economy could cause fresh shocks.

The east African region has some of the fastest growing economies on the continent.