Thursday, October 29, 2020

2019 Trade deficit largest since 2012

Botswana’s trade balance deficit has ballooned to the highest levels in over seven years as the country feels the pressures of the economy’s close ties with the diamond industry. 

According to the recently released International Merchandise Trade Statistics report, total exports in the last month of 2019 came at P5.8 billion – an increase of 22.2  percent from the P4.7 billion recorded in November. The outward trade receipts where anchored by a 25.8 percent surge in diamond exports, the country’s economic mainstay. Diamonds remained the main export, representing over 90 percent of total exports.

The total exports value for December 2019 shows a decline of 20.1 percent on the account of a 20 percent slid in diamond exports, fuelled by the recession in the diamond industry which has been characterised by disappointing sales in the midstream-made up of the diamond cutting and polishing industries, which are struggling to get rid of excess inventories.

On the other hand, the total imports for December were valued at P6.2 billion, down by 14.6 percent from November imports. The decrease was attributed to diamond imports which fell by 29.4 percent. Gaborone has now emerged as an important rough sales centre after the decision to move De Beers’ sorting operations and sight location to Gaborone in 2013. It imports diamonds from other De Beers mines outside Botswana.

Another recognisable decline in imports was recorded for vehicles and transport equipment, down by 56.8 percent  percent during the period under review. The government through Botswana Unified Revenue Services (BURS) have clamped down on grey car importers, demanding that it be paid its fair share of taxes.

Comparison of import figures for December and corresponding period in 2018 shows a 35.2 percent jump in total imports, with the increase attributed to  diamond imports which increased three folds. 

The trade data for December shows that the country once more recorded another monthly trade deficit of P460 million, bringing the fourth quarter’s deficit to P5.8 billion, the second biggest quarterly loss of the year. In the first quarter of 2019, the country recorded a trade deficit of P2.1 billion but recovered slightly in the second quarter with a trade surplus of P57.2 million. The third quarter’s deficit came at P6.1 billion, making it the largest quarterly deficit of the year. 

When summed altogether, the country ended 2019 with a cumulative trade balance deficit of P14.2 billion, the highest since 2012’s trade deficit of P16.3 billion. The country’s huge deficit has put an abrupt end to what has been an impressive recovery, marked by five straight years of trade balance surpluses.

On top of the trade shortfall, Botswana is expected to run budget deficits in the next two financial years as government ramps up on job creation and improving civil service salaries amid slowed revenues. The budget deficit for 2019/20 is estimated at P7.7 billion or 3.8 percent of GDP, while the expected deficit for 2020/21 is set at P6.9 billion or 3.1 percent of GDP, and then another deficit of P4.4 billion in 2021/22.

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