Sunday, January 29, 2023

Botswana records largest monthly trade deficit since 2016

Botswana has registered the highest monthly trade surplus since 2016, propelled by strong diamond sales, according to data from Statistics Botswana’s Trade and Merchandise for August.

The value of imports, which includes cost of product, insurance and transport charges, but excluding taxes, came at about P6.9 billion in August, 15.8 percent lower than the revised July amount. The decline was on the back of a 44.7 percent decrease in diamond imports. Though Botswana is a major exporter of the shiny luxurious stones, the country imports diamonds from De Beers mines outside Botswana, where they are aggregated, valued and then sold to outside buyers.

Topping the list of imports for August was fuel, accounting for 25 percent of total imports at P1.7 billion. Food, beverages and tobacco contributed 14.9 percent or P1 billion to the import bill. Machinery and electrical equipment brought in the country in August were valued at P938 million, representing 13.5 percent of total imports. The value of imported diamond was P837 million or 12.1 percent of total import value.

The P6.9 billion import bill was mostly from products sourced from the Southern African Custom Union (SACU), which contributed 76.3 percent (P5.2 billion) to imports. South Africa, the biggest economy of the SACU member states, was responsible for the 69.8 percent of the bill (P4.8 billion). Asia supplied imports worth P558 million, reflecting 8.1 percent of Botswana’s total imports. Botswana also received imports valued at P290 million (4.2 percent) from the European Union, while imports from Canada were P323.5 million. The imports from Asia, EU and Canada were largely diamonds.

On the other side of trade, Botswana sold goods valued at P10.7 billion in August, 7.1 percent higher than the previous month. The increase was attributed to an 8.3 percent rise in diamond exports, the country’s main export since independence. Diamonds made up 88 percent (P9.5 billion) of total exports, followed by copper at P437 million (4.1 percent). Machinery and electrical equipment exports were recorded at P204 million, or 1.9 percent of total exports for the month.

Asia was the top destination for Botswana exports, gobbling 69.3 percent (P7.4 billion) of total exports. The exports were mainly destined to the United Arab Emirates (UAE) and India, with the two countries buying diamonds and copper. The EU received P1.9 billion of exports, with Belgium receiving 99 percent of the exports, which comprised of diamonds. The SACU accounted for the 10.1 percent or P1.1 billion of exports, also largely made up of diamonds sales.

With strong exports against imports, August delivered the biggest trade surplus of P3.8 billion, making it the fourth consecutive surplus and the highest since the beginning of the year. The previous month’s trade surplus was P1.8 billion.

In the first quarter of the year, Botswana recorded a trade surplus of P250 million and closed the second quarter with a P1.6 billion surplus. The third quarter has so far registered positive inflows of P5.8 billion, with the September data yet to be made available but highly expected to be a trade surplus.

The strong trade balance has been driven by strong diamond sales, making a comeback period of widening trade deficits. Last year, Botswana recorded a yearly trade deficit of P10.8 billion, a significant improvement from 2020’s P25.4 billion trade deficit, the largest trade imbalance on record. The historic deficit extended the P14.2 billion shortfall recoded in 2019, the third highest since 2012’s trade shortfall of P16.3 billion. The consecutive trade deficits were a reversal of gains made in the five- year period of consecutive trade balance surpluses that started in 2014 before coming to an abrupt end in 2019.

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