Tanzania's economy is vulnerable to
the impact of global financial tightening as the US Federal Reserve is
expected to raise interest rates later this month, a new report has
cautioned.
The Economic Insight: Africa Q4 2015
report by the Institute of Chartered Accountants in England and Wales
says Tanzania is among five most vulnerable economies in Africa on
account of the current account deficit of 9.3 per cent and vulnerability
score of slightly below 250.
According to the report, the maximum
risk of 300 is equivalent to the highest possible score across these
three measures of current account balance, growth in private sector
credit and the ratio of foreign debt to reserve.
Tanzania recorded a current account
deficit of 221.50 million US dollars in September of 2015, according to
Trading Economics.
The current account in Tanzania averaged- 287.06
million US dollars from 2006 until 2015, reaching an all time high of
263.80 million US dollars in August of 2007 and a record low of -780.20
million US dollars in March of 2014.
However, Kenya and Uganda are considered
the most vulnerable in the East African Community region with current
account deficits of 10.4 per cent and 9.7 per cent respectively.
Tanzania (9.3%) and Ethiopia (8.0%)
follow closely behind. According to the report, Ghana emerged as the
weakest economy in Africa with a score of 273 out of 300 due to very
high current account deficit and spiraling debt.
Ghana’s economy suffers from both a very
high current account deficit and history of rapid credit growth. The
current account deficit stood at 9.6 per cent in 2014 according to
estimates from the IMF’s World Economic Outlook.
“While this is far from being the
highest on the continent, it is still expected to be a significant drag
on Ghana’s ability to cope with the potential havoc caused by US rate
rise in the near future.”
Generally, an economy with higher
current account deficit will be more vulnerable to sudden capital
outflows given the suggested dependence on imports. As its currency
depreciates, imports become more expensive to the local population.
Source: Daily News, reported from Dar es Salaam, Tanzania
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