The overall balance of payments registered a surplus of USD 207.5 million during the first quarter of 2007/08 compared to a surplus of USD 171.7 million in the fourth quarter of 2006/07 and a deficit of USD 44.0 million the same quarter of the preceding fiscal year.

According to the National Bank of Ethiopia (NBE) quarterly report, the improved performance was mainly attributable to increases in private transfers and the surplus in the capital account despite a widening of the trade deficit and a sharp decline in net service receipts.

During the first quarter of 2007/08, current foreign exchange receipts reached USD 1,280.1 million, 29.3 percent lower than the receipts in the preceding quarter but 41.2 percent higher than those of the same quarter of the preceding fiscal year. On the other hand, current payments rose by 2.2 percent on quarterly and 24.8 percent on annual basis and reached USD 1,706.1 million. The16.8 percent increase in service payments was responsible for the higher quarterly current payments. As a result, there was a net outflow of USD 426.0 million compared to a net receipt of USD 140.1 million in the preceding quarter.

Merchandise trade deficit widened by 13.7 percent from USD 956.7 million in the fourth quarter of 2006/07 to USD 1,087.7 million in the first quarter of 2007/08 owing to a 35.3 percent drop in export proceeds offsetting a slight decline of 1 percent in imports.

Similarly, merchandise trade deficit widened by 22.1 percent year-on-year basis due to a 23.6 percent annual increase in import payments despite a 30.0 percent growth in export earnings. Total export proceeds reached USD 265.9 million during the first quarter of 2007/08, reflecting a 35.3 percent quarterly decline due to seasonality factors in relation to exports of coffee, oilseeds and gold. In contrast, export earnings went up by 30.0 percent on annual basis.

NBE's report shows that export earnings from coffee, the main export item, went down by 40.3 percent from USD 154.7 million in the fourth quarter of 2006/07 to USD 92.4 million in the review quarter due to 45.9 percent decline in its volume despite higher international prices. On annual basis, however, export revenue from coffee slightly increased by1.6 percent in spite of 17.9 percent decline in volume as its international price went up by 23.8 percent. As a result, the share of coffee in total export earnings dropped to 34.7 percent from 37.6 percent in the preceding quarter of 2006/07 and 44.5 percent in the same quarter of last year.

Quarterly export earnings from oilseeds also went down by 40.0 percent to USD35.5 million as their volume fell by 47.4 percent, offsetting a 14.0 percent rise in the international price. On annual basis, however, oilseeds exports surged by 82.2 percent due to 28.9 and 41.4 percent increase in volume and international price, respectively. As a result, the share of oilseeds in total export earnings has moved up to 13.4 percent from 9.5 percent in the same quarter of last fiscal year.

Export receipts from pulses rose by11.2 percent to USD 23.5 million due to their increase in volume of export and world price. It also surged by 75.4 percent on annual basis owing to the same reasons. Consequently, export earnings from pulses accounted for 8.8 percent of total exports compared to 5.1 percent in the preceding quarter and 6.5 percent in the same quarter of last year. Earnings from export of leather and leather products amounted to USD 20.3 million showing a quarterly decline of 20.3 percent and an annual increase of 15.7 percent. Their share in total exports went up to 7.6 percent from 6.3 percent in the preceding quarter. Earnings from meat and live animals export also improved in the quarter.

Flower export, which is of recent history, assumed the sixth place in the list of major export items during the first quarter of 2007/08 accounting for 7.5 percent of total exports as the sector continued to receive government attention. Export earnings from flowers rose by 1.4 and 173.6 percent on quarterly and annual basis, respectively and reached USD 19.9 million. Earnings from fruits and vegetables also tended to rise.

NBE indicated that export earnings from gold slowed down (by 79.4 percent) from USD 63.7 million during the preceding quarter to USD 13.1 million in the review quarter as the volume of exports declined from 3,500 kg to 800 kg and its international price declined by 8.9 percent. Accordingly, the share of gold exports in total exports fell to 4.9 percent compared to 15.5 percent in the preceding quarter. On annual basis, however, gold exports increased 45.8 percent as both the volume of exports and its international price showed improvements.

Export of chat increased by 5.9 and 23.6 percent on quarterly and annual basis, respectively and reached USD 26.6 million due to increases in both the volume and prices. Chat accounted for 10 percent of total exports during the review quarter compared to 10.5 percent in the same quarter of last year. As a result of declines in all major import categories, except raw materials and fuel, total merchandise imports slightly went down by 1.0 percent on quarterly basis to USD 1,353.5 million. On annual basis, however, imports surged by 23.6 percent.

Capital goods imports declined by 13.6 percent on quarterly basis to USD 455.9 million while they increased 24.6 percent on annual basis. As a result, the share of capital goods in total imports shrank from 38.6 percent in the preceding quarter to 33.7 percent although the share remained at the level of last year. Generally, capital goods imports tend to increase during the second half of the fiscal year.

Similarly, imports of consumer goods slowed down by 3.8 percent on quarterly basis while they rose 13.2 percent on annual basis to USD 326.4 million. Consumer goods accounted for 24.1 percent of total imports compared to 26.3 percent in the same quarter last year.

Reflecting the continuous surge in oil prices in the international market, fuel import bill increased by 40.1 percent on quarterly basis and reached USD 234.9 million, accounting for about 87 percent of export revenue. Compared to the same quarter of the preceding fiscal year, however, fuel imports declined by 9.4 percent. The share of fuel import in total import bill during the review quarter was 17.4 percent compared to 12.3 percent in the preceding quarter and 23.7 percent in the same quarter of last fiscal year.

Imports of raw materials amounted to USD 62.1 million, up by 51.8 and 272.7 percent on quarterly and annual bases. The share of raw materials in total imports increased to 4.6 percent from 3 percent in the preceding quarter and 1.5 percent in the same quarter of last year. Import of semi-finished goods showed a quarterly decline of 6.6 percent and an annual increase of 49.4 percent and reached USD 221.5 million.

Accordingly, their share in total imports was 16.4 percent, higher than 13.5 percent a year earlier. Franco-valuta imports increased to USD 46.4 million during the first quarter of 2007/08, compared to USD 18.4 million in the preceding quarter and USD 0.8 million in the same quarter of the preceding fiscal year. The surge in franco-valuta imports was associated with the government’s decision to allow the import of cement on franco-valuta basis starting from the second quarter of 2006/07.

Asia was the major market for Ethiopia’s exports during the first quarter of 2007/08 overtaking Europe. Exports to Asia accounted for 40.2 percent of the country’s total export earnings. Of the total exports to Asia, 22.7 percent went to Saudi Arabia, 20.1 percent to Japan and 17.7 percent to China. Exports of coffee and oilseeds accounted for over two-thirds of exports to Asia. The share of coffee reached 42.2 percent and that of oilseeds 24.8 percent.

Exports to Europe accounted for 35.8 percent of total exports, of which 18.2 percent went to Italy, 18.0 percent to Germany and 17.3 percent to The Netherlands. The three major export items to Europe were coffee (39.0 percent), flowers (19.4 percent) and gold (13.8 percent).

About 16.6 percent of Ethiopia’s exports were to African countries, about 90 percent of it going to the three neighboring countries, namely Somalia, Sudan and Djibouti. The major export items to the continent were chat, having 58.1 percent share followed by live animals (11.4 percent) and pulses (10 percent).

The share of the Americas from Ethiopia’s total exports was 7.2 percent out of which 90.0 percent went to the United States of America. Exports of coffee accounted for 54.6 percent of exports to the Americas while oilseeds exports constituted 20.2 percent.

The report indicated that during the first quarter of 2007/08 over 65 percent of Ethiopia's imports originated from Asia. Of the total imports from Asia, four countries namely China, Saudi Arabia, India and Japan accounted for over 75 percent. Major imports from China included electrical materials, machineries and metals while over 85 percent of imports from Saudi Arabia was petroleum products. Metals, machineries, electrical materials and medical products were the major import items from India while road motor vehicles constituted the bulk of imports from Japan.

Europe was the second largest origin for Ethiopia’s imports accounting for 23.7 percent. From within the European countries, Italy was the major exporter to Ethiopia with 30 percent share followed by Turkey (13.1 percent) and Germany (12 percent). Machinery and road motor vehicles constituted the main items imported from Italy and Germany, and metals from Turkey.

Imports from the Americas accounted for 6.6 percent of total imports with two countries, namely the Unites States and Brazil making up over 93 percent. Electrical materials, machineries and food were the major imports from the Americas. Only 4.4 percent of imports came from African countries with about 95 percent originating from four countries, namely Egypt, South Africa, Sudan and Kenya. Petroleum products, electrical materials and metals constituted major imports from African countries.