Trends in oil prices and production will remain crucial for the current account during the forecast period. The contribution of cotton to exports should increase, as global prices for the commodity are set to remain high, particularly in 2011, when they are set to average 126 US cents/lb. Livestock exports are set to decline in 2011 as pastoralists struggle to rebuild flocks after the droughts in 2009-10, but should pick up in 2012. In 2011 goods exports are forecast to total US$3.9bn and imports US$3.4bn, leading to a trade surplus of US$503m. Assuming that extra oil production comes on stream as planned, in 2012 we expect total exports of US$4.1bn and imports of US$3.3bn, in line with easing commodity prices, leading to a surplus of US$774m.

The services deficit will widen gently in 2011-12, averaging US$2.7bn, as a result of the very small domestic services sector and in combination with increasing oil-sector service imports. We now expect the income deficit, caused mainly by profit repatriation by oil companies, to move in line with oil prices to US$1.2bn in 2011 and US$908m in 2012. The current-transfers surplus will increase slightly to an average of US$281m during the forecast period, following movements in remittances from workers in both Western and neighbouring countries. Overall, we forecast a current-account deficit of US$2.8bn in 2011 and US$2.5bn in 2012, equivalent to 36.1% and 33.2% of GDP respectively. The deficit will be funded largely by donor funds and the foreign parent companies of local oil firms.