THE RECONSTRUCTION OF TANZANIA’S ECONOMY

The basic 1982/83 – 1984/85 Tanzanian economic policy objectives and guidelines were presented to the National Assembly on June 16th, 1982 in the budget speeches of the Minister of State for Planning, K.A.Malima and the Minister for Planning A.H.Jamal. The broad policy structure of reconstruction planning is set out in Structural Adjustment Programme for Tanzania. The initial time frame set is 1982/83 – 1984/85, but the accompanying Budget Speech which contains the first year’s resource allocations implies that the period may be as long as five years.

In terms of immediate action the Structural Adjustment Programme’s 1982/83 tranche shows no marked changes on 1980/81 policy. It is a set of retrenchment measures. These result in a sharper proposed cut in recurrent, as well as capital expenditure because the end of the security expenditure related to the Uganda war and the subsequent reduction in the size of the armed forces has allowed a one-third cut in budgeted expenditure for defence. The 7 to 8.5% rise in nominal recurrent spending by other Ministries and by Regions implies a fall in real recurrent services of 4 to 7%.

The very sharp increase in parastatal rehabilitation and subsidy expenditure estimates for 1982/83 (not necessarily an equally large increase over actual 1981/82 expenditure) is related to past agricultural and transport parastatal losses and to the unsustainably high prices set for several crops – notably cotton, tea and tobacco – in 1981. The absence of either a sharp increase in staple grain and flour prices, or a minimum wage increase to offset inflation, represent a change from the approaches to deficit and income management in 1980 and 1981 as does also the absence of any tax increases.

There are no tax changes, resulting in a very large and uncertain local borrowing requirement of Shs.4,376 million. The uncertainty arises because the logic of the Structural Adjustment programme includes substantial additional foreign resource inflows – including $210 million in IMF drawings and a World Bank Structural Adjustment credit – which are not as yet negotiated. If they are negotiated and received promptly a smaller deficit is likely, but if late or not at all a much larger one is certain.

The Structural Adjustment Programme is in part a consolidation of elements from three earlier Tanzanian forward planning exercises: the abortive 1980-83 Structural Adjustment Programme, which foundered on non-acceptance by the Bank and the 1981 coffee price collapse; the 1980 decadal development proposals to the UNCTAD sponsored “least developed” conference series (notable for lack of practical response) and the 1981 and 1982 National Economic Survival Programmes. Because the external economic context ‘has worsened substantially during the period 1980 to 1982, the present Structural Adjustment Programme is far more draconic in its implications – albeit remarkably non-specific on what actual cuts are seen as acceptable. The policy statements on exports, incentives and efficiency consolidate those of 1980/81 and 1962/82 in a somewhat more coherent way, but specific measures (at least in an applicable form) are less evident than in the earlier statements.

The stated commitment to maintaining achieved degrees of egalitarianism and levels of basic services reads somewhat oddly in the light of what the Budget does not include in votes and wage changes, though the sharper decreases in defence spending and •the capital budget have allowed some protection of health, education and water (the key basic service heads). Given the level of subsidies to agricultural products, probably over Shs.1 ,500 million or over 10% of recurrent estimates as a whole totalling Shs.14,144 million, increases in peasant real incomes are clearly dependent either on increases of output, reductions of transport and storage losses, or cuts in procurement, transport and marketing costs in both the private and public sector.

A substantial number of proposals for directions of change, new approaches and rehabilitation packages are made. These are less interrelated, detailed or costed than in previous Tanzanian planning exercises. This may be because of the short time that elapsed between receipt of the report of “Three Wise Men” chosen jointly by the World Bank and the Tanzanian Government (formally known as the Tanzania Assistance Group, with three experts and a supporting secretariat)* in April and the mid-June budget deadline for the presentation of a Tanzanian programme harmonising their proposals with existing Tanzanian strategy. It may also relate to the fact that the detailed elaboration of proposals and programmes dependent on foreign finance prior to having been able to negotiate agreement on that finance, at least in principle and in order of magnitude, is not necessarily very useful and runs a distinct risk of over optimism.

The section on parastatal performance notes the very uneven performance – from good to abysmal – and the negative effect of the weaker parastatals on the performance of others. It re-stresses the problems caused by inadequate accounting personnel and by the refusal of many parastatal managements to accept responsibility. It calls both for the enforcement of the existing legal rules on the preparation of parastatal annual capital and operating budgets and the approval of budgets by Planning and Finance, also for substantially greater worker power through strengthened Workers Councils and enhanced representation at board level.

The outcome of the 1982/83 – 1984/85 Structural Adjustment Programme (and any extension to 86/87) depends in the first instance on negotiations with the IMF and the World Bank as well as other sources of external finance. With exports covering less than half of essential (slightly over half of actual) imports, no workable medium-term economic strategy, including one aimed at raising the ratio of exports to import requirements, can be made to work without either a sharp increase for three to five years in concessional resource flows, or a sharp recovery in the terms of trade (now perhaps 50 on a 1972 base of 100 or 45 on a 1976/77 base). The latter appears quite out of the question as neither a 100% increase in the price of coffee, tea, cotton and cashew nuts, nor a 50% fall in those of manufactured goods and petroleum, are in the least likely. Whether the reiterated stress on exports, incentives and productivity – now apparently in large measure endorsed by the “Three Wise Men’s” report – will have more success in allowing access to Fund and Bank resources than in 1980 and 1981 remains to be seen.

* see Bulletin No.13, page 2.

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