Letters from Tanzania suggest that the decline in the economy has ‘bottomed out’ and that there are definite signs of incipient recovery. There is certainly more activity among producers and traders, while the response of farmers to the provisions of the economic recovery programme has caused serious crop storage and movement problems. However, in spite of this more hopeful picture, the persistent trend of price inflation remains a serious worry, particularly to those on fixed salaries. Though hitherto the Government, aided by reasonable harvests, has been successful in sustaining morale and avoiding a food crisis, it would be rash indeed to assume that the Economic Recovery Programme has surmounted the formidable obstacles that lie in its path. Of these, th8 two most urgent and perplexing are the problems confronting the rehabilitation of exports and the debt overhang.

Except in 1968, Tanzania enjoyed a favourable balance of trade throughout the first decade of independence. But thereafter, for reasons that are too complex to discuss here, the trading account was consistently in the red and in 1986 export revenues at US$ 348 million were no more than one third of the cost of imports at US$ 1,047 million. This very serious outcome was the sequel to a fall in export volumes of sisal, cotton and cashew nuts, but other products increased in export tonnage, notably coffee, Tanzania’s largest export crop. For the moment the outlook for coffee is promising and indeed in 1986 a 15~ increase in exports was matched by a 130% increase in prices, resulting in a growth in earnings of 167% in shilling terms. But coffee is subject to seasonal fluctuations and in 1986 the difficulties encountered by the Brazilian crop created exceptional, though temporary, market opportunities. Over coffee, as with most of Tanzania’s traditional export commodities, hangs uncertainty about future total world demand, while increasing competition among Third World primary producers anxiously trying to rectify their trade deficits and fund their increasing burden of external debt casts additional doubt an the prospects for Tanzania’s staple export. This means that Tanzania can only hope to return to balance on her trading account through a resolute policy of export diversification in the years to come.

While the trade deficit imposes an intolerable burden on Tanzania’s balance of payments, it is also the debt overhang that gives rise to special anxiety. At the end of 1986 Tanzania was in debt to the rest of the world to the extent of nearly four billion dollars . Leaving aside private and short-term obligations, about two thirds of the outstanding public debt was to other governments and one third to the World Bank and the IMF. The interest and repayment of external public debt i n 1986 consumed 15% of the income from Tanzania’s exports, a burden which , although much less than that suffered by the Sudan, Somalia and some other countries, is likely to increase with the expiry of grace periods on multilateral loans and rescheduled debts in the nineteen nineties. Same of this burden can be relieved by converting bilateral loans into gifts. The United Kingdom has already done this, but with an outstanding bilateral debt in 1986 of US$ 2.112 million there is obvious scope for further relief along similar lines. Of the debts outstanding to the World Bank, US$ 656 million was due in respect of IDA (interest free) credits, which will fall for repayment in the next thirty or forty years as grace periods expire. But no less than US$239 million was borrowed in the early seventies on so-called IBRD terms, that is, at substantial rates of interest. Some consideration is now being given to the means of alleviating this debt burden, though it is far from clear what options will be open. Of the remaining debt burden, US$ 186 million represented accumulated commercial debts subject to export guarantee schemes, that is, in effect debts taken over by governments. It is believed that the U.K. would be willing to extend maturity periods and reduce rates of interest, but the implementation of such a proposal seems to depend on an agreement in the Paris Club (the main industrial nations) and there appears to be doubt about the willingness or the legal ability of the United States to co-operate.

It is of course difficult to foresee in this uncertain world the future outlook for Tanzania’s efforts at economic renewal. A downturn in the economies of the industrial nations could seriously jeopardise the prospects for many Third World countries dependent for their livelihood on the export of raw materials. The solution to the formidable balance of payments problem is still far away and exportable items and necessary commercial skills remain inadequate for the ‘purposes of a vigorous export programme. Underlying all efforts at economic renewal is the restoration and development of communications – roads, railways, port facilities, telephone and telex systems – a programme that will require years rather than :months to produce significant results.

But in spite of these hindrances and hasards, Tanzania possesses two important advantages, a stable government and a buoyant state of morale. Although the short term burden of reconstruction is falling disproportionately on the urban wage earner and his dependents, the absence of ostentatious private wealth and policies such as the minimum wage legislation help to offset, if only partially, the rigours of the recovery programme. These advantages cannot be assessed in developmental terms, but they create a favourable environment for growth. It must be our sincere hope that the benefits of structural adjustment, to which the Government has committed itself, will soon accrue to those who are paying the price.
J. Roger Carter

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