THE LONG HAUL BACK TO ECONOMIC RECOVERY

Tanzania is now in the fifth year of its economic recovery following six years of drought. Food production has grown at 3.5 to 4% over the past three years. The economic growth rate for 1988 seems certain to reach 5%, with inflation on the decrease and some signs of vigorous recovery in industrial output. Over the past four years the Gross Domestic Product (GDP) has grown about one fifth from its low point in 1983, and over one seventh from its recession level in 1978. These figures show the long hard slog that faces Tanzanians on the road back to full recovery. The present pace of growth remains unsatisfactory, with the living standards of almost half of urban households and, perhaps, a third of rural households still only at, or even below, the poverty datum line.

Sustained recovery now depends on at least a few more years of reasonable rainfall; increased efficiency in the public and private sectors; a lessening of the defence budget (which has risen because of the military aid being given to Mozambique); and on the terms of foreign trade not changing adversely. Given these conditions it is possible for Tanzania to maintain a growth record of 6 to 8% through to 1991; even so, this would restore per capita income to between 93% and 100% of the 1977 level – the year of Tanzania’s economic collapse due to the quadrupling of oil prices; the beginning of the six year cycle of drought; the cost of the war against Amin’s Uganda; the downturn of world trade prices for the country’s exports, and the increase in the cost of imports; as well as because of some mistaken government policies, especially in the performance of several parastatals.

Writing in the next volume of the African Contemporary Record, Prof. R. Herbold Green of the Institute of Development Studies of Sussex University, estimates that the cost of Tanzania’s military assistance to Mozambique was between US$ 125 and US$ 150 million in 1987-88. Two thirds of this expenditure involved direct or indirect imports. The restoration of security across the border would therefore be of considerable benefit to Tanzania’s national budget.

Weather and trade terms are ever present threats. However, the last four averagely good harvests have enabled the country to build up a maize reserve of up to 180,000 bags, which is enough to see it through at least one bad season.

Prof. Green estimates that external financial gross inflows are probably in excess of between US$ 500 and US$ 900 million. If technical assistance is excluded, the figure is between US$ 650 and US$ 800 million which, he says, is not enough for the country’s needs – especially if there is still no agreement on alleviating the unmanageable external debt-service burden.

Exports have not increased as much as was hoped for due to disease of cashew nut trees, falls in coffee prices, a slow turnaround of sisal production and bottlenecks in processing and transporting cotton. But even if these products, which form the old bases of export earnings, are marketed normally, they would still be insufficient to produce the needed lift-up of the total economy. They will need to be supplemented by increased manufacturing, natural gas exploitation and greater gold production.

Efficiency increases have been achieved – from grain marketing through operations of the Dar es Salaam harbour to electricity; but there are still sectors of poor services such as water supply for the capital, local transport, agricultural processing and in much of industry.

Prof Green cites three reasons why Tanzania’s external balance remains fragile.

First, with 1987 imports of goods at US$ 1,092 million and exports at US$ 347 million, only a net transfer receipt in excess of exports is able to keep the gap plugged. Second, exports are not rising rapidly, remaining static over 1986-87, with main commodity proceeds falling over 20% for price and volume reasons, balanced by rises in manufacture, secondary commodities and minerals . Third, the 1987 import level of US$ 1,092 million (only 4% up nominally and down perhaps 6-8% in volume terms on 1986) includes US$ 125-150 million worth of consumer goods and, perhaps, US$ 50-75 million defence-related elements not included in the US$ 1,200 million minimum imports for efficient rehabilitation and operation of the economy so that the shortfall is of the order of 20% Compared to the 1983 situation, however, imports are up over 35% in nominal terms (and perhaps 25% in real terms), and external transfers are up markedly, albeit exports have actually declined (largely for price reasons), falling over US$ 90 million to 1985 before rising to over 1]S$ 60 million thereafter.

On a fiscal year basis the trends are slightly more encouraging. The 1986-87 level was US$ 355 million and 1987-88 is estimated at US$ 388 million; but even here main commodity exports showed a fall of US$ 44 million whereas exports of manufactured goods rose US$ 32 million (the whole net gain), and of minerals and secondary commodities by US$44 million.
Colin Legum

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