TANZANIA AND THE DONORS

In ‘Habari’ the journal of our Society’s sister organisation in Sweden (No.3 of 1995) there is an article entitled “Nordens adoptivland gar kraftgang” (Scandinavia’s adopted country goes backwards). The article notes that Tanzania has received 16 milliard dollars of aid during the past thirty years, but that nevertheless it appears to be as far away as ever from becoming economically self-supporting. The special relationship with the countries of Scandinavia began when Julius Nyerere and Olof Palme together hammered out a programme of growth towards a goal of self-reliance. All the Scandinavian countries contributed generously to this end and there are many evidences of their open-handed treatment of the needs of Tanzania, one of the poorest countries in Africa. In the sixties and seventies, in spite of setbacks, the donor community continued its support, having in mind not only the external nature of many of the adverse influences that had dogged the Tanzanian economy- the two oil price rises, the break-up of the East African Community and the war with Idi Amin – but also the severe drought of the middle seventies and the adverse terms of trade in some of Tanzania’s traditional exports.

During the first twenty years of independence there were certain aspects of the economic situation that at the time ere not clearly understood. First, in spite of strenuous efforts to extend the educational system, a shortage of manpower trained and experienced in certain fields persisted and became more acute as development projects multiplied. Secondly, the critical importance of the maintenance of equipment and infrastructure went largely unrecognised. Thirdly, economic planning often failed to take account of the recurrent cost consequences of investment. The result in many cases was a rapid deterioration of plant and communications, poor economic performance and, in an economy characterised by state enterprise, growing burdens on the budget. The notion that the pace of development depended on the rate at which human and financial resources could be made available did not appear to enter into the calculations of the Government, or, for that matter, of the donors, who tended at that time to compete with one another for scare resources.

The consequences of planning failure can be seen in the educational system itself. In the Five Year Plan for 1969-74 it was envisaged that primary education would be expanded year by year, reaching the goal of Universal Primary Education (UPE) in 1989. The target date was set in accordance with estimates of the rate of growth of the economy, in other words, what could be afforded. In 1975, however, it was decided, in response to the policy of villagisation, apparently without the benefit of cost calculations, to bring forward the date of UPE from 1989 to 1977. The result was an attempted leap forward for which neither adequate funds, nor the necessary trained teachers, could be made available. External shocks, the growing rigidity of the economy and rising inflation put economic growth into reverse i the late seventies. Donors took the view that widespread structural adjustment was needed and sought compliance with a programme of reform mapped out by the International Monetary Fund. The rigid conditionality associated with IMF funding, however, proved unrealistic in a number of countries, sometimes provoking riots, and for a while the proposals of the IMF were resisted. In 1985 amid conditions of continuing economic decline and some softening of the IMF8 s requirements, the Tanzanian Government agreed to follow the prescriptions of the Fund. There followed a resurgence of donor support and growing coordination between donors.

The Government’s structural adjustment programme has brought a number of benefits, notably a resumption of economic growth. But in 1994 it became evident that revenues were flagging and that a growing budget deficit financed by borrowing from the Bank was causing inflation to rise. Serious concern about this trend among the donor community was compounded by the announcement by President Mwinyi on 9th. November 1994 that Shs 70 billion of revenues from import taxes has been lost on account of tax evasion and corruption. Tanzania had earlier been widely regarded hitherto as a country mercifully free from corruption and in President Nyerere’s day strenuous measures were taken against corrupt practices. It was therefore with alarm and shock that the donor countries learned of the extent of corrupt dealings. The consequence has been a suspension of significant parts of the donor programme.

Donor import support was allowed to expire without renewal, creating a critical shortage of foreign exchange. But the most serious consequence lay in shortfall in counterpart funds offered by traders in payment for foreign exchange. For this shortfall has led to a widening of the budget deficit, increased resort to Bank lending and in consequence a rise in inflation. Sweden, once the most generous of the aid donors, was also coming to realise that much project aid had been misdirected, for example for example, in the case of the Mufindi Paper Mill and the imaginative but unsuccessful sister industry programme. Something was going wrong and the Swedish government to put in hand a detailed review of the aid programme. Similar studies were instituted by the Netherlands and Finland.

The Scandinavian reaction reflected not only concern about corruption, but also a recognition that the conditions making for successful aid were most complex. What one writer has called the ‘aid bombardment’ could have negative effects by weakening local effort and encouraging the growth of a dependency culture. It can be argued that Tanzania’s sovereignty has already been impaired by aid amounting to almost half of the GNP and financing and financing a substantial part of the budget deficit and the import bill. Nobody was suggesting that aid should be abolished overnight, but greater care was needed to ensure that the effect was to promote self reliance and, in the long run to publish the necessity for aid. It is unlikely that the donors will resume exactly where they left off.

The approach of elections in October, inevitably led to a pause in new economic initiatives, but it was greatly hoped in donor circles that a strong government, armed with a renewed mandate would reactivate the reform programme. Recent events had set back progress towards a more self-sustaining and balanced economy, which only last February had seemed possible. Inflation, one of the most potent causes of poverty, remained at unacceptably high levels and must be brought under control as a matter of urgency.

With the reform programme again on track, donor aid, including that of the UK, is likely to follow, though not perhaps on the scale reached in recent years. For the donors, a commitment to the reform programme and to resolute measures to contain and wherever possible eradicate corruption will decisively influence their support. The donors for their part will need to understand the severe practical difficulties faced by the Tanzanian authorities – the shortage of trained personnel, the effects of population growth, the complexity of necessary changes, such as those in the banking system, and the political repercussions of civil service reform, not to mention the extreme sensitivity of a small economy to external influences and the vagaries of climate. It is also necessary to remember that corruption feeds on inflation and that the control of corruption is likely to be frustrated unless inflation is brought under control.

Above all the situation calls for a renewal of mutual confidence, which has been damaged by recent events. At the time of writing the signs were encouraging. The Netherlands renewed its contribution to import support in November and it is likely that other donors will do likewise following the election of the new President and evidence of a stern and consistent stand against corruption. Import tax evasion has been investigated by the Controller and Auditor General on the instructions of the former President Mwinyi. Prosecutions and dismissals have followed, many of the bonded warehoused have been closed and substantial unpaid taxes have been recovered. In February it was calculated that aid in the sum of $1.13 million would be needed for the remainder of 1994-95 and the financial year 1995-96. It no remains to be seen whether the new administration in Dar es Salaam can justify a renewal o support of this order.
Roger Carter

RSS feed for comments on this post · TrackBack URL

Leave a Comment

You must be logged in to post a comment.