PLAUDITS FOR TANZANIA’S ECONOMY

‘One African country that seems unable to put a foot wrong at the moment is Tanzania’ according to the March issue of ‘African Business’. IMF Director for Africa Goodall Gondwe spoke of Tanzania’s improving economy as a ‘tremendous achievement’. ‘Africa Confidential’ headed its most recent article on Tanzania: ‘Baby Tiger – At Last Some Good Economic News to Bolster President Mkapa’s Multi-party Democracy’ as some people even began to say that Tanzania could develop, in the new millennium, into one of the first ‘tiger economies’ in Africa.

ONE BILLION DOLLARS IN DEBT RELIEF

It was announced on January 23 that Tanzania had received a seal of approval from the Paris Club of donors. It had been given the most generous terms of debt reduction currently available for the world’s poorest nations – a debt relief programme of $1 billion (Shs 600 billion). The total debt is $7.8 billion. This relief should bring the government’s debt repayment to the 12 Club members in the financial year 1996/97 to Shs 44 billion instead of the Shs 100 billion anticipated. The remaining Shs 56 billion ($700 million) will be either rescheduled or refinanced over a period of 23 years including a six-year grace period on debt payment. In addition each creditor country can – separately – convert some Tanzanian debt into development projects. The creditor nations said that Tanzania’s very low per capita income and its very severe debt burden justified an exceptional treatment of the debt.

The debt relief followed President Mkapa’s agreement to split the National Bank of Commerce into three parts. World Bank Resident Representative Ron Brigish said the debt relief was a major pat on the back for the government of President Mwinyi and its tough economic policies. “Tanzania is now back in the fold” he said.

VERY ENCOURAGING SIGNS IN THE LATEST ECONOMIC DATA
Tanzania’s GDP growth rate reached 4.5% in the first half of 1996/97 and Tanzania’s foreign reserves have reached a record $450 million, the highest in the country’s history, following strong export growth and new donor support. Inflation has dropped at a record rate from 27% a year ago to 13.8% in February this year, the lowest figure for 11 years. Export earnings are up from $500 million on average for the last five years to $762 million last year. Revenue collection has improved substantially from Shs 29 million per month last year to Shs 45 million this year. The over-manned and underpaid civil service has been cut back from 335,000 to 275,000 since 1992 and those made redundant have received donor- financed compensation packages.

Foreign investors are coming back slowly but many are waiting for the passage of the new ‘Investment Bill’ which came before parliament in April. New investors in mining have recently claimed to have found up to 410 metric tonnes of gold which could eventually put Tanzania in the same league as South Africa and Ghana as an African gold producer. The huge new project in Kilwa, now well under way, will provide Dar es Salaam (and even parts of Kenya) with electricity from natural gas within two years. Tourism is beginning a boom – receipts are up from $250 million in 1995 to $322 million in 1996 and new hotels are springing up all over the country. And between 1992 and 1996, 125 of the country’s 400 mostly dilapidated parastatal industries have been wholly or partially privatised and many are now coming back into production. For the first time in its recent history, as a result of its tight monetary and credit stance, the government is expected to be in a position to meet 60% of its expenses during the next financial year instead of relying on borrowing or from the donor community for the major part of its expenditure.

The Dar es Salaam ‘Business Times’ is full of praise for what it believes to be the recommendations of the ‘Presidential Task Force on Tax Rationalisation’ which was due to present its report as this issue of TA went to press. The proposals could, if implemented, increase revenue collection from this years’ estimated Shs 564 billion to Shs 790 billion next year. ‘This would be a phenomenal improvement over a single year’ the paper wrote.

Meanwhile, the second tranche ($40million) of the IMF’s Enhanced Structural Adjustment Facility (ESAF) has been released; the money is to help increase allocations in the 1996/97 budget for the very hard pressed education, health and water supply sectors of the economy.

Finance Minister Daniel Yona attributed these positive trends in the economy to the radical reforms adopted in the mid-1980’s at the behest of the World Bank and the IMF.

FOREIGN AID RESUMES
Following the agreements with the IMF, the freeze on foreign aid, which was introduced at the time of the tax exemption scandal two years ago, has now ended. Tanzania has been picked as one of the six developing countries in Africa selected for Japanese aid; a representative of the Japanese Ministry of Foreign Affairs said that Japan was impressed by Tanzania’s political and economic changes. The EC’s latest package of grant aid for Tanzania is the second largest to be given amongst all 70 member countries of the ACP. Norway has agreed to provide $50 million in development aid this year, Denmark has promised Shs 150 billion and the African Development Bank is releasing $21.5 million for the first phase of a $281 million project to ease Dar es Salaam’s chronic water shortage.

But, to put matters into perspective, it has also been announced recently that about 60% of rural people and 39% of urban inhabitants have incomes below the poverty line.

AND IN ZANZIBAR
Here too, in spite of the continued reluctance of foreign donors to give further assistance pending a solution to the political deadlock, the economic news has been encouraging. The ‘Business Times’ reports that GDP growth was 3.9% in 1996/97 compared with 3.7% the previous year. Clove production increased to 10,105 tons last season, the best for three years but copra went down by 51%. Inflation has dropped to 12.6% compared with 30.8% the previous year. Revenue collection remained poor. Tourism has become Zanzibar’s second most important foreign exchange earner (after cloves). Tourist numbers increased from less than 30,000 in 1985 to 56,415 in 1995 and the number of hotels and guest houses had increased from 10 to 100.

AND THE NOT SO GOOO NEWS
Tanzania has shown once again how harsh its climate can be. Following the failure of the short rains, severe drought – in some areas the worst for forty years according to the ‘East African’ – has been afflicting almost four million people in nine regions of the country and foreign donors have been asked for assistance. Dar es Salaam’s three million population has been suffering from severe water shortage because of the very low level of the Ruvu river and breakdowns in equipment.

And then, with the beginning of the main rains in late March, the skies opened all over the country and there have very been very severe floods. Some 40 people are believed to have been killed and 2,100 people have been rendered homeless in Kilwa District.

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