The East African (November 25) reported that Tanzania was to receive a $27 million soft loan from the IMF following the successful completion of the fifth review of its economic performance under the ‘Poverty Reduction and Growth Facility’ (PRGF). Such loans carry a concessional interest rate of 0.5% repayable over 10 years with a five-and-a-half year grace period on the principal payment. This will be another drawing from Tanzania’s three-year PRGF arrangement for a total soft loan of $169 million, approved by the IMF in April 2000. So far, Tanzania has drawn $l34 million under the arrangement.

The statement quoted IMF Deputy Managing Director Shigemitsu Sugisaki as saying: “Tanzanian authorities are to be commended for their steady pursuit of sound economic policies which, notwithstanding serious capacity constraints and an often adverse external environment, has resulted in strong economic performance…. Economic activity remains buoyant, inflation is low, and international reserves are at a comfortable level owing to steady flows of foreign assistance and direct investments…. “Good progress has been made in the implementation of the ‘Poverty Reduction Strategy’”.

Norway has cancelled all Tanzania’s remaining debt amounting to Shs
7.4 billion; Italy (Shs 128 billion) and Belgium (Shs 21 billion) have done the same. These countries signed the Protocol of Amendment to agreements under the ‘Paris Club’ and ‘Heavily Indebted Poor Countries’ (HIPC) debt alleviation programme on November 22nd. The USA and Austria had cancelled their debts earlier.

In a frank criticism of Tanzania’s aid dependence, Finnish Ambassador to Tanzania Jorma Paukku, interviewed in the Business Times (November 2nd) said that the main reasons for this dependence were the Government’s misguided policies – supported and funded by donor agencies – that were not supportive of sustainable economic growth and did not encourage private initiative and entrepreneurship. Asked what Tanzania was still doing wrong, the Ambassador said that the Government and especially the President were giving out many correct signals -‘work harder to get rid of the dependence; create a conducive environment for investment; improve education; decentralise; strengthen democratic decision-making at the local level.

But at the level of implementation, the role of the private sector was not well understood. Big, mainly foreign, investors received favourable treatment but Tanzania’s own private sector was not given opportunities. The government was still constraining and controlling production and marketing chains that should be left to the private sector (coffee, tea, cloves). It was not helping small farmers to cope with monopolistic buyers (cashew nuts, pyrethrum). The incentive system in general gave the wrong signal to investors, civil servants and users of services. Few investors outside mining and tourism were to be found because of perceived high risks. Result-oriented performance was not rewarded but participation in seminars and workshops was. A lack of transparency and deficiencies in accountability left room for corruption and unfair practices.

The Ambassador gave a long list of policies and practices which should be changed; more initiatives at the grass roots level; new systems for transparency and accountability; civil service reform; better understanding between the public and private sectors; creation of public-private partnerships; private sector participation in service provision (for example water supply and sanitation, waste management and recycling, energy, health and education); treatment of farms as private enterprises; and, reform of the legal sector because both the quality of legislation (for example the 1999 Land Act) and the time it takes to have court cases resolved left much to be desired.


As part of ongoing financial sector reforms the Dar es Salaam Stock Exchange is expected to allow foreign portfolio investment towards the end of 2002 -Guardian.

Describing a new US ‘Millennium Challenge Account’, an American spokesman in Dar es Salaam said that, if fully implemented by the US Congress, this would represent one of the biggest increases in US foreign aid spending in half-a-century, with assistance rising about 32% in real terms.

President Mkapa opened, on September 13, the new North Mara Gold Mine of the Afrika Mashariki Gold Mines Ltd. Four hundred people are being employed at the mine and Tanzania can expect to earn an extra $50 million per annum plus other taxes. The mine is expected to last for eight and a half years.

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