By Joseph Kilasara
Tanzania has come of age with the onset of the fourth phase government as we like to call it. The third phase government of Mr Mkapa has made tremendous achievements in addressing the macroeconomics fundamentals of the economy with the exception of unemployment which remains astronomically high.
At the start of Mkapa’s government in 1995, the economy was in a dire state with inflation hovering around 29% and growing; the currency was depreciating daily; foreign donors had deserted the country; tax evasion and corruption, both high level and petty, was seen as a norm; and, as the government was not collecting revenue, salaries were extremely meagre and frequently delayed. For some time the economic and business environment was all but chaotic and the government had lost its credibility and was becoming more of a joke.
Mkapa’s government’s first task was to restore its credibility to foreign donors and creditors as well as the people. Hence the decision to almost freeze expenditure and pay foreign debts much to the distress of the people. Basically, the country had to pay her debts in order to qualify to borrow again and with more than 50% of the national budget dependent on donors, the word ‘choice’ was not in the government’s vocabulary. In this task Mkapa has passed with flying colours as not only has Tanzania qualified for the HIPC debt relief initiative, it has also qualified for the G8 debt relief programme, as well as being among 23 countries around the world to qualify for funding from the Millennium Challenge in the current year.
Some of the key indicators of the government’s achievements include bringing down inflation to 4%, massively increasing revenue collection from Tzs509bn in the year 1996/97 to Tzs1,625bn in the year 2004/05. The next government however cannot afford to relax on revenue collection as, despite the massive increase (150%), it amounts to only about 13% of the national budget which is lower than that of Kenya, Uganda, Rwanda and Malawi. The flow of Foreign Direct Investment (FDI) has been improving consistently from around US$50m in 1996 to more than US$240m at the end of year 2003 which demonstrate the increasing confidence of foreign investors on the future performance of the Tanzania economy.
These achievements have been widely recognised, with Tanzania emerging as the leader in the region’s competitive index moving to 71st position from 82nd last year. Kenya and Uganda were down to 82nd and 92nd respectively as indicated by the World Economic Forum.
However in addressing macroeconomics stability the government has not shown a concerted effort in addressing the high level of unemployment. This can be partly be explained by the lack of a clear strategy to boost growth of the agriculture sector. By 2003 agriculture contributed about 47% of the national GDP but only grew by a paltry 5%. A high growth of 15% was achieved in the mining sector but this had little impact on the GDP as its total contribution is only about 3%. This situation is not at all helped by the increased inflow of FDI to the country as only about 7% went to agriculture with mining taking a whopping 39% (Bank of Tanzania -2003). It is the agriculture sector, where the majority of the working population are self employed, that will be crucial in maintaining the peace and stability of the country and hence the benefits of economic growth. Mkapa’s government has laid the foundation. It is crucial for the current regime to ensure that the benefits trickles down to the masses; there is no better way of doing this than by modernising the way we farm.
The problem of unemployment is further exacerbated by the low level of public spending on education of about 4% of GDP. The United Nations Conference on Trade and Development (UNCTAD) has stated: “The low level of education and skills contributes to low productivity which necessitates constant supervision and motivation”. Though Universal Primary Education is being seen as a way forward, more needs to be done to ensure that quality is assured rather than an increased quantity of school leavers.