ECONOMICS

by Paul Gooday

China biggest foreign investor in Tanzania
China’s total direct investment in Tanzania increased from US $700 million in 2011 to US $2.1 billion last year, becoming the biggest foreign investor in the country. Bilateral trade has soared in the same period, reaching over US $2.5 billion by the end of 2012.

According to Imara Equity Research, this investment is focused on railways, ports, road construction, gas pipelines and wind power farms. It has not only boosted economic growth but also created more than 150,000 direct jobs. Up to 19 projects worth billions of dollars include construction of the new port at Bagamoyo, set to be the largest and most modern in Africa. The harbour is expected to be in operation by 2017 and will handle 20 times more cargo than the Dar es Salaam, which is Tanzania’s current major import and export gateway in East Africa. Additionally, a Chinese US $1.2 billion soft loan for a 523km pipeline connecting Dar es Salaam and the Mtwara gas field was endorsed in September 2012 between the Tanzanian government and the Exim Bank.
(The Citizen)

Single Currency and Monetary Union
The East African Community (EAC) Monetary Union Protocol was signed in December 2013 by the five heads of state in Kampala, kicking off ambitious plans to have a common currency within 10 years. The single currency is aimed at enhancing trade in the region.

A few weeks later, however, the Managing Director of the International Monetary Fund (IMF), Christine Lagarde, cautioned EAC member states against rushing the Monetary Union. Addressing the Kenya private sector she said the EAC was not yet ready for the move and needed to address key issues before uniting their currencies. The challenges include increasing non-tariff barriers, varying economies and different tax regimes. She added: “As a member of the European Monetary Union, I have to tell you that it is a very exciting and ambitious project. … make sure you learn from our mistakes, so that the East African Monetary Union can even teach the Europeans how to do it right.” (The Citizen)

Mobile Payment Transactions
Mobile money platforms offer instant money transfer using phones, which helps cut costs and saves time as compared to physically transporting money. The value of mobile payment transactions jumped more than three times in the twelve month period ended December 2013. This was due to increased use of mobile phones in payment of services such as utility bills. Further, several banking institutions have formed partnerships with mobile network operators to facilitate customer transactions, according to the regulator in its latest Banking Supervision report.
(The East African)

Debt dilemma
Tanzania faces a new debt crisis unless government moves fast to contain its current borrowing, which has seen national liabilities more than double in less than 10 years. Until around 2006, the public debt as a percentage of GDP was almost 70%. Debt forgiveness brought that ratio down to about 21% the following year, but since then it has been growing at an alarming rate.

“The national debt as a percentage of GDP is now about 38%. That is a manageable debt ratio,” said Prof Richard Mshomba, a Tanzanian economist based in the US. “However, what is alarming is that hat ratio has been steadily growing and Tanzania could find itself in a debt crisis.”

Some see that happening as early as next year, when the debt may hit TSh30 trillion, about three times what it was when the current government assumed power in December 2005. They warn that the crisis would derail economic prospects in the wake of huge gas discoveries and undermine efforts to alleviate poverty. (The Citizen)

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