by Valerie Leach
The IMF review in March was generally positive but with cautions about government spending. GDP growth has been close to 7% again in 2014 and rates of inflation continue at close to 4%, helped by falls in international oil prices and falls in the prices of food.
Tanzanians surveyed in Afro-Barometer were not so positive about the economy. In a survey of about 2,500 people conducted in August/ September 2014 two-thirds considered current economic conditions to be fairly bad or very bad. The chairman of the CEO Roundtable of Tanzania, Ali Mufuruki, told an international forum in London that Africa is still facing problems such as low education levels, lack of access to reliable energy, inefficient transport and logistics infrastructure, inadequate technology for maximising agricultural production and depletion of Africa’s biodiversity as a result of corruption. (The Citizen, 12 February and 12 March 2015)
The IMF team raised concerns about government budget implementation because of “substantial tax and nontax revenue shortfall and some delays in budget financing. To avoid further accumulation of expenditure arrears, it will be important to strengthen the expenditure commitment controls.
“The [IMF] mission welcomes the steps taken to address the governance concerns raised by the IPTL case. Continued progress will be critical both to sustain the resumption of donor financing and to limit any repercussions on the business environment. The accumulation of payment arrears in the public sector needs to be tackled forcefully. This problem has become pervasive with large and growing government arrears to domestic suppliers and pension funds, and persistent arrears of TANESCO, the national electricity company, to its suppliers. It is important that the government now implements measures to settle existing arrears and prevent the recurrence of new ones by tackling their root causes.
“It is essential for preserving fiscal policy credibility that the budget for 2015/16 be based on realistic revenue and financing assumptions. A realistic budget with a moderate deficit is a key prerequisite to avoid the accumulation of new arrears and large mid-year expenditure adjustments, and also to preserve debt sustainability.” (www.imf.org/tanzania Press Release No. 15/125, March 19, 2015)
As reported elsewhere in this TA, constraints on government finances may be relieved to some extent by the release of some of the budget support from external development agencies. The Budget Support Development Partners (BSDPs) have agreed to start disbursing USD 44 million out of over USD 400 million which they had withheld pending the outcome of the inquiry into the Escrow affair. (The Guardian, 12 March 2015)
Insufficient government funds have affected farmers who had produced a much larger harvest of maize than expected. Payments were delayed to farmers for purchases by the National Grain Reserve. The Prime Minister promised to repay them. The government has borrowed about TSh15 billion from CRDB to settle extended debts that the National Food Reserve Agency (NFRA) owes farmers. (The Citizen, 24 February 2015)
As a result of the large harvest, food stocks in the National Food Reserve were 459,561 in January 2015 – almost twice their level in January 2014. Stock levels had risen steadily from July 2014. Maize will be exported, including to China, and some of the stock will be sold to the World Food Programme so that the proceeds may be used to pay debts to farmers still waiting for payments owed them. (Daily News, 24 March 2015)
The Bank of Tanzania’s Monthly Economic Review in February 2015 reports that revenue from tourism, $2.05 billion, in the period January 2014 to January 2015 exceeded that from gold exports, which raised $1.31 billion. Both the volume and price of gold exports fell in this period. Plans to expand tourism include a project to upgrade the Southern Circuit of Ruaha and Katavi National Parks and Selous Game Reserve. (The Guardian, 27 January 2015)
An increase in exports of cashew nuts of 28 per cent was reported by the Cashew Nut Board of Tanzania, which said 149,742 tonnes of raw cashew nuts worth $226 million have been exported so far during the 2014/15 agricultural season. Horticulture exports are also increasing, reaching $450 million in 2014. (The Guardian, 9 February 2015 and he Citizen, 2 February 2015)
A consortium of international companies, led by Ferrostaal Industrial Projects of Germany and Tanzania Petroleum Development Corporation (TPDC), plans to establish a $1 billion fertiliser complex in Mtwara. This is expected to start operations in 2019/20 and will produce more than a million tonnes of fertiliser annually. (The Citizen, 3 February 2015)
Also in Mtwara, Nigerian tycoon Aliko Dangote is reported to be setting up a factory that will produce 3 million tonnes of cement annually. (The Citizen, 3 February 2015)
Construction of a large new port in Bagamoyo is expected to begin in July. Oman’s General State Reserve Fund (GSRF), the Tanzanian government and China Merchants Holding International (CMHI) will jointly develop the USD11bn port and a special economic zone. The first phase of the project is planned to be ready in three years’ time and will handle 20 million containers annually. The project also includes building a 34km road joining Bagamoyo and Mlandizi and a 65km of railway connecting the port to Tanzania’s Central Line and Tanzania-Zambia Railway. (The Guardian, 12 March 2015)