In 1984 it was difficult to resist a feeling that the decline in the Tanzanian economy was flattening out, thanks in part to the Government’s Structural Adjustment Programme of 1982-85 and to the impact of successive budgets. Today this trend appears to be confirmed by a number of indicators. An overall growth of 2.5% was the first increase in production since 1980 and a major contribution to this result was made by agriculture, Tanzania’s most important industry. While there was a continuing decline in the volume of most export crops purchased by the crop authorities in 1983-84 (crop of 1983), in the following year (crop of 1984) all the main export crops showed an increase, in some cases very substantial, and the prospect for 1985 is encouraging.
Among food crops, marketed maize suffered a decline to an all-time low level in 1983, but by January 1985 purchases of the 1984 crop had already reached 14% above the 1983 figure and there seemed to be a reasonable chance of reaching the target figure nearly 50% higher than in the previous year.
The volume of food crops marketed through official channels, of course, provides only a very rough indication of the total product, as it omits the amount consumed or stored by the producers and takes no account of sales in local markets, which have recently been encouraged. However, another indication of the improving supply situation is given by the favourable trend in food imports. In 1983-84 326,330 tonnes were imported, including 228,500 tonnes of maize, but in 1984-85 these figures are estimated to have fallen to 184,500 and 105,000 respectively. Peasant production in certain maize surplus areas, particularly Ruvuma and Rukwa Regions, is understood to be increasing steadily, though still hampered by serious shortages of diesel oil and vehicles for the movement of farm inputs and crops. In the case of Ruvuma Region the completion in December 1985 of the Songea to Makambako road should be a great advantage in opening up the fertile and well-watered Songea and Mbinga Districts to national markets.
The 1984 overall growth did not, of course, overcome further impairment to the standard of living on account of the high rate of growth of the population, which has been estimated to be in the region of 3.3% per annum. This figure is taken from the preliminary report of the 1978 Population Census, but in the absence of a full demographic analysis it must be treated with some reserve. What is clear from other information is that the population grew faster than the economy as a whole. The cost of living in 1984 as measured by the National Consumer Price Index rose by 38%, as compared with 27% in 1983, a burden only partially relieved by a rise in the minimum wage in July.
This trend mainly affected urban populations, who have very limited chances to supplement their resources by cultivation and apart from the suffering imposed it carries serious dangers of civil disturbance, of which the Government is acutely conscious.
The sharply increased rise in the cost of living in 1984 was mainly caused by a substantial rise in the prices paid to farmers, but the abolition of the sembe subsidy was a contributing influence. A large additional budget deficit resulting from the increase in producer prices was avoided by a devaluation of the shilling by 26% in dollar terms.
Already the impoverishment of the urban population has had the unpleasant side-effect of encouraging irregular and corrupt practices of various kinds in an effort to maintain living standards, or even to stave off destitution. The black market prices on offer for foreign currencies are an indication of the intensity of personal desire to acquire items no longer available in the shops. Corruption increases confusion and inefficiency and it will not be easy, until conditions improve considerably, to restore the reputation for integrity for which Tanzania was deservedly well known.
The dominant and formidable problem facing Tanzania’s economy, from which most other difficulties derive, is the desperate shortage of foreign exchange. In view of this problem, Hon A H Jamal MP was appointed chairman of a Presidential Commission to investigate ways of increasing export earnings; the Commission reported to the President in September. Put in general terms, the country’s minimum foreign exchange requirement has been estimated to be in the region of 1,200 million dollars per annum.
It is not surprising that current foreign exchange earnings of 400 million dollars leave industry starved of raw materials, machinery, industrial spares and diesel fuel, late or inadequate deliveries of fertilisers to farmers and serious delays in the movement of export crops to the ports. Nor is it surprising that between 1983 and 1984 industrial production in constant 1976 prices fell by a further 13% to a level only 37% of the 1978 peak year.
In spite of these grave difficulties, however, it has been possible to make progress in certain key industries, notably those catering for the agricultural industry and consumables such as soap, cooking oil and textiles. The production of hoes and ox ploughs approached the estimated national demand. Soft drinks were also on the increase and production at Fahari Bottlers in Dar es Salaam this year is expected to be converted to the exclusive use of local citrus fruits and other ingredients. The production of gunny bags, a vital requirement in the campaign against the Greater Borer Beetle, rose by 15% to 5.5 million bags in 1984 and is expected to reach 9 million bags this year following the recent rehabilitation of the Moshi factory. The production of cement and corrugated iron sheets increased between 40 and 50%. It is clear that, although the shortage of foreign exchange still weighs with exceptional severity on industry, the Government’s preferential policy has permitted valuable progress to be made in certain vital fields. These results, which flow directly from the Structural Adjustment Programme of 1982-85, have contributed to the favourable trend that is now plainly evident.
A major underlying cause of the present high level of inflation is the size of the deficit in Government expenditure that has to be financed out of bank borrowings. In the year ending 30 June, Government expenditure exceeded revenue by 15%, or 5% less than originally estimated, and there is some hope that this figure will continue to decline. Taking recurrent and development expenditure together, the shortfall financed from bank borrowing has already fallen from shs.4,699 million in 1983-84 to about shs.4,000 million in 1984-85 and further reductions are regarded as an important objective of fiscal policy. This is to be achieved by reducing costs, improving efficiency and the concentration of resources on essential services. It is recognised that Government activities have expanded faster than the resources necessary to finance them satisfactorily and that much Government expenditure has been devoted to consumption rather than to production and investment. The budgetary deficit is also likely to be narrowed by increased revenue, of which signs are already apparent, resulting from gradual economic recovery.
As has already been noticed, the agricultural sector is likely in the short term to be the principal generator of foreign exchange. Diversification of exports into other sectors is highly desirable and remains an object of Government policy, but it is unlikely that non-agricultural items will become significant earners of foreign exchange in the near future. Recognising the vital importance of the agricultural sector, therefore, the Government has increased considerably the allocation to agriculture in the development budget to 30.7% of the total. This contrasts strikingly with an allocation of around 11% in 1978-79 and 1979-80, rising to 20.9% in 1983-84 and 20.6% in 1984-85. The intention now is to give priority in the allocation of capital resources to those regions with the most favourable climatic conditions for crop production, to the promotion of cash crops, to irrigation and to research and extension services. It is hoped that recent reforms in the marketing arrangements, the establishment of Regional Co-operative Unions and the improvements in producer incentives will also contribute to progress in this sector.
The modest upturn in the economy has not been without its psychological benefits. Increased producer prices alone cannot guarantee greater production without a greater flow into the shops of consumer items on which money can be spent. The reappearance in the shops of certain consumer items long missing from the shop shelves, albeit at a price, seems to have its beneficial effect on morale, but the Government is fully aware of the importance of rehabilitation in those sections of industry catering for the consumer market to bring down prices and create an atmosphere favourable to greater productive effort. It must also be remembered that the effects of an upturn tend to be cumulative. Greater production increases tax revenue and provides the basis for smaller budget deficits, which in turn help to bring inflation under control. The rehabilitation of industry and transport open up the possibility of a return to the export crop production of the mid-seventies and growing export diversification, leading to a gradual mastery of the foreign exchange problem. Notwithstanding the formidable difficulties ahead in all these areas, there is ground for modest optimum in the present trend.
J Roger Carter