Exchange rate: $1 = 1,250 TShs £1 = 3,300 TShs

A visiting mission from the International Monetary Fund (IMF) in February extolled Tanzania’s economic growth trends despite ongoing global turmoil in trade and industry. The mission was impressed that the country`s economy has grown steadily to 7.5% in 2007/08, even as they noted that manufacturing and construction had continued to experience expansion. The mission suggested that for continued growth to be maintained the government had to strengthen domestic revenue collection efforts and judicious public spending and continue with a quality monetary policy. Monetary targets for end-2007 had been met thanks to improvements in the Bank of Tanzania’s conduct of open market operations; interest rates had declined sharply from the high levels reached in 2007. The outlook for 2008/09 was positive as investment, both foreign and domestic, was expected to remain buoyant, underpinning continued high economic growth. Tanzania faced two major challenges. First, domestic monetary policy had to be seen striving to return inflation to its target level while ensuring sufficient liquidity to allow further healthy growth in bank credit to the private sector.

The agreed priorities should focus on agricultural development, education, health, and infrastructure. The mission welcomed the decisive action taken by authorities to address the recommendations of the special audit of the External Payment Account (EPA) at the Bank of Tanzania. The year 2008 ‘Doing Business Report’ has painted Tanzania positively, although there was still said to be room for improvement. Tanzania improved from the previous year’s performance by 20 ranks, a performance which experts consider to be low compared with the resources potential the country is endowed with. Areas that required immediate improvement, included getting licences; employing workers; registering property and acquisition of credit from financial institutions. In these areas, Tanzania’s performance had not been impressive considering that it scored 170, 151, 160 and 115 positions respectively out of 178 countries.
On the ease of doing business across the globe, Tanzania ranked 130, behind Uganda, with the best countries and their rankings in brackets being Singapore (1), South Africa (35), Kenya (72), Zambia (116), Uganda (118). There had also been no improvements in terms of the duration through which an applicant waited to obtain a business license – 308 days in 2008. In dealing with licences in Tanzania, an applicant has to through 21 procedures – Guardian.

The Government announced in January an increase of the minimum wage for civil servants from TShs 80,760 to TShs 100,000 per month from July. Then, on January 11 it said that it had reduced the minimum wage for workers in export-oriented and labour-intensive private industries from TShs 150,000 to TShs 80,000 per month. The government had had lengthy discussions with stakeholders and the wage board and said that it had to accommodate genuine fears of losing external markets to competitors if exports become too expensive. A proposed increase in the statutory minimum wage from TShs 48,000 to TShs 150,000 alone would have eroded the manufacturing industry’s unit selling price margins by between 73% and 800% – Guardian.

The Government has been trying to introduce legislation to commercialise electricity supply in the country. TANESCO has been forced to increase tariffs substantially. It needs TShs 1.6 trillion to improve power production and distribution infrastructure. The 400-MW Kiwira power project, 400-MW Mchuchuma project, and 1,200-MW Stiegler`s Gorge projects should be expedited.
But MP’s opposed a proposed government Bill which they said would open the doors to private players, particularly foreign investors. This would be unfair because of the shaky purchasing power of most Tanzanians and TANESCO’s financial woes. We should first empower the state-owned firm financially and stabilise its performance before allowing in private players,” observed one MP – Guardian. Tanzania has saved almost $1 million since 2004 by substituting imported diesel with locally produced natural gas generating electricity. 12 companies are exploring oil and gas reserves in twelve blocks along the coast from Mtwara to Tanga and villagers in Songo Songo are now enjoying power, clean water and clinics and the project has generated employment for the local population – East African.
At the end of April the Dar es Salaam Water and Sewerage Company (DAWASCO) published the names of prominent people who had not paid their water bills. Those named included the MP for Kyela Dr Harrison Mwakyembe, the Executive Director of the Tanzania Investment Centre, Emmanuel ole Naiko, two permanent secretaries, the Tanzanian Christian Church and a former minister. DAWASCO said that it was losing TShs 2.5billion monthly in unpaid water bills, mostly well-to do customers – Guardian.

The Citizen (November 8th) reported that Tanzania lost at least $33 million (about TShs 40 billion) in uncollected non-tax forest revenue in the fiscal year 2006/07 as a result of the shortage of staff and supporting resources for the collection and prevention of illegal logging. The Head of Cooperation at the Finnish Embassy told a recent general budget review meeting in Dar es Salaam that the low rates of investment and expenditure on forest revenue collection and forest law enforcement also limited the revenue collection from forestry.

The non-tax revenue in forestry consists of registration fees, forest royalty fees, export permits, and penalties for forest law violations.

In royalties of timber sales alone, which account for about 93% of all forestry revenue collected, the Government loses around $23.8 million (TShs32 billion) annually.
Development partners urged the Government to put its house in order and strengthen its revenue collection mechanisms. They said it is incomprehensible that Tanzania should fail to collect so much revenue and still continue to depend on foreign aid to fund its budget.

The Ministry of Natural Resources and Tourism budget was cut by 13.8% for 2007/08 which has directly affected the ministry’s ability to effectively manage the forest resources and the revenue collection.
However, although the forest sector’s contribution to revenue collection increased from TShs 4 billion in 2001 to about TShs 15.2 billion in 2006, Government expenditure on forest activities particularly in relation to revenue collection decreased (Thank you Jerry Jones for sending this – Editor)

In her 2007/2008 budget statement in June, Finance Minister Mrs Zakhia Meghji stated that she would not borrow from the domestic market this year through Treasury bill and government bonds. The East African described this as the most ambitious fiscal target by a finance minister in years. She must have felt under some pressure to do this because large government deficits make it difficult for the private sector to obtain credit and contribute to inflation. Interest rates on Treasury bills are 16% in Tanzania compared with 12% in Uganda and 6% in Kenya. In the previous year the Government took TShs 35.92bn from the Bank of Tanzania.

Mrs Meghji indicated that next year’s revenue should be enough to enable the government not to borrow locally as weather forecasts appeared encouraging. She will be relying on considerable support from the donor community however to do this. Some 42% of the budget would come from donors – up 3% on 2006/2007.

Many of the other measures she announced attracted strong criticism especially a proposed increase of almost 9% on diesel and petrol and also more tax on kerosene which would have seriously affected the poor. Some opposition MP’s described the budget as the worst since independence. Eventually, under heavy pressure from MP’s, she deleted the kerosene tax increase from the budget, and reduced the proposed increase in vehicle licenses for smaller vehicles and increased them for luxury cars.
Priorities for expenditure were: education (18%), roads (12.8%), health (10%) and water (5.1%). She was criticised by MP’s for allocating only 6.2% to the agricultural sector.

Funds were also provided for the identity card scheme which is aimed at facilitating tax collection, accessing bank credit and to help in the war against crime. Income tax for low income earners was reduced from 18.5% to 15%. The budget also had a ‘green’ element. Tariffs for low energy consuming bulbs and solar energy panels were zero rated.
In summary, the Government expects to spend TShs 6.06 trillion, an increase of TShs 1.20tn on the previous year.
Meghji praised the efforts being made in revenue collection and estimated that GDP would grow at 7.3% this year.

Tanzania no longer needs financial support from the International Monetary Fund according to IMF Deputy Managing Director Murilo Portugal quoted in the Guardian. He said that Tanzania had achieved strong growth and low inflation through macroeconomic policies in the past few years. He added that the external position had strengthened in recent years, and debt relief had reduced Tanzania’s external debt burden. He said the role of the Fund now would be to continue supporting Tanzania’s development of a sound macroeconomic policy framework and to encourage reforms in areas that are critical to securing higher and more sustainable growth. Much remained to be done for Tanzania to make greater inroads in reducing poverty and raising living standards especially in creating a business environment conducive to private investment. Continue reading →

The Tanzania Investment Centre has been named the world’s best Investment Promotion Agency (IPA) of the year 2007 by the World Association of Investment Promotion Agencies (WAIPA) during an investment conference in Geneva. WAIPA is under the UN Conference on Trade and Development (UNCTAD). More than 200 WAIPA members had competed for the award. Other winners were: ‘Invest in Portugal’ and South Korea’s ‘Trade IPA’. Continue reading →

Different views
The East African (October 30) compared the different views on the economy which had been expressed by President Kikwete and Bank of Tanzania (BoT) Governor Daudi Balali. Kikwete was quoted as saying on October 2 that the economy was upbeat, the budgetary performance undisturbed, and – despite the power crisis – the economy was stable and on course. Continue reading →

(Exchange rates: £1 = 2,426 TShs, 1US$ = 1,244 TShs on August 6th 2006 )

The economy recorded a lacklustre performance for the year 2005. Though there was an increase in value of exports by 13.8% to $1,676.3 million this was matched by a similar increase in value of imports to $ 2,661 million leaving a trade deficit of $985 million equivalent to 5.8% of GDP. There was a 10.8% decrease in foreign reserves to $2,048 m which is equivalent to 6.4 months of imports as opposed to the targeted 7 months. This may have contributed to the 3.6% depreciation of the shilling to an average of TShs 1,128.8 to the dollar. Continue reading →

Exchange rates: 1 £ = TShs 2,124 1 US$ = TShs 1,216

The onset of the fourth government in the history of Tanzania came without the usual stories of inheriting empty coffers which is a very good sign of things to come. The market welcomed the new government enthusiastically with the CRDB Bank announcing a record profit of TShs 4bn. However, the value of the Shilling has been falling while headline inflation continued on an upward trend to 5.4% in February 06 from 4.5% in September ‘05. Continue reading →

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. Continue reading →

In an effort to boost the capacity of local microfinance institutions the Governor of the Central Bank of Tanzania, David Balali, has launched the ‘The Financial Sector Deepening Trust (FSDT)’. The objectives of the fund are to support any organization that contributes to realizing the objectives of the government’s ‘Poverty Reduction Strategy Plan (PRSP).’ The Trust’s investments will include research and development of financial markets, products and services, training, capacity building, strengthening smaller financial institutions as well as developing regulatory and supervisory frameworks – The Guardian.

The Guardian has also reported some good news for coffee farmers in Kilimanjaro thanks to the introduction of the Tanzania Kilimanjaro brand initiated by a company called Peet’s Coffee & Tea. The coffee is being marketed as a single origin coffee in the US as the result of a project funded by USAID, the Swiss State Secretariat for Economic Affairs, Farm Africa and other private donors.

Creditors have been closing in on the once high-flying flag of the road transport sector – The Scandinavian Express Services Limited – which operates throughout East Africa with its luxury buses. The liquidation bid has been filed in the High Court by Shell Tanzania seeking to recover about Tzs 1.5bn in unpaid oil supplies. This petition was immediately followed by those of several major local banks leaving the future of the company in a gloomy state. Nevertheless, this could in a way be a blessing in disguise to the credit market in general as it will instill a much needed debt-repayment culture.