The Economic Recovery Programme (ERP) came to an end on 30th June 1989. On balance it has been a successful programme, though formidable problems remain. Between 1978 and 1985 overall growth reached an average of only 1.5% per annum and, since the population was growing at an average rate of 2.8% per annum, this represented a decline in living standards. In 1986, however, this situation was reversed with an economic growth rate exceeding that of the population at 3.6% and in 1987 at 3.9% while in 1988 the growth rate reached a level of 4.1% Export income grew and the contribution of non-traditional exports, though small, showed particular promise. Employment, except in minerals, rose. Many consumer goods again became available in the shops though generally at a high price and, following a reasonable series of harvests, food was generally available, though special measures had to be taken to deal with local shortages caused by flood damage earlier this year. The improvement in the economy was sufficiently visible and pervasive to bring about an atmosphere of hope and expectation, leading to an improved state of morale and a spirit of enterprise.

While the importance of these gains must not be underrated, they fell short in certain important respects of the targets set out in the ERP. Overall growth at 4.1% in 1988 failed to reach the planned growth figure of 4.5%, while official export revenues were substantially less than planned expectations. Inflation, which was expected to have fallen to 20% in 1988, in fact remained stubbornly at 28.2% These outcomes do not invalidate the policies implicit in the ERP, but expose the unreliabilty of some statistics and the difficulty of forecasting in present circumstances. For example, in respect of export revenues, the true situation may be considerably better than the official figures suggest. Total exports in 1988 are estimated to have been nearer to US. 686 million than the official figure of US$ 362 million in view of the substantial volume of exports that are at present going unrecorded. Notwithstanding these shortfalls in performance, the trends set up by the ERP were promising.

INFLATION AND THE TRADE GAP
But great difficulties lie ahead. The two most critical problems are reduction of the rate of inflation and narrowing the gap between export earnings and import requirements. High rates of inflation present a constant threat to standards of living and, in the absence of indexing, wage adjustments always lag behind price increases. Inflation creates incessant cost problems for industry and places serious impediments in the way of economic forecasting. As to the trade gap, exports pay for no more than a third of imports, the shortfall being made up chiefly by external aid in the form of loans and grants. This degree of economic dependence is highly undesirable and explains the great importance rightly placed by the Government on a vigorous programme of export promotion.

THE MONEY SUPPLY AND THE EXPANSION OF CREDIT
But neither of these tasks is easily accomplished. The main engine driving inflation is the excessive growth of the money supply and the expansion of credit. By addressing these problems the Government hopes to bring down inflation to 20% by the middle of 1990. Part of the difficulty lies in the financing of the recurrent budget, inevitably made more difficult by the increase in wages and salaries in the public service announced in the budget speech, increases essential to morale not only in government, but also throughout industry and the parastatals where equivalent rises are expected. Nevertheless the budget for 1989-90, as in 1987-88, relies on borrowing from the banking system to fill the gap between revenue and expenditure, though only to the modest extent of Shs 600 million, amounting to 0.4% of total revenue.

The most serious problem lies in the expansion of credit to the marketing boards and cooperatives. The ERP aimed to contain the increase in credit to 15-20%, but in the event it rose by 23% in 1985-87 and 55% in 1987-88. The aim in 1988-89 is to limit the growth of credit to 30% Much has been said about the inherent inefficiency of the marketing boards, but there are also practical reasons for their insatiable need of funds. The dilapidated state of the roads and the obsolescence and inadequacy of transport vehicles have caused great difficulty in the movement of crops, leading to increased costs both in the transport sector and for the financing of stocks. These problems have been exacerbated by a substantial growth in production, especially of maize and cotton, and the inadequate capacity of processing factories, particularly in the case of cotton, tobacco, sisal and coffee. Between June 1986 and March 1989, credits to the National Milling Corporation grew from Shs 2,465 million to Shs 6,249 million while advances to the cooperatives increased almost sixfold. During this period the National Bank of Commerce was obliged to resort to the Central Bank to finance the needs of the economy including the crop parastatals and the cooperatives, and Central Bank advances to the National Bank of Commerce rose from Shs 418 million to Shs 40,595 million. The control of these inflationary influences lies not only in an improvement of financial management within the marketing parastatals themselves, but in the rehabiltation of Tanzania’s entire transport system and the rebuilding and expansion of processing capacity. Vigorous steps are in train with the help of external aid to rehabilitate transport and crop processing establishments, but, especially in the case of transport, it will be a long haul.

The improvement of transport and communications will also boost exports. Furthermore, the Government plans to extend the ‘retention scheme’ under which exporters may retain up to 35% of their export earnings in foreign exchange to finance machinery spares and designated imports of consumer goods. This arrangement acts as a strong incentive to traders seeking to enter export markets. Banking facilities in foreign currency are to be established at the National Bank of Commerce to accommodate traders’ export earnings. These arrangements will help to avoid the bureaucratic delays and uncertainties associated with applications to the Central Bank for foreign exchange and will greatly simplify the satisfaction of exporters’ requirements obtainable only in foreign currency. A further devaluation of the shilling from Shs 137 to 145 to the $US will also increase exporters’ profit margins in local currency terms.

Closing the trade gap will call for unremitting effort over a number of years. Apart from traditional exports, Tanzania has no great experience of exporting and a learning process will have to accompany the efforts of entrepreneurs, who, in increasing numbers, are attracted by the idea of entering the export field. Active consideration is now being given to the creation of advisory and information services for the benefit of traders entering foreign markets for the first time. The exploration of new commodities and new markets is all the more important both because of the stagnation in the world prices of traditional products and also because of the greater security to be obtained from a wider spread of export commodities. Competition among primary producers desperate to solve their foreign currency problems seems likely, in t he absence of natural calamities, to depress the prices of many traditional products in the near future.

Although, in common with previous budgets, much attention has been given to increases in government revenue to meet expenditure needs and reduce the impact of bank borrowing, the importance of psychological influences has not been overlooked. Thus the budget provides for an increase in the minimum wage in response to inflation, while the income tax threshold has been raised. At the same time income tax liability has been reduced. The psychological effects of budget changes are of considerable importance at all income levels for the successful prosecution of policies for economic recovery.

Nevertheless, the fact has to be faced that, in the words of the Minister of Finance in his budget speech to Parliament “development is a long journey and there are many pit falls along the way”. One such impediment is the growing obligation in respect of the payment of interest and capital on external debts, which are a prior charge on the country’s foreign exchange resources. In 1970 Tanzania’s external debt service was equivalent to 5.3% of export earnings but by 1987 obligations had risen to 18.5%. Discussions with the World Bank, the IMF and bilateral donors are continuing with a view to a reduction of the debt burden by extending the repayment period in certain cases. The recent decision by Belgium, France and the United States to convert loans into gifts follows similar previous action in the same sense by Britain, France, West Germany and some other countries.
J. Roger Carter

MANY CHANGES IN BUDGET
– Income tax down by 5% to between 10 and 50 per cent; taxable income level raised from 1,500/- to 1,900/- per month;

– the shilling devalued again to 145/- to the dollar instead of 137/-;

– minimum wage increased from 1,645/- to 2,075/- per month; a new four-category civil service salary structure (Operational Service 2,075/ to 7,285/- per month; General Scales 3,095/- to 12,075/-; Rare Professions such as pilots 5,980/- to 16,400/-; Super Scales for senior executives 12,785/- to 19,035/-);

– secondary school fees up to 2000/- instead of 1500/- per annum for day schools and 4000/- instead of 3000/- for boarding schools;

– airport service charges up from 510 to 520 for non-residents;

– taxes on cars, videos, refrigerators, cookers and other luxury goods increased;

– beer (a Safari Lager will now cost 152/- in grocers and 176/- in tourist hotels) soft drinks, cigarettes and petrol taxes up;

– land rent up by 50%;

– Tanzanian nationals working abroad can now open foreign accounts with the National Bank of Commerce or Bank of Tanzania.

Tanzania is now in the fifth year of its economic recovery following six years of drought. Food production has grown at 3.5 to 4% over the past three years. The economic growth rate for 1988 seems certain to reach 5%, with inflation on the decrease and some signs of vigorous recovery in industrial output. Over the past four years the Gross Domestic Product (GDP) has grown about one fifth from its low point in 1983, and over one seventh from its recession level in 1978. These figures show the long hard slog that faces Tanzanians on the road back to full recovery. The present pace of growth remains unsatisfactory, with the living standards of almost half of urban households and, perhaps, a third of rural households still only at, or even below, the poverty datum line.

Sustained recovery now depends on at least a few more years of reasonable rainfall; increased efficiency in the public and private sectors; a lessening of the defence budget (which has risen because of the military aid being given to Mozambique); and on the terms of foreign trade not changing adversely. Given these conditions it is possible for Tanzania to maintain a growth record of 6 to 8% through to 1991; even so, this would restore per capita income to between 93% and 100% of the 1977 level – the year of Tanzania’s economic collapse due to the quadrupling of oil prices; the beginning of the six year cycle of drought; the cost of the war against Amin’s Uganda; the downturn of world trade prices for the country’s exports, and the increase in the cost of imports; as well as because of some mistaken government policies, especially in the performance of several parastatals.

Writing in the next volume of the African Contemporary Record, Prof. R. Herbold Green of the Institute of Development Studies of Sussex University, estimates that the cost of Tanzania’s military assistance to Mozambique was between US$ 125 and US$ 150 million in 1987-88. Two thirds of this expenditure involved direct or indirect imports. The restoration of security across the border would therefore be of considerable benefit to Tanzania’s national budget.

Weather and trade terms are ever present threats. However, the last four averagely good harvests have enabled the country to build up a maize reserve of up to 180,000 bags, which is enough to see it through at least one bad season.

Prof. Green estimates that external financial gross inflows are probably in excess of between US$ 500 and US$ 900 million. If technical assistance is excluded, the figure is between US$ 650 and US$ 800 million which, he says, is not enough for the country’s needs – especially if there is still no agreement on alleviating the unmanageable external debt-service burden.

Exports have not increased as much as was hoped for due to disease of cashew nut trees, falls in coffee prices, a slow turnaround of sisal production and bottlenecks in processing and transporting cotton. But even if these products, which form the old bases of export earnings, are marketed normally, they would still be insufficient to produce the needed lift-up of the total economy. They will need to be supplemented by increased manufacturing, natural gas exploitation and greater gold production.

Efficiency increases have been achieved – from grain marketing through operations of the Dar es Salaam harbour to electricity; but there are still sectors of poor services such as water supply for the capital, local transport, agricultural processing and in much of industry.

Prof Green cites three reasons why Tanzania’s external balance remains fragile.

First, with 1987 imports of goods at US$ 1,092 million and exports at US$ 347 million, only a net transfer receipt in excess of exports is able to keep the gap plugged. Second, exports are not rising rapidly, remaining static over 1986-87, with main commodity proceeds falling over 20% for price and volume reasons, balanced by rises in manufacture, secondary commodities and minerals . Third, the 1987 import level of US$ 1,092 million (only 4% up nominally and down perhaps 6-8% in volume terms on 1986) includes US$ 125-150 million worth of consumer goods and, perhaps, US$ 50-75 million defence-related elements not included in the US$ 1,200 million minimum imports for efficient rehabilitation and operation of the economy so that the shortfall is of the order of 20% Compared to the 1983 situation, however, imports are up over 35% in nominal terms (and perhaps 25% in real terms), and external transfers are up markedly, albeit exports have actually declined (largely for price reasons), falling over US$ 90 million to 1985 before rising to over 1]S$ 60 million thereafter.

On a fiscal year basis the trends are slightly more encouraging. The 1986-87 level was US$ 355 million and 1987-88 is estimated at US$ 388 million; but even here main commodity exports showed a fall of US$ 44 million whereas exports of manufactured goods rose US$ 32 million (the whole net gain), and of minerals and secondary commodities by US$44 million.
Colin Legum

Asukile Kyando of SHIHATA has been interviewing Mr. Sylvanus Mipawa, General Manager of Williamson Diamond Mines about the present state of affairs at the mines.

They are situated in Mwadui town in Shinyanga region and were first discovered in 1940. They have the largest Kimberlite pipe in the world with a surface area of 360 acres. 50% or more of the production is gem quality diamonds. Total gross diamond sales between 1958 and 1987 are quoted at Shs 5,309 million. There are about 3,000 workers. The mines recorded their highest production of diamonds in 1966 – 47,000 m carats (a carat is equivalent to 0.2 grams) but in 1987 there were only 124,000 m carats.

One of the main reasons for the fall in production is the diminished ore grades. The former and richer deposits have been depleted after 48 years of mining but there still remain some 75.4 m tons of ore reserves at a grade of 5.1 carats per 100 tons. Ore available for mining to the planned 300 ft level is 35.1 m tons with a total of 2,202 m carats of diamonds. “So therefore” Mr. Mipawa said, “we shall keep on hearing about Mwadui mines for a very long time to come – we are certainly talking of a lifespan of at least ten years – provided that steps are taken to rehabilitate the plant and machinery”.

Mr. Mipawa was asked how he compared the old Mwadui and today’s Mwadui. He replied: “Mwadui town is relatively new. The biggest part of it was built in the 1960’s. Hence people have sweet memories of new houses, roads and other facilities. But now the town has started to age. It requires a facelift. Mwadui was also famous for its very modern self-service supermarkets with almost everything one can think of on sale. That is no longer the case and the difference is significant. …. Even in the production areas things have changed. The plant is old and its performance is very unsatisfactory … What we have in mind is to carry out a rehabilitation programme that will put plant availability back to an average of 80% In order to do so we will need at least US$ 5.0 million.”

Nearly half the parastatal organisations whose accounts were scrutinised by the Parliamentary Parastatal Organisations Committee in 1986 were loss making the National Assembly was told recently. The loss making institutions included the Tanzania Railways Corporation which lost Shs 110 million in 1982; Mwanza Textile Mill, Shs 87.2 million in 1984; the Sugar Development Corporation Shs 39 million in 1985; Musoma Textile Mill Shs 28.3 million in 1984; Tanganyika Planting Company Shs 19.8 million in 1985; and the Kagera Regional Trading Company Shs 15.9 million in 1983.

Profit making parastatals included the National Bank of Commerce with a profit of Shs 405.1 million in 1985, the Bank of Tanzania Shs 303.1 million in 1985; Tanzania Harbours Authority Shs 45.5 million in 1983; Aluminium Africa Shs 29.1 million in 1984; Arusha Regional Trading Company Shs 29.1 million in 1984; and Tanzania Elimu Supplies Shs 29 million in 1983.

Meanwhile, the Minister of Finance, Economic Affairs and Planning, Mr. Cleopa Msuya, has been telling a ‘Workshop on Public Enterprises’ in Dar es Salaam that the public sector had grown from 43 parastatals in 1967 to 421 today.

He said that out of the 707 establishments in the industrial sector employing 10 or more people 196 were wholly or partially state owned. He spoke of the deficits in certain parastatals as being a matter of grave concern and said that they were suffering from inexperienced management, over-extended involvement, over-employment, failure to adjust to changing circumstances, financial problems, inefficient working practices and inappropriate technologies.

Mr. Msuya noted that in the UK nationalised businesses were being privatised, in the Soviet Union a policy of ‘Perestroika’ was being evolved and in China ‘open door’ policy had been adopted.

In Tanzania loss making enterprises like sisal estates had been sold and others closed or merged – Daily News

WHO WILL BOSS THE BOSSES?
This problem of loss making parastatals became the subject of a subsequent article in the Sunday News by its satirical writer, Adam Lusekelo.

‘Why can this be?’ he asked. ‘Frankly I don’t know’ he wrote. ‘You ask the guys who are supposed to be in the know and they mutter something about socialism.

But then, who said that socialism means losses, inefficiency, embezzlement and nepotism? It’s stuff like this that gives socialism a bad name.

But should the parastatals be allowed to bleed the Treasury of a cool 2.5 billion bob? .. For example the money could be used by the Ministry of Lands, Natural Resources and Nyatis to increase the number of anti-poaching game rangers from 100 to 1000 and provide them with decent tracking equipment.

Again, do we need the loss-making paras? Of course we need them – otherwise they would not be there. Besides, they are pretty to look at. 141 loss-making paras means 141 prosperous looking general managers. 141 loss-making paras means platoons of marketing managers, legions of glamorous looking secretaries and other staff half of whom are relatives of the big boss. Long live the extended family.

Which is why I decided to approach one of the general managers to ask him why his para was making a terrible financial loss and still surviving …….
“We lose money, yes, but that is because of sabotage, imperialist propaganda, lack of inputs and … ,”
“Lack of foreign exchange” I finished the song.
“Good man. This is what I always say. Newsmen have a role to educate the masses. Now if you know that my para doesn’t have foreign exchange then the masses will know …….. ”

So I shifted to new ground. “The accountability thing. You remember Sir?”
“of course I remember.”
“Are you going to take full responsibility for the losses?”
“Of course I will”.
“So what are you going to do? Resign or beg forgiveness?”
“Who! Me? Resign? You are bonkers. Never leave your job in Tanzania. What I will do since I am the top boss – I am going to write a strongly worded letter … to myself. I will warn myself that the habit of losing government money should stop forthwith …. and, to pay for my sins, I will not drink more than four beers a day at the club ….. compared with my usual twenty. I am sure that that is punishment enough even in this age of accountability …..”

In his budget speech on June 16, 1988 the Minister for Finance, Economic Affairs and Planning summarised the situation reached at the end of the second year of the three year Economic Recovery Programme as being ‘generally on track’, though some fundamental economic programmes persisted and would take time and perseverance to overcome. For the second year running the economy as a whole grew faster than an increase in population estimated at 3.3% p.a. Growth at 3.9% indeed fell short of the rate 4.5% envisaged in the Programme, still more of the 5% average rate assumed in the Five Year Development Plan beginning in July 1988.

There is, however, a possibility that the official calculation of growth rate (GDP) underestimates the true position owing to the emergence of small scale and informal activities, which are not adequately represented in the published statistics.

Important Gains
At this stage certain important gains can be recorded. The production of food crops is substantially greater than in previous years and the prospects for further growth are good if the weather holds. Consumer goods are again widely available. A tentative start has been made with the rehabilitation of industry, with textile production increasing from a very low level by over 20% above the previous year, rubber products by 49% and cement by 15%. Industry’s contribution to export earnings, though still modest, rose by nearly 75% between fiscal 1986-87 and fiscal 1988, partly stimulated by the search for foreign exchange to finance industrial raw materials (the ‘Export to Import’ scheme). A beginning has also been made with the rehabilitation of internal transport by giving priority in the allocation of foreign exchange to the purchase of spare parts for the railways and for road vehicles and the procurement of 1,040 new lorries. In general, expectations appear to remain buoyant.

Communications Infrastructure
But against these positive manifestations of recovery some very serious problems lie ahead. Long stretches of the main trunk roads are in a deplorable condition and deteriorating, necessitating in some areas complete relaying and exacting a fearfull toll on vehicles. Parts of the central railway line are in a poor state, resulting in derailments and the number of locomotives in working order fell from 134 in 1986 to 111 in 1987. In view of the critical importance of communications in Tanzania the rectification of this situation is clearly an urgent necessity

The grave difficulties in the way of closing the gap between imports and exports have been explained in some detail in Bulletin No. 28. The programme envisaged an increase of 11.6% in export earnings in 1987; in fact the foreign exchange income from this source during 1987 remained almost the same as in 1986, though it appears that in the following half year an improvement was recorded, showing a 9.3% increase in fiscal 1987-88 over the previous year. It seems, therefore, that the measures taken to boost export earnings, such as the ‘Export to Import’ scheme and the ‘Own Funds’ scheme may be yielding some results. Nevertheless, the trade deficit of $ 745 million remained at nearly twice the size of export income. These figures probably deserve some correction owing to the unrecorded income believed to have slipped through under the trade liberalisation scheme.

Agriculture
Export volumes of all the main items traded except cotton, sisal and tea fell during 1987, due in large measure to the deterioration of roads and vehicles, and a serious reduction in earnings was only averted by a dramatic rise of 37% in the volume of cotton exported, resulting in a 37% increase in dollar earnings from this source. Sisal, on the other hand, despite a 50% increase in the volume exported, suffered an 8% reduction in earnings on account of a 39% fall in world price. In the case of coffee, a 20% fall in the volume exported encountered a 39% drop in world prices, producing a fall in dollar earnings of 51%. This reduction has been attributed to the coffee berry disease, an insufficient supply of fertilisers and a shortage of vehicles. These experiences well illustrate how unsatisfactory it is to rely predominantly on the traditional commodity markets and demonstrates the urgency of export diversification.

Cotton provides a typical example of the difficulty. Production in 1987 was unexpectedly high and the prospects for further enhanced production encouraging. But processing was held up by the inability of the ageing ginneries to operate at full capacity and delivery was impeded by tbe shortage of lorries and rail wagons. As a result, raw cotton has cluttered up the warehouses and village stores, getting in the way of the 1988 crop. The UK Government has offered help with the improvement of ginning capacity in the hope of getting the 1987 crop out of the way before the 1988 harvest.

The increase in stocks also had its implications for the money supply. Substantial funds at high rates of interest had to be found to finance these stocks, with the result of a large and unwelcome increase in bank credit fuelling inflation. It is indeed a paradox that any increase in export commodities is liable to make fresh demands on the money supply and to counteract the government’s efforts to bring inflation under control. The only solution to this problem lies in increasing dramatically the supply of consumer goods, but the concentration of resources on export industries and the rehabilitation of the infrastructure renders such measures highly unlikely for the time being. As in so many aspects of economic policy, the Government has had to seek a balance between competing objectives.

HIGHLIGHTS OF THE 1988-89 BUDGET
– wage increases; new Government minimum wage Shs 1,644;
– Reductions in income tax; minimum taxable income Shs 1,500;
– No duty on agricultural inputs and drugs;
– 100% duty on luxurious and conspicuous consumption goods;
– day school fees up (Shs 750 to 1,500 p.a.); boarding Shs 3,000;
– beer up Shs 5 to Shs 91; cigarettes up Shs 1 per packet;
– airport service charge increased to Shs 300;
– increase in cost of visas, plane charters, road tolls;
– new tax of Shs 20 on each video rental;
– price controlled items reduced from 22 to 12.

Inflation and Defence Against its Effects
The choice for the government is further complicated by the dangers inherent in the continuing 30% annual increase in the cost or living experienced by urban dwellers in mainland Tanzania. With the continuing slow drift downwards in the value of the shilling some inflationary pressures are inevitable, but the level of the index is much more dependent on the price of food and consumption goods, many of which are now outside the scope of controls. The target inflation rate of 25% by June 1988 in the Economic Recovery Programme has not been reached. High inflation increases costs, jeopardises efforts at industrial Rehabilitation, whittles away the incentive advantages of increased Producer prices for agricultural products and, finally, and most seriously, threatens whole populations with destitution unless countervailing measures are taken. The government has taken some steps to mitigate the effects of inflation on urban dwellers. First, on two occasions, reductions in income tax have left all wage earners with more take home pay and further changes in the tax structure will raise the tax threshold to Shs 1,500 per month. Secondly, a 20% increase in the lowest salaries has been announced, with smaller percentage increases in the higher ranges culminating in a 10% rise in salaries above Shs 6,000 a month. Thirdly, following the recommendations of the Nsekela Report, fringe benefits will be paid to government servants consisting of a Rent Assistance for those not in government houses amounting to 10% of salary and a Transport Allowance for government workers in Dar es Salaam of Shs 350 per month. These measures will help significantly to offset the higher cost of living for the time being.

However, the most important defence against the effects of inflation has consisted of measures taken by the people themselves by seeking extra opportunities for employment (moonlighting), or by cultivating a patch of ground. It is striking how far such measures are being espoused by middle and upper income employees, who have benefited least from a succession of salary changes. Such activities gain in importance as inflation bites into spending power and even causes troublesome absenteeism during office hours. No government can ignore these effects and the dangers of social unrest that may result from inflation. On the other hand. too generous a compensation for a fall in the standard of living could seriously unbalance the budget and generate new inflationary pressures. Here again, government must seek a middle path.

On the whole, in spite of disappointments, the Minister was justified in describing the Economic Recovery Programme as ‘on track’. Where performances fell short involved important aspects of government policy, such as export generation and the control of inflation. But the experience of the programme so far has drawn attention to three aspects that must be kept in mind. First, there is the development of unexpected consequences like the side effects of a healing drug. The log jam in the processing and transport of cotton and its effects on the inflationary trend is a case in point. Secondly, it is always hard to estimate the time scale involved in the implementation of policy decisions. At this two-year juncture in the Programme many developments are in train that have not yet been revealed in the official figures. One example is export promotion, the results of which are only just beginning to show up in the statistics of foreign exchange earnings. Breaking into foreign markets with new products is always a tricky business and in Tanzania the necessary skills are in short supply. Diversification calls for what may a:most be described as a cultural shift and such changes in outlook are not encompassed quickly or easily. Thirdly, no new decisions about exports can be taken in isolation from decisions in other spheres. Money for export may be flowing from the hives but the flow may be wholly dammed up by the absence of special export containers. Cotton may be there in profusion, but the bounties of nature will not reach the ports unless something is done about the ginneries.

SUMMARY OF UK AID – £70 MILLION SINCE THE IMF AGREEMENT
– Spare parts and equipment for road and rail transport;
– Veterinary drugs and agricultural chemicals;
– Rehabilitation of the Tanzania Railways Corporation;
– Second Phase of the Southern Region Health Project;
– English language teaching programme;
– Links between British and Tanzanian universities;
– Maintenance of the Songea-Makambako road;
– The medium term National AIDS Plan;
– Help to improve ginning capacity;
– Land planning, crop storage, pest control, agricultural research.

With all these considerations in mind, the impression remains that the government is managing the Economic Recovery Programme with skill and fortitude in the face of intense difficulties. One essential component is of course the support from outside, which has so far been generous in intention, but in some cases slow and cumbersome in implementation. The reduction of bureaucratic delays and further steps to relieve the debt burden (Bulletin No. 30) will notably assist in securing a successful outcome to the government’s efforts. It is hoped that these improvements in the performance of the international community will be forthcoming.
J. Roger Carter

Letters from Tanzania suggest that the decline in the economy has ‘bottomed out’ and that there are definite signs of incipient recovery. There is certainly more activity among producers and traders, while the response of farmers to the provisions of the economic recovery programme has caused serious crop storage and movement problems. However, in spite of this more hopeful picture, the persistent trend of price inflation remains a serious worry, particularly to those on fixed salaries. Though hitherto the Government, aided by reasonable harvests, has been successful in sustaining morale and avoiding a food crisis, it would be rash indeed to assume that the Economic Recovery Programme has surmounted the formidable obstacles that lie in its path. Of these, th8 two most urgent and perplexing are the problems confronting the rehabilitation of exports and the debt overhang.

Except in 1968, Tanzania enjoyed a favourable balance of trade throughout the first decade of independence. But thereafter, for reasons that are too complex to discuss here, the trading account was consistently in the red and in 1986 export revenues at US$ 348 million were no more than one third of the cost of imports at US$ 1,047 million. This very serious outcome was the sequel to a fall in export volumes of sisal, cotton and cashew nuts, but other products increased in export tonnage, notably coffee, Tanzania’s largest export crop. For the moment the outlook for coffee is promising and indeed in 1986 a 15~ increase in exports was matched by a 130% increase in prices, resulting in a growth in earnings of 167% in shilling terms. But coffee is subject to seasonal fluctuations and in 1986 the difficulties encountered by the Brazilian crop created exceptional, though temporary, market opportunities. Over coffee, as with most of Tanzania’s traditional export commodities, hangs uncertainty about future total world demand, while increasing competition among Third World primary producers anxiously trying to rectify their trade deficits and fund their increasing burden of external debt casts additional doubt an the prospects for Tanzania’s staple export. This means that Tanzania can only hope to return to balance on her trading account through a resolute policy of export diversification in the years to come.

While the trade deficit imposes an intolerable burden on Tanzania’s balance of payments, it is also the debt overhang that gives rise to special anxiety. At the end of 1986 Tanzania was in debt to the rest of the world to the extent of nearly four billion dollars . Leaving aside private and short-term obligations, about two thirds of the outstanding public debt was to other governments and one third to the World Bank and the IMF. The interest and repayment of external public debt i n 1986 consumed 15% of the income from Tanzania’s exports, a burden which , although much less than that suffered by the Sudan, Somalia and some other countries, is likely to increase with the expiry of grace periods on multilateral loans and rescheduled debts in the nineteen nineties. Same of this burden can be relieved by converting bilateral loans into gifts. The United Kingdom has already done this, but with an outstanding bilateral debt in 1986 of US$ 2.112 million there is obvious scope for further relief along similar lines. Of the debts outstanding to the World Bank, US$ 656 million was due in respect of IDA (interest free) credits, which will fall for repayment in the next thirty or forty years as grace periods expire. But no less than US$239 million was borrowed in the early seventies on so-called IBRD terms, that is, at substantial rates of interest. Some consideration is now being given to the means of alleviating this debt burden, though it is far from clear what options will be open. Of the remaining debt burden, US$ 186 million represented accumulated commercial debts subject to export guarantee schemes, that is, in effect debts taken over by governments. It is believed that the U.K. would be willing to extend maturity periods and reduce rates of interest, but the implementation of such a proposal seems to depend on an agreement in the Paris Club (the main industrial nations) and there appears to be doubt about the willingness or the legal ability of the United States to co-operate.

It is of course difficult to foresee in this uncertain world the future outlook for Tanzania’s efforts at economic renewal. A downturn in the economies of the industrial nations could seriously jeopardise the prospects for many Third World countries dependent for their livelihood on the export of raw materials. The solution to the formidable balance of payments problem is still far away and exportable items and necessary commercial skills remain inadequate for the ‘purposes of a vigorous export programme. Underlying all efforts at economic renewal is the restoration and development of communications – roads, railways, port facilities, telephone and telex systems – a programme that will require years rather than :months to produce significant results.

But in spite of these hindrances and hasards, Tanzania possesses two important advantages, a stable government and a buoyant state of morale. Although the short term burden of reconstruction is falling disproportionately on the urban wage earner and his dependents, the absence of ostentatious private wealth and policies such as the minimum wage legislation help to offset, if only partially, the rigours of the recovery programme. These advantages cannot be assessed in developmental terms, but they create a favourable environment for growth. It must be our sincere hope that the benefits of structural adjustment, to which the Government has committed itself, will soon accrue to those who are paying the price.
J. Roger Carter