Tanzanian Economy Expects Faster Growth Amid Structural Reforms

Tanzania is set to become one of the fastest growing economies in Africa after years of structural adjustment including diversification of the public sector.

"We are now expecting the economy to grow at between 7 and 10 percent a year, up from the current 4.9 percent," said Tanzanian President Benjamin Mkapa recently in a presidential campaign rally in Dar Es Salaam.

Mkapa, who is seeking a second five-year presidential term in the general elections to be held on October 29, told the public that after turning around the country's economy from a growth of about 2 percent five years ago to about 5 percent at present and curbing inflation to 6 percent from about 30 percent, the challenge ahead is to accelerate growth.

Mkapa can well be applauded for his confident words. Since he took the highest position in the eastern Africa country in 1995, he has introduced economic policies that have checked inflation, reduced budget deficit and stimulated entrepreneurship.

Divestiture of government-owned companies and parastatals, streamlining of the government operations, and implementation of structural adjustment programs. All these have resulted in an annual gross domestic product (GDP) growth rate averaging 4 percent in the past five years, and doubling of government revenue over the past four years.

According to the government's budget report for the fiscal year 1999-2000, Tanzania expects to achieve a growth rate of 5.8 percent in 2000, well above the 4.8 percent achieved in 1999.

The parastatal sector had been a huge drain on treasury because of its inefficiency and out-dated mode of operation. During the period between August 1993 and June 1999, a total of 191 economic entities have been privatized out of the 410 earmarked under the privatization program. Key parastatals such as Tanzania Telecommunications Company Limited and Tanzania Electricity Company are also in the process of being privatized.

Mainly due to a more reliable power supply and a series of the International Monetary Fund/the World Bank-inspired liberalization measures, total production in the manufacturing sector at 1985 constant prices increased by 20 percent in 1999 and its contribution to GDP increased from 8.1 percent in 1997 to 8.4 percent in 1998, and surging to about 10 percent in 1999.

Meanwhile, a wide-range investor-friendly measures have not only inspired private sector confidence in the economy, but also attracted greater international interest in investing in Tanzania.

Tanzania, which has huge potentials in mining of gold, coal, and base metals, is claiming the lion's share of Africa's mining investment flow. The mining sector grew by 17 percent in 1997 and 27.4 percent in 1998.

By June 1999, there were 1,350 domestic and foreign investment projects worth more than 360 million U.S. dollars licensed to undertake mining and minerals operation in the country. Meanwhile, the tourism industry is also recovering rapidly as a result of the government's efforts to advertise Tanzania's tourism potential with a focus on high-value and eco-friendly tourism. It is estimated that over half a million tourists visited Tanzania in 1999, earning the country more than 626.3 million dollars.

The encouraging results achieved in economic reforms constitute one of the factors that make Tanzania eligible for the Highly Indebted Poor Countries debt relief. Tanzania's total debt stock stood at 7.3 billion dollars by January 31, 2000. The International Monetary Fund and the World Bank approved 2 billion dollars of debt relief for cash-strapped Tanzania in April this year, halving the country's debt servicing bill for 2001-2003 and reducing it by a third in future years.

However, the benefits of the impressive economic performance have not yet trickled down to the majority of the population who still live in abject poverty. There has been a fall in production of the agricultural sector on which 80 percent of the population depends for their livelihood. To enhance the country's food security is still a long-term task for Tanzania.

The fragility of the agricultural commodity markets is compounded by the country's narrow range of export commodities dominated by a few traditional export crops such as coffee and cotton, which are featured by price volatility.

Besides, trade account deficit is still very high despite that it has improved slightly from 877 million dollars in 1999 to 806.5 million dollars in February 2000.

To maintain the tempo of improved performance, it is imperative for the government to continue to implement the macro-economic adjustment program and complete the on-structural reforms, including the speedy conclusion of the privatization program, analysts said.

They held the government needs to pay particular attention to unconducive and uncoordinated sectoral policies and regulatory problems to enhance the flow of foreign direct investment.

For Tanzania, one of the most economically debilitating legacies of the past is poor economic infrastructure in terms of logistics, network and the availability of utilities at competitive rates.

Improving the transport network can go a long way in opening up the country and accelerating its economic growth, analysts said, stressing that Tanzania cannot address poverty alleviation and national development without an effective, efficient, and countrywide transport infrastructure.

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