| 2010/11 BUDGET COUNTDOWN: Economy 'not out of the woods yet' | Send to a friend |
| Monday, 22 March 2010 07:57 |
 By Costantine SebastianDespite putting on a brave face during and in the immediate aftermath of the global recession, Tanzania has yet to emerge from the economic woods, with the government forecasting full recovery in 2013.The Finance and Economic Affairs ministry says Tanzania’s economic troubles last year were also aggravated by a prolonged drought and persistent famine in the recent past. However, the ministry is confident that 2010 will be better with entrepreneurs saying there are already signs of the year being relatively prosperous. Treasury’s latest projections show that the economy performed slightly better in 2009 than earlier forecast, and will grow by 6.2 per cent this year. The performance is expected to further improve next year with the economy set to expand by about 6.6 per cent. The growth projections for 2012 and 2013 are 7.1 per cent and nearly 7.6 per cent, respectively, which mirror the pre-crisis rates. The average growth between 2002 and 2008 was 7.2 per cent. Experts say economic growth needs to be sustained at 10 per cent for Tanzania to make notable progress in reducing poverty. “The Tanzania economy is still reeling from the negative impacts of the global economic recession and the prolonged drought,” Treasury notes in the Guidelines for the Preparation of Medium Term Plan and Budget Framework for 2010/11-2012/13. “The global economy is healing and emerging from recession, though the recovery is likely to be relatively slow. The recovery is expected to be reflected into the Tanzanian economy by 2010,” it adds. The chief operating officer of Skylink Travel & Tours, Mr Murtaza Versi, concurs with government observations, saying that business has started to pick up, but cautions against “premature celebrations”. Economist Honest Ngowi of Mzumbe University said it was too early to be overly optimistic” since the situation was both “fragile and volatile”. Speaking at the Tanzania Private Sector Foundation meeting on tax reforms for 2010/11, he warned the government against raising taxes and introducing new ones, saying this could adversely affect recovery efforts. “What we are seeing are signs of recovery, not the recovery itself,” Dr Ngowi told The Citizen in a recent interview. Last week, the International Monetary Fund (IMF) said the timely implementation of the government economic recovery plan was a decisive factor in mitigating the impact of the crisis. It, however, warned that the global recovery was still nascent, and said the growth experienced locally had been concentrated in lightly taxed sectors. Consequently, the Bretton Woods institution noted, government revenue collection had continued to fall below targets set in the Budget. It also said inflation was persistently high last year largely due to supply shocks affecting food prices, but had now begun to abate and would fall to about eight per cent in June. According to the National Bureau of Statistics, the rate of increase of the cost of living went down to 9.6 per cent last month from the January level of 10.9 per cent. “Macroeconomic policies including monetary and fiscal easing, supported by the government’s economic recovery plan, have helped mitigate the impact of the global crisis,” an IMF mission, which was in the country during from March 2 to 12 to assess the economy, said in a statement. “A stronger than anticipated rebound in the global economy has helped offset the impact of disruptions from the regional drought, floods, and power outages, with result that we have revised slightly upwards our growth forecasts for Tanzania to 5.5 per cent in 2009 and 6.2 per cent in 2010,” the team added. Apart from deficient revenue collections, another indicator of continued underperformance of the economy is the reluctance of commercial banks to loan. Whereas tax revenue collections were still below target by nearly eight per cent in January, lending to productive sectors, which is vital for the economy’s recovery, has continued to decelerate. Monthly revenue reports of the Tanzania Revenue Authority (TRA) show that the agency missed its collection targets by over Sh200 billion in the first seven months of the current financial year. It only managed to collect about Sh2.63 trillion between July 2009 and January 2010 instead of the projected Sh2.86 trillion According to the Bank of Tanzania (BoT), commercial banks’ credit to the private sector last year was only a third of the loans extended in 2008. Whereas some Sh1.4 trillion was loaned in 2008 for productive activities, the amount fell to about Sh436 billion last year. In 2007, manufacturers, traders, individuals and other borrowers managed to secure loans worth about Sh841 million from the banking system. “The rate of growth of credit to the private sector continued to decelerate reaching 9.6 per cent (in December 2009), compared with 12.2 per cent recorded in the preceding month, and 44.6 per cent recorded in the year ending December 2008,” BoT notes in its January review of the economy. “The sustained slower growth rate of credit…is mainly driven by the continued cautious stance taken by banks…following the global financial crisis. The activities that suffered substantial decline in the flow of credit from the banks in 2009 include manufacturing that recorded negative growth rate of 7.7 per cent and agriculture (-9.5 per cent),” it adds. Add this page to your favorite Social Bookmarking websites           |
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