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Thursday, April 7, 2016

World Bank expert faults Tanzania exports terrain

While Tanzania takes pride in having achieved strong economic growth numbers in the last few years, the general feeling among its public is still one of pessimism and indifference.

This is mirrored by the prevailing visible evidence on the scores of households in the country that are still constrained by low incomes and increasing costs of living.
In general, the beef by the holloi polloi on the street is that they are not feeling any better off than they were in the past few years or so even as the country’s GDP arguably continues to expand healthily.
Indhira Santos, World Bank Senior Economist says Tanzania’s spill-over effects of export recovery had not been as strongly felt by many because of the limited linkages of the country’s export-oriented industries with the domestic sectors.
“Our research has found that Tanzania’s export-oriented sectors have fairly limited linkages with the domestic economy,” she said.
According to Santos, Tanzania’s relatively low level of wages of GDP, could also describe the limited impact felt by the masses despite the strong growth of the country’s economy.
“If the wages of the people could go up, they will definitely feel more of being a part of this economic growth,” she says.
Nevertheless, Santos acknowledges that the government has been putting in much effort to increase the wage levels of Tanzanians. Undoubtedly, Tanzania has been one of the better performing economies in Africa in recent years buoyed by the country’s robust GDP growth numbers.
Growth has been particularly strong in the last decade and most recently driven by construction, trade, agriculture and transport sectors. Still, she predicts that Tanzania will enjoy further growth rates in the years ahead.
She however, advises on the need for adjustment on the domestic side to rebuild the buffers against future conditions.
That means the monetary policy may need to become less accommodative and the fiscal policy may need to adjust for the government to continue to reduce its fiscal deficit so that it can have the right fiscal position to face the crisis in case it arises.
The standardisation process towards a less accommodative monetary policy, which involves higher interest rates, a tighter fiscal policy and government reducing subsidies, is expected to dampen domestic demand growth.
Still, Santos believes there is really a good economic story to be told about Tanzania.
Similarly, Santos says Tanzania is on track to reach the benchmark of being a middle-income economy, which the World Bank has defined as one with a gross national income (GNI) per capital of more than US$1,045 (2m/-).
“Judging by the model of its economic growth, I am sure that Tanzania will reach the goal even before 2025,” Santos affirms.
She emphasises the importance of executing critical reforms to ensure sustainable growth of household income and wages in the economy.
The WB economist also points out the significance of improving quality education system in Tanzania, adding that human capital is the key challenge of the 21st century for countries that are committed becoming advanced economies.
According to her, Tanzania’s structural growth would require policymakers to address issues pertaining to the quality of human capital.
On his part, leading Education Specialist and Task Team Leader at the World Bank, Arun Joshi, says that prioritising key activities based on evidence, developing specific interventions with extremely detailed implementation plans and operationalizing a strong monitoring process from the central to the local levels will enable Tanzania to reform its institutions for more productive investments in human capital development.
“Beyond the low-hanging fruits of commodities-related and infrastructure investment, we think an accelerated pace of reforms to improve the quality of human capital would be required to see investment momentum pick up pace from here,” Joshi underscores.


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