2015. However the rate of growth was a bit lower than what had been
expected during the year, according to the Bank of Tanzania (BoT).
In a report released last week, BoT said the economy posted robust growth
and foresees superb performance this year. The revised growth rate of seven
per cent, which is also how the economy flourished in 2014, was still among
the fastest paces globally.
Six out of the 10 fastest growing economies in the world last year were in
Africa and Tanzania’s was one of them. In October, IMF revised global
growth projections for 2015 from the 3.5 per cent projected in April 2015.
“The domestic economy remained resilient to shocks on account of strong
macroeconomic performance,” BoT notes on the state of the economy.The report has it that GDP growth for 2015 was revised downward in October
to seven per cent from 7.2 per cent in April due to low export commodity
prices.
The review says drivers of the projected growth include the on-going
investment in infrastructure, expansion in private and public sector
construction activities as well as improvement in external sector.
“Tanzania’s economic growth remained vulnerable to spill over-effects from
slowdown in emerging market economies and tight financial conditions. GDP
growth for 2015 was revised downward in October 2015 to 7.0 per cent from
7.2 per cent in April 2015 due to low export commodity prices mainly gold
and some traditional export commodities,” the report reads in part.
BoT says inflation remained in single digit, a trend expected to be
maintained in 2016 on account of prudent monetary policy, reliable power
supply as well as low food and oil prices.
According to a top World Bank economist, Punam Chuhan-Pole, Tanzania and
other African top economic performers have survived the bad economic times
because they are transforming from agricultural production to more modern
forms of investment.
Speaking as the acting World Bank chief economist in October, Chuhan-Pole
said Tanzania, Ethiopia, Rwanda, Cote d'Ivoire and Mozambique would sustain
the seven per cent economic growth rate or more in the next two years.
"To withstand new shocks, governments in the region should improve the
efficiency of public expenditures, such as prioritising key investments and
strengthen tax administration,'' said Chuhan-Pole from Washington during a
teleconference briefing.
That’s exactly what President John Magufuli has been doing since he assumed
power in November and is highly expected to consolidate starting this year.
Through his unorthodox leadership style, the no-nonsense president has
introduced hitherto-unheard-of radical economic thrift measures.
His increasingly popular fiscal discipline has not only deprived
extravagant leaders and greedy public officials the opportunity to squander
national resources but also ushered in a new era in public financial
management.
According to Global Risk Insights, a UK-based international outfit that
provides analysis on political risk and geopolitics, the new president’s
actions have put Tanzania on a positive trajectory. The company says that
Tanzania has changed from being perceived as a backward country in the
region, to being seen as a progressive example to East Africa.
Measures that have made Dr Magufuli popular, include fixing tax evasion
loopholes and cutting out ‘unnecessary’ expenditure to boost revenue
collections. The government managed to collect 1.3trn/- in tax revenue with
new Finance and Planning minister Philip Mpango vowing to rake in 1.5trn/-
a month.
President Magufuli’s restrictions on foreign trips could bolster national
coffers by up to over US$160 million (about 344bn/-), which was spent under
his predecessor. The fiscal legacy of former President Jakaya Kikwete under
which Tanzania recorded robust GDP growth that averaged seven per cent in
the last five years, will include overambitious revenue targets that were
never met and overspending in every aspect of the term.
“The Tanzanian economy has continued to perform strongly with economic
growth at about seven per cent and inflation remaining relatively well
contained. The IMF expects this positive outlook to continue into the new
year,” the head of the global financial prefect in the country, Thomas
Baunsgaard, told The Guardian last month.
The resident IMF rep said Tanzania will not be directly affected in the
near future by the US Fed rate hike last month, which some quarters say
will be one of the external factors the national economy will have to cope
with in 2016.
BoT Governor Benno Ndulu told The Guardian that the impact of the hike had
already been priced in the exchange rate as part of the measures to cope
with the development. The shilling has also been trading above 2,000/- to
the dollar as part of BoT’s monetary strategy to keep it within its true
value.
In September, an IMF mission that was in the country to assess the state of
the economy said the local currency had been overvalued for quite some
time. The IMF has it that the unprecedented recent free fall of the
shilling was normal because it reflected the strength of the US dollar.
Its chief of Debt Policy, Hervé Joly, who led the September mission, said
other factors that helped to clobber the shilling in 2015 included high
liquidity in the banking system, seasonally low export earnings, and high
repatriation of corporate dividends.
The shilling’s woes were further compounded by donors’ delays to fund the
2014/15 budget, which fuelled a foreign exchange shortage psychology. With
a monthly tax revenue target of 1.5trn/-, which would bring in 18trn/- in a
year that is 4.4trn/- less the total current budget, the days of donor
dependency look numbered under President Magufuli.
According to Prof Ndulu, the strong dollar has not only triggered exchange
rate volatility globally but it has also led to tightening of financial
conditions. He says in the report that Tanzania was not spared from the
tight liquidity conditions as pressure emanating from strong US dollar
mounted.
“However,” he explains, “the resulting depreciation helped to correct
overvaluation of the shilling contributing to improvement of Tanzania’s
export competitiveness. Besides, decline in oil prices contributed to
reduction in the country’s import bill, contributing to improved current
account.”
According to the latest monthly economic review, the current account
improved to a deficit of US$4 billion in October from a deficit of US$4.97
billion recorded in the corresponding period in 2014. The improvement was a
result of an increase in the value of export of goods and services, coupled
with a decrease in the value of imports of goods especially crude oil.
The head of strategy at NMB Bank, Manzi Rwegasira, said low prices will
help to reduce Tanzania's trade deficit. Lower trade deficit should support
the Tanzanian shilling, he added noting that lower oil prices should reduce
inflation.
“Low oil prices should mean that the prices of these goods should increase
a lot slower due to the low cost of production. In Tanzania the prices of
kerosene, petrol, diesel, should remain stable if not fall,” Manzi told The
Guardian over the weekend
SOURCE: THE GUARDIAN
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