3.6.09
By Costantine Sebastian
President Jakaya Kikwete is set to announce a bail out package worth billions of shillings to rescue local companies that have been hit hard by the global economic crisis.
The Government's stimulus package, which awaits cabinet approval on Thursday, could be unveiled by Saturday, Finance and Economic Affairs minister Mustafa Mkulo said yesterday.
He said the bail out plan, compiled by a team of experts led by Bank of Tanzania (BoT) governor Prof Benno Ndulu, would be the major point in President Kikwete's address to the Parliament next week.
The Citizen has established that the package primarily seeks to keep the current economic growth on track and provide a form of social security amid fears of massive job losses due to looming company closures.
Addressing members of the Parliamentary Committee on Finance and Economy yesterday, Mr Mkulo said the stimulus package was critical "given the weight and importance of the current situation".
"The stimulus plan will target companies-mainly banks - to help them sustain their operations for a period of between six months and two years,"the minister said.
He also announced the approval of a $224 million (approx. Sh292 billion) advance from the $336 million (over Sh436 billion) released to the Government by the International Monetary Fund (IMF) to help fight the adverse effects of the global crisis.
Treasury officials, who spoke on condition of anonymity since they were not allowed to divulge details of the rescue package to the media, said the plan also targeted to control food prices.
And Prof Ndulu said the Government was trying to boost the economy amid concerns the slowdown could reverse nearly a decade of buoyant economic growth in the country.
He said Tanzania would do whatever was possible to "protect the hard-earned macroeconomic stability".
"The most crucial thing for us to do is to minimise the possible interruption in the growth process during the 2009/10 financial year, and cushion workers against lay offs and high costs of food," the central bank chief said early this year in a presentation on the crisis.
Prof Ndulu urged cooperation between the private sector and Government saying the downturn posed a real challenge to the country's economy and food security.
This was despite earlier remarks by the Government that the recession would not have any major effect on Tanzania since the country was remotely linked to the global economic system.
But there seems to be consensus now between key economic stakeholders in the country that the downturn is a major threat to Tanzania's economy.
However, some economic analysts criticise the Government for "dragging its feet" and taking too long to wake up to the reality of the magnitude of the economic crisis.
Dr Honest Ngowi, a lecturer at Mzumbe University warned that if not properly administered, the bail out plan could spark massive spending, which could lead to hyperinflation.
"While it is important to stimulate the economy through bailing out specific key industries, there is need to guard against the negative implications of such interventions," he said.
Prof Ndulu, who headed the team that drew up the stimulus package, said the Government, which had poor revenue collections this year, would seek collaboration with banks in its response to the crisis.
The banks would be encouraged to open lines of credit, especially to local horticultural, cotton, coffee and sisal farmers, whose exports have plunged due to falling demand from the traditional European markets.
The other major focus area of the rescue plan would be promoting infrastructure investments to boost agricultural production, which is projected to decline to 2.4 per cent in 2009 from 3.6 per cent in 2008.
Prof Ndulu also said there were efforts to eliminate red tape, aimed at attracting investments at a time some foreign investors are either rescheduling or cancelling their projects.
In a paper titled The Global Financial and Economic Crisis: Challenges and Responses, the central bank chief said the Government would not bail out companies that had solvency problems, which only got worse due to the crisis.
"Beneficiaries of the stimulus package should be sectors, projects and organisations with systematic risks and whose demise will negatively affect the economy and lives of ordinary people," he said.
Additional reporting by Damas Kanyabwoya and Ray Naluyaga
President Jakaya Kikwete is set to announce a bail out package worth billions of shillings to rescue local companies that have been hit hard by the global economic crisis.
The Government's stimulus package, which awaits cabinet approval on Thursday, could be unveiled by Saturday, Finance and Economic Affairs minister Mustafa Mkulo said yesterday.
He said the bail out plan, compiled by a team of experts led by Bank of Tanzania (BoT) governor Prof Benno Ndulu, would be the major point in President Kikwete's address to the Parliament next week.
The Citizen has established that the package primarily seeks to keep the current economic growth on track and provide a form of social security amid fears of massive job losses due to looming company closures.
Addressing members of the Parliamentary Committee on Finance and Economy yesterday, Mr Mkulo said the stimulus package was critical "given the weight and importance of the current situation".
"The stimulus plan will target companies-mainly banks - to help them sustain their operations for a period of between six months and two years,"the minister said.
He also announced the approval of a $224 million (approx. Sh292 billion) advance from the $336 million (over Sh436 billion) released to the Government by the International Monetary Fund (IMF) to help fight the adverse effects of the global crisis.
Treasury officials, who spoke on condition of anonymity since they were not allowed to divulge details of the rescue package to the media, said the plan also targeted to control food prices.
And Prof Ndulu said the Government was trying to boost the economy amid concerns the slowdown could reverse nearly a decade of buoyant economic growth in the country.
He said Tanzania would do whatever was possible to "protect the hard-earned macroeconomic stability".
"The most crucial thing for us to do is to minimise the possible interruption in the growth process during the 2009/10 financial year, and cushion workers against lay offs and high costs of food," the central bank chief said early this year in a presentation on the crisis.
Prof Ndulu urged cooperation between the private sector and Government saying the downturn posed a real challenge to the country's economy and food security.
This was despite earlier remarks by the Government that the recession would not have any major effect on Tanzania since the country was remotely linked to the global economic system.
But there seems to be consensus now between key economic stakeholders in the country that the downturn is a major threat to Tanzania's economy.
However, some economic analysts criticise the Government for "dragging its feet" and taking too long to wake up to the reality of the magnitude of the economic crisis.
Dr Honest Ngowi, a lecturer at Mzumbe University warned that if not properly administered, the bail out plan could spark massive spending, which could lead to hyperinflation.
"While it is important to stimulate the economy through bailing out specific key industries, there is need to guard against the negative implications of such interventions," he said.
Prof Ndulu, who headed the team that drew up the stimulus package, said the Government, which had poor revenue collections this year, would seek collaboration with banks in its response to the crisis.
The banks would be encouraged to open lines of credit, especially to local horticultural, cotton, coffee and sisal farmers, whose exports have plunged due to falling demand from the traditional European markets.
The other major focus area of the rescue plan would be promoting infrastructure investments to boost agricultural production, which is projected to decline to 2.4 per cent in 2009 from 3.6 per cent in 2008.
Prof Ndulu also said there were efforts to eliminate red tape, aimed at attracting investments at a time some foreign investors are either rescheduling or cancelling their projects.
In a paper titled The Global Financial and Economic Crisis: Challenges and Responses, the central bank chief said the Government would not bail out companies that had solvency problems, which only got worse due to the crisis.
"Beneficiaries of the stimulus package should be sectors, projects and organisations with systematic risks and whose demise will negatively affect the economy and lives of ordinary people," he said.
Additional reporting by Damas Kanyabwoya and Ray Naluyaga
SOURCE: The Citizen
LET'S HOPE THE BAILOUT PLAN WON'T BECOME ANOTHER EPA,RICHMOND,AND THE LIKE.I AM STILL UNCONVINCED IF THE PLAN IS ACTUALLY FOOLPROOF TO MAFISADI,ESPECIALLY AS THE NATION IS HEADING FOR POLLS IN A YEAR'S TIME.CAN'T CONNECT THE DOTS?WELL,IT'S RUMOURED THAT THE LAST ELECTION WAS "EFFECTIVELY" USED BY THE FISADIs TO CONVINCE THE POWERS THAT BE TO RELEASE THE EPA LOOT.
JUST THINKING ALOUD!
Brother. That's another "advance" for early campain activities. I hope someone out there will keep this information so that we can ask the President by the end of next year, because i know this "bailout" might "melt" unknowningly.
ReplyDeleteLet's live to see
I agree with you,Mzee wa Changamoto.This could be another EPA in the making.
ReplyDelete