6 Apr 2009

By Damas Kanyabwoya

The projection by the International Monetary Fund (IMF) that Tanzania�s economy will grow by four per cent this year has been challenged by local economists.

Some economists are arguing that the Bretton Woods institution's forecasts are too pessimistic and give the wrong impression of the country's economic outlook.

An IMF visiting delegation said early this week the country's economy would grow by between four and five per cent this year due to the global downturn.

But commenting on the sidelines of the annual poverty alleviation meeting in Dar es Salaam recently, local economists said the projections had missed the point since the fundamentals of the country's economy remain sound.

An economic analyst, Prof Haidery Amani of the Economic and Social Research Foundation, said the global financier's figures were questionable because the economic crisis had no direct impact on the country's economy.

What factors have the IMF used to make their projections because Tanzania's economy depends mostly on agriculture. The four per cent growth can only be possible if agricultural production falls, he said.
Prof Amani said there were indications that most troubled Western economies, especially the US and in West Europe, would stabilise by end of year, making it impossible for Tanzania to get worse.

Last December, the Government projected a 7.1 per cent economic growth for 2009, which Finance and Economic Affairs minister Mustafa Mkulo last week revised down to 6.5 per cent.

Other economic analysts have also disputed the IMF figures saying Tanzania's economic outlook seemed strong enough to survive the recession this year.
The Bank of Tanzania (BoT) said recently banks in the country were well capitalised and although interest rates have edged up marginally, there has not been any dramatic disruptions witnessed in the country.

And on the sidelines of the Research on Poverty Alleviation (Repoa) annual meeting in Dar es Salaam, local economists said the global crisis has had a minimal effect on the country.

They argued that the country's economy was not directly integrated with global economies, a situation which spared the country when financial giants in the developed world collapsed.
I don't think the country's economic growth will fall to such lower levels despite the current economic crisis. But I also don�t think the economy will grow beyond six per cent, Repoa executive director Prof Joseph Semboja said.

The Planning Commission's permanent secretary, Ambassador Charles Mutalemwa, said the IMF projections were too pessimistic.

Dr Kassim Kulindwa, a senior research fellow with the University of Dar es Salaam's Economic Research Bureau, said variations in figures were expected because multilateral bodies and local economic researchers used different economic growth indicators.

There are often differences on various economic figures between multilateral institutions and local research institutions, for example, on such issues as per capita Gross National Product. The problem is they use different databases, he said.

Debate on how much the global economic crisis has affected Tanzania is still raging on with no common position between the Government and private sector.

Some industries depending heavily on the export market have obviously been hit hard by the crisis due to falling demand.

Despite assurance by the Government, there have been signs that sectors like agriculture, mining and energy became the immediate casualties of the downturn as some big firms closely linked to these industries wound up businesses.

Big employers who have to shut down their operations have attributed this to declining business and cash flow, as their export markets shrink.

President Jakaya Kikwete recently appointed a special team to study the effects of the recession on the country.

The taskforce chaired by Bank of Tanzania (BoT) governor Benno Ndulu is expected to present its preliminary findings later this month, according to Finance and Economic Affairs minister Mkulo.

But in June last year, almost six months into the recession that started December 2007, the minister told parliament that Tanzania�s economy would grow by 7.8 per cent in 2009.

That figure was revised down to 7.1 in December last year and then 6.5 per cent last week amid the global crisis that has seen the collapse of big Western companies and tumbling world markets.

Economists fear if the recession persists, it would reduce foreign direct investments (FDIs) in the country, cause cuts in official direct assistance (ODA) and slow foreign remittances from Tanzanians living abroad.

But despite being the worst affected by the economic downturn, major western donors said they would not cut aid to developing countries, giving hope to countries like Tanzania.

However, some analysts say such promises are not dependable, therefore, the developing world should find its own strategies to survive the global crisis.

�It is time for Tanzania to shift towards mobilising its own resources for development. The country has abundant natural wealth that must be tapped to stop this donor dependence, Prof Ophelia Mascarenhas, a retired UDSM professor, said.

She said the global crisis should be a lesson to the country that dependence on donor funding was not a lasting solution.

For instance, instead of giving tax incentives to foreigners for up to 10 years why don�t we do the same thing to locals for even at least
two years? she queried.

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