Showing posts with label GLOBAL FINANCIAL CRISIS. Show all posts
Showing posts with label GLOBAL FINANCIAL CRISIS. Show all posts

3 Jun 2009

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

SOURCE: The Citizen



19 May 2009

Source of funds remains elusive

By Costantine Sebastian

Poor revenue collections, the unpredictability of donor funds and an economy reeling from the biting global recession -- the challenges for the 2009/10 national budget seem just too much to bear.

After months of wallowing in the global economic crisis, the Government should now be talking about finding a way to fund the next budget and get the economy going.

Early this month, President Jakaya Kikwete hinted at the uncertainty of funds for the budget when he revealed that domestic revenues are expected to continue on the downward path since the global crisis was persisting.

While source of funds for the current budget were considered evasive at a time the crunch had not hit this part of the world hard enough, economists predict the worst is yet to come.

Economists say there would be major problems implementing the Government's financial plan for the 2009/10 year.

This is largely due to the falling revenue collections and the unpredictability of donor support caused by the recession that has adversely affected Western donor countries, they say.

For instance, the depletion of tax revenue this year will see the outturn of the current budget falling to Sh6.98 trillion instead of the planned Sh7.22 trillion.

And budget preparation documents confirm the Government's awkward fiscal position. Some economists have raised concerns that the desire to fulfill political promises would make the situation even more desperate.

Decreasing revenues

In the medium term, the Treasury puts domestic revenue at 17 per cent of the Gross Domestic Product (GDP) in the forthcoming fiscal year from 17.7 per cent in 2008/09 while aid will fall to 8.9 per cent from 9.1 per cent during the same period.

The Treasury asserts that the overall resource envelope in 2009/10 will decrease to 25.9 per cent of the GDP, which is a 0.2 per cent decline compared to the current fiscal year.

"This trend will persist and reach 22.8 per cent in 2011/12, primarily on account of the projected decline in foreign assistance," the document on resource envelope and expenditure reads in part.

It also notes that foreign aid will further plummet in the medium term to 5.3 per cent of the GDP.

2010 Elections

And the 2010 elections will not take the Government out of its tight corners. Instead, they are widely expected to make the financing and management of the forthcoming budget even more difficult.

"Although the elections will come in the second half of 2010, and therefore a subject matter of the 2010/11 budget, they are expected to impact the 2009/10 budget substantially," Mr Honest Ngowi, an economist and lecturer at Mzumbe University, said.

He added: "The Government will naturally want to be voted back into office. As such, among other things, it will have to deliver on its previous election manifesto."

Mr Ngowi says the "unfulfilled promises" are major poverty reduction projects that would require financing from State coffers.

He based his predictions on the economic theory of government opportunism, which states that sitting governments would to do everything in their power to win support before a competitive election.

In the case of Tanzania, he said, the Government would attempt to implement a number of infrastructure, health, education, water and other social service projects in order to win votes, come 2010.

World Bank economist for the East Africa Poverty Reduction & Economic Management unit, Mr Paolo Zacchia, said Tanzania faces huge budgetary challenges under the prevailing circumstances.

He said the dire situation was evidenced by the failure to meet revenue targets during the current financial year and poor performance of key sectors such as mining and tourism.

Rescue packages?
Yet while Tanzania's budget is heavily dependent on donor funding, last year, donor funds for the 2008/09 budget did not come on a silver plate.

Donors clearly spelt out their conditions: governance issues needed to be sorted out first before any funding pledge could be fulfilled.

The donors, probably irked by corruption among senior government officials, were apparently reluctant to release the general support funds.

Most of them had, however, honoured their commitments by February this year.

And once more the Government is expected to get a kick out of rescue packages pledged by the Bretton Woods institutions and other bilateral donors like the US.

Tanzania recently received a $340 million (Sh452.2 billion) fiscal stimulus from the International Monetary Fund (IMF). The World Bank has also promised another bailout package of about $200 million (Sh266 billion).

The major challenge though is how far that crumb of comfort would go to salvage the Government from the 2009/10 budget ordeal.

According to the World Bank economist, the main difficulty faced in financing the current budget was offset by domestic borrowing, which is expected to persist during this coming year.

Excessive domestic borrowing is often said to affect credit lines for the private sector and cause interest rates to skyrocket.

"But borrowing domestically is inevitable, yet it has to be done carefully to avoid a negative impact on interest rates," Mr Zacchia cautioned.

The Government is obviously walking on eggshells before it comes up with a realistic and workable budget amid the global crisis that has started to take its toll on the people.

Key economic sectors stunned by the crunch need to be rescued, otherwise revenue sources will continue to take a nosedive and thousands of people will lose their jobs.

By March, the Tanzania Revenue Authority (TRA) had managed to collect only about 70 per cent of the budgeted Sh4,485 billion tax collections, missing the target for the three quarters by about Sh279.2 billion.

Tax revenue constitutes nearly 95 per cent of the domestic resources that were required to finance government expenditure in the current financial year and about 62.2 per cent of the total budget.

The Bank of Tanzania (BoT) said in a March report the cumulative budget deficit of Sh750.7 billion by February was one per cent above the expected level.

"The (July 2008-February 2009) deficit was financed through foreign borrowing to the tune of Sh674.4 billion, and the balance through domestic borrowing," the central bank noted in the March monthly economic review (MER).

SOURCE: The Citizen


3 May 2009

The Italian mob has probably never had it so good. Italy's various crime syndicates – lumped together colloquially as Mafia Inc – are gobbling up petrol stations, muscling in on supermarket franchises, making loans to cash-starved businesses, taking over trattorias and acquiring buildings in swanky neighbourhoods in Rome and Milan, investigators say...continue

SOURCE: The Independent

7 Apr 2009

BoT now pegs growth at between 5 and 6pc
By The Citizen Reporter

Tanzania's economy will grow by between 5 to 6.1 per cent this year, according to a top BoT official.

BoT director of policy Joseph Massawe said projections by the IMF were "ill advised".

Dr Massawe said Tanzania's economy had not been much affected by the global financial crisis, adding that the effects could be more pronounced in the coming months.

Some economists have also disputed the Bretton Woods institution's forecasts, saying they are too pessimistic and give the wrong impression of the country's economic outlook.

An IMF delegation said early last 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 Haidari 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.

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.

SOURCE: The Citizen


27 Mar 2009

Brazil’s President Luiz Inácio Lula da Silva on Thursday blamed the global economic crisis on “white people with blue eyes” and said it was wrong that black and indigenous people should pay for white people’s mistakes.

Speaking in Brasília at a joint press conference with Gordon Brown, the UK prime minister, Mr Lula da Silva told reporters: “This crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing.”

He added: “I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.”

Mr Brown appeared to distance himself from Mr Lula da Silva’s remarks. “I’m not going to attribute blame to any individuals,” he said.

Mr Brown was visiting Brazil as part of a five-day tour of Europe, the US and South America in preparation for the G20 summit to take place in London next Thursday. He made a joint appeal with Mr Lula da Silva for the world’s biggest economies to provide $100bn to boost global trade.

“I’m going to ask the G20 summit next week to support a global expansion of trade finance to reverse a slide in world trade,” Mr Brown said.

Mr Lula da Silva also spoke out strongly against raising trade barriers in response to the global crisis. “I compare protectionism to a drug,” he said. “Why do people use drugs? Because they are in crisis and they think the drug will help them. But its effects pass quickly.”

The two leaders’ remarks demonstrate the desire each will have to secure the other’s support during the G20 meeting.

Brazil – which has long campaigned unsuccessfully to be given a permanent seat on the United Nations Security Council – will argue for a bigger voice for Brazil and other emerging nations in multilateral organisations such as the International Monetary Fund and the Financial Stability Forum, a group of central banks and national supervisory authorities established in 1999.

Brazil is one of many nations calling for increased regulation of global financial markets and greater powers for multilateral regulators.

It will also call for a resumption and conclusion of the Doha round of talks at the World Trade Organisation.

In return for supporting such initiatives, Mr Brown will expect Brazil to endorse calls for fiscal stimulus in a bid to mitigate the impact of the global crisis, such as the proposed $100bn in trade finance.


17 Mar 2009

By Mkinga Mkinga

The Government is assessing the impact of the global financial crisis on the Tanzanian economy.

The deputy minister for Finance and Economic Affairs, Mr Omar Yusuf Mzee, told The Citizen yesterday by phone that officials from his ministry had been dispatched to regions to talk to stakeholders on problems facing them as a result of the global financial crisis.

"I am in Kigoma on a similar mission and my colleague [deputy minister Jeremiah Sumari) is in southern regions," he said.

The assessment is aimed at collecting crucial information on the crisis. He said his tour would take him to Kigoma, Tabora, Singida and Dodoma regions while Mr Sumari would visit Lindi and Mtwara regions to gather similar information.

"We need to know the real picture when we call stakeholders to a national meeting to discuss the crisis.During the meeting we will focus on how we can help businesses which have been affected," he said.

He said a national roundtable with chief executive officers of various firms to discuss the situation would be held soon after completing the assessment.

Bank of Tanzania (BoT) Governor Benno Ndulu, did not say what the Government could do to shore up businesses amid the crisis.

"I cannot say that the Government will offer stimulus packages to affected businesses. But we are aware of the situation and we are planning something for our local entrepreneurs," he said. Prof Ndulu said BoT was closely following the developments.

He noted that so far there was no indication that local banks would face difficulties in the near future as a result of the global crunch.

"People should go on with their activities; there is no need to worry as we are closely following the developments here and abroad. In case of any serious problem, we will issue an alert immediately," he said.

Recently, Finance and Economic Affairs minister Mustafa Mkulo did not rule out direct Government intervention, as members of the business community called for a state plan to save them from collapse.

He said during the forthcoming roundtable meeting, the Government would discuss with CEOs and draw up a joint strategy to deal with the problem.

"Our intervention will be within the limitations of the budget and it is my hope, as the Finance minister, that our engagement will be effected as soon as possible. It should be before the conclusion of the budget proposals," he said.

"If employers are thinking of retrenching workers, this will be discussed to see the best way in which the Government could assist," said Mr Mkulo.
Many countries are offering stimulus packages to private companies.

Such countries include the United States where the financial crunch started, sending financial institutions crumbling.The ministry has dispatched its team to regions at a time when businesses are calling for quick plans to remedy the situation.

The Association of Tanzania Employers (ATE) has confirmed that it had received urgent appeals for assistance from three companies. ATE executive secretary Aggrey Mlimuka warned of difficult times ahead unless the Government intervened.

The Tanzania Horticultural Association bemoans a 50 per cent business slump.It has urged the Government to support the small-scale growers and supply chains using a portion of the money that President Jakaya Kikwete pledged to give to agriculture.

It has also asked for the rescheduling of loans through commercial banks with BoT's intervention.
SOURCE: The Citizen


13 Feb 2009

10 Oct 2008

Gordon Brown declared diplomatic war on Iceland last night. 

He launched a furious attack on the 'illegal' refusal to pay back billions owed to British investors in the country's failed banks. 

The Prime Minister invoked rarely-used anti-terrorism powers to freeze Icelandic assets here as fears grew that vast sums of British cash could be lost. 

Private savers, companies, town halls, police authorities and charities have seen up to £20billion frozen after Iceland nationalised its three top banks. 

Most private savers should be compensated under UK government guarantees. 

But these do not apply to public sector bodies and charities, and it emerged yesterday that more than 100 councils had invested up to £1billion of taxpayers' money in Icelandic banks, lured by high interest rates. 

Financial experts said that if the cash is lost for good, council taxes could rise every year for the next 25 years. 

The crisis has also hit dozens of charities, which had investments of £230million. 

Whitehall sources fear Iceland is now effectively a bankrupt state. It owes the world an astonishing £35billion – £116,000 for every man, woman and child. 

Britain's relations with the North Atlantic island were rapidly deteriorating to the hostility of the 1970s 'cod wars' over fishing rights. 

One unnamed minister said last night: 'It's not Cod War, it's Wad War'. 

Scotland Yard is one of the big losers, with £20million invested in Iceland. 

On another day of financial upheaval: 

  • Labour's £500billion bank rescue gamble appeared to be having little impact on the markets; 
  • The International Monetary Fund made available 'hundreds of billions of dollars' in emergency aid for countries hit by the credit crunch; 
  • Mr Brown and David Cameron stepped up their attacks on irresponsible City fat cats; 
  • Labour MPs boasted that the financial crisis could prove to be Mr Brown's 'Falklands moment'; 
  • In New York the Dow Jones fell 678 points, 7.3 per cent, to close below 9,000 for the first time in five years; 
  • House prices plummeted further, losing an average of £27,000 a year. 

But it was the turmoil in Iceland that was causing the most immediate concern. The country suspended trading on its stock exchange in a bid to prevent further market panic. 

The Treasury plans to send a team of senior officials to Reykjavik to thrash out concerns about the impact on Britain. Chancellor Alistair Darling said last night: 'The Icelandic government, believe it or not, told me yesterday they have no intention of honouring their obligations here.' 

Mr Brown said the attitude was 'totally unacceptable'. He said: 'I have been in touch with Iceland's prime minister. I have said that this is effectively illegal action.

'We are freezing the assets of Icelandic companies in the UK where we can. We will take further action against Icelandic authorities wherever necessary to recover the money.' 

In an extraordinary move, the Prime Minister used powers under the Anti-Terrorism Crime and Security Act to freeze British assets of Landsbanki, one of the collapsed banks and the operator of the popular internet account Icesave. 

'I don't apologise for it,' Mr Brown said. 'This is a very unusual situation, where a

Iceland's Prime Minister Geir Haarde

Voiced disappointment: Iceland's Prime Minister Geir Haarde

country has effectively defaulted.' 

Iceland's prime minister Geir Haarde voiced disappointment at the lack of assistance he has received from Western countries and threatened to find 'new friends'. 

That was seen as a clear reference to Russia, which has offered a four billion euro loan. 

There are claims – denied by Reykjavik – that the Kremlin wants the use of a former U.S. military base in return. 

Mr Haarde said he told Mr Darling he considered the use of anti-terrorism powers a 'completely unfriendly act'. 

The Icelandic disaster could have even wider effects on Britain. Its banks and finance companies are significant shareholders or backers of household-name firms from House of Fraser to Hamleys and the frozen food store Iceland. 

Iceland's president has been admitted to hospital for heart surgery, it emerged yesterday. 

Olafur Ragnar Grimsson had an angioplasty operation earlier this week as the devastating extent of Iceland's economic meltdown became clear. 

Aides were unable to say when he would resume his duties. Although his post is largely ceremonial, his absence will add to the country's gloom.

SOURCE:Daily Mail

3 Oct 2008

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