Invisible
Robot
- Feb 26, 2006
- 16,285
- 8,464
By ABDUEL ELINAZA
Monday, December 21 2009
The Bank of Tanzania predicts that the economy will grow by 5.0 per cent in the current fiscal year, down from the average of 7.1 per cent experienced in the past three years.
BoTs preliminary economic forecast has the economy growing by 5.7 per cent in 2010/2011 fiscal year due to the stimulus package announced six months ago, as economic parameters show a positive growth trend.
The final figure, however, depends heavily on eco-proceeding of three to four months to come.
Prof Benno Ndulu, Governor of the Bank of Tanzania, told The EastAfrican in Dar es Salaam last week that the stimulus package had saved the education, health and infrastructure sectors from collapse, as it provided $600 million to fill the revenue gaps between June and July.
Apart from bridging the recurrent expenditure gap, the package also improved the country foreign-exchange situation, as about $300 million was pumped into the market to balance the current account deficit, with the International Monetary Fund providing the funds.
According to Prof Ndulu, another $200 million facilitated debt repayment and guarantees for the agriculture sectors most hit by global financial recession namely coffee and cotton to rejuvenate farming and buying activities.
Of this, $21.9 million went into coffee and cotton crop buying loans, with loan guarantees and rescheduling accounting for $45 million, food security $20 million, farm implements $20 million and the Tanzania Investment Bank receiving over $90 million for the agriculture window through Kilimo Kwanza.
Still, the $1.2 million stimulus package so far provided by the Central Bank falls short of the total of $1.7 million earmarked by the government for various sectors affected by the global economic crisis.
The rest of the package depends on funds released by the January-June 2010 revenue collections.
However, Hussein Kamote, director of policy and research at the Confederation of Tanzania Industries, told The EastAfrican that the stimulus package was not by itself sufficient to jump-start the economy and get it back to above 7 per cent growth, adding that the government needed to induce banks to lower interest rates to boost lending to private sector.
Mr Kamote said the government could build banks confidence by guaranteeing bailouts for firms in crisis, though the current two-digit inflation is another factor pushing up the cost of lending.
Government intervention
A senior lecturer at the University of Dar es Salaams, Business School, Dr Donath Olomi, said government intervention is crucial in order to restore credit to the private sector, as the crisis had made banks especially risk-averse.
In its first review under the exogenous shock facility for Tanzania, the IMF said the fiscal and monetary stimulus to support growth had resulted in early signs of a nascent recovery.
The release further said, Fiscal revenues remain weak and it will be important to preserve control over expenditures, particularly given the need to respond to the drought in the region and address infrastructure weaknesses.
However, all assessment and performance criteria for end-June were met, and there has been good progress in implementing structural reforms.
Source: The East African