The International Monetary Fund (IMF) has warned that Tanzania’s economic growth is showing signs of slowing down, despite its robust growth rate of 6.8 per cent in the first half of the year.
The encouraging growth rate was a result of good harvest during the last agricultural season. This has also helped stabilise food prices, keeping inflation at bay. International reserves, which have increased to more than five months of imports, and the decrease in fiscal deficit, have also boosted the economy.
What has prompted the IMF’s warning, however, is decreased government spending as well as lower than expected tax revenue collection. The IMF also has noted weak private sector credit growth and the increase of non-performing loans. In general, the instability in the banking sector, as evidenced by high non-performing loans and reduced capitalisation, are a cause for concern.
It is worthy to note that the IMF report, notwithstanding, signs of slowdown in the economy became visible when the government embarked on cost-cutting measures two years ago, which led to massive lay-offs by private sector companies.
The IMF advises the government to increase spending, improve the business environment through wider dialogue with the private sector, and regulatory reforms.
It is our hope that the government will heed the IMF’s call and work hard to contain the impending slowdown. We also urge the government to improve its rapport with the private sector. Tanzania is a private sector led economy, and there is no way that the same economy can improve without taking the business community on board. This can only be done through constant dialogue and consultations and, whenever possible, giving private sector players some incentives. Looking at private sector players as the enemy is self-defeating. It will result in an economic vicious cycle. And as the IMF warned, Tanzania’s high population growth needs a stronger private sector that can provide jobs and other lifelines to the workforce.