WB: 12m Tan­za­ni­ans still live in ab­ject poverty

The African - - NEWS - BY JOSEPH LINO

De­spite the tremen­dous strong eco­nomic growth over 12 mil­lion peo­ple are still liv­ing in ex­treme poverty ac­cord­ing the World Bank’s lat­est eco­nomic up­date for Tan­za­nia.

Ac­cord­ing to eighth Tan­za­nia Eco­nomic Up­date en­ti­tled The Road Less Trav­eled: Un­leash­ing Pub­lic Pri­vate Part­ner­ships in Tan­za­nia re­leased last week shows that the eco­nomic growth was around seven per­cent in 2015, and in­fla­tion was con­tained within sin­gle digit lev­els.

The econ­omy growth still put Tan­za­nia the fourth largest pop­u­la­tion liv­ing un­der poverty in Africa the re­port says.

The re­port notes that a sig­nif­i­cant por­tion of the non-poor pop­u­la­tion lives just slightly above the poverty line, and risks fall­ing back into poverty with the slight­est level of dis­rup­tion, un­less proper mea­sures are in place.

World Bank Coun­try Di­rec­tor for Tan­za­nia Bella Bird said ap­prox­i­mately, 12 mil­lion peo­ple still live on less than Tsh1.300 per day and a large pro­por­tion of Tan­za­nia’s rapidly grow­ing pop­u­la­tion still does not have ad­e­quate ac­cess to in­fra­struc­ture and so­cial ser­vices.

“Tan­za­nia needs to in­crease in­vest­ments in in­fra­struc­ture and hu­man cap­i­tal to fur­ther un­lock its growth po­ten­tial while en­abling the pri­vate sec­tor to cre­ate more jobs”, says Bird.

“This will not only have a stronger im­pact on poverty re­duc­tion but it is also con­sis­tent with the new govern­ment’s pri­or­i­ties and its com­mit­ment to the achieve­ment of the coun­try’s Vi­sion 2025 goals.

“The needs are many but the re­sources are lim­ited and a fo­cused ap­proach in which key de­vel­op­ment pri­or­i­ties are fully fi­nanced will be needed to achieve the de­sired re­sults.

The eco­nomic up­date has in­di­cated tt the same time that about 800,000 young Tan­za­ni­ans en­ter the job mar­ket ev­ery year where pro­duc­tive op­por­tu­ni­ties re­main scarce,” she said.

The Tan­za­nian econ­omy has grown at an av­er­age an­nual rate of around 6-7 per­cent for more than a decade and the rate of in­fla­tion has de­clined since Jan­uary 2016 although it trended up­wards in the pre­ced­ing few months due to in­creased do­mes­tic food prices and the lagged im­pacts of the sharp de­pre­ci­a­tion of the Tan­za­nian Shilling dur­ing the first half of 2015.

As of June 2015, the govern­ment had ac­cu­mu­lated ar­rears to a value of ap­prox­i­mately Tsh5 tril­lion (6 per­cent of GDP) with sup­pli­ers and pen­sion funds in­clud­ing ar­rears with sup­pli­ers. The fis­cal deficit in 2014/15 in­creased to 4.5-5.0 per­cent of GDP.

In ad­di­tion, TANESCO has ac­cu­mu­lated a level of ar­rears, the value of which Is es­ti­mated to reach ap­prox­i­mately TZS tril­lion5 (1.2 per­cent of GDP) while the sit­u­a­tion of other paras­tatal en­ti­ties, such as REA and DAWASCO, re­mains un­clear ac­cord­ing to the re­port.

How­ever the sky rock­et­ing cost of debt ser­vice cre­ates ad­di­tional fis­cal chal­lenges, with debt ser­vice cur­rently con­sum­ing ap­prox­i­mately 25 per­cent of do­mes­tic rev­enues.

Mean while eco­nomic per­for­mance has re­mained strong in the re­cent past, the new govern­ment ad­min­is­tra­tion comes into power in the con­text of in­creas­ingly sig­nif­i­cant ex­ter­nal risks.

China’s eco­nomic slow­down the de­cline in com­mod­ity prices sig­nif­i­cant nega­tives im­pact on Tan­za­nian’s econ­omy as a re­sult of a de­cel­er­a­tion in ex­ports.

World Bank Se­nior Economist, Em­manuel Mun­gu­nasi ex­plained that one per­cent point de­cline in China’s do­mes­tic in­vest­ment growth is as­so­ci­ated with a de­cline of ap­prox­i­mately of 0.6 per­cent points in the rate of the growth of Tan­za­nia’s ex­port.

“Slower, more bal­anced rate of growth in China has led to de­pressed global de­mand for com­modi­ties and hence to de­crease de­mand for Tan­za­nia.

One per­cent de­cline in in­vest­ment in China is es­ti­mated to have the im­pact of re­duc­ing Tan­za­nia’s ex­port price by nearly one per­cent, so Tan­za­nia may need to di­ver­sify its ex­port des­ti­na­tions,” Mun­gu­nasi noted.

The re­port makes the fol­low­ing key rec­om­men­da­tions to­wards a new di­rec­tion that could en­sure PPPs de­liver for Tan­za­nia as they have with other coun­tries.

World Bank Se­nior Pub­lic Pri­vate Part­ner­ship Spe­cial­ist, Jef­frey Del­mon noted the pri­vate sec­tor, which em­ploys more than 95 per­cent of the work force, should take the driver’s seat to fos­ter pri­vate sec­tor growth and the govern­ment needs to cre­ate a more con­ducive busi­ness en­vi­ron­ment.

“The eco­nomic up­date shows that Pub­lic Pri­vate Part­ner­ship (PPP) could play a use­ful role in fi­nanc­ing eco­nomic de­vel­op­ment can be achieved if PPPs are well-de­signed and ap­pro­pri­ately im­ple­mented,” he said.

Del­mon noted the coun­try has sig­nif­i­cant ex­pe­ri­ences with PPPs, although these have so far pro­duced mixed re­sults. PPPs are not a panacea and do not nec­es­sar­ily work well in all sec­tors and their projects should be care­fully se­lected on the ba­sis of their fi­nan­cial vi­a­bil­ity and at­trac­tive­ness to the pri­vate sec­tor.

“What is needed now is to em­brace these im­por­tant past lessons and com­bine them with best prac­tices from the largest emerg­ing economies such as Brazil, Chile, Mex­ico and In­dia and de­velop a strong PPP pro­gram that ad­dresses the coun­try’s in­fra­struc­ture de­vel­op­ment chal­lenges and gen­er­ates jobs.”

Ac­cord­ing to the World Bank, the govern­ment must ad­dress fund­ing and fi­nanc­ing is­sues re­lated to PPPs by de­vel­op­ing and im­ple­ment­ing clear and trans­par­ent ap­proaches, in­clud­ing work­ing with do­mes­tic fi­nan­cial in­sti­tu­tions to grad­u­ally de­velop lo­cal cur­rency fi­nanc­ing for PPPs.

The Tan­za­nia Eco­nomic Up­date is a bian­nual re­port pub­lished by the World Bank with the aim of fos­ter­ing con­struc­tive pol­icy di­a­logue be­tween stake­hold­ers and pol­i­cy­mak­ers and stim­u­lat­ing de­bate on es­sen­tial eco­nomic is­sues in the coun­try.

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