Tanzania’s economy is on the right track despite shocks exerted by the global rise of inflation, war in Ukraine and Covid-19, thanks to the measures taken by the government to diversify the production sector.
The Deputy Permanent Secretary in the Ministry of Finance and Planning (Economic Management and Policies), Mr Lawrence Mafuru, said in Dar es Salaam yesterday that the government is taking the right policy approach to absorb the pressures from the global economic shocks.
“The economy is moving on the right direction due to our policy approach aimed at attracting more Foreign Direct Investment, investment in mega infrastructure projects and measures to attract equity private financing,” he said.
Mr Mafuru said the measures will certainly continue to stir up economic growth despite being a net importer of various goods from the developed countries which are hit hard by the global shocks.
He said the big economies like the US and Europe are facing high inflation rate that has pushed up prices of various goods and services.
Thus net importer countries like Tanzania are forced to dig deeper to purchase much needed goods including fuel and capital goods.
In a bid to contain the rising inflation, the US and Europe have resorted to hiking interest rates which in turn is impacting heavily on developing countries when they need to borrow for development projects.
Also, the rising interest rate in the big global economies is hitting hard the developing countries where they have to pay more while serving their debts.
He said the diversification of the economy has helped the country to continue bringing the much needed foreign currency into the economy, thus making the exchange rate stable.
For example, he said, the country’s sources of foreign currency are improving due to the gradual improvement of the tourism sector, ongoing efforts to boost agriculture productivity as well as the execution of the 30 billion US dollars mega Liquefied Natural Gas (LNG) project.
He said also that due to the rising cost of financing by the global financier, Tanzania has been very conservative in accessing commercial loans except for the finance needed for the execution of highly productive projects.
The Finance and Planning Deputy PS said also that the country is benefitting from the huge demand for rare earth metals in the global market thus continuing to increase the inflows of foreign currency.
He said Tanzania’s strategic location as the transport and logistics hub for most land-linked countries is giving a huge advantage to boosting its flow of foreign currency.
The PS said Tanzania’s trade with regional countries like Kenya, the Democratic Republic of Congo (DRC) and South Africa has continued to bolster the country’s foreign exchange earnings.
Mr Mafuru said as the developed world is currently facing economic shocks, the global economy has not been spared from this pressure.
He said in Tanzania, inflation is being contributed largely by oil and capital goods importation thus exerting pressure on the country’s exchange rate.
The World Bank (WB) while slashing its global growth forecasts from projections it made in mid-2022 on the back of what it sees as broadly worsening economic conditions said the Tanzania GDP is projected to grow from 5.6 per cent this year to 6.1 per cent next year.
The international development institution downgraded almost all of its forecasts for advanced economies in the world, cutting its growth outlook for the global economy to 1.7 per cent for this year, it said in its latest report, Global Economic Prospects. The organisation earlier projected the world economy to expand by 3 per cent in 2023.
The adjustment was led by a significant downgrade to its prospects for the US economy — it now forecasts 0.5 per cent growth from an earlier projection of 2.4 per cent.
“Global growth has slowed to the extent that the global economy is perilously close to falling into recession,” the World Bank said, attributing an “unexpectedly rapid and synchronous” global monetary policy tightening behind the sluggish growth.