Crisis, what crisis? Mpango dismisses concerns over economic 'slowdown

30Dec 2017
Henry Mwangonde
The Guardian
Crisis, what crisis? Mpango dismisses concerns over economic 'slowdown

FINANCE and Planning Minister Philip Mpango yesterday dismissed concerns that Tanzania's pace-setting economic growth was showing worrying signs of slowing down and painted a strong picture of the economy as the year winds down.

Dr Mpango said despite criticism from some opposition leaders on the government's handling of the economy over the past two years, the country's gross domestic product (GDP) was still on track to grow by an estimated 7 per cent this year.

A projected 7 per cent GDP growth in 2017 would keep Tanzania firmly in the list of the world's 10 fastest-growing economies, the minister insisted. 

The government expects a medium-term economic growth of around 7.4 per cent in 2018 and beyond on the back of massive public infrastructure investments, including the ongoing construction of the standard gauge railway (SGR) line and the Uganda-Tanzania crude oil pipeline, he said.

The minister, however, admitted that some Tanzanians were yet to see the benefits of this rapid economic growth, because the GDP expansion was mainly being driven by sectors that were not labour intensive.

Dr Mpango noted that a high GDP growth rate would nonetheless have long-term benefits on the lives of Tanzanians by reducing poverty and stimulating national development. 

“Economic growth can be compared to the movement of a vehicle. When the vehicle moves at a fast speed, it will reach its destination quickly," the minister told a press conference yesterday in Dar es Salaam when giving an overview of the performance of the country's economy in 2017 and outlook for next year.

"But when the car is moving slowly, it does not mean that it is not going forward, but rather it will take longer-than-expected for it to reach its desired destination."

He insisted that there was no "negative GDP growth" in Tanzania, but explained that the economy has grown at a slower pace from 7.7 per cent in the first half of 2016 to 6.8  per cent this year.

Mpango said the agriculture sector, which is the backbone of the country's economy, grew by only 2.1 per cent in 2016 due to low productivity from rainfed agriculture, thus limiting the trickle-down effect of the fast GDP growth.

He explained that the fastest-growing sectors in the economy were those employing a relatively fewer number of people, such as construction (13%), information and communication (13%), transport and storage (11.8%), mining and quarrying (11.5%) and banking and insurance services (10.7%).

Mpango noted that the liquidity squeeze in the economy has already started to ease due to improved money supply and said the banking sector was now rebounding from a spike in non-performing loans.

He also said the inflation rate remains tamed within the government's targeted 5 per cent benchmark, while the national debt was sustainable and gross foreign reserves were at a 10-year high.

However, the minister said the high instance of bad loans in the banking sector in 2016/17 was not unique to Tanzania, noting that several neighbouring East African nations and other major economies in Africa, such as Nigeria and South Africa, also suffered from the same problem.

On the dolarisation of the economy, Mpango said the government has directed that with effect from 1 January 2018, no product or service would be sold or bought in foreign currency in Tanzania.

An exception for quoting prices in US dollars would be made for services and products that are meant for tourists and non-Tanzanian residents, such as visas and tourist hotel accommodation.

“Every Tanzanian resident must not be forced to use foreign currency when seeking any service in the country and law enforcement agencies must not hesitate to take action when this happens,” he said.

According to the minister, the government has received reports that some dishonest businessmen were engaged in illegal currency manipulations, and hinted at the need to amend the Foreign Exchange Act of 1992.

Mpango said the shilling remains stable against the US dollar and other major currencies and applauded the Bank of Tanzania (BoT) for its prudent impementation of the monetary policy. 



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