East African Gazette reporter and agencies
Tanzania
The World Bank has approved two separate loans worth $1.14 billion combined to support Tanzania’s private sector including the development of its commercial capital and fight the effects of climate change, According to World Bank officials.
The first financing is worth $750 million called “Development Policy Financing” is meant to finance reforms such as making business licensing faster and also broaden access to cheap credit to accelerate private sector growth,
This was contained in a World Bank’s press statement issued on yesterday December 20,2023.
The second loan of $385 million will finance infrastructure and building institutions that will help Tanzania’s commercial capital Dar es Salaam to cope with the effects of climate change.
Speaking during while releasing the press state Nathan Belete,
the World Bank country director for Tanzania, said Tanzania remains very vulnerable to climate change and limited to its preparedness to adapt and respond to the adverse impacts.
The Tanzanian financial budget 2023/24 government expects to spend Sh2.1 trillion from external sources.
The second lot of $385 million will go towards financing infrastructure and building institutions that will help Tanzania’s commercial capital Dar es Salaam to cope with the effects of climate change, the bank said.
Belete said “Tanzania remains very vulnerable to climate change and is limited in its preparedness to adapt and respond to the adverse impacts”.
The GDP growth is projected to rise to 5.3% in 2023 and 6.3% in 2024, driven by the sustained recovery in tourism and gradual stability in supply and value chains.
Inflation is projected to increase to 4.7% in 2023 due to higher food and energy prices before moderating to 4.0% in 2024 due to better agricultural performance. The fiscal deficit is projected to widen to 3.5% of GDP in 2023 and 2024 due to higher spending on infrastructure.
The World Bank report shows that this is viable, and will enable the country to reach its full development potential, in the coming years to switch gears towards a more private sector-driven growth model.
According to the newly launched country’s economic memorandum the country’s growth over the past twenty years has been characterized by a noticeable shift towards increased reliance on public infrastructure investments to fuel growth.
Nathan said “This requires complementing the public investment push with strong reforms that help local businesses compete and grow, along with robust social programs that help people get ahead and stay resilient, and boost export orientation.”
According to the World Bank’s report Tanzania’s structural transformation has slowed in recent years and the economy has not been able to create enough jobs in higher-productivity sectors, making it harder for people to escape poverty.
Tanzanian exports experienced substantial growth until 2012, they have since shrunk as a share of GDP and their composition has shifted from agricultural products towards extractives, primarily gold.
This change has made the country more reliant on a smaller number of products, which makes it more vulnerable to changes in the global market.
The World Bank Senior Economist Harun Onder said considering the slow structural transformation and persistent poverty, in the absence of a stronger domestic market, one that facilitates a more qualified participation.
Onder said the shrinking export orientation will constrain Tanzania’s development trajectory,” said Harun Onder, and co-author of the Memorandum.
“While public investments have played a crucial role in narrowing Tanzania’s infrastructure gap, in the absence of a more private sector-driven and inclusive growth, fiscal exposure emanating from these investments can be costly.” Onder said
World Banks recommendation improve the economy
To achieve a more balanced and inclusive growth pattern, the report authors recommend the privatization of growth through five priority policy actions.
Accelerating the implementation of business climate and investment promotion reforms. Removing current obstacles without erecting new ones, is critical for more sustainable and private sector-driven growth in the country.
This calls for scaling up social protection with a more institutionalized approach and promoting adequate access to healthcare.
Improving productivity and resilience in agriculture by addressing the drivers of low productivity, limited access to technology, finance, and rapid scaling of adaptation efforts is also key.
Leveraging the upside potential of Tanzania’s tourism by addressing several long-standing regulatory and infrastructure bottlenecks to attract and mobilize private investors.
Harnessing regional integration to unlock Tanzania’s export potential that is hindered by low productivity and high trade costs including logistical and procedural challenges.