President Samia Suluhu Hassan
Mwananchi Communication Limmited
Summary
·
Less
liquidity in the economy led to a higher cost of living, which was eased when
President Hassan took power
Dar es Salaam. It is difficult to tell when and how it all started but what is well documented is the
fact that between 2016 and 2017, Tanzanians – mostly those in the low and medium income categories – were living in difficult conditions.That was precisely why ‘vyuma
vimekaza’, semantically meaning ‘difficult living conditions’ became
the most popular discourse in most of the country’s informal gatherings.
In fact, the discourse went viral
and reached those in the corridors of power when in December, 2016, former
President John Magufuli was compelled to issue a warning that those heard
saying ‘Vyuma vimekaza’ would be arraigned.
Like in any other debate, there were
two sides to the argument. Those in support of the government’s policies said ‘Vyuma
vimekaza’ was a result of the late Magufuli’s corruption war which saw
an end to a tendency of bringing money obtained through corrupt deals into
circulation. They also argued that with the government injecting much of its
resources in improving infrastructure through mega projects like the Standard
Gauge Railway (SGR) line, the 2,115 Megawatts Julius Nyerere hydropower Project
and the Air Tanzania Company Limited (ATCL) revival, there was no way that
Tanzanians could live ‘lavishly’.
Nonetheless, those against the
government’s position contended that a single focus on infrastructure signified
a failure – in theory and practice – to make a people-centred development at
the heart of Tanzania’s economic prosperity. Opposition legislators contended
that though investment in mega projects remains strategic, it does not
necessarily translate into improvement in lives of the poor.
Whether that was right or not
remains everybody’s guesswork but what is well documented is that in 2016,
billions of shillings held in commercial banks by ministries, public
corporations and local government authorities, were immediately transferred to
the Bank of Tanzania (BoT).
Though the measure had a positive
implication on the management of government revenue, it also deprived the
private sector of its much-needed funds to support to propel economic
activities.
The move also resulted in a rise in
the cost of borrowing as funds became scarce.
At that time, economists contended
that it was dangerous to place such huge amounts of money under BoT where the
executive has a free say on the use of the funds.
It also symbolised the beginning of
the shift from Tanzania’s pro-business policies where the government is a
partner for the business community to ones whereby the former and the latter
compete for the available funds.
Against that decision, BoT figures
show that between October 2015 and September 2016 banks disbursed Sh1.7
trillion in loans to the private sector as compared to Sh2.9 trillion they
dished [to the private sector] between October 2014 and September 2015.
The manufacturing sector suffered
much as the credit growth rate declined to -7.9 percent by September, from 20.7
in the same period in 2015.
By September, 2016 there was a total
of Sh22.2 trillion in the economy (including foreign currency deposits in
banks), according to the BoT figures.
However, in the 12 months to
September 2016, only about Sh913 billion was injected into the economy (an
annual growth of 4.3 per cent) as compared to Sh3 trillion that was injected
into the economy in the 12 months to September 2015 (an annual growth of 16.5
per cent), the BoT report shows.
It was the tight liquidity levels in
the economy that in March 2017, the BoT was compelled to take several measures,
including cutting the minimum reserve ratio. In August, 2017, the BoT also
revised downwards its discount rate.
Some improvements started to be seen
in 2019, whereby credit to the private sector grew by 11.1 percent before
reaching 17.8 percent in 2020 due to accommodative policies adopted by the BoT.
However, it was in July, 2021 that
President Samia Suluhu Hassan’s administration showed the government’s seriousness
in boosting commercial banks’ lending to the private sector.
In an effort to stimulate economic
activities and increase commercial banks’ lending to the productive sectors in
the wake of the global Covid-19 pandemic, the BoT reduced the statutory minimum
reserve (SMR) for banks that would extend credit at an interest rate not
exceeding 10 percent per annum to the agricultural sector. It also relaxed the
agent banking regulations by removing the requirement of business experience of
at least 18 months for banking agents. Of particular importance was the
provision of a special loan amounting to Sh1 trillion to banks at an interest
rate of three percent for pre-financing or re-financing of the agricultural
sector at an interest rate not exceeding 10 percent. It also reduced the risk
weights for salaried loans from 100 percent to 50 percent in an effort to
increase private sector credit growth.
In September, 2021, following
President Hassan’s approach to the handling of the global Covid-19 pandemic,
the International Monetary Fund (IMF) approved $567 million (about Sh1.3
trillion) in emergency support for Tanzania to help it finance a vaccination
campaign and meet the health and social costs of the pandemic.
In October, 2021, the government
decided that the IMF funds must be directed towards activities that would not
only improve the delivery of social services but also in a manner that would
stimulate economic activities.
Finance and Planning minister
Mwigulu Nchemba said in October, 2021 that using local contractors, the funds
would go up to the remotest of the remote areas and spent on building 15,000
classrooms in secondary schools and 3,000 in primary schools on Mainland
Tanzania.
Part of the money was also spent on
building about 32 regional Vocational and Education Training Centres (Veta),
procuring 462,795 school desks and 10,812 books in braille for the blind. More
funds went to implementing water projects in urban and rural areas respectively
- as well as purchasing 25 vehicles with water wells drilling equipment.
Apart from procuring and install
modern Intensive Care Unit equipment, the money was also spent on building
Modern Emergency Departments (MEDs) at the national, referral, zonal, regional
and strategic districts levels. President Hassan is on record as having warned
that she would have zero-tolerance to misappropriation of the public funds.
“When you look at me, you say Her
Excellency is white in colour; but I have my actual colours. Those who want to
know my actual colours should steal the money or change expenditure plans
without prior approval,” she warned in October, 2021.
“The country is going to boil over,
with development projects in all corners. Therefore, ministers, district
executive directors and respective teams should exercise proper supervision of
the projects.”
With more money in circulation, it
was at that time that the language changed from ‘Vyuma vimekaza’ to
‘Pochi la Mama limefunguka’ semantically meaning that ‘Mama has opened
her wallet [and she is distributing money]’. In other words, there is enough
liquidity in the economy.
With the various initiatives
undertaken during the past two years, there has been not only a considerable
growth in money in circulation but also the amount in credit that commercial
banks extend to the private sector. For instance, credit to the private sector
grew strongly by 22.5 percent in December in what the BoT says is a reflection
that various economic activities were recovering well from the effects of the
global Covid-19 pandemic, complemented with supportive monetary and fiscal
policies.
“The improvement in liquidity
explains the government’s more spending in projects that directly touch on
lives of ordinary people, including construction of schools, roads and others.
This has increased the amount of money in circulation,” said a trade expert and
economist, Dr Donath Olomi.
An economist from Dodoma University,
Dr Lutengano Mwinuka, shared similar sentiments, adding that the other factor
could be that of the flow of grants and concessional loans which Tanzania gets
after improvement of its relations with development partners.
However, he recommended that the
government could also look at ways of unlocking other sources of financing,
including through harnessing the participation of Tanzanians in Diaspora in the
building of the economy.
No comments :
Post a Comment