Domestic and foreign investments spur eco-growth

 Imani Muhingo

TANZANIA: ACCORDING to the Bank of Tanzania, economic growth in Q1-24 is estimated at 5.1 per cent, backed by increased domestic and foreign investments.

This was underpinned by the notable private sector credit growth which remained in double digits for the last two years. Headline inflation saw a slight increase of 10bps in the year ending April 2024, standing at 3.1 per cent, from 3.0 per cent in March.

Despite the slight increase, inflation remains with the central bank’s target range of between 3.0 per cent and 5.0 per cent. Stable inflation stems from stabilised food prices as the non-core inflation stood at 1.4 per cent, 50bps higher than February.

The Unprocessed Food Index saw a slight annual deflation of 0.5 per cent in April from 0.6 per cent in March and 0.1 per cent in February. However, the index saw a 1.0 per cent inflation on a monthly basis, down from 1.9 per cent for March 2024 due to seasonal movements.

The period between February and April is historically known to have the highest monthly food inflation being far from harvest seasons.

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Considering the weight and significance of food products in the consumption basket of the Tanzanian community, along with significance of agriculture as a sector in the balance of payment, employment, and its share to GDP, the government has been taking a number of initiatives to improve the agriculture sector and domestic food security, partially leading to the recent stability in food prices.

Some of government’s initiatives include providing a 1.0tri/- agriculture facility at the central bank available to commercial banks, to lend to the sector at less than 9.0 per cent since 2021. In the same vein, the Bank of Tanzania further waived the statutory minimum reserve requirement for credit extended to agricultural activities.

The government also provided subsidies in agriculture inputs such as fertilizers to alleviate input prices during the pandemic and global supply shock experienced since the end of 2021. Moreover, in 2023, the Ministry of Agriculture oversaw the establishment of the Tanzania Agriculture Insurance Consortium (TAIC) which is a collaboration between the government, agriculture stakeholders, and insurance companies.

The primary objective is to empower farmers against the risks surrounding agricultural activities, while simultaneously attract financing into the sector.

Furthermore, in his budget speech, the Minister for Agriculture hinted on the Ministry finalizing talks with NBC Bank in regards to the National Food Reserve Authority (NFRA) issuing a Food Security Bond so as to ensure sufficient domestic food supply.

Despite this being a notable development for the sector, and a demonstrator of how capital markets can be utilized for economic development, generation of NFRA’s cashflows for debt service is a crucial question to be poised, so as to avoid addition of debt burden. We wait for the final structure of the programme.