Tanzania - Economic memorandum

FILE COPY Report No. 1567-TA Economic Memorandum on Tanzania Prepared for the May 1977 Meeting of the East Africa Consultative Group-Tanzania April 12, 1977 Eastern Atrica Country Programs I FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only In the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization  CURRENCY EQUIVALENTS 1/ SDR 1.00 = Tanzania Shilling (T.Sh.) 9.66 US$ 1.00 = Tanzania Shilling (T.Sh.) 8.30 T.Sh. 1.00 = US$0.12 TANZANIA FISCAL YEAR July 1st - June 30th l/ In October 1975 the Tanzanian Shilling was pegged to the value of the Special Drawing Rights (SDR) of the International Monetary Fund. The US Dollar/Tanzania Shilling exchange rate is therefore subject to change. Conversions in this report were made at US$1.00 to T.Sh. 8.30 which is close to the recent average exchange rate.  FOR OFFICIAL USE ONLY ECONOMIC MEMORANDUM ON TANZANIA Table of Contents I. Introduction ................................................. 1 II. Macro-Economic Developments .. 2 A. Background to the 1974/75 Economic Crisis ................ 2 Investment and Resource Mobilization ..................... 2 Trends in Aggregate Output ............................... 5 The External Sector ...................................... 8 Income Distribution and Employment ....................... 10 B. Economic Crisis and Response .12 Dimensions of the Economic Crisis .13 The Government's Policy Response .15 Some Destablizing Policies .17 C. Short-Term Balance of Payments Outlook .21 III. Performance in Key Sectors ..24 A. Agriculture and Rural Development .24 B. Industry .27 C. Education .29 IV. Major Issues for the Future ..32 The Need for an Export Policy .32 Domestic Resource Mobilization .33 Parastatal Efficiency ................................. , 35 Urban-Rural Income Differentials .36 The Rural Economy .37 This report has been prepared by Mr. S. Acharya who led the Basic Economic Mission to Tanzania in July/August 1976. The Basic Economic Report is in its final stages of preparation and will be issued after discussions with the Government in the summer. This document has a rastricted distribution snd may be used by recipients only in the performance of their official dutis. Its content may not otherwise be disclosed without World Bank authorlaution.  I. Introduction 1. Recent economic developments in Tanzania have been dominated by two sets of forces: a continuing history of institutional change in pursuit of social and economic objectives, and a severe economic crisis precipitated by the simultaneous deterioration of the terms of international trade and two successive years of drought. 2. The propensity towards institutional innovations has not been the product of political instability; on the contrary, Tanzania has had a degree of continuity and stability in political structure and leadership which is virtually unrivalled in Africa. It is this continuity which has permitted the evolution of a deeply held set of goals and has facilitated experiments in social transformation in pursuit of the goals. In 1967 the Tanzanian leadership carried out a searching assessment of the country's previous development experience and potential and emerged with a comprehensive articu- lation of social and economic objectives. These objectives, which were seen as mutually inter-dependent, include transition to a participatory socialist economy, self-reliance at local and national levels, and a more equitable distribution of income. The objective of egalitarian socialism was to be achieved through a strategy which emphasized rural development, social owner- ship of the major means of production, a fundamental reform of the education system, and the creation of economic institutions and structures conducive to participatory decision-making. This strategy has spawned a series of institutional initiatives, chief among which have been the nationalizations of large-scale industry, commerce and finance in the late 1960s, the creation of numerous parastatal bodies, the movement to create ujaama villages characterized by communal ownership and production, the 1972 decentralization of Government, and the more recent mass campaign of villagization. 3. It is important to stress this record of institutional change because it severely constrains any attempt at assessing Tanzania's economic performance in terms of the traditional categories of GDP growth, income distribution and macro-economic stability. This is partly because of the difficulty of assessing institutional changes themselves, since these are typically imbued with a high dose of non-economic objectives, and are charac- terized by a long-term perspective. At least as important, however, is the difficulty of factoring out the effects of more traditional economic policy instruments like public investment, tax/expenditure policy, wage/price policy and foreign exchange management in a period of rapid institutional change. Nevertheless, it would be unwise to go to the extreme of arguing that the traditional categories for assessing economic performance are irrelevant. For one thing the goals of growth, greater income equality and macro-stability are all explicit or implicit in the Tanzanian pantheon of objectives. For another, however important the non-economic components of Tanzanian goals, their successful attainment is, to a large degree, predicated on good performance with respect to more narrowly defined economic objectives.  II. Macro-Economic Developments A. Background to the 1974/75 Economic Crisis Investment and Resource Mobilization 4. A sustained effort at increasing investment expenditure has been one of the most impressive elements of Tanzania's development performance in recent years. As Table 1 indicates, gross domestic investment as a proportion of GDP increased from less than 15 percent in 1965 to over 20 percent in the early 1970s, where it has held steady since. There has been a corresponding increase in fixed capital formation, which has risen from 13 percent of GDP in 1965 to around 20 percent in the early 1970s. Within the category of fixed capital formation it seems legitimate to draw a further distinction between the monetary and the non-monetary sectors, on the grounds that the latter is largely beyond the influence of policy. 11 The increase in the ratio of monetary fixed capital formation to monetary GDP is, if anything, even more impressive than the aggregate record, having risen from 15 percent in 1965 to around 25 percent in the early 1970s. 5. This increase in investment effort occured during a period when the relative importance of different categories of investing agents was changing markedly. (See Table 2.) In 1965 the private sector accounted for 60 percent of all monetary fixed capital formation. By 1970 its share had fallen to under 30 percent, and by 1973 the public sector was responsible for almost four-fifths of monetized fixed capital formation. Quite clearly, the increase in aggregate investment effort during this period was spearheaded by a massive public sector investment program. Within the public sector the relative importance of parastatal enterprises increased sharply. 2/ 6. Until 1971 this impressive investment effort was matched by a strong savings performance; between 1965 and 1970 the ratio of gross domestic savings to GDP rose from 15.5% to 18.1%. However, after 1971 the savings performance clearly faltered. The underlying data do not permit a precise identification of where the shortfall in savings has been concentrated, but three trends seem to have been operating. First, private monetary savings, 3/ which accounted for two-thirds of gross savings in 1970 declined steadily from 12 percent of GDP in that year to 8 percent in 1973. In part this was due to increased taxation, but an additional reason has probably been the uncertain climate for investment opportunities; as the share of private investment has fallen so has the share of private savings. Second, despite a remarkable effort j/ The current policy emphasis on self-help investment would run counter to this assertion, but the national accounts system is yet to gear up to measure such investments. 2/ While there certainly was an immediate increase in the investment responsibility of parastatals following the 1967 nationalizations, subsequent increases can be wholly explained by the classification of the TAZARA project under parastatal investments. Excluding this single lumpy investment there has been no significant change in the relative importance of different public sector agencies in investment activity since 1970. 3/ In the national accounts estimates, "private monetary savings" is a residual item which includes savings attributable to cooperatives and East African Community Corporations.  Table 1: Investment and Savings Ratios 1/ Average 2/ 2/ 1965 1967-69 1970 1971 1972 1973 1974 1975 GDCF (current GDP price) 14.6 17.0 22.5 26.4 21.7 21.7 22.4 22.4 GDCF (constant GDP 1966 prices) 13.3 16.3 21.5 24.4 18.9 19.0 20.4 20.4 GDFCF (current GDP price) 12.9 16.0 20.5 24.2 21.1 20.5 19.4 20.8 Monetary GDFCF (current Monetary GDP price) 14.7 19.2 25.1 30.3 26.1 25.0 23.5 26.7 GDS (current GDP price) 15.5 16.4 18.1 17.6 16.6 14.9 8.3 9.2 GNS* (current GNP price) 3/ 14.5 15.8 17.9 17.2 16.3 14.5 8.1 8.9 GNS (current GNP price) 3/ 15.1 16.7 18.9 17.6 16.0 14.8 10.2 12.4 1/ The following standard abbreviations are used: GDCF = Gross Domestic Capital Formation GDFCF = Gross Domestic Fixed Capital Formation GNS = Gross National Savings GDS = Gross Domestic Savings 2/ Provisional 3/ Tanzanian accounting practice classifies all transfers as current transfers even though there has been a growing proportion of capital transfers in recent years. Thus we have defined GNS* to exclude all transfers, while GNS includes them. The correct definition would include only current transfers and fall between our two concepts.  - 4 - Table 2: Shares in Monetary Fixed Capital Formation (current prices) (percent) 1965 1967 1970 1973 Private 60 37 28 22 Public 40 63 72 78 Central Government 23 20 25 20 Parastatals 1 27 39 47 of which: TAZARA (-) (H) (16) (26) Other Parastatals (1) (27) (23) (21) Other 1/ 16 16 8 11 Total 100 100 100 100 1/ Includes Local Authorities and East African Community entities. Source: Table 7, Statistical Appendix.  - 5 - at raising Government revenue (the Central Government recurrent revenue/ GDP ratio rose from 15% in 1967 to 20% in 1973), the ratio of Government savings to GDP fell to 0.4% in the period 1971-73 from a level of 1.5% in 1966-68. Finally, though the parastatal sector has grown rapidly in recent years, through acquisitions and fresh investment, its contribution to savings has not grown commensurately. In sum, while the public sector has been successful in increasing its share of disposable income in the economy, it has not shown a high marginal propensity to save. On the contrary the process of income transfer seems to have been from a high-saving segment of the private sector to a lower-saving public sector. Trends in Aggregate Output 7. Between 1967 and 1973 GDP at constant factor cost grew at an annual rate of 4.5 percent. With population growing at 2.7 percent, this meant that per capita product grew at only 1.8 percent per year on average. For an economy investing over 20 percent of its income this was not an impressive record. Nor was there any noticeable acceleration in the rate of growth (see Table 3) in response to the increased rate of capital formation, indicating that the ex-post incremental capital-output ratio for the economy had increased over time. There were three reasons for this modest yield on aggregate invest- ment. First, the composition of investment during the entire period 1966-73 was tilted heavily in favor of high ICOR, long-gestating, infrastructure sectors (Table 4). Transport and communications together received 43 percent of all fixed capital formation, reflecting the major projects (road, pipeline and railway) undertaken to cement the trunk routes to Zambia. When investments in power and water supply are included the share of infrastructure rises to more than half of all fixed capital formation. The directly productive sectors of agriculture, manufacturing and mining received less than a quarter of fixed investments. 8. The second reason underlying the modest trend growth in aggregate output was the sluggish performance in the key sector of agriculture. Despite the importance attached to rural development in the country's development strategy since 1967, agricultural output increased at only 2.7 percent per year between 1967 and 1973, barely keeping pace with the rate of growth of population. With 40 percent of GDP originating in this sector the implications for the rate of overall GDP growth were obvious. Part of the explanation for a slow growing agriculture lay with the meager allocations of capital received by this sector (Table 4), but perhaps more important was the fact that this sector bore the burden of the major institutional changes which characterized this period of Tanzanian development. While in many respects these changes, especially the 1972 decentralization of Government, increased the potential for bro'ad-based rural development, it is difficult to escape the conclusion that during the period of transition, the upheavals and uncertainties in framework, organization and management of the supporting services for agriculture and rural development  - 6 - Table 3: Growth Rates in GDP and Selected Sectors 1/ 1 1967-73 1967-70 1970-73 1974 1975 GDP (factor cost) 4.5 4.3 4.7 2.2 4.6 Agriculture 2.7 2.7 2.6 -3.3 6.6 'lanufacturing 7.6 7.8 7.4 1.4 0.3 Transport and Communications 8.8 10.8 6.8 6.2 1.3 Construction 6.5 4.1 6.7 -0.9 -8.6 Public Administration and Services 7.7 5.3 10.2 13.1 15.3 1/ Provisional Source: Table 4, Statistical Appendix.  - 7 - Table 4: Fixed Capital Formation by Industry (percent shares) 1966-69 1970-73 1966-73 Agriculture 9.6 5.8 7.1 Manufacturing and Mining 16.4 15.7 15.9 Electricity and Water Supply 6.6 8.2 7.6 Transport and Communications 35.9 46.9 43.2 All Other 31.5 23.4 26.2 Total 100.0 100.0 100.0 Source: Table 9, Statistical Appendix.  - 8 - took their toll in terms of foregone potential output. Fina].ly, GDP growth during this period would have been greater if the efficiency of resource use had improved in the monetized, non-agricultural sectors. In fact, by 1973 there were both micro and macro signals that factor productivity in sectors like manufacturing was declining. The External Sector 9. Despite the sluggish performance of domestic output, the balance of payments did not present major problems up to 1973. Between 1967 and 1973 there was a gradual increase in net foreign exchange reserves. While this was an indicator of prudent foreign exchange management, it was not a true guide to the growth of Tanzania's foreign exchange earning capacity. In 1967 Tanzania had a small deficit on its trade account (equivalent to 3 percent of its merchanidse export earnings) which was more than compensated for by net earnings on non-factor services (Table 5), indicating a positive resource balance. By 1972 the trade deficit had grown to 40 percent of merchandise export earnings, and the current price resource gap (deficit on goods and non-factor services) stood at 5.2 percent of GDP. By itself an increasing resource gap is not a source for anxiety for it is a necessary concommitant of rising levels of resource transfer from abroad, and since 1970 Tanzania had been enjoying a sharply increased net capital inflow, much of it associated with financing of the TanZam Railway (TAZARA). What is more disturbing for the long-run viability of the external sector, however, is the disappointing record on commodity exports. The increasing reliance on foreign capital was associated with a declining share of domestic resources devoted to producing exports. 10. Between 1967 and 1972 the volume of merchandise exports increased by a little less than 3 percent a year, though this trend disguises sharp year to year fluctuations that might be expected in an agricultural economy. The growth in volume of the six principal unprocessed agricultural exports (coffee, cotton, sisal, cashewnuts, tea and tobacco), which together accounted for 50-60 percent of total commodity exports during this period, was even slower, barely 2 percent a year. The slow growth in agricultural production, noted earlier, was clearly reflected in these export trends. That the current price ratio of exports of goods and non-factor services to GDP declined only 2 percentage points between 1967 and 1972 (Table 5) is attributable to two developments: the beginnings of the commodity price boom which was already affecting export earnings by 1972, and increases in non-factor service earnings.l/ In 1973, as the world commodity price boom gathered steam and the pace of general world inflation accelerated, Tanzanian merchandise export volumes declined almost to 1967 levels. While there was some decline in the volume of principal agricultural exports, the shortfall was concentrated in other export categories indicating weaknesses in export performance unrelated to weather. Despite the shortfall in export volumes, price increases in excess of 20 percent increased merchandise export value by 11 percent in 1973, and kept the trade deficit from widening. At the same time increases in net capital inflow allowed an addition to net foreign exchange reserves of 215 million shillings. 1/ Much of these increases reflected earnings from freight and insurance of goods being transported between the port of Dar-es-Salaam and Zambia and Burundi.  - 9 - Table 5: Balance of Payments (Mainland) (millions of shillings) 1967 1972 1973 1974 1975 Exports f.o.b. 1,654 2,086 2,302 2,719 2,434 Imports c.i.f. 1,706 2,925 3,410 5,137 5,423 Trade Balance -52 -839 -1,018 -2,417 2,990 Services (Net) -66 256 130 152 451 Transfers (Net) 52 -30 35 323 689 Balance on Current Account -66 -613 -942 -1,942 -1,850 Capital (Net) 76 868 909 1,309 1,437 of which: Exceptional Financing - - - 383 475 Net Errors and Omissions 41 134 248 28 345 Overall Balance 51 389 215 -605 -68 Net Change in Reserves (+ = decrease) -51 -389 -215 605 68 As Percent of GDP (current market prices) 1. Exports of Goods and Non Factor Services 26.5 24.4 22.3 20.9 18.4 Goods 22.5 18.1 17.7 17.1 13.1 Non Factor Services 4.0 6.3 4.6 3.8 5.3 2. Imports of Goods and Non Factor Services 26.2 29.6 29.2 35.1 31.7 Goods 23.2 25.6 26.0 32.4 29.4 Non Factor Services 3.0 4.0 3.2 2.7 2.3 3. Current Price Resource Balance (= 1-2) 0.3 -5.1 -6.8 -14.2 -13.3 Sources: Tables 10 and 14, Statistical Appendix.  10 Although the balance of payments thus presented no real financing problem in 1973, the decline in export volume at the time of a gathering export price boom meant that the economy paid a severe penalty in terms of fore- gone earnings, even before the onset of the economic crisis of 1974. 11. Two other trends in the export sector may be noted. First, there was a small increase in the share of Tanzanian exports going to the East African market (mainly Kenya) from an average of 5 percent of total exports in 1966-68 to 8 percent in 1971-73. Though this increase was sizeable in relative terms, it was still quite small in absolute terms, which meant that Tanzania's export fortunes continued to be determined overwhelmingly outside East Africa. Secondly, the share of processed goods in total exports did not change markedly; it was 30 percent in 1966-68 and 28 percent in 1971-73. Thus, during a period when unprocessed agricultural exports suffered from a weak production record in agriculture, no real success was achieved in building up processed exports as a viable alternative. 12. On the import side the most striking trend was the doubling in merchandise import value between 1967 and 1973. In the earlier years nearly all the increase reflected volume growth, while in 1972 and 1973 it also captured significant import price inflation. The economy's increased depen- dence on imports is not only indicated by the ratio of imports to GDP, which increased sharply (Table 5), but also by the changes in composition in favor of intermediate and capital goods. The share of consumer goods fell from 41 percent in 1966-68 to 28 percent in 1971-73, while the share of capital goods increased from 22 percent to 27 percent, and that of intermediate goods from 37 percent to 45 percent over the same period. In part this change in composition of imports reflected import substitution in consumer goods, but it also underlined the increasing dependence of production on the importation of capital and intermediate goods from abroad. 13. Finally, the increases in net capital inflow during this period were overwhelmingly from official sources and on easy terms. The main donors were the People's Republic of China, IBRD/IDA, the Nordic countries, United States, Canada and Federal Republic of Germany. Most of the flows took the form of interest-free long-maturity loans. As a consequence, in 1973 the debt service on public medium and long-term debt claimed only 5.4 percent of earnings from exports of goods and non-factor services, and 80 percent of the public debt held at the end of 1973 had a maturity of over 20 years. Income Distribution and Employment 14. Improving the distribution of income has been a major focus of development policy since 1967. It is useful to distinguish three different dimensions of distribution: intra-urban, intra-rural and urban-rural. All three have witnessed important policy initiatives which have had varying degrees of success.  - 11 - 15. The nationalizations of 1967 and subsequent years were central to a strategy of preventing the evolution of an indigenous urban class reaping high incomes from commercial and industrial capital. At the same time the "Leadership Code" contained in the Arusha Declaration banned Party, Government and parastatal leaders from any kind of involvement with private business. In this way the possibilities of "topping up" Government salaries with private consultancies and directorships were sharply reduced. The danger of the growing parastatal sector becoming a source for high urban incomes was also perceived. In 1968 parastatal salary and fringe benefit policies were brought roughly into line with Government pay scales. These measures were largely preemptive in nature, they prevented or moderated the emergence of a high income, urban citizen elite, rather than actually reducing existing upper-level incomes. The task of reducing intra-urban income dis- parities amongst citizen wage and salary earners centered on two sets of measures: tax and wage policy. Taxation, especially indirect taxation, became increasingly progressive, while public sector wage and salary adjustments between 1967 and 1973 were always tapered and usually left the top brackets unchanged. Though taxation and compression of salary scales were powerful influences on the distribution of intra-urban citizen, wage/salary incomes, the actual change in the distribution of income during this period was much less,owing to the operation of two counter-balancing forces. At the highest levels of the income spectrum individuals benefited from rapid promotion as new posts were created and old posts were "citizenized". In the middle orders, incumbents benefited from a marked upward shift in the skill-composition of wage/salary earners. Even if the net effect on the distribution of urban citizen incomes was small, it is quite clear that without the tax and salary scale adjustments the distribution would have worsened markedly. 16. In rural areas much of the disparity in household incomes reflected factors innate in the soil, ecology and weather, which differ markedly across Tanzania's agronomic zones. However, in some areas a history of cash crop development had created income differences which were regarded as potentially inimical to the underlying equity objectives of the Tanzanian leadership. As a consequence, two kinds of policy thrusts can be discerned in the period 1967 to 1973. The first, a negative one, was a reluctance to use producer price policies to increase smallholder incomes in the belief that the benefits would accrue chiefly to the already well-to-do. More positively, 1968 saw the launching of the ujaama program as an effort at broad-based rural develop- ment centered on communally organized villages. It is difficult to estimate the overall effect of these policies on the distribution of rural incomes. To the extent that these policies entailed some loss of potential agricultural output, it is likely that the shortfalls in output and income were concentrated on the better-off farmers, who were more likely to have reaped the benefits of higher producer prices. On the other hand the increase in agricultural wages (decreed by Government policy) combined with the fall in agricultural employment worked in the opposite direction to worsen the intra-rural distribution of income.  -- 12 - 17. Perhaps the most important area of distribution policy has been that of urban-rural income differentials. Though over 90 percent of Tanzanians reside in rural areas, with tne overwhelming majority engaged in smallholder farming, the real income increases prior to 1967 had been skewed heavily in favor of the urban sector, dominated by wage/salary earners. Average small farmer real incomes were between a quarter and a third of average wage/salary incomes. This gap in urban-rural living standards has been a prime target for policy since 1967. In rural areas the effort focussed on raising output, incomes and public consumption, though achievements by 1973 were limited. Amongst wage-salary earners an incomes policy introduced in 1967 aimed at restricting nominal wage increases to 5 percent a year. While in the initial years the policy had a powerful effect on moderating increases in wage and salary scales, the marked upward shift in the skill- composition of the wage-salariat, which had occurred by the end of 1973, raised average wage/salaries at a rate nearer to 8-10 percent a year. Indeed there is strong evidence that the change in skill-composition reflected a widely prevalent practice of in-service promotion and job reclassifications, which weakened the inLluence of the incomes policy. In any case, by 1972 the incomes policy had been largely abandoned. Although these nominal increases in average urban citizen wages and salaries, noted above, translated into smaller real income increases owing to the effects of taxation and inflation, the available evidence nevertheless indicates that between 1967 and 1973 there was no significant change in urban-rural real income differentials. While this was a vast improvement on the previous record of sharply diverging living standards, it remained a cause for serious concern. 18. In one important respect the continuing gap in urban-rural living standards exacted a significant cost in terms of Tanzania's objectives of equity and growth. After 1968 urban formal sector employment increased rapidly (between 1969 and 1974 the rate of increase of regular employment was 5 percent a year). Much of this increase reflected increasing degrees of overmanning, especially, but not exclusively, in the growing parastatal sector, where the profitability checks on such overmanning were, at best, weak. The increase in formal sector employment, coupled to the rural-urban real income gap, created substantial incentives for rural-urban migration at rates well above those which could be accomodated in formal sector employment. The result was an increase in open urban unemployment (the rate of urban unemployment is estimated to have gone up from about 8 percent in 1969 to 16 percent in 1974) and rapid growth of the low-income informal sector. The equity costs of this process are obvious. Further, since in most areas of Tanzania in this period agricultural output was labor-constrained, there is likely to have been some loss of potential agricultural output associated with this "excess migration". B. Economic Crisis and Response 19. In 1974 the Tanzanian economy was buffetted by an economic crisis of unpre- cedented proportions. The proximate causes of the crisis were outside Tanzania's control and took the form of a severe drought and the most dramatic increase in import  - 13 - prices that Tanzania had experienced, but because of its severity and suddenness the crisis drew attention to some of the longer term weaknesses in savings, production and export performance outlined earlier. By doing so it triggered or accelerated a set of policy changes which were necessary for longer-term viability of the economy. However, the economic crisis did not slow the pace of social transformation. While the tenacity with which these changes were pursued attested to the Government's commitment to fundamental social change, it also heightened the risk of failure from over- commitment of human and material resources at a time when the availability of real resources had been significantly reduced by external shocks. Dimensions of the Economic Crisis 20. Late in 1973 the rains failed in several regions. By 1974 the drought had intensified and spread to other parts of the country. Between 1972 and 1974 the production of maize, the basic staple, declined by over 20 percent. 1/ Paddy and wheat suffered even sharper output declines. The effect on marketed surpluses of foodgrains, reflected in the domestic purchases by the National Milling Corporation (NMC), the parastatal charged with purchase and distribution of foodgrains, was even more dramatic. In the 1974/75 buying season NMC purchases of maize and wheat fell to less than one-fourth of their 1972/73 levels, while rice declined to less than half. At the same time that the domestic supplies into the public food distribution system were drying up, the demands on it were soaring. To bridge the yawning foodgrain deficit the Government was compelled to import 440,000 tons of foodgrains in 1974, much of it at the high commercial prices than prevailing in the world markets. Maize imports alone amounted to 291,000 tons, compared to an average of 36,500 tons in 1970-73. The total food import bill rose from 274 million shillings in 1973 to over a billion shillings in 1974. 21. Food was not the only addition to the import bill. The increase in petroleum prices and the general world inflation in manufactured and capital goods raised average import prices to Tanzania by nearly 60 percent. Despite a drop in volume the value of net petroleum imports increased by about 200 million shillings. Overall, import volume registered a small decline, but the net effect of the price increases was to raise the value of merchandise imports by over 50 percent from 3,410 million shillings in 1973 to 5,137 million shillings in 1974. 22. The drought also took its toll of Tanzania's exports. Export volumes of coffee, cotton and sisal declined by 32, 20 and 18 percent, respectively, and overall export volume declined by more than 20 percent. This decline coincided with the sharpest increase (about 50 percent) in export prices in Tanzania's history, an increase resulting from the massive surge in world commodity prices in 1974. For the second year in succession, but with more dramatic effect, a decline in export volumes sharply curtailed Tanzania's - benefits from the world commodity boom. The outcome was that despite the huge increase in export prices export receipts grew by only 18 percent between 1973 and 1974. 1/ These are orders of magnitude only, since the production figures for all subsistence crops in Tanzania are only estimates.  - 14 - 23. The effect of these movements in foreign trade prices and volumes was to widen the trade deficit from 1,108 million shillings in 1973 to 2,417 million shillings in 1974 (Table 5). A favorable balance on services and a much improved position of net transfers (due to food aid and an increase in bilateral grant aid) kept the increase in the current account deficit to a billion shillings. With net public capital inflow from traditional sources at roughly the same level as in the previous year, the additional current account deficit was financed by a massive depletion of foreign exchange reserves and recourse to IMF drawings (gold tranche, first credit tranche and 1974 oil facility). By the end of 1974 net foreign exchange reserves were equivalent to only one month's imports. 24. Continuing drought in the 1974/75 growing season further depressed export volumes in 1975; the effect was compounded for certain crops (notably cotton) by the disruptions caused by the massive villagization program initiated in the latter half of 1974. While average export prices continued to hold up (prices for some crops like sisal and cotton declined from their 1974 peaks), the lower export volume led to a ten percent decline in export value. Food imports continued heavy (415,000 tons) in the first two-thirds of the year, tailing off in the latter third as the improved weather in 1975 together with the Government's exhortative campaign to "grow food as a matter ofL life or death" began to show results in the form of a better harvest. Despite extremely tight controls on all other categories of imports, which reduced overall import volumes below the 1974 level, the total import bill increased by almost six percent, due to continuing import price inflation in t'he range of 10 to 15 percent. As a result of these trends the trade deficit w,-idened in 1975 to almost three billion shillings. However a heavy inflow of grant assistance and food aid and a much improved outturn on services account (partly due to the opening of the TAZARA line) kept the current account deficit from widening. The deficit was met through increased disbursements on project-related aid and a massive infusion of program assistance, including a $30 million World Bank program loan, further IMF drawings and multilateral assistance from the Arab Fund for Africa. Including multilateral and bilateral grants (classified in the balance of payments under transfers), total net capital inflow in 1975 was about $300 million or over $20 per capita. 25. While the worsened balance of payments situation was the most glaring symptom of the macroeconomic adjustment problems created by the economic crisis, domestic savings also suffered. The current price ratio of gross domestic savings to market price GDP declined from 14.9 percent in 1973 to 8.3 percent ln 1974. It is difficult to gauge the extent to which this decline was simply a mirror image of balance of payments developments and to what extent it reflected independent behavioral trends. Some elements of the latter were clearly at work, although the absence of up to date information on the composition of savings makes diagnosis difficult. Savings by the Central Government turned  - 15 - negative, perhaps in the order of 250 million shillings (1.5 percent of GDP), as a result of the increase in public sector wages and salaries associated with the May 1974 wage award (see below) and a rapid increase in some categories of recurrent expenditures. Recorded parastatal savings held up in absolute amounts, but only because of an inadequate treatment of the massive Government subsidy to the National Milling Corporation occasioned by the food relief effort. While some of the fall in private sector savings is attributable to the real income losses entailed by the economic crisis (in some quarters the alternative of reducing consumption would have risked starvation), some of it may have also reflected a trend decline in private savings. The Government's Policy Response 26. Two objectives dominated the Government policy response to the economic crisis: first, in the short-run to protect the weaker sections of the society from bearing the brunt of the crisis; and second, looking ahead, to maintain the pace of the development program - despite the reduced availability of real resources it chose a strategy of "growing out of the crisis". 27. In effect, the first objective meant importing as much food as was necessary to relieve the hardships inflicted by the drought. It also led to a massive wage increase in May 1974 which had double-edged consequences. To mitigate the effects of the rising food import bill, the Government sharply tightened controls on non-food consumer imports in mid-1974. Automobile imports were cut back drastically and liquor and tobacco imports banned. In addition overseas travel allowances for business and tourism were reduced, certain dividend remittances suspended and remittances to relatives abroad reduced. To reduce domestic consumption of petroleum, prices of gasoline and related products were raised to fully reflect cost increases and a ban was imposed on Sunday afternoon driving. 28. As the crisis unfolded it became clear that with a reduced avail- ability of real resources, the goals of maintaining the rate of real investment and shoring up the consumption of those suffering income losses from the drought required curbs on other elements of private and public consumption. Indirect taxes on textiles, beer and cigarettes were increased. Retail prices of key foodstuffs were raised in November 1974 (maize flour by 60 percent, sugar by 100 percent and rice by 150 percent), although food for famine relief continued to be free. A one-year wage freeze was declared after the May 1974 award, and wage adjustments of 12 percent in May 1975 were confined to the lower end of the wage-salary scales. No further general wage increases have been legislated since then despite increases in the National Consumer Price Index of 20 percent in 1974, 26 percent in 1975 and around 15 percent in 1976. 1/ 1/ The index covers 18 towns in Tanzania and is the most representative available price index. Other price indices relating to Dar-es-Salaam low-income wage earners and middle grade civil servants indicate sharper price increases.  - 16 - In a further effort to control the growth of public consumption the Government attempted to curb overall growth of recurrent expenditures, which had been accelerating since 1972/73. Between 1968/69 and 1972/73 net recurrent expenditures had grown at 16 percent per year. Between 1972/73 and 1974/75 the per annum rate of growth increased to 45 percent owing to the continued expansion of Government responsibilities, the wage awards of 1972 and 1974 and the expanded need to purchase food in world markets. The 1975/76 budget constituted a determined effort to reverse the trend and cut back recurrent expenditures (net of debt repayments) to a level 14 percent below the revised 1974/75 estimate, implying a very substantial real reduction in recurrent expenditure. 29. To facilitate the longer-term adjustment to both the short-run crisis and the longer-term legacy of worsened terms of trade, the Govern- ment realized the importance of increasing the economy's productive capacity, especially the production of tradeable commodities which could help bridge the massive balance of payments deficits. Government action stressed two instruments of policy: agricultural producer prices and the composition of public investment. In May and November 1974 the Government announced substantial increases in agricultural producer prices (127 percent for maize, 75 percent for wheat and 35 percent for paddy). At the same time the process of review and decision making on agricultural pricing was strengthened and institutionalized through the staff work for the annual Agricultural Price Review by the Ministry of Agriculture's Marketing Develop- ment Bureau. This regular review focussed attention on both the level and structure of producer prices. Further price increases were announced in September 1975 (for details see below) for the 1975/76 growing season, and again in October and December 1976 for the 1976/77 season. The latter increases were facilitated by the 14 percent devaluation of the Tanzanian shilling in October 1975. 30. Even more important for the rate and structure of long-term growth was the restructuring of public development expenditure carried out in the budgets of 1974/75 and 1975/76. The 1974/75 Government Development Budget allocated 36 percent of expenditures to directly productive sectors of agriculture, industry and mining, compared to a realized average of 23 percent in the preceding four years (Table 6). For total public investment (as defined in the Annual Plans) 45 percent was allocated to directly productive activities. Despite implementation problems the realized shares -- 28 percent for Government Development expenditures and 41 percent for total public investment -- were higher than corresponding averages for preceding years. For 1975/76 the allocations to directly productive sectors in the Government Development Budget and the Annual Plan were even higher than the shares originally budgeted in 1974/75. What was particularly impressive about the new directions in public investment was that for projects started in 1975/76 fully four-fifths of public investment funds were allocated to the directly productive sectors. As the allocation for new projects is a more genuine  - 17 - indicator of current priorities than is the full investment flow, this percentage makes apparent the change in investment strategy. The 1976/77 budget and Annual Plan maintain high shares for directly productive sectors, at 42 and 48 percent, respectively. Table 6 : Sectoral Shares in Government Development Expenditure and Plan Investment- (Percentages) Annual Plan Investment 1975/76 Government Development Expenditure Planned 1970/71- 1974/75 1975/76 1974/75 All New 1973/74 Prov. Actual Budget Est. Prov. Actual Projects Projects Directly Productive 22.9 28.2 38.5 41.3 47.7 78.8 Economic Infrastructure 47.8 44.5 36.4 36.5 32.0 12.1 Social Infrastructure 8.0 8.7 9.6 7.1 8.2 8.6 Other 21.3 18.6 15.5 15.1 12.1 0.5 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: Statistical Apperdix Tables 21 and 22. Some Destabilizing Policies 31. The economic crisis was aggravated by two steps taken before its full extent was realized. First the wage award of May 1974, which increased minimum wages by more than 40 percent and incorporated tapered increases for higher incomes, increased unit labor costs by 30-35 percent. The aim was to compensate low-paid wage earners for past cost-of-living increases and to anticipate future increases: the effect was to worsen inflation and hasten the decline in saving. The second step was the initiation of the villagization program which quickly escalated into a far more comprehensive effort than had been foreseen, involving the move- ment, in 1974, of several million peasants into new or old settlements from their previously scattered homesteads. This massive movement of persons inevitably had an adverse impact on agricultural production in 1975. As the newly settled peasants, understandably, concentrated their efforts on growing subsistence food crops, and were encouraged to do so by the Government, the marketed surplus of export crops in affected areas bore a disproportionate burden of adjustment (cotton is the prime example).  - 18 - 32. Even after the full extent of the economic crisis should have become apparent, the implied scarcity of resources was not fully appreciated in all quarters. Late in 1974 and early 1975, the TANU Party leadership advanced the target dates for universal primary education (UPE) and universal rural water supply (URWS) from 1989 to 1977 and from 1991 to 1980, respectively. In large part the pressure for rapid expansion of social services arose from the accelerated villagization program: the newly settled villagers expected the benefits of improved social services. To some extent the declaration of these new targets for social services should be seen as exhortative attempts to mobilize self-help efforts to provide services. Certainly, the Government continued to hold the line on budgetary allocations to reflect the priority for directly productive sectors. Compared to 1974/75 the regional development budget allocation for primary education in 1975/76 was 28 percent higher and that for rural water supply 22 percent higher, increases which were not out of line with the 20 percent increase in the overall development budget. And the 1975/76 recurrent budget allocation for primary education was only 9 percent higher than expenditures in the previous year. Instead of greatly stepped up budget allocations the Government has concentrated efforts (especially in primary education), on generating local self-help efforts to construct low- cost facilities and has experimented with various alternatives for reducing the cost of teacher's services. Although these have been successful in holding down budgetary expenditures in the short-run, a careful analysis indicates that recurrent costs implications of UPE are likely to be quite severe in the medium and long-run. 33. The wage awards of 1972 and 1974, the determination to push ahead with development spending, and the growing tendency towards over-commitment of Government efforts (exemplified by the growth of administrative respon- sibilities associated with the decentralization of Government) found reflection in the rapid increase in Central Government expenditures (Table 7). Between 1972/73 and 1974/75 net recurrent expenditure nearly doubled, rising from 2,066 million shillings to 3,991 million. Development expenditures rose even faster and in 1974/75 were two and a half times what they had been in 1972/73. With revenues growing slower than recurrent expenditures, the surplus on recurrent account disappeared and the overall deficit on Central Government operations grew fourfold in nominal terms. That inflation was only a part of the story behind these large increases in nominal values can be seen by examining the trends as shares in GDP (Table 8). Between 1972 and 1974 the share of Central Government expenditure increased from 24 percent to 33 percent of GDP, that of recurrent revenue grew from 18 to 22 percent, and the overall deficit grew from 6 percent to 11 percent. By any standards, this was a dramatic increase in the scale of Central Government operations in the economy, and an expansion which was mainly funded by drawing on resources outside the recurrent revenue system. 34. Even though net foreign finance to the Government in the form of loans and grants was increasing rapidly in absolute amounts during this period, it failed to keep pace with the widening of the overall budget deficit. Its share in the financing of the overall deficit fell from 73 percent in  Table 7: Summary of Central Government Operations (millions of shillings) 1/ 2/ 3/ 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 4/ Adjusted Recurrent Revenue 1,682 1,803 2,284 3,022 3,900 3,994 4,731 Net Recurrent Expenditure 1,555 1,643 2,066 2,695 3,991 3,630 4,033 Recurrent Surplus 127 160 218 327 -91 364 698 Development Expenditure 889 884 956 1,642 2,352 2,309 3,220 Other "Expenditure" 5/ 38 -35 -124 -232 -22 502 -8 Overall Deficit (- deficit) -800 -689 -614 -1,083 -2,421 -2,447 -2,514 Financed by (percent shares) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Net Foreign Finance 32.4 50.1 72.8 57.6 56.9 40.6 67.2 (Net Loans) (31.9) (43.0) (61.2) (37.9) (33.0) (16.6) (33.9) (Grants) (0.5) (7.1) (11.6) (19.7) (23.9) (24.0) (33.3) Net Domestic Finance 67.6 49.9 27.2 42.4 43.1 59.4 32.8 (Banking System) (39.6) (41.2) (-0.2) (25.9) (28.1) (47.6) (20.0) (Non-bank Sources) (28.0) (8.7) (27.0) (16.5) (15.0) (11.8) (12.8) 1/ Provisional Actuals. 2/ Approved Estimates for Revenue; Revised Estimates for Expenditure and Financing. 3/ Budget Estimates. 4/ The main adjustment is exclusion of foreign grants which are treated as a financing item. 5/ Reconciliation item between fiscal and monetary accounts which in recent years has grown rapidly to include expenditures not fully accounted for in the revised expenditure estimates. Source: Table 20, Statistical Appendix.  - 20 - Table 8: Fiscal Trends: Ratios to GDP (market prices) 1/ 1971 1972 1973 1974 1975 1976 Adjusted Recurrent Revenues 17.8 18.1 20.2 21.8 21.2 20.4 Total Expenditure 25.4 24.0 26.7 32.9 34.3 32.0 Net Recurrent 16.3 16.5 18.1 21.1 20.5 17.9 Development 9.1 8.2 10.0 12.6 12.5 12.9 Other 0.0 -0.7 -1.4 -0.8 1.3 1.2 Overall Deficit -7.6 -5.8 -6.5 -11.1 -13.1 -11.6 1/ Assumes 1976 growth of 15 percent in nominal value of market price GDP over 1975.  - 21 - 1972/73 to 57 percent in 1974/75, with the residual being taken up by a very rapid increase in Government borrowing from the domestic banking system. In 1974/75 the Government borrowed 856 million shillings from the banking system or nearly three times the recourse to banks in any previous year. One consequence was a 27 percent increase in the supply of money and quasi-money in 1974/75. In a regime of direct controls on prices and imports, no short-run links can be drawn between movements in money supply on the one hand and inflation and balance of payments on the other. Never- theless it is quite clear that monetary growth of this magnitude contributed to the environment of excess demand. 35. Though the 1975/76 budget incorporated a serious attempt to cut back net recurrent expenditures, success was limited. The revised estimates do not tell the whole story for they have not yet been reconciled with the banking system accounts. Every indication suggests that the recent growth in spillover of expenditures authorized in one fiscal year into the next (a major reason for discrepancies between the fiscal and monetary accounts) has been associated with attempts by spending units (often successful) to evade the stringent expenditure limits imposed by the Treasury. Total expenditures in 1975/76 were clearly well above budgeted amounts and Central Government recourse to the banking system increased from the 1974/75 level to 1,089 million shillings, compared to the 150 million shillings estimated in the annual Finance and Credit Plan. Quite clearly, it was proving difficult to reverse the pattern of rapid expenditure growth in an environment characterized by continuing inflation and an underlying tendency to extend human and financial resources in pursuit of ambitious social and economic objectives. The 1976/77 budget underlines this point with its increased allocations for recurrent and development expenditures (the latter is 40 percent above the revised estimate for 1975/76). To avoid excessive recourse to the banking system the 1976/77 budget calls for a 20 percent increase in net recurrent revenues. But, given the problems of budget control, and the uncertainties associated with year-to-year spillovers of expenditures, it is not clear whether recourse to the banking system can be held to the planned amount of 700 million shillings. C. Short-term Balance of Payments Outlook 36. In 1976 the balance of payments picture improved (Table 9). The trade deficit declined from US$400 million to 250 million due to the bonanza cf high coffee prices, a recovery in cotton production from the 1974/75 slump, and a slight fall in the value of imports attributable to greatly lessened need for foodgrain imports and continuing tight restriction on all other categories of imports. Project related capital inflows remained at the high level of prior years, although exceptional balance of payments assistance was limited to $24 million (SDR 21 million) from the IMF's export compensatory financing facility. (Tanzania was eligible for this drawing because of the slump in exports in 1975.) The overall balance of payments is expected to show a surplus of about $35 million for the year and net foreign exchange  - 22 - Table 9: BALANCE OF PAYMENTS SUMMARY AND FORECAST TANZANIA MAINLAND (Millions of Current US$) 1/ 2/ 1973 1974 1975 1976 l977 A. Exports (f.o.b.) 327.9 380.7 328.4 438.3 480.0 B. Imports (c.i.f.) -485.7 -719.1 -731.9 -692.1 -835.0 Trade Balance -157.8 -338.4 -403.5 -253.8 -355.0 C. Services (net) 18.6 21.2 60.9 60.1 65.0 D. Transfers (net) 5.0 45.3 93.0 83.3 100.0 Balance on Current Account -134.2 -271.9 -249.6 -110.4 -190.0 E. Public Capital (net) 136.0 97.7 108.7 110.2 115.0 F. Other Capital (net) -6.5 31.9 21.0 23.9 25.0 G. Net Errors and Omissions 35.3 3.9 46.5 11.0 - Overall Balance 30.6 -138.4 -73.4 34.7 -50.0 Y. Exceptional Financing 31 - 53.6 64.2 24.2 I. Net Change in Reserves (+ = decrease) -30.6 84.8 9.2 -58.9 Total of H and I -30.6 138.4 73.4 -34.7 1/ Estirated. 2/ IBRD staff projections. 3/ Includes IMF facilities, IBRD program loan, and other bilateral and multilateral balance of payments support.  - 23 - reserves have increased to $115 million which is equivalent to two month's import requirements at the 1976 level, a modest improvement over end-1975 but still an inadequate level. For 1977 the Government's objectives are to sustain the 5 percent rate of growth of GDP attained in 1976 and to further reduce the rate of domestic inflation. Based on this overall growth target, our projections (Table 9) indicate a widening of the trade deficit by some $100 million, reflecting primarily a selective liberalization of imports following several years of very tightly constrained import levels. The value of exports is projected to increase only moderately. Almost all of the improvement in exports in 1976 was due to higher prices for coffee and cotton, along with a recovery in the volume of cotton production, and further increases of this magnitude cannot be counted on in 1977. Thus even with anticipated improvements in the volume of sisal, cashew, tea and tobacco exports the total increase in export earnings is not expected to exceed 9-10 percent. 37. On the import side an increase of some 20 percent in value terms (13 percent in real terms) is projected. Consumer goods imports have been maintained at austerity levels for the past three years, and this restraint will continue during 1977. However, raw materials and spare parts imports have been severely constrained with the result that essential industries have been suffering from production bottlenecks. The Government intends to relax the import control system sufficiently to allow for an increase in the volume of industrial inputs and spare parts sufficient to raise the average utilization rate of industrial capacity from 60 percent to 80 per- cent. The projected rate of growth in industrial output is 7 percent, compared with an average annual growth rate of only 2.5 percent over the period 1974-76. The program of import liberalization is also designed to permit an increase in inventories which are inadequate at the present time, and in spare parts for the transportation sector. Finally, it is intended to increase foodgrain imports from $15 million in 1976 to $20 million in 1977 in order to begin building a strategic grain reserve. 38. Our balance of payments forecast assumes that grant assistance plus project-related capital inflows will be maintained at roughly the same level in real terms as in 1976. The same holds true for net service income. The residual deficit in the balance of payments which results from the above set of assumptions is $50 million. Of this residual gap $15 million will be filled by the recently approved IDA program credit and there are good chances of obtaining the rest from other multilateral and bilateral sources.  - 24 - III. Performance in Key Sectors A. Agriculture and Rural Development 39. Agriculture dominates the Tanzanian economy, contributing 40 percent to GDP, 80 percent of exports (in terms of both unprocessed and processed agricultural products) and employing around 90 percent of the labor force. Between 1967 and 1973 agricultural value added grew at only 2.7 percent per year, slightly less than the rate of population growth. Behind this average trend lay sharp year-to-year fluctuations in output of both subsistence and monetized agricultural output, a record of instability which underlines the dependence of Tanzanian agriculture on natural factors like weather. The slow rate of growth has been a characteristic of both cash crops and foodgrains. As a result export volumes rose little, while an emerging food deficit led to repeated recourse to foodgrain imports since 1971. Most of the growth which did occur came from expansion of the area under cultivation. Though population pressures have begun to be felt in areas like Bukoba, Sukumaland and Kilimanjaro, potentially good quality land remains unutilized in many districts and considerable growth potential exists from further extensions of cultivated area. In the long-run even more can be expected from inten- sification of agricultural practices, which until 1973 had shown little progress. 40. The causes underlying the weak agricultural performance are varied and include inadequate farmer incentives, insufficient research on appropriate technical packages (especially for foodcrops), a poor infrastructure base, an inefficient extension service and serious defects in supply and marketing systems. One common thread has been the absence of a stable environment for peasant producers which offers remunerative returns to farmer effort combined with adequate and reliable support in the form of marketing, inputs and extension services. Though rural development has been at the center of the Government's development objectives since 1967, the Government strategy has stressed the creation of institutions appropriate for broad-based, long-term equitable development rather than quicker income/output gains from provision of incentives and supporting infrastructure and services to progressive farmers. At least since 1967, the Government has viewed the latter strategy as fraught with the danger of increasing skewness in the distribution of rural incomes and assets. Thus, until recently, producer price policy had been neglected. Instead the Government has concentrated its energies on undertaking a series of institutional reforms aimed at moving the rural sector towards the long-term vision of communal production in small, self-reliant villages. Amongst the institutional changes which have had far-reaching impact on the rural environment have been the ujaama village movement (launched in 1968), the decentralization of Government in 1972, the accelerated villagization program of 1974-76 and the 1976 overhaul of the structure of cooperatives, which abolished  - 25 regional cooperative unions and ushered in multipurpose village cooperatives. Over the same period the specialized marketing boards have been transformed into parastatal crop authorities with much wider functions and responsibilities. 41. The implementation of these institutional changes has frequently embodied deviations from their original conception. For example, the ujaama program conceived an almost spontaneous coming together of scattered homesteads -n mutually supportive, participatory and self-reliant village communities. In fact most of the ujaama villages formed prior to 1974 were created under the aegis of massive exhortative campaigns by the Government and Party and depended heavily on the central bureaucracies for their impetus, design and services. The most recent spate of villagization was accomplished through a combination of persuasion and compulsion, though the latter ran contrary to the principles outlining the evolution of ujaama villages. Even though the means adopted have sometimes gone against initial principles, however, there has been a consistent attempt to create a situation which, at least physically, is closer to the long-range vision of village communities. And institutional changes like the decentralization of Government have brought day-to-day decision making closer to the rural masses and have laid the ground for the mounting of integrated rural development programs. Still, this succession of institutional reforms has repeatedly altered the framework and organization within which rural produc- tive activity is carried out and has undoubtedly imposed considerable uncertainty costs on the average peasant farmer. 42. Since 1974, on the other hand, the Government has shown increasing pragmatism in the execution of policy in the rural sector. For example, though the villagization program was carried out zealously (and often in an unplanned and costly manner), the newly settled farmers were allowed to farm on an individual basis. Physical grouping of scattered homesteads into villages was justified on the basis of expected scale economies in the pro- vision of productive inputs and social services and the anticipated speed in adoption of innovations. While these "technocratic" elements were also a part of the original ujaama vision, its communal organization aspect has been shelved, at least for the present. Recent Government investment programs like the National Maize Project attest to the concern for increasing production and constitute a part of the strategy of reallocating resources into directly productive activities. The Government has also taken steps to institutionalize agricultural producer price policy and use it as a major policy instrument. Table 10 records the recent pattern of producer price increases. 43. It is difficult to gauge the effect that these producer price increases have had on agricultural output and incomes, since their influence to date has been swamped by the effect of the recent droughts and the program of villagization. Moreover, recent changes in the marketing system have compounded uncertainties associated with producing marketable surpluses and may have vitiated some of the effects of producer price increases. In March 1976 the regional cooperative unions and primary marketing societies were  - 26 - Table 1C: Producer Prices for Selected Agricultural Crops by Marketing Year (Shillings per kilogram) 1/ 2/ 3/ Percent Increase 1973/74 1974/75 1975/76 1976/77 1977/78 1973/74-1977/78 Cotton (seed) AR 1.13 1.50 2.00 2.00 2.30 104 BR 0.60 0.65 1.00 1.00 1.15 109 Cashewnuts Standard Grade 0.95 1.05 1.05 1.10 1.15 21 Under Grade 0.75 0.95 0.95 0.95 1.10 33 Tobacco Flue-cured 5.85 5.85 7.00 7.40 7.40 28 Fire-cured 2.40 2.55 3.00 4.50 4.50 91 Maize 0.33 0.50 4/ 0.75 0.80 0.85 5/ 157 Wheat 0.57 0.77 4/ 1.00 1.20 1.25 5/ 105 Rice (paddy) 0.59 0.65 4/ 0.80 1.00 1.20 103 1/ Announced November 1974. 2/ Announced August 1975. 3/ Announced September 1976. 4/ Announced April 1974. 5/ Announced December 1976. Source: Marketing Development Bureau, Ministry of Agriculture.  - 27 - abolished, while villages became multipurpose cooperative societies under the new Villages and Ujaama Villages Act. The marketing functions of the old cooperative structure were taken over by the parastatals; whether these abrupt changes will have significant disruptive effects remains to be seen. 44. As regards the pricing and distribution of inputs the picture is more complicated. Prices of production inputs are established centrally but because the various agricultural parastatals operate different input subsidy and credit schemes, prices of selected inputs vary throughout the country and for different uses. For cash crops the input subsidies are recovered through the pricing structure for the outputs. Though this implies allocative efficiency costs, it is generally considered superior to full-pricing-cum-credit schemes owing to the long history of failures with small farmer credit schemes in Tanzania. As with outputs, the uncertainties relating to the distribution of inputs often makes availability a more important determinant of farmer production decisions than price. B. Industry 45. Manufacturing activities contribute about 10 percent of Tanzania's GDP. Between 1967 and 1974 the manufacturing sector was systematically transformed from a large private and foreign-owned set of activities into one where ownership and control was vested predominantly with parastatal companies. By 1974 parastatal companies accounted for about one-half of manufacturing value-added and 50 percent of new capital formation. The growth of public ownership of manufacturing enterprises was accompanied by increasing reliance on direct controls in allocation decisions and a reduced role for the market and indirect interventions such as taxes, subsidies and the exchange rate. Components of the control system include increasingly centralized decision-making on investments, detailed allocations of foreign exchange through import licensing, an even more detailed regime of price controls and rules of procedure operated by the National Pricing Commission, credit allocation according to the annual Finance and Credit Plan, wage-setting by the Permanent Labour Tribunal and the Government, and the operation of various kinds of confinement schedules which constrain the channels of trade open to manufacturing enterprises. At the same time that the external environment for manufacturing firms was becoming increasingly subject to controls, within the firms material incentives for motivating workers and managers were being deemphasized. 46. The proliferation of control systems has not been matched by an equivalent increase in the capacity to monitor and coordinate their operation. Even the coordination of public investment decisions in manufacturing has  - 28 - proven difficu't. Parastatal enterprises often appear to initiate and decide on major industrial investments without appropriate screening (at an early stage) by central ministries responsible for planning industrial development. Central control does not eliminate the need to measure enterprise performance and calibrate investment and output decisions accordingly. On the contrary, it places greater demands for the creation of systematic performance criteria. Despite this clear need, performance indicators consistent with the control system are still lacking. By default, financial results continue to be relied on as a measure of performance, even though they are frequently more dependent on decisions regarding prices, wages and input supplies taken outside the enterprise, rather than decisions and effort applied within. the firm. At the micro-level, though material incentives have certainly been weakened, adequate non-material substitutes are still generally lacking. Nor is a readiness to use material incentives within an enterprise easily implementable in the absence of an accepted framework for enterprise performance. Thus the bonus system for parastatal workers which has been in existence for some years (but little-used) has continually foundered on the absence of an objective and unequivocal yardstick for measuring parastatal performance. The Government has been well aware of all these problems but has yet to devise effective solutions. 47. The difficulties with devising an appropriate framework for industrial activities has been reflected in the overall performance of the manufacturing sector. Between 1967 and 1973 manufacturing value added increased at 7.6 percent per year. But this growth was not commensurate with the increase in productive factors allocated to this sector. A three year moving average of the observed incremental capital-output ratio for manufacturing (with output lagging investment by a year) shows a steady upward trend, from 3.6 in 1968 to 4.9 in 1972 and to 6.6 in 1973, though the latter figure is heavily influenced by the 1974 stagnation in industrial output which is attributable to a number of short run factors and the sudden tightening of foreign exchange licensing (Statistical Appendix, Table 8). A recent estimate by the Ministry of Manpower Planning l/ indicates that aggregate labor productivity in manufacturing may have declined by over 3 percent per year between 1969 and 1974. These aggregate trends are consistent with numerous specific instances of overmanning which have developed in enterprises. Recently the Government has become acutely conscious of these trends, especially the prediliction towards overmanning, and has taken some measures to reduce the dimensions of the problem. In March 1976 the Central Government set an example by firing nearly 10,000 of its employees (about 6 percent of the Government work force). Specific actions have been initiated against individual parastatals, including retrenchments in the head office of the Tanzania Tea Authority and at Texco (the textile holding company) and recent reductions in work force at the cement and packing plants. Despite these ad hoc positive moves the problem of low factor pro- ductivity remains critical in the manufacturing sector and is linked to the continuing absence of a workable system of performance indicators and incentives (whether material or non-material) for enterprises and their staffs. 1/ In the Annual Manpower Report to the President, 1974.  - 29 - 48. Until the early 1970s the Government did not have a well-articulated long-term industrial strategy. Most industrial investment went into consumer- good import substitution. Since 1974 a basic industrial strategy (BIS) has been adopted after serious consideration of other alternatives. In essence, the strategy aims at a gradual structural transformation of the economy by giving priority to industries that process domestic raw materials for consumption in the home market (such as textiles and sugar). The strategy tends to view the subsequent development of manufactured exports as a logical extension of production for the home market. However, given the stringency of the present and foreseeable foreign exchange situation it is not at all clear whether the strategy's implicit dependence on intermediate and capital good imports can be sustained without more emphasis on accelerated expansion of manufactured exports. In fact, despite this long-term strategy, Government investment policy in recent years has favored direct investment in export-oriented public sector industries, notably, cashew-processing, sisal-spinning, meat-processing and leather processing, and has been actively exploring prospects in mineral-based exports such as soda-ash. While most of the recent export-oriented investments will bear fruit late in the decade, there is scope for generating more exports from existing manufacturing industries. But that would require improvements in underlying factor productivity and favorable changes in the institutional and price policy framework for manufacturing exports, which have tended to be neglected thus far. 49. The importance of tailoring industrial investments to the long-term outlook on foreign exchange availabilities has been underlined by the recent incidence of excess capacity in industrial activities caused by the scarcity of foreign exchange for spare parts and materials. In 1975 eight of the sixteen major industries for which figures are available were producing at rates at least 10 percent below their level of production in 1973 or 1974. C. Education 50. Since Independence the development of the Tanzanian education and training system has been structured around detailed manpower forecasting and planning, with the primary goal of achieving full local skill-sufficiency (in effect, self-sufficiency in higher level skills) by 1980. As a consequence initial resource flows and Government attention focussed on expanding the capacity of secondary schools and higher education institutions. The volume, composition and content of education was initially built around producing a few thousand graduates to fill high/middle level manpower imbalances. A thorough revaluation of the education system in 1967 by the Tanzanian leadership found it elitist in character, inadequate for preparing students for productive work, excessively oriented towards book-learning, and divorced from real-world experience. A subsequent reformulation of objectives stressed education which  - 30 mould benefit the masses (instead of the few), would be restructured in content to match education with the pupil's anticipated role in society, wqculd stress experitcence and practical work in the curriculum, and would encourage the development of schools and colleges which were self-supporting -Inancially, true examples of the national goal of self-reliance. 51. Until 1974 progress towards these new priorities was mixed. Perhaps the most successful implementation of mass-oriented education policy occured in the field of adult education. In 1972, following successful development of a pilot project, the Government launched a national literacy program aimed at eliminating illiteracy by the end of 1975. Though the program has fallen considerably short of the target, it has nevertheless recorded impressive gains. Enrollment in literacy classed grew from 370,000 at the end or 1970 to about 3.6 million by the end of 1974, or about 70 percent of the r-ginal estimate of adult illiterates in the population. Of course, enrollment aloes not necessarily imply regular attendance and the original figure of 5 maillion illiterates is believed to have been an underestimate. Nevertheless progress has been remarkable. A particularly encouraging aspect of the literacy program has been its success in mobilizing people to act as instructors and in making use of existing facilities. In that sense it has been the most cost- effective component of the Tanzanian education system. While instructors came -rom ma-ny sources (school teachers, secondary school pupils, TANU, etc.) the largest proportion - over half until 1973 and fully three-quarters in 1974 - were volunteers, usually primary school graduates, who were paid a small honorarium of 30 shillings a month. Classes have been held in primary schools, factories and government offices: no new construction of facilities has been required. In other respects progress towards the educational goals articulated in l%97 was slow. Though enrollments in the first year of primary school increased faster than the rate of population growth in the relevant age category, more than 40 percent of this group were still being missed by the education system in the early 1970s. The emphasis in primary schooling was on improving the continuation rate within the primary system more than on rapid expansion of the base. Throughout the education system examinations continued to play ar. over-whelmingly important role. There was some progress in improving curriculum in favor of more practical subjects, but by and large book-learning continued to dominate. The growth of self-help activities in constructing and operating schools was slow. It was against this background that the TANU Party's National Executive Committee adopted the "Musoma Resolution" in late 1974. The major recommendations were advancement of the target date for UPE to November 1977, the diversification of secondary school curricula, the requirement of practical work experience (at least two years) before a candidate could enter university and a call for downgrading the role of examinations.  - 31 - 53. The most far-reaching recommendation was the new target of UPE by 1977. It immediately raised issues of physical and financial feasibility and had wide-ranging implications for the viability of existing educational programs such as the adult literacy campaign and ongoing curriculum reform within the primary school system. While the sudden announcement of the UPE target can be readily criticized as an example of ad hoc and uncoordinated decision-making, it had some positive aspects. First, it decisively shifted priorities in education expansion in favor of primary mass-oriented education. This is reflected in the dramatic increases in Standard I enrollments from under 250,000 in 1974 to 665,000 in 1976. Second, by placing seemingly impossible demands on the delivery system, it jolted the planners and implementers into seriously experimenting with lower standard physical school plant and much higher proportions of self-help than had been entertained before. This was as true for teaching staff as for school plant. Since the existing stock of trained teachers was quite inadequate for the new loads implied by the accelerated UPE program, innovations had to be tried in creating teaching staff, including the use of various categories of untrained teachers, such as primary school leavers, secondary school leavers doing National Service and adult literacy instructors. Basically UPE may be seen as a way of mobilizing people at all levels towards a relatively easily defined objective. 54. The potential dangers implicit in such a crash program hardly need emphasis. First, by placing excessive demands at the grassroots level the program could disrupt existing efforts such as the literacy campaign. Second, with the target expressed in quantitative terms, the emphasis on boosting enrollments is likely to occur at the expense of all other dimensions of educational outputs. Third the changed delivery system for the massive expansion in intakes could create new inequities within the primary school system between "UPE schools" and "regular schools" with the output from the latter getting preferential treatment. Above all, the greatest concern with the UPE program is the additional resource requirements associated with its implementation. A detailed analysis indicates that while the capital costs might be quite manageable through maximum self-help construction of classrooms and teacher houses, massive future claims on the recurrent budget will be difficult to evade on present policies. The 1976/77 budget provides support for this view. Despite the rapid increase in enrollments, noted above, the regional development budget allocation for primary education is 18 percent lower than in 1975/76, indicating major successes in mobilizing self-help labor for construction of classroom and teacher houses. But the recurrent budget allocation for primary education is 26 percent higher than expenditures in the previous year, despite the heavy reliance on "untrained" teachers. To achieve serious economies in the longer-run recurrent budgetary costs the Government needs to consider structural changes including reducing the number of years of primary education (at present seven), resorting to "double-shifting", where one teacher instructs two standards, one in the morning and one in the afternoon, reduction of the real level of teacher salaries, and cost-recovery from villages as they become the productive income earning units they are intended to be.  - 32 - IV. Major Issues for the Future 55. Confronted by the economic crisis of 1974/75, Tanzania was fortunate in having extraordinary access to concessionary flows of external capital which allowed it to maintain the pace of real capital formation and consumption during the crisis. To the extent the decline in the availability of real resources (other than aid) was the consequence of strictly temporary factors, such as drought, it was sensible and correct to protect the domestic economy as far as possible. To the extent, however, that permanent adjustments were required, either to cope with a long-run decline in the terms of trade or with factors underlying sluggish output performance, some difficult decisions have already been made, while others remain to be taken. This need for adjustments is predicated on the assump- tion that present levels of real external capital flows may neither be stable over the long-run nor consistent with the Tanzanian objective of self-reliance. And even at the present level of external finance the management of the balance of payments entails a stringency of import restric- tions which appears to be taking some toll of potential output. The most important adjustment that has already occured has been the restructuring of public investment in favor of directly productive activities, an adjustment which should yield dividends in the form of tradeable output within a few years. But to speed the process of adjustment and continue the pursuit of equity a number of key issues will require continuing attention. The Need for an Export Policy 56. Between 1973 and 1975 the commodity terms of trade moved against Tanzania by over 15 percent. But far more damaging to Tanzania's external trade account were the setbicks in export volume. The volume of commodity exports in 1975 was more than 20 percent below what it had been a decade earlier. Even before the advent of drought, the growth in export volumes had been sluggish. This was mainly due to the slow growth of agriculture, but in part it may also be attributed to some ambivalence towards the encourage- ment of primary commodity exports, which, in some quarters, were regarded as symptomatic of the colonial pattern of trade. But, at least until recently, the ambivalence towards primary exports was not compensated for by any systematic effort to encourage processed exports. The costs of this lukewarm attitude towards the export sector were borne home in the recent crisis. If exports were an indicator of dependence on the international economy, foreign loans and grants were more obviously so, and it is to these that Tanzania has had to turn to manage the balance of payments. 57. Since the economic crisis the Government has taken some measures to stimulate exports. Cash crop producer prices were increased. The export tax on coffee was reduced while that on hides and skins eliminated altogether. In October 1975 the Government devalued the shilling by 14 percent in concert with Kenya and Uganda. The Government has also proceeded with the expansion  - 33 - of agricultural processing industries which increase the domestic value added component of exports (sugar, tea, cashew, sisal) and is seeking a stronger export orientation for existing resource-based industries such as textiles, wood products, cement, leather and leather products. Some investments in these subsectors have already occured and others are planned. An export promotion bureau (for manufactured exports) has been set up in the Ministry of Commerce and an export department established in the Bank of Tanzania. While these are steps in the right direction, the export effort remains subject to serious uncertainties, in particular, the problems of institutional change, marketing and transport in agriculture and low factor productivity in manufacturing. These problems pervade the entire economy and until they are ameliorated they will continue to hamper export growth. 58. But in the meantime the Government needs to recognize that to compensate for these general problems, exports will need special inducements. For at least the next decade a successful export strategy must rest on boosting agricultural exports. Producer prices are likely to require continued, periodic upward adjustments if the relative profitability of exports crops is to be improved and then maintained. While this may lead to some short-run worsening of intra-rural income distribution (whether between households or villages), this social cost must be weighed against the benefit of an economy less reliant on foreign loans and grants. For manufactured exports the Government's investments in export activities need to be complemented by changes in the institutional-cum-price framework. Processed commodities are exported by both private and parastatal firms. Since the performance of even the latter continues to be gauged in financial terms, export subsidies (or other price inducements) have a role to play in encouraging manufactured exports. Domestic Resource Mobilization 59. To the extent the recent collapse of domestic savings is a reflection of the sudden widening of the external resource gap, a recovery in export output and incomes should benefit savings. But it is clear that fresh policy initia- tives will be necessary. The outlook for budgetary savings is problematic. Though the economic classification of the Government's expenditure accounts has not been finalized for the two most recent years the available evidence points to significant Central Government dissaving in 1974 and 1975. On present policies the outlook for the future is not promising. Given recurrent claims arising from past development projects and the acceleration in programs of UPE and rural health, the prospect, in the absence of major policy initiatives, is for even greater dissavings. The scope for increased savings through general tax increases is limited, for two reasons. First the past record indicates a strong tendency for recurrent expenditures to rise to match revenue increases. Second, recent history also suggests that the transfer of income from private to public hands through taxation has tended to be disproportionately at the expense of private monetary savings. It is probable that the institution of  - 34 cost recovery measures at the village level (to finance the expanding recurrent costs of social programs) may be insulated from these two self- Iefeating asnects of a strategy to improve budgetary savings through increased taxation. But, it is becoming increasingly clear that if budgetary dissaving is not to become a growing problem, a major reordering and rationalization of recurrent expenditure needs to be carried out within a Lon&7erm perspective, in fact what is called for is a reappraisal of long-term outlook and priorities for all Government expenditure. The rapid increase in Government expenditures since 1972/73 and the attendent tendency t-owards overcommitment has, in some sectors, created imbalances between the allocation of expenditure for specific investments and recurrent funds for their maintenance and utilization (roads, rural water and rural health units are prime examples). In such areas there may be greater real returns from the pruning or control of development expenditures. The forthcoming Third Five Year Plan (scheduled for release in June 1977) provides such an opportunity for overall long term expenditure planning and there are encouraging indications that, in contrast to earlier plans, the Government is making a serious attempt to estimate the recurrent cost implication of new development proiects. For any such long-run expenditure planning exercise to yield real dividends in improved expenditure allocations and better budgetary savings performance it will first be necessary to revamp the systems of budgetary control and accountability, which have weakened significantly in the past two years. The Government has recently set up an early warning system to monitor monthly regional expenditure and conduct a quarterly review of expenditures by central ministries. An investigation of the causes of recent excess expenditure is underway and new steps may be anticipated. 60. Parastatal savings performance offers considerable scope for improve- -ment For the most part measures which improve productive efficiency will be congruent with those which boost savings (for example. reduction and controL of overmanning, improved capacity utilization). In addition it would be desirable to consider devices for transferring income to those -arastatals which have demonstrated a capacity to generate large surpluses. Thus, an upward revision of interest rates would tilt the appropriation of income in favor of financial parastatals, which have, on the whole, displayed a good record for generating and maintaining surpluses. 61. A higher irterest rate structure is also indicated by the growing need to bolster household savings in the form of financial assets. Despite a decline, private monetary savings continued to account for over half of total savings in 1973. Given the Government's long-term goals to reduce the productive role of the private sector, the element of private savings corresponding to self-financed investment in enterprises is likely to fall. All the more reason to offer inducements to private household savings in financial assets. Further, in the medium-run, it would be unwise to neglect the benefits from self-financed private investment. Private investment still constitutes a quarter of the nation's monetary fixed investment, and policies  - 35 - which discourage it also have some negative impact on private savings and typically encourage capital flight. Ultimately, this is a political choice, but if the continued existence of a rump private, non-agricultural sector is deemed compatible with national goals, the sooner the position is clarified the better for national savings and investment. Finally, though resource mobilization through self-help efforts (such as school construction) is not presently counted in either savings or investment estimates of the national accounts, the increase in such activity should, by substituting for "regular" (and accounted) forms of capital formation, help restore macro-economic balance. Parastatal Efficiency 62. With parastatals accounting for over half of value-added in manufacturing the concern with declining labor and capital productivity in industry has focussed on the efficiency of these organizations. The causes of inadequate performance are numerous and complex. They include a basic scarcity of management cadres, weak incentives for management and workers, diffuseness in identifying objectives and responsibilities, start- up problems in some recently initiated industrial activities, sporadic shortages of key inputs and a price-setting procedure which permits ratifica- tion of all types of cost increases, coupled to a protected, excess-demand environment which provides inadequate checks on price hikes to pass on cost increases. The variety of causes argues in favor of a similar variety of solutions. But two types of policies may be distinguished. The first involves specific efforts to improve management and technical efficiency in individual enterprises while the second strives to make general reforms to the environment within which parastatal decisions on output, investment and employment are taken. 63. So far Government efforts have mainly fallen into the first category of solutions and have included some cases of retrenchments of staff in overmanned parastatals, an 8 percent limit on allowable increases in overhead costs of manufacturing firms which approach the National Price Commission for price increases, and the hiring of a foreign consultant group to advise on operational/managerial improvements for National Development Corporation firms. These steps are experimental in character and do not add up to a full-fledged system for monitoring, evaluating and influencing the performance of parastatals. But that is an intrinsically difficult task and requires prior decisions on the appropriate degree of decentralization and the permissible role for material incentives. The present (largely unarticulated) framework could be strengthened by systematizing and building on certain existing elements. These could include: (a) use of strong negative incentives at the worker-level through periodic recourse to redundancies when overmanning becomes an obvious problem in any individual enterprise;  - 36 - (b) a system of labor-productivity targetting institutionalized through the existing price-setting mechanism; (c) complete banning of subsidies from the Treasury for loss- making parastatals; and (d) greater performance-indicator roles for financial surpluses, especially when it comes to investment decisions (although this begs the question of whether financial surpluses earned within the present environment have much to do with economic efficiency, it introduces pressures to rationalize this environment). 64. The problem of efficiency and its evaluation are even more difficult for parastatals in the service sectors of the economy, especially marketing, transport and construction. The single-channel marketing monopolies exercise a crucial role in the distribution of consumer goods to rural areas and the collection and transport of the marketed surplus from peasants to urban centers and foreign markets. There have been growing signs of difficulties in both activities. It is possible that these difficulties only represent teething troubles associated with rapid expansion of the responsibilities of these agencies. But they could also be indicative of a long-term trend which it will be difficult to check if methods are not devised to monitor and control the operational efficiency of these institutions. Urban-Rural Income Differentials 65. Despite the importance attached to reducing the gap between urban and rural incomes, little has been achieved. Indeed the events of 1974 (the drought and massive wage increase) led to a significant widening of the real income gap between the urban wage earner and the rural smallholder. The subsequent policy of wage restraint at a time of rapid inflation reversed the process, so that comparing 1969 to 1975 there was very little change in the real income differential. The continued high income differential combined with the rapid increase in formal sector employment until 1974 pulled in migrants from rural areas. This was accentuated by the quickening spread of primary education in rural areas which increased the supply of migrants in rural areas with minimum educational qualifications for urban employment. Both forces contributed to the growth of urban unemployment and the expan- sion of a low income informal sector. Since 1974 the growth of formal sector employment has slowed, reducing the "demand pull" for migrants. But the rapid expansion of primary education has continued to increase the potential supply of migrants. The Government has launched its "back to the land" program to resettle unemployed/underemployed migrants in the countryside. Whether this will be sufficient in coping with the existing problem and stemming the increasing pool of potential migrants from moving to the cities depends largely on its success in three dimensions of policy: holding down the growth of formal sector employment to real increases in employment opportunities (that is, a rigorous control of overmanning), avoiding large,  - 37 - destabilizing wage adjustments which imply sudden widenings of urban- rural income differentials, and a long-term reduction in urban-rural disparities, which, ultimately, must come from more rapid growth of rural incomes. The Rural Economy 66. The key to more rapid growth, a more manageable balance of payments and a better distribution of income remains, as it has always in Tanzania, with the rural economy. And it is here that the history of institutional change makes prognostication of outcomes particularly difficult. The issues on which the outcomes hinge are becoming more clear-cut. First, the choice between intensive, non-shifting agriculture and extensive, shifting modes of farming has been tilted decisively in favor of the former by villagization. The productive viability of villages is intimately linked to the speed with which farming adapts to the use of fertilizer, pesticides, intermediate (and appropriate) technologies and other accoutrements of intensive farming. There are strong risks of over- cultivation and overgrazing, especially in the drier regions, if appropriate "technical packages" are not quickly established and propagated. This is not just a matter of research and extension. It demands serious improve- ments in the efficiency and orderliness of input supply and marketing. The potential costs of continued experimentation with the organization of the delivery systems for agriculture are now much higher in the villagized rural economy. 67. Second, while villagization in a gross sense is a fait accompli, it has become increasingly clear that the size and layout of individual communities will often require serious modifications if the potential benefits from better land-use planning, improved conservation, and economies of scale in the provision of technical and social services are not to be suppressed or swamped by the diseconomies of labor time lost in getting to and from farms or water sources. Third, in areas of high population density villagization appears to have exacerbated the growing pressure on land and raised the issue of whether inter-regional resettlement schemes need to be pursued more actively. Fourth, villagization has blurred the distinction between directly productive investments and social and economic infrastructure. For example, in some drier regions the provision of rural water supplies has become a necessary concomitant for the continued viability of villages as productive units. What this implies is that if the national priorities in favor of directly productive activities are to be maintained, the claim of rural communities in the allocation of social and economic infrastructure may need to be increased at the expense of urban activities. 68. Finally, the production outcomes in the rural economy will, to a great extent, rest on non-economic considerations. The impetus for ujamaa and villagization was premissed on the expectation that transferring traditional peasant farmers from scattered homesteads to village communities  - 38 - would bring about major attitudinal changes, which would speed the moderniza- tion of agricultural practices and provide dramatically increased opportunities and motivation for transferring otherwise idle labor time into productive capital assets through various kinds of self-help efforts. Only time will tell whether this gamble is won or lost. Much will depend on whether the organization of village activity continues to be heavily governed and domina- ted by the Government and Party bureaucracies which spearheaded the implementa- tion of villagization or whether the scope for peasant participation in decision- making will increase. This, in turn, will hinge on whether the present emphasis on block farming on an individual basis will persist, or whether it will be overtaken by a renewed drive towards communal agriculture. In the former (and more 14kely) case the role of producer price incentives will be crucial. But for effectiveness these incentives must be accompanied by improvements in transport and marketing of the surplus and better distribution of consumer goods up-country so that potential increases in purchasing power and real income are not subverted by physical shortages of goods.  STATISTICAL APPENDIX List of Tables 1. Population (Mainland), 1967-1975 2. Distribution of Population by Sex and Broad Age Groups in 1967 and 1975 3. Gross Domestic Product by Industrial Origin in current prices, 1961, 1964-1975 4. Gross Domestic Product by Industrial Origin in 1966 prices, 1964-1975 5. Resources and Use of Resources in current prices, 1964-1975 6. Capital Formation by Public and Private Sectors, 1964-1975 7. Components of Monetary Fixed Capital Formation, 1965-1975 8. Trend in Manufacturing Sector ICOR 9. Capital Formation by Industry, 1966-1975 10. Summary of Balance of Payments (Mainland), 1965-1975 11. Value of Principal Merchandise Exports, 1965-1975 12. Value, Volume and Price Trends of Six Major Agricultural Exports of Tanzania (Mainland), 1965-1975 13. Indices of Value, Volume and Prices of Six Major Agricultural Exports of Tanzania (Mainland), 1965-1975 14. Exports and Imports as Ratios to GDP (market prices), 1964-1975 15. End-Use Classification of Imports, 1965-1975 16. Total Imports by SITC Classification, 1965-1975 17. External Public Debt Outstanding as of December 31, 1967, 1970 1973, 1975 18. Disbursements of External Public and Publicly Guaranteed Debt, 1967-1975 19. Commitments of External Public Loans and Grants by Sources, 1967-1975 20. Summary of Central Government Budgetary Operations, 1965/66-1976/77 21. Government Development Expenditure 22. Public Investment Expenditure 23. Monetary Survey 24. Domestic Price Indices  Table 1: POPULATION (MAINLAND). 1967-75 (thousands) 1967 11,946 1968 12,242 1969 12,576 1970 12,916 1971 13,265 1972 13,623 1973 13,991 1974 14,368 1975 14,838 Source: Bureau of Statistics.  Table 2: DISTRIBUTION OF POPULATION BY SEX AND BROAD AGE GROUPS IN 1967 AND 1975 (Percent unless otherwise specified) 1967 1975 Age Group Male Female Total Male Female Total Below 5 18.2 17.7 17.9 18.6 18.3 18.5 5 - 14 27.2 24.8 26.0 27.0 26.6 26.8 15 - 44 37.8 42.3 40.1 42.1 41.8 41.9 45 and over 16.3 14.8 15.5 12.3 13.3 12.8 Not Stated 0.5 0.4 0.5 - - - Total 100.0 100.0 100.0 100.0 100.0 100.0 Population ('000) 5,835 6,111 11,946 7,389 7,449 14,838 Source: Bureau of Statistics.  Table 3: GROSS DOESTIC PRODUCT BY INDUSTRIAL ORIGIN. 1961. 1964-1975 (Shs. million at current prices) 1/ Provisional Provlisional 1961 1964 ;P65 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Mometarv Sector Agriculture, hunting, forestry & fishing 2,282 1,448 1,235 1,406 1,295 1,345 1,449 1,648 1,587 1,817 2,129 2,593 2,866 Mining 110 134 139 186 198 134 139 105 115 111 122 132 97 Msnufacturing & handicrafts 139 371 429 525 571 648 742 828 937 1,159 1,332 1,510 1,751 Electricity & water supply 27 42 46 62 64 69 74 84 91 95 110 110 139 Construction 117 125 137 173 245 266 260 341 429 459 509 601 610 Transport, storage & commnication 171 349 386 482 536 621 668 713 793 878 1,002 1,251 1,318 Wholesale and retail trade & restaurants and hotels ) 661 704 825 825 932 911 1,046 1,109 1,261 1,517 1,801 2,111 ) 612 Finance, insurance, real estate ) & business services ) 131 168 165 252 248 274 285 329 369 425 571 681 Public administration & other services 412 592 647 688 746 789 814 920 1,016 1,172 1,335 1,697 2,062 Less imputed bank service charges - 29 46 49 101 85 92 110 134 144 185 228 254 Monetary GDP at factor cost 3,870 3,824 3.845 4,463 4631 966 5239 5,860 6,272 7.176 8 296 10.038 11,381 Subsistence Production Agriculture, hunting, forestry & fishing , 1,342 1,361 1,547 1,574 1,647 1,632 1,733 1,905 2,201 2,410 2,866 4,067 Construction .. 43 47 51 53 57 59 63 67 75 82 93 108 Owner-occupied dwellings ,. 385 418 453 477 511 530 559 601 678 743 839 978 Total Subsistence Production 1,770 1,826 2,051 22104 2,215 2,221 2,355 2,573 2,954 3,235 3.798 5.153 GDP at factor cost 3,870 5594 671 6j514 6,735 7&182 7.460 8,215 8.845 10,130 11,531 13.836 16,534 lAnnuai rate 0t growth, %1) (4.6) ( t(1.4) (14.9) (3.4) (6.6) (3.9) (10.1) (7.7) (14.5) (13.8) (20.0) (19.9) Indirect taxes net of subsidies .. 436 469 528 608 692 811 958 952 1,140 1,613 2,021 2,049 GDP at current market prices ., 6.030 6,140 7,042 7.343 7,874 8,271 9,173 9,797 11,270 13,144 15X851 18,583 1/ Sectors not classified into monetary and non-monetary; in 1970 the national income accounts were completely revised and a nea series starting with 1964 were constructed. Source: Ministry of Finance and Planning, National Accounts of Tanzania, 1964-1972 and The Economic Surveys.  Table 4: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN. 1964-1975 (Shs. million at 1966 prices) Provisional Provisional 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 _me ta Sa4tor Agriculture, hunting, forestry & fishing 1,246 1,194 1,406 1,350 1,417 1,499 1,589 1,504 1,600 1,611 1,537 1,567 ilUn ng9 qerying 141 163 186 192 136 135 97 134 97 74 70 60 HW fgasurtas g d handicrafts 394 446 525 572 611 672 716 782 846 887 899 902 Electricity and water supply 51 53 62 66 72 82 92 96 98 114 123 133 Construction 142 148 173 238 256 236 270 322 329 363 357 320 Transport, storage & c mmuication 381 400 482 536 618 644 729 814 852 889 944 956 Miolesale *ad retail trade & restaursate and hotels 670 710 825 816 912 914 984 996 990 1,048 1,096 1,110 ripance, insurance, real estate & business services 146 177 165 241 230 253 257 279 292 316 361 325 Public adinistration & otwer * rriis 620 658 688 741 764 772 866 952 1,071 1,158 1,310 1,510 Less imputed bank service charges 32 48 49 98 80 85 99 115 115 136 140 122 Monetary GDP at factor cost 3,765 3.901 4,463 4,654 4,936 5,122 5,501 5,764 6,060 6,344 6,57 6.761 Subsistence Production Agriculture, hunting, forestry & fishing 1,377 1,381 1,547 1,605 1,660 1,590 1,616 1,662 1,825 1,847 1,807 1,997 Construction 48 50 51 52 53 55 57 58 60 61 63 64 owner-occupied dwellings 429 441 453 466 479 492 506 521 536 551 568 585 Total subsistence production 1,854 1.872 2.051 2.123 2,192 2.137 2,179 2.241 2,421 2.459 2,438 2 646 GDp at factor coat (1946 prin55) 5 619 5.773 6.514 6.777 7.128 7.259 7.680 8 __481 8.803 8.995 9.407 (Annual rate of growtfi, Y.) (,) (2 7) (128) (4.0) (5.2) (1.8) (5-8) (4-2) (5.9) (3.8) (2.2) (4.6) Source: National Accounts of Tanzania, 1964-72 and The Economic Surveys.  Table 5: RHSOURCRS AND USE OF RESOURCES, 1964-1975 (Shs. million at current prices) Provisional Provisional 1964 1965 1966 1967 1968 -1969 1970 1971 1972 1973 1974 1975 SuiF17 ef Resources a"t inrlet pricas 6.030 6jAo 7 042 7 343 7 7 8 27 9.j173 9 9 11 270 13.144 15 857.1.f GOP at factor cost 5,594 5*756 7,182 7,460 8,215 , 1115 Plus: Not indirect taxes 436 469 528 608 692 811 958 952 1,140 1,613 2,021 2,049 leets ofgoods and *ervicea 1,398 j5A 1.903 1,927 2.102 16 2,607 3,233 3,329 3.839 5.565 5,883 I7,428 7.684 8.945 9,270 9,976 10.287 11,780 13.030 14,599 16.983 21.422 24_466 Bbe of Resources Coaunptiotx 4,983 ' 5 840 6 01 6 674 6, 961 7,512 8.077 9 403 116.881 Pt*lic 588 -725 803 884 995 1,208 1,365 1,494 1,983 Private 4,395 4,546 5,115 5,207 5,790 5,966 6,304 6,712 7,909 9,206 (kom OFial formtion 767 896 1 022 ljL3L 1.396 1.285 2.068 2.587 2.4451 2863 -553 4 170 Gosdptlfr i3g 892 665 645 62 1,236 1,674 1,713 1,9 2,018 2,8 Private 533 643 703 647 751 663 832 913 738 910 1,535 1,887 R pcrts of goods and servicX 1,678 2.013 1.948 1,906 2,041 2.200 2,366 2,745 29 3,328 3,415 7J~~ 8.945 - 9.270 9.976 1028 11,780 1303 14,599 16.93A2346 j Include. "statietical discrepancy". Source: Data provided by the Bureau of Statistics, Ministry of Finance and Planning, and mission estimates.  Table 6: CAPITAL FoRATIoIN BY PUBLIC AND PRIVATAE . 1964-1975 (5hs. million at current prices) Provisional Provisionl 1964 165 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Central govgrenst 118 148 182 215 276 356 426 408 335 481 737 s9 Local Authorities & FKt African OainLty 39 43 38 48 50 39 36 46 59 55 69 70 E.A. 0C eity 8cterprieen 36 28 78 119 78 62 115 136 152 242 181 181 Parastatal Bterpri.ea 41 34 91 283 241 165 659 1,084 1,167 1,168 1,031 1,042 (1) Total public sector fixed capital forintion 234 253 389 665 645 622 1.236 1.674 1.713 1.946 2.018 2.283 (2)-Total private sector fixed capital foa tion 537 593 567 657 591 642 694 663 750 1.057 1 579 - M tary ector 292 383 443 393 4 431 4T72 517 461 30 817 1,303 - Non-_metary sector 147 154 150 174 171 160 170 177 202 220 240 276 (3) Total fined capital for ation 673 790 982 1.232 1.302 1.213 1.878 2,368 2.376 2.696 3.075 3.862 (4) Increase in stocks 94 107 110 80 94 72 189 219 75 160 478 308 (5) Total capital forution 767 896 1.092 1.312 1.396 1.285 2,067 2.587 2.451 2.856 3.553 4.170 (1) as % of (3) 34.8 32.0 39.6 54.0 49.5 51.3 65.8 70.7 72.1 72.2 65.6 59.1 Sorce: Ministry of Finance and Planing, The Economic Survey 1975/76.  Table 7: COMPONENTS OF MONETARY FIXED CAPITAL FORMATION, 1965-1975 (as a percentage of Monetary GDP at current market price) 1/ 1/ 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Monetary Fixed Capital Formation 14.7 16.7 20.2 20.0 17.4 25.1 30.3 26.1 25.0 23.5 26.7 Private Sector 8.8 8.9 7.5 8.6 7.1 7.0 7.1 5.5 5.4 6.8 9.7 Public Sector 5.9 7.8 12.7 11.4 10.3 18.1 23.2 20.6 19.6 16.7 17.0 of which: Central Government (3.4) (3.6) (4.1) (4.9) (5.9) (6.2) (5.6) (4.0) (4.9) (6.1) (7.4) Local Authorities and E.A. Community General Fund (1.0) (0.8) (0.9) (0.9) (0.6) (0.5) (0.6) (0.7) (0.6) (0.6) (0.5) E.A. Community Enterprises (0.6) (1.6) (2.3) (1.4) (1.0) (1.7) (1.9) (1.8) (2.4) (1.5) (1.3) Tazara 2/ ( - ) ( - ) ( - ) ( - ) ( - ) (4.0) (8.5) (8.0) (6.5) (3.6) (3.7) Other Parastatals (0.8) (1.8) (5.4) (4.3) (2.7) (5.7) (6.5) (6.0) (5.3) (4.9) (4.1) 1/ Provisional. 2/ Derived as the difference between parastatal fixed capital formation as reported in the National Accounts and in the Analysis of Accounts of Parastatals. Totals may not be exact owing to rounding. Sources: Table 6 and mission estimates.  Table 8: TREND IN MANUFACTURING SECTOR ICOR Fixed Investment in Manufacturing Incremental Value-Added (shillings million) in Manufacturing Current Price 1966 Prices (1966 shillings million) ICOR (1) (2) (3) (4) 1966 153 153 79 1967 183 174 47 1968 211 207 39 3.6 1969 160 151 61 3.7 1970 319 282 44 3.7 1971 374 312 66 4.3 1972 329 238 64 4.9 1973 334 223 41 6.6 1974 12 Sources: Col. (1) from Table 9. Col. (2) = Col. (1) deflated by national accounts investment deflator. Col. (3) from Table 4. Col. (4) obtained by relating 3-year moving averages of Col. (2) and (3), with output lagged by one year.  Table 9: CAPrIAL FORMATIOW BY INDUSTRY. 1966-1975 (Shs. million at current prices) Provisional Provisional 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Agriculture 111 122 114 109 117 119 142 160 Mining 15 17 10 22 31 31 23 22 Manufacturing 153 183 211 160 319 374 329 334 Construction 28 37 22 31 77 90 97 111 Electricity and water supply 55 76 91 89 119 168 191 285 Wholesale and retail trade 17 21 30 33 54 38 22 37 Transport and communications 322 468 502 407 756 1,151 1,180 1,285 Govermuent administration 55 70 86 84 83 70 54 90 Service (incl. real estate) 108 114 103 141 176 171 162 182 Own-accotmt rural construction 118 124 133 137 146 156 176 190 Total fixed capital formation 982 1.232 1,302 1.213 1.878 2,368 2.376 2,696 Increase in stocks 110 80 94 72 189 219 75 160 478 308 Total capital formatioa 1.092 1,312 1"396 1,285 2.067 587 2 451 2 856 3 53 170 Total capital formation (196L prlces) 1.092 1,252 1,352 1,216 1.821 2 160 1 788 1.908 2.104 2.156 (Annual rate of growth, %) (16.8) (14.7) (8.0 ) (-Y.1) (49.8) (18.-6) (-17.-2) (6.7 (10.3) (2.5) Sources: Ministry of Finance and Planning, National Accounts of TanZania. 1964-1972- and data provided by the Bureau of Statistics.  Table 10: SU MMRY OF BALANCE OF PAYMENTS ('ANZANIA MAINLAND),1965-1975 (Mil lions oi Shillings at Current Prices) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 A. Goods Exports f.o.b. 1,420.0 1,775.0 1,654.0 1,590.0 1,566.0 1,626.0 1,680.0 2,086.0 2,302.1 2,719.4 2,433.7 Imports c.i.f. 1,386.0 1,721.0 1,706.0 1,835.0 1,739.0 2,284.0 2,779.0 2,925.0 3,409.6 5,136.8 5,423.5 Trade Balance 34.0 54.0 -52.0 -245.0 -173.0 -658,0 -1099.0 -9 1,107.5 -2,989.8 B. Services (Net) -71.4 -72.9 -66.4 21.1 64.7 225.9 208.8 256.0 130.3 151.7 450.9 Freight and Insurance 6.4 35.7 75.7 107.4 119.9 216.4 256.9 221e7 202.7 190.0 281.7 Travel 8.6 33.6 -2.9 -47.3 -36.0 0.9 -49.2 -90.6 -73.3 -30.0 119.4 Investment Income -102.9 -137.9 -120.0 -27.5 -20.6 -24.9 -22.6 -11.9 -51.7 -28.7 -54.3 Other Services 16.4 -4.3 -19.3 -11.5 1.4 33.5 23.7 136.8 52.6 20.4 104.1 C. Transfers (Net) 32.9 -9.3 52.1 76.6 79.3 91.6 41.4 -30.0 34,9 323.4 689.4 Private and Parastatal - 7.1 29.3 58.4 58.2 79.4 24.6 -104.3 -101.1 -81.2 85.5 Government 32.9 -16.4 22.9 18.2 21.1 12.2 16.8 74.3 136.0 404.6 603.9 Balance on Current Account -4.5 -28.2 -66.3 -147.3 -29.0 :340.5 Z848,8 -613.0 -942.3 -1.942.3 -1j&49.5 D. Capital (Net) 61.4 175.0 75.6 40.0 138.1 511,6 8 909.1 10 1,436.5 (i) Government M&LT Loans (a) Tazara Project - - - - - 291.6 820.7 675.9 762.4 437.4 370.6 (b) Other Projects 133.6 54.3 166.4 87.0 148.0 221,8 342.5 254.4 321.2 339.2 518.7 Amortization -9.3 -2.9 -4.3 -17.9 -9.8 -11.2 -43.7 -109.8 -73.4 -47.6 -52.5 Compensation payments .. .. -7.9 -21.2 -61.7 -44.6 -48.7 -40.8 -55.4 -31.4 -31.6 (ii) Private & Parastatal MELT (Net) -62.9 123.6 -78.6 -7.9 61.6 54.0 119.7 37.1 79.8 174.9 208.0 (iii) Other Capital Movements (*et) .. .. .. .. .. .. -100.7 51.5 -125.5 53.0 -52.1 (iv) Exarptional Financing 1/ - - - 383.0 475.4 E. Net Zars and Oniga&on 2/ -68.4 64.3 41.2 159.2 -68.5 -285.5 -275.4 134.3 240.1 28.0 344.7 Overall Balance -11.5 211.1 50.5 51.9 40.6 -114.4 -34.4 389.6 214.9 -605.8 -68.3 F. Net Change in Reserves 11.5 -211.1 -50.5 -51.9 -40.6 114.4 34.4 -389.6 -214.9 605.8 68.3 T+ = decrease) 1/ Includes drawings on IMF Oil Facility and Credit Tranches, World Bank Program Loan and other special multilateral balance of payments support. 2/ Residual item includes valuation gains and losses from currency adjustments. Sources: Bank of Tanzania, Ministry of Finance and Planning and mission estimates. For mainland estimates of goods accounts 1965-72 data from National Accounts of Tanzania, have been used.  1/ Table 11: VALUE OF PRINCIPAL MERQLANDISE EXPORTS. 1965-1975 (Millions of Shillings) 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 sredosceed Aanicultural Products 960.4 1,217.9 1,025.6 1,032.4 1,091.4 1,129.2 1.112.9 1,455.3 1,648.9 1,880.6 1,787.7 Cotton 244.2 349.9 2514 282.9 234.7 247.2 244.8 336.4 333.1 472.6 296.7 Coffee 171.8 301.0 237.0 265.0 257.0 312.0 222.0 383.0 495.3 375.1 423.0 Sisal 285.6 234.7 200.9 158.7 159.7 178.8 133.8 144.8 221.6 463.4 302.2 Cashewnuts (raw) 82.5 100.0 92.2 101.6 118.9 115.2 119.6 150.3 141.2 196.2 176.9 Tea 30.2 45.1 43.2 44.9 48.3 42.2 48.9 53.8 54.2 69.1 81.2 Tobacco, unmanufactured 22.6 23.4 39.2 40.2 38.7 59.5 60.3 64.8 67.7 133.6 117.6 Oilseeds and nuts 47.2 46.9 42.7 47.6 46.6 38.0 77.2 40.3 55.9 36.9 25.3 Hides and skins 30.3 42.9 29.0 31.5 35.5 27.3 22.3 41.6 46.6 45.3 43.9 Cloves 46.0 74.0 90.0 60.0 152.0 109.0 179.0 240.3 233.3 88.4 320.9 Manufactured and Mineral Products 208.2 291.7 470.4 394.0 397.6 365.3 479.9 469.7 405.5 530.3 485.1 Cashew kernels 0.3 4.3 9.4 9.8 17.4 21.5 28.5 22.4 32.7 46.6 44.1 sisal products 6.1 13.3 23.7 24.2 26.1 26.2 44.1 39.0 72.0 151.8 90.0 Tinned mat 29.6 44.9 39.3 33.9 41.4 26.6 29.0 32.8 16.4 34.1 9.4 lbttle extract 9.1 9.6 9.6 9.4 9.0 7.5 7.6 15.0 15.7 31.4 20.9 Pyr.trir extrect 20.8 28.8 29.2 17.7 20.7 11.0 18.4 21.7 16.6 11.7 19.8 Petrolmum products - 4.8 136.2 164.0 105.0 111.5 143.3 215.5 87.6 132.4 122.9 Diamonds 142.3 186.0 223.0 135.0 178.0 161.0 209.0 123.3 164.5 122.3 178.0 All Other Exports 265.4 256.4 232.0 249.6 282.0 341.5 339.2 236.0 348.6 359.1 451.2 Total 1,434.0 1,766.0 1,728.0 1,676.0 1,771.0 1.836.0 1,932.0 2,161.0 2,403.0 2.770.0 2,724.0 of iwich: Exports to Kenya and Uganda 121.0 98.0 83.0 90.9 103.9 147.5 196.6 133.1 170.2 217.7 174.6 1/ Includes Zanzibar; excludes re-exports. Source: East African Customs and Excise Department, Annual Trade Reports of Tanzania, Uganda and Kenya.  Table 12: VALUE, VOLUME AND PRICE TRENDS OF SIX MAJOR AGRICULTURAL EXPORTS OF TANZANIA (MAINLAND), 1965-1975 1965 1966 1967 1968 1969 1970 1971 1972, 1973 1974 1975 Value (Millions of ShillinRs) Cotton 244.2 349.9 251.4 282.9 234.7 247.2 244.8 336.4 333.1 472.6 296.7 Coffee 171.8 301.0 237.0 265.0 257.0 312.0 227.0 383.0 495.3 375.1 483.0 Sisal 285.6 234.7 200.9 158.7 159.7 178.8 133.8 144.8 221.6 463.4 302.2 Cashewnuts (raw) 82.5 100.0 92.2 101.6 118.9 115.2 119.6 150.3 141.2 196.2 176.9 Tea 30.2 45.1 43.2 44.9 48.3 42.2 48.9 53.8 54.2 69.1 81.2 Tobacco, unmanufactured 22.6 23.4 39.2 40.2 38.7 59.5 60.3 64.8 67.7 133.6 117.6 Total 836.9 1,054.1 863.9 893.3 857.3 954.9 834.4 1,133.1 1,313.1 1,710.0 1,457.6 Percent Share of Mainland Exports 59.0 59.4 52.2 56.2 54.7 58.7 50.0 54.3 57.0 63.0 59.9 Volume (Thousands of Metric Tons) Cotton 56.2 86.2 60.8 62.9 56.7 60.7 54.8 64.5 60.0 49.1 38.0 Coffee 28.2 50.6 44.4 49.2 49.5 44.8 35.5 54.7 60.3 41.0 54.4 Sisal 213.6 198.9 204.4 189.1 171.9 217.2 160.8 153.1 113.4 93.4 101.6 Cashewnuts (raw) 64.6 72.2 70.9 79.7 82.2 77.4 95.9 112.9 109.9 114.0 97.3 Tea 4.3 6.3 6.1 6.7 7.6 6.9 8.3 9.2 9.5 9.6 10.4 Tobacco, unmanufactured 3.3 3.4 4.9 5,2 5.0 7.7 6.6 7.1 7.2 12.1 8.6 Unit Prices (Shillings per Ton) Cotton 4,345.2 4,059.2 4,134.9 4,497.6 4,139.3 4,072.5 4,467.2 5,215.5 5,551.7 9,625.2 7,807.9 Coffee 6,092.2 5,948.6 5,337.8 5,386.2 5,191.9 6,964.3 6,394.4 7 001.8 8,213.9 9,148.8 8,878.7 Sisal 1,337.1 1,180.0 982.9 839.2 929.0 823.2 832.1 945.8 1,954.1 4,961.5 2,974.4 Cashewnuts (raw) 1,277.1 1,385.0 1,300.4 1,274.8 1,446.5 1,488.4 1,247.1 1,331.3 1,284.8 1,721.1 1,818.1 Tea 7,023.3 7,158.7 7,082.0 6,701.5 6,355.3 6,115.9 5,891.6 5,847.8 5,705.3 7,197.9 7,807.7 Tobacco, unsanufactured 6,848.5 6,882.3 8,000.0 7,730.8 7,740.0 7,727.3 9,136.4 9,126.8 9,402.8 11,041.3 13,674.4 Source: East African Customs and Excise Department, Annual Trade Reports of Tanzania, Uganda and Kenya, and the Economic Surveys, various issues.  Table 13: INDICES OF VALUE, VOLUME AND PRICES OF SIX MAJOR AGRICULTURAL EXPORTS OF TANZANIA (MAINLAND), 1965-1975 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Value (1966 = 100) Cotton 70 100 72 81 67 71 70 96 95 135 85 Coffee 57 100 79 88 85 104 75 127 164 125 160 Sisal 122 100 86 68 68 76 57 62 94 197 129 Cashewnuts (raw) 83 100 92 102 119 115 120 150 141 196 177 Tea 67 100 96 100 107 93 108 119 120 153 180 Tobacco, unmanufactured 97 100 167 172 165 254 258 277 289 571 503 Total 79 100 82 85 81 91 79 107 125 162 138 Volume (1966 = 100) Cotton 65 100 71 73 66 70 64 75 70 57 44 Coffee 56 100 88 97 98 89 70 108 119 81 108 Sisal 107 100 103 95 86 109 81 77 57 47 51 Cashewnuts (raw) 89 100 98 110 114 107 133 156 152 158 135 Tea 68 100 97 106 121 110 132 146 151 152 165 Tobacco, unmanufactured 97 100 144 153 147 226 194 209 209 356 253 Total 75 100 88 92 88 93 82 99 95 82 82 Unit Export Price (1966 = 100) Cotton 107 100 102 111 102 100 110 128 137 237 192 Coffee 102 100 90 91 87 117 107 118 138 154 149 Sisal 113 100 83 71 79 70 71 80 166 420 252 Cashewnuts (raw) 92 100 94 92 104 107 90 96 93 124 131 Tea 98 100 99 94 89 85 82 82 80 101 109 Tobacco, unmanufactured 100 100 116 112 112 112 133 133 137 160 199 Total 105 100 93 92 92 98 96 108 132 198 168 Source: Table 12.  Table 14: EXPORTS AND IMPORTS AS RATIOS TO GDP (Market Prices) (at current prices) 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1. Mwomts of Goods and NFS 27.8 26.0 28.6 26.5 24.2 24.7 24.0 24.2 24.4 22.3 20.9 18.4 Goods5 =2 25.2 225 20.2 18.9 17.7 17.1 18.1 17.7 17.1 -3.1 Non-factor services 2.6 2.9 3.4 4.0 4.0 5.7 6.3 7.0 6.3 4.6 3.8 5.3 2. Imports of Goods and NFS 23.2 25.1 27.0 26.2 26.7 24.4 28.4 33.0 29.6 29.2 35.1 31.7 Goods 20.8 25.5 24.4 23.2 23.3 21.0 24.9 28.4 25.6 26.0 32.4 29.4 Non-factor services 2.4 2.6 2.6 3.0 3.4 3.3 3.5 4.6 4.0 3.2 2.7 2.3 3. Current Price Resource Balance (- 1 - 2) 4.6 0.9 1.6 0.3 -2.5 0.3 -4.4 -8.8 -5.2 -6.9 -14.2 -13.3 Sou