Tanzania - Recent economic developments

FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT I N 4 Ti RNAR IOILJNAL D V ELOUMfEN "I ASaSOCIATI OtAN Not For Pub;Ic UTe Report No. 30-TA RECENT ECONOMIC DEVELOPMENTS IN TANZANIA Memorandum Prepared for the January 1973 Meeting of the East African Consultative Group on Tanzania December 4, 1972 Eastern Africa Region This report was prepared for official use only by the Bank Group. It may not be published, quoted | Ior cited withniit ank Gnrmin auithnrization The Rank Groun dnec nnt accept repqnnnihilitv fnr the I accuracy or completeness of the report.  CURRENCY EQUIVALENTS 1 Tanzanian ShillingL U.S.$0.lh 1 U.S. Dollar - Sh 7.14 This report is based on the findings of an Updating Economic Mission to Tanzania by Mr. Pieter Bottelier during August/September 1972.  TABLE OF CONTENTS Page 1. Introduction and Summary ............ . . ..... . .. . . .. . .. . . 1 2. Investment and Savings ............ ....*....... 2 3. Balance of Payments . .......... .. ................. ... 5 4. Money and Credit .................................... 7 5. Public Finance; the 1972/73 Budget ............. ........... 7 6. External Aid ........... 0 9 7. The Decentralization of Government ..................... 11 8. Restructuring of State Trading Organizations ........... 14 9. Income Distribution .. .* .9..................... 15 10. Rural Development ........... ....................... 16 11. Statistical Appendix; List of Tables ................... 19 ooo 0 ooo   Introduction andu S-twu-ay 1. This updating memorandum is meant to be read in conjunction with and as a follow up to Volume I of the Baunks latesat Econoi,Lc Report on Tanzania (Report No. AE-26, "The Economic Development and Prospects of Tanzania;, in four volumes, dated May 22, 197c (Vo'iu"es I and III) and June 22, 1972 (Volumes II and IV). Most new statistical information in this memorandum concerns calendar year 1971 and financial years 1970/71-1972/73. For ease of comparison, information relating to earlier years has often been inclued. oDue to a recent revision by Tanzania's Central Statistical Bureau of all national account statistics covering the period 1964-1970, certain statistics in this memorandum do not agree with earlier publications. In case of conflict, the latest information should prevail. Most of the statistical revisions are relatively minor and do not substantially affect the conclusion of the above mentioned Economic Report. The only exception to this rule concerns the distribution of income between savings and consumption in recent years. It appears that domestic savings had previously been grossly underestimated as explained in paragraphs 6 and 7 below. A short statistical appendix to this memorandum contains summary tables of the revised national accounts and other relevant information. Some other statistical tables form part of the text of this memorandum. 2. There has been no fundamental change in the economic structure and trends of the economy since the Bank's previous economic mission to Tanzania (August/September 1971). Some of these trends, most notably the rapidly growing resource gap are rather disquieting and threaten to become more serious than expected in previous reports. In other respects, progress is being made, particularly with regard to the effectiveness of credit policies and foreign exchange controls, the utilization of existing industrial capacity, the rationalization of state trading operations and the implementation of rural development policies. Perhaps the least satisfactory aspect of Tanzania's economic performance in recent years is the sluggish growth of marketed agri- cultural nroduction. This is the main factor underlying the virtual stagnation of mainland exports since 1966 and a lower than expected growth of the economy. The outlook for most crops during the 1972 harvesting season is rather good which holds out the promise of an improved export and growth performance in that year. 31 The orowth of G.D.P. in 197 is estimated at 4.5 per cent (6 per cent in 1970 and 2.3 per cent in 1969). Total marketed agri- cultuaral production (measured in constant prices) fell slightly in 1971 (l.14 percent). The average annual growth of agricultural production during the period 1966-1970 was onlv about 2 per cent. The principal growth sectors in recent years have been Construction, Public Admiuistra- t-ion, and Tnaport. S+tOagae and Communications. About half the increase in construction activities is accounted for by the building of the railway to Z-amb4ia vhile t+he other half is a reflection of the genaral investment boom in the country. The rapid growth of expenditures for Public ,4,i4strationr partly re'ects +he increae And improvement of social I ~ -