Economists predict a gloomy year ahead as the private sec-tor continues to shrink due to austerity measures by President John Magufuli’s government, which is keen on procuring goods and services locally.
Prof Honest Ngowi, an econo-mist at Mzumbe University, says Tanzanians should expect high tax rates, increased nuisance tax and declining lending by banks.The government has already barred its institutions from de-positing their funds in commer-cial banks, with Tsh500 billion ($231.5 million) already with-drawn from 54 banks and depos-ited in the central bank.
Prof Ngowi told The EastAfri-can that the current cash crunch will continue to bite.“The government is the big-gest buyer of goods and services, and the directive to trade locally will continue to bite as long as it stands,” he said. Recently, the Magufuli admin-istration issued a directive to all central government and local government authorities, public institutions and statutory corpo-rations to engage in government-to-government business dealings, a move analysts say could nega-tively affect private sector com-panies.
According to guidelines for the preparation of the government budget for the year 2017/18, is-sued by the Ministry of Finance and Planning, accounting officers of all public entities are to stop buying goods and services from private firms and instead deal with state-owned enterprises.
Prof Ngowi cited poor rains, which will hurt food security and accessibility of energy as hydro-power generation dams are likely to experience a decline in water levels — as another danger sign.“The weatherman’s warn-ing on low rains next year is of concern because it will not only bring about food insecurity but also a power crisis as the nation depends on it for 48 per cent of electricity generation,” he said.Prof Ngowi added that the eco-nomic situation will also depend on other issues such as new ad-ministration in the US and how China’s economy performs in 2017.
“There is a direct link between China’s economy and Tanzania’s and we will need to see how the new president of the US will be-have on aid and trade with Afri-ca,” he said.Prof Ngowi said government-to-government dealing will ad-versely affect the private sector and lower its capacity to employ and pay tax. As a result, govern-ment revenue will suffer.The Economic Partnership Agreement (EPA) with Europe is also on the cards as an importa-tion factor in how the economy performs.“Should Tanzania and Burundi endorse the EPAs by January, it means that trade with Europe will ease, giving way to other cooperation that will affect the economy directly,” he said.
Prof Haji Semboja, an econo-mist with the University of Dar es Salaam envisages no change in Magufuli’s administration style, as the 2016/17 budget is just six months gone — or halfway through its duration.He said the administration’s priority is infrastructure develop-ment such as ports, railway and government buildings for the Do-doma relocation project.
“This means that most cash will go to these projects and there will be no direct effect on the peo-ple who will feel the benefits lat-er,” he said.He said Magufuli’s purge of corruption will strengthen reve-nue collection and control spend-ing and wastage in civil service.“For poor economies, the public sector is a very important pillar of the economy, but the private sec-tor drives the economy in rich countries.
This means that the private sector in countries like Tanzania must be innovative and engage in value addition in sec-tors such as agriculture, process-ing, tourism and hospitality,” he said.President Magufuli’s style of governance has elicited mixed reactions from Tanzanians as he has embarked on a spirited anti-corruption battle, cutting govern-ment spending and instilling dis-cipline in the public service, leav-ing many who used to get “easy money” without cash.His emphasis on investing in infrastructure and mega projects procured from other economies has resulted in low money circu-lation, with citizens banking on benefiting from long-term benefits of projects such as the stand-ard gauge railway, reviving the national airline and strengthening performance of the country’s gateway – Dar es Salaam port.
Source: The East African

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