The central bank of Tanzania (BoT) has painted the state of the economy on a different canvas.
BoT’s economic bulletin for the quarter ending June 2021 and the monthly economic review for July 2021 indicates Tanzania has been on a very promising trajectory for the past two years, shown by its dedication towards building a resilient industrial economy and self-reliance through steady ownership and control of natural wealth.
According to the BoT, in the quarter ending March 2021, the economy grew by 4.9 per cent compared with 5.9 per cent in the corresponding quarter in 2020 and four sectors were noted to have contributed greatly, namely construction, transport, agriculture and storage.
Former hotbed sectors and speedy forex contributors such as accommodation and restaurants were gravely impacted by the pandemic, slapping a -1.7 per cent performance for 2021.
By the end of March 2021, the growth and expansion of telecom in Tanzania by 9.1 per cent to the GDP made the sector top at number two as a higher GDP contributing activity, outmatched by mining and quarrying – attributed by increase in production of gold, coal and gypsum.
However, the monthly economic review brings another crucial aspect of the economy, as was published on August 16, 2021.
The recent report showed inflation was low and within the benchmark attributed by “adequate domestic food supply, stable exchange rate, and prudent fiscal and monetary policies”.
Twelve-month headline inflation increased to 3.6 per cent from 3.2 per cent registered in the corresponding period in 2020 and 3.3 per cent recorded in May 2021. The increase was mainly attributed to an increase in the prices of non-food items.
Also, annual food inflation decreased to 4.7 per cent in June 2021 from 4.9 per cent. This slight change came about by the fall in prices of maize grain and rice. Core inflation, “whose index accounts for the largest share in the consumer price index, increased to 4.0 per cent in June 2021 from 3.7 per cent in May 2021, attributed to an increase in prices of textiles and shoes, restaurants and accommodation services and rent”.
Money and Credit
The government has been taking the domestic economy performance very seriously, as the BoT’s Monetary Policy Committee (MPC) was satisfied with the adequate liquidity in banks and stabilized money market interest rates at low levels at its meeting of July 23, 2021.
“Regarding the domestic economy, the MPC observed that the improving global economic environment will provide great impetus to recovery of economic activities, particularly those directly linked with the global economy. Inflation remained low, within the target range of 3-5 per cent, and the risk to inflation outlook is moderate, notwithstanding the recent rise in global oil prices. Foreign exchange reserves were adequate and consistent with country and EAC benchmarks, hence contributing to the stability of the exchange rate. The MPC underscored the need to continue diversifying export markets and improving value addition,” the report noted.
The report exposed the performance of the sector clearly showing that annual growth of extended broad money supply (M3) maintained an upward trajectory, reflecting the impact of an accommodative monetary policy stance pursued by the Bank.
“M3 grew by 11.6 per cent in the year ending June 2021, compared with 7.9 per cent in the preceding month. This development was occasioned by an increase in the holding of foreign assets and domestic credit by the banking system. Likewise, broad money supply (M2) grew by 10.4 per cent compared with 7.7 per cent in the preceding month,” the BoT report noted.
Further, the central bank report noted that domestic credit has been extended to both the private sector and central government, and kept a positive growth rate, despite the pandemic shocks.
In terms of numbers, the report argued that “private sector credit recorded an annual growth of 3.6 per cent in June 2021, lower than 4.7 per cent and 5.5 per cent in May 2021 and June 2020, respectively”. In this context, the drop was due to the private sector credit facing repayment of loans which were extended to agricultural operations, “coupled with subdued demand for new loans, following the adverse effects of the pandemic on some domestic businesses,” the report showed.
The report noted that the national debt stock was at more than $33 billion at the end of June 2021, an increase of $1.08 billion and $4.08 billion from the preceding month and the corresponding month in 2020 respectively.
Also, the public debt (external and domestic) constituted 82.9 per cent of the total national debt, while external debt was accounted for 75.8 per cent of the stock (BoT).
Further, in this section, external debt in both the public and private sector stood at around $25 billion at the end of June 2021, an increase of $239.2 million and $2.5 billion from debt registered in the preceding month and the corresponding month in 2020, respectively.
The monthly economic review showed the performance of exports to be slow. According to the report, during the year ending June 2021, the value of exports of goods and services stood at $8.85 billion compared with $9.347 billion during a similar period in 2020.
“The decline was observed in travel receipts, due to effects of the pandemic. Meanwhile, exports of goods increased by 10.0 per cent to $6.45 billion, owing to the good performance of non-traditional exports. The value of non-traditional exports rose to $5.56 billion from $4.57 billion, with significant increase registered in exports of gold, manufactured goods, horticultural products and other exports,” the report noted.
Further, gold exports, which accounted for 54.4 per cent of total non-traditional exports, rose by $437.5 million to $3.02 billion, which is the highest level of earnings ever reached. This growth was contributed by the increase in gold prices in the world market and ongoing Tanzania’s strategies to strengthen the mining sector
The value of manufactured goods increased by 36.2 per cent to more than $1.09 billion, while horticultural products increased to $324.6 million compared with $194.6 million in the same period of 2020.
During the year ending June 2021, the value of traditional exports was $578.4 million which is lower than $995.9 million in the corresponding period in 2020. However, the central bank report noted that the decline was observed in all traditional export crops except for coffee and sisal. But also monthly traditional exports remained widely the same around $14.1 million (Tanzania Central Bank).
The BoT noted the import of goods and services dropped to at least $9.8 billion from $10.04 billion in the corresponding period in 2020, with much more decrease “reflected in travel payments, building and construction materials as well as transport equipment. Oil imports which constituted 18.4 per cent of all goods imports increased marginally by 1.3 per cent to $1.57 billion mostly on account of volume effect”.
However, the report argued that the recent increase of oil prices in the global market could revert to pre-pandemic levels, which BoT forecasts might severely affect the sector.
Further, the import bill of goods rose to $795.3 million from $575 million registered in June 2020 due to a rise in oil imports as well as capital and consumer goods.