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 It may not be published, quoted | Ior cited withniit ank Gnrmin auithnrization The Rank Groun dnec nnt accept repqnnnihilitv fnr the I accuracy or completeness of the report.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 ~ - … - - -2 - nd econmic services, p&-4C u i i 4 .'11 iYan . T-4AL Ln. D1 4A - istration, the Transport, Storage and Gormmnications sector, during Al-le ±last. t y------, had b . LA Uree A, LA t6es as fast as the rest of the economy. Inevitably, the tranaition fram private UradLng UV state VsLS. ga&.LLL16 Laddu '-,LLOWL 1M%AJL4OkU1enA UpoV -L U disruptions and the excessive build-up of stocks of some goods at various ilevels in ,e -LsL-.LVULLi.LUI Xi.UAU V. L.UI Vo° tse pUVLCkU a-e s-au being resolved and the recently announced restructuring of state trading organizati on9houldU uu muuu tJJupLUVO LALLIU =.L.L. IALLe secr.;.U This restructuring parallels and complements the Decentralization of Lroverrm-e-n-'A AUmi .tJLS-rak, -Lon wich iL8 . LU ZLJ - . nst-LtL r change that has occurred since the nublication of the Bank's previous Economic Report on Tanzania. 4. The sectoraL growtn pattern of recent years i8 not altogether a healthy one. Service sectors have been growing very fast while the production of goods, especially crops, has been lagging behind. A continuation of this trend would lead to structural imbalances in the economy which might be difficult to correct. Tne acceleration of agri- cultural production both for export and domestic consumption is of para- mount importance and a condition for the successful implementation of Governmentrs social and rural development policies. investment and Savings 5. Gross investment in the monetary sector continued to grow and reached a record high of Sh 2,431 milMlion or nearly 33 per cent of monetary G.D.P. at market prices in 1971 (27 per cent in 1970 and 18 per cent in 1969). About half of the increase and one quarter of total fixed capital formation in 1971 was accounted for by the construction of the railway to Zambia. The heavy construction program is reflected in the import bill for capital equipment. There has also been a further large increase in stocks. Private investment appears to have risen again after several years of stagnation. A substantial part of private invest- ment and probably most of the recent increase, is in imported capital equipment used by private contractors working on Government or para- statal projects. As expected, the bulk of public sector investment con- tinued to be in social and economic infrastructure (mostly ongoing projects, such as the railway and road to Zambia, Dar es Salaam port, secondary schools, the Kidatu power project) and a relatively small proportion of total investment (about 20 per cent) was available for directly productive activities in agriculture and industry. This general pattern of investment, which is not expected to change drametically /1 The national account figures for the sector have been somewhat inflated in recent years owing to the fact that local cost expenditures on the Tanzania-Zambia railway project are statistically classified under Public Administration. -3- before the end of the Second Five-Year Davelopment Plan (June 1974) 'ecause of commuitments already made, is one U.o AL-A1- pZ-i,Lpa1 fsCors underlying the slow response of total output to the high level of invest- mer.t 4-. recer.t yearss. . wn, A.,* .W~v J.. 6. nm.e of +he t-nrne-qinns of hononmic Report AE-26 (Volume I!) was that the development of an unexpectedly strong prassure on resources from the third vear of the current Five-Year Develoument Plan (1969-1974) was partly due to the relative "stagnation" of national savings, partio- ularly in the public sector. This conclusion needs to be modified in the light of the recent revision of national account statistics for the period 1964-1970. The revised statistics show that earlier estimates of consumption growth (private consumption) had been too high and that savings had been underestimated. According to the new statistical series national savings have in fact been growing at a very healthy rate and this trend continued in 1971. In the analysis of the causes for the development of the pressure on resources greater emphasis should have been placed on the exceptionally high investment growth rate (for some years higher than previously estimated) and on the Large unaccounted for outflow of private capital ("errors and omissions" on the balance of paynei . TaW.bL L U1.LUW OLIUWs L.e reVi.sedU 8WtiSt.LC f.oL r aLvIO4 and investment for 1969 and 1970 and includes provisional estimates for 1971. Tahl A It Mainland Tanzania Savin^s and Tnvestment in the Mhnetized Economy (in current prices) 1969 1970 1971 1. Monetary GDP at market prices 6146 6800 7337 2. Gross monetary investment 1123 1816 2431 (2) as percentage of (1) 18.3% 26.7% 33.1% 3. Resource surplus (+) - gap (-) +58 -313 -630 (3) as percentage of (1) 40.9% -4.6% -8.6% 4. Net factor income payments -21 -25 -20 5. Net transers --- -9 my n - 6. National savings (2+3+4+5) 1221 1567 1833 (6) as peiLcen.t-zge 04t- (1 '19.9% 23.0%& 2r5.0 marginal national savings ratio 52.9% 49.5% 7. -.,,,ir,ed o f c -1X5 - 2J5 8. Resource gap adjusted for (7) -87 -674 -865 (8) as percentage of (l) ti -1.h% -9.9% -11.8% 9. National savings adjusted for (7) 1076 1206 1598 (9) as percentage of (1) 17.5% 17.7% 21.8% adjusted marginal national savings ratio 19.9% 73.0% a In a country like Tanzania where a lot of accumulated savings are un- lawfully leaking out of the country the use of the national savings concept (commonly defined as Gross National Product minus Consumption, or Gross investment minus the current account deficit on the Balance of Payments) can be misleading. The amount of savings available for lr.ves'-ent ' '.-.e Jcr.- i8- reduce --y 'w, 'lesi sws hr .UMLVOOWWU"LAl .1 LaicW1 U&SU1UJ La. rWU4UUU UJV WIO .L.LL0A."g VUU.L,iiW ti±uLIU fiAre is reason to adjust the national savings figure accordingly if the n,.oble. is Of a ser,4 'U nMatu-e. anAd not .ere' y 4-4Arc+ie,tal. .zar4 ha in recent years suffered a considerable unaccounted-for-outflow of sav-insa 44ih is qA4Av'ed to he plrimarl1v related to the contravention of exchange control regulations by Asian residents who are preparing for their departuire from the countrv or praving for deendents abroad. The exact amounts involved are not known. To illustrate this problem, item 9 of Table 1 shows figures for what might be called "AdiI-Adu+- National Savings". - h - 7, ~~Tv% 1071 plic 14 to sa, n- s siowve, a Si -cat improvemet. 7 __- .19 V_ _ W -% 3" % ,..LL L More than half of the increase in total national savings was due to an ,i r~aaa~ 4 v ~ +~ ..-l~~I.4 3- -1 1 increase in .- as+-5 MWl .es w44h is an encourain devepJ_lM.L It is probable that at least part of the improved public sector savings p o 4* S* F 4cnd Jeat higheLr rate:s of capaciJl. .uLtlizato. n 'JJ.L many stat industries and/or improved operating efficiency. Since a sizeable portion of' p-statal sa-vring may con-,sist o'L ma-kze"n boar' urpl-uses w-icn -~I. uo u1 . UL. -~JJ~ ~ .ULJ. ~UL ii.n I1_ ~ UU.u. 1pL B WuILIcfl tend to fluctuate strongly from year to year, it is difficult to make sorv GG-^, pro4ection. 'LJt Js reasUAbDle -wL exect, however, thiat parastatal surpluses and hence public sector savings will continue to show a. uw&ard t-end. Part of 'e expecedu i-crease will be the result of certain retail price rises announced with the introduction of the 1972/73 budget. Centra. Government savings (fusing the narrow definition of the recurrent budget surplus) have never been an important source of ratio na or p-ub'c sectwr savings and this situation is not expected to change in the foreseeable future. 8. Parastatals are rapidly becoming the major vehicle for public sector invesUm-ent, as intended. They increased their share in gross- fixed capital formation (in the monetized economy) from about 12 per cent in 19606 (the year before the Arusha Declaration) to nearly 50 per cent in 1971. The share of Central Government ministries by contrast, is slowly falling which is also by design. The distribution of investment by public and private bodies is shown in Table 2 below: Table 2: Capital Formation by Public and Private Sector in MDnetized Econom (in Current Prices) 1969 1970 1971 Sh m % Sh m % Sh m % Central Government ministries 356 34 408 25 372 17 Local authorities and East African Cownmmity 29 3 45 3 57 3 East African Commrunity enterprises 62 6 83 5 136 6 Parastatal enterprises 153 14 629 38 1048 48 Total public sector 601 57 1165 71 1613 75 Private investment *) 456 43 480 29 550 25 Total fixed capital formation 1057 100 1645 100 2163 100 Increase in stocks 66 171 268 Tot.al >(monetary) nvestment 1123 1816 2431 *) Includes cooperative societies and campanies in which the Government Aol-U> less ULaU; pen r cant orV ±f e O/- . ,Aace; The Eonomirc Surv-y i7, -5- 9. Gross investment, after reaching a record level of 33 per cent of monetary G.D.P. at market prices in 1971, is expected to decline some- what in 1972 and 1973. Investment by the Government itself (ministries and Regional Governments) is projected to remain about constant but para- statal investment (not including the Tanzania-Zambia Railway Authority) will decline temporarily as several large industrial and building projects have recently been completed. This temporary decline is part of a conscious effort to reduce the overall pressure on resources which began to emerge in 1970 and which was reflected in excessive credit creationLl, some price inflation, and a sharp drop in external reserves. The overstraining of resoircees may in part have been related to the construction of the railway to Zambia, which is the largest of Tanzania's current investment projon+t- h7 far. Even thouvh the financing of the prolect will not lay a direct claim om scarce domestic resources until repayment of the loan comaences (1983) t-he ndirec-t c-laims cannot be ignored. The project employs some 50,000 people which represents an estimated annual wage bill of Sh 2940 million (or l1 per cent of t+he total national wage bill excluding the railway project). The substantial additional purchasing power, thus created MSt have Td-nirectlyr contrihuted to thp farirly sudden increase in the pressure on real resources in the economyjL Balance .f Pa7yiuLenttos 10. The most prominent features of the balance of payments during the last th,ree years, including 1971 have been: l. fJ4. 4., - ,s -n-4r+a 19l ,nv (a) A d-aMt..Lc Lcrease . 4-n Jiports of capital g.oo (120 per cent since 1969) and intermediate goods (65 per cent 8iLnce 19-697) re e.LcL'."g la-,e sh"arp- rise o-L ca-pi.all foM ation and stocks in the country. Consumer good imports have not increased since 1968. (b) Tne virtual stagnation of hle main agricult-ur-al exports: coffee, cotton and sisal (in 1971 the export value of nese crops declined muainWly due to ,rasportd- ys) and a disturbingly small increase in the value of total exports (excluding Zanzibar clove exports and re-e-ortts) as shown in Table 3 below. One encouraging development is the increasing diversification of exports resulting mainly from the fairly rapid growth of "other agricultural exports" (including cashew tobacco, tea, meat, oilseeds, pyrethrum, hides and skins . Their share in total exports increased from about 23 per cent in 1967 to nearly 30 per cent in 1971. / Excessive in the sense that it was not matched by real production increases. 2 All external and local costs of this project are borne by Cnina and when shortfalls occurred in the sale of Chinese commodities (imported under the loan agreement for the financing of local costs) the Chinese Government made direct cash contributions in foreign currency. The Tanzanian portion of the railway is expected to be completed towards the end of 1973. - 6 - Table 3: Value of YAinland Eports, 1967-1-9 (Sh million) 1967 1968 1969 1970 1921 coffee, cotton, sisal 689 707 652 738 574 nther avrgiulttiral axnorts 37h 4102 h13h 447 509 diamonds 223 135 178 161 217 other exrorts 352 372 355 381 432 total exports *) 1638 1616 1619 1727 1732 of whi eh to Kerr7a and Uganda 5.1% 5.6% 6.JA 8.5% 11.0% *) a,rr nd4 nv r-exnmrorts . (c) A healthy increase of service earnings, mainly on account of i- nstoeii r'rffin to nni from 7Amhimn. (d) A rvn4A rl-t f no+. nf49'1fJI1 rcp4+.I1 inflnsq (firm Sh 197 million in 1969 to Sh 872 million in 1971 (Sh 251 milliton excluicng (;inese disbursaments for +he railwq-ay project)). (e) A high unaccounted-for-outflow of capital (mostly illegal ...v,4 ....4- ,....4 + _,1 P14 ..4+ '\ qo 04 +ii+4 ,wt nco +r hous M-.X _r v uw UJ. *. , _ improved, however, in 1971 and 1972 due to more effective ..lUjJ..~I~A U...IL J.L 4.aA.LOL~~%.AJV,L U4. WJ.L A. LL.L- U~WAU.L& j t lc.e^tionof EX-111hange Cnro-4-l reg-aIor4 1; +whe Bank of Tanzania. 11. Even without the large imports required for the Tanzania-Zambia railway project, the balance of pay-ments sho-ws a ra-yid'a gro-ing resor-ce gap. The export performance in 1971 was particularly poor but this was partly due to interna-1 transport problems which caused delays in shippig. Without sharp increases in diamond exports and petroleum product exports to Zambia (which is largely a re-export becea-use of the limivted domestic value added) mainland exports in 1971 would have been much lower than in 1970. The export prospects for 1972 are better part'ly because of favorable weather for many crops during the 1971/72 growing season and partly because some payments related to delayed 1971 exports will be collected in 1972. The overall balance of payments is expected to show a significant improiement over 1971. During the first nine months oI 1972 external reserves rose by about Sh 230 million, or 33 per cent over the December 1971 level. internal transport problems have been alleviated due to increased road haulage capacity and reduced use of the central railway line for the supply of material and equipment to the Tanzania- Zambia railway project. Nineteen seventy-two imports are expected to be lower than in 1971 because of the bunching of imports for the railway project in 1971, the tailing off of total investment and further re- strictions on luxury consumption. -7- 12. Longer term export prospects remain modest but in view of the country's poor export performance in recent years, it is extremely diffi- cult to make projections. The prospects for two of the three major export crops - sisal and coffee - are limited by external market constraints while known diamond reserves are expected to be depleted before the end of this decade. The expansion of cotton, cashew, tobacco, tea, meat and some other exports, however, is principally a question of supply, at least for the time being. Assuming no change in the combined export value of sisal. coffee and diamonds. other exDorts will have to grow at least 8 per cent to meet an overall export growth target of 5.5 per cent per annum which is the rate that was used for export nrolections in Tanzania's second Five-Year Development Plan and in the Bank's Economic Report No. AE-26. The actual growth rate achieved for exnorts other than sisal, coffee and diamonds during the last four years was limited to about h per cent ner annum. Monev and Credit 13. One of thp kyv pol4cylit i nrinni lrndrlAT vrlnvg the Anrmql PIan and budget for 1971/72 was the restriction of credit expansion to about 10 peir cent of total monnv suirn1v ly at. +he r begn,-i, Of the. per~io so as to achieve the twin objectives of real growth and monetary stability. The actual expansIon of mo.ey supply ove t 12 - n+h.s pro -a lrt to 8.3 per cent which is a dramatic improvement over the 31.7 per cent increase in 197n/71. ThAe monet&y pIctu4 e for 19710/79 4is --A~n+ less balanced, however, when looking at the allocation of new credit. The ar.osw"t of adrl;tior.al barb- len-4r4 t the Central Covemm=ent (Sh 284 ~*f' flI i.. ~A.~t ..~Jw.a &J.ffl.L 11tLS6 U' E, v JOfl v. M.4 tAt)V VALJAIUVA U ,~LfA -C million, compared with a ceiling of Sh 150 million in the original credit pla - --A. or 1971 / twa l.LV ex dJ. Ued tU.L 0Sp-,sion Ofv tppy which means that credit to the rest of the eoonomy contracted (by about A vt asA& LA4. A /. *L dJ LCUJ: WAJ± tJ_JL tJ.L , UV.L L. vJ.LVJULVL LJ.U 'vW1LUJ..1ir, to the Central Government came from the Commercial Bank because at some pot duri Mlln yeorjwa Central Gulovee-lul,,ent'os 4.d1bVVVVMeSS tlo vhe C.entra Bank reached the legal maximum. In the implementation of credit re- striction policies, care was taken not to ration credit necessary for the financing of export crops. The main sectors that had to contend ,WILth reAUC-6LkM.-.aIrCaf 4L-aCU4VAV 5 wer .A_ -1-8 _--e ar n4. VIA A. ...V-.L uJVVJ. U.A. 0.1. Us ±..w.. . ILVO | o IcUAM 0..L% d.U " .LiU L.L cLLIOjUJ kU. In retrospect this may have been a good thing as there was (and is) .. chl scope for IMprolvAmg the oeaigeiinyo aattl r these sectors. The credit plan for 1972/73 again aims at limiting the growth in' money supply to 10-12 per ct". Monetary G.D.P. in c-rrent prices is expected to grow by 8-9 per cent. Public Finance; the 1972/73 Budget 14. Tanzania's recurrent revenue performance continued to be excellent in 1971/72. Total collections are provisionally estimated at Sh 1913 million which represents a 13.7 per cent increase over 1970/71. Part of this increase was related to improved tax administration and the collection of arrears. The marginal rate of taxation on the monetized economy has been quite high during the last few years and is expected to come down. The averate rate is already among the highest in the developing world (about 25 per cent of monetary G.D.P. at market prices -8- in l9711/72). Ine future growTh of recurrent revenues will probably fall to a level nearer the monetary G.D.P. growth rate. The former may be expected to remain higher than the latter, however, since the overall tax structure is reasonably income elastic. The 1972/73 budget expects recurrent revenues of Sb 2188 million, Including Sb 163 million new taxation and about Sh 52 million of taxes previously collected by District Councils (see paragraph 29). Allowing for the latter complication, total recurrent revenues are projected to increase by 11.7 per cent during 1972/73 and by 9.4 per cent during 1973/74. Some of the new taxes intro- duced with the 1972/73 budget take the form of retail price increases for goods sold by parastatal companies. 15. Recurrent Government expenditures have continued, and are projected to grow at roughly the same rate as recurrent revenues leaving only small surpluses for capital expenditure. The 1972/73 budget shows that, like in previous years, the strongest growth (both in absolute amounts and in relative terms) in taking place in recurrent expenditures for debt service, defense and national service. These three expenditure categories together absorb about 40 per cent of additional recurrent revenues. Only 27 per cent of the increase is allocated to the principal economic and social services (including agricultural extension, health, education and water) and an estimated 25 per cent will be required for minimum wage increases. Most of the remainder of the increase will be used for the expansion of the Office of the Prime Minister who is res- ponsible for rural development and the coordination of Regional development plans under the decentralized system of government. 16. Perhaps the most interesting aspect of the 1972/73 recurrent budget is the effect it will have on the distiibution of income. Minimum wages throughout the economy have been raisedL. simultaneous with the introduction of new taxes weighing mostly on the higher income groups (see also paragraphs 34-36). h For comparative data refer R. I. Chelliah. Trends in Taxaticn in Developing Countries, IHF Staff Papers, July 1971. /2 Effective July 1, 1972 minimum wages for agricultural workers have been raised by 75 per cent to Sh liO per month. for civil servants by 35 per cent to Sh 270 per month, for most industrial workers by a similar nercentaae to Sh 240 enr month, for milittarv nArmnonnAl hv a lower percentage to Sh 370 per month. It should be mentioned, that mnnRt. larve nrivat- at.atsa± qnd Government. farmc rii d A1?ra.nv Tr r%AnV the higher minimum agricultural wages so that the cost raising effect Of +.h npw minimim wages in that sector will basi -r o v- be felt by private farmers and small estates. - 9 - 17. AnMClur LHport.Iul Leaaure 0L ile fltw ouudgeu, or ratner OI the accompanying legislation, is to give greater power to the Minister of rinance over the use oI temporary cash flow surpiuses and profits of certain specified companies and statutory corporations. The "Specified Companies (Reguliation oI Elvidends and Surpiusesj Bill"', wnich has since been enacted, empowers the Minister to set minimum or maximum dividends so as to further enhance resource mobilization in the national interest. Initially some fifty companies and statutory corporations have been specified. it is not yet Known how the Act will be used in practice. 18. Last year's development (capital) budget (1971/72) was essen- tially a contraction budget. It had to be because of the severe pressure on resources that developed in the course of 1970 and 1971. Actual capital expenditures during 1971/72 (including transfers to parastatals but excluding local and external costs of the Tanzania-Zambia railway project) were probably close to the budgetted amount of Sh 772 million (829 million in 1970/71). The contraction achieved is an indication of the seriousness of Government's intention to maintain a balance between public sector investment and available resources and the growing effectiveness of its financial controls. 19. The 1972/73 development budget of the Government is based on a broader resource base (mainly because of the anticipated acceleration of disbursements from external sources). Total capital appropriations (again excluding the railway project) amount to Sh 978 million which is some 27 per cent more than the figure for likely actual capital expenditures in 1971/72. Most of the increase will be transferred to parastatals but total public sector investment is not expected to increase as direct foreign borrowing by parastatals will be sharply reduced. The 1972/73 budget which could be characterized as a consolidation budget also reflects the beginning of the intended shift in emphasis towards the promotion of small industries, agriculture, and rural development in general. Apart from a large mechanized bakery planned for Dar es Salaam there seem to be no new big industrial projects. Instead, most industrial projects provided for in the budget are either ongoing projects or relatively small projects, including a substantial number of industrial workshops to be operated by the National Small Industries Corporation. The most significant expansion, however, will take place in the development of agriculture (especially beef and dairy cattle, including processing facilities, cold storage and sugar), feeder roads, rural water supplies, rural health facilities and education. This is in line with the shift in investment priorities as repeatedly announced by the Government and based on directives issued by the party (TANU). The proposed financing of the 1972/73 Government development budget is shown in Table 4, page 10. terna1 ,A4 d 20. During the first two years of the Second Five-Year Development projections.4 A pt a -r i+cha %nged 1 d.ri th nA elI third a ort PI en projections. This picture changed during the third and fourth year - 10 - of the Plnn when almmst half of publii sectnr capnital formation was Pinanced from external resources. The increase was related to speedier ; ple.mentat±on of tY+r.pilv i4ded nrnioP_ts. At t+hA namn timte the aid pipeline (imdisbursed commitments) has continued to grow substantially, h rvi,+. +Iia {ho nrnmi v +3int flui+.iivPQ rliA>1 r An+ mAv hA hi hA-r .hnn previously expected. Gross external aid disbursements (excluding Chinese assist-ance for the railway proJect) are compared ui+h nt.hr Cran+.rn1 Government resources available for investment in Table 4 below: Table 4: Central Government Resource for Investment ,MI, .4 lliri 19O6O9/70 07A/71 1071 /72 1075'/73 107/71. likely Budget Budget A -4- -1 Ac,,u 's A1+ ala lsa+-4 n+Ma Es+A1+e Non-bank domestic borrowing 125 143 126 160 165 wi"r*Ls'U uurIUW.tg .LurW Ub4s 252 314 2874. ) 19 Other internal grants 62 50 23 27 30 ZXternal loans -aui grdan'is 2 C. C4'L 4 d4 .Uutal. reso-arces 6117 82 g3 7893 Percentage of externia loans and grants 20% 33% 39% 55% 49% 21. me average terms of new external Loans have niot changed much and the use of supplier credits/contractor finance continued to be minimal. The external debt service ratio crept up from about 7 per cent in 1969 to about 8 or 9 per cent at the present but this increase would not have occurred if exports had grown in line with Plan projections. Because the resource gap is growing in spite of serious and apparently successful efforts to raise domestic savings there is a strong need and case for increased local cost financing by external donors. Provided the average cost of external borrowing does not rise substantially above the present level and provided exports will start growing again at a reasonable rate, Tanzania is not expected to experience serious difficulty in servicing its external debt. 22. In Volume I of Economic Report No. AE-26 gross capital aid inflows for the last two years of the current Five-Year Development Plan 1972/73 and 1973/74 (excluding Chinese aid for the railway project) were projected at Sh 400 million and Sh 467 million respectively. According to the Annual Plan for 1972/73 (which includes estimates for 1973/74) the Government expects gross disbursements for these two years of Sh 541 million and Sh 454 million respectively. Me undrawn amount on outstanding loans and grants as at July 31, 1972 (again excluding the Chinese railway loan) is estimated at Sh 1,377 million. As things stand at the present time the quantity of capital aid available to Tanzania does not apDear to be out of line with the country's requirements - 11 - .nc nhbsorp4tve tnaTn4nniv riiing the crnrAnt. and nprAt financral yenr. Substantial further aid commitments will be required, however, to increase the flow of d1sbutsements in future years. It may be eo-ected that the recently implemented Decentralization of Government (see paragraphs 2)4-30 bd3nelro) wi411 c +r% to e%+ P aclr +atio 4omv%4-mA4 t.ied f - t.+1e. investment pattern from social and econamic infrastructure to agriculture, rw,w1-al devel-opmewr.t. 4ir g.emvral sv^nll 4"rA.hiawIr s -.rl 4t-, ; e ir the j total absorptive capacity of the economy. 23. Tanzania will need more aid and more aid of a different kind. -adiviorllwr r.OS+ car44- ' 1ai to deve-lop4 .g cout.tes, -inclvA4 ng Tz- 4a, .... akJ-JLJ... vId~ F ..jJ. U.L CWJ.IA UJ '4A V 4.Jj...L W.~LLA J.L 0 J- 1LLL'..LL.6 cL"OJ.. has been linked to the procurement of imported equipment and materials fPr e At_Vl _1 4-4-g _-.r 4 4_e__-'- "A -. - - -4 - - 4 _| __ of aid will continue to be required for this purpose but it is expected tihat Tan.znia wl41 require a gro-wi-Lng pJ-U.-toion of aid for smulaller agri- cultural1--and-:rural- .development projects which may have less. appeal for foreZgn donors ut- which are neverUheless very i-portant for he de-vel- op tof thecountry. The answer to this may lie in increasing the siare oL program lanj, vlUCal cost finUancig anU aU for integrated rural development projects. Tne Decentralization of Government 24. In order to make the Government more responsive to the needs of rural development and to improve the overall efficiency of Government administration, a new status and greater responsibility for the formulation and execution of development projects has been given to Regional and District authorities. Depending on the character of its evolution, this reorganization will ultimately affect the absorptive capacity of the Government as well as the pattern of Government investment. The effective date of this change was July 1, 1972. A considerable number of senior and middle grade civil servants and some parastatal personnel (about 480 in all) have been transferred from Dar es Salaam to strengthen the Regional and District administration. Inevitably a number of Central Government ministries have been left somewhat denuded of staff which is bound to present adjustment problems and perhaps some lack of continuity during the transitional period. A drastic reorganization like this one cannot be implemented overnight and it will probably take some years before the new system is fully operational. A lot of details have yet to be worked out but the basic principles of the Decentralization are clear. 25. There are 18 Regions and 63 Districts in Tanzania. One of the basic principles of the new system is that all civil servants working in the Regional and District administration will be directly responsible to the Regional and District authorities and not to central Government ministries in Dar es Salaam as before. The Central Establishments Division in the President's Office will, however, retain ultimate control over the recruitment and allocation of staff. The Regional Commissioner (appointed by the President) is the chief political officer in the Region. He has been given Cabinet rank under the new system. The head of the civil service is the Regional Development Director (RDD), who is equal in - 12 - rank to a Principal Secretary in a Central Government ministry and has similar responsibilities including the one of being the Government's Chief Accounting Officer for the Region and all Districts within the Region. The final responsibility for the auditing of all Government accounts will remain with the Central Government Exchequer and Audit Department in Dar es Salaam. Immediately under the RDD are three functional officers, a Regional Planning Officer, a Regional Finance Officer and a Regional Personnel Officer, each with supporting staff. The chief political officer on the District level is the Area Commissioner. The head of the civil service is the District Development Director (DDD) supported by a staff similarly structured as the Regional civil service. 26. The iob description of most Regional and District staff is development oriented. Less emphasis is placed on purely administrative functions. The chief responsibility of RDD's and DDD's is to identify and prepare development projects geared to the needs and potential of their areas and to supervise the implementation of approved proJects. The preparation of plans for primary schools, feeder roads (including mnint.enAnce)_ miral -water sunnlies and ag-ricultural proiects have been specifically identified as Regional and District responsibilities. The RDD Twill oordinatA Mtrtict plans whereas the Prime Minister's Office in Dar es Salaam will be responsible for coordinating Regional Plans in c,onsnlftitnon w,nth the TreAaqrv. the Ministrv of Economic Affairs and Development Planning (Devplan) and substantive ministries responsible for sector planning- The Central (Gvernment will continue to be resnonsible for the execution of externally aided projects. The exact distribution of deCiv-r%;n Ym_lrincr h0+TwrJt .hp Primp M-nric+.ArIqt nfflPfl o hr Trpeasurv, Devplan and substantive ministries is not yet entirely clear but this T jJJ. sJl .J proba ly ee ork . out r-ti *-ng a tt+.ri… l A.nrd Arrort' period. 27. Possibly the weakest aspect of the new administrative machinery plans. The other side of the coin is that the new system removes the cause ofL (ii-ided loyal+vies Or' Pw-gor.l . nr4sr^ i (riTr-rn'ed between their Central Government parent ministries and the local authorities) WILi-L.-CL 'or.UribU- A L#L u A LtLo L calAlluL4k of fUsturatAon n.d i.nertia -5ndA5 the old system. The need for a comprehensive sector plan is particularly stU-ong ar.d -argeriL .LL twhe case of agrio.1tu.re. LL Uwlouft± suchA' a p]Lan t.LLere is a real danger that Regions will prepare plans and set production vargets -without due regard to national sUpp'ly an=d deand bal-ces- or- the international market situation. A problem that may be created by the new system of government is that thle "absorptive capacity- of ULe Regions and Districts is likely to grow much faster than the availability of funds for Regional and District level projects. There can be no real harmony under the new system unless the increased responsibility of local authorities is matched by an equally large increase in effective power to implement projects, which means power to spend. Any tendency on the part of the Government in Dar es Salaam to retain too many and too rigid controls will lead to frustration on the Regional level and a waste of scarce manpower resources. Under the 1972/73 budget the direct res- ponsibility for the spending of investable resources available to Government (excluding the Tanzania-Zambia railway project) is approximately divided as follows: - 13 - - . ~ ~~AJ.-L 7 ..J1.. -S -l - - - -4- -t 4 4.L_ Table 5s me Ap-prodL, nat1.erUUI,±U U.L Z.JPULLOr±U±.LLU_bi.y for Government Capital Expenditures in the ly I2/ r, Budget SliM p Central Government ministries 3 57 Central Government transfers to Parastatals 306 32 Regional and District Governments lu4 11 946 0oo 28. In view of spending commitments related to ongoing project, it is not very likely that the share of Regional and District Governments in total Government investment will increase much during the next few years. In the meantime Regional and Mistrict authorities will have ample time and opportunity to build up a project pipeline in anticipation of a larger flow of funds later on. The President has announced that the emphasis of the next National Development Plan will be on health, wer and education, especially primary and adult education. It is precisely in these areas that the new Regional and District authorities have been given substantial responsibilities. 29. It should be mentioned that Tanzania's new decentralized government administration is far removed from a Federal system of govern- ment. Regional and DMstrict authorities have no taxing powers of their own and are entirely dependent on Central Government appropriations. Revenue collection became even more centralized with the dissolution of District Councils. These Councils used to collect an average of about Sh 41milion per District in respect of trade licenses, primary school fees, market dues, etc. Such revenues used to be retained by the District Councils and were not shown as Central Government revenues. They now flow into the central Treasury as general revenues. Apart from the Central Government, urban local authorities (i.e., Dar es Salaam City Council, Tanga Municipal Council and 13 Town Councils) are the only remaining bodies with some limited taxing powers. Even these limited powers were recently reduced when the right to levy and collect the business license tax was transferred to the central Treasury. An estimated Sh 15 million (Sh 9 million in Dar es Salaam) or less than 1 ner cent of Central Government revenues will be collected by and accrue to urban local authorities in 1972/73. The recent Decentralization is therefore essentiallv limited to plan and budeet preparation, program implementation, and staff supervision. 30. There are some increases in Government recurrent costs associated with the Decentralization. No estimates are available but the amounts involved are probably modest. Most increases result from the upgrading 0f manv civil servant Dosts---in the Regional and District centers. It- is not the intention to replace civil servants who have been transferred frrnm lAnttral rlne!rnmAnt ministri eisi n Dr es Sal aam on the assumpntion that the workload of these ministries will automatically diminish as the Re4ornnl and Dst+ret Governments will begin tn firnctAnn Alnder the new system. - 14 - Restructuring of State TradingOrganizations 'A. Economic Report No. AE-26 identified inefficiencies in state trading as an important economic management issue. Parliament has recently approved a number of far-reaching Government proposals for the reorganization of state trading functions. The changes are based on a thorough reappraisal of the State Trading Corporation (STC) and other, more specialized state trading organizations. The key principles under- lvi-ng the new structure are product specialization and decentralization. STC will cease to exist in its present form. A number of specialized operatIon;s (such 2as -shipping agency transactions, export marketing of various agricultural commodities, importation of steel products, jute bags, hessian cloth, hard boards and soft boards) will be transferred to self-contained ministerial units or existing parastatal production companies snpMnjialized in those fields. The ownership and control of STC subsidiary compepies will be similarly transferred. In order to decentralize other state trading functions.existing regional STC branches will be transformed into 18 independent local trading companies operating under thle S--ireni-ii sn of Regional authorities who will determine the composition of their boards of directors. These local trading companies will each have their own eqliitv capital and the power to borrow. Operating surpluses which are not required for capital expansion, however, are to be paid into the central Treasury. 32. A^-t sLhe san +mle a nrmber of new state trading companies will be formed, each one dealing in specific product lines (such as pharma- ceutica s, ir tri4al anrd agricriltmtual supp I es, buil din' materials and hardware) which req-uire specialized professional competence in importing, handling, storage and distribtion. They will be in direet relationship with suppliers outside Tanzania and serve the Regional Trading Companies on an agency basis. A r. fe o such specialized s+ate-owned nrodLct lines trading companies were already in existence (dealing in educational su-pnlies, ber bags, rolled steel products, and textiles). All Regional and Central Trading Companies will operate as independent companies. Tne Regional o-nes i"- be answerable to the PRgional authorities and the Central ones to the Mlnister for Commerce and Industry. In order to promo'Lle effec've coordination -- . s4 +ate tra,4Yh n'actti -is new organization, the Board of Internal Trade, will be created under the Ministry of Commerce and iEndustry. ,Ta..o ..nnoucement-, lave been mndea concerning the pricing policies to be foll6d4bythe new Regional and Central trading-compa-iLes but this -w'll presumably rem-in a Central Government responsibility. 33. These changes are in many ways parallel and complementary to the changes in government administration. *It viU' probab-y take some years before the new system of state trading is fully operational. On paper the new system of specialized and decentralized trading companies appears to be superior to the old one. Two major advantages of the new system are that management control will be closer uo uend users and that it will be possible to compare the performance of Regional trading companies. 'Whether the new system will in fact lead to greatser effi- ciency, as expected, will depend largely on the capabilities and - 15 - dedication of those who will man the new institutions. A fundamental question applying to both the old and the new system, however, is whether trading and distribution functions can be performed efficiently in the absence of competition and apparent profit incentives. The answer to this question probably is that only a strong ideological commitment on the part of all individuals participating in the system can substitute for the incentives and penalties which are usually provided by competition in a more traditional capitalist trading svstem. Income Distribution 314. ,Mich pro'reea has been made towards greater equality in the distribution of income within the group of employed workers. This concerns a minoritv of some 400,000 workers or an estitated 6 -er cent of the country's population between the ages of 15 and 65. It is less clear what is happenlng to the distribution of 4i come between this minority and the 94 per cent majority of self-employed people, most of whom. re subsis+erce frmers. The la+est rond -4' --I 4- wag- 4--creases (which includes employees of East African Corporations by separate decisions) w_ll idbtedly have 4-n--ras 4*'n iJncoe gap between wage earners in the lowest bracket and the average peasant farmer. Paragraphs 347-li bealow att-av.pt to shed aome ligh4v on th- 0-vrra.m.ent's ap-proach lo rural development in general. 35. The increased equality of income distribution within the category of e-.l.p A workers ir.volves a stalizaLI.Dtion andL 4 rmaiy cases a reduction of the real incomes of employees in the middle and upper brackets. S'alary scales app'-Zng to M u'e and senior r aue civil ServanIs as well as parastatal personnel have not been increased since 1964L* In fact the only adjust-menut since that year has been a downward one (in 1966). In the meantime the cost of living has risen considerably due '.o a variety ol factors including indirect taxation and a growing housing shortage in urban areas. Individual employees have often enjoyed m*,odest annual ic L ir±,cre st -wi'-in existlng salary scales but these com- pensate for little more than cost of living increases. Those who have reached the top of their scales frequently experience a decline in real income in subsequent years. The wage and salary picture in the remaining private sector is not very different. In some cases private employers have been asked by the national labor union (NUTA) to reduce wages when they were out of line with public sector rates. Generally, only the lowest paid categories of workers have received across-the-board pay increases since the middle sixties. 36. The stabilization and reduction of real incomes for employees in the middle and upper income brackets has important social and economic implications. President Nyerere has consistently resisted all pressures i The salary scales of parastatal and civil service personnel are identical. - 16 - for general wage increases exceDt in the lowest brackets. Whilst there are understandable expressions of displeasure from some of those who have been adverselv affected by these policies and possiblv a decline in morale because of a change in the pattern of incentives, the benefits of t nhse policies must be emnhasized. Not onlv are thev in stark contrast to the social developments in most other African countries with their bhurgeopnn'i high incnme urban elitesa but economlicallv they are having a profound effect on patterns of consmnption. This change is already notie-ebh1. Aqsnacia1 in urban areas. ('nnqni rmnniv lnmry conSm.ptiton has stagnated or declined. Consumer goods imports would almost certainly have been higher wt tout the income equali4>tinn polieiPe Rural Development 17. A 4%v annmh+.tam1 a ,ct Of Ti.z4a's 9e opta+vn+.n' 4s t isa emphasis on rural development, not only in official statements but in- an iw,, 91 1n.+ eq, vaa 4 he fI o A e ,.A A14+4 creasLngfly s o, .Jn a -p ata. 1J les.V e.l. .a-&-.. m- -.A a1- pvi&lC.4- choice for social equality and is making much progress in coming to grips W±LUd1 Ldle AU~VW_LUFUL=J..1IJ J.LVV.LWULOJ J.L WLI~ jJ.I.JJ.aLJ..U L~.L . LLI ~ v.IU.i of resources allocated to programs and projects aimed at improving the standard of 4' v4- 4 s -el as *e pro'cte cp--4t-y- +1O e ,-----sn.+ sections of society is rapidly increasing in both absolute and relative te-* .. LT -s fff.L.L. crL'tJ Lto es L.JJJSeW L,II - 6IUnU.LA I,_ -oLA ved as a l0a-g part of the assistance takes the form of improved extension services, cuau lt .-L .-racY %Ua LqaiLAJ, pu.ia ic.-a.L ducatLioLn .LApUF±Ve heOC"1 0h vices, water surveys, temporary food relief programs, etc. Part of this "invest- met-s om xlncdfr 1s-u 8-; recuarrent ' es(s-"ela eira and DLstrict budgets under the new system of government administration), part -romL cai-tl b-udgets and pa-t from direct foreign technical assista-.ce. It is. typical of the Tanzanian approach to rural development that most attention is concenuraL.e-u on i.he poores, areas. he actual develJ.UPHent. in those areas is difficult to measure with conventional statistical methods. Munch oI- the initial progress is reflected in improved nutritSion and health, better housing, better water, higher literacy rates and increased motivation towards achieving further Jmprovements. Such progress is not necessarily reflected immediately in increased production for the market which is the most important conventional yardstick for measuring development. 38. There can be little doubt that Tanzania is making progress in rural development but it is, as pointed out, notoriously dirficult to say exactly how much or whether the benefits justify the costs. Raral development is inevitably a long-term process requiring (in the terminology of traditional economic analysis) long-term risk investments in such things as improved water supplies, storage, simple roads, edu- cation, adapted agricultural research, health, etc. It is not clear whether the increasing flow of resources used for the promotion of rural development will have a retarding effect on the growth of GNP. The Government is conscious of the need to give a direct productive content to its rural development policy but this is not always easy to achieve - 17 - in the short run. The policy places maximum emphasis on self-help and ,se-lf-]eriance so as to mobilize Tanzania's biggest underutilized resource: male labor in rural areas. Tanzania does not accept the development poten4ti-a1--af- an area as given, nor does it accept the theory that the development of the modern industrial sector and the export sector will automatically filter down to the poorer semnents of society, though they are, of course, a crucially important resource base for the development of those segments. The country is making a conscious effort to involve everyone in the development process and to satisfy the basic material and psychological needs of everv citizen. 39. The original motivation for this approach to develonment is social, or ideological, but it would be shortsighted to overlook its possible long-term eronnmic 1ust-i f catr4on. The distincttion between social and economic benefits is often a vague one. Tanzania has tradi- +ion2nal been denpndent on thPe ernort serqtor aq the main gAnerator of economic growth. Whbile considerable scope remains for the expansion aid div'ersificatio of e rorta- h5ncmffri- n At+.n+ion many have benn given in the past to the development of domestic markets. Tanzania is nou payingT tncrdeae attentior. to the possIbil-ties of an Iwrd looking development strategy by placing greater emphasis on the promotion and d"iversifica+i^r. Of domnestIc food crops an.d rural industries, *as4,g ci4mvrle technologies. It may be expected that this policy - if successful - will gradually lead to chan.ges n4 production and con-sumpion patterns and bring these into closer harmony with the needs and effective demand of t2he vastI- majo.-LUpy ofO T-a4nam"as peasant POpul1atiO-- 40. rN creas - produc 'tior. 'Ir ---'I co,. __-w. ti r -_ the +V velop - L4L. .LLIJ VI. L . UALLL UJJ.JAL 4.LV. L l _LVtC.. '.,VLAD U.L'.A.ML 06L W~AA - ~ V -~k VA of domestic markets is, of course, a necessary condition for the success XI 5 4 _A-t_A 4_Aw_ ___ tt+A_AA_A T.T4 4-A, OU u jJ P iU Lico C.. mII Au ad .- rUU%.,.LL2r, .L04CU".LL 0 VA.-JJV.L V (lW1ispenAKen ML LAuIu production increases, whether for local consumption or export, the el.LeQUi. U±L UjJAU1UJ.L~JLO I.AJVCUUt1L-UMIMLLt, 11LULM.J .J.J. L ±U.L.L~4 CLL-I0 W-LJ.L4 LJW _.LJ.U_L4..V" to the distribution of income leaving the total resource base of the econo-my unchanged. Ule promotion of producti'on for local consump-tion (i.e., the inward looking development strategy) should not be seen as _n- - ..L.2 . .L L-.L .. -_ --- __ -' - __ ...--.l.. 1. an d.L LW vl 1 bu i Ud;ECU vU WJUU,-.W 6.L-UDWl u auov development will require imports and therefore the growth of foreign exchange earnings. In Tanzania boUt sbrategies are important and neither should be neglected. 41. The improvement of rural incomes and living standards may reduce or pernaps even reverse migration to the towns thus avoiding the growth of an unemployed and often unemployable urban proletariat. The strong emphasis on adult education and literacy campaigns (well over one million people and over 30,000 teachers are now involved in adult education programs throughout the country, compared to 360u,000 people and 13,000 teachers in 1970) is another essential element of the Govern- mentis rural development policies. by giving education to the parents as well as to the young ones social disruption associated with education ! policies which concentrate mainly or exclusively on the young, it is hoped, will be avoided. - 18 - 42. The number of people Living in ujamaa villages rose from some about 8 per cent of the rural population in the begnirining of' 1971 to about 15 per cent at the end of the year. Diring the same period the number of 5mnh vi-IlaDes increasAd fr7om ahmit 3snnn to )iMnn- Tn some areas, the establishment of uijamaa villages involves the resettlement lof neople. The most imnortant of snch arxes is TDhn-mq PR8ai .n whe nmA 200,000-people have movedi-di the last fez years (some with Government assistan.e) whirh is one of the largest migratorv movnewnta in Af ica's ,history. Teams of hydro-geologists and drilling crews (mostly externally fininced) Are atively searchi-ng fr dependable sources of pot+ale eond and surface water in Dbdoma and other Regions. The number of ujamaa vil- 1D- ~ ~4~~'il~j-AA .n'}v v~A~~+ ... 17 in April 1971 to 160 in May 1972. There continues to be opposition to+.he esambiQhI4arzTnv ^ oiif 4m.s mllnms md- colctv -P.-4- 4 n ricber * 'n.d ------' --- - , L ,.JILJE, in. S - and more densely populated areas (especially in Kilimanjaro, West Lake snd TL"in g an S / - 19 - STATISTICAL APPENDIX Table 1. (rR()SS DOMESTTI PROTGTT AT r.-.TOR (rT BM Y _T MTTMPTAT n7PTflThT (AT CURRENT PRICES) 2. GROSS DOMESTIC PROWCT AT FACTOR COST BY INDUSTRIAL ORIGIN (AT 196A P,RIE-S) 3. G.APTTTIT.p 'R.MATTION BY PE1LI OF ASSER yATE MMUTT -( CRTiRva ), ^~.APT AT. >n'PMAfrTn\ PV1 DTTnTTf4 A'RM 'D'DAfP QVrrMD AVP nrDTM PRICES) 5. BALANCE OF PAYMENTS ESTIMATES - TANZANIA 6. TOTAL WAGE EMPLOYMENT BY INDUSTRIAL DIVISION 7. SECTOR DISTRIBUTION OF EMPLOYMENT 8. PRODUCTION OF THE PRINCIPAL EXPORT CROPS 9. MnNETARY SURVEY ooo 0 000 Table 1: GROSS DOMESTIC PRODUCT AT FACTOR COSI' BY INDIUSTRIAL ORIGIN (AT CURRENT PRICES) (Mi'llion shillings) Industry /a 2.964 1.965 1]966 1L967 :1968 :1969 1'970 1971. _ __-… _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . Agriculture, hunting., forestry and fishing - 2,790 2,596 2,952 2,,855 2,,973 3,074 3,378 3,324 3c Mining and quarrying 134 139 192 198 134 172 108 122 I Manufacturinig and handcrafts T 371 429 525 594 647 724 794 893 ' Electricity and Water &upply 42 46 62 64 69 74 83 92 t Constru.ction 168 184 222 309 325 316 387 465; Wholesale asld retail trade and restaurants and hotels f2. 661 704 825 862 974 1,000 1,107 1,192 l Transport, storage and commuanications 349 386 482 536 621 668 713 800 9 Finance,, insurance, real estate and business services ' 516 586 618 729 759 804 844 922 U1 Public administration and other services j 592 647 689 746 788 814 919 1,025 lX Less imquted bazk service chairges 29 46 49 101 85 92 111 131 - G.D.P. at factor cost t 5,594 5,671 6,518 6,,792 7,205 7,554 8,222 8,704 ,. of which: subs:Lstence productiOn 1,770 1,826 2,054 2,,104 2,,214 2,219 2,353 2,406 Source: The Ecmomic Survey 1971/72 Table 2: GROSS :DOME3TIC PRODUCT AT FACTOR COST BY INDUSTRIAL O.IGINf (Al' 1966 PILICES) (M.11ion shillings:) Industry 19614 1965 1966 1967' 1968 1965' 1970 1971. Agriculturel, htuting, forestry and fishilng 2,623 2,575 2,952 2,954 3,062 3, 08C) 3,189 ',143 Mining and quarrying 1141 163 192 183 137' 1448 138 157 Manufacturing asnd handerafts 394 446 525 584 627' 687' 7259 785 Electricity and Water Supply 51 53 62 66 72 82 91 101. Construction 190 198 222 299 315 293 322 385 Wholeseale and retail trade and restaurants and hotels 670 710 825 853 95C0 973 1,051 1,097 Transport, storage and conurnnications 387 400 482 536 618 644 730 812 Financei, Insurance, real estate and business services 575 618 618 707 709 7445 763 796 Public administration and other services 620 658 689 741. 764 771 865 964 Less imiputeid baLnk service charges 32 48 49 98 80 8' 99 113 G.D.P . at factor cost 5,619 5,773 6,518 6,825 7',174 71,338 7'1,7779 8,12i7 of which: subsistence production 1,854 1,872 2,o54 2,126 2,192 2,135 2,178 2,177 Source: The Econoauic S'urvey 1971/72 Table 3: CAPITAL FORMATION BY TYPE OF ASSET4 (At Current Prices) (Million Shillings) 1964 1965 1966 1967 1968 1969 1970 1971 Buildings: 1. Residential 36 50 60 78 83 89 115 128 2. Rural own-account 101 110 118 124 133 137 146 156 3. Non-Residential 11il 13L 129 171 186 160 217 226 4. Total buildings 251 29h 307 V7q hO2 1,1 Other Works: 5. Land improvement 4 4 9 12 7 18 29 49 S= Roaiq- ferries anA br4dges 25 29 55 70 95 160 1)49 16C 7. Water Supplies 21 23 23 31 37 46 50 48 8. Other Works cI 76 9n2 1R7 OR 921 A6 9. Totan+.lohe workseQ 10n 107 I w1w A a99 Eno 7 We. ,.4 pm An + 10. Transport equipment 102 119 229 208 223 168 248 290. 11. Ot+her eqpmen.t ° 26 35 I A 1°. Tot&al --,,4 pmer.t 4137. )en L.Q4Q QUU 13. Dairy and breeding cattle 46 44 32 5° 38 23 24 25 14. Fixed capital formation 674 789 229 1,271 1,3i8 1,217 1.815 2J44 15. Increase in stocks -a 10 111 80 _4 90 189 295 165. Capital formation 7 896 1,102 1.351 1,412 1,307 2,004 2,639 Of which: 17. Non-monetary 193 203 182 226 214 184 188 208 113. Monetary 574 693 920 1,125 1.198 1,123 1,816 2,431 19. Total 767 896 1,102 1,351 1,412 1,307 2,004 2,639 /1 Including TAZARA Source: The Economic Survey 1971/72 Table 4: CAPITAL FORMATION BY PUBLIC AND PRIVATE SECI0OR (At Current Prices) (Million shillings) 1964 1965 1966 1967 1968 -1969 1970 1971 Central Government 118 148 182 215 276 356 408 372 Local Authorities and East Aftican Comnuxilty 39 43 38 48 50 29 45 57 E.A. Community Enterprises 36 28 78 119 78 62 83 136 Parastatal Enterprises 41 34 102 260 279 153 629 1,048 Total Public Sector 234 253 400 642 683 601 1,165 1,613 /9 Private-monetary;; 292 383 441 455 465 456 48o 550 Fixed Capital Formation - Monetary 527 635 841 1,097 1,148 1,057 1,645 2,163 Increase in Stocks 47 58 79 28 51 66 171 268 Capital formation - monetary 574 693 920 1,125 1,198 1,123 1,816 2,431 Non-monetary: Private fixed capital formation 147 154 150 174 171 160 170 181 Increase in Stocks (cattle) 46 49 32 52 43 24 18 27 Total non-monetary capital formation 193 203 182 226 214 184 188 208 Total capital formation (monetary and non- monetary) 767 896 1;102 1;351 1J412 1307 21004 2,639 /1 Includine TAZARA 7T Includes co-operative and residual unidentified Sources The Economic Survey 1Q71/72 Table 5: BAlANCE OF PAYMDITS ESTIMATES - TANZANIA^ Millions of shillings 1969- 1970/ 1971 A. Goods: Ecports f.o.b. (including gold and re-exports) 1,792.4 1,851.8 1,985.0 Adjustmwents (time, value and. coverage' -38.4 4.1 -3 Imports c.i.f. 1,709.6 2,274.1 2,688.o Adjustments (tine, value and coverage) 80.3 85.5 84.8 Trade Balance -36.1 -549.9 -830.8 B. Services: Total Earnings on Services 492.0 616.7 746.8 FreAght and Freight Insurance 140.1 :93.2 280.2 Passenger Transportation, etc. 102.7 16e.5 172.7 Other earnings from foreign visitors 83.8 96.o 98.7 Interest, nrofits and ni vidends 76.0 76.6 67.4 Other Services 89.4 115.4 120.4 Total Payments on Services 366.6 405.9 493.3 t … 0.......4...J.... +,. 02 A~7~ -20 in10r Passenger TranLWprt-ation, etc. 9. 1I2 103.5 Expenditure on Education 50.3 53.9 41.3 Other Expenses on travel abroad 30.0 37.4 112.4 interest, Profits and Davidends 96.6 101.5 87.7 Other services 96.1 100.6 148.4 Balance on Services 125.4 210.8 253.5 C. Transfers: Total Transfer Receipts 213.4 265.8 260.8 Private and Parastatal 161.4 213.6 217.0 Government 52.0 52.2 43.6 Total Transfer payments 152.6 177.1 208.4 Private and Parastatals 121.7 137.5 178.1 Governmer.t 30.90 10.6 A0.3 Balance on Transfers 60.8 86.7 52.4 Balance on Current Account 150.1 -250.4 -524.9 D. Capital Account: Government mrelium and long-term loans 138.2 502.8 764.5 Inflow 148.0 513.4 808.7 (a) Tazara Project n.a. 291.6 620.7 (b) Other projects 148.0 221.8 188.0 Outflow -9.8 -10.6 -44.2 Compensation Payments (including interest) -61.7 -44.6 -41.7 Parastatal medium and long term loans 56.4 70.8 107.6 Inflow 93.7 152.0 211.3 fltfl_ 35.3 8i.2 103.,7 Private medium and long term loans 16.9 -0.6 8.7 Inflow 28.6 12.8 13.4 vlut.-now -11.7 13 .4 24s.7 Other Capital movnnents n.a. n.a. -127.7 Inflow n.a. n.a. 375.2 vUtflow n.a. n.a. 502.9 E. Errors and Omissions: -145.3 -360.8 -107.4 Balance on Ordinary Transactions 156.6 -82.8 79.1 F. Special Transactions: 6.8 39.4 64.o Redemption of E.A.C.B. Carrency 6.5 1.0 - Net Gain on Revaluation 0.3 - 28.0 Special Drawing Rights - 38.4 36.0 Allocation - 38.4 32.1 Revaluation gains - - 3.9 0. Change in Foreign Reserves: 163.4 -43.2 143.1 Bank of Tanzania 19.8 -111.0 -32.4 Commercial Banks 145.6 65.2 176.7 Mainland 22.8 -5.9 -1.8 Zanzibar 122.o 71.1 178.5 Including Zaiizibar 42 Revised ZI Provisional Source: The Economic Survey 1971/72 Trable 6: TOTAL WAGE EBILOYMR BY INDUSTRIAL DIVISION Industry 1964 1968 1969 1969 :L97Oi- 1971- (old) (Niew) i(New) (Ne;w) Estiate Agr'LcuJLture 163,589 109,2'13 115,508 112,888 1(7,36 8 109, 692 Mining and Quarrying 8,035 6,121 5,919 5,919 6,0'6 5,552 Manufacturing 23,58,3 35,359 40,323 40(,323 43,746 54,714 Publ-ic Utilities 4,637 9,601 99,755 ,755 6L1,296 10,618 Construction 33,740 47,305 52,767 52,76'7 54,569 52,6558 Commerce 17,341 21,415 18,671 19,072 120,6:7 22,508 Trnmsport and Comumunications 25,670 31,7'64 32,389 32,39 8 :33,813 39,984 Finance - - - l4,25 7 4,8:35 5,6$81 Services 74,662 90,5933 92,594 9(),5565 93,2295 :1.00,505 Total 351,257 351,7'11 367,926 367,926 3'75,6:35 4013,912 Inciex (1964 = 100) 100.0 100.1 104.7 1Lo4.7 106.9 114.4 Non-Agricultural Enployment 18,7,668 242, 498 252,418 255,038 268,267 292,220 Index (1964 - 100) 100.0 129.2 14.5 1359 148.9 155.7 /1 Provis:Lonal 72 Figures not strictly comparable to the base due to new industrial classification; "old" refers to old industrial group classification. "New" refers to new indusl'irial group classification N.]3. - These figures do not include figures on employment for TAZARA (c.4h5,00() and Kllimanjaro International Airport (3,500) Source: The Econoimic Survey 1971/72 Table 7: SECTOR DISTRIBUTION OF IELOYIMENT 1968, 1969 1970 1971 L A B A B iA B A B (1) Private Enterprise 142,468 140.5 143,986 39.1 141,,438 37.6 14J3,332 35.7 (2) Co-operatives and Non-profit making Institutions 24,101 6.9 20,523 5.6 14,,648 3.9 12,0139 3.0 (3) Parastatal Sector L2 45,712 13.0 52,438 1I.3 64,,461 :L7.2 82,041 20.4 (4) Government and E.A. Community and its allied Services 139,430 39.6 150,979 141.0 155,,o88 l.3 164,1450 40.9 (5) Public Sector (2+3t4) 209,243 59.5 223,940 60.9 234,,197 6 2.4 258,580 64.3 Total 351,711 100.0 367,926 100.0 375,,635 100.0 401,912 100.0 A 'Wage Eknp'loyment in the Sector 13 EMnployment in Sector as a percentage of total retcordLed wrage empLoyment /1 Provisional figures and excluding figures for TAZARA andL Kilimanjaro International Airport 72 'rhis includes all institutions which receive parastatal directives 1'rom Standing Coomnit-tee on Parastal Organization S,ource: The Economic Survey 1971/72 Table 81: PIRODUiCTIO,N OF THE PRINCIPAL EPORT CROPS iat 196 -…- ljnit Averaze 16 198 1.969 197'0 .71 Ootton, lint thousiuA 400 lbs. bales 190 390 283. 383 421 364 Coffeei thousaid metr:Lc tons 2'L 40 52 46 5;0 46 Sisal thouwaiad metric tons 209 220 197 209 202 181 Teia thousanid metric tons 4 7 8 9 8 10 Tobacco thousaid metric tons 2 8 7 12 11 12 Cashew thousand metr:lc tons 45 81 77 1iL 114 113 Py'rethrum thomusaid metric tons 1 7 5 4 2 4 /1. Provisional Sources: The Economic Survrey :L971/72 and earlier Economic Surveys Table 9: M)NETARY SIRVEY ( Shs. milliorn) (End uf month) December June December June December June Decemnber Jwune Dceemb:er Jane 1967 1968 19681 1"69 1969 1970) 1970 1971 1971 15'72 Currency in circulation (outsicle ban]ks) 511.7 I30.8 52a.6 507.9 605.0 616.7 818,4 817.2 986f.4 5'24.3 Dernand deposits 680.4 618.4 768.f; 746.2 931,8 822.3 9180.4 3,077.7 14192?.1 1,128.6 Totl motley su.pply /'1 ___1,192.1 1,049.2 1,397-4 1,254.1 .,536.8 ,1439.0 1,7'98.8 2,894,9 2,1178.5 2,052.9 Time deposits 206.0 293.2 356.-7 455.9 479.B 55].9 615.9 656.0 775.4 e28.0 Savings deposits _____ s1a.6 152.4 15'3.7 1L63.9 177.3 189.5 205.2 199.4 215.7 3144.2 Totil qwasi money Z. 347.6 445.5 51tS.4 619.8 657.1 741l.4 821.1 855.4 995.1 1,072.2 Net. claims on Central Govrnimerit -42.1 -89..Lt -20.5. 89.9 163.tS 75.7 Ž82.3 352.8 439'.3 516.7 of which Direct Advvances: 19.0 - - - 216.0 216.0 196.13 274.0 260.0 Lending to other dc,eestic sectors / 818,1 705.6 8913.6 898.8 1,092.6 1,058.1 1,3l47.1 1,358.7 1,504.5 1,279.6 Net liquid foreign assets held by Bank of Tanzania and Central. Government plus IMF gold tranche position plus SDR's 432.6 521.5 546.6 580.B 564.2 504.5 455.8 517.1 422.2 ti70.5 Incresse in money supply during preceding 12 months period 17 ..2 19.Y5 10.L% I)s.7% 17.C0 31.ti 21.1% 8.37 Money supply as a percentage of monetary G.D.P. at mar.ket prices 22.2% 23.8% 24.1% 26.4% 2'3.7% Net. foreign assets of Zanzibar 2 125.2 135.2 10:2.8 179.1 248.6 346.0 313.8 388.2 479.7 516.3 I Inclutdes Zanzibar Z Zanzibar reserves are controlled by the People's eBank of Zanzibar Source: Bank of Tanzania