RESTRICTED t20 be G .|i3 i'.tReport No. AF-3a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION THE ECONOMY OF TANGANYIKA December 18, 1962 Department of Operations Africa CURRENCY EQUIVALENTS 100 EA cents = 1 EA shilling = U.S. $0. 14 20 EA shillings = L 1 sterling = U. S. $2. 80 L 1 million sterling = U. S. $2. 8 million U.S. $ E EA shilling 7. 15 U.S. $1 nmillion = 1E 357, 143 CONTEITS Page Basic Data Charts Sunmary and Conclusions I. THE COUNTRY AND ITS PEOPLE ........................ 1 II. THE POLITICAL CONTEXT .................. ......... ... 2 III. STRUCTURE AND GROWTH CF THE ECONOMY . . . 7 Recent Economic Growth..................... .Po* 7 Principal Economic Sectors,.....* ......... 10 Agriculture .... 0 10 Mlining .......... ... ... ... *.. .. 13 Manufactures ...... a ........ * . . . . ...,, 1l Transportation .... .... .. . . 15 Power.. . . . ... V. * .. .. ..09............ .. 16 Education ............ so . ..........* a ...... 17 Public Administration......... ......... ..... 17 IV. FINANCE ANDDEVFELOPMENT PLANNING ..... 18 Noney and Banking .......... ...........,* 18 The Budget .............. .. ** . 20 Development P l ann ......... 24 V. EXTERNAL TRADE & BALANCE OF PAYrENTS . . 29 Trade Policies ......... . ..................... . . 31 VI. ECONOMIC PROSPECTS AND CREDITORTHINESS ........... 32 Production Growth ............... , 32 Budget, Plan and Investment Effort . ..... 35 Balance of Payments .... ....... . ....... * 36 Conclusions.e ...~~~........... 37 Statistical Tables 1 to 24 %aps - 1. General Map 2. Rainfall and Population 3. Transportation Network BASIC DATA Area: 362,000 square miles. Population (June 1962): 9.5 million, increasing at 1.8% o.a. Africans - 98.5%: Asians & Arabs - 1.3%: Europeans - 0.2% Gross Domestic Product Per Head (1961): U.S. ,156 (at factor cost, including subsistence sector) External Public Debt (December 31, 1961)1/: £17.5 million (U.S. th9 million) Sterling Assets (June 30, 1962)Z/ £12.0 million (U.S. '33.6 million) Gross Domestic Product: 1961 (£ million, at factor cost) 187 of which, in percentages: subsistence sector 39 cash crops & livestock 21 mining & manufactures 8 Gross Fixed Investment (% GDP) 15 inc: public sector 6 Price Series (1954 = 100): Retail Prices 105 Exnorts 85 Terms of Trade2/ 118 External Trade (£ million): ExDorts 53 ImDorts (c.i.f.) 50 Trade Balance 3 i9621/2 1962/3 (est.) (bud.) Government Finances (£ million): Expenditures - current 22.2 23.1 - capital 6.9 8.3 - total 29.1 31.4 Revenues - total 20.2 22.9 Excess of Expenditures 8.9 8.e5 financed by: special revenues & reserves 2.2 0.3 borrowing ) 6.7 8.2 external grants ) j/ Net of accumulated sinking funds at face value. / Excludes sinking funds or any attribution from £56 milLion sterling assets of the East African Currency Board. 3/ Rise in index indicates movement unfavorable to Tanganyika. TANGANYIKA GROSS DOMESTIC PRODUCT, INVESTMENT, AND EXPORTS (MILLIONS OF i) 200-_ --T 200 TOTAL GP 150 _ _ --- _ _ 150 MONEY GDP 100 100 F~~~~~~~~~~~~~~~~~.......... ..................... . ... .- ........... ........ .... EXPORT PRICES 50 _ ~~~~~~~~~~~~~(INDEX, 1954:= 100) -5 5O0 50 4 *- --- ---- _ _ _ _ _ __ _ ___ ^EXPORTS …- *GROSS INVESTMENT 0 I I I l 1954 1957 1958 1959 1960 1961 (Prelim.) PERCENTAGE COMPOSITION OF EXPORTS (TOTALS IN MILLIONS OF f) 1954 1961 OTHER SALOTHERSIA TOTAL: 36.2TOTAL:8 SISAL DIAMONDS302 (MILSEEDSDIAMONDS 1 2 AND NUTS 90148/ OILSEEDS CFE COTTON ~~~COFFEE AND NUTS '"V111.... TOTAL: 36.2 TOTAL: 48.6 GOVERNMENT REVENUE AND EXPENDITURE (MILLIONS OF £4) 30 30 YEAR ENDING JUNE YEAR ENDING JUNE ~~~~CAPITAL EXPENDITURE REVENUE K ,# CURRENT EXPENDITURE 20 20 I10 I10 DIRECT TAX ES 1955 1958 1959 1960 1961 1962 1963 7/20/62 (Est.) (Budget) 2020 IBRD - Economic Staff SUIIARY AND CONCLUSIONS 1. Tanganyika is a large, equatorial country on the East Coast of Africa. Over a large part of the country, the climate is marked by unreliable ard insufficient rainfall, and the terrain by its aged and eroded soils. These adverse natural conditions account in part for the general poverty of the country. The African population, 98% of the total, is generally engaged in subsistence farming, with varying degrees of contact with the market economy, especially in the sale of cotton, coffee, oilseeds and cashews. African growers account for somewhat more than half of agricultural exports. The small group of Asians and Europeans is primarily concerned with govern- ment, commerce, industry and plantation agriculture, particularly sisal, coffee, tea and pyrethrum. 2. Independence was achieved in December 1961, after some 40 years as a British trust territory, and a republic within the Commonwealtb was established in December 1962. There have been two Prime Ministers since independence, but effective political power lies in the hands of the Tanganyika African National Union led by Mr. Julius Nyerere. While TANU embraces a variety of views, there is no significant political opposition to Mr. Nyerere, and no dissension of a tribal nature. The government has proceeded to Africanize the civil service and to intensify development efforts, which are especially directed at improving agriculture and roads amd creating an educated class to administer the country and to extend the Africanst role in the economy. 3. The dynamic force in the economy is its increasing sale of primary products abroad. Despite lower prices, export receipts, chiefly from sisal, cotton, coffee, nuts and diamonds, increased 50% between 1954 and :L960, and the growth of the money economy more or less paralleled this expansion. I4. Tanganyika is dependent on the contribution of non-Africans who still form a large part of the senior civil service, whose plantations and mines provide half of all export receipts, and whose incomes provide the bulk of government revenues. Events associated with the gaining of independence shook business confidence in the new political situation and led to a sub- stantial capital flight. Confidence is, however, expected to return as the stability of government is recognized and as people become accustomed to the new regime. Last year was an economicnlly disastrous one, with per capita income falling 6% as a result of drought and famine, and, although full recovery is expected in 1962, it may be 1965 before income levels return to those of 1960. The reduction of incomes has aggravated the weak financial situation of the Government, reducing reserves to a bare minimum and making Tanganyika's dependence on foreign aid for its development program during 1962/3 virtually complete. 5. The 1961/1h Development Plan is aimed at raising income some 5% per annum, and it consists of a series of related programs designed to strengthen the infrastructure of the country and to increase agricultural production. - ii - The Plan is generally well conceived, although irrigation receives a lower priority than recommended by the 1960 Survey Mtission, and iimplementation may lag owing to the departure of expatriate staff. The Plan is to cost 2i24 million, of which the Government feels the local contribution can be no more than b2 million, or 9%. Some ;22 million is expected to be provided from abroad, primarily from the United Kingdom, the United States and West Germany, on a loan and grant basis. Most of these funds have been arranged in principle, though agreement has still to be reached on the projects to be financed and the degree to which local costs are to be met. 6. The uncertainties of Tanganyikats situation are apparent, notably in the possible effects of rapid Africanization and the shortage of skilled manpower on the execution of the Plan, on the efficiency of government and on the confidence of non-Africans. By mid-1962, one-third of the European civil servants had left or notified their intention to leave, and, apart from new contract staff, the departure of Europeans may be virtually com- plete by 1964. While the stability of government does not appear to be in question, political pressures could lead to the adoption of less responsible policies with regard to the civil service, foreign enterprises, wage rates and the monetary system. In any event, the Government must operate within restrictions imposed by the limited skills of the population, the basic weakaess of its finances, and the slow growth in agriculture and in export earnings (2-3% annually, or 1% per head) which may be expected for some years. 7. On the other hand, Tanganyika has come through its independence period evidencing a substantial degree of political maturity, including the conduct of government since the resignation of Mr. Nyerere. As reflected in the 1962/63 budget, the Government is determined to mount a strong development effort, including control of its current expenditures and increase of the tax burden. Given its $33 per capita money income, Tan- ganyika has meager financial resources and the 20% of GDP taken by the Government is absorbed in necessary current expenditures. In addition, there is a substantial savings effort in the private sector, primarily by non-Africans. The cooperative movement is capable of becoming a strong factor in development, and infrastructure is generally adequate to present needs, save in roads and education. The diversity of experts, low burden of external debt, and the external reserve position, as a member of the East African Currency Board, are additional strengths. 8. Tanganyika needs further external assistance if its Development Plan is to materialize and the economy is not to stagnate. There is still a gap of some ;3 million in the Plan. With the $43 million of borrowing envisaged by the Plan, external public debt would virtually double, and, if all loans were on hard terms, debt service payments wrould increase from 2.5% of export earnings in 1961 to 4.5% in 1965. Moreover, the increased debt service payments would absorb half the expected increase in revenues over the next few years, raising debt service payments from 8% to 15% of the budget and imposing a severe limit on the growth of such development services as education and health. The development effort -which the Gcoernment is making, the poverty of the country and the limited resources available to - iii - implement this effort, and the stringent financial situation which the country faces lwarrant the extension of assistance on as lenient terms as possible. Moreover, it would be desirable for Tanganyika to retain some capacity to service additional externaal debt after 1965. Hence, access by Tanganyika. to IDA resources would seem appropriate. THE E0JNOMIY OF TANGA'NYIKA I. THE COUNTRY AND ITS PEOPLE 1l One of the newest, largest and poorest of Africa's independent nations, Tanganyika lies just south of the Equator. From its 500-mile coast line on the Indian Ocean, it extends inland for some 600 miles, its area of 362,000 square miles being comparable to that of Nligeria, Pakistan or Venezuela, or Texas and Colorado combined (Map 1). 2. Tanganyika's poverty must in part be attributed to the inhospitable nature of the climate and terrain over a large part of the country. The soil is extensively eroded, there is a shortage of water, and rainfall is often unreliable (Map 2). The central plateau (2,O0O-4,OO0 feet), which forms much of the oountry, is therefore an area of low productivity, and the presence of the tsetse fly in some 60% of the country is a further handicap to development. Production is concentrated in the bettel- agricul- tural areas--the northern coastal district which is well suited to sisal, the highlands arourid Mt. Kilimanjaro where coffee is grown extensively, the Lake Victoria region which is a major center of cotton and coffee production, and the Southern Highlands which are being developed to produce a variety of crops, including tea and pyrethrum. 3. On the other hand, Tanganyika does have several river basins capable of further agricultural development, thouglh at substantial cost in terms of irrigation and transportation, and the hydro-electric potential of these rivers is now being studied. As yet, no economic deposits of industrial minerals have been discovered, but diamonds and gold are mined, and the Government hopes that systematic surveys will reveal economic deposits of other minerals. 4. Of the 9.5 million population, some 98% are African (Table 2). Over 120 tribal groups are recognized, but there is no predominant group, only the Sukuma federation having more than 4% of the population. In addition, there are about 23,000 Europeans and 124,pOOO Asians., iostly Arabs and Indians. Despite high mortality rates, the African population is estimated to be increasing by some 1.8% annually, and this rate is expected to rise as health standards iVmprove. Average age is about 18 years. At present, much of the population suffers from diseases which reduce life expectancy and efficiency. Illiteracy is widespread and knowledge of good farm practices is minimal. 5. The average density of population is low (28 per square mile), although there are substantial population concentrations in the more NOTE: An Economic Survey Mission organized by the Bank visited Tanganyika in 1959. This paper draws extensively on the mission report "The Economic Development of Tanganyika" which was officially submitted to the Govexrment in ilovember, 1260. - 2 - favorable agricultural areas on the periphery of Tanganyika--around Lake Victoria and Mt. Kilimanjaro, and in the douuhern Highlands. Indeed in some cases, there is appreciable local population pressure, and the need for movement to other districts is becoming apparent. Land is generally held on a customary tribal basis with limited individual rights to property and improvements, and with no general system of freehold land tenure. 6. Only 200,000-300,000 Africans have non-agricultural employment. A further 200,000 are wage laborers on agricultural estates, especially in the cutting and processing of sisal. The bulk of the population is engaged in agriculture and animal husbandry on its own account. Shifting agriculture and nomadic cattle raising to meet subsistence requirements are wide-spread. In addition, African commercial agriculture is geared to the production of export crops (cotton, coffee, oilseeds and cashews), and of maize, meat and other foodstuffs. There is no clear-cut division between the monetized and subsistence sectors of the economy, most farmers entering local markets to sell surplus production and to buy such requirements as textiles and clothing. European growers concentrate on the production of sisal, tea and coffee. 7. The standard of living is low, average annual income per head being about $56 and money income $33. Far higher incomes are earned by Europeans, notably as senior civil servants, plantation owners and professional workers, and by Asians in the civil service, trade and industry. Even among Africans there are substantial differences between city wrorkers and farmers, between market-orientated farmers and those producing primarily for subsistence, and betwJeen Africans living in different regions of the country. II. THE POLITICAL CONTEXT 8. The modern history of Tanganyika begins with its occupation by Germany during the 1880's., Before then, the Arabs had been the principal contact with the outside world, though this contact was largely limited to the coastal areas until the 160'so Following the maritime discoveries of the late 15th Century, Portuguese settlements were made, but by the early 18th Century they had succumbed to the Arabs. Then, in the middle of the last Century, Arabs and European traders, explorers and missionaries began to penetrate inland, in part spurred by the demands of the slave traffic. 9. In 1884/5, a private German company led by Dr. Karl Peters secured the lands of several tribes in Tanganyika, and the company administered the area until the early 190ts when the Imperial Government assumed a protectorate over the whole country. This step followed a revolt of Arabs and Africans against the German company; indeed, the country was not pacified until 1906. German administration continued until 1916/17 when British forces occupied the country. In 1921, the British Government was entrusted by the League of Nations with the administration of Tanganyika, which covered all of German East Africa except Ruanda-Urundi, and the British mandate continued until 1946 when Tanganyika became a United Nationst trust territory adminis- tered by the United Kingdom. During the 1920's, an advisory Legislative Council was established, but government was essentially in. the hands of the - 3 - British Governor and his senior civil servants. Local government was based on the system of "indirect rule", the tribal authorities being responsible to Provincial and District Commissioners appointed by the Governor. 10. During the inter-war years, the British Government formed a customs and currency union of Tanganyika and the neighboring British colonies and protectorates of Kenya and Uganda. Then, in 1948, the East Africa High Commission was created to administer a number of joint services--notably, railroads, ports and telecommunications--and to collect income tax and customs and excise duties. 11. It was only after 1955 that progress towards self-government was significant. In 1958/59, the first elections to the Legislative Council were held. However, the franchise was severely limited and there was a majority of nominated and ex officio members in the Council. In July 1959, a 12-man advisory Council of Ministers was established, with Africans holding three of the five elected positions. Then, in August 1960, elections were held umder a franchise which allowed 900,000 voters for a Legislative Council of 82 members. The Executive Council ceased to exist, and the Council of PLinisters now consisted of the Governor, the Deputy Governor, two officials and 10 members of the Legislative Council, one of whom was appointed as (Chief Minister. 12. The transition from this limited measure of responsible government to complete internal self-government was achieved in May 1961, just seven months before independence. The Chief Minister becare Prime Minister, the Council of Ministers the Cabinet, and the Legislative Council became the first National Assembly. The Governor and other officials withdrew from the Council of Ministers, although defense and foreign affairs remained the prerogative of the Governor. Then, finally, on December 9, 1961, Tangan- yika achieved independence within the Commonwealth of Nations. Under the new constitution, the British cabinet system of government was retained and independence of the judiciary was guaranteed. The National Assembly elected in 1960 continued in office, and it was provided that subsequent elections would be conducted on a basis of universal adult suffrage. Revisions of the constitution can be made by Act of Parliament, provided there is a two-thirds majority for any amendment. 13. Underlying the rapid 3-year progress from colonial government to com- plete independence has been the development of the Tanganyika African National Union (TANU) which was founded by Mr. Julius Nyerere in 1954 to press for prompt self-government and independence by peaceful means and without pro- moting racial antagonism. In the 1958/9 election, TANU won all 10 African seats and TANU-supported Asians and Europeans were generally successful. Then, in August 1960, TANU and its supporters won 70 of the 71 elected seats. Mr. Nyerere was appointed Chief Minister, becoming Prime Minister on the advent of internal self-government in May 1961. Other political parties, the African National Congress and the All-Muslim National Union, have attracted little support, and TANU is therefore the dominant political organization. 14. Allied with TANU has been the Tanganyika Federation of Labor (TFL) which was created in 1955 to foster trade unionism among African wage earners and to press for higher wages and other work benefits. The Federation has been a militant force for independence and for the as- sumption of control over economic life by Africans. 15. When Mr. Nyerere became Prime Minister, he had general popular support, a strong political party and labor movement in TANU and the TFL, and the goodwill of the British Government as indicated in its promise of large financial assistance through the early years of independence. Gov- ernment policy favored the cooperative movement and a large public role in investment and in the promotion of agriculture and industry; but there was no hostility to private or non-African enterprise. The Government wa.s committed to Africanization of the civil service and to securing in- creased opoortunities for Africans in trade, industry and education; but official policy was for this to be an orderly process. 16. However, developments during 1961 resulted in great pressure on the Government to change its policies, particularly with respect to Africanization, and Mr. Nyerere resigned as Prime Minister in January 1962 only seven weeks after independence. Mainly because of drought and flood, 1961 was a very poor year, income per head declining some 6%. 17. By resigning the leadership of the Government and reassuming control of the party, Mr. Nyerere planned to restore a. sense of purpose to the nation and to check extremism. The Government was 'left in the hands of Mr. Rashidi Kawawa, a Nyerere supporter, a new moderate presi- dent was appointed to the TFL, and Mr. Nyerere began touring the country to revitalize TANU and to encourage increased development efforts on a local basis. The nine Provinces were renamed Regions and African Re- gional Commissioners replaced the British Provincia.l Commissioners (Map 1). This move was designed to spread Africanization, to provide nine local political managers responsible to the Government and to establish centers for stimulating regional economic growth. In this way, the Government planned to harness individual efforts to such local develop- ment projects as road construction, well digging and other health projects, thereby creating a. sense of personal involvement and national purpose to replace the drive for independence. A Ministry of Cooperative and Com- mnunity Development and a federation of cooperative bodies were also es- tablished as part of this program. 18. To hasten Africanization, the Government appointed an Africaniza- tion Commission under the new African head of the civil service. Again, since freehold existed only for a. small number of Europeans and Asians, the decision to convert freehold titles to leasehold wa.s construed by many as part of the movement to Africanize, even though it affected less than 1% of the land area. Asian businessmen were urged to help Africans establish themselves in commerce and industry. On the other hand, the Government refused to adopt the extreme measures a.dvocated by some TFL leaders, and it stood firm in the fa.ce of a threatened general strike. 19. On December 9, 1962, the first anniversary of independence, Tanganyika became a republic within the Commonwealth with executive authority vested in the President, Mtr. Nyerere, who was elected by universal adult suffrage in October. The existing NationaL Assembly met in November to consider necessary amendments to the constitution. It is proposed that the parliamentary and presidential elections should thereafter be held simultaneously, normally for a 5--year term, to reduce the possibility of the parliamentary majority and the Presi- dent being from different political groups. The system of government will be a hybrid presidential/parliamentary one. The President will have wide executive powers a.s both Head of State and Head of Govern- ment. From the Assembly, he will choose both a Vice Presicdent to serve a.s lea-der of government business in the House and the Cabinet over which he will preside. He is not to be bound by the advice of his Ministers, and he will have the right to convene or dissolve Parliament and to nominate ten members to the Assembly. Acts of Parliament, including financial bills, will require his consent, but his veto may be overruled by a two-thirds majority; or, in the event of disagreement, he may call new elections. The dissolution of Parliament would, however, entail the President's own resignatione To ensure that the administration will effectively carry out government policy, the President is to have direct control over the civil service, with authority to appoint, promote, dismiss and discipline the staff. 20. Tanganyika's desire is to avoid close association with the WIest, while maintaining its Commonwealth ties. On independence, Tanganyika declined to assume in toto the United Kingdom's treaty obligations, and it is renegotiating each one sepa.rately. Tanganyika has established diplomatic relations with the Soviet Union and Mainland China, but not with Portugal and South Africa. It has joined a number of international organizations, including the UN and the GATT, and, in September 1962, the IMF, IBRD and its affiliates. Because it wishes to be an "uncom- mitted" country, it does not want "a.ssociation" with the European Economic Community. 21. During negotiations for independence in 1960-61, MIr. Nyerere strove to keep the way open for a federation with Kenya and Uganda.. However, - 6 - Tanganyika's freedcm was in fact achieved before either Uganda or Kenya had full internal self-government. Nevertheless, the Government has strongly supported the transformation of the East Africa High Commission into the East African Common Services Organization (EACSO) and it is resolved to main- tain the common market which has been developed since the 1201s. Moreover, Tanganyika decided to retain the common monetary arrangements of the East African Currency Board, and not, at this stage, to establish a central bank and separate currency. 22. Notwithstanding the swift developments of the last few years, Tangan- yika appears to be maintaining political stability. No disturbances followed Mr. Nyerere's resignation and no marked changes in policy have in fact taken place, although Africanization has been hastened. There remain, however, three major problems of an essentially political nature-the reestablishment of investor confidence, the preservation of administrative standards despite the loss of European and Asian civil servants, and the effective mobiliza- tion of popular support for the development effort. 23. The political uncertainties of 1960-61 resulted in a large capital outflow. Evidence of antagonism towards non-Africans, the resignation of Mr. Nyerere, and the intention to abolish freehold land tenure have disturbed local investors and businessmen, for example in the sisal industry, and have caused foreign investors to adopt a wait-and-see attitude. 24. Secondly, the pressure to replace Europeans and Asians in the civil service threatens to reduce substantially the standards of administrationp Of some 6,300 senior and middle-grade posts in the 33,000-man civil service in March 1962, 1,337 were held by Africans, a marked advance from 1 in 1951, 155 in 1957 and 340 in mid-1960. Some 1,400 senior and middle-grade posts were vacant, and the remaining 3,500 were held by Europeans and Asians. In May 1961, when self-government was obtained, there were 2,200 senior Europeans, of whom 1,700 were employed on normal civil service terms and 500 were under contract. In addition, many middle grade posts were held by Asians. During the following twelve months, over 600 Europeans resigned or gave notice of resignation, only one-third of these being replaced by contract staff. With the increased tension of late 1961 and early 1962, a 50% reduction of the 1,700-man European establishment by the end of 1962 is possible with a virtual complete departure, except for contract personnel, by the end of 1964. The pressure of events was also hastening the exodus of Asians. In view of the shortage of trained Africans, and despite the increasing employment of foreign officers on a contract basis, the reduced availability and quality of senior civil servants and of office staff impedes the execution of the development plan, the collection of revenues and the general administration of the country. Indeed, on just these grounds, the Budget Speech of June 5, 1962 expressed the gravest concern at the current loss of staff and the number of vacancies. 25. Finally, it is still too soon to assess the response to the Govern- mentts recent measures to galvanize the general public into active support of the development effort through self-help schemes organized on a community - 7 - basis, These efforts have to start from a very narrow economic base, with low levels of income, education and efficiency and a small volume of resources available for new investment. Moreover, the drive begins while the country is recovering from the economic setback sustainled in 1961. III, STRUCTURE AMD GROWTH OF THE ECONiOMY Recent Economic Growth 26. While there are no national income data before 1954i, it would appear from production series and unofficial estimates that the output of Tanganyika doubled in size between the end of World War II and 1960, and living stand- ards rose some 50% (Table 7), In part, this increase stemmed from develop- ment outlays by the United Kingdom, averaging about ;l milLion per annum, but the principal factor was the rising volume and value of a broad range of agricultural and mineral exports which together constitute 45-50% of money national income. Even after the Korean boom of 1950-52 had subsided, there was substantial expansion, export receipts rising 50% between 1954 and 1960. Since average export prices fell by some 12% during the period, *the rise in volume was even greater. At the same time, only slow growth (probably little more than the 1.8% annual increase in population) is thought to have occurred in subsistence agriculture, a sector which accounts for 40% of total income and in which almost all Africans are to some extent involved. The overall result may have been an increase of real GDP by as much as 5% p.a. duiring 1954-1960, income per head rising some 2% to 3% annually, after allowing for adverse movements in the terms of trade. 27. There has been no great change in economic structure over the last seven years, apart from some decline in the relative contribution of sub- sistence agriculture (Table 3). There have been slight increases in the proportions of GDP contributed by mining and manufactures, and an appreci- able growth in the importance of public administration, primarily through increased salaries. 28. Given the dominance of agriculture (farming, livestock and forestry contributing almost 60% of total output), the year-by-year growth of the economy varied in large part with export and seasonal conditions. Thus, 1958-1960 was a period of substantial economic advance. Export prices, led by sisal, oilseeds and nuts, rose 8% and export volume (especially for cotton and coffee) by 20%. The GDP increased by 10% and government revenues by one-sixth. This was the economic background for the independence negotiations of 1960-61. 29. Then, in 1961, the growth of the previous six years was halted; GDP fell sharply, per capita income declining 6% or more. Widespread drought and subsequent flooding combined to reduce agricultural production by 10- 15%. Famine prevailed over large areas an(d substantial food imports, in particular maize, provided by the U.S. PL480 Program, were necessary. Export volume fell 8%, and the decline in receipts was aggravated by lower prices for sisal, coffee and nuts. The large favorable balance of trade earned in - 8 - 1960 virtually disappeared. In addition, there was a 15% decline in private investment resulting in part from political uncertainty, and trade, industry and imports for the private sector declined. A substantial budget deficit occurred in 1961/62. The estimated increase in government revenues was not realized, and expenditures were raised by relief and highway repair costs, as well as by provisions for independence and increased wage rates. The incidence of this economic set-back was quite uneven: business profits declined; the total wages bill rose 16% while employment fell slightly; subsistence farmers were severely affected by the weather conditions. 30. Underlying the growth achieved over the last several years has been a relatively high rate of investment, even in 1961. While the volume of investment has been no greater in 1958-1961 than in 1954-57, it has absorbed 15% or more of total GDP, or more than 21% of money GDP (Tables 4 and 5). The stabilization of investment after 1957 resulted from a decline in trans- port investment by the EACSO during 1957-60, offset by increases in the private and other public sectors: and then a large increase in EACSO and other public outlays in 1961 wihen private investment declined. 31. In recent years, over 35% of investment, including that in the sub- sistence economy, was apparently concentrated in the sociaL sector, especially housing9 Education and community facilities each accounted for some 5%. A fAurther quarter of investment was in transportation, particularly outlays by the EACSO on railroads and by the Tanganyika Government on highways. The commodity-producing sectors absorbed 20%, with manufactures and mining sharing equally with agriculture. Distribution and a rather extensive range of miscellaneous public works accounted for the remainder. 32. The private sector has in recent years contributed 60-65% of monetary investment as well as all investment in the subsistence sector. Private effort has been about equally distributed between the directly productive sectors (agriculture, mining and manufactures) and distribution. housing and motor vehicles. 33. Public investment, one-third or more of the monetary total, has been devoted to infrastructure, notably communications, and to the social sector, particularly education and water supply. 34. There are no comprehensive official estimates of the role of foreign capital in Tanganyika, but U.K. grants, development loans raised in the U.K., and loans raised by the EACSO for its own transportation program may have accounted for some two-thirds of public investment, or ;5-6 million annually, in the years since 1957. In addition, long-term private investment (includ- ing re-investment) may in this period have exceeded ;2 million per annum, principally for estate agriculture, manufactures and mining. On the other hand, there was a substantial outflow of private capital in 1959-61. Finally, banking and monetary authorities were accumulating funds abroad, particularCly in 1957-8 and again in 1961. As a resul-t of these diverse movements, it is possible that in recent years four-fifths of Tanganyika's investment activity has on average been financed locally. Gross domestic savings during 1957-60 may therefore have been equivalent to 13% of total GDP or 17% of money GDP, - 9 - with net savings ratios of perhaps 10% and 13% respectively. In 1961, however, the reduction in incomes may have been accompanied by a 25% or more decline in national savings from the peak achieved in 1960. Given the level of in- comes, these ratios represent a sizeable domestic savings effort, although $6 per head available for investment does not provide the basis for large annual increments of output and income. 35. Of 5 million Tanganyikans over the age of 16, less than 500,000 are recorded as employed in the monetary sector (Table 8). This total excludes both peasant farmers and those engaged independently in growing coffee and other cash crops. Most wage earners are employed in primary production, including processing activities: one-third of all male African wage earners are engaged in the sisal industry. Most others are employed in a broad range of service industries, from transport and construction to domestic services, Only 27,000 Africans and 3,000 non-Africans are engaged in manufactures and mining, excluding handicrafts and factories employing less than five. In total, some 250,000 Africans are engaged in non-agricultural pursuits. 36. Particularly in the large subsistence sector, underemployment is widespread; but unemployment is not a pressing problem. However, rising wiages in 1960-61 have encouraged a drift towards the capital city of Dar es Salaam, which is believed to have some 5,000 unemployed, or somewhat more than 5% of its workforce. Moreover, increased wages have :Led the sisal estates to reduce their employment by over 10,000. With a 65% rise in factory wage rates, employment in manufactures has fallen by almost 5,000 (or 25%) since 195;8. :37. Of employed African adults, some 80,000 are officially rated as skilled, including 12,000 clerks, 15,000 with manual skills, 7,000 school teachers and 11,000 executive and technical personnel (Table 9). This is a small group with which to administer and develop the country, and both private and public activity suffers from the shortage of skills. On-the- job training is therefore offered by most businesses and public authorities, and there is a Technical Institute in the capital, with a second commercial school in Moshi. 38. The trade union movement was successfully established in Tanganyika in 1955 with the creation of the Tanganyika Federation of Labor. Since then, membership has increased from 10,000 to more than 100,000, or some 25% of the work force. The Government has encouraged collective bargaining, and agreements on wages and conditions now cover 60% of African workers, or about 250,000. With the approach of independence, there was an increase in industrial unrest, chiefly related to agitation for the promotion of Africans to senior and supervisory positions, for example to replace Asian foremen. A wave of strikes was directed in particular at the EACSO, but disputes over disciplinary matters and staff positions also severely affected the sisal and tea plantations and the diamond mine. Discipline deteriorated and, particularly in 1961, productivity declined markedly. The Government has recently taken strong measures, including the passage of the Trades Dis- putes Settlement Bill to outlaw strikes ancd to institute compulsory concilia- tion. Strikes have ended, but the hostile attitude to management may not have abated. - 10 - 39. The last two years have been marked by a rapid rise in African wage rates with increases of more than 15% in each year. The total wage bill in 1961 was ;40 million, or 35% of the money GDP. While the 1961 famine raised food prices in some localities, the general stability of prices means that most wage earners enjoyed substantial rises in real income, in large part at the expense of private profits and government reserves. The establish- ment of a collective agreement in the sisal industry in 1959 was followed by a large wage rise, and rates for government day laborers were also raised. The Minimum Wages Board has just recommended new wage scales for 1963, and there will be an average increase of about 20% for somie to0, 000 workers. This would affect both the Government itself and the labor-intensive sisal arid mining industries. These industries are very denendent on export markets, and further substantial wage rises in excess of rises in aroductivity would be most damaging to their development, particularly to gold and diamond mining. In the sisal industry, there may be scone for better organization of labor and increased efficiency, and wage increases might be largely offset by im- proved management. 40. While per capita income is about $56, including some $33 of money income per annum, the distribution of income is by no means even. African money incomes range from near zero for subsistence farmers through a national average of some $100 per family to $150 for 45,000 coffee growers in the I4oshi area, $160 for the average wage earner and more than $350 per year for the highest paid 25,000 workers, mostly in the service indulstries. Again, on a regional basis, income distribution is uneven, reflecting both varia- tions in natural conditions and adaptability to commercial agriculture. The 40% of population living in the northern border areas from Tanga to the Lake Victoria district has almost 60% of the GDP: the West, Central and Southern regions have almost half the population, but produce only one-fourth of the national output, Improved transport facilities, the extension of education and health services, and the spread of commercial agriculture are reducing this disparity. 41. As much as one-third of money income is estimated to accrue to the 150,000 Europeans and Asians: their incomes are therefore a large multiple of the African. The bulk of taxation falls on these highly productive sectors; conversely, the taxable capacity of the African is low, except for the wage earning group and the more prosperous of the dash crop farmers. Principal Economic Sectors 42. Agriculture. Some 44% of total GDP is contributed by agriculture and a further 14% by other primary production, namely livestock, forestry and hunting (Table 3). These activities are, of course, the predominant concern of the subsistence sector, and, according to official estimates, agriculture as a whole is about equally divided between subsistence farming and cash crop production. Farming accounts for over one-third of money income and other primary production for 6%e Agriculture is therefore the largest economic sector, and its growth during 1954-1960 paced that of the economy as a whole. It is also the predominant earner of export receipts on which the public revenues and general growth of the economy depend. - 11 - 43. Tanganyika is fortunate in the diversity of its agriculture. The most important product, sisal, contributes one-eighth of money income and almost 30% of export receipts: for the three major products, sisal, cotton and coffee together, the contribution are 24% and 57% respectively. Some- what more than two-thirds of the coffee crop is arabica, and the remainder is robusta. In addition, there are oilseeds and cashew nuts, tea, livestock and timber products as well as sugar, maize and subsistence foodstuffs. Com- pared with many underdeveloped countries, then, Tanganyika relies on a broad range of products for its income, Moreover, a number of these products have recorded considerable increases in output during the 150ts-especially cotton, oilseeds and cashew nuts, tea and pyrethrum (Table 6). Cash crop production is estimated to have risen 90% between 1951 and 1960, and almost all products have contributed to this growthl. Subsistence production-cassava, maillets, bananas, rice--has probably increased about 20-25%, allowing a slight rise in per capita consumption. 44. In view of the increased production, there has been no great increase in food imports, except in drought years. However, Tanganyika has looked to Kenya and Uganda to make good its deficiencies in dairy products, sugar and beverages (Table 21). 45. Basic to the expansion of output in the cash economy was an almost equal increase in acreage: yields were in general static. Save in certain areas, the soils are not highly fertile, and traditional farming methods are not conducive to efficient farming. Shifting agriculture is common. Exten- sion services are concentrated on cash crops and are in any event very limited in scope. They encounter low standards of education and a general antipathy to change. Moreover, the tribal system of landholdings does not favor improved agricultural practices: it is not possible to plan land use, to encourage individual initiative, or to use land as security for agricultural credit. There are, too, the natural disadvantages associa-ted with the tsetse fly and the absence of adequate and reliable rainfall in many areas (Map 2). Finally, the rapicl expansion of land under cultivation cannot continue indefi- nitely. There is population pressure in some regions and much of the uncul- tivated area is unsuited to efficient production./ While expensive irriga- tion settlements may eventually overcome these difficulties, as in the Rufiji basin, no extensive program has so far been attempted.2/ J The Government's recent White Paper "Proposals for Land Tenure Reform"t (Government Paper No. 2, 1962) indicates that its proposed land legis- lation, which includes the abolition of freehold, is really intended to secure the full development of idle but productive land whether it is now held as freehold or under rights of occupancy. In 1961, the FAQ completed a survey of the Rufiji basin and recommended a long-term $1O00 million program of irrigation, drainage and flood con- trol. Pilot farms should be established in the first stage to provide experience in raising cotton, rice, citrus, castor beans, etc. - 12 - 46. European and Asian estates, wzhich occupy about 1% of the land areas play a major role in agriculture. They are responsible for almost 40% of cash crop production, including almost all sisals tea, pyrethrum and tobacco, and almost half of the arabica coffee; they account for somewhat less than one-half of agricultural exports. In particular, sisal accounts for 80% of plantation production and for over one-third of agricultural exports. African peasants, on the other hand, produce most of the coffee and virtually all the cotton, oilseeds and nuts. They also own most of the 15 million livestock. 47. The cooperative movement has been a leading factor in agricultural development, handling one-third of exports, particularly cotton and coffee. Some 330,000 Tanganyikans belong to the producer cooperatives which are now federated in a National Union. The cooperatives have encouraged cash crop production and have sought by negotiation and by the operation of pro- cessing facilities to increase the net return to the African farmer. They have also provided community and education facilities. As yet, they have not mounted any successful campaign for increasing agricultural productivity, for example by encouraging fertilizer use or improved standards in coffee processing. This shortcoming of the cooperatives may in part be due to limited managerial abilities as well as to the indifference of farmers. Cooperatives are now being established in commerce and banking, partic- ularly for the provision of agricultural credit and in the wholesale and retail trades. The Cooperative Bank of Tanganyika has been registered with the support of the commercial banks, and the Cooperative Supply Association has been e;2tablished, with an Israeli managing agent, to foster cooperative trading. 48. European and Asian farmers secure finance from their own profits, parent companies and bankers. Given the limited interest of African farmers in improving productivity and therefore in purchasing equipment and plant, their demand for credit has been small. At the end of 1961, two African Loan Funds had a total capital of 1200,000, of which IU50,000 was in use, and t.e Land Bank had advanced i1.2 million, partly on short term, to non- African farmers. In addition, through the cooperative societies, the commercial banks were regularly providing seasonal credit to African farmers. The three government institutions have now been consolidated in an Agricul- tural Credit Agency, and an expanded credit program is planned through the Agency and the new Cooperative Bank. 49. Tanganyika's livestock production is important primarily for subsis- tence. There are 8 million cattle, 4 million goats and 3 million sheep (Table 6). The quality of the stock is low, and overgrazing is common. How- ever, meat products, hides and skins provide 7% of exports, and meat exports have risen rapidly during the '50's. Milk and butter production has shown no increase over this period. The TanganyiSa Agricultural Corporation, created by the British Government in 1954 1/ and given to Tangarnika at the The Corporation took over the assets of the Overseas Food Corporation which had been responsible for the unsuccessful groundnuts scheme in the early post-war years. - 13 - time of independence, is pioneering in cattle ranching and the demonstration of improved metliods of livestock raising, as well as in farm settlement schemes. 50. Forestry products contribute little more than 2% to the national economy, and a similar proportion of exports. Timber is an important factor in the subsistence economy, and exports include a variety of hardwood and mangrove poles, wattle bark extract, beeswax and coir fiber. 51. Mining. Only diamonds and gold are produced in significant quantities, the former accounting for 73% of mineral output and the latter for 15% in 1961. Other minerals are tin, mica, silver and salt. Mining is an important export industry (14% of export earnings) and is as large a sector of the economy as manufactures 'over 6% of money GDP). 52. Mineral production has increased some 50% since 1954, or somewhat more rapidly than the economy as a whole. Diamond production has doubled and gold output has increased by one-third; but the production of lead, and associated silver and copper, has ceased following exhaustion of the mine opened in 1954 (Table 6). In addition, Tanganyika produces salt and limestone, sand and gravel for local industry; and the mining of meerschaum has recently formed the basis of a smokerts pipe industry. There is, however, no pro- duction of major base metals or, despite several years of exploratory work, of petroleum. 53. The diamond industry is operated by a firm established on a private basis in 1940 but jointly owned, since 1958, by the Government of Tanganyika and the de Beers interests. Production has expanded rapidly since de Beers assumed operating responsibility for the firm (Williamson's Diamonds Limited) and granted it a sales quota which is considerably larger than present pro- duction. The company contributes the major part of the government's annual receipts of about E1.5 million from dividends, royalties and taxes in the mining industry, Part of the government's 50% interest was financed by a kU.3 million loan from de Beers which is to be repaid by 1968. The Govern- ment is now prepared to consider applications for prospecting rights in areas outside the Williamson concessions. 54. Of the two gold producing firms, one is controlled by the CDC. Both are troubled by rising wage costs and by disappointing yields, and the 1Minimum Wages Board has recommended a government subsidy. 55. Large areas of Tanganyika have still to be surveyed and prospected, and it is possible that a variety of economic mineral deposits will be found. For example, there are deposits of sapphires, rubies and miobium which may prove to be commercial. Oil exploration, while unsuccessful, has revealed other deposits, including rock salt. Extensive coal and iron ore deposits exist in the Southern Highlands, but transport and technical obstacles so far render their use uneconomic. It is the government's policy to encourage exploration, Tax and royalty rates (37.5% and 15% respectively) are reason- able, and various incentives (e.g., depreciation allowances) are offered. In addition, the Government is spending about lOO,OOO per year on survey work. 56. Manufactures. Like mining, manufactures contribute 6-7% of money GDP, or over ;7 million annually. While there was no increase in production in 1961, substantial though erratic growth occurred over the previous decade, probably averaging 7-8% annually, with very rapid expansion in 1956-58. A principal factor in this growth was a small number of relatively large firms established by overseas interests to produce commodities previously imported, for example, textiles, insecticides, metal pipes, canneries, and more recently, cigarettes, sugar and footwear. Cement packing and pipe production have also begun. It is these firms which have provided much of the estimated h2 million annual investment in manufactures. Then, there are a number of firms, generally in the hands of resident Asians and Europeans, which process agricultural products and produce foodstuffs, beer and other beverages, candy, textiles, timber, paper bags, plywood and light metal produots. These two groups of firms number about 300, and employ some 15,000 wior-ers, as compared with 20,000 in 1958. Rising wages, the decline of wooO'worltng industries and the 1961 recession explain this reduced employment, 57. In addition, there are a further 15,000 workers in b,000 "factories" which employ less than five hands, many operating wit'lout the use of pcwer. These factories produce foodstuffs and wood products and engage in a wide range of light engineering and repair work. Finally, there are some 1,000 concerns employing 55,000 workers in basic agricultural processing, particu- larly in the sisal and cotton industries. 58. Apart from the small size of the industrial sector, perhaps the most important features are the predominance of foreign and non-African capital and enterprise, and the associated lack of skilled African technicians and managers: and the necessary gearing of industry to producing import substi- tuites, a process which the Government is resolved to encourage, 59 The Government h2s always welcomed foreign enternrise, and indenend- ence has not chan^ed this nolicy. It his been negotiating for three large industrial underuakings, namely, the establisbhent of a $12 million oil refinery by ENI of Italy, a t-:e factory by tne French Michelin concern, and a $3.5 million cement plant by an Anglo-Swiss group, While the Government has a large interest in Tanganyika Packers Limited, there is no purely government manufacturing enterprise, nor has the Government declared any intention of using its meager financial resources directly in a field which may be expected to attracst prirate enterprise. The only large public enter- prise is the East Africnn R3ailways and Harbors Administiratic,n (EAR&1), a service of the EACSO, with its engineering and repair shops employing some 3,000 men. 60. Apart from the 10% additional investment allowance introduced in the 1962/63 budget (which makes 110% of the cost of assets allowable for income tax purposes), no extensive inducements are offered by way of tax exemption or subsidy. While the Government provides remissions of import duties and imposes protective tariffs, its freedom of action is somewhat limited by the need to coordinate customs duties with Kenya and Uganda and by an East Africa-wide system of licensing in the textile and metal industries. The Customs Union prevents Tanganyika from extending protection to its own - 15 - industries against East African competition. However, firms operating else- where in East Africa have recently established plants in Tanganyika to meet local demand, for example for beer, flour, shoes and textiles. 61. Company tax has for several years been 5/6 in the pound, or 27.5%. However, in their 1962/3 budgets, the three East African Governments have also imposed a 10% Corporation Tax, the profits of 1961 being subject to the new combined rate of 37.5%. There is also an undistributed profits tax (9/6 in the pound) which applies to "closely held" companies (i.e., those con- trolled by 5 or fewer persons) distributing less than 75% of their net income as dividends. 62. Early in 1962, the Government established a T500,000 Development Corporation to foster the development of industry and commerce, and its first activities are to finance a hotel and to assist the meerschaum pipe industry, In addition, the Corporation is joining as a one-third partner in the crea- tion of a Tanganyika Development Company with the British CDC and the Develop- ment Assistance Company recently established by the West German Government, each subscribing an equity capital of ;6500,000. The Development Company mill have the same objectives as the Governmentts own Corporation, but it will be managed and controlled separately and will concentrate on promoting manufactures. The Government is also encouraging private business to pro- vide opportunities of promotion to Africans, and it is expected that some government resources will be used to help establish Africans in manufacturing and commercial activities. 63. Transportation (Map 3). With a relatively large area and a widespread population, Tanganyika requires extensive communication facilities. Trans- portation represents about 12% of the money GDP and 17% of investment. It is as large an economic sector as manufactures and mining combined. While port facilities may be rated as good and airports as adequate, there are marked deficiencies in land transport, especially in highways. 61X. In the 21,000-mile road system, there are 4,000 miles of Territorial main roads, 6,000 of local main (feeder) roads, and 10,500 miles of local authority roads of varying standards; most roads are passable only in dry weather. While there are only 41,000 motor vehicles, road transport is vital for much inter-regional travel and for the delivery of produce to market and to the railheads of the east-west railroad systems. The EAR&H also provides road haulage on certain routes, and there are a number of commercial carriers licensed by the Government. 65. At present, several regions have no direct connection by road or rail, and bad weather, as for example in 1961, can reduce the road system to chaos, with considerable loss to the economy. This deterioration of roads is in part due to the low standards of construction and maintenance which the Govern- ment has felt it could afford. 1J Tanganyika's share will be paid over several years, including T75,000 in the first three years. - 16 - 66. The railroad system, operated by the EAR&H{, presently consists of three separate lines, with 1,650 miles of one meter track. The principal route is the 780-mile Dar es Salaam-Kigoma line which runs right across the country to Lake Tanganyika, with a northern branch to Mwanza on Lake Victoria and a spur to Mpanda, built in 1953 to serve the now defunct lead mine. There is a 250-mile line from Tanga to Moshi and Arusha, serving both the Kilimanjaro area and the northern sisal estates. Finally, there is a 150- mile southern railroad inland from Mtwara, a port which was built in con- nection with the postwar groundnuts scheme. The Government has now decided to close this route as uneconomic. 67. Several railroad construction programs are underway or contemplated. A 117-mile line linking the Dar es Salaam railroad with the Tanga line (and so with the Kenya-Uganda system) is due to be completed soon. This wll speed traxel and enable the exchange of rolling stock between the various lines which ha-we different periods of peak traffic. Secondly, a 44-mile souatie-_-n spur line f:-om the Dar es Salaam route has just been completed (KiPsaocThlim~'l. This is also intended to be the first stage of a rail- road to thie Southern Hlighlands. Thirdly, a new link is envisaged between the Moshi-Arusha area and the Kenya railroad to shorten the route and to provide 2 better track. 68. The railroad system is well operated, and equipment has been greatly improved over the last several years, capital expenditures accounting for almost 10% of all money investment. Freight shipments, however, have not ex- panded as rapidly as the economy as a whole, growth being less than 40h during the '50s, with a very small increase since 1957. 69. The two principal ports, Dar es Salaam and Tanga, are also operated by the EAR&H and have been thoroughly modernized in recent years. Capacity is avrailable to handle a. large increase in cargo. In the south, there have been two relatively small ports, Mtwara and Lindi, and the latter is now being closed, with traffic diverted to the better-equipped Itwara. 70. Power. Electric generating capacity doubled between 1951 and 1961, when it reached 47,000 KW, and there is no shortage of power. Sales in Tanganyika increased on average by 11% annually, though with slower growth (8-9%) in later years (Table 7). In addition, about one-seventh of produc- tion is exported to Mombasa. Annual consumption is now 120 million KWH1, or only 13 KWH per head. Expansion has taken the form of increased hydro elec- tric capacity on the Pangani River and the installation of thermal plants in Dar es Salaam and elsewhere. Diesel units have accounted for most of the expansion and now constitute 60% of capacity. 71. Power is supplied by Tanesco (Tanganyika Electric Supply Company), a subsidiary of a British company, in which the Government has a. small but growing financial interest. The company is regarded by the Government as conservative and as having an unduly favorable concession. The Government is therefore extending its financial interest and may ultimately take over the utility (Table 1). - 17 - 72. To meet anticipated growth in demand, Tanesco is now constructing the £5 million 21 NWT Hale power station on the Pangani River with the help of a £3 million CDC loan. The Government is also lending £1.75 million which in five years will be converted to equity. In view of the complicated re- lationships between the Hale and earlier Pangani schemes and other possible installations on the river (in terms of minimum required water flows and irrigation needs), it would seem that, as implied by the survey mission, the Government and the company have failed to secure the systematic and most economic development of the whole Pangani River for both irrigation and power purposes. This large increase in capacity will supply the needs of the Dar es Salaam and Tanga areas for several years, and there appears to be further hydro electric potential on the Pangani and its tributaries and on the Rufiji where the Stigler's Gorge site has a potential of 00 MW. The Government is exploring these orospects. 73. Education. Few Tanganyikans have received 4 years of primary educa- tion: far fewer still have technical mad professional qualifications. The consequent low standards of education are a major obstacle to efficiency, es- pecially in the two vital sectors of agriculture and public administration. In 1961, almost 500,000 Africans were in school and only 11% of these were in grades 5 to 12 (post-primary schools). Enrollments have more than doubled in the last decade, with post-primary schooling exDanding almost threefold (Table 7). Despite this growth, only 25% of children 6 to 1I years of age are enrolled, including ab2Vt one-third of all boys, with negligible propor- tions in the higher grades . lkWhile the Government has general control over educational standards and provides most of the finance, schools are generally owned and operated by private organizations. The school system was integrated at the beginning of the 1962 session, and there are now to be 8 years of primary and four years of secondary education. 7h. Until SeptemK.&r 1961, there were no university facilities in Tanganyik4 Tanganyika has a quota of 300 students in Makerere College at Kampala, Uganda, and also sends students to the Royal College in Nairobi and to various univer- sities abroad. Now, in addition, as part of the new University of East Africa, a law school has been started, a. college of arts and sciences is under construc- tion in Dar es Salaam and university enrollments there are planned to reach 666 by 1965/6. There are also teacher training schools and a Technical Institute in Dar es Salaam and a commercial college at Moshi. 75. Public Administration. The wages and salaries of public servants now constitute one-seventh of money GJDP, and public administration is there- fore second in size to agriculture. Its 35% growth in the last two years, 1960 and 1961, has chiefly been the result of large wage increases. Half of these payments, forming 7% of the GDP, are for administration, law and order, which therefore constitute a very heavy burden on the nation, Other major services are education, public health and oublic works, especially road maintenance. 1/ In 1961, 1,100 Africans completed the School Certificate Course which re- quires ten years of school: some 200 completed the whole 12 years of schooling. There were only 28 School Certificate completions in 19h8 and 101 in 1953. - 18 - IV. FINANCE AND DEVELOPMENT PLANNING Money and Banking 76. The currency is issued by the East African Currency Board and the unit of account is the East African shilling with a par value of twenty East African shillings to £1 sterling. The Board issues currency in Tanganyika, Uganda, Kenya, Zanzibar and Aden. In view of the movement towards independ- ence, the Board was re-constituted in 1960 as a representative institution located in East Africa. Its basic functions of issuing East Africa's legal tender money, and of redeeming it at a fixed parity with sterling, have not changed: nor has the requirement that the Board maintain substantial ex- ternal reserves against its currency. Since 1955, however, the Board has accepted the principle of making a fiduciary issue, holding some of its re- serves in local securities which has afforded governments the opportunity to issue treasury bills and to develop local capital markets. 77. The reserves which the Board holds against its currency have long been equal to some 100% of the note issue (Table 10). In mid-1961* total reserves were equivalent to 11h% of the £59 million currency in circulation; reserves held abroad (£56 million, almost all in U.K. securities) were equiv- alent to 96%, the residue being held in East African bonds and bills. Tangan-- yika's Government stock has been in the Board portfolio since 1956/7, and Treasury bills since their first issue in 1959/60. In recent years, the Board has increased its holdings of local securities and, nmder its 1957 regulations, it may create a fiduciary issue up to £20 million. In fact, th.e fiduciary issue was £14.9 million at the end of June 1962, and the cor- responding assets of the Board included £2 million of Tanganyika. bonds and £2.7 million of bills. The fiduciary limit is alloca.ted among the five mem- ber territories according to their shares in the surplus income which the Board may declare, and this in turn is based on an "economic imDortance" index which the Board has adopted, giving Tanganyika the right to 28% of both disbursed and surolus income and of the fiduciary limit, (i.e., equiv- alent to an absolute amount of £5.6 million). 78. The Board has taken other steps to assist government finances and the development of the local money market. In 1960, it was agreed to re- discount up to £500,000 of internal bills for Tanganyika, and is now prepared to increase this sum to £5 million in respect to seasonal commercial bank credit relating to crop processing and marketing in East Africa. It is also allocating £5 million of reserves to financing the costs of East African countries joining international organizations, notably the Fund and the Banlc. Finally, in the last two years, the Board disbursed about 40% of its £3 mil- lion annual earnings to the Treasuries of member governmen-ts. The Board is, however, conscious of the need to maintain substantial sterling reserves as currency backing and resists pressure for further dilution of its reserve policy. Its sterling reserves are equivalent to four or five months of total merchandise imports by its East African members. - 19 - 79. Prior to independence, there was a move to establish an independent monetary authority in Tanganyika, but the Government decided against this, partly because it did not wish to complicate the establishment of an East African federation. When inmediate unity was no longer possible, the Govern- ment asked the Bank of England to secure a German currency expert to report on safeguards for Tanganyika in the operation of the present Currency Board, and to suggest steps needed to establish an East African currency and central bank. The Government now awaits the report of the experte 80. The present Currency Board clearly represents an interim monetary stage, preceding the independence of Uganda and Kenya. Tanga-iyika alone is an independent member, and Board decisions mrust therefore be unanimous if the charge of colonialism is to be avoided, There is some pressure to establish an independent central bank. 81. There are nine commercial banks in Tanganyika, but only three have substantial operations-Barclays Bank D.C.O., National and Grindlays and the Standard Bank. In addition, the three major banks have development companies, Each of the principal banks is a branch of a large British institution. At the end of 1961, there were two government agencies--the Land Bank and the Post Office Savings Bank. The former, with ;tl.2 million of loans outstanding) has now been merged in the new Agricultural Credit Agency which has a capital of ;2.2 million. The P.O. Savings Bank has suffered from a sustained with- drawal of deposits by non-Africans since 1955, the total falling from i2.6 million to ;1.5 million at the end of 1961. Now there is also the Cooperative Bank, a government company established to help the cooperatives in both agriculture and commercial activity. 82. There are no data on currency circulation in Tanganyika; all that is knowm is that the currency in circulation throughout East Africa has not increased greatly since the 14% rise in 195h/5. Over the same period, 1954- 1961, the demand deposits of the commercial banks in _anganyika, after declining in 1954-6, have shoin no rising tendency, 1 even though money GDP rose more than 40% (Table 10). 83, While their deposits remained virtually stable, the commercial banks increased their lending greatly (85% during 1954-60), and their advances/ deposit ratio rose from 41% to the very high figure of 80%. Much of this increase occurred in 1960, when capital flight was facilitated by the increased bank advances; deposits and balances held abroad declined. Then, the banks raised the interest rate on advances to 8%, and declined to lend against j/ After allowing for a -6 million increase in government deposits in mid-1961 when the Exchequer and Audit System was introduced. The Government banker now advances ;6 million to the Government, for working capital within the month. This advance is offset by deposits at this bank by the Ministries. - 20 - collateral held abroad. During 1961, there was a decline in advances to the private sector, particularly to farmers and traders, and an increase in deposits occurred, despite the continued outflow of capital. The banks increased their funds abroad by about L4 million and the ratio of advances to deposits declined from the peak level of 1960. 840 There is no developed capital market in Tanganyika. In the private sector, capital transactions are conducted directly or through the commercial banks and the Nairobi Stock Exchange. However, the Government has, with the help of the Currency Board, moved to develop the local money market. Between 1956 and 1960, L4 million of government bonds were issued locally, of which the Board took L2 million. To tap small savings, developmient bonds were issued from 1957, usually at 5% to 5-3/4%, and 1525,000 were outstanding by mid-1960. However, redemptions have since reduced the total of these bonds to some ;i400,000. Then, in 1959/60, the Government made its first issue of Treasury bills, of which T64.8 million were outstanding in July 1961, again with half held by the Board. The remainder are held by the commercial banks and their clients for whom they act as agents. The bill issue has been kept within the limits of ;h.5-5.5 million. 85. The Government had hoped that, as part of the 1961-64 development plan, it would be able to raise ;l million from a domestic long-term issue as well as to sell additional development bonds. Quite apart from the actual flight of at least L2 million of private capital in both 1960 and 1961, it became impossible to contemplate a new bond issue, and the development bond program also came to a halt. However, the Government still hopes to raise 1,.5 million from further Currency Board participations and from a "tap" issue which would provide a local investment for provident funds and sinking fund contributions, 86. In the absence of inflationary pressure from the monetary or govern- ment sectors, with export prices falling since 1951 and with relatively stable import prices, a marked rise in general prices was not to be expected. According to available indices, retail prices of goods consuned by wage earners may have risen on average by 1-2% annually over the last few years, with perhaps a 4% rise in prices for higher paid workers during 1961 (Table 11). There have also been wide fluctuations in the prices of staple foodstuffs according to seasonal conditions. The increase of 30% or more in money wages during 1960 and 1961 has not as yet been reflected in official price series: but the increased purchasing power (about ;10 million in two years) may be expected to boost the import of consumer goods. The R?iget 87. The financial position of Tanganyika. has changed drastically in the last decade. During the first half of the '501s, there were substantial surpluses (up to £3 million ner nnnuxn) of revenue over current expenditures (T9ble 12). Then, in the following five years there w.s a series of small - 21 - surpluses or deficits. The t60ts began with a small surplus in 1960/61, but a 12 million deficit is expected in 1961/2, and a further deficit in 1962/3. There is no longer a surplus for financing development, and reserves built up prior to 1956 were reduced to less than L2 million by the time of independence. Except for the assumption of about U1 million of defense expenditures by the United Kingdom during 1960-62, the Government has not received any subsidy for current expenditures. 88. The most important sources of revenue are import and excise duties which provide some 45% of all receipts: income tax and personal tax which contribute over 25%: various indirect taxes 8%: and property and other revenues about 20% (Table 13). As export income constitutes almost half of money income, its growth and variation largely affect both income tax receipts zmd revenues from import and excise duties. Indeed, government revenue fore- casts are based on tax receipts being close to 44% of export income, allowing an 18-monthst lag. In addition, there have been changes in tax rates. Thus, for 1962-3, increased company tax and higher duties on liquor, gasoline, sugar and cigarettes are expected to contribute M.8 million of additional revenues. 89. Customs duties are levied on a wide range of imports, generally at a rate of 25%, though with rates in excess of 50% for protective purposes or on luxury items. On the other hand, many essential materials and machines are admitted duty free, and the average rate of duty in 1960-6l was 20%. Excise duties are concentrated on liquor, tobacco, matches and sugar, commod- ities with a relatively inelastic demand by non-Africans and with a growing demand from Africans as their rmoney incomes rise. Income tax is progressive, rising from 10% on the first n400 of taxable income to 15% on the next ;h00 and by stages to 75% on incomes above 69,000 per annum. There is an allowance of L700 for a wife and of ;75-150 for a child, depending on his age. Few Africans are subject to income tax whereas most have been subject, along with non-Africans, to the Personal Tax. This tax now requires an annual payment of L1 from persons with incomes of J100-4150: L2 for incomes between ;150-;200: and rises by stages to ;30 if income exceeds s800 annually. The January 1962 exemption of income earners receiving less than Q100 removes 1.5 million Africans from this field of taxation. Costs of collection, in- cluding the administrative burden, exceeded the 12/- nayment ner person in this group, end the exemption nrovides a broader tax base for the local au- thorities. ComDan;y tx has been 27.5%, but the 1962-3 budgets of Tanganyika, Uganda and Kenya have added a 10% Corporation Tax, making a total levy of 37.5',%. There is, in addition, a variety of minor and locil taxes. The Drincinal one is the Native Authorities Rate which is essentinlly n poi1 tax of 10 shillings or more annually. This levy provides most of the income of the local author- ities. 90. Import and excise duties and income and company taxes are collected by the EACSO on behalf of the three East African governments. While each government sets its own rates of taxation in these fields, these rates are generally similar or identical. Because there has been some feeling in Uganda and Tanganyika that Kenya, as the commercial center, has benefited most from the common market, there is now a redistribution of revenues between - 22 - the three countries in accordance with the recommendations of the 1961 Raisman Commission. Beginning in 1961//2, the EACS0 retains 6% of the import and excise duties it collects and 40% of the income tax paid by companies engaged in manufactures and finance. After meeting the costs of collection, the EACSO allocates ,half the surplus, or "distributable pool" to its non-self- contained services/ and the other half is divided equally between the three territories. Since Kenya contributes more than one-third of the levy, the distribution constitutes a net benefit to Uganda and Tanganyika, in partial compensation for the alleged favorable position of Kenya within the customs union. Government of Tanganyika: Receipts & Expenditures (i million) Current Current Surplus/ Capital Loans Year revenues expenditures deficit expenditures & grants 195V/5 19.1 16.5 2.6 3.3 2.5 1958/9 19.14 19.5 -0.1 5.2 3.6 1959/60 22.1 21.2 0.9 3.9 3.1 1960/1 21.4 (23.4) 21.0 (23.0) 0.3 5.7 4.8 1961/2 (bud.) 20.5 (23.7) 20.9 (24.4) -0.4 8.2 7.9 1961/2 (est.) 20.2 (23.4) 22-2j(25.7) -2.0 6.9 n.a. 1962/3 (bud.) 22.9 (25.8) 23.1 (26.3) -0.2 8.3 8.2 91. After 1954/5, when export prices fell 13%, there was a decline in governmen-t revenues which did not recover the level of that year until 1958/9. Then, revenues rose rapidly during 1959-61, following the one-third increase of export incomes in 1958-60 which increased the tax base of the country substantially. Higher rates of customs and excise duty and rising property income from mining also augmented revenues (Table 13). Maintenance of revenues in 1961/2 reflected income tax receipts from the peak year of 1960, which more than offset the effects on indirect taxes of the decline in incomes during 1961. Revenues have once again risen to more than 20% of money GDP, though not to the 23-24% ratio of 1954 and 1955. Nevertheless, a one-fifth allocation of money incomes to public purposes represents a sizeable tax effort, particularly in view of low average incomes. Indeed, with local authority revenues of L4 million, total government receipts are equivalent to 25% of money GDP (Table 18). 92. The growth of current expenditures has been particularly rapid in the three years ending June 1962. They have risen by some 30%, far exceeding the growth of the economy or of government revenues (Table 12). The principal e.g., economic and statistical services, agricultural research, meteorology, Locust control. j/ Source: Tables 12-14. Figures in brackets are comparable wTith earlier years--Table 13, Note 1. - 23 - expenditures are for administration, law, order and security. These, together with pensions and debt service payments, account for about half of the current expenditures, and so absorb about half the revenues (Table 13). The remaining expenditures are divided between economic services (agriculture, livestock and highways) and social services (education and public health), with a somewhat larger expenditure in the social sector. Between 1957-8 and 1961-2, increases of 50% or more were recorded in many components of public expenditure, reflecting both higher rates of pay (e.g., administration) and expanded services (e.g., education). Finally, between 1956 and 1960, local government expenclitures also increased by some 50%. 93. While current expenditures increased rapidly after 1956, absorbing all government revenue, the Government was also spending some 15 million per annum on capital works during this period (Table 12). Lacking a revenue surplus to finance these works, the Goverrment reduced its free reserves, wfhich stood at Q-2 million in 1954, to about ;4 million by June 1961. Secondly, during the period 1954-61, Tanganyika received W7.5 million of U.K. grants for capital purposes. Finally, the Government increased its borrowing, both locally and abroad. Public debt reached ;23 million at the end of 1961, including 18 million of external debt, and debt service was i1.7 million in 1961-2, or about 8% of revenues. In addition, some L4.6 million of Treasury bills were outstanding in December 1961. Moreover, Tanganyika, like Kenya and Uganda, is a joint and several guarantor of the public debt incurred by the EACSO (paragraph 114). In the event of default, the three governments agreed to share equally in the additional indebtedness. 94. The last several years have therefore been marked by a weakening budgetary position--revenues growing more slowly than current expenditures, the surplus on current account disappearing, reserves being run down to finance development, and public debt rising appreciably and becoming a sub- stantial charge against revenues. 95. The 1962-3 budget attempts to halt this deterioration by increasing taxation and by holding down the level of current expenditures. Revenues are estimated at B22.9 million, expenditures at ;23.1 million, and the deficit at ;244,o000 Receipts are to be increased 92.3 million (11%) over the 1961-2 estimates, chiefly through increased company and personal taxation and through substantially higher (25% to 100%) import and excise duties on cigarettes, liquor, gasoline and sugar (Table 13). Expenditures are estimated at L2.2 million (10%) above last yearts estimates, reflecting increased salaries and pensions, and the costs of the foreign service and the army. Departmental expenditures, excluding health and education and the effects of the general salary rise, have been held at 1961-2 levels. These estimates do not take into account L2.9 million of pension payments to expatriate civil servants which are to be financed by loans and grants from the United Kingdom, or ;,1.1 million provided by the Currency Board to meet the costs of joining international economic organizations. The revenue estimates appear feasible, although some shortfall on income tax may occur, reflecting the conditions of 1961 and the shortage of staff. While expenditures on several accounts may have been underestimated, as in most recent years, underspending may again occur. Consequently, the actual deficit may not be much greater than the estimate; this is, of course a vital matter when reserves are less than 1.2 million (Table 17). - 2 Development Plan 96. Prior to 1961, the Government had not drawn up a development plan as such. There was, however, a substantial annual works program carried out by its departments, especially Agriculture and Communications, Power and Works. In addition, there were the investment outlays of local governments and the EACSO. For the last several years, local government investments were about Il.5 million annually, or one-sixth of all public investment, chiefly for education, roads, health and miscellaneous activities. The EACSO expendi- tures varied from more than 15 million to less than 92 miLllion annually, chiefly for railroads and ports, and the rate of spending followed a separate course from the Government's own activities, though Tanganyika did, of course, agree on the EACSO program jointly with Kenya and Uganda. Tanganyika govern- ment investment was about ;5 million annually (Table 14). Total public investment effort as a percentage of overall economic activity and of govern- ment expenditures has therefore declined substantially since 1957. 97. Three aspects of pre-1961 experience are pertinent to present planning efforts. Investment outlays in fact differed substantially from budget estimates, and this in part reflects inadequate planning and execution of departmental works programs. Erratic performance and general shortfalls in expenditure indicated lack of coordination and the limited ability of staff, with the large number of vancancies, to execute programs1. Secondly, reliance on surpluses and reserves as a source of finance had to diminish greatly in the late 150's, dependence on loans and grants rising correspondingly. By 1960-61, the local contribution to investment finance was less than 20%. Finally, emphasis was placed on transportation, education and water supply as high priority investments, although substantial sums were also devoted to community development and other public works. 98. With the approach of independence, attention was given to general economic planning and to drawing up a Development Plan which would enable more rational use of resources and would be a focus for public support of the new government and of the development efforts of the country. The Govern- ment received the advice of a Bank Survey Mission on investment priorities and development policies, a Development Committee of the Council of Ministers was established, and the Treasury began to devise machinery for planning. A 3-year plan was presented to Parliament when self-gove rment was achieved in May 1961. 99. The Development Plan for 1961/2-1963/4 is not intended to be a plan for the whole economy: it covers only two-thirds of public investment and one- third of total money investment. After two years of discussion, the Gov- ernment has still to decide the best form of planning organization and its relationship to the executive. However, the present pLan is more than a list of departmental works projects. While the first step was to receive requests from the departments, the Plan is composed of a series of programs, consisting of a. number of projects,determined to some extent by a priority rating of the various economic sectors as well as by the estimated avail- ability of money and manpower. In presenting the Plan, the Government ex- pressed the hope that it would help achieve income growth of some 5% per annum and would provide the infrastructure for continued growth in the longer period. 100. To attain,these objectives, the Plan envisages £24 million of ex- penditures over three years. Allowing for £l.4 million of current outlays on agricultural extension and education, and excluding £1.8 million being lent to Tanesco, the plan implies a. government investment program of some £7 million annually, as compared with £6 million recomended by the Survey Mission and £5 million actually achieved in recent years (Table 15). The Plan excludes a large amount of related public investment by local govern- ments and the EACSO. The Government has subsequently expanded its highway and education programs, especially for the University College, the new Agricultural Credit Agency is seeking funds abroad, and German aid in ex- tending the Mikumi branch of the central railroad has been agreed. More- over, the part of the road program financed by contractors is excluded from the Plan, and there are parallel%ynvestments by the CDC and Germany in the Tanganyika Development Company- . With these supplernentary and expanded projects, total public investment (excluding the power sector) during the three years would be close to £30 million. However, the Tanganyika Government itself would be responsible for executing only two- thirds of the total. 101. Limits to the Plan were set by two financial factors, and not by Government doubts concerning ability to execute it fully. One limitation was the availability of funds. The Government estimated available resources at £19 million of foreign grants and loans and £5 million of local financ:J2 The other limitation was the burden of the program on the current budget. It was estimated that investment in education and agriculture would raise cur- rent outlays in these fields by £2.7 million in 1964-5 and annual debt serv- ice by £0.8 million. The total increase in current expenditures of £3.5 mil- lion annually wa.s regarded as the maximum consistent with the estimated in- crease in revenues. There are,however, grounds for doubting both the Govern- ment's estimate of its own capacity to execute the program fully and its es- tima.te of the increase in current development expenditures. In 1960/61, gov- ernment investment (excluding advances to Tanesco) reached E5.4 million; for 1961/62, it is estimated at £6.5 million as against a planned £7.7 million (again excluding Tanesco); for 1962/63,outlays of £7.6 million are planned. In view of the loss of expatriate staff in 1961 and 1962, it is quite pos- sible that there will continue to be shortfalls in the execution of the plan for some years yet: it is difficult to expect a. 4% increase in outlays in two years in present administrative conditions. Secondly, from experience in other countries and from the growth in wages and other current costs in Tanganyika in recent years, it would seem that the Government underestimates the increase in current expenditures likely to be associated with the devel- onment effort. g/ There is also the £3 million loan of the CDC to Tanesco towards the £5 million Hale power plant. This project is excluded from calculations here as the work will be carried out by foreign contractors responsible to the Company and not to the Government of Tanganyika. g/ The Survey Mission in 1960 estimated resources available for 1961/4 at £18 million, of which £16 million might be obtained from foreign loans and grants. It was with these financial limits in mind, rather than because of inability to execute a larger program, that the mission al- lowed for capital expenditures of £6 million annually. - 26 - 102. Highest priorities are given to trunk roads, secondary education and agriculture, including extension services, on the grounds that these are vital to growth in the near future and to the provision of an a.denuate infrastructure for subsequent growth. The Government concurs with the Survey Mission in granting priority to secondary education, despite strong popular Dressure for expanded primary education. It disagrees with the mission's emphasis on feeder roads, holding that prompt completion of the main roads system should have priority, and it shifted the emphasis in agriculture from irrigation to extension services which are regarded as more immediately needed for an early increase in production. The Govern- ment also gave high priority to assisting the £5 million Hale hydro-power project in the private sector (para. 72). In view of the size of the extra- plan investment related to the public sector (para. 100 and Table 15), no great significance can be attached to the detailed composition of invest- ment within the Plan itself. However, emphasis is clearly placed on agri- culture, transport and education, with supplementary investments emphasiz- ing power and industry. 103. IJhile there do not in general appear to be major misallocations of resources in the Plan, the decision to accord low priority to pilot irrigation projects and to the building up of staff for a major expansion of irrigation which will be required in the second half of the 'sixties, conflicts with the recommendation of the Survey Mission. The Mission rated irrigation as an important development activity for the first plan period, pointing to land near Dar es Salaam and elsewhere which could quickly be brought under irrigation both for Pilot and early commercial production, and to the long-term need for expansion of wet farming if agricultural ef- ficiency and output are to be increased. substantially. The 1961 FAO Survey of the Rufiji Basin supported the Mission's priority rating for irrigation. The Government, however, adopted the view that, in view of farmers' inex- perience of irrigation, development would necessarily be slow, and that it was preferable to attempt a rapid increase in oroduction by expanding ex- tension services with associated improvements in the use of fertilizer and seeds. The roa.d program of the Survey Mission embodied a slower com- pletion of the main roads system and greater emphasis on feeder roads. By resorting to contractor finance, a. step which the Mission did not recommend, the Government is attempting a faster completion of the main road network, and it takes the view that a large feeder road program must await the com- pletion of surveys. W^]hile the Government appears to have adopted too high Standards of paving in some sectors of the main roads program and too low standards in others, the need for extensive work on the system wa.s made a.pparent by the devastating floods of 1961. Again, the economic justifica- tion of making certain investments a.t this time may be questioned, for example, the expansion of the University College and the extension of the railroad through Mikumi to Kidatu. Finally, even if the Government were to review the olan or were to prove capable of executing it in full, a number of factors which are discussed in Part VI below make it unlikely that Tanganyika will in fact achieve the 5% per annum target rate of growth. 101. Originally, the Government envisaged more than 2(Y of the Plan being financed from local resources, with some 30%/ coming from foreign - 27 - grants and half f'rom external borrowing (Table 16). Almost all the loans and much of the expected grants had still to be negotiated. Since mid- 1961, however, the financial situation has changed aopreciably. The de- terioration of local financial conditions has meant that, in addition to there being no contribution from reserves or from a budget surplus, the estimate of local borrowing has been more than halved, and the whole local contribution reduced to less than 10%. Indeed, the 1962-3 budget provides only 1% of local finance for the £8.3 million of development expenditures planned. 105. In August 1961, the U.K. raised its grant for the plan period from £4.5 million to £8.8 million, and agreed to make a £4 million Com- monwealth Assistance Loan as a "loan of last resort." The U.K. grants are freely usable for development purposes, and none of the £12.8 million is tied to specific projects. However, the loan portion is tied to the pur- chase of British goods. Later in 1961, the German and U.S. Governments agreed to lend Tanganyika £3.2 million and £3.6 million respectively. The U.S. funds are expected to be mainly loans on soft terms. They will be for specific projects and while the dollars are to be used only for imports from the U.S., the imports may be unrelated to the project and so provide local currency for disbursements on the project. German funds are to be disbursed against specifically agreed projects and can be spent on local goods and services or imports from any source. Tanganyika is also expected to receive a number of foreign grants for a variety of educa- tional and agricultural projects. As much as £2 million may be provided by specific grants from the U.S. Government and private foundations, private agencies in the IJK., and grants from the West German and Scandinavian Governments for technical, agricultural and university education, teacher training, farm institutes, land settlement projects and mineral surveys. Only part of these grants, however, would be for projects presently in- cluded in the Development Plan. i06. lW!hile external assistance has reduced the overall financial gap from more than £11 million, the original estimate, to less than £3 million (excluding any II)A assistance and assuming that only half the German credit is used for projects within the Plan), there are problems associated with the terms under which some of the assistance has been offered. Thus, the U.S. and German loans, totalling £7.5 million, are to be for specific proj- ects, and aid-granting institutions have had difficulty in finding projects which are of sufficient size and which are in fields where the agencies are prepared to lend. Particularly within the present plan, there is a large number of small and scattered projects, as well as outlays for social proj- ects for which it is difficult to secure foreign funds. Thus, one-third of the plan relates to law and order, administration, health, housing, and township development. It has therefore been easier for the Government to secure finance for some projects outside the plan which by their nature or size are more attractive to lenders; for example, the railroad extension and the Development Company. The terms on which aid is made available may there- fore have forced the Government to adopt lower priority projects rather than risk foregoing foreign assistance. Recently, however, requirements for the use of funds have been eased. - 28 - 107. The Development Plan itself, and the associated projects outside the Plan, mean a substantial increase in indebtedness. The Plan entails some £13 million of external public borrowing, of which £10 million has already been agreed. In addijXon, the related projects entail borrowing at least £2.3 mil:lion abroad.. Total public borrowing of at least £15 million ($43 million) is therefore envisaged (paras. 141/2). 108. It would appear that there has been a shortfall in expenditures of £1 million to £1.5 million in the £8.2 million program during 1961/62, reflecting the limited capacity of government agencies to achieve a 0% increase in one year, particularly in view of the loss of expatriate staff and the delay in establishing adequate planning machinery. It was origi- nally intended to issue a revised plan with each annual budget, thereby creating a moving 3-year program; but this has not so far occurred. In- stead, the 1962-63 budget includes only the program for the new fiscal year. This is for £8.3 million of investments, or about 20% more than estimated expenditures in 1961-62. While there are no marked changes in the composition of investment, the roa.d ancl farm Drograms are increased, as are those for hospitals and police: towrnship development and mis- cellaneous oublic works are curtailed. Some 99% of the cost is to be met from abroad i:ncluding E3.4 million of loans or grants for which ne- gotiations have still to be completed. 1/ This excludes the £3 million CDC loan to Tanesco, a private company, guaranteed by a mortgage on the assets: and £1 million of CDC/German money in the Development Company, which is an equity investment. - 29 - V. EXTERNAL TRADE AND BALANCE OF PAYETN4TS 109. The crucial factor in the economy of Tanganyika is its dependence on the export of primary products. Sisal, cotton, coffee, nauts and diamonds constitute about 80% of exports. In addition, there have been growing ex- ports of tea, pyret;hrum and meat products. Economic growth is dependent largely on the increase of exDort receipts which generate about half of money income. A prime example of this relationship was the rapid growth in export volume (16%) and values (25d) between 1958 and 1960, and the con- sequent growth of money GDP and government revenues by one-sixth. In ad- dition, of course, seasonal variations have affected both exports and production, as did the drought and floods of 1961 when exports fell 11% and national income by more than 4%. 110. The 50% increase in export values between 1954 and 1960 resulted from a 70% increase in volume and a decline of more than 10% in average prices (Tables 12 & 20). The increase in volume occurred in almost all the principal exports, especially in cotton and nuts. While export prices in general declined, those for sisal, cashews and tea rose. The largest contributions to increased earnings therefore came from sisal and nuts and from cotton, its price reduction being far offset by the increase in volume. Tanganyika appears then to have benefited from the comparative diversity of its exports, a minimum of three products constituting half of receipts. In 195h, sisal and coffee together provided 60% of earnings. While some of the subsequent diversification merely results from falling coffee prices, it also stems from increased production of other exports. 111. Tanganyikats principal export markets are the United Kingdom (34%), the European Economic Community (21%) and North America (10%) (Table 22). The United Kingdom is the only importer of diamonds and gold, and the major sisal market. The Common Market takes 20-40% of the four principalagri- cultural exports, North America takes half the coffee. India buys all the cashew nuts, and both India and Hong Kong are major cotton customers. The relative importance of these various markets has changed little since 1954, apart from the decline in exports to North America.a.s a result of the fall in coffee prices. 112. Of Tanganyika's imDorts manufactures comprise 80%, mineral oils 10% and foodstuffs 7% (Table 21). In addition, Tanganyika imports food- stuffs (e.g. flour and tea), beer, cement, metal products, clothing and shoes from Kenya. and Uganda. More than half the manufactures imported from overseas are producers' equipment and materials, while consumer goods, except food, constitute about one-third of imports. The onlly noticeable change in the composition of imports from overseas has been the increase in the "machinery and transportation" category associated wqith increased investment activity and purchases of private motor vehicles, as well as wiith the growing supply of "other" manufactures coming from East Africa rather than from abroad. - 30 - 113. The United Kingdom is still the principal source of imports, though its importance has declined during the postwar period from one-half to little more than one-quarter (Table 22). The EEC has continued to supply about one- eighth of imports over the la.st several years, and imports from North America have risen from 2% to l4%. The principal changes have been the displacement of India by Japan as a source of textiles and the rise of East Africa (es- sentia.lly Kenya) to the position of supplying almost as large a volume of imports as the U.K. Because they lend themselves readily to local produc- tion, it is precisely the type of imports which come from Kenya and Uganda (Table 21) that Tanganyika is now endeavoring to produce for itself. 114. Imports have risen more erratically than exports, peak levels in 1955 and 1957 being attributable to increased volumes of producer goods as- sociated with investment activity; and on each occasion there wa.s a. substan- tial decline in the following year. For 1954-1961 as a. whole, imports from overseas have risen much less than either exports or national income. Even including the poor export record in 1961, the capacity to import (exports deflated by import prices) rose one-third, while imports increased by one- quarter. But, since imports from elsewhere in East Africa rose 80%, the growth of export earnings was in fact matched by the overall increase in imports, and the balance of trade showed a small surplus in 1961, as it had in 19514 (Table 23). 115. During the last decade, Tanganyika's overall trade balance fluc- tuated between a deficit of £10 million in 1955 and a. surplus of £12 million in 1960. There have been only two years of deficit, 1955 and 1957, when increased. imports were accompanied by an actual reduction of exports. On average, the period 1954-61 has yielded a surplus of £2-3 million annually, a. level which wa.s achieved even in 1961 when movements in import and export volumes and in the terms of trade were all unfavorable. Since 1957, the surplus position has strengthened, trade with overseas countries resulting in surpluses of £13 million on average, while the deficit with East Africa ha.s been about £7 million. 116. Tanganyika's invisible account transact ons have in recent years involved net payments abroad of about £6 millionl . The principal payments are for investment income, transportation (except freight), insurance and foreign travel: these items do not appear to have changed greatly in re- cent years. Tanganyika therefore tends to have a. strong favorable balance of payments on current account only in years of very good export earnings, for example 1960. Conversely, large deficits are found in years of export failure, for example 1957, or when, as in 1955, import demand rises sharply. On balance, it would appear that Tanganyika's favorable balance of trade is more than offset by its service account, leaving the country with a slight deficit on current account. In other words, the net contribution of the foreign sector to domestic savings has in recent years been relatively small, perhaps 10-20%. 1/' This figure is based on EACSO statistics and on estimates of Tanganyika's service account with Uganda and Kenya.. If anything, it understates the deficit position with respect to invisibles by perhaps £l-2 million per annum. - 31 - 117. The principal factor in Tanganyika's capital account is the in- flow of official funds, both grants and loans. Apart from large borrowing in 1961, each of these has been between £l-2 million for a number of years, so that total official receipts were perhaps £2 million on average, net of amortization. In addition, there has been a net inflow of long-term private capital, including re-invested profits, averaging perhaps £2-3 million, for investment in manufactures, distribution and plantations. These favorable factors have resulted in some increase in overseas re- serves held by the Currency Board and the commercial banks, but the most important development in 1959-61 has been the large outflow of private capital in response to the political uncertainties in East Africa. This is reported at Z2-3 million in 1960 and 1961, but the actual flow may have been much greater. 118. The sterling reserves of the Currency Board are by far the most important of Tanganyika's foreign assets. Wr.1hile no amount of the Board's reserves is attributable to any member country, a.n estimate can be made by anplying the formula used by the Board. in distributing its surplus income among members (para. 77). On this basis, £15-16 million might be a.ttributed to Tanganyika, a sum equivalent to four to five months' imDorts. In addition. government net investments abroad. mostly for special purposes, were o.bout £7 mil:Lion in June 1962. Trade Policies 119. The essential elements of Tanganyika's trade policies have de- veloped in common with those of the other East African territories. As a member of the sterling area and the East African Currency Board, Tan- ganyika maintains a policy of unrestricted capital transfers within the area. It also shares in the benefits of Imperial preferences with respect to certain exports, whereas, under the provisions of the Congo Basin Treaty, it has a single-column tariff. In view of the customs union within East Africa, the tariffs imposed by the three countries tend to be similar or identical, and in broad concert with Uganda, and Kenya, Tanganyika. has ap- plied protective duties to foster industrial develooment. There is some feeling, however, that the common market inhibits Tanganyilcan industrial growth, particularly through competition fror. longer-established firms in Kenya; but the benefits of the customs union are held by the Government to outweigh any disadvantages. 120. After independence, Tanganyika. joined the U.N. and the GATT, and it has recently become a. member of the Fund, the Bank, IDA and IFC. The desire to maintain an independent position in world affairs, along with many other Afro-Asian countries, partly explains its present inves- tigation of trade possibilities with the Soviet Bloc. Tanganyika's polit- ical position also affects its attitude towards negotiations between the EEC and the United Kingdom. 1/ Assuming advances from the Crown Agent are only anticipations of loan funds forthcoming in due course. - 32 - 121. Like other Commonwealth countries, Tanganyika is concerned at both the possible loss of preference in the U.K. market and the imposi- tion of a common EEC tariff favoring African territories presently as- sociated with t.he common market. Loss of preference would affect primarily the export of sisal to the United Kingdom which takes one- third of Tanganyika's output and grants a preference of 10% against competing suppliers, principally Brazil. For coffee, cotton and nuts, Britain is a minor market, so that the preferences of 5-10% on various oilseeds and on coffee are not as important. On the other hand, the common market itself is a principal importer of Tanganyika's leading agricultural products (coffee, cotton, sisal, oilseeds and nuts) and provides 20-25% of Tanganyika's export receipts (Table 22). The EEC has still to agree on a common external tariff on agricultural products and on preferences to associated territories. Clearly, however, a substantial tariff would adversely affect Tanganyika's exports of cotton, coffee and oilseeds, unless Tanganyika. achieved a special relationship with the Community or received specific safeguards on important exports (e.g. nil tariffs). W1hile it has apparently rejected formal association with the EEC, Tanganyika may yet decide to seek special trade arrange- ments with the Community. 122. Tanganyika.is also concerned at the recent restrictions im- posed by the United Kingdom and other developed countries on textile imports from such low cost producers as Hong Kong and India which are major importers of Tanganyika.'s cotton. VI. ECONOMIC PROSFECTS AND CREDIT1ORTHINESS 123. Important uncertainties beset any economic appraisal of Tan- ganyika. Most immediate are those associated with the rate of Africa- nization, the role of the expatriate civil service and the confidence of non-African enterprise in the preservation of political stability and a satisfactory business environment. These factors affect vital aspects of the economy including the inflow of foreign investment, con- tinuation of plantation agriculture which provides some hO% of export earnings, and availability of extension services, particularly to African cotton producers. In addition, there are decisions still to be made re- garding, for example, the nature of relations with the EEC and the con- tinuation of East African economic cooperation, including a common cur- rency. Finally, the success of present efforts to crea.te a sense of national unity and purpose, based on hard work in support of the Devel- opment Plan, has still to be demonstrated. The export sector is the dynamo of the economy, and its prospects are affected by these political uncertainties, as well a.s by the more usual factors of production and marketing. Production Growth 124. In 1962, the GDP is expected by the Government to regain the volume of 1960, which implies per capita incomes 3-4% below those of 1960. - 33 - Over the following several years - given a favorable political conjuncture - Tanganyika may achieve a growth of 3% per annum in total GDP, and somewhat more in the monetary sector. With population increa.se approaching 2% per annum and slightly less favorable terms of trade, this would entail in- come per head rising some 1% annually. Thlis represents substantially slower growth than during the 150's, or thlan expected by the Government or the Survey Mission, the economy having expanded in the past at some 5% on average, and expecta.tions being that 4-6% growth would be achieved during the 160ts. In view of present uncertainties, any estimate is particularly subject to revision. Thus, if there is a sustained setback to business confidence and a prolonged decline in standards of public ad- ministration, including extension services, economic growth during the next several years, both in agriculture and in the economy as a whole, will hardly keep pace writh population. Or, on the other hand, if the Government's cotton and livestock programs were executed a.s rapidly as hoped, if sisal prices were to rise, and if investment by non-Africans were to increase in response to a more optimistic assessment of condi- tions, growth might be as rapid as envisaged by the Government. 125. Underlying the present estimate of 3% overall growth, is the as- sumption that the money (export) sector of agriculture will expand more slowly than in the pre-1961 period. Production of cash crops may expand some 2.5% per annum, with overall growth in agriculture being slightly less. WJithin the cash economy, diverse trends are to be expected. Out- put and exports of plantation crops raised by non-African farmers (para. 46) are expected to increase by only 1% p.a. As explained below, neither sisal nor coffee production are expected to increase, while the newer estate crops, tea. and pyrethrum, are estimated to increase by some 7% annually. On the other hand, the production and export of cash crops grown by Africans (cotton, cashews and oilseeds) are expected to increase by 3-4% annually. Each of these major African crops yields an appreciable cash income to farmers and should continue to do so, even though prices have generally declined over the last several years and further declines for coffee and oilseeds may be expected. 126. Sisal production increased 2-3% annually during 1954-1960, but problems of estate management (including labor disputes, rising labor costs, running down of estates, and unwil:Lingness to invest further or to improve production methods) are expected to result in a virtual stabilization of output. Cotton production has increased almost 10% per annum, chiefly through the exDansion of acreage, and further substantial growth may be expected in view of the suitability and profitability of the crop to African Droducers. However, with the limited. area of new land readily available and the inadequacy of extension services, oar- ticularly in present circumstances, to encourage improved farm methods, the rate of growth may be of the order of 4-7% per annum. Coffee pro- duction, which has increased 5% annually, is not expected to expand ap- preciably. Tanganyika's export quota under the 5-year international coffee agreement drafted in August, 1962 is 25,600 tons, or only 3% more than 1960-1961 exports. Even if the agreement, as finally adopted, is - 34 - effective in securing crderly marketing, some fall in coffee prices is expected, perhaps as much as 2.5C p.a. Hovever, there is scope for con- siderable improvement in the quality of Tanganyikan coffee, and it is expected that, as Et result of these divergent factors, money incomes and export receipts will change little from 1960/61 levels. Prospects for cashew nuts and oilseeds production are good. Production of cashews may continue to expand by some 7% per annum, and groundnut and other oil- seed Droduction by 4% or more. For cashew nuts, the increase will come from trees already planted and rnow maturing. Oilseeds, too, are well suited to peasant agriculture; but a weakening in world market prices is likely to confine the increase in receipts from these crops to some 2-3% annually. Providecd non-African estates are able to maintain efficient operations, tea and pyrethrum continue to have good prospects as export crops: Tanganyika is a. small factor in the world market and has suitable climate and soils. Sugar produc:tion is expected to increase substantially as part of a Dlan for self-sufficiency, based on the Kilombero sugar proj- ect with which the IFC is associated. For subsistence crops, it is as- sumed that production will, as in the past, expand somewhat more rapidly than population, or by little more than 2% per annum. 127. Livestock and forestry oroduction are essentially subsistence activities, but they also includce export production of hides and skins, meat nroducts and a variety of t-imbers. While hides, skins and forestry production appear to be lagging, meat exports have been rising, and the livestock industry, for both local and foreign markets, has good prospects, which the Government is encouraging. It is assumed that these sectors will therefore increase somewhat faster than subsistence. 128. Mining oroduction, which increased 7% per annum between 1954 and 1960, is expected to continue expansion, though at the slower rate of 4-5%. Both diamond and gold production are threatened by labor unrest, and gold in particular by rising wages. Exploration of diamondiferous pipes con- tinues, and substantial exPansion of output from the profitable mine is quite possible under the marketing agreement with de Beers. Despite cost problems, some increase in gold production is planned by both operating companies. In addition, as indicated by the Survey Mission, known mineral deposits and geological structures give promise that further exploration may result in the long-term development of other economic mineral deposits. 129. The scope for increased manufactures is essentially limited by technical, ccmpetitive and marketing considerations to the production of selected import substitutes. However rapid the increase in manufactures may be, its small size (6% of money GDP) means that its contribution to overall growth is necessarily limited for many years. However, there would appear to be good prospects of increasing production at 8% per annum, as in 1954-1960, or even of exceeding this rate, despite rising taxes and wages. The Government is anxious to assist industry through its two new develooment institutions, by imposing tariffs, introducing an investment allowance and rest;ricting the right to strike. Given a renewal of confidence, Asian businessmen are reportedly willing to respond to the Government's suggestion that they shift the emphasis of - 35 - their investment from commerce to industry; and overseas interests may continue to find investment worthwhile. The variety of light manufactures established in the la.st few years and the list of such goods presently imported (Table 21), both indicate the scope for increased manufactures to meet local demand, as well as to carry agricultural processing to more advanced stages. 130. Given these growth prospects for the commodity-producing sec- tors, increases in the service sectors should at least be at an equivalent rate. The growth of public administration should be limited by the re- straint which the Government will have to exercise over its current ex- penditures. 131. Over the longer period, Tanganyika's growth prospects should improve. As extension services are increased, and irrigation introduced, as commercial stock raising develops, and as the cooperative institutions are used to encourage improved farming and to extend African agriculture into sisal and other plantation crops, production and productivity should increase. WSith improved roads and standards of education, a more effi- cient economy, still based on agriculture, should be developed. Budget, Plan and Investment Effort 132. The weakest aspect of the economy, apart from its general low productivity,is the Government's fiscal position. If, as in the nast, rev- enue growth more or less parallels the growth of export income, then in view of the prospective growth of exports by some 2-3% per annum, tne Gov- ernment might expect its revenues to increase over the next few years by some £500,000 per annum. Givern the increased company tax and increased excise and import duties in the 1962/3 budget, the growth of revenues in the current year might exceed f2 million, and subsequent revenue growth of some £600,000 per annum might be expected. However, with the volume of profits adversely affected by rising wages, and with the departure of civil servants, little increase in revenues may be expected from the non- African sector. Indeed, the revenue base in this sector may even contract. Nor would further imposts encourage investment in plantations and industry. Additional revenues will have to come in large part from increased taxa- tion on Africans, especially the growing class of wage earners and the more prosperous growers. It is true that revenues will rise as African money incomes increase; but the need for increased rates of taxation in succeeding budgets must be envisaged. 133. While the increase in current expenditures, associated with the Development Plan, may have been underestimated, the expected increase in revenues during 1962/3 may come close to providing a balanced budget. Thereafter, however, an increase of current revenues by some £600,000 per annum would not suffice to keep pace with necessary increases in cur- rent expenditures. For the next few years, according to the Government, these increases include the cost of the education program (rising £300,000 p.a.), pension charges, excluding U.K. aid (£250,000 p.a.), and. debt service - 36 - (£250,000 p.a. if one-third of new debt were on conventional terms). In addition, there will be increased outlays for security and international relations, wage rises following the recent recommendation of the Minimum l?ages Board, and increases in health and other current services. Strict economy in administration will be required, and this may be difficult to secure in present political circumstances. However, it is assumed here that Tanganyika wi:Ll so regulate its current budget, including rates of taxation, that a subsidy from abroad will not have to be sought. In the longer run, the reduction of pension payments after 1965, and the pos- sibility of an increasing rate of growth may enable a surplus to be created for investment. 134. Mleanwhile, the Development Plan must operate on the basis of a. negligible local contribution, and therefore of a net capital inflow on public account of more than £7 million per annum. This sum is virtually assured for the next two or three years, as a result of assistance by the U.K., U.S. and Germany, together with possible help from IDA. M4oreover, the foreign funds n1ow available may be smread over a somewhat longer period if, as is possible, it takes some time for development expendi- tures to reach the planned leve:L of £8 million per annum. However, by 1965, Tanganyika will face the problem of finding resources to maintain its public development effort, and it would seem tha.t neither a.revenue surplus nor the local capital market could be developed sufficiently to provide the major part of development finance at that time. Tanganyika. snuld therefore plan for further substantial borrowing after the first program is completed. 135. Absence of a. sizeable local contribution to the Plan should not, however, obscure the substantia:l investment effort which Tanganyika makes in the private sector through its own domestic savings. Even in 1961, gross private investment locally financed exceeded government capital ex- penditures by almost 2:1, ouite apart from private capital inflow and investment by the EACSO and local governments. For the next few years, however, private savings may be expected to decline as a percentage of income. Increa.sed taxation, higher money wages and lower profits are leading to a redistribution of income which favors increased government and private consumption. Nevertheless, increased government investment, ba.sed on public capital inflows,, should largely offset the depressing ef- fect which this tendency in the private sector might otherwise have on total investment. Balance of Payments 136. Given the local condi-tions of production and the prospects of the wqorld market, Tanganyika may expect to increase its export receipts by some 3% per annum. Except for coffee, the limits on production are set more by local factors, indicated above, than by export conditions. The impact of the world market is, rather, on the prices which may be expected. Apart from short-tern movement, for example the rising sisal price in 1961/2, there does not appear to be any reasonable prospect that - 37 - Tanganyika's export prices will rise. Some further fall in coffee prices is to be expected and oilseed prices may decline; but it is assumed that no marked change will occur in other export prices. Cotton, nuts and oilseeds should therefore be the leading contributors to increased ex- port earnings, followed by diamonds, tea, pyrethrum and meat. Receipts from sisal, coffee and hides are unlikely to increase. This estimate assumes that the final arrangements between the U.K., the EEC and the associated territories will not be so radical as to disrupt Tanganyika's trade, and that bilateral agreements with the Soviet bloc, if made at all, will not be significant in total. 137. Substantial import growth is to be expected. The Development Plan and its associated projects will reouire additional capital goods, almost entirely financed by external loans and grants. Despite higher tariffs and excise duties and the growth of local manufactures, demand for imported consumer goods is expected to increase greatly as a result of rising African money incomes (para. 86). A reduction in import de- mand on the part of non-Africans is to be expected, but this would not be sufficient to offset the growth in African demand as money wages and farm incomes rise. MIoreoverj, import prices may rise, the terms of trade becoming more unfavorable as both export and import prices move against Tanganyika. Imports may therefore increase much more rapidly than ex- ports. 138. Consecluently, the balance of trade may be expected to deteriorate. Apart from an improvement in 1962, as exports regain their pre-1961 levels, the balance of trade may decline by some £l-2 million annually, so that by 1965/6 a. trade deficit is likely. Moreover, there is no reason to expect an improvement in the service account. Hence, Tanganyika may be expected to develop an increasingly unfavorable current payments position during the next few years. 139. In its capital account, Tanganyika. is virtually certain to re- ceive large public capital inflows during 1962/5, and private foreign in- vestment may be sustained at recent levels. Indeed, with these inflows and with the export growth expected in 1962, there may be a short-term accumulation of reserves, provided capital flight now subsides. There- after, capital inflow should be sufficient to offset the current account deficit and so to provide the increased support of the national savings effort which is reauired if investment is to be maintained. Then, there will be the problem of sustaining investment and securing adequate capital inflow after 1965. I^Thile the growth of export earnings and in- comes may accelerate somewhat, there will still be a very marked reliance on foreign capital for an indefinite period ahead. Conclusions 1ho. The uncertainties cf Tanganyika's situation are apparent. In any event, the Government has to operate within restrictions imposed by the limited skills of the population, the basic weakness of its finances, - 38 - and the slow growth in agriculture and in export earnings which may be ex- pected for some years. On the other hand, Tanganyika has come through its independence period evidencing a substantial degree of political maturity, and there appears to be a willingness to continue reasonable policies and to make a strong development effort, Tanganyika is also fortunate that it is not beset by tribalism, but rather ha.s a. strong cooperative movement: and its infrastructure, apart from certain deficiencies in roads and education, is an adequate ba.se on which to build. 1h1. At the end of 1961, Tanganyika's external public debt was $L9 mil- lion, excluding its contingent liability for the EACSO debt of 'l163 million-1/ (Table 1). In addition, there was an internal debt of $1h.3 million. In 196e, debt service payments abroad are estimated at ~3.3 million, or about 2.4% of 1961 export receipts.. Service on the 1961 debt reaches a maximum of $11.6 million in 1972 (a peak due to use of the sinking funds system), with payments of 83-4 million per annum during 1963-71. The Development Plan and associa.ted projects envisage foreign borrowing of some $43 million during 1961-6h. On conventional terms, this borrowing would raise external public debt payments to some 117.5 million in 1965, or 4.5% of anticipated export earnings,.2 1424. While the present debt service burden, both in terms of current payments and of prospective charges in 1965, may be rated as moderate, several factors make the debt position less favorable. One is the con- tingent liability for the EACSO debt, which itself is li:kely to expand. Secondly, the Government's own liability for pensions due to retiring ex- patriates (£1.2 million in 1S)61/2), will increase by some £250,000 annually until 1965. This constitutes a further dra.in on export receints, and there is also the oossible amortization on the £9 million U.K. pension loans. Thirdly, the dependence of Tanganyika on foreign capital will continue for many years, and it would be unwise to overtax debt servicing capacity in the short run. Finally, the current budgetary position and the fiscal prospects are such that debt service imDoses a severe burden on revenues. In 1961/2, annual debt service payments, including that for internal debt, were .-%4.8 million, or 8% of revenues. If the increased borrowing envisaged by the Plan were entirely on hard terms, these payments would virtually double while revenues grew one-sixth. Half the increase in revenues would have to be reserved for debt payments. Debt service would therefore absorb up to 15% of the budget by 1965, with the prospect of further substantial increases in debt service thereafter. 1h3. Tanganyika needs further external assistance if its Development Plan is to materialize. The development effort which the Government is g/ If Tanganyika were called upon to pay one-third of this liability, as provided under the agreement with Kenya and Uganda, additional debt service would be !3.7 million in 1962 and a maximum of $8.3 million in 1968. These payments would represent, respectively, 2.7% and 6% of Tanganyika's 1961 exDort earnings. 2 This excludes amortization Dayments on the U.K. loans of £9 million for the pension and commutation schemes, for which the terms of repayment have still to be agreed. - 39 - making, the poverty of the country and the limited resources available to implement this effort, and the stringent financial situation which the country faces, warrant the extension of assistance on as lenient terms as possible. Moreover, it would be desirable for Tanganyika. to retain some caoacity to service additional external debt after 1965. Hence, access by Tanganyika. to IDA resources would seem appropriate. List of Tables Number External Public Debt Outstanding, Deceimber 31, 1961......... ...... la Estimated Service Payments on 2~:ternal Public Debt, 1962-75 ............. 1s b Population: Growth & Composition, 1942-1961 ............................. 2 Gross Domestic Product, 1954, 1957-1961.... ............*. 3 Gross Domestic Expenditure, 1954, 1957-1961 ............... ... 4 Gross Capital Formation, 1954, 1957-1961................................. 5 Principal Production Series, 1951, 1954, 1957-1961...................... 6 Various Indicators of Recent Economic Growth, 1951, 1954, 1957-1961..... 7 Distribution of Employment, June 1961 ................................... 8 Occupational Status of African Adult Nale Employees, June 1961 ......... 9 iM7onetary & Banking Situation, 1946, 1952, 1954, 1957-1961............. ..10 Movements in Prices, 1951-1961 ........ ...... ........ .. . * . *.. * *11. Tanganyika Government: Revenues & Expenditures, 1948, 1952, 1954-63 ..... 12 Tanganyika Government: Composition of Current Revenues & Expenditures...13 Tanganyika Government: Capital axpenditures .................... o ...... 14 Three Year Development Plan: 1961/2-1963/4......**es ........ ... ..... 15 Sources of Funds for Development Plan, 1961/2-1963/4 ................... . .......16 General Reserve Position of Government, 1960-1962.......................17 Central Government Activity in Relation to GDP, 1954-1961 ................3 18 M,1ovements in Volume & Terms of Trade, 1954-1961 ....... ...................19 Exports Values, Volumes & Prices, 1948, 1952, 1954, 1957-1961..o ....... 20 Composition of Imports, 1954, 1957-1961 ..-.o........... ...... .. . .,.21 Principal Trading Partners, 1954, 1957, 1960-1961........ .........**w22 Trade & Payments Position, 1948, 1952, 1954-1961...o ............ ..23 Sterling Assets of Tanganyika, 1960-1961 ...........o..e*......o..... ..24 Statistical Sources Unless otherwise specified, tables are based on the Statistical Abstract, 1961, as updated by the Monthly Statistical Bulletin, April 1962; the T-ud,7et Survey and Budget Speech of June 5, 1962, and the Lstimates for 1962/63 presented therewith: and other data provided by the Treasury of Tariganyika in February 1962 and subsequently. Table 1, A. IbternaJ. Public Debt Outstandinr., December 31, 1961 (irciucding undis rursed) (6U.S. million equivalents) TYpe of Debt Amount outstandin4/ Publicly issued bonds 31.3 Privately-placed debt 2.4 U.S. Government loan 1.9 U.K. Government loans 13.3 4L89 17 H\et of accumulated sinking funds, at face value. B. Estimated Service Payments on External Public Debt, 1962-75 (NU.S. million equivalent) Year Net amount outstanding Payments during year (as of January 1) Amortization Interest Total 1962 46.11/ 0.9 2.4 3.3 1963 45.0 1.5 2.4 3.9 1964 43.2 1.0 2.4 3.4 1965 42.0 0.8 2.4 3.1 1966 41.0 0.3 2.3 3.1 1967 39.9 0.8 2.3 3.1 1968 38.8 0.8 2.3 3.1 1969 37.6 0.8 2.3 3.1 1970 36.3 o.8 2.2 3.1 1971i 35.1 0.9 2.2 3.1, 1972 33.8 9.4 2.2 1,1.6 1973 24.0 7.1 1i.6 3.7 1974 16.5 0.7 1.1 1.8 1975 15.7 0.7 1.1 1.8 1/ Includes all debts listed above except 1961 loan of Z1.1 million (U.s. $'3.13 million) from U.K. Government for civil service compen- sation scheme. This loan is interest free and its amortization schedule has still to be agreed. Source: IERD Statistics Division General Note: The East African Common Services Organization had an external public debt of some $163 million at the end of 1961. In the event of default by the Organization, the Governments of Tanganyika, Uganda and Kenya are jointly and severally liable for the debt and its service. Under an administrative arrangement, the three governments agreed that each would meet one-third of any such payments. None of this debt is included in the above tables. kt present, under the agreement, Tanganyika' s contingent debt service liability would be $3.7 million in 1,962, with a peak of $8.3 million in 1968. Table 2 Population: Growth & Composition (thousands) Arabs Year Africansl/ Europeans & Asians Total Immigration (in year) 1948 (Census) 7,407 111. 59 7,478 - 1952 ( ) n.a. 18 78 n.a. 4.8 1957 ( ) 8,663 21 102 8,786 4.4 1960 (June 30) 9,099 22 1.17 9,233 2.1. 1961, ( " ' ) 9,258 23 1.24 9,404 1.5 Principal Towns, 1957 Census Principal Tribes. 1957 (thousands) (thousands) Dar es Salaam - 129 Sukuma - 1,093 Tanga - 38 Nyarmwez-i - 363 Mwanza - 20 Yakonde - 334 Tabora - 15 Haya - 325 Chagga - 318 / Average annual increase for inter-censal period, 1943-1957, was 1.75%. This rate has been used for the 1957-1961, estimates. Table 3 Gross Domestic Product (2 million, at factor cost, current prices) A. Total Product 1/ % OfGD?L_ Sector 195, 1957 1958 1959 1960 1961,-' 5 1oofGD261 Agriculture 68.3 76.5 75.0 8O.O 82.5 80.3 48.2 43.6 Livestock 13.3 14.6 15.0 16.7 18.4 1.7.2 9.4 9.5 Forestry, hunting,fishing 6.5 8.1. 8.2 8.5 8.6 8.3 4.6 4.5 Mining 4.6 5.0 6.2 6.6 7.0 7.3 3.2 3.8 Manufactures 3.7 5.7 6.8 7.1i 7.5 7.5 2.6 4.0 Handicraft 5.2 5.6 5.7 5.8 5.9 6.0 3.7 3.2 Construction 10.5 10.3 10.5 10.0 10.9 11.8 7.4 6., Transport,public utilities 8.7 10.8 12.4 13.4 14.5 14.5 6.1. 7.8 Distribution 7.0 7.6 7.8 8.6 8.6 8.3 4.9 4.5 Public administration 7.7 10.4 11.3 11,8 13.3 15.9 5.4 7.8 Othpr sprviceks/ 6.2 7.6 8.1 8.6 9.1 9.9 4.3 5. 1 Total GDP 141.6 162.4 167.1. 1.77.1: 1.86.2 186.9 100 100 Index 100 115 118 125 131 132 B. Monetary Economy Agriculture2/ 28.2 32.6 32.2 36.9 40.8 :36.3 35.5 33.8 Livestock 3.7 3.7 3.5 4.4 4.1. 3.7 4.7 3.4 Forestry,hunting,fishing 3.2 3.9 3.4 3.3 3.3 2.9 4.1 2.7 Mining 4.6 5.0 6.2 6.6 7.0 7.3 5.8 6.3 Manufactures 3.7 5.7 6.8 7.1 7.5 7.5 4.7 6.7 Construction 6.2 5.4 6.1. 5.6 6.4 7.2 7.8 6.0 Transport,public utilities 8.7 10.8 12.4 13.4 14.5 14.5 11.0 1i2.7 Distribution 7.0 7.7 7.8 8.6 8.6 8.3 8.8 7.4 Public administration 7.7 10.4 11.3 11.8 13.2 15.9 9.7 12.7 Other servioes./ 6.2 7.6 8.1 8.6 9.1 9.9 7.8 8.3 Tctal Money GDP 79.1 92.9 97.9 106.2 114.4 113.5 100 1.00 Index 100 117 123 134 145 143 C. Subsistence Sector Agriculture 40.1 43.9 42.8 43.0 41.7 44.0 64.2 59.0 Livestock 9.6 10.9 11.5 12.3 14.3 13.5 15.4 19.1T Forestry,hunting,fishing 3.3 4.1 4.8 5.2 5.3 5.4 5.3 7.4 Hardicraft 5.2 5.6 5.7 5.8 5.9 6.0 8.3 8.2 Construction A.-3 4.9 4.4 4.4 4.5 4.6 6.9 6.3 Total Subsistence GDP 62.6 69.4 69.1 70.9 71.8 73.4 1,00 100 Index 100 111 1111 1.13 115 117 Subsistence as % Total GDP 44.2 42.7 41.4 40.0 38.6 39.3 1-/ Preliminary. / Including rents, both paid and imputed. i/ Contribution of Major Cash Crops to Money GDP Crop 1954 1960 1961 m. % -Mm. A m. el Sisal 10.1 12.8 13.9 12.2 12.6 11.1 Cotton 3.5 4.4 7.0 6.1 6.8 6.0 Coffee 7.0 8.9 5.8 5.1 5.1 4.5 Oilseeds, nuts 3.5 4-4 5.4 4.7 3.0 2.6 Table 4 Gross Domestic aPpenditure 1/ (z million, current market prices) 1961 Exp. 1954 1957 1958 1959 1960 1961 2 as % of 1954 Private consumption 109.1 127.3 125.4 135.6 135.3 ) ) 16h.6 135.9 Govt. consumption 12.0 16.3 17.6 18.2 20.2 ) uross investment 25.9 29.5 27.4 26.6 29.8 29.8 115.1 Private (15.7) (19.7) (18.9) (18.5) (22.0) (18.9) (120o4) Govt. (10,2) ( 9.8) ( 8.5) ( B.1) ( 7.8) (11.0) (107.8) Merchandise exports 38.8 43.1 46.4 49.8 58.9 52.8 136.1 Total 185.9 216.2 216.8 23(02 244.2 247.2 133.0 Less: merchandise imports 37,8 45.3 4o.7 42.6 h7.0 50.3 133.1 Expenditure on Gross Domestic Product 148.1 170.9 176.1 187.6 197.2 196.9 133.0 Percentages: Private conslunption 73.6 7405 71.2 72.4 68.6 ) o3.6 Govt. consumption 8.1 9.5 10.0 9.7 10.2 ) cross investment 17.5 17,3 15,6 1h.2 15.1 15.1 E'rivate (1096) (11,5) (10.7) ( 9.9) (11.2) ( 9.6) Govt. 6.9) (5.7) ( 4h8) ( 4.3) ( 4h0) (5.6) Surplus of merchan- dise exports over imports 0.7 1.3 3.2 3.8 6.1 1.3 Total 100 100 100 100 100 100 1/ Includes subsistence sector. 2/ Preliminary. Note: Exports as % of Money GDP: 49.1 h6.3 47.h 46.9 51.7 47.7 Table 5 Gross Capital Formation ( million, at current market prices) Composition 1954 1957 1958 1959 1960 196121 5/ in 1961. 1. By Industrial Use Agriculture 2.1 2.5 2.3 2.4 3.1 2.8 9.9 Mining 1.11 1.2 1,3 0.5 0.7 0.7 2.5 Yanufactures 1.0 1.7 2.0 1.9 2.4 2.0 7.1 Construction 1.2 1.5 1.5 1.3 1.6 1.3 4.6 Public utilities 0.6 0.7 0.2 0.4 0.4 0.4 1.4 Transportation 5.6 3.8 2.7 4.2 4.3 4.9 17.4 Distribution 1.1 2.0 1.9 1.5 2.1 1.3 4.6 Housing 8.0 9.1 8.7 8.4 8,3 7.9 28.0 Public administra- tion 4e7 6.1 5.9 5.1 5.6 6.3 22.4 Other services 0.5 o.8 0.9 0.9 1.0 0.6 2.1 Total 26.0 29.5 27.4 26.6 29.4 28.2 100 2. By Sector Private 15.7 19.7 18.9 18.5 21.1i 18.3 64.9 Monetary (11.5) (14.3) (14.2) (13.8) (16.3) (13.3) (47.4) Subsistence ( 4.2) ( 5.4) ( 4.7) ( 4.8) ( 4.8) ( 4.9) (1.7.5) Government 10.2 9.8 8.5 8.1 8.2 9.9 35.1, Central ) 51( 5.7) ( 5.7) ( 4.5) ( 5.0) ( 5.5) (1,9.5) Local ) ( )( 1:3) 1.4) (1) ( 1.4) ( 1. 4) ( 5.0) Enterprises / ( 5.1) ( 2.8) ( 1.5) ( 2.1) ( 1.8) ( 3.0) (1o.6 Total 26.0 29.5 27.4 26.6 29.4 28.2 1.00 of which: i onetary 21.8 24.1 22.7 21.8 28.5 23.3 32.7 GCF as I'a of Monetary GDP 27,6 25.9 23.2 20.5 21.5 ;21.1 of which: Govt. 46.8 40.7 37.4 37.2 33.5 42.5 1/ Preliminary. 2/ Common Services Organization, particularly East African Railways and Harbors Admninistration. Note: The 1960-61 series given above are based on earlier data than the investment series in Table 4. Revised component figures are not available to match the revised totals given below: Sector 1960 1,961i Private 22.0 18.9 Govt. 7.8 1,1.0 Total 29.8 29.8 Table 6 Frincinal Production Series A. Production of Plain Cash Crops (thousand tons) Cotton Pyre- Cashew Oil Index Year Sisal Coffee Tea Tobacco lint Sugar thru nut seedsl/ 1954=1002/ 1951 145.2 15.4 1.1. 2.2 8.5 8.2 0.3 n.a. n.a. 77 1954 178.2 19.4 1.6 2.5 18.3 10.7 0.5 16.0 68.0 100 1957 184.9 20.7 2.3 2.1 30.2 18.4 0.7 34.0 93.0 124 1958 196.6 22.5 2.3 2.5 30.7 21.0 0.6 27.0 83.0 136 1959 205.3 22.7 3.65 2.7 35.4 27.7 o.8 34.0 97.0 139 1960 204.9 26.2 3.7 2.4 32.0 28.7 1.0 55.0 1119.0 148 1961 198.0 19.23//4.4 2.6 33.0]/ 29.0 1.3 28.1i 70.0 124 1/ Groundnuts; castor, sunflower & sesame seeds; copra. 2/ Based on 1956-60 average prices received by producers. 3/ Including 13.8 thousand tons of arabica coffee and 5.4 thousand tons of robusta. 1/ But 1961/2 marketing year = 29.5 thousand tons. B. Livestock Products Milk i-eat ('000 tons) Hides & Skins ('000 tons) Index Year (million gal.) Beef M4utton Goat Hides Sheep & goat skins 1954=100 1951 31 64 7 13 3.1 1.4 89 1954 32 93 8 14 4.5 1.6 100 1957 35 70 6 12 3.7 1.3 97 1958 37 92 8 15 4.1 1.6 110 1959 39 121 8 19 5.5 1.8 122 1960 40 137 9 19 6.5 1.9 129 1961, 35 178 3 20 7.6 2.0 129 C. Mineral Production Year Diamonds Gold Silver Lead Copper ('000 carats) ('000 troy ounces) ('000 tons) 1943 148 58 25 - - 1954 330 74 212 2.1 0.4 1957 373 63 521 4.9 1.1 1958 515 68 738 4.5 1.6 1959 555 96 536 5.7 1.1 1960 537 107 595 6.0 1.2 1961; 635 101 64 0.3 0.1 INote: Compare export series (value and volume) in Table 20. Table 7 Various Indicators of Recent Economic Growth 1960 actual 1951 1954 1957 1958 1959 1960 1961' (1954 = 1iO0) Consumption of: Sugar 54,000 tons 65 100 113 110 128 147 146 Beer 1.9 mil. gal. 65 100 145 90 98 119 n.a. Cigarettes 1,310 tons 68 100 121 121 134 130 n.a. Cotton piece goodsl/ 71 mil. sq. ft. 61 100 133 79 95 94 n.a. Cement 133,000 tons 101 1.00 114 113 1.00 120 1.20 Electricity sold 136 mil. K1!Ha/ 62 100 133 143 149 159 1.67 111 mil. K1.. 64 100 1.33 148 160 172 186 Urban water supply 2.6 bil. gaL 83 100 164 202 212 238 248 IIotor vehicles (private registry) 37,000 n.a. 100 136 146 163 170 n.a. Telephones 15,200 59 100 1.34 139 151 164 n.a. Railroad freight 1.6 bil. ton1 miles 90 1iO0 116 116 123 123 n.a. Education: Primary enrolments 386,ooo 68 100 130 134 137 141 156 Secondary enrolments 49,000 75 1.00 140 144 158 175 203 1/ Includes artificial textile fabrics. 2/ Including export of electricity to Miombasa. 31 Sales within Tanganyika only. Table 8 D:Lstribution of Employment, June 1961 (thousands) Non- Average African Africans Africans cash earnings (shilling per mo.) May 1960 Agriculture, forestry etc. 1/ of which: sisal - 136 187 2.2 55 Mvlining 10 0.7 96 Ilanufactures 15 2.2 91 Electricity and luater 6 0.5 134 Construction 39 0.8 103 Transportation 17 1.8 187 Commerce 15 4.3 82 Other services 60 4.0 107 Total 350 16.5 80 4/ Estimated unclassified 60 1.0 Estimated domestic servants 30 . Total employees 440 V 17.5 Excludes peasant agriculture. v For firms not responding to questionnaire. 3/ Includes about 90,000 engaged in Public Service, including construction wor'kers and other day laborers. 4/ For mid-1961, the average was 96 shillings per month. Table 9 Occupational Status of African Adult Male Employees, June 1961 Number of employees :reported (thousands) Administration and executive 4.2 Professional and technical 6.5 Clerical 12.5 Shop, office and storehands 7.8 MIechanics, fitters, electricians 5.6 Carpenters, joiners, cabinetmakers 4.2 Masons and bricklayers 4.8 Foremen, supervisors, headmen 10.8 Other skilled (inc. teachers) 25.1 Total skilled 81.5 Unskilled 200.0 Domestic servants 20.0 Unclassified 88.5 Total 390.0 Table 10 I%,onetary & Bankinp Situation (' million) A. Position of East African CurrencY Board Reserve Fundl_ As at Currency in As 7, of June 30: circulation!/ Total currency 1946 24.5 23.4 95 1952 48.3 46.5 96 1954 53.3 57.6 108 1957 60.7 63.8 105 1958 58.7 63.4 108 1959 57,3 63.8 111 1960 60.4 66.8 1,102/ 1961. 59.2 67.3 1143/ B. Commercial Bank Operations in Tan_anyika Loans, advances & Net balances A'dvances As at Denosits bills due from as '5, of Dec.31: Demand Time/Savinps Total discounted other banks depnsits Abroad Other B.Africa 1946 8.2 1.2 9.4 0.9 7.5 9.6 1952 16.7 2.7 19,4 5.6 4.8 S.1 28.8 1954 17.4 3.5 20.8 8.6 4.3 5.7 41.3 1957 13.8 5.5 19.3 12.0 2.7 3.2 62.4 1958 14.5 5.6 20.1 10.2 3.4 4.1 50.6 1959 16.0 5.9 21.9 13.8 2.1 3.4 63.0 1960 14 8 4 7 19.5 15.7 0.1. 0.4 80.5 1961 21.4A/ 6:3 27.6 19.64/ 4.6 -0.7 71,.0 (15.4) (21.6) (13.6) (63.0) 7 ',Currency in circulation" & 'Reserve Fund" represent totals for all member countries of the LACB. At present, these are Tanganyika, Uganda, Kenya, Zanzibar and Aden. The East African shilling ceased to be legal tender in Somalia in July 1961, No amount of "Currency" or "Reserves" can be attributed directly or exclusively to Tanganyika. 2/ Or, 91/, excluding reserves held in form of bonds and bills of member governments. ]/ Or, 96%, excluding reserves held in form of bonds and bills of member governments. 4/ During 1961, advances to government rose M6.2 million and government demand deposits rose 25.6 million. These changes follow from introduction of IEcchequer and Audit System in July 1961: the government banker now advances up to '6 million for working capital within the month, and deposits by liinistries have risen correspondingly. Series excluding this operation are given in brackets. Source: Tanganyika Treasury and Report of the East African Cuwrency Board, for the year ended June 30, 1961. Table 11 Movements in Prices (1954 = 100) Retail Price Index Cost of of African consumer goods Living Exports Imports (Europeans) 1951 85 90 148 n.a. 1952 90 97 132 n.a. 1953 102 98 102 n.a. 195)4. 100 100 100 100 1955 97 103 87 96 1956 96 105 91 97 1957 101 109 88 95 1958 105 111 81 95 1959 103 113 85 94 1960 io4 113 88 99 1961 105 114 85 100 1/ For wage earners receiving £60 to £200 per year. Table 1.2 Government of Tanganyika: Revenues & Lxnendituresl/ (- '000) A. Current Accounts Year Revenue Lcpenditure 'urplus/Deficit 1948 6,711. 5,842 -869 1952 16,378 13,334 +3,044 1954/55 19,088 1.6,469 +2,619 1955/56 18,322 18,491 -169 1956/57 1!7,492 17,847 -355 1957/58 18,834 18,694 +140 1958/59 19,412 19,527 -115 1959/60 22,066 21,154 +912 1960/61 21,355 (23.4) 21,017 (23.0) +338 1961/62 (budget est.) 20,506 (23.7) 20,948 (24.4) -442 1961/62 (June 1962 Est.) 20,170 (23.4) 22.0-23.0 (25.7) -2,000 1962/63 (budget est.) 22,893 (25.8) 23,137 (26.3) -240 Hotes: Figures in lDrackets are comparable with earlier years - see Note 1 to Table 13. The 1961/2 and 1962/3 series exclude assistance from U.K. towards defense, civil service salaries and pensions - see Note 2 to Table 13. B. DevelolDment BudRet Financed from: Capital Reserves a other Lxternal Loan Year expenditures domestie resources Mints funds 1948 996 345 340 311 1952. 4,989 1,985 1,080 1,924 1954/55 3,337 792 530 2,015 1955/56 4,084 11,136 677 2,271 1956/57 5,282 1,160 922 3,200 1957/58 5,454 1,668 899 2,887 1958/59 5,159 1,529 1,283 2,347 1959/60 3,939 852 1,361 1,726 1960/61 5,672 866 1,974 2,832 1961/62 (budget est.) 8,210 300 2,648 5,262 1962/63 (budget est.) 8,344 153 4,020Q/ 7772/ Notes: Reserves: principally from budget surpluses of pre-1955. Domestic resources: includes ;2.5 million from Enemy Property Fund during 1955/61. Loan funds: includes advances in anticipation which were 24.7 million in June 1961. During 1956/61, ;4.5 million of loans were raised locally. I7 Lxcludes local governments and also the East African Common Services Organization. From 1,954/55, fiscal year runs from July 1I to June 30. 2/ Leaving ,3.4 million "to be found from external sources", including T570,000 expected from IDA. Table 13 Goverraent of Tanganvika; ComDosition of Current Revenues & Expenditures (Is mil'Lion) A. Revenues Item .1 1 1 1954/55 1957/58 19L8/52 1959/60 1960/61, (budget) (June 1962) (budge Impoit duties 2.70 4.30 4.82 5.31 6.69 7.77 7.69 8.18 7.35 9.2 Excise duties 0.47 0.96 1.35 2.10 2.06 2.47 2.44 2.47 2.43 2.8 Inconme tax 0.65 3.89 4.60 4.28 3.53 3.78 4.49 4.12 4.60 4.8 Personal tax 0.98 1.61 1.95 1.41 1.31 1.32 1.31 0.97 1.00 °.S Other taxes 0.68 2.30 1.71 li.56 1.67 1.69 1.53 -1.13 ) 1.3 Property income 0.75 2.12 1.77 1.97 1.85 2.80 2.41 2.28 ) 4.27 2.2 Other revenues 0.18 0.52 2.01 0.89 0.98 0.99 1.48 0.80 ) 0.8 Provision of goods & services 0.29 0.68 0.89 1.30 1.32 1.35 - - - Distributable Pool - - 0.55 0.52 O.E Total current receipts 6.71 16.38 19.09 18.83 19.41 22.07 21.36 20.51 20.17 22.8 (23.4) (23.7) (23.4) (25.8 Note: Totals in brackets are compar ble with earlier years - see Note 1i to Table 13. Decline in Personal Tax, after 1960/61, reflects exemption of taxable incomes below blOO p.a. B. ,Crrent,Zxj2gaditurea Iten12L8 t95 ~1954/55 12575 1958/59 1959/60 1960/61 1961/62 1 (budget est.) Administration 11.14 2.38 3.46 2.84 3.26 3.74 3.92 4.26 n.a. Law, order, defense 0.51 1.25 2.27 2.71t 2.91i 3.12 2.74 2.77 3.53 Pensions & gratuities 0.32 0.53 0.68 0.94 0.96 1.12 11.13 1.22 1.65 Debt service 0.24 0.23 0.56 11.00 1i.25 1.75 1.57 1.73 1.85 Economic services 0.86 1.72 2.90 3.82 3.85 4.25 3.95 4.03 3.72 inc: Agriculture (0.24) (0.29) (0.48) (0.63) (0.63) (0.74) (0.84) (0.98) n.a. Veterinary (0.14) (0.30) (0.39) (0.46) (0.44) (0.50) (0.49) (0.50) n.a. Road maintenance (0.19) (0.34) (0.66) (0.91.) (0.97) (1.04) (1.19) (1.40) (1.25) Social services 0.89 2.48 3.92 5.04 5.31 5.47 5.32 5.67 6.87 inc: Education (0.37) (1.33) (2.46) (3.12) (3.30) (3.42) (3.26) (3.61) (4.59) Medical (0.48) (1.04) (1.29) (1.72) (11.79) (1.83) (1.83) (1,.85) n.a. Unallocated public works 0.34 2.20 0.92 0.90 1.47 1.15 1.59 1.25 n.a. Miacellaneous 1.S5 2.56 1.76 1.42 0.53 0.56 0.81 - - Total expenditures 5.84 13.33 16.47 18.69 19.53 21.15 21.02 20.95 23.14 (23.0) (24.4) (26.3) Note: Totals in brackets are comparable with earlier years - see Note 1 to Table 13. However, components have not been adjusted similarly. Note 1 to Table 13 Comparability of Revenue and Expenditure Series 1959-63 Current Nevenues (9 million) 1959/60 1960/61 1961/62 1962/63 (bud.) (est. 6/62) Budget item 22.1 21.4 20.5 20.2 22.9 Appropriations-in-aid - 1.4 1.9 1.9 2.1 Rlaisman contribution to CSO - - O.8 o.8 o.8 IJ.K. defense subsidy - 0.6 0.5 0.5 - Adjusted revenues 22.1 23.4 23.7 23.4 25.8 Current Lxpenditures (= million) 1959/60 1960/61 1961/62 1962/63 (bud.) (est. 6/62) Budget item 21.2 21.0 20.9 22.21/ 23.1 Appropriations-in-aid - 1.4 1.9 1.9 2.1 Costs of CSO - - 1.1 1.1 1.1 U.K. defense subsidy - 0.6 0.5 0.5 - Adjusted expenditures 21.2 23.0 24.4 25.7 26.3 1/ ;22-23 milliorn depending on actual amount of underspending which occurs. Appropriations-in-aid: Beginning in 1960/61, charges for "Provision of Goods and Services" (e.g. water supply) hiave been netted from revenues and expenditures and treated as appropriations-in-aid of expenditures. Raisman contribution to CSO: Beginning in 1961/62, as a result of the Raisman Comnission, receipts from company tax and from import and excise duties are given net of a levy paid to the C00 to help meet its costs of operation. rxpenditures are given net of costs of collection which were previously an expenditure item in the budget (under "administration") and net of contribution to costs of CSO (previously a charge under 'miscellane- olus"). As one aim of the Raisman scheme is to compensate Tanganyika and Uganda for the greater benefits which Kenya may receive from the arrange- ments for economic cooperation, there is a distribution from the CS0 "Pool" of revenues. Consequently, the Raisman adjustment reduces Tanganyika's net revenues less than it reduces expenditures. Defense subsidy: For 1960/61 and most of 1961/62, the U.K. has borne the defense costs of Tanganyika, which are some M600,000 in a full year. ilote 2 to Table 13 The 1961/2 & 1962/3 Budaets: Revenues (n million) 1961 /62 1962/63 Budget estimate 20.51 Estimate for 1961/2 20.17 Estimated shortfall =2.34 Est. revenue growth 0.61i Revised estimate 20.17 New tax measures: U.K. pension aid-/ 1.74 Company tax 0.46 U.K. army aid 0.20 Personal tax 0.10 Total receipts 22.11 Excise & import duty 1.37 Estimated deficit, Other 0.18 assuming shortfall Revenue estimate 22.89 in spending 2.00 U.K. pension aidT T 2.90 24.11 Currency Board grants (for IMF, etc.) 1.10 Total receipts 26._8 Current Expenditures (; million) 1961/62 1962/63 Budget estimate 20.95 Budget for 1961/2 20.95 Army 0 13 Pensions 0.40 Independence 2 0.25 Army; diplomacy 0.80 Famine relief 0.64 Salaries (ADU) 0.72 Salary rise (ADU)2/ 0.72 Departmental 0.27 Departmental 0.37 Budget 1962/3 23.14 23.06 U.17 . - pensions 2.90 U.K. - pensions Currency Board - I1N4F 1.10 & army 1.94 Total exp. 27.14 Total appropriatiorns 25.00 Deficit -0.24 less: unders pending, 26.g9 estimated at up to !M m. 24-25 1/ i.e., aid towards civil service compensation and pension commutation. 2/ In addition to '100,000 provided in budget estimates. S/ In addition to 300,000 provided in budget estimates. Table 14 Goverment of TanEapyiika: Capital E,cenditures (r '000) Item 1948 1952 12J5/5 1257/8 1258/9 195/60 1960/1 1961 2 1962/3 ( budget est. ) Economic: W42 2,963 2,025 1,635 1,870 1,374 2,565 4,085 4,727 inc: Agriculture & livestock (169) (252)' (130) (147) (247) (14) (133) (1,005) (1,100) Water supplies (140) (209) (294) (492) (634) (447) (607) (756) (900) Roads (112) (1,880) (1,210) (906) (849) (643) (1,208) (1,298) (1,560) Socia: 185 754 944 2,498 2,236 11,137 1,274 2,370 2,208 Education ( 47) (211) (388) (1,196) (1,135) (489) (395) (1,246) (1 117) Eealth & welfare ( 65) (176) (206) (309) (291) (228) (272) (433) (357) Townships ( 73) (367) (350) (993) (810) (420) (607) (691Y (551) Public baildinas & works 272 1,213 335 1,253 966 885 1Iy318 1,094 966 Other 4L7 60 33 68 87 5/3 516 660 £3 Total 996 4,989 3,337 5,454 5,159 3,939 5.672 8,210 8,344 Note: "Economic" Investzments include purchases of shares in or loans to Tanganyika Electric Supply Co. as follows: 1960/61 - i250,000 - thermal project 1961/2 (est.) - i540,000 - Hale hydro-electric project 1962/3 (est.) - W700,0(O- Hale hydro-electric project Table 15 Three Year Development Plan: 1961/2-1963/h Capital Outlays by Governrment Sector Plan: 1961/2-1963/4 Last 3 years - 1958/9-1960/1 £m. p m. fo Economic: 13.29 55.5 6.i6 41.? inc: Agriculture & livestock ( 3.18) (13.3) (0.88) ( 6.0) Nlater & irrigation ( 2.29) ( 9.6) (1.69) (ll.4) Roads ( 4.17) (17.4) (2.70) (18.3) Industry ( 0.68) ( 2.8) ( .. ) C . ) Power ( 1.80) ( 7.5) (0.25) ( 1.7) Social: 6.91 28.9 L.65 31.5 inc: Education ( 3.27) (13.7) (2.02) (13.7) Health (0.95) ( 4.0) (0.79) ( 5.3) Township t& connunity development (1.38) ( 5-8) (1.810) (12.5) Housing (0.69) ( 2.9) (n.a.) (n.a.) Public buildings & works 1.03 14.3 3.17 21.5 Police & -prisons 2.18 9.1 n.a. n.a. Other 0,52 2.2 0.80 5.4 Total 23.93 i/ 100 14.77 100 j Includes about £1.4 million of current costs for education and agriculture: but excludes £.1.15 million of roads to be -financed by contractors; £3 million of electric power to be financed by Cc'lonial Developmaent Corporation; £0.5 million for Development Company from CDC; and an estimated £1.6 million (50,%) from West German credit to be used for non-Plan projects iLcluding Developmnent Company and Kidatu railroad. Note: No railroad, port or telecoremunications investments are included above as these ara carried out by the East African ComT.;cn rervrices Organization. The 1963/7 plans of the EACSO are presently being discussed by the Govern- ments of Tanganyika, Uganda and Kenya. In 1958/60 EACSO investment in Tanganyika averaged about £2 million annual'ly rising to £3.3 million in 1961. Source: Treasury of Tanganyika, including Development Plan for Tanganyika, 1961/2-1963/4 (May 1961) : see also Table 14 for 1958-1961. Table 16 Sources of minds for Development Plan, 1961/2-1963/4 Original Estimate Treasury Revision Source June 1961 February 1962 £ million % £ million Local Contribution: 5.0 21 2.2 9 Various funds ( 1.0) ( 0.7) Short-term borrowing 2/ ( 3.0) (.. ) Longer term borrowing ( 1.0) ( 1.5) 3 External Grants: 7.5 31 8.8 37 U.K.-CD&W ( 4.5) ( h.8) -Special (.. ) (4.0) Other 4/ (3.0) ( ? ) External Borrowing: 11.5 48 13.0 54 U.K.-Cth. Assistance Loan ( ) ( .0) -C.D.C. ( ) ( 0.2) U1.S.A.-D.L.F. ( 0.7) 0.7) -A.I.D. (.) (3.6) \4. Germany (.) (1.6) To be secured (10.8) ( 2.9) 24_.0 100 2.00 Note: For Feb. 1962, "local contribution" is a Treasury estimate: "grants" are those afreed by UK in Aug, st 1961b "borrowing" represents UK loan of August 1961; U.S. offer of $plO rmillion of AID) funds in December 1961; half of German offer of DM 35 million. If more than half the German funds are used for projects outside the plan, or if U.S. and UK funds are so used, then the £2.9 million "To be secured" would be increased correspondingly. 1/ e.g., local authorities, luimp sum premia, National Development Fund. 2/ Principally, it was hoped, from Currency Board. Currency Board and medium-term "tap" loans. Foreign and international institutions, both public and private: partly firm, mostly uncertain. Source: As for previous table. Table 17 General Reserve Position of Government (t million) Item June 1960 June 1961 December 1961 May 1962 Reserve Funds 2.2 2.3 2.3 2.3 General revenue ba:Lance 2.5 2.6 0.3 0.3 Development Fund 0.3 - - - Less: advances from Crown Agent 1.1 0.7 2.3 2.2 Total 3.9 4.2 0.3 o.4 Treasury bills outstanding 3.4 4.8 4.6 5S0 Note: There was a deficit in the current budget of £2.3 million during July-December 1961 and £2 million of development expenditure were made, partly on the basis of anticipated loans and grants. This £,4.4 million excess of expenditure was financed by depleting reserves and by advances secured in anticipation of loans and of Il.K. grants. Thus, there was a substantial rise in advances from the Crown Agents. During January-May 1962, expenditures appear to have been more closely matched by current revenues and receipts on capital account from abroad. Table 18 Central Government Activity in Relation to GDP (f million) Current & Capital Expenditures 2/ Current Admini- Year GDP Revenues Total stration 3/ Economic Social Capital Z m. £GDP t m. % GDP (as , of total expenditure) 1954 79.1 18.8 23.8 19.2 24.3 48.;4 14.6 19.8 17.2 1955 81.8 18.7 22.9 21.2 25.9 48.1 14.6 19.8 17.5 1956 89.3 17.9 20.0 22.8 25.5 43.4 15.4 20.6 20.6 1957 92.9 18.1 19.5 23.6 25.4 40.2 16.1 20.8 22.9 1958 97.9 19.1 19.5 2h.4 25.0 41.8 15.6 20.9 21.7 1959 106.2 20.7 19.5 24.9 23.4 h3.3 16.5 21.7 18.3 1960 1Lh.4 22.7 19.8 26.9 23.5 45.0 16.4 20.8 17.8 19614/ 113.5 23.5 20.7 30.6 L/ 27.0 43.2 15.0 19.1 22.7 j/' I1 Monetary economy only. / Calendar year series have been produced by averaging fiscal years. Revenue ancl expenditure series (both total and by sector) for 1960-62 have been adjusted so as to be consistent with earlier years. (Table 13, Note 1). 3/ Includes law and order, defense, public debt, unallocated public works, miscellaneous. ,J Reflects budget estimate for 1961/2. iictual capital expenditures may be 20%; of total. Note: Local governrment is excluded. In 1957/60, local net revenues and expendit;ures were about LU million p.a., including el.4 million of capital expenditures. Their inclusion would raise the ratio of revenues and expenditures to GDP by about 4% in recent years. Table 19 .Movements in Volume & Terms of Trade j (1954 = 100) A. Terms of Trade 1954 1955 1956 1957 1958 1959 1960 1961 St Export prices 100 87 91 88 81 85 88 85 Import prices 100 96 97 95 95 94 99 100 Terms of trade 100 110 107 108 117 111 113 118 B. Volume of Trade Exports 100 115 136 124 142 147 171 157 Imports 100 142 113 128 107 112 116 121 C. Valule of Trade Exports 100 99 123 109 116 125 150 134 Imports 100 136 112 123 105 108 118 124 1/ Excludes trade with Kenya and Uganda. Table 20 Export Values, Volumes & Prices A. Principal Exports (beyond East Africa) (Z million) Composition Commodity 1948 l/ 1952 1954 1957 1958 1959 1960 1961 % in 1960-61 Sisal 8.9 21.7 10.9 9.5 10.3 13.1 15.4 14.0 28.5 Coffee 0.9 5.5 10.0 7.1 7.6 5.7 7.3 6.8 13.6 Cotton 1.3 4.7 3.4 6.6 7.2 6.7 8M8 6.8 15.1 Tea 0.1 0.3 0.5 0.6 0.6 o.8 1.2 1.3 2.4 M4eat & products n.a. n.a. 0.8 0.5 0.9 1.5 1.9 2.1 3.9 Hides & skins 0.5 1.1 1.5 1.2 1.2 1.9 1.8 1.8 3.5 Cashew nuts 0.1 0.5 0.6 1.5 11 1.6 2,1 1.8 3.8 Ground nuts 01 0.6 0.2 1.1 0.8 0.8 1.1 0.2 1.3 Other oilseeds, nuts 0.2 1.9 1.2 2.3 2,0 2.0 2.2 1.9 4.0 Diamonds 1.0 4.0 3.1 3.2 4.4 4.5 4.7 5.8 10.0 Gold 0.5 0.9 0.9 0.7 0,7 1.1 1,2 1.2 2.3 Lead - - O.4 1.1 0o,9 08 1.1 0.1 1.2 Other 2.6 5.3 3.5 3.9 3.9 4.8 5.9 4.7 10.2 Total 16.2 46.5 36.2 39.4 41.7 45.3 5S.8 48.6 100 1/ Includes exports to Kenya and Uganda. B. Price & Volume of Principal Exports (1954 = 100) 1961 1961 price exports Commodity £ per ton. Average Unit Price t000 tons Volume 1957 1955 1959 1960 1961 1957 1955 1959 1960 l76 Sisal 70 80 80 97 115 108 206,9 108 118 125 124 123 Coffee 272 75 66 57 57 53 24.6 93 112 102 130 128 Cotton 229 86 80 77 81 82 29.7 225 265 254 321 247 Groundnuts 67 92 85 89 99 92 3.4 644 504 484 584 iLo Cashew nuts 47 132 103 138 171 133 400. 207 192 204 225 246 Tea 425 88 86 91 116 135 3.2 138 144 169 200 200 Diamonds .. 92 91 87 91 89 685 / 113 156 168 163 208 Gold ., 100 100 100 100 100 101 / 86 93 129 146 149 P Thousand carats. 2/ Thousmad oz. Table 21 Composition of Imports Net Imports from Overseas (? million) Composition Category 1954 1957 1958 1959 1960 1961 1954 1961 (percentages) Food 2.3 2.6 2.1 2.3 2.3 3.7 7 9 Beverages & tobacco 0.4 0.3 0.3 0.3 0.3 0.3 1 1 Crude materials 0.1 0.1 0.1 0.1 0.1 0.1 Mineral fuels 2.7 4.1 4.1 3.7 3.9 3.6 9 9 Animal & vegetable oil & fats 0.1 0.3 0.2 0.1 0.2 0.2 . 1 Chemicals 1.3 1.7 1.9 2.1 2.3 2.4 4 6 Manufactures / 16.3 19.4 15.0 15.8 16.8 17.9 51 45 Machinery & transport equipment 7.4 9.6 8.7 9.1 10.9 10.3 23 26 Miscellaneous 1.3 1.3 1.3 1.0 1.1 1.2 4 3 32.0 39.3 33.6 34.5 37.5 39.7 100 100 i/Including: textiles & clothing 8.5 9.5 6.3 7.3 8.1 8.3 2 2 Selected Imports 1960 (Z '000) Sugar (refined) 834 llheat flour 282 (from Kenya) Tea 330 ( " i) Beer 507 (from Kenya & Uganda) Cigarettes 1,609 ( " " " ) Tires & tubes 950 Cotton fabrics 3,847 (10/5 from Uganda) Synthetic fabrics 1,636 Bags & sacks 526 Blankets 396 Cement 931 (805" from Kenya) Footwear 635 (605 " " ) Clothing 1,1433 (33% at ) Composition of Retained Imports from Overseas (Percentage) Category 1958 1959 1960 Food, drink & tobacco o 7 Proclucers' materials 31 29 30 Capital goods 22 22 22 Spares & accessories 4 4 4 Consumer goods 31 34 34 MLiscellaneous 4 3 3 Total: Percentage 100 100 100 C million 31.5 32.5 36.1 Table 22 Principal Trading Partners (Percentages) A. Destination of Domestic Exports Country 1954 1957 1960 1961 Principal Items, 1960 1/ United Kingdom 34.1 29.2 30.4 34.1 34% sisal, 100% dianonds & gold Kenya/Uganda 2.8 4.9 4.1 4.5 tobacco, coconut oil India. 5.0 7.0 8.1 5.0 100% cashew, 23% cotton Other Sterling 11.0 13.9 12.9 16.0 Total Sterling Area 52.9 55.0 55.5 59.6 USA/Canada 15.8 8.5 10.0 10.9 47% coffee, 9% sisal E.E.C. 23.5 25.6 23.8 21.0 37% coffee, 30,%' cotton, 24h sisal, 18% nuts Other 7.8 10.9 10.7 8.5 sisal, cotton, nuts Total 100 100 100 100 B. Origin of Direct Imports CDuntry 1954 1957 1960 1961 United Kingdom 36.3 30.3 26.5 28.2 Kenya/Uganda 15.5 18.3 23.7 25.1 India 12,7 6.7 t.9 5.1 Other Sterling 11.1 6.3 5.9 6.5 Total Sterling Area 75.6 61.6 61.0 64.9 USA/Canada 2.8 2.1 2.8 4.2 E.E.C. 13.2 11.2 14.1 12.9 Japan 0.8 12.8 8.8 7.5 Other 7.6 12.3 13.3 10.5 Total 100 100 100 100 1/ Percentage figure represents proportions of Tanganyika's exports of that comniodity which is taken by country or area specified. Table 23 Trade & Payments Position A. Balance of Trade (£ million) Item 1948 1952 195h 1955 1956 1957 1958 1959 1960 1961 Overseas trade: Exports (i re-exp.) 15.4 47.5 37.7 37.4 46.3 41.0 h3.8 47.2 56.6 50.6 Imports (c.i.f.) 20.1 37.5 32.0 43.5 35.9 39.3 33.6 34.5 37.8 39.7 Balance -4.7 10.0 5.8 -6.1 lo.4 1.8 10.3 12.8 18.8 10.9 East Africa trade: Exports 1.2 0.9 1.1 1.7 2.1 2.0 2.6 2.6 2.3 2.2 Imports 2.1 4.5 5.9 5.6 6.3 7.7 9.0 8.1 9.2 10.6 Balance -0.9 -3.6 -4.8 -3.9 -h.3 -5.7 -6.4 -5.5 -6.9 -8.4 Overall trade balance: -5.7 6.h 1.0 -10.0 6.1 -3.9 3.9 7.3 11.9 2.5 B. Estimated Balance of Payments 1/ (Z million) Item 195f9 1960 1961 Balance of trade 7.3 11.9 2.5 Invisibles -6.3 -7.0 -5.8 Current account balance: 1.0 4.9 -3.3 Private capital 2.5 0.5 0.9 of which: long term (2.0) (2.5) (3.5) short term (0.5) (-2.0) (-2.6) Unrecorded transactions -3.5 -604 -1.1 Official grants 14 1.6 2.0 Long-term public capital 3 -0.7 1.6 h.0 Nonetary movements (- = increase) -0.7 -2.2 -2.5 Capital account balance: -1.0 -4.9 3.3 1/ With rest of world, including Kenya and Uganda. 2/ Principally unrecorded private capital movements; but also errors and omissions on current account. 3/ Includes attribution of part of CSO transactions to Tanganyika. Note: The Balance of Payments estimates are based on data from the Tanganyika Treasury and the Statistical Office of the! Coruion Services Organization. It is probable that the net deficit on invisible account is under-estimated by Ul million or more per year. Table 24 Sterling Assets of Tanganyika (£ million) June 1960 June 1961 June 1962 General government 1/ 2.5 2.0 ( ( 6.z Special funds 2.3 2.1 ( P. 0. Savings Bank 1.5 1.0 1,0 Total 6.3 5.1 7.2 Currency Board / 15.4 15.7 (est.)16.0 Commercial banks 2.3 3.8 L88 Government Sinking Funds 0.7 1.0 1.5 In addition, .,overnment deposits with conmmercial banks in Tanganyika were: 1.8 million in June 1960 Z2.4 million in June 1961. However, advances from Crown Agents were: £.1.1 million in June 1960 r0.7 million in June 1961. 2/ For illustrative purposes, 20S of the sterling reserves of the East Africa Currency Board are here ascribed to Tanganyika. This is a purely arbitrary procedlure based on Tanganyika's share in the disbursed surplus income and fiduciary issue of the Board (see para. 77 of text). TANGANYIKA Map I UGANDA ~~~~~~~~~~~~~~~~~~~NATIONAL BOUNDARIES B.kobo M. MAR REGIONAL BOUNDARIES LAKE VICrORA -- DISTRICT BOUNDARIES { t A _ \ 7A 8~A A M A Sny9Q- 4 1~~~~~~~~~~~~~~~~~~7 N Z G A D. o _'N M P A / ~ Z A M0 BAC I Q U E AM KJULYo M21L4 0 KI B JO A A~~~~~~~~~~~10Y*i JULY 9Y61 TANGANYIKA RAINFALL PROBABILITY-POPULATION Map 2 0 20 40 60 80 I0SM, M _____I__I__I_ R----------- REGIONAL BOUNDARIES REPRESENTS 1000 AFRICANS LAKE V/CTORcA TOTAL CrY POPULATIONS . nd.r 1500Y 8 9A8080 U 4 ; 1500 - 5000 , .M' zi uusomnaco S; #@liot7K. U 25,000 - 50,000 Over 100,000 4 X t''~~~~~~~~~~~~~~~~~~A 1' .W N.~~~~~~~~~~~~~~~~~~2 b _)0.1|* ; 72nal .-,~~~~~~~~~~~~~: ~~~~G ~,b N. -d .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~K N..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M..k RAINFALL PRORABILITY Better than 95% eoe8tcatIO8 of 30 1nh-es d,rlng yeau a * ,V,vo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~MWRA 85-95% eapectatlon of .Z. ; 1 0 lrches durltr year Worce th2n 85% eceptatlion Z Ol 20 irches Ic October-May. JUL' 1962 t1R0-1025 TANGANYIKA TRANSPORT NETWORK Map 3 K'.p j g bze1'} ' '' ;' ' i AILWAYS ! = -, U-7t as --- > a- S . . pnder con.truction LAKE' v/c rORIA i t.H- 1 …-----SHLPPING ROUTES - 'WE JS - >\ \ >