Business-friendly climate lures investors
PRUDENCE HAS PAID DIVIDENDS IN TANZANIA AS LOW INFLATION COUPLED WITH AN AMBITIOUS RESTRUCTURING OF THE BANKING SECTOR HAVE PROVIDED THE FOUNDATIONS FOR SUSTAINABLE GROWTH

STANDING OUT FROM THE CROWD Tanzania’s attractive range of incentives, abundant natural resources, and favorable labor conditions make it a prime investment target.

Over the past six years Tanzania has established an impressive record of economic progress which has brought it widespread praise from many quarters including influential institutions such as the World Bank and the IMF. Both
organizations see Tanzania’s path towards fiscal rectitude and structural reform as providing a model that can be mirrored in other countries across the continent.
Last November an IMF report highlighted the economic achievements of the government in carrying out a variety of structural
reforms including improvements in governance and financial management, an increase in transparency, and the control of corruption which have led to the creation of a more favorable business climate.

Much of the credit for these achievements must go to the republic’s central bank, the Bank of Tanzania, which has worked hand-in-hand with the government in implementing policies aimed at achieving sustainable rates of growth in the national economy.
Supported by a prudent fiscal policy, the Bank of Tanzania has been able to lower the annual rate of inflation to a 25-year low of 5.1% by September, from 30% in 1995. At the same time the country has seen growth rates increase from 2.5% in 1994/5 to 5.5% in 2001, with rates averaging 4.4% over the past six years. The current account deficit of the balance of payments declined from 12% of GDP in 1999 to less than 10% in 2000 and gross foreign exchange reserves have been growing.

BASIL MRAMBA Minister of Finance

Minister of Finance Basil Mramba outlines the steps taken by the government. “Tanzania has for the past ten years or so been moving steadily towards a market-based economy. That has meant restructuring businesses so that state enterprises have been privatized. It has meant restructuring the banking sector and adopting macro-economic policies which are business friendly and market oriented so that we can encourage economic growth.”
The Governor of the Bank of Tanzania, Daudi T.S. Ballali, has been at the forefront of the government’s drive to control inflation. With over 20 years of experience working with the IMF, Mr. Ballali had an ideal grounding to enable him to bring about the successful implementation of such policies. He says the bank are single-minded in their determination to achieve their primary objective of maintaining price stability and thus creating an environment that will favor increased private investment.

DAUDI T.S. BALLALI Governor of the Bank of Tanzania

With macro-economic stability now established, the main focus of government policy has shifted to growth. It is recognized that present growth rates are inadequate to reduce poverty. Growth rates of at least 7% are needed to enable a substantial reduction in the incidence of poverty. The objective is, therefore, to increase GDP growth to at least 8% over the medium term, with a long-term goal of 10-13%.
Aspiring to such rates would not have been possible without a substantial reduction in Tanzania’s external debt. Therefore the recent approval of $3 billion of debt relief by the IMF and World Bank under the Highly Indebted Poor Countries (HIPC) initiative has been a major boost to the government’s plans. “This is the most important economic event in the past quarter century,” Governor Ballali said in the Bank of Tanzania’s monthly economic survey in January. The money saved through the debt reduction will be directed towards attacking poverty through improvements in health, education, water and rural communications.

Mr. Ballali believes that Tanzania offers one of the most favorable environments for potential investors in Africa. Its wide range of incentives, abundant natural resources and favorable labor conditions all make Tanzania an attractive destination for foreign direct investment. “We need to raise investment beyond current levels if we are to achieve our targeted growth rates. Investors that come to Tanzania will find a new country fully committed to a market economy,” concludes Mr.Ballali.