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Monday, 29 April, 2002, 10:12 GMT 11:12 UK
Tanzania: Reforms under pressure
IMF in Africa
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by Andrew Walker
BBC Economics Correspondent in Dar Es Salaam
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The managing director of the International Monetary Fund Horst Koehler is visiting five countries in Africa to assess the impact of IMF policies. Andrew Walker is travelling with him.

Tanzania is the first stop on the African tour of the IMF's managing director Horst Koehler.

The country is pursuing a Poverty Reduction Strategy - a programme agreed with the IMF and the World Bank and in consultation with the Tanzanian public.

Tanzania's efforts under this new strategy have gained it a reputation as one of the IMF's star pupils.

Under the country's founding President, Julius Nyrere, the economy was largely state-controlled, but much of the apparatus has now been dismantled.

Privatisation in full swing

One example is the container terminal at the capital's port, now run by a company owned by Hutchison Whampoa of Hong Kong and a local businessman.

The company's chief executive, Dave Cotty, says the number of containers it handles has risen by 22% within 18 months, while productivity is up 37.5%.

The company has invested $7m in new equipment.

Tanzania now has a small stock market, where seven brokers trade shares in four privatised companies in three half-sessions a week.

It is not Wall Street, but chief executive Hamisi Sibola, says the market can make an important contribution as a forum where companies can raise funds for new investment.

Progressive reform

The governor of the central bank, Daoud Ballali, says that in the last seven years there has been tremendous progress in establishing macroeconomic stability.

Inflation has come down from 30% in 1995 to 4.7% today, its lowest since the late 1950s, he says.

After shrinking in the 70s and early 80s, the economy is now growing at more than 5% a year, ahead of the African average.

In the financial sector, there used to be only one bank before 1993, but now there are 20, complemented by a further 12 non-bank financial institutions.

Debt relief

Tanzania's reforms have also smoothed the way to debt relief and new financial assistance from the IMF and many other donors.

The resources freed are being used for health and education services. The most high-profile example was the abolition of fees for primary education.

The response from parents and children was enthusiastic, but many say that the schools can not cope with the sudden influx of new pupils.

Rakesh Rajani of Haki Elimu, a group which runs a number of education projects around the country, says that there were not enough classrooms and teachers.

Many try valiantly, but he says there are still cases of children or their parents having to pay fees in roundabout ways - for instance, in the form of contributions towards classroom construction.

A joint IMF and World Bank review of progress with the Poverty Reduction Strategy in late 2001 said that progress with delivering services was encouraging.

However, on social outcomes it was another story.

Food for thought

The review said there was little sign of improvement in nutrition or infant mortality, and there were signs of increased inequality between urban and rural areas, and rising youth unemployment.

That is consistent with the experience of Freeman Mbowe, a member of parliament whose constituency in the Kilimanjaro area in the north has many coffee growers.

He does not want to go back to the old days of state controlled agriculture, but he does say that poverty among his constituents has got worse under economic liberalisation.

Many say that traders, rather than farmers, have been the main beneficiaries of liberalisation.

Agriculture problems

The central bank governor, Daoud Ballali, acknowledges that there are problems in agriculture, which is moving more slowly than other sectors of the economy.

He says the biggest problem is the extremely low level of world commodity prices.

Tanzania's exports are dominated by products whose price is weak - coffee, tea, cashew nuts and cotton.

Agriculture is still the most important sector of the economy.

And some observers see some signs of liberalisation being rolled back.

Brian Cooksey, Director of the Tanzania Development Research Group, says the standard account is misplaced.

He believes that moves to create crop boards and give new draconian powers to the agriculture minister are signs of powerful anti-liberalisation forces in Tanzanian society.

Agriculture minister Charles Keenja rejects this, arguing that the new powers are needed partly to tackle newly-formed crop buyers' cartels which are driving down the prices paid to the farmers.

The message from the IMF will be - the market works best.

See also:

14 Jan 02 | Business
IMF chief calls for open markets
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