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Macro-economic trends in the Tanzanian economy

The recent economic history of Tanzania can best be seen in the light of its growing population. From a total of approximately 9 million people at the time of independence in 1961, the population of Tanzania has been growing inexorably at a rate of over 3 per cent per year, until it has reached at the present a figure of nearly 27 million. This is a trebling in population: the economy must have trebled in order simply to have maintained income per capita.

Maintaining income per capita is all the Tanzanian economy has been capable of doing. Initially, in its first decade, the economy was able to expand at a rate faster than the population grew (see Table 5.1), so that GDP per capita (Table 5.2, column 2) rose, in terms of constant prices of 1987, from approximately TSh900, to a peak, in the years 1975/6, of TSh985 per year. At the present, income per capita is back at its original level. There are three times as many Tanzanians as at the time of independence, but individual Tanzanians, on the average, enjoy no higher a standard of living. In per capita terms, Tanzania's is not a growing but a static economy.

Other economic data, appearing in Tables 5.1-5.3, reveal that the era of rising incomes per capita, from independence until the mid-1970s, coincided with a growth of the industrial sector, whose share of GDP reached a peak of nearly 13 per cent during the same period. Over the next ten years, industry declined in absolute amount: it is only in the Latter half of the 1980s that the output of the industrial sector resumed its rise, although it has still to reach its peak of the mid-1970s as a proportion of GDP.

Table 5.1 Tanzania: GDP 1971-1991

Year GDP at market prices (billions current TSh) GDP deflator (1987=100) GDP (billions TSh constant prices of 1987) Exchange rate (annual average conversion factor, TSh per $US) GDP (billions current $US)
1971 9.8 7.8 126 7.14 1.37
1972 11.2 8.3 135 7.14 1.57
1973 13.1 9.1 144 7.02 1.87
1974 16.0 10.9 147 7.14 2.28
1975 19.0 12.5 152 7.37 2.58
1976 24.4 15.5 157 8.38 2.90
1977 28.9 18.3 158 8.29 2.48
1978 32.2 20.0 161 7.71 4.15
1979 36.3 22.0 165 8.22 4.41
1980 42.1 24.9 169 8.20 5.12
1981 45.6 26.7 171 8.28 5.90
1982 53.7 31.3 171 9.28 6.25
1983 64.4 37.8 170 11.14 6.32
1984 79.7 46.5 171 15.29 5.79
1985 105 59.0 178 17.47 6.81
1986 140 76.2 184 32.70 4.79
1987 193 100.0 193 64.26 3.20
1988 279 137.3 203 99.29 2.93
1989 369 175.2 211 143.38 2.60
1990 451 206.6 218 195.06 2.30
1991 600 265.0 226 219.16 2.74
1992 745p 318p 234p n.a. n.a.
1993 935p 383p 244p n.a. n.a.

Source:
1971-1991: World sank, World Tables 1991, 1993
1992, 1993: Planning Commission/Ministry of Finance, n.d. Table 4.5, p. 19 and Table 4.2, p. 15
Note:
p preliminary

Table 5.2 Tanzania: GNP per capita 1971-1991

Year Population (millions) GDP per capita (TSh at 1987 prices) GNP per capita (current US dollars) Average rate of growth of GDP
1971 13.9 905 100 3.9
1972 14.2 950 110 7.1
1973 14.6 985 120 6.2
1974 15.0 980 140 2.1
1975 15.4 985 160 4.0
1976 15.9 985 180 3.3
1977 16.4 968 190 0.0
1978 17.0 950 220 2.1
1979 17.5 944 250 2.5
1980 18.1 933 280 2.7
1981 18.7 915 300 -1.0
1982 19.3 885 310 -0.3
1983 19.9 853 320 -0.5
1984 20.5 835 310 4.6
1985 21.2 840 310 1.5
1986 21.8 843 270 5.4
1987 22.4 860 200 4.1
1988 23.0 880 150 5.2
1989 23.8 885 120 4.3
1990 24.5 890 94 4.5
1991 25.2 860 108 3.9
1992 25.9 904 n.a. 3.6
1993 26.6 915 n.a. 4.3

Sources:
1971-1991: World Bank, World Tables 1993
1992, 1993: author's estimates

Table 5.3 Tanzania: GDP by sector 1971-1991

Year GDP (at factor cost, billions constant TSh 1987) Agricultural product (at factor cost, billions constant TSh 1987) Share of agriculture in GDP (%) Industrial product (at factor cost, billions constant TSh 1987) Share of industry in GDP (%) Manufacturing product (at factor cost, billions constant TSh 1987) Share of manufacturing in GDP (%) Services (at factor cost, billions constant TSh 1987) Share of services in GDP (%)
1971 130 84 64.6 17 13.1 9 6.9 31 23.8
1972 138 91 66.0 17 12.3 10 7.2 33 23.9
1973 143 92 64.4 18 12.6 11 8.0 35 24.5
1974 146 88 61.3 18 12.3 11 7.5 40 27.4
1975 155 96 61.9 18 11.6 11 7.1 42 27.1
1976 157 91 58.0 20 12.8 13 8.3 45 28.7
1977 158 92 58.2 19 12.0 12 7.6 46 29.1
1978 161 90 56.0 19 11.8 12 7.4 49 30.4
1979 165 91 55.0 20 12.1 13 7.9 51 30.9
1980 170 94 55.2 20 11.8 12 7.1 52 30.5
1981 169 95 56.2 18 10.7 11 6.5 53 31.4
1982 170 97 57.0 18 10.6 10 5.9 53 31.2
1983 166 99 59.7 15 9.0 9 5.4 52 31.3
1984 172 103 59.8 16 9.3 10 5.8 53 30.8
1985 179 110 61.5 16 8.9 9 5.0 53 29.6
1986 186 116 62.4 16 8.6 9 4.8 54 29.0
1987 193 121 62.8 16 8.3 9 4.7 56 29.1
1988 243 148 61.0 16 6.6 15 6.2 79 32.5
1989 310 193 62.4 16 5.2 15 4.8 101 324
1990 368 220 60.0 20 6.4 17 4.6 128 34.8
1991 487 296 60.9 25 5.1 20 4.1 165 33.9
1992 n.a. 152p n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1993 n.a. 159p n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Source:
1971-1991, columns 1, 2, 4, 6, 8: World Bank, World Tables, 1991, 1993
1992, 1993: column 2: Tanzania, Ministry of Agriculture, Livestock and Cooperatives, 1991
Note:
p preliminary

The decline of industry is one reason; many other reasons are given for Tanzania's relative decline since the mid-1970s, and some of them are quite obvious - a relative fall in the prices of Tanzania's agricultural exports, particularly that of coffee; the sudden eruption of war with Uganda in 1978/9 and the continued claims of the expanded Tanzanian army upon the output of the country; and the shortages, particularly of imported raw materials and spate pasts, accompanying the reduction in foreign earnings. But, even severally, these explanations do not appear to be completely adequate; some blame must be levelled at the transfer of resources into the meeting of social needs, particularly that of employment in the cities. Here the figures in Tables 5.4-5.6 are revealing, for they show that an ever-increasing fraction of government expenditures are devoted to meeting current consumption. It is not that government expenditures as a whole have risen rapidly, nor that the government's budget deficits have increased substantially, but that increasing amounts of what the government is able to raise and to expend are devoted to meeting the costs of ever-expanding employment in the public and para-statal sectors. That these expenditures are at the expense of the development of the Tanzanian economy can be seen both in the total figures on gross investment (the final column of Table 5.4) and in the shares of total government expenditures allocated to those activities which raise productivity (the columns headed Agriculture, Education and Health in Table 5.6). Focusing on government expenditures, the shares of the total represented by expenditures on agriculture and education have both fallen proportionally by nearly half, from 14 per cent to 7 per cent and from 14 per cent to 8 per cent respectively. The main increases are in Defence expenditures and in the 'Other' in Table 5.6, which includes the wages and salaries of most civil servants and the amounts by which the para-statals fail to cover their wage and salary bills.

Tanzania's external accounts reveal the difficulties already mentioned. Looking at imports and exports (see Table 5.7) we see that exports in terms of current US dollars rose year by year to 1981. Simultaneously' imports rose, and by a much more rapid rate, so that in the year in which imports peaked, 1980, the country's balance of payments deficit was US$628 million, 75 per cent of export earnings. Thereafter, export earnings declined from the peak of US$809 million to a low of half that amount in 1985; subsequent years have shown little real improvement. Imports contracted by a lesser amount, but have resumed their rise and are now at their highest level ever. In spite of growing remittances from abroad, the deficit in the balance of payments seems inexorably to rise.

To explain why imports have been able to rise more rapidly than exports, and particularly why they rose again after 1983 when exports were barely increasing, one must turn to Tanzania's foreign borrowings and repayments. The deficit in the balance of payments over the years has been financed almost entirely by long term borrowings. These borrowings have been mainly official, through the offices of the international financial agencies and developed countries (see Tables 5.8 and 5.9). The IMF has accounted for a very small portion of this; the World Bank for a larger portion, averaging approximately one-fifth. The remainder of the borrowings have been primarily bilateral, at least a substantial portion which have been in the form of export credits. External debt continues to rise, standing now at nearly US$7 billion. This represents roughly three times Tanzania's GDP. Relative to total exports, the servicing of Tanzania's debt comes out at approximately one-half, a figure higher than that of the other countries we have studied; relative to GDP to over 10 per cent (see Table 5.9), again higher than comparable countries.

Table 5.4 Tanzania: public, private and total investment as a percentage of GDP 1964/5-1991

Year As a percentage of GDP
Public Private Total
1964/65 2.3 4.7 7.0
1966/69 5.6 4.7 10.3
1970 n.a. n.a. 25.5
1971 15.9 2.9 26.4
1972 n.a. n.a. 21.8
1973 n.a. n.a. 21.1
1974 n.a. n.a. 22.0
1975 13.4 7.3 21.1
1976 n.a. n.a. 22.9
1977 n.a. n.a. 26.1
1978 n.a. n.a. 25.2
1979 14.6 12.9 26.1
1980 n.a. n.a. 23.0
1981 n.a. n.a. 20.6
1982 n.a. n.a. 21.0
1983 n.a. n.a. 13.6
1984 n.a. n.a. 15.3
1985 n.a. n.a. 15.7
1986 n.a. n.a. 19.5
1987 n.a. n.a. 22.8
1988 n.a. n.a. 21.2
1989 n.a. n.a. n.a
1990 n.a. n.a. n.a.
1991 n.a. n.a. n.a.

Source:
Public and private, as a percentage of GDP: Ndulu, 1988, Table 2, p. 46
Total, as a percentage of GDP: World Bank, World Tables 1991,1993

Table 5.5 Tanzania: government revenues, expenditures, and total investment 1971-1991

Year Government current revenue (billions current TSh) Government current expenditure (billions current TSh) Government surplus (+) or deficit (-) (billions current TSh) Government capital payments (billions current TSh) Government consumption (billions of current TSh) Total gross domestic investment (billions of current TSh) Total gross domestic investment (billions of TSh at 1987 prices)
1971 n.a. n.a. n.a. n.a. 1.14 2.59 52
1972 1.8 1.6 -0.6 0.7 1.40 2.44 41
1973 2.3 2.1 -0.7 1.0 1.91 2.76 43
1974 3.2 2.9 -0.9 1.2 2.76 3.52 49
1975 4.2 4.4 -1.9 1.8 3.28 4.00 45
1976 4.4 4.3 -1.5 1.6 3.99 5.60 50
1977 5.9 5.2 -1.5 2.2 4.31 7.52 59
1978 6.8 5.9 -2.4 3.3 5.58 8.09 57
1979 7.4 8.2 -5.4 4.5 5.96 9.46 59
1980 8.5 7.5 -3.5 4.5 5.49 9.69 55
1981 10.3 9.0 -3.3 4.6 5.80 10.4 53
1982 n.a. n.a. n.a. n.a. 7.1 11.7 58
1983 n.a. n.a. n.a. n.a. 8.7 10.9 40
1984 20.1 18.5 -5.5 7.1 11.6 11.6 46
1985 n.a. n.a. n.a. n.a. 16.2 16.3 50
1986 n.a. n.a. n.a. n.a. 21 25.1 51
1987 n.a. n.a. n.a. n.a. 25 50.0 50
1988 n.a. n.a. n.a. n.a. 31 85.1 60
1989 n.a. n.a. n.a. n.a. 41 106.1 72
1990 n.a. n.a. n.a. n.a. 49 124.8 n.a.
1991/92 n.a. n.a. n.a. n.a. 94 131.2 n.a.
1992/93 164 279 n.a. n.a. n.a. n.a. n.a.
1993/94 236 384 n.a. n.a. n.a. n.a. n.a.

Sources:
1969-1989: World Bank, World Tables, 1991, 1993
1992/93, 1993/94: Planning Commission/Ministry of Finance, n.d., Table 12.1, p. 99

Table 5.6 Tanzania: central government expenditures, share of total expenditures (%) by function 1976-1985

Year Agriculture, forestry, fishing Mining, manufacturing, construction Transport and communication Education Health Defence Other Total expenditures (millions of current TSh)
1976 14.0 2.0 6.3 14.0 7.1 12.1 45 5,969
1977 11.6 7.4 6.6 13.5 7.0 12.2 42 7,404
1978 9.3 8.7 5.5 14.5 7.3 14.8 40 9,131
1979 7.4 6.8 7.6 12.3 5.7 25.8 34 12,756
1980 10.9 11.6 9.2 13.3 6.0 9.2 40 12,102
1981 11.1 9.6 9.4 13.3 6.0 12.3 38 13,096
1982 7.0 8.5 8.1 12.4 5.4 12.5 46 18,427
1983 6.4 7.3 7.5 13.2 5.1 13.2 47 19,289
1984 7.4 6.3 6.0 11.7 5.5 12.8 50 21,461
1985 7.1 6.3 7.2 8.3 5.7 15.8 50 23,178

Source:
IMF, 1990, Government Finance Statistics Yearbook 1990, Washington DC International Monetary Fund

Table 5.7 Tanzania: balance of payments 1911-1991

Year Total exports of goods and services (millions of current US dollars) Total imports goods and services (millions of current US dollars) Balance on current account (before official transfers) (millions of current US dollars)
1971 350 455 -102
1972 412 473 -76
1973 456 568 -127
1974 488 823 -346
1975 491 824 -321
1976 633 722 -78
1977 656 843 -167
1978 625 1,263 -614
1979 697 1,219 -492
1980 762 1,412 -628
1981 809 1,346 -514
1982 530 1,173 -617
1983 491 899 -389
1984 506 1,024 -455
1985 437 1,178 -506
1986 446 1,242 -545
1987 448 1,421 -742
1988 507 1,504 -765
1989 538 1,549 -825
1990 548 1,667 -955
1991 535 1,775 -832

Sources:
1971-1991: World Bank, World Tables 1993

If the servicing of its debt is one of Tanzania's main problems, the relation that this bears to the inflow of capital to the country is another. On balance, as Table 5.10 reveals, capital continued to flow into the country until 1986. In the following year, there was a reversal, so that capital flowed out of the country in almost exactly the same amounts as had flowed inwards in previous years. This reversal of capital flow has occurred on both official and private transactions. Instead of Tanzania, a country in which capital is scarce, receiving capital from abroad, it became and has continued to be up to the present a net exporter of capital. In meeting its international financial obligations, Tanzania is acting as a good citizen of the world; in supplying capital to capital-rich institutions in the developed countries, Tanzania is perverting the world's allocation of resources.

Table 5.8 Tanzania: debt 1971-1991 (millions of current US dollars outstanding at end of year)

Year External debt total Long term debt total Short term debt total Private sector debt, total (Including non guaranteed
1971 258 258 0 20
1972 360 360 0 30
1973 495 495 0 46
1974 703 703 0 52
1975 889 889 0 57
1976 1,058 1,058 0 64
1977 1,448 1,289 159 65
1978 1,806 1,523 253 70
1979 2,101 1,851 250 80
1980 2,476 2,170 306 107
1981 2,622 2,321 301 94
1982 2,915 2,506 409 100
1983 3,136 2,675 461 94
1984 3,385 2,775 611 94
1985 3,752 3,034 718 50
1986 4,295 3,941 355 47
1987 5,142 3,654 488 56
1988 5,409 4,880 529 46
1989 5,349 4,993 356 45
1990 6,129 5,750 380 43
1991 6,460 5,941 519 42

Source:
1971-1991: World Bank, World Tables 1993


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