Why Tanzania's lowest budgetary growth in East Africa

IMF's projection of Tanzania's
 growth path to 2024 

Tanzania has posted the lowest budget growth in the East Africa region.
The financial year 2019/2020 budget statements, read simultaneously in five parliaments last week, posted on average a 12.52 percent increase over the last financial year without Tanzania. With Tanzania, the average growth declined to 10.40 percent.

The Tanzanian budget increased 1.9 percent over the previous year to US$14.3 billion. The leader is Uganda who posted a 21 percent expansion in the budget to US$10.7 billion; Rwanda 11 percent to $3.16 billion; Kenya 10.3 percent to $30 billion; and Burundi 7.2 percent.

Tanzania’s budget rose to Tshs 33.1 trillion ($14.3 billion) from Tshs 32.48 trillion (US$15 billion) in the last financial year.  In absolute terms, the budget expanded by Tshs 600 billion (US$222.8 million). However, depreciation of the local currency reduced the value in US dollar terms compared to the previous year.
The currency declined 24.4 percent year-on-year from Tshs 2,165 to Tshs 2,693 to the dollar. Even then, her budgetary expansion is less than half of Rwanda’s $460 million.

Although some reports attribute this to Tanzania’s “up by your own bootstrap approach,” the weak budgetary expansion confirms the reality of IMF’s projection that Tanzania GDP growth will falter to 4.0 percent over the next four years. The six percent decline from 7.2 percent in 2015 and 6.0 percent in 2018, is the result of legislation and policy actions that have undermined confidence in the economy.

In the past, experts have persistently warned that Tanzania’s policy and legal environments were not conducive for investment and could stymie economic growth. However, the government ignored them. Instead, it chose to create an intrusive and the meddling bureaucracy and laws that legalize extortion and blackmail of investors. The result is falling FDI as investors hold back their plans to invest in the country.

 Also lengthy bureaucratic procedures delay investment plans. For instance, the construction of a $30 billion natural gas plant at Lindi is set to begin in 2022. The project has been in the drawing board since 2014. Lengthy and uncertain negotiations framework have delayed the project’s implementation.

The changed fortunes place Tanzania in unfamiliar territory and the government in a precarious position. According to the African Pulse, published by the World Bank, Tanzania was rated among the top performers in Africa. In the World Bank’s taxonomy, Tanzania was ranked among “The established” Performers, those who have consistently posted growth rates above 5.4 percent for a long period of time. With the new circumstances, the country will drop to the level of “Stuck in the middle” countries whose growth rate hardly exceeds 5 percent.

The deceleration is unwelcome news for it comes at the wrong time for the ruling party: it comes in the run-up to an election year. Coming at a time when the ruling party’s fortunes are shrinking, the deceleration could result in the rout for the ruling Chama Cha Mapinduzi, CCM, in the ballot. Its popularity has shrunk from 85 percent in 2005 to 55 percent in 2015 and could shrink even further this year.

 No wonder the

government was so unhappy with the IMF report this April that it was not released in Tanzania nor was it published by the local press.