Dar es Salaam. Tanzania’s quarter 2 economic results show the country’s economy is maintaining a steady recovery from the COVID-19 shock and the Russia-Ukraine war.
At a 5.2 per cent growth, this is much more positive growth compared to 2022, where growth was recorded at 4.7 per cent, and also in 2021, where growth was recorded at 3.8 fueled mainly by government spending.
Sectors that recorded the highest growth include financial and Insurance services, which recorded the highest growth of 15.6 per cent, followed by electricity (12.4 per cent), and other services, which include household as an employer and arts and entertainment (11.5 per cent).
Others include transport and storage (7.6 per cent) and accommodation and food service (7.2 per cent).
Sectors that employ many people, such as agriculture, construction, trade and repair, recorded a modest growth.
Agriculture registered a decline to 2.4 per cent, indicating that while there is growth in the economy, poverty reduction will remain lagging as growth remains in the sectors that directly employ few people.
Sectors such as electricity, which recorded significant growth between April and June 2023 for increased distribution of electricity to 2,155 million kWh from 1,918 kWh million, hardly reflect the realities on the ground, as the country is currently facing a severe power rationing challenge.
In the latest economic outlook report by the International Monetary Fund (IMF), the group has predicted that economies in sub-Saharan Africa will continue to experience a fall this year but anticipate a rebound in 2024.
The report highlights several issues that have hampered African economies this year, such as increased exchange rate pressure, inflation, and debt vulnerabilities.
Tanzania, like other economies in the region, has found itself under increasing pressure caused by exchange rate pressure due to the existing dollar shortage in the economy.
The uniqueness of Tanzania in this challenge is that it also runs several capital-intensive projects, such as the SGR Railway and Julius Nyerere Hydroelectric project, which are implemented with its own resources.
In ensuring that it meets its obligation, Tanzania resorted to acquiring expensive non-concessional loans in addition to several concessional loans.
This means that for Tanzania to achieve its growth trajectory, there is a need to resolve these challenges so as not to return to a recession.
IMF highlights several measures the country can take, such as managing debt obligations by expanding the tax base. Here, the report recommend a shifts to the formal sector and explores progressive sources, such as income and property taxes.
Also, selecting investment projects carefully and borrowing prudently, especially avoiding non-concessional loans where possible.