WORLD BANK WARNS TANZANIA ON ECONOMIC STAGNATION

	The 60-page Tanzania Economic Update (TzEU) report, “The Road Less Traveled –Unleashing Public Private Partnerships in Tanzania” launched in Dar es Salaam yesterday attributes untenable economic investment in infrastructure and human capital to a stumbling block for the country’s economic growth.
	The bank says despite Tanzanian economy being the fastest growing among the East African Community (EAC) countries, with a 7 percent rate last year, a radical reform in energy and finance is needed to foster it further.
	Modernizing agricultural sector and improving production safety, adopt fewer investment projects that can be fully funded as well as improving fiscal management, verification and payment of arrears are key areas for a stable economy, says the report.
	It foresees a 13 percent of Tanzania’s per capita income if its infrastructure will be improved to average Africa’s level, saying it still faces a significant deficit in roads and power production compared to other countries in the continent.
	Tanzania’s road density and per capita power production is about half that of the African average, the report says.
	The bank’s reports also flags the level of arrears accumulated by the government with suppliers and pension funds, warning as being “extremely high” calling for immediate clearance.
	The government had accumulated a stock of arrears to a value of Sh5trn, more than the 2014/15 development expenditure, apart from Sh1trn arrears owed by its power monopoly company, Tanesco. It has also accumulated Sh2.2trn for road contractors and Sh2.8trn for pension funds, says the report.
	“While the Tanzanian economy has been stable so far, risks are looming both externally and internally,” says Bella Bird, WB country Director for Tanzania, adding; “Tanzania needs to increase investment in infrastructure and human capital to further unlock its growth potential while enabling private sector to create more jobs.”
	She says creation of productive jobs is crucial in a country where more than 800,000 young people search for jobs each year. “This can be possible where the Government provides conducive environment for the private sector to grow and generate the needed jobs,” she says.
	The bank’s report also points out that despite growth, 12 million people in Tanzania are living under poverty line, in a trend that has remained unchanged since 2007 due to fast growing population.
	The richer 10 million people who are likely to fall below the poverty line in case of a major economic shock, are just above 10 percent or less from the national poverty line, the report says.
	But in what appears to be the government’s coincidental response to the WB report, Vice President Samia Suluhu Hassan said the government had initiated mechanism to improve revenue collections and management, business environment and strengthen its public-private partnership portfolio.
	She agreed challenges in selecting PPP projects and their implementation were rampant, stifling investment due to massive financing gaps.
	“We’re currently strengthening the institutional, legal and regulatory framework for PPP. We had little coordination but now all PPPs are under the Ministry of Finance and Planning,” she said.
	While raising domestic revenue will create more fiscal space for public investments, the government could also partner with the private sector to develop and implement projects, leveraging their financing through PPPs.
	Emmanuel Mungunasi, WB Senior Economist and co-author of the the bank’s report said further development of the private sector would be key to accessing the needed resources including finances and creation of more employment opportunities which are critical for poverty reduction.
	“Tanzania has had a mixed experience with public private partnerships,” notes Jeffrey Delmon, WB Senior PPP Specialist and co-author of the report.
	“What is needed now is to embrace these important past lessons and combine them with best practices from the largest emerging economies such as Brazil, Chile, Mexico and India and develop a strong PPP programme that would address the nation’s infrastructural development challenges and generate jobs,” he says.