Africa Guardian

JOHN KIMBUTE:
THERE is an expression among the coastal people in Tanzania, arising
from a more fatalistic outlook in religion than is usually the case in
Christianity, mixed with Greek scepticism and American probability in
its centuries long formation of attitudes, that ‘payment is right here
in the world.’ This view tallies with what most Scriptures contain,
but clergy in most religions prefer one or other end of the world or
end of life moment of judgment – that until that point one just has to
be at peace with the priests, and all will be well. The same is true
of secular issues, that errors are often unmasked rather early,
rapidly.
Until the meeting between donor agencies headed by the IMF resident
representative held in-depth talks with a Ministry of Finance team
headed by minister Mustafa Mkulo, the country’s rather dormant network
of economic analysts had been fed with, or rather satisfied with, Bank
of Tanzania expertise. BoT was saying in a question and answer
clarification on the 1.7trillion/- bailout issue with the Business
Times, that the bailout had enabled the government to cover revenue
gaps and prevent likely durable economic decline on account of
breakdown of the cotton sub-sector, etc. But is all this really
cyclical?
The moment of correcting this central bank wizardry about throwing
cash all over the place as helping to stem cash shortfalls – typical
of Keynesian and Stiglitzian born again radicalism against the IMF –
was the meeting with donors. They raised queries as to the way in
which the Ministry of Finance sent to Parliament budgetary estimates
that were 400bn/- more than what was presented to donors, in which
case making all their previous comprehension of fiscal strategies and
benchmarks irrelevant. Formally the minister did nothing wrong; donors
aren’t charged with approval of the Budget but are consulted.
Yet there is no escaping the fact that when a country is already in
some sort of program with the IMF, even if BoT wishes to keep it under
wraps as a routine exercise due to its oft-quoted phrase since the
1974 drought and oil price rise, as ‘exogenous shocks,’ the smoke was
hiding a fire. When the minister and the IMF-led donor delegation met,
while the scribes waited in another chamber, it became clear that a
fire was burning, not just a ‘cyclical smoke’ due to the global
downturn. It was also a clear vote of no confidence on the part of
donors that throwing money via costly rescue packages was no solution.
That is why one is compelled to wait for a sea change in how the
ministry will approach the Budget estimates this time, and how this
will go into modifying political language on what the country is doing
or what it needs. Shocks are coming, as the reason for this profound
budgetary crisis where close to 60 per cent is deficit financing –
from donors by slightly over 25% and from bank borrowing the rest –
has to be eclipsed for more rational fiscal relationships. Minister
Mkulo seems entirely concerned with benchmarks relating to overall
money supply, exchange rate and inflation, in which case adjust levels
of government borrowing from commercial banks; attention isn’t given
to low financial intermediation.
While this can’t be declared to be an egaged battle as yet, it is
likely that in due course, even within the next fiscal plan (Budget
estimates) the government will have to make reasoned decisions about
the public sector way of doing things where deficits can’t be brought
down and stakeholders cry for even more deficit financing. Against
this, fiscal rationalization would involve – typical of all
revolutions – the illegitimization of onerous demands of parasitic
ruling classes, the likes of Tanesco, Air Tanzania, TTCL, TRL, NIC…
who prevent billions in foreign currency inflows by holding unto vital
sectors of economy, and contribute nothing in terms of revenue. Yet
these interests are the matrix of all political loyalties.
Put simply, it is evident that the minister will not try to sidetrack
the IMF and other donors this year as he did last year, because there
is a formal engagement about a standby credit facility, of such a
nature as to require inspection of benchmarks and prospects in other
areas. For instance the whole problem of ‘ease of doing business’ was
left to Joyce Mapunjo, permanent secretary at Industries and Trade,
who didn’t even seem to grasp the problem, when the said that negative
impressions arose from a low efficiency level in municipal commercial
desks. It was resolved by supplying computers, right software!
The wider problem of ‘ease of doing business’ that has made Tanzania
the most sluggish economy in East African Community zone in relation
to financial intermediation, credit penetration into various sectors
of economy. Examining what major stakeholders require and interest
groups campaign for, and what Parliament works tirelessly to bring
about, is precisely to reinfroce the sort of things that prevent
capital to deepen and broaden in various sectors, which leads to even
more of deficit financing. What reason has Mr Mkulo for instance to
opt for sovereign bonds, not 20 year leases in road construction?
It may not constitute exaggeration to say that Tanzania excels in
poverty because it is still in step one in the whole ethic of
formation of private property in non-movable assets, where its land,
now rapidly being ‘allocated’ to this or that investor, is simply a
farming or grazing area. Many African countries have healthier
penetration of credit because the lands the peasants weed are rented –
not a plus on equality and not even an asset for peace and harmony,
but it facilitates credit. Those which are more developed industrially
like Kenya have at least ten per cent of its land in freehold
ownership format, which facilitates transactions in banks, with ease.
Tanzania’s communal ethics and public ownership preferences, adherence
to the Nyerere ethic and complete inability to grasp market economy
beyond retail trade is its own worst enemy; it risks going into
structural implosion of deficits before it changes.
(ends)