Poverty and Human Development Report 2009 - UNDP in Tanzania

pOVertY aND hUMaN DeVeLOpMeNt repOrt 2009
global market prices for hides and skins (raw and processed) plummeted since september 2008. the
price of salted semi-processed leather dropped from Usd 1,500 to Usd 500 per ton by March 2009.
similarly, unsalted leather fetched only Usd 350 per ton in March compared to Usd 1,100 per ton in
september 2008. huge stocks piled up in warehouses as exporters were no longer able to find buyers.
in turn, tanners and exporters stopped buying hides and skins from producers, and when recommenced
buying, the prices they offered were very low, giving no incentive for quality improvement.
fortunately, the demand for gold, which accounted for about 34.7% of the value of tanzania’s exports
in 2008, increased following loss of confidence in the hard currencies of developed countries.
on the import side, food prices were less affected by the crisis since food demand is less income-elastic
than other commodities. on the other hand, the world market price of crude oil (nYMeX) rose rapidly
to a peak of Usd 147 per barrel in July 2008, then fell precipitously to a low of Usd 32.40 per barrel in
January 2009, after which the oil price began to rise. thus, while the country’s external trade balance
was shaped by the collapse of commodity prices, the negative impact was in part mitigated by the drop
in fuel prices.
tanzania’s tourism sector has expanded rapidly in recent years, and is currently the leading source of
foreign exchange earnings. however, tourist operators indicated a drop in cash flows up to 20%, with
tourist cancellations of 30-50% for the season starting January 2009. growth of passenger traffic at
Julius nyerere international airport (Jnia) in dar es salaam declined to only 6.4% in 2008 contrasted to
16.1% in 2007. in January 2009, aircraft movement at Jnia declined by 11.2%, international passengers
by 12.3%, freight tonnage by 4.9% and mail tonnage by 34.1% when compared to January 2008.
tanzania still receives considerably more aid as a percentage of gdP than most other countries in the
region. to date, there has been only limited impact on aid flows, but future funding will depend on the
length and depth of the economic crisis in donor countries.
however, given the severity of the slowdown in growth in advanced economies, a potential reduction
in aid cannot be ruled out, and this poses a serious concern, though some international organisations,
notably the iMf and european Union, have provided compensatory funding.
in order to mitigate the impact of the crisis on the economy, the government took measures as part of a
stimulus package spelt out in the 2009/10 budget. Key elements of the package included: compensating
losses incurred by cooperatives and private companies which sold cotton and coffee for export at a
loss; rescheduling guarantees of outstanding loans; providing working capital at concessional terms;
strengthening the export guarantee scheme and small and medium enterprises (sMes) guarantee
scheme; and soliciting additional resources from development partners.
a crisis of this proportion provides both lessons and opportunities with respect to the country’s
development policies. it is critical to develop capacity and systems to identify and analyse the causes
and impacts of such events on the domestic economy. this will aid development of policy response,
including appropriate public spending, to address the downturn without sacrificing the long-term
objective of sustainable growth.
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