Country Report Tanzania August 2008

Outlook for 2008-09

• The government's reputation will benefit from a perceived crackdown on corruption. However, the centralisation of power around the president, Jakaya Kikwete, will limit the effectiveness of policy implementation.
• The two main parties will continue to seek a compromise over the future of Zanzibar: a referendum on a power-sharing agreement is the most likely outcome.
• The government's pursuit of market-oriented reforms will include the promotion of private-sector growth by improving infrastructure and reforming the weak legal system, but progress will be slow.
• The economy is forecast to remain strong, with annual GDP growth averaging 7.1% in 2008-09. Growth will continue to be supported by robust activity in construction and mining, and by a pick-up in manufacturing.
• A trade imbalance will sustain the large current-account deficit but high donor inflows will lower this to 12.8% of GDP in 2008 and 11.6% of GDP in 2009.
• Inflation will remain high, driven mainly by high food and fuel prices. It is forecast to average 8.6% in 2008, before falling to 6.7% in 2009.

Monthly review

• Tensions have escalated in the Zanzibar muafaka talks: comments by the Zanzibari minister of natural resources have undermined a previous agreement on oil revenue sharing between the mainland and the isles.
• Further allegations of wrongdoing have been made against the wife of former president, Benjamin Mkapa. However, this anti-Mkapa campaign will founder unless a corruption case with few links to the current government is found.
• The central bank has outlined an ambitious monetary policy for 2008/09 (July-June) with the aim of attaining inflation of 7%. Monetary tightening has begun with interest rates rising and the shilling appreciating in recent months.
• Provisional GDP figures for 2007 from the National Bureau of Statistics estimate a robust economic growth rate of 7.1%, despite a lacklustre performance in the agriculture sector. The figures show that the services sector has become increasingly significant, accounting for around 50% of GDP.
• Inflation has remained persistently high and reached 9.3% in June, driven by a modest rise in food prices. It is likely to ease over the coming months as the benefits of crop harvests outweigh increases in transport and electricity tariffs.
• Aminex, an oil and gas company listed on the Irish and UK stock exchanges, has announced that it has found a commercially viable gasfield following successful drilling on its Kiliwani North 1 well.

Source: Country Report