Fiscal policy issues for Tanzania

Tanzania began serious efforts at reform more than twenty years ago, but the payoff to these – in macroeconomic stability, increased revenue and a rising revenue share – only gathered pace in the last decade. It is vital that the impact on these achievements of the global economic and financial crisis be minimized. This impact seems likely to follow three main routes; via sharp reductions in export revenues, including receipts from tourism; via reductions in FDI, remittances, and what had seemed to be the availability of non- or relatively low-concessional finance for infrastructure, with the outlook for ODA being less clear; and via a reduction in government revenues consequent on these changes and the reduction in growth that they have induced. Real growth in GDP is projected to have fallen from 7½ per cent in 2008 to 5 per cent in 2009. It is also believed that Tanzania’s recovery from this slowdown is likely to be gradual, as demand for its exports and foreign investment are both expected to lag behind a global recovery.