RLE5rRiCTED

IM7 IC 9"l4DVr IBAL ~Jlul -a AE7

Vol. 1

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. ine report maynot be published nor may it be quoted as representing their views.

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LXTR'NTOA BAN lanR RECCOSRCINAzT tEOM,Trrt:tThTT A ~MTC.j A T D AD P MPMTTT AS CTION~~ A. ~ ~ .L , J,q.LC4~.' .~'L. Li .1A.J. L L ' ..± X.11.1-1 -L J .L/~VL L~JLi±

TXNTE:DXT A -rT,TC'NT A T TYMIM t-T C'D1AT=IT- A OLotvCT A ~V^X

THE ECONOMIC DEVELOPMENT

AND PROSPECTS

OF

TANZANIA

(in two volumes)

VOLUME I

THE MAIN REPORT

March 17, 1970

Eastern Africa Department

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1!14jU1 VAlMlaii

(arrency

1 Tanzania Shilling = U.S. $0.14U.S. $1 - Sh 7.14B St. 1 = Sh 17.1428

Weight

Unless otherwise stated, tons in thisReport refer to long tons of 2240 lbs.

Tanzania - Parastatal Organizations Abbreviations

Tanzania Electrical Supply Co. Ltd. .................... TANESCONIational Development Corporation ....................... N.D.C.National Small Industries Corporation .................. N.S.I.C.State Trading Corporation ..... ....... .. ...... ..... . S.T.C.Tanzania Tourist Corporation ........................... T.T.C.National Parks ....................... .......... ...... PARKSNational Housing Corporation .................*O*..-.... N.H.C.IMwananchi Ehgineering and Construction Co. ............. M.E.C.C.O.National Agriculture and Food Corporation ............... N.A.F.C.O.Tea Authority ........... ......... a .... * ... 0Tanzania Sisal Cornoration ... ............ .... .......... T.S.C.The National Milling Corporation ........ O..O............ N.M.C.Lint and Seed Marketing Board ........ s....to........... L.S.M.B.Tanzania Tobacco Board *..0.6 ........ **... *O... ...* T.T.B.National Agricultural Products Board ................... N.A.P.B.National Dairy Board ..*.......0 .... .********... N.D.B.National T)evalonment Credit Agency ..................... N.D.C.A.National Cooperative Bank ........... .. ... .. N.C.B.N1tionq1 Sug.yr Board .. ..................... N.S.B.Tanzania Pyrethrum Board ............................... T.P.B.Tanzni.q Sis21 Mprketing Board- ......................... T.S.M.B.Tanzania Coffee Board .......................* T.C.B.National Cooperative and T)vplo nment BRnk O =. ... N.G. .RNational Bank of Commerce ........................ . . N.B.C.Nation:al Insurance Coprto @* .- X-XX$X .IG

East African Community

East African Community ........ ................ E.A.C.

-S4t At±- CanA,ays CorporatA 4on.LLI* LI9........*.*.* . .A*.....*.*.*A*. * E.A.A.

East African Railways Corporation ...................... E.A.R.D_s t Afric: Posts &_ T .4. A &

East African Posts & Telecommunications ............................. E.A.P. & T.

-I TEk' Ai lO , AI, l F. 1 03 A Al L' U r1) 1) LVfl/ NTCD 1f T1'-r ft AT 1i fl V ?/VELOPI'1 EAIL' ANTI I v I IC~, ;V1 , I I JVt I ." , IVrI r I 1 I X IX kL. iV71 1 t, ~ I I ' I I-, .

IL AZUSA 4j%j1A A RESTRICTED

R70-43

FROM: The Secretary March 24, 1970

TANZANIA

There is attached for information a copy of a report entitled

"The Economic Development and Prospects of Tanzania" (AE-7), in two

volumes, as follows:

VoL!um.e T - The Main Report, dated March 17, 170;

Vnlme II - An-?,ultur ' 4 i d Rur ' Dlop.wnt, +-A

March 18, 1970.

This report has been made available to the Consultative Group

for East Africa (EA 70-6).

Distribution:

Executive Directors and Alternates* President* President's Council* Executive Vice President, IFCVice President, IFCDepartment Heads, Bank and IFC

* Without attachment

THE MISSION

This report is based on the findings of a mission which visitedTanzania during August-September 1969. The mission consisted of thefollowing:

Kudlapur G.V. Krishna (IBRD) Chief of Mission andChief Economist

Shawki Farag (IBRD) - EconomistNeil Riden (IBRD) - EconomistHans Kordik (IBRD) - AgriculturalistCarl K. Eicher (Consultant) - Agricultural EconomistDeryke G.R. Belshaw

(Consultant) - Agricultural Economist

THE ECONOMIC DEVELOPMENT AND PROSPECTS OF TANZANIA

VOLUME I

THE MAIN REPORT

TABLE OF CONTENTS

Page No.

BASIC DATA

SU6MMtY AND CONCLUSIONS . . . i-iij

I. INTRODUCTIO)N.1

Geeral.l1Poitia Si.JL.Lon ...L .jaU..'.J.....-2

Socio-economnic Objectives ................................ 3

II. 13CONOMIC DEVELOPMENTS DURING THE FIRST PLAN .S...............................

A. TheGrowthoftheEconomy ........................................... .G ve rrne Budgets ............................................. 1

C. Banking, Money and Credit.18D. Balance of Payments ............................ 21

III. KE i DEYOMNS FOtt THE FTSTPuTLNu .27............. 27

Preparation and Execution of P1rojects ............... 27Review of the Main Sectors .......................... 28Parastatal Organizations ............................ 34The State Trading Corporation ....................... 35East African Community ..... ............... ""I ..... 36The Role of Private Enterprise ...................... 37Supplier Credits .................................... 37

IV. ECONOMIC PROSPECTS ...................................... 39

A. The Second Five-Year Plan, 1969/74 ............ .. 39B. Investment and Output . . 42C. Financing of Investment . . 50D. Central Government Budgets . . 521•. Balance of Payments ............................. 55F. External Public Debt .. 58G. Projection of Debt Service, 1970-85 .. . 59

APPENDIX I - POPULATIONAPPENDIX II - HOUSINGAPPENDIX III- PROJECTS FOR EXTERNAL FINANCINGAP?EINDIX IV - STATISTICAL TABLES

YAP

ANNEX (under separate cover)

VOL-CUME II - AGRICULTURE AND RURAL DEVELOP4ENT

TAN ZAN IA

BASIC DATA

Area: 361.800 square miles (including 20,650 square miles of water area)

Population: (1970) 12.9 millionRate of Growth: 2.7 percent, p.a.Prpu] ation densitvy 3a pArsons per square mini I

Political Statls: Independent since cemb.er, 196l

Member of Commonwealth and the East African Community

Gross Domestic Product and Current Factor Cost (1968): Sh 5869 million, of which

Monetary Product: Sh 4205 million

Non-m-onetary Pro^act: Sh 166\~ m41o

A--ual ~ ~ Tta raDP 2.1 -4y -4-,4-IIUA Q.L. V a _W- 'Ji '-WI UILI \~JJ_ _ W V02 I 7WWJ\ . L ~J .JA.UD I I 7%J%.J 1 I . I i7%JU

Monetary 2.2 5.1

Percent of total GDP (current prices, 1968)

Agriculture 50.0iniiring 1.9

Manufacturing 6.4Services including Comnmerce

and Transport 31 .8Other sectors 9.9

National Income:

Total (1968) : Sh 5,433 millionPer capita : Sh 444

Percent of GDP at Current Factor Cost 1968 1964--1968

Gross fixed Capital Formation 17.8 15.9Gross national savings 15.9 17.3Balance of Payments current account - 2.4 0.6Net factor income payments 0.7 18.6Government current revenue (average fiscal year) 21.0 1EI.3

Money and Credit (Sh million)1968 1964

Bank notes and coins in circulation 583Commercial Bank deposits 1,313 825Commercial Bank Advances 965 681Liquidity Ratio (percent) 25.5% -

Public Sector Operations (Sh million)1968/69 1963/64

Central Government:Current Revenue 1,294.o 717.8Current Expenditure 1,196.4 709.1Surplus on Current Budget 97.6 8.7Development Expenditure . 424.3 145.3

External Public Debt (US $ thousands)December 31 December 31

1968 1964Total debt outstanding

Tanzania debt 213.1 168.5One-third of EACSO debt 70.2 62.5

Total debt serviceTanzania debt 7.4 5.1One-third of EACSO debt 11.0 4.2

Debt service ratio, percent 6.7 4.0

Balance of Payments (Sh million)1968 1964

Merchandise exports 1,613 1,521Merchandise imports 1,831 1, 252Net invisibles 62 -66

of which net factor income -43 -76Balance on current account -139 226

Commodity concentration of exports (Percent)

Sisal 10 29Cotton 18 13Coffee 16 15Diamonds 8 9

Foreign exchange reserves(Bank of Tanzania) - October 31, 1969: US $ equivalent 68.2 million

IMF Position(TT.Z' $ L.L..&.ll

Quota 32.0Dra in.gs a

External financial assistance (in thousands of US$)

Average 1961-1967 1968Commitments Disbursements Commitments Disbursements

Total 1/ 25,650 18 399 23,691 16,600Soft assistance- 9,467 k,035 16,900 11,597Hard assistance 16,183 14,364 6,791 5,003

9 /Major donors='IBRD 7h3 - - 792IDA 3,371 1,951 3,000 4,524U.K. 9,445 7,171 667 667W. Germany 1,758 1,428 38 18U.S. - A.I.D. 228 1,804 13,900 6,838Others 10,105 6,o45 6,086 3,761

1/ Defined to include (a) loans repayable in foreign currency with a maturityof over 20 years and a rate of interest of not more than 3%, (b) loarlsrepayable in local currency.

2/ Loans only, soft and hard.

THE ECON01'IC DEVELOPMEAT AND PEOSPECTS OF TANZANIA

VOLUIVE I

SUIVIkRY AlD CONCLUSIONS

i. During the First Five-Year Plan, Tanzania's gross domesticproduct grew at an average annual rate of about 4L. percent. The growthrate was about a third less than was projected in the Plan; the lowerrate is attributable principally to adverse weather. but a mu^h lowerprice for sisal also played a part. The most notable structural changein the economv is the decline in the share of agriculture in GDP. andthe very rapid build-up of manufacturing capacity. The service sectorwhich also sg'e.w ranid1v benefited in some degree from the vrowth ofZambian transit trade.

ii. Total investment during the period 1964-68 amounted to Sh 4,239millin or 829 eroent+. eof' the Plri ta1rget+. orf Shi i 0920 millirnn rCent-r-

Government development expenditure (by RiLnistry) amounted to about 82pcen.nnr+ of +1he Pla tr-get. An--,,,l A revelop .ent 4- r .r was rathe

low in the first two years of the Plan, but rose significantly in the±0 .UA __J :.._: un_- dJ G 0, U51= dVVAa6U |RV V~t JJ BAj.JD 1 UL -L U± ± 11 UI XdO I. LIII Gt yDd. 0

of the Plan was about 50 percent higher than in the first two years.Ille ±-r1aLemIenflation of (4hi1le investrmment prograrL, Icli WCas sous.lLI;±y IIOS±U±kcqJjPJLL by

the shortage of trained and experienced personnel to prepare and executeprojects. T1ere wd-ws ouJIlU ±rV1-UVeI11n1U in IALi res pec,.. bU-wards ' bi'e endu of

the Plan, but many crucial gaps still remain. The financing of developmentexpenditure showed a considerable departure from the pattern en-visagedin the Plan. Wqhereas the Plan provided for 78 percent of the total CentralGovernment development expenditure to be financed from external sources,internal sources accounted in practice for about 65 percent.

iii. About half way through the Plan, the Government adopted animportant policy statement known as the Arusha Declaration which extendedpublic control, in varying degrees, to enterprises in the fields of banking,insurance, import and wholesale trade, processing and manufacturing, andlater also the sisal industry. Compensation for owners of the nationalized.enterprises has been agreed in respect of 98 percent of the value ofassets acquired, with the exception of the sisal estates. The Governmenthas also announced that it would welcome the participation of privateinvestors in many fields - particularly manufacturing and tourism - eitherin association with the Government or on their own. Several venturesinvolving the joint participation of private investors and the government-owned National Development Corporation have been established.

- ii -

iv. Tanzania's First Plan ended in June 1969 and the Second Five-Year Plan was launched on July 1, 1969. A strong team of advisors wasretained to prepare the new Plan. In general, both the general frameof the Plan, and the output and investment targets are well-conceived.Mlany of the targets appear to be feasible, but much will depend on theavailability of personnel to prenare and imnlement oArciects. Althoughserious efforts are being made to increase the supply of trained Tan-zanians. Tanzania will continue to need the servises of' expatriate per-sonnel for the next 10-15 years.

v. The Second Plan envisages a total investment of Sh 8,055 million.By compnrison wH th the preinous Plan, there is a mnrked redtio+n in +.heshare of private investment. There is a strong emphasis on rural devel-,A,n me_nt +rvflectin +;n 1% + h Q _. 4.. fl+n+ 1.' VL1 1. JP U| _ *Ce n; I o ... .1 .+ ; will reside and earn a livelihood in the conmtryside. The strategy for

urba. dvelpr.nt 'l for lirit.g the gro-wyvh of Dar es Saamand

promoting the development of other urban centers.

vi. It appears likely that investment as projected in the Plan will.A.0|J 3 6x.. uLJ u J tr.L IZd u-, - -U1- Ult : jd ite Ic i ±U d Z UjUU . Ri d J UU_1 L

the Arusha Declaration, there has been a rapid build-up of various para-statal organizations. However, sorie of the organizations w-hich <-ecalled upon to undertake investment are not yet equipped to do so, becauseof a shortage of staff. Moreover, some of the proposed projects to beundertaken by the parastatal bodies require further technical and economicevaluation. Hence a shortfall in parastatal investment appears likely.The scale of the proposed Central Government Ministerial developmentprogram is realistic. Although some of the projects listed in theinvestment program may not be implemented, other important projects mayrequire a volume of resources bigger than that which the Plan provides.

vii. The mission estimates that investment during the Plan couldamount to about Sh 7,,435 million made up as follows: Central Government(excluding contributions to parastatal organizations) - Sh 2,855 million;parastatal organizations - Sh 1,850 million; East African Community -Sh 580 million; private - Sh 2,150 million. It should be possible toraise domestic resources amounting to about Sh 1,870 million for theCentral Government program, leaving about Sh 1,500 million to be raisedby external sources. Including investments by the other entities amountingto Sh 7,435 million, external sources should provide about Sh 2,300 millio?or 31 percent of total investment. Thus the major proportion of theinvestment would be financed by internal sources, as was the case duringthe last Plan. These figures do not include investment in the proposedTan-Zam Railway.

viii. If an investment program amounting to about Sh 7,400 millioncan be implemented, the gross domestic product at constant 1968 pricescould grolT at an average annual rate of 6.5 percent during the period1968-73. which is the same rate projected in the Plan. The identical

- iii -

rates projected for the growth of GDP by the Plan and the mission is acoincidence. The mission would have projected a lower growth rate, butthe anticipated inprovement in the outlook for coffee - one of Tanzania'smaJor exports - during the next 3-4 vears Justifies an upward re. sion.

ix. In relation to external assistance amol-qting to abou+-. Sh 1,500million for the Central Government's program, a sum of about Sh 650 millionTrill probably be anilable from existing coruntm'ents, leav-ing a gap ofSh 650 million for which new commitments will be required. Taking intoaccount the pipeline for the e-aly years of the next P.an, total newcommitments of about Sh 1,570 million be required during the Plan.

x. Tanzania's overall balance of payments is expected to be satis-factoy. IT+s merchandize exports wvill beneft from the -unexpected im-provement in the outlook for coffee during the next 3-4 years. Invisibleern-n- are- expected t Uo grow steaudi.y owg bo the rapidly developingtourist industry and the increasing volume of transit trade to Zambia.W'1ith forreign exchange earnings rising at the scale projected, there shouldbe no problems in servicing the country's external public debt. Never-theless, the teriyorary nature of the coffee export boom, the dominanceof agricultural items in exports and the as yet small resource base makeit desirable Uhat the major proportion of external assistance for Tanzania;'development program be on concessional terris.

I. INTRODUCTION

General

1. Tanzania 1/ is situated just south of the Equator between LakesVictoria, Tanganyika and Nyasa, and the Indian Ocean. Its total area is361,800 square miles, including 20,650 square miles of inland water. Withthe exception of a narrow strip along its coastline of 550 miles, the couW-try lies at an altitude of over 1,000 feet. A large part of the country isa plateau of about 4,000 feet. The highland srea stretches in a southwester-ly direction from the Usambara mountain near Tanga all the way down to LakeNyasa. The continent's highest mountain, Mt. Kilimanjaro rises to a heightof over 19,000 feet in the north, close to the border with Kenya.

2. The latest census of population was held in 1967 and showed thatTanzania (including Zanzibar with about 300,000 people) had a little over12 million people (Table 1.1 - Statistical Appendix). The census also re-vealed that the population in 1967 was substantially higher than the officialfigure based on the assumption of a growth rate of 2.2 percent. Althoughthere was a distinct improvement in coverage -- wnich means the inter-censalgrowth rate has little meaning -- it is now believed that population hasprobably been growing at an annual rate of about 2.7 percent. A fuller dis-cussion on population is included in an appendix to this report. The popu-lation includes A9_000 Indo-Pskisatanis, 26,000 Arabs; 15.000 Europeans andsome 4,000 others, collectively adding up to a little over 1 percent ofthe total. The ouerall density- of nonpulat-inn i8 only 36 to the square milebut, since a large part of the country is uninhabitable owing to tsetse flylnfestntion, the bulk of the nonpulntion 4a A4ctri-r1,tedi on the peripheryv, andthis has created some population pressure in certain areas (Table 1.2 -

Statistical Ap-endix) The present geographleal lsat-ribut-inin nf nontilationhas also created some problems in matters such as transport and administration.There are inheritable cuti4%t 4

r.4 rig4htf-. 4l and but larA in reaordled am a

national asset-and the State reserves the right to govern its use.

3. According to published figures, Tanzania's gross national productper capit-a 4Is only about $67, t-hn 1^ na mn- t. thvagf Root AfrIenn io-nn-tries. It is believed, however, that the published national accounts under-estimate aggregate GDP, growth rates and ar.r.ual changes. A mo4nv re-isin

of the national accounts is currently underway and a new series, retro-act.ivel.y adJusteA to 1966, is expected tLo be ava:lable uy id-1970.

4. I~n the first half of th'e 190'As agriculture accounteA for about* LII~~~A L.I i1LL 0_ L L& AJ. LJ. LIC.L1 UJL 7 u L . LL~ L.LC aL~L i.... *',

60 percent of the gross domestic product. Since then, the share of agri-culture hl as lUeer. uecll.ir.nLg a,lu was about 50 percent ofL GDPL iLr 19671=68. ThJIe

decline in sisal prices and adverse weather played an important part in-epressir.g output. Inr particular, the quantity of -arketed cotton fe-l-l '

434,386 bales in 1966 to 284,000 bales in 1968. As compared with a growthrate of 3.2 percent irn thLe primary sector during the period 19UV-6O, an

1/ All references and statistics in this report relate to MainlandTanzania and, unless explicitly stated, not to Zanzibar.

increase of 9.7 percent was achieved in the secondary and tertiary sectors.Most of the sectors in the seconuary ana tertiary group have grown rapidly,but manufacturing, construction, commerce and transport have registered thehighest growth. The ma'n Lactors which have influenced tne growtn of thesecondary and tertiary sectors are (a) the establishment of import-substitut-ing industries and (b) Lne rapdlay growing transit traue of LamDia wnicnhas necessitated the expansion of various transport facilities.

5. Agriculture, particularly estate agriculture, accounted fornearly 50 percent of the wage labor in 1964. Between 1964 and 1968,wage labor in agriculture fell by a third, mainly because of the depressedstate of the sisal industry which was the biggest employer. Because ofthe substantial drop in agricultural employment, total employment did notexceed the 1964 level until 1968.

6. On present evidence, the main thrust of economic developmentwould have to originate in the agricultural sector. The mining sectorhas for some years been dominated by diamonds but, unless new seams areare discovered, production is likely to decline. The country has bothiron and coal -- reportedly in abundant quantities -- and, although thedeposits are being evaluated, they are unlikely to be developed duringthe present Plan. The expansion of Zambian trade is likely to providea further stimulus to the growth of the service sector. As a result ofefforts already underway and those now planned, tourism could well emergeas a major source of economic growth.

Political Situation

7. Since its peaceful and orderly transition to independence in1961, Tanzania has had an enviable record of political stability. Theconspicuous absence of tribal conflict and the Government's constructiveapproach to the problems posed by the presence of economically strongminority groups, have enabled the leadership of the country to focusclearly on medium- and long-term objectives and the appropriate strategiesfor achieving them. Very soon after its indenpendence Tanzania opted fora socialist pattern of society aimed at the gradual elimination of all"exploitation", and has adopted a number of measures towards this end.

8. Externally, Tanzania has adopted the posture of a non-alignedcountry, and has cultivated friendly relations with communist countriesboth in Europe and Asia, while retaining close links with Western coun-tries. The new links that are being forged are not, however, based onthe accentance of the communfst doctrine, but are defended on the groundthat, as an independent country, Tanzania must have access to people anditidea in any cniintrv of it-c 'hnirp- Tan7znia has snouhrt andobta4ned,

financial and technical assistance from countries with varied politicalsystems.

9. During the F4rst Plan, a large -mount of aid which had been nego-tiated with the United Kingdom and West Germany could not be utilized forpolitical reaso..s. Diplo,.atic relatlons w4th Britain were suspended f---

- 3 -

the end of 1965 to mid-1969. Aid from West Germany is being resumed, but.new aid commitments from the lUnited K,ngdom have not materialized, owing tolack of agreement on the issue of payment of pensionis to British civil se-vants who served in Tanzania prior to the latter's attaining self-governmentin 1961.

Socio-economic Objectives

10. Tanzania's socio-economic objectives are deeply rooted insocialism antd self-reliance. W"hen. the countr-, attainee ir.de-endence,President Nyerere, who was then Prime Minister, made no empty promiseschoosing instead to emphasize the importance oS hard wor'k. H.e set apersonal example in austerity and prescribed a strict code of conduct forhis immediate colleagues.

11. In February 1967, Tanzania's socialiSm was re-empwhasizedt in a newstatement known as the Arusha Declaration. The Declaration emphasized"sel-f-reliance" an a reduced depen'enceo.. ofor.en aid9 arid it rejectelindustrialization as the panacea to the problem of underdevelopment. TheDeclaration called for a comMituent to improve the lot of the peasantfarmers by making available to them a large share of the fruits of theirlabor. Just as the exploitation of the urban workers was to be preverLted,the exploitation of the rural by the urban population was also to beeli...inated .

12. In oruer to ensure that there was consistency between preceptand practice, the Arusha Declaration prescribed a rnew code which calledupon "leaders" (defined to include Ministers, parliamentarians, seniorand middle-level civil servants and parastatal employees etc.) to avoid"capitalist practices". All "leaders" were prohibited from owning sharesin any company, holding directorships in privately-owned companies, re-ceiving two or more salaries and owning houses for rent to others. Thereappears to be a growing acceptance of these standards, and indeed a senseof priue in adhering to them.

13. The Arusha Declaration was soon followed by the transfer topublic ownership of all private commercial banks, a number of food-process-ing firms, and several leading firms engaged in external and wholesaletrade. All new life insurance business was to be vested in the NationalInsurance Corporation which was also transferred to public ownership. TheGovernment also acquired a controlling share in seven industrial firms, andin the important sisal industry. It also announced that full and fair coin-pensation would be paid to the owners of the nationalised enterprises. TheGovernment recently stated that agreed settlements have been reached on 93percent of the value of assets acquired in 1967, with the exception of thesisal industry, the claims of which are now being processed.

14. The Government has taken a number of steps to bring about a moreequitable distribution of incomes. These include salary cuts for politi-cians and senior civil servants, uniform terms of service for employeesof the Central Government and the parastatal organizations, an incomes

-4-

policy aimed at preventing excessive wage increases, a mechanism (theNational Price Control Advisory Board) to enforce uniform prices for basicconsumer goods, an increase in taxes on higher income groups and, finally,a greater emphasis on rural areas in the capital expenditure program.These nolicles are discussed in detail in other sections of the report.

15. In Sentember 1967. President Nverere wrote a naner entitled"Socialism and Rural Development" in which he set out the basic principlesof "TJ4Tmqa" whi,,h governed traditinnal Afriran life The rinrinples of

Ujamaa are the recognition of each individual's role in the family, thesharing of goods held in common, and an nhliogfinn tn work by everyone inthe family. The President has argued that a rededication to these prin-ciples is necessar- if socialism is to make any headway in the rural areas.

The conclusion of the paper was that, instead of being a "nation of indivi-dual peasarnt producers 4 h--.' -A-.1 -lly aoptin4g the- 4incn--tives an-A t-I

ethics of the capitalist system", Tanzania should become a "nation offUJ4ama. villi ages where th.e people cooperate d4rectly in. small groups anAwhere these small groups cooperate together for joint enterprises".

16. While committed to the concept of Ujamaa, Tanzania has rejectedth,Oe use of compulsion i.n any fom.S. R-atiner, it has affi....eA th.at the estab-lishment of Ujamaa communities should be a gradual process based on voluntaryassociatior. an' a clear recogr.it40n of the advan.tages of Joint effort.assuL~L AL .Ii a u i- Al L~Q I.&&..'

6LLLL L tt.U ~L_L 5 . jA J %J.fh. A.L L.

17. ^~A-ng-the f actors which have lr.bibited the -4api devrelop,ment of.L Likr L.= A aL L-L WA"LAl ILL uwuL.U~L~LI L GIJ.Lu UC;V=.LWJI L L- A.

Tanzania is the delay in embarking on a systematic investigation of the.Latent naturaL resources e.g. iLron ore ar.dU coa-l, snLAU iLL eAP.LoLtin LLuLL

to the best advantage after their full potential has become evident e.g.tourlsm; this matter i8 now receiving serious attentio,n. However, thecountry is less troubled by tribal and political preoccupations than aremany others and the Government has made a great effort to create a senseof purpose and cooperation as a basis for future growth.

-5-

II. ECONOMIC DEVELOPMENTS DURING THE FIRST PLAN..

A= Th Crnowth nf thp Ernnomv

A, itnUtif

18. During the period 1L964-68, GDP t constant f2atror rnct rose atthe rate of 4.4 percent a year, while in current prices the growth was 5.3p o_ r c t 1 / The y-ear n --ly grwth of GtDP fluc..,uatd,A aou.ni the. aimrle avera

rate of 4.5 percent with a standard deviation in the order of 3 percent.Such wide fluctuations in the annual growth rates reflect the sensit-ivit 7fthe economy to adverse weather and changes in the export prices of itspri.,.ary -- -A .... odtis 4o instance,4i 195dough substantially reduced

the output of the agriculture sector and, coupled with a drop in the pricesLtS sis0l anL,t coffcc, *le Lt i ta redc' tion of tle rae f rwth US * * ... frou it LWA

Level. Although in 1966 the growth rate reached a high peak, a combinationoIf ba' weather ar.d depressed export prices 'or, s'sal, pyre.hu .d_ -- A .ndI) LiU WudLi~ dLU U J~~Li~jIL L £L A. y~LLU1 SL

reduced it again in 1967 and 1968.

19. The realized growth rate of 4.4 percent was somewhat higherthan the population growth rate of 2.7 percent. sowever, it is about one-=third below the target growth rate of 6.7 percent envisaged in the FirstFive-Year Plan (1964-1969). The main reasons for the aivergence betweenthe target rate and the actual rate are: (a) the severe drop in the priceof sisal at the outset of the Plan from an average price or Sn 2,167 a toiiin 1964 to Sh 1,394 in 1965, and its continued decline until 1968 when itreached Sh 864 a ton; (b) the shortage of skilled manpower wnich hamperedthe preparation and implementation of projects; (c) the inflexibility, atleast initially, in the allocation of investment funds; (d) the allocationof substantial amounts to capital-intensive village settlement schemes wh:Lchproved unproductive; and (e) the difficulty in utilizing external aid whichhad already been negotiated, and hence a lower than anticipated level ofinvestment.

20. The share of the primary sector (agriculture and mining) in GDP

decreased from 61 to 58 percent during the Plan 2/ (Table 2.1 - Statistical

1/ The present GDP series which was constructed almost ten years ago,contain several imnerfections; enpeciallv in its coverage of the

subsistence sector, which tend to underestimate the aggregate figures,growth rates and annual rhanges A mAinr rpvisinn and imnrovement of

Tanzania national accounts is in progress and a new series startingwith the year 1966 will be nphulished 4n 1970.

2/ The series of real GDP by origin is available only in terms of constant1960 prices. This series suffers from two defects: (a) the use ofdeficient index numbers; and (b) the remoteness of 1960, the base year,whose prices (based on that year's production patterns) are used asweights.

Appendix), and notable increases took place in the secondary and tertiarysectors, particularly in manufacturing, public utilities and the servicesincluding transport and commerce. The manufacturing sector expandedrapidly under the stimulus of import substitution, mostly of consumer goods,while the services sector - notably commerce and transport - benefitedin some degree from the need to cater for Zambia's trade. The principaldevelopments in the key economic sectors are outlined below.

Agriculture

21. The performance of the agricultural sector during the FirstFive-Year Plan was characterized by the rapid increase in the output ofsome of the newer products, but growth was uneven, both in terms of annualchanges and in relation to commodities and geographical locations. Althoughthere were marked increases in the output of cashewnuts, coffee, tea,tobacco and pyrethrum, the overall growth of the sector averaged only 1percent a year because cotton showed only a small increase while sisaldeclined substantially. The principal factors which contributed to theslow growth of the sector were the steep fall in the price of sisal in1965 and 1966, and adverse weather in the following two years which reducedcotton output substantially below the peak output of 1966. The value ofsisal output went down from Sh 442 million (37 percent of monetary agri-cultural output) in 1963 to Sh 155 million (under 16 percent of monetaryoutput) in 1968. The value of cotton output decreased from the high levelof Sh 247 million in 1966 to Sh 174 million in 1968, reflecting principallythe effects of adverse weather which caused a drop in production from434,386 bales to 284,000 bales.

Table 1: OUANTTTY AND VA1UE OF MARKETED OUTPUT, 1963-68(Quantity: 000 tons - Value: Sh million)

% Growth Rate1963 1968 1963-68

Item Quantity Value Quantity Value Quantity Value

Sisal 214.3 442 193.8 155 - 2.0 -23.0rCol-tton 45r,. 7 r152 50.7 1174 2.1 2.~,_` I J..J- J.J I .L I L.J. L.7(

Coffee 28.2 134 49.2 233 12.1 11.7.. 564 U.J 1. 03 13.3 24.0

Sugar 49.2 46 81.0 75 10.5 10.3ea /.~~~~ .fl -'IC 'I JC in

Tea 4.9 JU .0 40 9.8 5.9Tobacco 2.3 8 7.1 30 25.0 30.0ryretllrum 2.3 1 4.7 19 15.4 .Wheat 18.8 8 27.4 15 7.8 13.4Groundnuts 11.9 18 14.0 13 3.3 -6.7Others 154 129

1,038 974

Sourrce Background to the Budgets

22. A steady increase in the production of a number of smallercommodities has helped in reducing the dominance of cotton, coffee andsisal in total output. These three commodities accounted for Sh 728 mil-lion or 70 percent of total marketed output of crops in 1963, but theirshare decreased to Sh 560 million or 57 percent of the total in 1968. Onthe other hand, the combined output of cashewnuts. tea. tobacco, pyrethrumaand sugar, which in 1963 amounted to Sh 130 million or 12.5 percent oftotal marketed crop outnut; rose to Sh 255 million in 1968 or about 26percent of output. Data concerning food production is somewhat sketchy,but- growth of outnut probably slightlv exceeded the growth of population.

23. Tn teirms of the broad strategy for agricultural development. the,First Plan emphasized both the "transformation" aud "improvement" approaches.The first approach envisa-ed a radical change in farming through the devel-opment of new ranches, settlement, irrigation and flood control and theextensive use of mechanization; the second focused on extension and market-ing services, and crop-oriented researchi. Programs based on the transfornm-ation approach were carried out by the Ministry of TLands, Settlement andWater Development through village settlement schemes and block farming.Thle village settlement approach was virtually abar,dIonedI 4r. 1066 after it uwasJ. &t V ~L.. L.LU~ ~ ~ L . LL1 WI VL. Lu~.Ly UALJR . *f '"_

found that thle settlement schemes were over-capitalized and inefficient, be-nefaiting only a sm-1all percentage o. oLi.e ru-raL population and making heav-

mands on scarce manpower. On the other hand, the improvement approach, whichwas carried out by the Ministry of Agriculture, Locused on assisting smxall.farmers by providing extension, marketing and production services, and wasvery successful in promoting tne expansion of some commodities. For example,during the period 1964-68, the value of coffee exports increased 20 percent,while tobacco exports grew from just about Sh 1 million to Sh 40 -'llion.

lhybrid maize has been expanding rapidly in the Njombe District, with acreageincreasing from 975 in 1968 to 5,511 acres in 1969. Tne value of marketedoutput of crops by peasant producers rose from Sh 508 million at the outsetof the Plan to Sh 724 in 1968 or an increase of 7.3 percent a year, whileestate production in the same period went down from Sh 530 million to Sh 250million or a decrease of 16.2 percent a year.

Mining

24. The share of mining in monetary GDP (in constant prices) hasdecreased from 3.3 percent in 1964 to 2.9 percent in 1968. Over thisperiod, mineral output rose at an average rate of about 1 percent a year.The output of the mining sector is dominated by diamonds, which accountfor over 80 percent of the total value. A decrease in diamond output andalso of the unit price in 1968 reduced the value of mineral sales in theyear to Sh 163 million from Sh 248 million in the previous year.

25. At present, Tanzania does not produce any significant amounts

of other minerals which could provide the basis for rapid industrial growth.Gold production was important until 1965, but there has since been a steepfall in output. Other minerals produced in small quantities are salt, tinconcentrates, gem-stones, mica, magnesite, tungsten, lime, gypsum, glass-sand,

- R -

kaolin, coal and meerschaum. In the last two years, salt replaced gold ast-1- Am4M< sec eondeoraniss ;expowrtedi to thee n;1ihoring 4 .. trie. f

,,,nc ~ ~ '-y.. ,r * -'-'"'- -S ; - - _ L* k c : > Li

Burundi, Rwanda and Congo(Kinshasa).

26. In 1965, the UNDP started a minerals exploration project in thek V-1eictoria Go lt.4el.4, whclh waS completed iLn IL0LO. a resuLt of Lur-

ther investigations by the Mineral Resources Division, gold deposits havebeen d'scovered in the Buck Reef south of Geita, and commercial exploita-tions is now under consideration. Prospecting for oil and natural gas isto be undertaken by the 'uazan'a Go-verrLenit Agency 'T.G.A.' in collaborationwith AGIP, a subsidiary of the Italian Government-owned E.N.I. The oper-ations of the Department of Mines have surfered seriously on account of asubstantial loss of exDatriate personnel.

Manufacturing

27. The manufacturing sector has grown at an annual rate of 11.2percent during the past five years and accounted for 7.4 percent ofmonetary GDP in 1968. Emplovment in this sector increased from 22,212in 1963 to 35,359 in 1968. Production or manuractured goods for domesticuse, to a large extent based on the processing of domestic primary prod-ucts accounts for a large share of manufacturing output. While consumergoods industries still account for most of the output and employment, theestablishment of an oil refinery, a cement plant, an aluminum productsfactory, a plastics plant, and some new metal product industries has broad-ened the base of the manufacturing sector. An important tactor in the de-velopment of industries in the last few years was the Government's emphasison the need for creating manufacturing capacity within the country to re-place imports, both from overseas and the two East African countries. Anumber of import-replacing industries - particularly of the consumer goodsvariety - were established in this way, and to protect these industries,the Government imposed some quantitative restrictions on imports, whichprincipally affected Kenya's exports to Tanzania. Following the signingof the Treaty for East African Cooperation (see paras. 73-74), which pro-vides for a 'transfer tax' to protect domestic industry under certain con-ditions, the quantitative restrictions were abolished.

Table 2: PRODUCTION OF SELECTED) INDUSTRIES, 1964-68

Industry Unit 1964- 1965 1966 1967 1968

Beer Brewing '000 gal 2.249 2.673 4.139 5,120 5,413Textiles '000 sq yd 8,930 12,126 17.121 18,277 34,519Cigarettes millions 1.535 1,869 2.049 2,044 2,137Paints gallons 96,981 162,513 221,020 274,623 317,948Plvwood '000 sq yd 6-573 7,794 10.247 8.808 10.658S-isal Twine tons 65i3 5,778 10,138 14,887 16,454Saw Milling '000 rnt ft 4675 5,029 5.026 4,585 5,029Wheat Flour tons 29 818 138,433 39,714 41,159 42,2.38PvrethrumExtract tons l.Q7 174 200 287 137

Canned Meat tons 11,109 9,16? qS520 6,7116Cement tons -- - 49,324 144,61.2 153,894

Source: The Annual Economic Survey, 1968

28. There is no series on inves:ment in manufacturing. However, itis estim,ated that thLe gross capita LaJ. stoc'b - in industry s iL n th-L.Le ran-be ofSh 1,200 - 1,400 million, and also that about one half of this figure hasueen reaLdLzedU dLurL ig t.Lie FLrst Plan. This est'iULate seems reasonabDle sincesome of the major investments in the country e.g. the textile mills, the

~~ L. ~ Inn -4114o-.oil reLcitnery adu thLe .U-eiert actory, accounLtig Lfor a.,out Sh 3J00 rl4"ioL

in investment took place during the First Plan. An indirect indicator ofthe rise of investment in manufacturing is provided by imports of capitalgoods; such imports have been rising steadily from Sh 281 million in 1963to Sh 667 million in i968, and it is very likely that a major portion ofthese imports were absorbed by the manufacturing sector.

29. The most recent survey of industrial production was for theyear 1966. It shows that of 438 establishments in Tanzaniia 164 arelocated in Dar es Salaam, and also that 270 of the establishments employless than 50 persons. The value added by the manufacturing sector repre-sented 23 percent of its total gross output in 1966. The Arusha-Moshiarea and the Mwanza area have been emerging as manufacturing centers nextin importance to Dar es Salaam.

30. The government-owned National Development Corporation (NDC) hasbecome the most important instrument of industrial development, followingthe acquisition by the Government - as a sequel to the Arusha Declarationof 1967 - of a controlling share in certain types of industries, whichare now operated as subsidiary companies of NDC. At the time of thenationalization, the Government stated that, apart from those industrieswhich were listed in the Declaration, others would be open to completeprivate ownership. However, the Government also stated that, if a poten-tial investor desired Government participation in his undertaking - even

- 1o -

on a minority basis - this would be given favorable consideration. Inpractice, most investors - apart from those establishing small scaleindustries - have preferred to invite Government (NDC) participation intheir investment, even if the industry concerned is not covered by theDeclaration. In this way, NDC's stake in industrial development issteadily increasing.

31. At the end of 1966, total investment and commitments in the NDCGroup of Companies 1/ was Sh 510 million, of which NDC's own investment(including loans) was Sh 113.7 million; at the end of 1968, the corres-ponding figures were Sh 1,273 million and Sh 279.8 million respectively(Table 5.7 - Statistical Appendix). The increase in NDC's investment ofabout Sh 166 million was made up of (a) its new investment, (b) transferto NDC of an existing Government company and (c) the acquisition by NDCof a share in the investment of existing privately-owned companies, as asequel to the Arusha Declaration. The increase in NDC's investment whichresulted from nationalization was Sh 76 million. Following the transferin 1969 of its investments in agricultural processing, livestock, hotelsand game lodges to other newly created parastatal organizations, NDC'smajor investments are now in manufacturing and mining.

Power

32. The generation and distribution of power is handled by thegovernment owned Tanzania Electric Supply Co. (TANESCO). Total sales ofpower rose at an average annual rate of a little over 10 percent.The supply of power was augmented by 32 million KWH in 1969 by the openingof a hydro-electric power station at Nyumba ya Mungu. The major increasein power sales -- both domestic and industrial sales -- has taken place inthe Dar es Salaam area followed by the Arusha-Moshi area, while demand inthe Tanga area decreased mainly because of the decline of the sisalindustry.

33. In order to meet the anticipated increase in the demand for powerby laQ7u 1973 nrtirtitlarIv in the rncatal area, TANESGC is, nnw planningto develop the hydro-electric potential of the Great Ruaha River at Kidatu,-nd - feasiblUit studAi, hia hbaen -nria,-rl nitt hv r-nnttlfilng ano4,IrlOV4vuNe

firm. The report has been considered within the World Bank which willsh-ortly ur.dertake the appraisal o%f t-he Viedstu Pro4cM orpsibeBnr….. … ~~~~-- , ct f r os i l -. k

financing. The World Bank has already financed a project to cover some oft…he power neeAs in the i.-terim e4rod

OtherL Sectors

34'. The service sector coWuuerce, transport andU servlces) grLw a tanaverage annual rate of 6 percent over the First Plan period and accounted

1/ Companies wholly-owned by NDC, and also its Subsidiary and Associatecompanies.

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for 27 percent of monetary GDP in 1968. There were a number of significintdevelopments in this sector. First, following the policy enunciated in t:heArusha Declaration, the State Trading Corporation (STC) was formed in1967 to take over a large part of internal and external trade formerlyhandled by several large private and two parastatal firns (see para. 114).Second, the development of transport links with Zambia resulted in anincrease in the volume of transit trade in Tanzania, thereby necessitatingthe rapid growth of a variety of services. Finally, tourisa has grownrapidly, with the number of visitors reaching 40,000 in 1968 representinga near doublirng of the number in 1964.

National Income Savings and Tnvestm-ent

35. Tanzania'R natinnal incnme et- ruirrent nriee rose at an annualrate of 5.2 percent from Sh 4,220 million in 1963 to Sh 5,433 million in1968; in the Tatter year, the per crpita income was Sh 444. Official statis-tics show that during the period 1964-1968 stubsistence income has grown atan annual rate of 1.6 percent and that the share of suhsistence income intotal national income has been fairly steady about 30 percent. However,estimates of subsistence income were based on the pre-census (1967) nopu-

lation figures which were clearly underestimated, and therefore, subsistenceincome is almost certainly higher than the present estimate. This will bereflected in the new series now under preparation. Monetary income hasgrourn. a,", an average rate of 8.1 percent per a,nu.., with compensation ofemployees and the surplus of enterprises accounting, on an average, forabout 4. 4 erc pc t a ercent respectively ( le 2.4 - Statitical Appn

dlix).

36. During the period 1964-1968 total consumption (Table 2.7 - Statis-tical tppenudix) rose at arn average annual rate of 7.2 percent anlu accountd,on an average, for about 84 percent of GNP. Public consumption 1/ rose atan average annual rate of 15 percent, and private consumptLorn at 5.5 per=cent.

37. For the period 1964-1968 as a whole, imports of consumer goodsaccounted for about 23 percent of private consumption (excluding th.e sub-sistence sector). However, the ratio of imports of consumer goods toprivate consumption has gone down from 24.1 in 1964 to 20.5 in 1968, asthe following figures indicate:

1/ Due to inicomplete data on public consumption, the total recurrent bud-get of thie Central Gover.ment mjin.us perisaLons and transfers to the de-velopment budgets is presummed to represent total public consumption.

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(Sh million)1964 1965 1966 1967 1968

(1) Tmports of Conu,mer

Goods 528 543 660 536 567

(2) Private Consumption

L' _ { _ _ -1 .1 ... e1 t 1) I1 ns n' o

E,XPendiuresLq 2,1973 2,165JJ I 2,42 2,53 276

%- c Ul Il k J L ) . 1L L 1 Z. Z. I . 20.5

This has been the result of the establisshment of new, and the expansionof existing, import substituting industries.

38. National savings have been rising at an average annual rate of2.4 percent over the period 1964-1968 kTable 2.7 - Statistical Appendix).Central Government savings (contributions from the recurrent to the dev-elopment budget) rose at an average annual rate of 23 percent over thesame period and, as a proportion of national savings, such savings rosefrom 4.2 percent in 1964 to 8.7 percent in 1968. Inrormation is not avail-able in sufficient detail to permit a breakdown of non-governmental savingsinto private business, parastatal l/ and household savings. However, thelimited data concerning the surplus of the parastatals indicates that theirshare of national savings may have been in the region ot 25 percent in 1967.This rather high share is a direct result of the Arusha Declaration and thesubsequent transter ot a large number of the private enterprises into theparastatals sector. It is reasonable to assume that from 1967 on, thesavings of the Central Government and the parastatals have accounted for noless than one-third of the national savings.

39. During the period 1964-68 there was a rapid increase in gross fixedcapital formation, both in absolute terms and as a proportion of GDP in themonetary economy. Capital formation rose from Sh 571 million in 1964 toSh 1,045 million in 1968, or at an average annual rate of 16.3 percent.

Table 3: CAPITAL FORMATION AS A PROPORTION OF MONETARY GDP, 1964-681 nro. ' trz no M nr IC I nr .1 I n-.JJVU' X7t1J ±7VV ±7U/ 1UO0

1. Gross fixed capitalformation 571 765i 855 1,003 1,045

2. GDP in the Monetaryeconomy 3,801 3,948 4,418 4,625 4,828

3. i as , of 2 15.0 i9.4 19.4 21.7 21.7

Source: The Annual Economic Survey, 1968.

1/ Parastatal savings should appropriately be assigned to the public sector.However, in individual enterprises in which some parastatals participate,there is joint public-private ownership, ranging from a minority sharefor parastatals to complete ownership. Therefore, it is convenient toinclude parastatal savings in the private sector.

- l. -

The growth in investment was rather uneven. This was partly the resultof the lumpiness of some of the investments, but the fi aures are alsoinfluenced by the statistical procedure whereby investment in a specificenterprise is attr4buted to the year 4n h-ch it u- s completed. The

marginal capital-output ratio for the Plar. period as a wnole was about2).9 an co"pe favoaby -with that of most developing ccu.ntries*.. a&au comparesL~ lavorau .Ly WLLL1-l L.&L A %AJ~

40. Gross flxed capita. L Uor a-on atl curient prLices mer the period

1964-1968 totalled Sh 4,239 million. This amounts to 86.2 percent ofthle investrent target oJ shi q4920 set out 11 Lte rFirst LLan, ------- for

increases in prices, the achievement in real terms may be iu the regionor 75 percent.

41. There is no information on the breakdoown of the gross capital.formation among the various sectors. However, data on investments by typeof asset reveal that the share of macihinery and equipment in total irivest-ment rose in percentage terms from 37.8 in 1964 t a49.2 in 1968, while theshare of building declined from 36.1 to 27.5 in tne same period. The inL-crease in the former type of asset reflects the rapid growth of manufactu:r-ing.

42. The shares of the public and private sectors in total investmentcannot be demarcated clearly, since published statistics include parastatalinvestment (in which public participation is quite substantial) underprivate investment. The share of the public sector in total gross invest-ment rose from 33.6 percent in 1964 to 38.5 percent in 1968. If the appro-priate public share in parastatal investment is reapportioned to the publicsector, this would undoubtedly show a significantly higher share for thepublic sector, since the Arusha Declaration has considerably widened thescope of this sector. The results of this policy are expected to becomeeven more pronounced under the new Plan (Table 10.3 - Statistical Appendix).

43. In the initial years of the First Plan i.e. 1964-66, nationalsavings exceeded gross fixed capital formations as follows:

Table 4: NATIONAL SAVINGS AND RESOURCE GAP, 1964-68

1964 1965 1966 1967 1968

Gross National Savings 851 860 966 1,024 931

Less: Capital formation 571 765 855 1,003 1,045

Equals Resource Sur-plus (+) Gap (-) +280 +95 +111 +21 -114

The excess of national savings over investment resulted mainly from arapid growth of exports unaccompanied by a corresponding increase inimports, reflecting the slow implementation of the Plan in the initialyear. However, as the pace of investment quickened from 1966 onwards,the resource surnlus began to shrink and; for the first time in 1968, a

resource gap appeared.

- 14 -

Employment, Earnings and Prices

44. Total wage employment at the beginning of the Plan was 340,344.Agricultural employment - mostly in the larger sisal estates - was 165,531or 48.6 percent of the total. The First Plan included a long-term obiect-ive of creating 200,000 additional remunerative jobs by 1980. In 1965,however, there was a large fall in employment mainly as a result of thesteep decline in the price of sisal which forced some estates to closeand others to switch to labor-saving methods. As a result, emplovment in1966 was actually lower than at the outset of the Plan and it was onlyslightly higher in 1967. Non-agricultural employment has- however, risensteadily from 174,872 in 1963 to 242,498 in 1968 and is consistent withthe achievement of the Plan's long-term goal. In rtlat1on tn the Plantarget for employment as a whole, there has been a shortfall, and the mostsignifirant development has been the qtrtiet-ural change in t pattern of

employment, the principal feature of which is that the secondary andteritarv sprtors have now taken the lead as t-h main sources of employment(Table 1.3 - Statistical Appendix).

45. The total annual wage bill (Table 9.1 - Statistical Appendix ) roseat an annual rate of about 9 percent from Sh 975 m1lllon in 1964 to Sh 1,315million in 1968. This upward trend in the annual wage bill despite analmrnct stti 1nary level nf tont-l .mTn1^,,mgnn- was t-h-e reult of several

developments in wage policy. Among the more notable ones are: the intro-dutiotn nf the minlr.n - I2 in lQk vah4M-t- $-, Minimum w-age at

Sh 100 - 150 a month; the increase in minimum wages in the sisal industryfrom. Sh 100 to Sh 125 per month with a. esalalor clause raising t-lie Ilnimillum

by Sh 10 annually until 1969; the rise in the minimum wage for governmentem,ployees '.£I Dar es Salaam from. Sh 1550 to Sht 180 per mon`; aan' fnall'Ly, the

contributions which employers were required to make to a new National Pro-v1Lent Fur.d estab"liseA ir uJuly 1*4 .

46. The distribution of ebployers by wage groups abe 9. -

tical Appendix) reveals that employees earning less than Sh 100 per monthihave decl1ined fror£n 17.8 0 percent of totaL emnp±oyment in 1964 to 5.3 percean

in 1963. The wages of adult males continued their upward trend and, in 1968,72.9 percent had earnings over Sh[ 150 per month as opposed to 35.8 percentin 1964. In general, the lower wage groups improved their position vis-a-vis higher wage groups, a development whicn is in conformity with the Govern-ment's social policy.

47. Over the period 1964-1968 there was a rapid increase in employmentin Dar es Salaam (Table 9.3 - Statistical Appendix). The sharp build-up ofconstruction and related activity along the route to Zambia resulted in thegrowth of some employment in the Dodoma-Singida, Tabora-Kigoma, and Iringa-Mbeva areas. Tanga and the Coast-Morogoro area have experienced a decreasein employment as a result of a decline in activity in the sisal industry.

48. In 1967, following the recommendations of the Report on Wages,Incomes and Prices Policy (Turner Report) prepared under the auspices ofthe International Labor Organization with UNDP support, the Government

- 15 -

adopted a wages and incomes policy aimed at stabilizing wages and evolving

a more equitable distribution of income between the urban and rural areas.Under this policy wage increases should not exceed increases in productivity

and, furthernore, no annual increment should exceed 5 Percent. Increases

in productivity in excess of 5 percent may accrue to workers in the form

of shares in the enterprises concerned. A Permanent Labor Tribunal was

created to carry out the Government's policy on wage increases. Moreover,in 1966, the National Institute of Productivity was established with theassistance of UNDP to advise enterprises on ways of measuring and increas-inv productivity. The Covernment also reorganized NUTA. the country's

only labor organization, and the Minister of Labor became the Registrar of

the organization and can thus exercise greater control over it.

49. Pric.es 1/ rose sharply in 1964 and in 1967 (Table 9.4 - StatisticalAppendix). Prices of the locally produced foodsttuffs remained fairly stable

and some part of the increase in prices is the resul t o f increased excise

taxes and import duties. Althouglh, the cost of living, especially in the

urban areas, has been increasing in the last five years -- the price index

for goods consumed by wage earners rose from 96 in 1964 to 114 in 1968

wages probably rose more than prices, and further improvements were securedin fringe benefits and working conditions.

B. Government Budgets 2/

50. A steady expansion in the scope of activity of the Central Govercn-

trent during the l964-#67 Plar, i8 reflected 'Lr, th-e growth of thIne recuarrentand capital budgets. Althrogh recurrent expenditures rose steadily,

recurrent revenue more than kept pace, thereby yielding some surpluseswhich augmented development revenues. Development expenditures were modest

in the initial period of the Plan but rose rapidly in the later years.

Development expenditures were financed largely through the mobilization or

domestic resources, in contrast to the Plan assumption that external sourceswould provide the major proportion of development finance (Table 5.1 - Sta-

tistical Appendix).

1/ Tanzania publishes two price indices: (1) a retail price index of goods

consumed by minimum wage earners; and (2) a cost of living index of goods

and services consumed by middle-grade civil servants. Both indlces, how-ever, are limited in their geographical coverage to Dar es Salaam. T'heretail index is based on 1951 prices and the expenditure pattern of thatyear, and thus it is out of date both as to relative weights and to l:he

coverage of the various components.

2/ The analysis of Tanzania's public finances is limited to the CentralGovernment, since data on the finances of the local authorities is in-

complete. The accounts of the parastatal sector do not lend themselvesto a consistent analysis in view of the frequent changes in the composi-tion and the varying degree of association with private enterprise.

- 16 -

51. Recurrent revenue rose from Sh 718 million in 1963/64 to Sh 1294million in 1968/69 or at an average annual rate of 12.5 percent. The

increase in revenue accrued mostly from taxation, the proceeds of which morethan doubled during the Plan. Income and corporation taxes, and importduties accounted for most of the increase. although other taxes such as

excise and export duties and personal tax also grew rapidly. Although theshare of import duties has decreased from about 44 percent in 1963/64 to 39percent in 1968/69, they are still the largest single source of tax revenue.Tn the same period the combined share of income. cornoration and nersonal

taxes in total tax revenue increased from about 29 to 33 percent. Non-taxrevenue has not shown any significant change (Tahle 9.2 - Statistiral

Appendix).

52. Tax revenue as a proportion of the gross domestic product rosefrom about 10.5 vercent in 1964 to almost 16 percent in 1968. As a Dropor-

tion of GDP in the monetary sector of the economy the growth of tax revenuewas even more impressive - from 17 percent in 1964 to a little over 22 ner-

cent in 1968. The level of taxation and total tax collections as a propor-tion of GDP indicate a greater effort by Tanzania in this field than is found

in many other developing countries. With a steady increase in the rangeof imnort-replacing industries. excise taxes on locally prodused items arerising in importance.

53. Recurrent expenditure 1/ rose from Sh 695 million in 1963/64 toSh IIQA million in 1968!69 or at an average annual rate of 11.5 nprcent.

Economic services accounted for the biggest increase in recurrent expend-iture,-risina from Rh 13.0 million in 1963/64 to Rh 308.Q million 4In1968/69 (Table 5.3 - Statistical Appendix). In particular, the growth ofexpend4ture on agriculture and roads was quite 24 pi. By contrast e Axe-

iture on social services grew at a modest rate from Sh 249.7 million in1963/64. to cS 357.6 m,.illion 4i 1Q968/6. A -,,4 -pro-r-tion of this 4ncrezae.17. 7 JJ Ut LU UhL* .JJ I U *1.SLF& -S - -flUJ UJ.- * 0 US.__J jJ UJJ L4UC L L ALSO LLLUr

was on education and health. Among the general services, debt service in-creasedu Arom Sh7 47. -41L4lion 4i 1963/64 to Sh 158.4 mh4lion 4-. 19 8/69,

while defense expenditure rose from Sh. 18.6 million to Sh 77.6 million.Contributions Afrom. the rec-urrent t'o the capital budge duirgthe PlanConLL UUL.LU1~ £ 'JILLLI1~ £VL-ULL ~UAL LI) LL~ L ~ L. C L L~J UUU~.~-L UUL L1 LLi: LkL

averaged about 55 million a year.

54. Development expenditure by the Central Government 2/ rose fromSh i83.6 million in 19i64/65 to an estiL,uatdL e ISh 35L.J 'L I 'LlI in L'L968/6;

during the Plan period as a whole expenditure increased at the rate of about20 percent a year. As against the Plan target of Shn Lo60 million (includ-

ing a carryover from a previous program), actual development expenditureamounted to Sh 1321 million or about 82.5 percent of the target. If aLlow-

1/ Excluding contributions to the development budget.

2/ Excluding (a) Central Government contributions to parastatals and (b)

direct to project loans and grants estimated at Sh 200 million duringthe Plan.

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ance is made for cost increases of 10-15 percent, development expenditurein real terms probably amounted to 67-72 percent of the Plan target.However, development expenditure in the last three years of the Plan was,on the average about 50 percent higher than the average level in the first:two years, and expenditure in the last year of the Plani was nearly twiceas high as in the first year. Whereas the level of expenditure in theinitial years of the Plan was well below the level of available resources,at the end of the Plan the limits on available resources began to act asconstraint on development.

55. An analysis of development expenditure by Ministry 1/ (Table 5.5+ -Statisti1al Appendix) during the Plan shows that anong the large spending

Ministries, those of Works 2/ and Agriculture 3/ exceeded planned expenditurewhile those of Education 4/ and Lands 5/ reachedd only 50 percent of the

targets. The Ministry of Commerce and Industries attained only 23.7 per-cer.t of the tar-et.

56. The Ministry of Works accounted for 36.6 percent of the actialdevelopment expenditure during the Plan. The major proportion was forroads, tfollowed by urb.an watller suppjlies and aerodromes. The Ministr-'s

capacity to execute programs has undergone a distinct improvement ase-vid'LencedU by thie Lfact thlat the a-verage level of Udevelop,.ent expendiure lnthe last three years of the Plan was three times as high as in the firsttwo years. Among t the other Ministries which accounted for a sizeableproportion of total development expenditure are Lands, (16.2 percent) Educa-tLon (11.j percent) and Agriculture (10.4 percent). in general', the ratioof actual to planned expenditure in each of the budget years since 1964/65has been improving.

57. Including the direct loans and grants to projects, contrLiout'Lons

to parastatals and capital items in the recurrent budget, which are notreflected in the development budget, total Central Government developmentexpenditure during the Plan amounted to Sh 1,496 million. The annual levelof development expenditure rose - although not steadily - throughout thePlan, and more than doubled between the first and final years.

1/ A comparison of the actual with planned expenditures by Ministry is com-plicated by changes which have taken place from time to time in the com-position of individual Ministries. The Ministries of Lands, Agriculture,and Commerce and Industry were those most affected by the changes. Tihepresent description of the relevant Ministries is given below.

2/ Ministry of Communications, Transport and Labor.

3/ Ministry of Agriculture, Food and Cooperatives.

4/ Ministry of National Education.

5/ Ministry of Lands, Housing and Urban Development.

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58. The financing of Tanzania's public sector development programshowed a considerable departure from the pattern envisaged in the Pilan. ThePlan provided that 78 percent of the total resources should be obtained fromexternal sources. Although a pipeline of external aid existed at the outsetof the Plan, there was a real absorptive capacity constraint, since therewere serious deficiencies in the preparation and execution of projects.When an improvement did occur in Tanzania's capacity to utilize externalassistance, aid from two important sources (United Kingdom and West Germany)became frozen owing to political reasons. Hence, Tanzania was required tofinance the major proportion of development expenditure from local resources.Domestic sources provided Sh 990 million or 66.8 percent of the total devel-opment expenditure while external sources provided Sh 506 million or 33.2percent (Table 5.4 - Statistical Appendix).

59. The breakdown of the internal sources of development finance shows

that medium and long-term sales of Government securities accounted forSh 426.2 million or 43 percent of the total. Surpluses from the recurrentbudget amounted to Sh 278.7 million or 28 percent and miscellaneous itemsfor the rest. Domestic borrowing rose from Sh 16.3 million in the firstyear of the Plan to an average of Sh 125 million in the last two years ofthe Plan. The National Provident Fund, which was established in 1964, isthe principal buyer of Government securities while the commercial banks andinsurance companies have been increasing their subscriptions. The Bankingsystem is now able to increase its holdings of government securities as a

result of its highly liquid situation which is probably the result of re-duced demand for credit from the private sector following the Arusha De-rclaration. Between July 1967 and June 1969, commercial bank holdings of

medium and long-term government securities rose from Sh 10.2 million toSh 93 3 million.

C. Banking, Mnnev and Credit

60. The Rnnk nf TAnzanin which was established in June 1966 is

responsible for regulating banking and credit, acting as banker both to therwvrernbment an.d co.t.mercial banks, admini-cterincg thp npublir debpt andi managJ-ng

the foreign exchange reserves of the country. Within a few months of itsestafli L s.hment camte the A.….sa. Declnvatinn f …llowed b- the nationnaliztion

of banks and a temporary disruption of banking activity. The Bank oflan.zarila hau to u a i ,.f

of the new National Bank of Commerce, such as meeting urgent demands forcredit at home, providing credit for imports and providing badly needed

assistance to the new Bank in finance and even in staffing.

61. The banking system of Tanzania underwent substantial structural

and institutional changes during the Plan period. In February i196 all the

private commercial banks in the country were nationalized and reorganised asthe National Bank of Commerce (NBC), which took over the assets and lIabili-ties of the nationalized banks. The present banking system comprises three

banks including the NBC, the National Cooperative Bank and the People's Bank

of Zanzibar, but the scope of operations of the last two banks is limited,and NBC has emerged as the onlv full-fiedged commercial bank. The nation-

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alization of banks resulted not only in some disruption of normal banking 1c-tivity, but also in the loss of many expatriate staff and the freezing ofoverseas balances by some of the banks which had been nationalized, pendinga setttlement of their claim for compensation. The NBC had to recruit keystaff on an emergency basis to ensure a smooth and effective take over of theassets and liabilities of the nationalized banks, negotiate agency/correspond-ent arrangements abroad to keep trade moving, while maintaining thX conti-nuitv of banking operations within the country. Houever, bv the end of 19i7the NBC had established itself as a strong and efficient organization. As-RiRtanre with staffing wJas obtained from a number of sources. The bankingsystem was rationalized by reducing the excessive nulmber of branches, whileextending banking facilities to areas where it was badly needed.

629 The -rincipal features- of com,m.erc4 al ban-r during the Plan wzere(a) the steady increase in advances (b) the shifts in credit by borrowing

Y,roups (c, the growth of M teA4U -*e --ndi arLd Jnvcst mentt i med'u. d

long-term securities and (d) the policy on dispersal of banking activity.Trotal AeposlIts rose from, el- 927.3 Millions at th-e end of '9$6r to elShI 13

million in December 1968 and to Sh 1399 million in June 1969. Total advances,w-hich amounted to ShL 833 2 mri L1.ilon in DecemIber 'L £ 66, slIowet-W hardly any rise in1967 owing to the uncertainty which followed the nationalization measures,but rose to Sli 965 mIiIlloa in December i960 and to Sh 952 mlillon in June

1969. The ratio of advances to deposits was 89.7 percent in 1966 but wasmuch lower at 73.5 percent in 1968 and about 69 percent in Ju1ne l969. Theliquidity ratio was 16.6 percent in December 1967 but wa, 25.5 percent ayear later, and 22.5 percent in june 1969 (Table 6.3 - Statistical Appendlx).

63. Commercial bank advances by sector indicate that while the shareof agriculture in total lending is holding steady, there has been a signif-icant increase in the share of manufacturing reflecting the very rapidgrowth of this sector. Advances to commerce have grown at a much lower rate(Table 6.1 - Statistical Appendix).

64. Following a detailed review of the need for medium-term lending,the NBC introduced medium-term loan facilities in November 1967. This hasgorne a long way to meet the need for credit extending over two to five years,and in 1968 medium-term lending doubled. The NBC has also been active inthe hire purchase field, following the withdrawal by a number of firms whichwere engaged in this business, after the introduction in November 1966 ofthet Hire Purchase Act which sought to regulate their activity. A subsidiarycompany, Karadha, has been established by the NBC and has been extending hirepurchase facilitLes for commercial vehicles, plant and machinery. Facilitiesare also extended for the purchase of private vehicles, particularly by gov--ernment servants.

65. After the Central Government began to hold its accounts withthe Banik of Tanzania, there was a decline of direct commercial bank creditto the Central Government. On the other hand, there has been a sharpincrease in commercial bank purchases of government securities and treasurybills. At the end of 1966 commercial bank holdings of treasury billsamounted to Sh 6.0 million and of securities to Sh 10.1 million. At the end

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of 1968 the commercial banks held treasury bills and other securities amount-ing to Sh 104.0 and 39.6 million (Table 6.2 - Statistical Appendix). Therewas a further, substantial rise by June 1969, particularly in the holdingsof aovernment securities which rose to Sh 93.3 million. This rather sharpincrease in commercial bank holdings of government securities has assistedthp (nvprnmpnt in financina develonment.

66 DTnmPet-ir credit to the economv follows a RPasonAl nattern, the

peak season being the months of September-December.

Table 5: MONETARY SURVEY, DECEMBER 1966-DECEMBER 1969 a/

(Sh million)

Dec Dec Dec Dec1966; 1967 19Q6 1969

Net foreign assest 479.4 546.1 662.9 823.0

Domestic Credit

Net claims on the Government -173.3 -42.1 -20.5 126.1Lending to other domesticsectors 820.9 818.1 922.6 1090.6

Money Supply

Currency in circulation outsidebanks 431.5 511.7 528.6 650.3Demand deposits 557.9 730.6 861.7 991.7

Time Deposits ) 156.1 288.6 298.8257.4)

Savings Deposits ) 141.3 158.9 178.3

Other items, net -119.8 217.6 272.8 79.4

a/ Includes Zanzibar. The increase in net foreign assets in 1969 is attri-butable to the rise in Zanzibar's share.

Source: Bank of Tanzania - Economic and Operational Report, June 1969, andData supplied to IMF bv the Bank of Tanzania.

Even after allowing for seasonal factors (which are generally dependent onthe size of the crop) there was a substantial increase in credit in 1968,and this appears to have continued through 1969.

67. Prior to the establishment of the Bank of Tanzania, the foreignexchnange reserves of the countrv were represented bv a share in the sterlinginvestments of the East African Currency Board. Following the establishmentof the Banrk of Tanzania_ the praotiee develoned of identifving the countrv'sholdings of foreign assets separatelv since, among other things, the Bankbegan to issue a separate currenrvy Foreign eyxhanae renerves amounted to

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Si 451.7 million in December 1966, Sh 557.8 million irn Decemiber 19671, Sh649.4 million in December 1968 and Sh ?59.9 million in Jv;re 1969. The major

proportion of the foreign exchange resenres are held by the Bank of Tanzaui.a,

(the lioldings attributed to the commercial banks are presumed to be largelythose of Zanzibar). The IMF gold tranche and small balances held by the

Government make up the rest.

D. Balance of Pjyments 1/

Merchandise Trade

68 Tanzania's foreion trade showA some features typical of a devel-oping economy. Its exports consist mainly of agricultural commodities, mostof which are facing market limitations either because of the slow growth of

demand or the inroads made by synthetic substitutes. Although newer exportros have expanded ra pidly fin ro'ant- xrrp tri-jer share in total exports

is still modest. Among non-agricultural exports. diamonds were the onl-trsignificant item until 1967, hut exports of petrotlem products (based onimported crude) have since assumed sonte importance. Until recently, Tanzaniaobtained a maJor proportion of itS requirements of manufactured goods bothconsumer and capital goods from abroad. The share of consumer goods has now

begun, to decrease reflecting the manufacturing capacity established within

Tanzania. Kenya has been an important source of supply of manufacturedgooAS .

L-9. Tanzania's m .erchandise exports rose from Sh 1530 millionb iF LG6to Sh 1631 million in 1968 2/. (Table 3.1 - Statistical Appendix). UntiL±7u'-4, exports -were ULintLdlU uy th'iree couuoditiesa cton - and

coffee -- which accounted, on an average, for about 50 percent of totalexports. Among these, sisal was by far the most -important, accounting formore than the combined value of cotton and coffee. A steep fall in the price

of sisal in 1965, followed by further declines in subsequent years, movedsisal to third place among exports, with cotton moving up to the first place.

Sisal exports which, at their peak, amounted to Sb 437 million in 1964,

decreased to Sh 159 in 1968. Cotton and coffee exports have increased and

have partially offset the decline in sisal exports.

1/ Statistics pertaining to Balance of Payments are incomplete. Information

on the current account is available for the period 1961 onwards, but

capital account transactions have been compiled systematically only since

1967.

2/ Tanzania's merchandize trade figures require an adjustment for balance

ot payments purposes. The three important kinds of adjustments are for

valuation, timing and coverage. Since part of its trade flows through

Kenya, import values require to be adjusted upwards and exports down-.

wards. Unadjusted trade figures are used in this section. This discus-

sion on balance of payments includes adjusted figures.

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Table 6: EXPORTS AND THEIR CONCENTRATIONValue - Sh millionsQuantity - 000 tons

Item 1964 1965 1966 1967 1968

1. Total Exports 1,530 1,400 1,795 1,668 1,631

2. Sisal

Quantity 209 210 196 201 186Value 437 286 235 201 159Value as % of 1 28.5 20.4 13.1 12.1 9.7

3. Cotton

Quantity 45 55 85 60 62Value 198 244 350 251 283Value as % of 1 12.9 17.4 19.5 15.0 17.4

4. Coffee

Ouantity 33 28 so 44 8AValue 221 172 301 237 265Value as % of 1 14.4 12.3 16.8 14-2 16.2

5. Value of 2 + 3 +4as % of 1 55.8 50.1 49.4 41.3 43.3

Source: Derived from background to the budgets.

Among agricultural exports which have increased rapidly in recent years areashe,Arnuts, tea nd tobacco, but their com-bined value amountedd i 19 on 0 J.

to a little over 10 percent of total exports. Diamond exports rose steadilyunrtl 419ci, but tilere was a substantial decrease in 19 ow'ng to a IAecL.ie

in production and a lower unit export price (Table 3.2 - Statistical Appen-II - \ A I _- _ - - - - - L . _ _ L ___J_J__s___s1 I L Ud.ix * AltU6oUeeL CxpULLot lihVe swn d LaLtr s trend - although at tne moaestrate of 1.6 percent a year during the period 1964-68 - except for setbackscaused by price falls as in 1965 or aduverse weather as in 1967-68. It isbelieved that exports in 1969 were significantly higher than in 1968.

70. Total imports rose from Sh 1,194 million in 1964 to Sh 1,778million in 1968 or at an average annual rate of 10.3 percent. The mostsignificant feature concerning imports is that, over the five year period1963-68, consumer goods imports grew at the rate of 2.2 percent a year whilecapital goods imports increased at the rate of 18.4 percent a year, andintermediate goods - mainly crude petroleum - at 11.2 percent.

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Table 7: IMPORTS BY MAIN CATEGORIES-/-'

(Sh m.illion.)

Item 1964 1965 19o6 1967 1968Value % Value % Value % Value % Value %

Consumer goods 528 44 543 41 660 41 536 34 567 32Inte .-ediate goods 1 85 ...... 15 251) 15 254 16 293 I_ 9011 12Q3 I16

Transport equipment 112 9 129 10 197 12 212 13 232 13Cap4 ta' gooAs 340 28 428 32 A5 2° aI5010 7 32 667 371 ~ _,P~v SO -tS.U 4L4J U jUI jL UU VWI Ii

Miscellaneous 29 4 30 2 47 3 30 2 29 2

Total 1 9h 100 j_33.5 100 1,613 100 1577 100 1,778 100

1/ Excluding Zanzibar

Source: Derived from Background to the Budgets

,71. Imports of intermediate goods and transport equipment have alsorisen rapidly. The steady rise in imports, coupled with a relatively modestgrowth of exports has changed the long-standing surplus on the merchandiseaccount (on a balance of payments basis) into one of deficit starting in1967.

72. The United Kingdom has for a long time been Tanzania's principaLtrading partner, accounting, on an average, for a little over 25 percentof Tanzania's imports and exports (Table 3.4 - Statistical Appendix), butits share has lately been decreasing. The European Economic Community's(EEC) share of Tanzania's imports rose from 13 percent in 1963 to 21 percentin 1968 (Sh 147 million to Sh 374 million), but its share of Tanzania'sexports decreased from 19 percent to 13 percent during this period. Amongthe other important destinations for Tanzania's exports are Hong Kong, Indiaand Japan. As a source of imports, Japan is increasing its share, whileimports from Mainland China have also grown in recent years. Exports toZambia - mainly of petroleum products - which were negligible until 1966have since risen fast and amounted to Sh 177 million in 1968.

73. A cormmon market comprising Tanzania, Kenya and Uganda has existedsince about the end of the First World war, and the three countries maintaina common extern al tariff. For many years, Tanzania was concerned about it:sgrowing trade deficit with its partners, particularly Kenya, and afterattaining independence in 1961, it began to take steps to remedy theimbalance. In particular, in order to protect its newly established indus-tries, it began to impose some restrictions on imports from Kenya and Uganda.

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Table 8: TRADE WITH KENYA AND UGANDA, 1964-68

(Sh million)

KENYA UG&NDAImport Exnort TImport- Exportfrom to Balance from to Balance

1964 266 82 -184 48 20 -281965 282 01 -191 52 27-2

1966 266 76 -190 62 17 -45196'7 228 66 =16 49) . 15r -341

1968 261 74 -187 41 17 -24

Source: East African Customs, Annual Trade Reports, 1964-1968.

74. Following a major review of all arrangements that existed among thethree East African countries, the Treaty for East Africa Cooperation wassigned in June 1967 and the East African Community was established on December1, 1967, with the East African Common Market as an integral part of theCommunity, with some modifications aimed at a more even spread of benefitsamong the three countries. The Common Market provides for the maintenanceof a common custom tariff (subject to minor exceptions) and the abolitionof quantitative restrictions on trade among the three countries, with anexception for certain agricultural products. However, the Treaty permitsthe levy of a transfer tax on manufactures originating from any of the twomember countries with which the tax levying country is in deficit. A trans-fer tax can be imposed by a Partner State if it sustains a deficit in itstotal trade in manufactured goods with other two member states, at a rateof not more than 50 percent of the rate of external tariff on an identicalitem of manufacture. Every transfer tax must expire eight years after thedate of its first imposition, unless revoked sooner. Tanzania has imposedtransfer taxes on a wide range of manufactured goods imported mainly fromKenya, effective December 1, 1967. However, with the abolition of quanti-tative restrictions, Kenya's exports to Tanzania increased siignificantlyin 1968, thereby reversing the development of the two previous years; thisis likely to cbntinue in 1969.

75. Tanzania follows a liberal trade policy and, at present, the onlyquantitative restrictions are on trade with Japan. These were introducedin 1965 after the persistent trade deficit with Japan had grown to Sh 94million in 1964. Imports of consumer goods are allowed to the extent offifty nernent of the value of exports to Japan; imports of caDital goodsare not restricted. After the introduction of the restrictions, the deficitin trade with Japan has heen suhstantially reduced. and amounted to Sh 20million in 1968.

Services Account

76. The balance of non-factor services has grown rapidly from Sh 10millicn in 1964 t* Sh 105 million in IQA8. Thisc was t.he result. of ()th

- 25 -

rapid increase in freight earnings from Sh 8 million in 1963 to Sh 109million in 1968, due principally to the increase in the value of transittrade to Zambia, (b) the growth at an annual rate of 25 percent of earningsron international passenger traffic handled by East African Airways and (c)an increase of Sh 20 million in earnings from foreign visitors during thesame period (Table 3.5 - Statistical Appendix).

77. Factor income payments rose from Sh 116 million in 1964 to a pealcof Sh 192 million in 1966; these paynents then declined by about one-thirdin 1967 and by about one-half in 1968. Among the reasons for the declineare: (a) profits in 1967 were lower than in 1966: (b) some private companiesmay have remitted large amounts abroad in the fonn of dividends in 1967because of the uncertainty about the future role of private enterprise (c)the devaluation of the pound in late 1967 which reduced interest paymentson Tanzania's sterling debt; and (d) the nationalization measures of 1967which substantially reduced investment irncome accruing to non-residenternterprises. On the other hand, factor income receipts grew from Sh 32million in 1964 to Sh 56 million in 1968, owing to higher interest earningson Tanzania's increasing holdings of foreign assets.

78. Net receipts on account of transfers averaged nearlv Sh 23 millionannuallv over the period 1964-1968. The small negative balance of nettransfers in 1966 was due to a reduction in direct inter-governmental grant:s,particularly the receipts from the U.K. under the Overseas Service Aid Scheme.The balance of payments is shown in summary form in the table below:

Table 9: SUMMARY OF BALANCE OF PAYMENTS, 1964-68

(Sh million)

1964 1965 1966 1967 1968

Balance on Trade 269.3 47.1 36.2 -52.9 -218.2

Balance on Surplus -65.7 -93.6 -62.9 -21.7 61.9

Balance on Curretnt Account 225.7 -13.7 -36.0 -22.2 -138.7

Net Government CapitaI 96.4 116=5 47,9 158.8 170.9

Errors and omissions a/(including private andparastatal capital) -427.8 -130.0 181.0 -22.4 53.1

Net Change in ForeignExchanoe Reserves bj

increase) 105.7 27.2 -192.9 -106.1 - -91.6

a, ancluding an adjustment in 1967 of Sh -8.1 million due to the devaluationof the sterling and the redemption of the E.A.C.B. currency, and in 1968an adjustment of Sh + 6.3 million due to the latter.

Ill ILncl&udes ShII 397 . A. L.LJ.Aon represen.ting realisatio.n of E.A.C.B. assets.

Source;. Table 3.5 - LStat'Lst'Lcal AppenU'x

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Cpaital Transactions

79. Information on private and parastatal capital transactions is incom-plete. The large figures for "errors and omissions" in the capital accountsuggest that there was an unrecorded outflow of capital in 1964 and in 1965probably as a result of the uncertainties generated by the army mutiny earlyin 1964 and the revolution in Zanzibar. However, with the improvement ofbusiness confidence, and the extension of exchange control measures tosterling area countries 1/ the capital outflow appears to have been checked.The data suggests that there was probably an inflow of private capital in1966 and also in 1968, but that there may have been an outflow in 1967following the nationalization measures. The size of the outflow in 1967 washowever, considerably smaller than the outflow in 1964-1965, mainly as aresult of the stringent steps taken to restrict capital flight immediatelyfollowing the nationalization measures.

80. During the period 1964-1968 there was a substantial net inflowof public capital totalling Sh 591 million. Public capital inflows wereadequate to cover both the deficits on the current account and the private

capital account, and to achieve a modest build-up of foreign exchangereserves, amounting to Sh 391 million over the four-year period 1964-68.The mission estimates that the foreign exchange holdings of Tanzania(Mainland only) amounted to Sh 546 million December 1968.

1/ Exchange control at this time did not cover transfers to Uganda andKenya; in 1967, however it was also extended to these two countries,but only for about four months.

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III. KEY ISSUES FOR THE FUTURE

Preparation ar1d Epxect'i,n of ProMptts

81. Soon after attaining independence Tn na:rnin dolnnted the zoal ofself-sufficiency in high-level manpower by 1980, and the educational sys-tem. wasO A4rec-Aed 4to a t selfi towards tbe realization of this objeJtivP.As a result of deliberate planning, the manpower situation at the end ofthe First Plan was so..newhlat better than at. thae )esinla, bt, manny gaps

still remain.

82. During the course of implementing its First Five-Year Plan, Tan-zanla was serLousuLy hlandicapped b-y I-a----- -t of ------- to p a a

execute projects. The problem was particularly acute in the initial yearsof the Plan anrd, in 1 many instances, aid already n,egotiated could not beutilized since absorptive capacity was limited.

83. The continued shortage of manpower is implicitly recognized in theSecond Plan by the flexible approach concerning projects wnich are to be im-plemented during the five-year period. The Plan envisages that investmentwill be based on a two-year forward list of projects, and that the prepara-tion of projects will continue throughout the Plan. Although such a flex-ible approach is useful, it is nevertheless important that a core or projectsconstituting a minimum investment program must be available at any time as abasis of investment at least in the following two years. Volume Il of Tan-zania's Plan is intended precisely to serve this function. However, manyprojects listed in Volume II which constitute the investment program of thefirst two years have not yet been prepared, and a large part of the invest-ment currently under way is in fact a "carry-over" from the last Plan. Whilethis is to some extent to be expected, there is a possibility -- unless effortsat preparing projects are stepped up considerably -- that the momentum of in-vestment may slow down by the end of the second or the beginning of thethird year of the Plan.

84. In order to ensure a supply of projects, and further to ensurethat they could be implemented, Tanzania would be required to mobilize asubstantial amount of high-level manpower. Since the supply of trainedand experienced local manpower is likely to be inadequate for many yearsto come even on the best assumptions, the required personnel will have tobe obtained from external sources. In some fields such as infrastructure,the required expertise could be made available through contracting or con-sulting arrangements. In the more directly productive fields, however, itis vital that there be a rapid build-up of manpower - mobilized from with-in or without - to ensure that projects are prepared and implementedthroughout the Plan period.

85. It is important that external donors recognize that, in many cases,it would be desirable to incorporate a technical assistance component intheir aid programs, to ensure the smooth implementation of projects whichthey finance. In some instances the role of external donors could usefully

begin right at the outset, in identifying and preparing projects in areas inwnich they have a potential interest. In the absence of such "pre-invest-ment" assistance, Tanzania will experience difficulty in submitting a steadysupply of projects ror tne consideration of external donors.

Review of the Main Sectors

86. In its review of the sector programs, the mission focused mainlyon the agricultural sector, and its findings are attached as an annex(Volume II) to the report. The mission did not attempt an assessment ofthe program for the industrial sector, in view of an impending study bya separate industrial review mission from the Bank. The mission is ingeneral agreement with the programs proposed for the other sectors of theeconomy, and the investment to be undertaken by the Central Government,parastatal organizations, the East African Community organizations and theprivate sector.

Agriculture and Rural Development

87. The mission considered the prospects of the agricultural sectorwith reference to (a) governmental organization and institutions, (b) cropproduction, (c) research and extension, and (d) manpower.

Governmental Organization

88. The reorganization of the Ministry responsible for the agricul-tural sector with the title Ministry of Agriculture, Food and Cooperatives(and the subsequent inclusion of Water Development and Irrigation Department-WD&ID) has been helpful, in bringing all major agricultural programs underone Ministry. The Ministry's jurisdiction also extends to a number ofparastatal organizations which are responsible for the implementation ofagricultural projects. The reorganization will also facilitate the devel-onment of an integrated aDDroach to the proper exploitation of naturalresources. However, some problems still remain. Among these are (a) theIack of nentral direction for extension work which is diffused among at

least four Divisions, and (b) the shortage of staff in the Research and

Trainino fivuiionn which hampers the develonment of an integrated annroach

to research on all aspects of agriculture.

89. The mission believes that it might be advantageous to expand thestaff of the Planning Section and to set up p1annning rc11s in the Production

Division, and also in WD&ID which is responsible for about 30 percent of the.mi.iteralbudget. PIt -tuld also be desirable to bring about a -reater co-

ordination of manpower planning, administration and training. In order toensure a more sat4sfactory utl44at40n of arner personnel, the mlssonn

recommends that the need for retaining the post of D)istrict Coordinator (66positions) b'e th-orougll-i'y revi ewed, andu the- post- 1-r, abois-1 80 that

those released from the performance of routine administrative duties canconcentrate on substantive progr uAIs in their arLc of sei li. hile

responsibility for large-scale irrigation needs to be centralized under one

- 29 -

Division in the Ministry, and the responsibility for aiding small farmersand Ujamaa villages should be consolidated within the Agriculture Division.

Crop Priorities and Prospects

90. The crop priorities and production targets for the export cropsare generally well conceived. The target for cotton may be difficult toreach but production could be stepped up substantially provided that acotton campaign is worked out and the necessary financial and staff re-soturces allocated to it. The situation facing coffee will undergo a re-markable improvement in the short-run -- as a result of the substantialreduction in world outnut following thoe frnot ir, Brazil -- and makespossible an upward revision of the export target, and will also contributeto the overall growth of the economy. The change in the coffee outlookis probably no more thian a temporary bonus, and Tanzania should continueits efforts to upgrade quality and weed out marginal acreaege Diversificationpossibilities should also be studied so the economy can be in a strong posL-tion when world production returns to norm-al. The position on tea is un-certain since Tanzania has chosen to stay out on an interim agreement amongthe major producers to lI4MIt tea exports in 1970, on the basis of assignedquotas. There is a need for a more aggressive approach to promote cashewnutsfor- which the world' prlce out"look- is fwavorable . TLhe pessim.ism.. show in thePlan concerning the prospects for sisal seems justified, but it may be pos--sible tuo maintain producei.on at or near the 1968c 12-vel ofc 190,000O Ions.~J-UL~ L' mIaj LLdL uJ OU CI.u at or Iid L 7~1U0 J_V L UL A. 'JIJL LSJ&.

Attempts to achieve self-sufficiency in crops such as soft wheat should notbe pushed too rapidly as long as they can be imported at reasonable prices,since Tanzania cdoes not have sufficient knowledge on all technical aspectsw`ich could 'be passed on to the farmers. To import these itemus -- ratherthan increase production in Tanzania -- would enable extension and othersLafL to be employed in activities where they would be most productive e.g..cotton or cashewnut production. Moreover, unless the objective of self-sufficiency in food production is approached on a national basis -- ratherthan within eacth region of the country as it now appears to be -- there isa possbility Lnat both peasants and their extension advisors would bedevoting their time and efforts to crops which are clearly less profitablee.g. wheat in Njombe District, than those they are currently producing verysuccessfully e.g. maize, also in Njombe. Finally, if self-sufficiency wereapproached on a national basis, a different regional distribution of cropscould be worked out. For example, unless transport costs dictate otherwise,any addition to output that is required may be concentrated in areas whichoffer the most favorable conditions e.g. wheat in Arusha or maize in Njombe.The task of identifying for each main producing area the crops which ensurethe maximum payoff for farmers should be vigorously pursued.

Livestock

91. Livestock is one of the most important assets in Tanzania'sagricultural sector. Some progress has already been achieved both inbeef ranching and dairying, and consideration is being given to furtherdevelopment. However, there is a need to develop a clear policy for bothlivestock and dairy development in order to avoid the proliferation of anumber of ad hoc projects which might be uneconomic.

Research

92. There has been a deterioration in the overall situation facing

agricultural research in Tanzania. The main problem is the inadequacy of

experienced personnel and, to a lesser extent, of funds for research. The

preparation of a national research plan, which is currently under way,should be speeded up, and research within the East African institutions

should be more closely related to national needs. The situation in thefield of research is likely to deteriorate with the departure of a number

of research personnel following the termination of the Overseas Service

Aid Scheme (OSAS) arrangements under which they work in Tanzania. In a

field where continuity of research work is highly important, it would be

virtually impossible to find replacements for these people. Efforts are

being made to recruit replacements from other sources, but these are

mostly short-term arrangements. The best solution would be for Tanzanianresearchers to assume the major responsibility, but the limited number of

university graduates precludes a rapid build-up of research personnel.The Government should consider the possibility of entering into long-term(five-years) contracts with overseas agencies for the supply of researchpersonnel. An arrangement of this type already exists for cotton (with

the Cotton Growers Corporation) and another one is being considered forTobacco (with the Institut de Recherches Agronomiques Tropicales). Con-

sideration should also be given to offering a modest research contract to

the Tanganyika Wattle Company in Njombe.

93. The budget for some research votes was reduced by about 25-30percent in 1969/70 despite assumption by the relevant Division of increasedresponsibility in this field, and an increase in the overall budget of theMinistry. This is likely to stifle some of the ongoing research, although

it is also evident that the allocation of additional funds for research

should be based on a careful evaluation of new research proiects.

94. Tt is intended that- when the new Faculty of Agriculture is fully

established at Morogoro, it would make an important contribution to research.Technical asiQtunce qhnuild eh obtained for this nurpose. The Economic Re-

search Bureau should also be used to greater advantage in applied economic

r-eserch.

Mnpower

nc rntt..L L. 1 nA ,.-r_a- . . ---- -oo -_ na-----1 A --. 4 A*_ . LI 1 U t ,.,a>uc. M,... e..tn.. c J v . .a.o.v. v. K v _ tttLJaLvvv_ o.A s j.j AKO

is similar to that in the narrower field of research. Although the esta-

blishLUment proposed Lin the PLIIan appears audequate, the proportion of trained

staff in total establishment is still low. The agricultural staff at the

district level needs to be strengthened if it iS to fuiLLL iLts uevelop-mental responsibilities.

96. The demand for skilled manpower arising from varied sources in-cluding the Ministry and parastatal organizations exceeds the supply so

that the feasibility of implementing the whole of the proposed investment

- 31 -

program becomes questionable. Moreover, the allocation of manpower amongdifferent aetivities within the Ministrv dosR not corresnond to theirexpected contributions to GDP. For example, the staff of the FisheriesSqertinn has groLm Yery ranitdly, hbut tf-Tc-jre. hs hbeen lit-tIP corresoOndinngrowth in output. The shortage of high-level manpower will be a majorcomnstradnt osn the raten at w7hIch agrvicultura - 1r 4rt nsh mlmnolIt will be particularly acute in the first three years of the Plan and itmay well mean that pro4ected investment in agriculture will fall short ofthe Plan target by 25-30 percent. The manpower needs of the parastatalorganizati4ons should le revewel ir, th.e light OL the responsibility placedon them for undertaking a part of the investment. The limited supply of

LU L) …A. 41L I . ~..2A111.trained~L. safsolbe deployed iLn a mannier which will ml>aximizethi

contribution to output, as for example, in special campaigns for cotton,m,a:lze, tobaccu, etc.

97. Tanzania has plans for large-scale farming, particularly statefarms and commercial farms to be run by NAFCO. The state farms are in-tended as a means of achieving self-sufficiency in food. Investment inthese farms, which are highly capital intensive, is unlikely to be pro-ductive unless (a) it is preceded by thorough technical and economicsurveys and (b) adequate skilled manpower is available. Substantiallosses could occur if large-scale farming programs are pursued withoutadequate preparation. Even if large-scale farming is technically feasi-ble, it would be necessary to obtain a great deal of management assis-tance from external sources.

98. The investment programs of the Ministry of Agriculture and theparastatal organizations under the jurisdiction of the Ministry sthould beclassified according to priority so that scarce resources of finance andmanpower can be most advantageously employed. The level of investment ineach year of the Plan should be related to the available manpower, and ef-forts are needed to obtain the required manpower from outside, since suf-ficient Tanzanian personnel are unlikely to be available for at least 10years.

Rural Development

99. In the program for rural development, the Government has assignedan important role for the Ujamaa villages. These are villages in whichpeople live and work together -- rather than in isolated hamlets as theydo in many parts of Tanzania -- and share the fruits of their cooperativeeffort. The Government expects that when people live in villages of thistype it will be possible to provide a variety of services e.g. extension,education, health, water supplies etc. more effectively and economically.The sharing of the results of collective effort is intended to facilitaterural socialism and self-reliance. There is considerable emphasis onself-help.

100. The Uianiaa program is to be based on voluntary association andno timetable has been set for the formation of these villages but it isintended that eventually the entire rural population will live in them.

- 32 -

There was some evidence that regional officials and politicians were puttingsome pressure on the rural population to form Ujamaa villages, but actionhas been taken to prevent the recurrence of such instances. The Governmentbelieves that not onlv will the Uiamaa program not require any additionalresources such as staff, but that it might even facilitate their better de-nlovment. A misallocation of staff resource could occur only if regionalofficials favor people who live in Ujamaa villages even if they are unableto use such resourres as effectively as those who live outside the U-amaavillages, but it is unlilcely that there would be a substantial diversionof capital for t-he Uln,mnn program.

11. Tn some nrogramc clLPh as2 tobancro-growing- it is 1rpndev rlanr thatUjamaa villages may offer some advantages, and this could well apply to othersm-allholder cops. However, it would be advisabl-le to regard the pt-gr aan experiment during the present Plan, and to judge the responsiveness of therural, population and the pattern of resource allocation that develops as be=tween the Ujamaa and non-Ujamaa population. There is a need for further re-se r t 4_-! a.1 A 4_ :4 OUglse _ <.. 4 .S_ .

LI>:a u au A_ 1 F< t * (_u- A. 6LA v&Iot|S z; -E-- szv;z u > u

phases of development.

102. Some two years ago the Government established Regional DevelopmentFunds to be used at the discre.tion of the regi or.al authLoriti es, 4in consulta-tion with representatives of the districts. Each region is allocated anamlount of muoney every year f/or 'Loca.L prograr.s suchi as feeder roadU, watersupplies etc. The Regional Funds provide a good opportunity for the ruralpopulation to satlsfy their iDL UCdltC requirem.eLnts without going throughthe Central Government machinery, and hence they are an effective meansoL ueveloping local initiatLve. I' these prograris sh ouw positi-ve results,they would merit support by external donors.

ndus try

103. The Plan envisages a total investment of Sh 1,300 million inmanufacturing. A number of enterprises which are included in the Planare already being established. The National Development Corporation, whichis expected to invest Sh 780 million during the Plan, is the Government'smain instrument for furthering industrial development, and has been suc-cessful in securing the collaboration of foreign interests for a varietyof enterprises.

104. The program for the manufacturing sector includes the establish-ment of a variety of relatively small consumer goods as well as some largerones to produce intermediate goods. Provision is made for a rather largeinvestment (Sh 360 million) in a sisal pulp and paper factory. However, thetechnical feasibility of industrial scale production has not been conclusive-ly demonstrated and further investigation needs to be undertaken.

105. There is no doubt that some more consumer goods industries willbe established. However, these industries have been growing rapidly duringthe past few years and it may not be possible to maintain the same momentumfor the entire five-year period of the Plan. In some cases e.g. cotton

textiles, present capacity is adequace to meet foreseeable needs, and no

further investment is likely. In fact, most of the in;ustrl2s which a

considered feasible have already been identified, and many are being

established.

106. In addition to industries which are intended to replace fmports,

the Plan includes processing and export industries. Most of the more ob-

vious possibilities in the processing field are incl.uded in the N1)DC programa.

With regard to export-oriented industries, the possibility that they arelilcely to be high cost industries - at least initially - might act as aconstraint on developing an export trade in '..Janzanian manufactured goods.

There should be some possibilities of expandling sales in the East Arricani

Common Market. However, the question of establishing nlew industries in

the Common Market has to be seen in the context of the problems and poli-cies of all Partner States. The three Governments desire to preserve theCommon Market, but it has also beer. agreed that some measures should be

taken to give particular encouragement to industrial development in Tan-zania and Uganda to enable them to catch tip with the development which hasalready taken place in Kenya. This raises issues concerning the proper

role of the so-called "transfer taxes" and of other measures which mightbe used to stimulate industrialization in Tanzania and Uganda. It willclearly be important to avoid the establishment in more than one country

of enterprises which require the whole Common Market to make them viable.

A mission from the Bank is at present in East Africa studying the problem

of industrial. policy in the context of the Common Market.

Other Sectors

107. The Plan envisages that the services sector, including transport

and commerce will grow at an annual rate of 7.1 percent. Although the growth

of the industrial sector may be less than the Plan target, and agriculturaloutput may turn out to be less than projected owing to adverse weather, there-

by contributing to a slower growth of the services, there is likely to be a

rapid build-up of the transit trade to Zambia, and significantly higher earn-

ings from tourism than the Plan assumes, so that the services sector could

well grow at the rate projected in the Plan.

108. The Plan provides for an ambitious program of roads and aerodromes.During the first two years, the roads and aerodromes program will account

for Sh 514 mil:Lion or about 47 percent of the total Central Government

development expenditure of Sh l,lQQ million. The program is dominated by

the Dar es Salaam - Tunduma trunk road (Sh 327 million) and Kilimanjaro

airport (Sh 70 million) which arccount for almost eightV percent of thetotal expenditure in this field. The major expenditure on secondary and

feeder roads have been deferred until the third year of the Plan. If a

cotton campaign is developed along the lines proposed in Volume II of therepnort- it- would require complementary developments, irncludin2 secondary

and feeder roads, somewhat earlier than planned. It would, therefore, be

useful to make an early review of the phasing of investment in the road

program so as to ensure that the requirements of agr'Lculture -- the main

productive sect:or -- are adequat-ly met.

- 34 -

D a _ac..a~..J

lO9n. I., line with the pol4icy enunciated 4 n th1e Arusha Dleclaration,.LV 7 *Lit ..AC W. Lit -L - - ktAfLtt" I iti IL uai I/LLLil UL

Tanzania is endeavoring to expand the public sector in order to ensure

that the G70vternMent hLas a sulDstantL.I.aL pCrLtLi.cLipaLiUoL LiI a.Ll ptoUUUcLiVt ana

distributive activities. The responsibility for administering these acti-

vities nas aevolveu uputo Lite Vdlaiu pdatbLataL organlizatiLons, of whichthere are now twenty five. Many of these organizations pre-date theArusha Declaration, but a few were established after it.

110. In March 1969, the Government introduced a number of majorchanges in the structure of the parastatal organizations. The Presidentialcircular on the Rationalization of Parastatal Organizations noted that thestructure of parastatal organizations was not the result of any plan, butof a series of decisions taken since independence. Often the responsibili-ties of these organizations overlapped and there was no clear line of au-thority running from the Government to each of the organizations. In the

reorganized system, each parastatal organization is placed under the juris-diction of a 'parent' Ministry, and the President acts tlhrough the CentralCoordinating Ministries, particularly the MIinistry of Finiance and the Minis-try of Economic Affairs and Development Planning.

1ll. Until the reorganization in March 1969, thie Government's principal

instrument for economic development was the National Development Corporation(NDC). In view of the rapid increase in its responsibilities, the Govern-ment decided to commuission an expert study of NDC's management control and

information flow system. The consultants recommended that NDC be divided

into three separate organizations. In the Presidential Circular, it was

announced that the non-industrial and non-mining responsibilities of NDCwould be transferred to two new parastatal organizations. These were theNational Argirultural and Food Corporation (NAFCO) and the Tanzania Tourist

Corporation (TTC).

112. The reorganization of the parastatal organizations will assistin streamlining procedures, improving lines of communication, and ensuringthat all activities are carefully screened before any investment is under-taken. It is, however, important that organizations which are engaged innroductive activities and sell goods and services in return for pavment,

should be staffed by people with financial and business experience. Thesupply of Tanzanians with exnerience in running business organizations

is quite limited, and hence the effectiveness of the "Rationalization" isno-t at, tomnticl-b- 1¶7 assured One Rolution might he to obtain managerialpersonnel from abroad and phase in Tanzanian personnel as they becomeavailable. If hiri ag expatriate managers is not nossible, it might he

advisable to defer the establishment of new parastatal organizations,particularly in the productive sector. Sino the Govprnment has planer

considerable reliance on the parastatal organizations to undertake invest-

ment during the Plan, these must be provided Tith the manpower they need.

- 35 -

113. The procedure by which the parastatal organizations undertakeinvestment has recently been tightened by te introduction of a three-tiercontrol system. This should ensure that investment proposals are subjectedt'o a searching analysis.

ilLe ot ate ml r-a -u _p o1ralt'L

.L14. Following thie Arusna Deciararton i reoruarv i967, ene flaLe

Trading Corporation (STC) was established to take over the trading acti-iities Lormerly undertaken by some large private firms and two parasuatalorganizations, Until January 1969 these firiio'Ž were allowed to retain theirseparate identitv, but were then reorganized into six separate departmentsof the STC. There are branches of STC in 10 towns and four more are plan-ned within Tanzania. The STC also has offices in Kenya, Uganda and Zambia.

115. The share of STC in total import trade is estimated at only about20 percent, although it is quite substantial in consumer goods imports. 'Itis the sole importer of certain types of commodities -- particularly thosewhich are in demand by large numbers of consumers -- and can therefore beexpected to increase its share of the import trade. The role of STC is lesssignificant in export trade (an estimated 7 percent) since the main exportsof Tanzania (coffee, cotton and sisal) are handled by marketing boards. STCis anxious to handle the distribution of the products of most domestic in--dustry, but these enterprises -- including some which are NDC subsidiaries-- have resisted this on the ground that STC is not properly equipped tohandle their products.

116. STC has the difficult task of trying to combine acting on com-mercial principles - which is necessary if it is to compete with the re-maining private firms - with the pursuit of certain social objectives.For example it attempts to equalize the prices of certain essential itemsin all parts of the country. However, since it cannot control retail pro--fit margins its social objectives may be thwarted by retail traders.These objectives can also make it more difficult to compete with privatetraders. STC is also attempting to expand its operations to all parts ofthe country although it is not clear that this is necessary from a purelyeconomic point of view. The present structure and organization of STC iscurrently being reviewed by a team of consultants.

117. STC also has the responsibility for importing goods (mainlyconsumer goods) under various commodity credit agreements, which the Gov-ernment has negotiated with communist countries. These goods are to besold locally and the proceeds used to finance the local costs of projectswhich the communist countries have agreed to finance. One of the problemswhich STC faces is that, in many raseg, imnorted goods comnete directlywith local industries - some of which still need protection - and couldstifle their progress. STG will hb rpneirpd to undertakp massive importsunder a commodity credit arrangement with Mainland China to raise localcost finance for the Tan-7Zm PRilyanx There is aome rlAi1th t.heithpr STCcan successfully undertake this operation.

- 36 -

East African CommunEkZ

118. The Treaty for East African Cooperation has now been in force fortWo years and many of its nrnuisionn are gradually bein iTmnnplrnnte,d. Iow-

ever, some problems still remain. Among them are (a) the lack of coordina-t-;A1 4-1;!4t~in owlrnF ( h ifr1e in _Ot-_hl 4 ch4ng then

cessary physical facilities for the Community in Aruslia, (c) problems overthe relocation of the lLeadquarters of the Corporatlons and- -(d) c SL lA

re2strictions -- albeit indirect -- withlin the Common Market.

119. With regard to industrial development, there would appear to betilhe danger tILhat unilateral investment decisions will be made ini th Lthee

countries with resulting losses for all of them. Even large-scale invest-mients ha-;e bUeen negotiated" wL -it ex ternal sponsors WJ iJ_t . llut adequate concsul-tation among the Partner States, although the viability of these investmentsls uependuenit or access to thLe whLUo'Le oft tLile East kiLrLcan r,.arket. Priogress inestablishing Arusha as the main base of the East African Community hasbeen slow. There have also been problems concerning tne relocation orthe Corporations, stemming from the reluctance of staff to move fromplaces where they are well established. Finally, the Common Market pro-visions are to some extent being thwarted by the national trading corpora-tions vwhich enjoy a monopoly for dealing in certain types or goods. Whiiethe Treaty precludes quantitative restrictions or outright prohibitions --

except where explicitly stated, as in tne case or agricuiturai commodities-- the national trading corporations are able to circumvent these provisionsb-7 the simple expedient ot not importing commodities from the Partner States.

120, Although the implementation of the institutional and other provi-sions of the Treaty for East African Cooperation has been somewhat slow inthe past, there is evidence that the Partner States are now addressing them-se_ves to some of the outstanding problems. Tanzania's commitment to theCommunity has been strong and it has already expressed its willingness tocoontribute towards the creation of the physical facilities required by theCommunity in Arusha. Several meetings have been held in recent months ofthe Economic Consultative and Planning Council of the Community, the Commit-tee of Planners (at Principal Secretary level) and of various sub-committees(comprising senior officials) on areas of activity such as industry,tourism, etc. It is envisaged that the work of these bodies will form thebasis of coordinated effort among the Partner States on matters of commoninterest. A number of problems concerning provisions relating to the Com-mon Market have been resolved within the Common Market Council. The EastAfrican Development Bank which has the important responsibility of remedyingthe imbalance in industrial development has already made some investments,and is actively initiating some studies the results of which could form tilebasis of further, substantial investments. The Income Tax Board has beendecentralized to make it more responsive to the needls of thie three couLntries.And finally, the Partner States have agreed to commission a study on theharmonization of fiscal incentives to ensure standardised procedures in thethree cnuntries

- 37 -

The Role of Private Enterprise

121. Following the Arusha Declaration in February 1967, the scope forprivate enterprise -- other than in association with. NfC -- in Tanzania hassubstantially decreased. The Second Plan estimates that private investmentwill amount to Sh 2,150 million or about 26 percert of the total. It i8 eK=pected that the major proportion of the private investment -- almost 90 per-cent of the total -- will be in housing, road transport and construction.The Government does not exp6ct private enterprise to play a crucial role inmanufarturing or large-scale agriculture.

122- During the First Plan, private investment conformed closely tothe target until February 1967 when there was redefinition of its role.it is too earl to Judge whether tie A-rusna Declaration had a directinfluence on private investment. Although there are no separate statis-tirs on private capital formation, Lt appears that the growth of privateinvestment slowed down in 1967 and 1968. The combined data for the privateand parastatal enterprises (the former was the dominant element prior to1967) shows that investment increased from Sh 327 million in 1963 to Sh 585million in 1966 or at an average annual rate of 21.4 percent, but the averageannual increase was only 5.9 percent since 1966. Although the statisticalprocedure olf attr'Lbuting investment in a given project to the year in whichit was completed precludes any definite conclusions, the indications arethat. since tle assumption by the parastatal enterprises of major responsi-bility for investment in the directly productive fields, the momentum ofinvestment appears to have declined.

123. The Government considers that, with the exception of those en-terprises listed in the Arusha Declaration, private enterprise continuesto have an important role, and several examples of collaboration with theparastatal organizations -- notably NDC -- exist. In most of these cases,the initiative has come from foreign interests. The main fields in whichlocal private enterprise is active are housing, transport and tourism. Mosthousing investment will be in owner-occupied housing, since the Government'spolicy is not conducive to the construction of rental properties by manypeople (the "leaders") who are able to undertake investment of this kind.

124. Perhaps the most important field which is open to private enter-prise is tourism. Tourism is projected to grow rapidly and, although theGovernment-owned Tanzania Tourist Corporation has its own plans for ex-panding tourist facilities such as hotels and game lodges, the field isbig enough to provide many opportunities for private investors. Apartfrom investment in accommodation, there should be opportunities in trans-port, conducted tours, entertainment, crafts and curios etc. The Govern-ment has stated that private enterprise is welcome in this field.

Supplier Credits

125. For many years Tanzania has carefully avoided supplier creditsand contractor finance. At the end of December 1968, supplier creditsamounted only to US$5.2 million or a little over 2 percent of the total

- 38 -

outstanding external public debt. No firm figures are available forprivately-contracted supplier credits, but this is unlikely to be sub-stantial.

126. In recent months, there have been indications that the cautiouspolicy adopted by the Ministry of Finance with regard to supplier creditshas not been followed by the private sector or by some of the Governmentand parastatal agencies. The National Development Corporation proposesto finance many of its projects through machine credits which involve tying.Some concern about the growing use of supplier credits was expressed a fewmonths ago by the Governor of the Bank of Tanzania. It might be desirablefor the Government to undertake a review of all supplier credits/contractorfinance which have been used, and those which are now being considered, byall agencies (including the Government) with a view to providing cleardirectives for the future. This action would also enable the Bank ofTanzania to exercise vigilance when being called upon to approve arrange-ments involving supplier credits.

127. There may, of course, be projects to which the Government attacheshigh importance which cannot obtain support from the conventional sources offinance, and hence necessitate a resort to supplier credits. The mission'srecommendation concerns the majority of cases where prolects which have beenwell-prepared and satisfy minimum economic criteria do attract the supportof conventional financing agencies.

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IV. ECONOMIC PROSPECTS

A. The Second Five-Year Plarn 1969-74

Dev!j1 o-men t Strateg,

128. The broad objectives and strategy of Tannzania's See.ond Five-'earPlan were laid down in the Arusha Declaration of February 1967, which hasaffected all Aa4or decisions n mo-aoMic npolicy. The Declaration camewhen the First Five-Year Plan wBa at midway, and some assessment had beenmade not only of Plan performance, but of the validit Of the strateyybehind the Plan. Even before the Arusha Declaration, it was clear thatthe Government wished to follow a soeia4-It course, eniargin- the roleof the Government in the economy and carrying out a3 accelerated progra-mof rural development. These broad considerations whIc a have since in-fluenced many policy decisions provide the main theaes of the present Plan.

129. The Plan aims at producing a balanced development of the socio-economic structure of Tanzania. In the fiLrst place, investrment in direct--

ly productive activities which enlarge the resource base, thereby sustainiLngthe miomentum of growth, isL to be stepped up, -while provision is to be madefor some increase in consumption, particularly at the lower income levels.,The rural areas are to receive a fair share of totaI. investu,ent throug,

programs with a rural bias, so that the considerable disparity betweenurban and rural living standards is reduced. Further, growth is to bediffused rather than being concentrated in limited areas of the country.Growing inequality of incomes is to be avoided. Finally, while exteral.assistance is to be welcomed, there would be a larger mobilization ofresources within the country.

130. The strong emphasis on rural development in the Second Plan re-flects the recognition that the bulk of Tanzania's population will have tomake a living in the countryside. Although structural change involvlLigindustrialization and other capital-intensive activities will be under-taken, the need for improving the quantity, quality and variety of agricul-tural output remains a matter of paramount importance. This objective isnot, however, to be pursued in isolation, but as part of an effort toimprove rural life in many ways. The initiative for rural development isto come mainly from the rural population, with support from the Governmenitin the form of staff and finance, well-conceived infrastructure, and aneducational system which provides training for agriculture. Efforts willalso be made to develop a technique for improving rural housing at minim=uacost.

1.31. Industrialization during the Plan will initially proceed alongthe lines already established during the First Plan i.e. manufacture of con-sumer goods, further processing of local products and basic industries suchas cement and petroleum refining etc., but there is provision for develop--ing export and capital-goods industries. The emphasis for many years willbe on import-sulbstitution which hag already made substantial progress durDing

- 40 -

the First Plan. With regard to the road program, the early years of thePlan are expected to be dominated by the Tan-Zam highway, but the Plan alsoemphasizes the need for feeder and secondary roads for the agricultural pro-ducer. Tourism is accorded an important place so as to take advantage ofthe great variety of natural attractions in the country. A major invest-ment which is currently under way - an international airport near Arusha,the focal point of the northern tourist circuit - is to serve the growingneeds of tourism.

132. The Plan has a strategy for urban development which involveslimiting the growth of Dar es Salaam, the capital, and promoting thedevelopment of nine urban centers distributed in all parts of the country.These centers should provide direct and indirect employment for the ruralpopulation in their vicinity, the former through demand for wage labor,and the latter through an increase in the demand for the goods producedin the hinterland. Thus, urban development is not only to be diffusedbut to act as a catalyst for rural development. There will be some publicinvestment in low and medium cost hou.sng and also in on-site developmentswhich are to facilitate self-help effort.

133. Important changes are envisaged in the educational system. Thelong-term objective of achieving self-sufficiency in high-level manpowerby 1980 which was adopted soon after independence, has influenced alldecisions in the educational field. The expansion of primary educationwas slowed down during the First Plan in order to ensure that adequateresources were allocated for relatively higher levels of education. Thisis to be changed in two ways: (a) by providing a full seven-year trainingfor all pupils in the primary system; and (b) by stepping up primary edu-cation with a view of achieving universal entry by 1989.

134. The strategv for educational development is to make the systemmore responsive to the needs of a rural society, and to enable it produceend-products who will fill crucial manpower gaps, by increasing trainingin science subjects and technical education.

Plan Targets

135. The First Plan set out to achieve an average annual increase inthe garnq dnm.qt1r nrndiirt of 6.7 nprrent a vyar= Acrording to offirinlestimates, the actual increase was 4.3 percent a year, but it is believedthat growth has been underestimated in the official fiires, and t-ha tthe

real increase was close to 5 percent a year.

136. The Second Five-Year Plan aims at increasing the gross domesticnrn,4.,. at 9i percaent a ,anr. This rstet 4i a composite Of an

4ncr-aSe in

the monetary economy of 7.6 percent a year and of subsistence at 3.0 percenta year. -u- - -a- -u --- cortru and publ u are expeted to

grow at a high rate, followed by transport, commerce and agriculture. Theonly sect'or wh'iich ls expecteld tLo shiUow a decline is mining. It 'Ls expectedlthat there will be a decrease in the share of agriculture in GDP, and modest-"&creae s11 'Ln 1 t' LVe rieLativi staesUo L a LUL aLfau , UnUcLL UU LruLon anU LtrlaLUpo L

(Table 10.1-Statistical Appendix).

- 41 -

137. In order to achIeve a growth "b5 percenit a year, the Plan projecsa total investment of Sh 8.085 mlllie nmade -tiv of the foS!l-w.Lg comp telt

Central fGovernmnent - s 055 million

Parastatals arnd Cooperatives : s5 2 AOOt) sai ll.0or

Private - Ib 2 i '- i ion

Easf Afrc.an Communv1-,>h F -i mil1lon

Tel .;2J- Sh ir ,X ion

138. The :Lnvestment of Sh 3,0..'5 nbilin by the Gentral G.overnment re-presents ministerial expenditure on2:. vX and includes Sh 305 milliotn for thetlocal cost of the Tan-Zam Railway; ., -oecz not- Include the csrntributicns toparastatal organizations of Sb l650 milMou,n inveotmenz by the East AfricanCommunitv is the estimatted share of Ta%n.;enia in the total investment programof the Comimunity, principally the Corporatio.ns. The parastatal and coopera-tive investment is accounted for by the prograns of 25 bodies, although fIveorganizations - National Development Corporation (NDC), Tanzania ELectricitySupply Co. (TANESCO), National Agriculture and Food Corporation (NAFCO),Tanzania Tourist Corporation (TTC), and National Housing Corporation (NIIC)-- together account for almost 85 percent of the tota3l. parastatal investmernt(Table 10. 4-Statistical Appendix). Private investiment will mainly be inhousing, transport and construction, since the major responsibility forinvestment in agriculture and manufacturing has been transferred to theparastatal organizations.

139. In line with the einphasis on self-reliance in thie Arusha Declara-tion, the Plan aims at Renerating the maior proportion of development financewithin the country. Of thie Central Government development budget of Sh 3,705million (including contributions to the parastatal organizations), Sh 2,105or 57 percent is to be financed by domestic sources. Abouit 30 percent of theparastatal program of Sh 2,300 million will be financed from their ownresources, a further 30 percent from resources provided by the Central Gov-ernment and the balance from abroad, in the form of eauity capital, long-term loans and supplier credits (Table 10.6-Statistical Appendix). Pastexperience suggests that between 35 and 40 percent of the investment by theEast African Community organizations could be financed from their own re-sources, and the rest from abroad. Private investment will have to befinanced almost entirely from domestic resources, since most foreign pri-vate capital is expected to flow into the parastatal organizations, par-ticularly the NI)C. In sum, internal resources are expected to financeabout 66 percent of the total investment and external soures the rest.

140. In ordler to im1nement an investment program on the scale pro,ertedin the Plan, there would have to be an irncrease in the raria of gross in-vestment to gross dnmestic -roduct. Investment a_ s a proportion of mouetaryGDP rose from an average of about 15 percent in 1963-64 to an average of

- 42 -

almost 21 percent during 1965-68. The Second Plan proposes to raise theratio of investment to CDP even higher. Investment is projected to increaseat the rate of 10 percent a year during the Plan so that the economy willbe capable of allocating 25 percent of the monetary GDP to investment bythe end of the Plan.

141. With regard tc employment, the Plan recognizes that there will notbe any increase in agricultural wage employment. Non-agricultural employmentis expected to increase at the rate of 7 percent a year, from 250,000 in1968/69 to 348,000 in 1973/74 (Table 10.2-Statistical Appendix). The project-ed increase in employment is tied in with the growth of GDP, and is also inline with the rate of increase in employment during 1965-68. The requirementsof high-level manpower will be kept under review so that appropriate adjust-ments can be made in the investment in various types and levels of education.

B. Investment and Output

142. In reviewing the Plan target for the growth of GDP - both in theaggregate and for individual sectors - relevant factors such as past ratesof growth, implied marginal capital-output ratios, the capacity for pre-paring and executing pro_jects - particularly in the light of manpower pro-blems, prospects for individual commodities, the overall climate for invest-ment and the availability of resources were taken into account. The targetgrowth rates in the Plan for the construction, public utilities, commerce,rent, transport and service sectors seem realistic. In the light of availa-ble information, the pessimistic assumption concerning mining also seemsJustifiable. The Plan targets for the agricultural and manufacturingsectors seem, however, to be rather high.

143. In projecting the growth of output, the Plan uses a 1968/69 base.51nne eonmnlete data was not available even for 1968 while the Plan was beingprepared, projections to 1973/74 are from a base year output which was initself an apnnrnimation- Tt is better to use 1968 (for which the relevantfigures became available after the Plan was finalised) as the base year andcarry the nvr trrins thrnouh 197'3. Althntioh this fa 1l short of the Plnr

period by six months, it gives a firmer base to the projections. A com-n0.4a^rl nv tha o tr,rtnranl armnth rntpa nrnieprtp hv the Pln,n And t-ha m4caiaan

is given in the summary table on the following page, and details of them4ssion'8 pr4git- 4iora are saheorn 4n Tnhle 10.8-Statistca Appendix

- 43 -

Table 10: GDP PROJECTIONS, PLAN AND MISSION- AT CONSTANT 1968 PRICES

(Sh million)

Sector Plan Mission Plan MIssion Plan Missionl9-Q/-9 1a;-6 193,76 197 Grv C=ro -

(Base) (Base) Rate (%) Rate (%)

Agriculture

Monetary 1,480 1,270 2,095 1,874 7.2 8.1

Subsistence 1,630 1,664 1,890 1,929 3.0 3.0

Industry 384 377 707 625 13.0 10.7

Other Sectors 2.676 2.558 3.753 3,584 7.0 7.0

Total 6.170 5.869 8.445 8.012 6.5 6.5

144. It should be emphasized that the identical rates projected forthe growth of GDP by the Plan and the mission is a coincidence. The mis-sion would have projected a significantly lower rate of growth - both foragriculture and total GDP - but for the great improvement in the outlookfor coffee - one of Tanzania's major exports - during the next few years.

Agriculture

145. The Plan sets a target growth for monetary agriculture of 7.2 per-cent a year which would result in its relative contribution to GDP beingSh 615 higher at the end of the Plan. Planned development expenditures bythe Ministry of Agriculture, Food and Cooperatives is Sh 635 million or 21percent of the total Central Government development Plan. 1/ In additionto the Ministry, parastatal organizations 2/ in the agriculture sector havean investment program totaling Sh 357 million.

1/ Total investment by the Central Government in the agricultural sectoras a whole would be higher, since account would have to be taken ofrelated investments by other Ministries such as the Communications andEducation Ministries.

2/ N.A.F.C.O., Tea Authority, T.S.C., Dairy Board, N.M.C., L.S.M.B.,N=A=P.B.. Tobacco Board.

- 44 -

146. An analysis of the physical output targets and prices on a commodi-ty basis 1/ shows that the contribution of monetary agriculture to GDP couldreach Sh 604 million in 1973, only about Sh 11 million short of the amountestimated in the Plan. On the basis of the expected reduction in the outputof soft wheat, rice, oilseeds, and livestock, and some expansion of sisal,it is likely that the actual physical output would decrease by about Sh 39million. The breakdown of the estimated decrease in output is shown in thefollowing table:

Table 11: EFFECT ON GDP OF CHANGES IN PHYSICAL OUTPUT

(Sh million)

1973

Increase in Sisal Output +16.4Decrease in Output Uo

Soft Wheat -23.0R'ice - 1.5Oilseed -17.2£Live s-14.uck V

TuTAL -39.3

147. On the othue: hanA, on the basiz of revised Azssumpi4ons concerr.ir.g

changes in the prices of some commodities, the contribution of monetaryagriculture tuo GDP could 44-crease bPy sowe Sb 28. milin ..eb'L- d-L~J 'JAJ~ ..'JU.L~& &U,' aJI .J1I &U..J ULLLJJ.L.JLVLI. LAIC UL~1¶CL&UVWU

of the estimated increase in output is shown in Table 12.

Table 12: EFFECT ON GDP OF CHANGES IN PRICE ASSUMPTIONS(J&i U~l±lior)U

i~I ..)

Decline in PricesCotton -75.0Tea - 8.5Pyrethrum - 0.3Rice - 9.2Oiiseed - 3.0

Increase in PricesCashew + 3.5Coffee +121.0

TOTAL +28.5

1/ For detailed analysis, refer to Agriculture Annex.

- 45 -

The increase in coffee prices followring the severe frost in Brazil J.n

1969 will probably more than offset the decline in the value of outputarising from lower prices for cotton and other commodities. The combinedeffect on GDP of changes in physical output and price ia:umptions (Sh -9.Jand Sh +28.5 million respectively) results in a cont:vibutian to monetaryGDP by the agricultural sector which would be Sh 504 mil:L.ton higher thanthe base year - only Sh 11 million short of the Plan target of aa increaseof Sh 615 million.

148, The growth rate of monetary agriculture is Lloe;r LO be 8.1 per--cent a year. Such a high rate is only possiblc becaur3e rf unexpected in-crease in world coffee prices which occurred s½ce the publication of- ti Second Plan. Coffee prices are expected to renain htgh foxr 3-4 years, bywhich timae Brazilian coffee production is expected zo return to the 1968level. If coffee prices had not increased, the rate of growth of monetaryagr:lculture would have been appreciably lower - probnblv onlv 6.5 percenta year -. as compared with 7.2 percent a year as projectecs in the P'1an.

149. The prospects which face Tanzania's principq1 exports are asfollows. The price of sisal is likelv to remain at its oresent level.and the Plan's assumption of an output of only 160,000 tons by 1974 seemstoo pessimistic: outnut could be about 15 nereent higher than. the Planestimate. The export price of cotton is expected to decline by about 15percent over the Plan period; but miutut eould apnroach the Plan target.Several measures are listed in Volume II which could provide a basis forincreasing nutput to 615,l000 bals hv 1974. By 1974 the4 rroductlon ofcoffee is expected to reach 67,000 tons. As a result of the frost inBrazil in 1969, there has been a dramAtir rhange in the wrld aiipplv-demand relationship for coffee. The difference between prices for quotaand nnn-ri,nta onffDee will viy-rtu-ailly A ppanena.r for th,e r-.Vt ferw yDraq and

by 1973 the price may be about 30 percent higher than in 1968. There ap-pear to be good market prospects for cashewnuts and the rate of growthprojected in the Plan seems feasible. There is some question, however,ahniit the effirienry of the buying and proeessina ArtivitiesQ which an-pear to reduce incentives for the rapid expansion of higher quality nuts.In rho liaht of market prospects, the scope for acreage ex painn nnd the

level of production costs, cashewnuts warrant higher priority in the al-location of rAesources Tne output of a is expected to reach 110,000tons by the end of the Plan. However, the cost of domestic production ishigh, and the expansion in sugar production might better be limited to theutilization of present excess capacity, with the gap between domesticp-roduction and consupt-ion durin the -Second Plan ben 4-tb 4----tsc

The low import price c.i.f. Dar es Salaam means that the agency respon-sible for seling importJeA sugar would blA e azbUle to accuJullate a substantial surplus. The output of tea is expected to increase by 50 percentover., t P.i.L peod L. A decrease ln it*e average price f. 2 percet ayear is expected during the Plan. However, the future market for tea isuncertain. The uajor tea proaduci - agreement tocontrol exports of tea in 1970. Tanzania did not participate in thisagreement. TI'o achieve the Pln's mbtiustage for 'clue-cured tobaccoeof35 .millionpounds, more~ attention should be~ devoted totheorganization

of 35 million pounds, more attention should be devoted to the organization

- 46 -

of credit and extension services. The market prospects are good and it Isexpected that prices will rise by about 8 percent over the Plan Deriod.Prospects for fire-cured tobacco are also bright, and the Plan target maywell be exceeded. It should be possible to achieve a growth rate of 15or even 20 percent a year rather than the 6 percent given in the Plan.The introduction of new, more powerful synthetics on the commercial mar-ket may mean a further price decline for pyrethrum by the end of the Planperiod. Output may not expand at all if this happens, unless the returnto the farmer can be. maintained by an increase in productivity. The pro-posal for wheat expansion in the Plan is open to doubt on two grounds:firstly, the physical practicability of the expansion program; and secondly,the high protected price which the inferior soft wheat germ in East Africareceives. The wheat program could well be deferred whilst other programs.especially tea, tobacco, cotton and cashew are given a higher priority.Until more systematic cost-benefit studies are carried out, the allocationof scarce extension manpower to rice does not warrant high priority. Moreapplied research on agronomy, varieties, etc., is required before a maiorproduction campaign for o iseeds could be expected to yield an attractivereturn. Among the other crops the most important single commodity ismaize; the output of this item may increase significantly in view of thetechnical breakthroughs that are currently being achieved.

150. The proiected increase in the supnlv of marketed beef is notlikely to be feasible. Milk production will also rise slowly, becauseof the delay ini buildine un uminbers of purebred and crossbred exoticcattle. Consequently a growth rate of 3 percent would be more realisticthan the novrall targat of 5 nercent given in thea Plan- The tarogst forfishing and forestrv seem reasonable in the light of past performance.Haever, the cont-ribution- of snenrifir fishPriesp nrgrams and nrnipets toachieve this Increased output require more detailed economic appraisalthan has prevht~icu been done

151. Thce Plan estimates that investment in t-he m3nu,jfnct-rinf sectorwould amount to Sh 1,300 million during the period 1968/69 to 1973/74.If 4nvestmer.nt on this scale is achlleved, th-e anufacturin.,- sector wouldgrow at an average annual rate of 13 percent and result in a value added4r. t.e f4nal year of the, Plan. of cl 707 -414o.n: it should be -ed, low=

ever, that a significant proportion of the increase in output would resultfrom ir.vest'ments com-pleted towarAs the end of the_ Fl3 Pa. h poeceJ. L L J. LV~ Lk~LL A LU L_ " LLWJ Ln ~L4 ,' Li L4 A. ~ A..~L. .LZ 91LJ= ~investment is based on a review of investment opportunities amounting tor.U -I flLi -~I I P '1'L t-_ 'I - I. . -1 I I ... 1 t _.. - _ - __ L.._ -S'n fL Lvv miL.L.L'or. tile bUlkUL of thte L VeL.11MMAL W.L.L. be UrU,LLdertakn y INj%s.

Other parastatal organizations, such as the National Small IndustriesCorporation and the Workers' Development Corporation will be responsiblefor relatively small investments.

152. The target for the manufacturing sector is somewhat high. Amore realistic estimate would be about Sh 1,000 million. Investment ofthis magnitude should increase industrial output at the rate of 10 per-cent a year, and make a contribution to GDP of Sh 625 million in 1973.

- 47 -

153. Three factors are likely to coritrbute to a lower level ofindustrial output than is prolected in the Plan. in the first place.there is likely to be a reduction in thte scope fqrz i.rort suhstitution -particularly of consumer goods - %&hich n r. ra nt part instimulating the establishment of industrl.ei duri.ng thel: First Plan. Manyof the more obvious import-replacink in.litw;ries already exist and othersare now in the process of being established. Thus, there is every like-lihood that the growth of new consumer 0oods industripq will slow do_nafter the first two or three vears of the Plan. Although the P'tn refersto the possRbilitv of estPbli_nshi:cg exnort-nriented inidiatries, it alsorecognizes that many of the 1!nduetrial products which 'ianzania couli ex-port to nthpr *ron tries are also likely kk be n -prcd. nced by- the Thtter intheir early stages of industrial development. tience, aP export trade inindtintri al nroducts onuld have _o depend on special advanta-es whIlc atpresent do not appear to exist. The growth of indutstrialization also hasto be seen in the context of the Treat? for EW-t Afr1cn. Cooueratio.. which.prohibits the imposition of restrictions on manufactuired imports b-y any ofthe Partner States on the products of nthers. che provisie.rin fol- a trarsfertax will no doubt offer a mer<.nre of protection for Tanzania's industries,but this is unlikely to .ict as a com..plete bazrier to Common Mark'et exportsto Tanzania, parti^.ularly from Kenya. Tavnzania m-.y be able to increasee-ports to the Common Market, aAlthougli 4.it may prOve difficult inJ view o:Ethe relatively late establishment of it:s industries.

154. Progress in industrial development is also likely to be influ-enced by the somewhat narrowed ruope 'or private enterprise in Ta3zania,particularly since this may result in a reduction in the supply of skil.ledpersonnel. Th1ere -is a contintu:li skortag of people t:o manage industrialprojects. The arrangement by which a number of expatriate staff are st:Lllworking for nationalized eiterprises has been an important factor in w.ain-taining industrial output at its present level.

Mining

155. The output of the mining sector is expected to decline hb- 2.5percent anrnually over the Plan period. This is mainil due to the declinlein diamond and gold production. The Government has an :intensive gealog:Lcal-oapping, prospecting and mineral expioration program, wh+ich gives partic-ular emphasis to mineral prospecting.

Other Sectors

156. The services sector. including coTmmerce end transport, isexpected to grow at an annuai rate of 7.:i percent over the Plan period.The growth rates projected for the components of this sector in the Planare likely to be maintained, since th.e increae.e in the value of transrittrade to Zambia and, to some extent, the increase in tourism will offsel:the effect of the decline in the output of manufacturing and any unex-pected decline in the output of the aRricultural sector. Tnvestmnent inroads and airports is projected to be Sh 817 million or ahout 30 percent

- 48 -

of total Central Government development expenditures. The two major proj-ects are Kilimanjaro Airport (Sh 70 million), and the Tan-Zam Highway(Sh 394 million).

157. Investment in housing and buildings during the Plan may reachSh 1,209 million as rollows:

Central Government 56National Housing Corporation 278Private Sector 875

It is expected that housing will grow at 6 percent annually. The con-struction sector will be expanding rapidly at an annual rate of 10 per-cent in line with the rapid growth in investment.

Power

158. The program for the power sector envisages an investment ofSh 472 million which is completely related to TANIESCO. Nearly 83 per-cent of TANESCO's total sales Is in the coastal system which suppliespower to the Dar es Salaam, Tanga and Morogoro areas. The growth of thissystem is realistically estimated at 12 percent in 1970, 11.5 percent in1971-72 and 11 percent a year thereafter. The projects included in thissector nrogram are the extension of Ubun2u Power Station. which is beingfinanced by a World Bank loau, a bridging thermal plant in Dar es Salaam,and a new maior hvdro-electric Droiect at Kidatu. Anart from these whichaccount for about 64 percent of the total investment in power, there willbe a small hvdro-electric nroiect (2 KW) at Kiwtra costing about Sh 14million. The rest of the investment is for the generation requirementsof nanll centers that alrpadv haue nnwer siinnlv and fnr thp ronntruc,tion

and distribution of additional transmission and distribution lines. AboutSh 5 million has hbpen Prmnrkpd for hrin8ina elec-triityv rn five samnll

townships. Apart from the Kiwira project which could be somewhat uneco-nnm4 r tNhO fT79Qtm nt- nVp.tMA.OA in rho P1_n ioQ Vian f lri r

Tourism.

159. ~T.he Tanzanla Tvourist Corporat4on (TTC) 'was establ4 ished ir. 19694

to take over investment in tourism previously handled by NDC, and todevelop an expanded program for tle prorotion of tourisu. TTC will per-form the functions both of tourism promotion and investment in physicalLacilities such as hL-ote'ls and ' game 'lodges. 'Lh'e Plar. est',mates th-at 'Ln-vestment in tourism projects will amount to Sh 203 million.

160. At the end of 1968, a mission from the World Bank visitedTanzania to identify projects in tne field of tourism. Tne mission con-cluded that, given rising incomes in Europe and North America and therapid development of air charter tourism, it was possible to maintain acontinued growth of visitor arrivals at a rate not less than the 14 per-cent a year, which was the average for i9b3-68. Tne approximate numberof visitors was 40,000 in 1968 but could increase to 100,000 by 1974.

- 49 -

161. While a number of different projects for new hotels are beingconsidered and the Drogram of investment is being modified from time totime, the total investment proposed up to 1974 could reach Sh 160 milliozlfor accommodation and Sh 34 million for wildlife areas. This does not in-clude the cost of supporting infrastructure which requires further studybefore investment costs can he aRsessed. The new airnort at Sarva Juunear Arusha/Moshi which is being built at a cost of Sh 70 Million is ex-pected to brine visitors directly to the northarn Tanz,an!an game parksrather than through Nairobi, as at present.

East- African Community

162. The Plan estimates that investment by the East African Community -1inlvy the Corporations - in Tanzani-az moy nmount to8h 580 mR9 fll1tnn Thfle

Plan does not provide any details of thilis investmexnt and, at any rate,it is not posslble accuratel- to --- tion the invetm-ent 1-narmm of

C'orporations among the Parttner States. The major investireat programs oftbe Corporationls Is being financed pr'n-ipw ~~-1y he World -a..k, gnthe share attributed to Tanzania in the Plarn seems a reasonable estimate.

Parastatal Investment

163. The Plan estimates that investment by the parastatal sector willmount Lt--o about Sh 2,inn 300 Jt'in InUvestr..entby flve, Cof LU1- lr- co:por-ations (out of a total number of 25) is expected to be about Sh 1,830 millionor 80 percent. off the tLA1I 'Lse pr 138). The i,sn prga of mos I of

the parastatals seems reasonable. The investment program of NDC includesa verYy large project "Sh 'A.: L .L/ LU I IU:LI Jt : jusj oLLU

factory. For the reasons stated earlier (see para 104), this investmenti8 not likely -Uto be carried Ou UULr'ng the Pl a iu. -.Aans 'or a

sizable investment in sugar at Kagera-Mtibwa, which is likely to be un-econoriiL ln thie lightL o aLteratL-ves Lhat are available. Shortfalls

are also likely to occur to a small extent in the investment programsvJ. ;vULuL UJ. ;L.L1 au1dLLvx usLbaLILL.vL.LUL *pcz ±U,1i LLVe::LWuncL uy> L.LLt: asxw-

w1.11 probably be about Sh 1,850 million, or Sh 450 million less than theamouont projected inr the Plan.

Private Sector Investment

164. The Plan estimates that investment by the private sector wlllamount to Sh 2,150 million distributed as follows:

Sh million

Housing 600

Otner Buiiding 275

Transport 750

Construction Equipment 250

Other Machinery 275

Total 2,150

- 50 -

The major proportion of private investment is expected to be in housing,road transport and the construction industry, since the scope for privateenterprise has been considerably narrowed both in manufacturing and agri-culture, except for peasant farming. In the light of the performance ofthe private sector prior to the nationalization measures of 1967, invest-ment on the scale projected in the Plan may well be achieved. The amountof private investment projected in the Plan for housing and transport ap-pears feasible.

C. Financing of Investment

165. The mission estimates that total investment during the Plan willamount to Sh 7,435 million which is 92 percent of the Plan's projected in-vestment of Sh 8,085 million. The breakdown of the investment is shownbelow.

Table 13: MISSION PROJECTION OF INVESTMENT

Sh million %

1. Ministerial Development Expenditure 2,855 a/ 38.4

2. Parastatal Organizations 1,850 24.9

3. East African Communitv 580 7.8

4. Private 2,150 28.9

Total 7,435 100.0

a! Excluding investment to be covered by a commodity credit of Sh 200million on the Tan-zam Railway.

166. The figure of Sh 2,855 million for ministerial expenditure doesnot include Central Goverrment contributions to the parastatal organizations.The Plan estimates that a sum of Sh 200 million will be raised through com-modity credit arrangements to meet the local costs of the Tan-zam Railwayvleaving Sh 105 million to be provided by the Central Government. Thisfigure of Sh 105 is, however, included in the mission's estimate of invpRt-ment by the Central Government, since it is not covered by the agreementand hence becomes a charge on the Government's resouirces.

167. Investment bv the East African Community and the private sectoris included at the levels projected in the Plan. However, parastatal in-vestment wil1 probably eh lower than projectPd in thp Plan. The reoAonnfor the lower estimate are outlined in paras 104 and 163.

168. In view of the projected shortfall in parastatal investment, theCftnitral rGlveinment-'a i8ontribitiovn to thisc sector%r soun,ld nm^nt t-o Sh 525

- 51 -

million, rather than Sh 650 million as projected in the Plan. mIne Minins-terial investment program and contributions to the parastatal program wOULdtogether require the Central Government to raise Sh 3,380 million. The man-ner in which resources on this scale are to be raised is indicated below'

Table 14: FINANCING OF CENTRAL GOVERNMENT DEVELOPMENTEXPENDITURE WDRING THE PlAN

(Sh million)

Investment Financina

Sh million Sh millionInternal Sources

(i) Ministerial Programs 2,855 (1) Contributions(ii) Contribution to from the

Parastatals 525 Recurrent Budget 498Total 3,380

(ii) InternalBorrowing 1,050

(iii) Other Local 325

'rotal 1,873

External Sources

(iv) Total 1,507of which:

(Grants) (100)(Loans) (1,407)

A more detailed discussion of the financing of the Central Government devel-opment program is included in the next section (para 179).

169. The estimate of investment by the parastatal organizationsamountinp to Sh L,850 million i9 exnpeted to be financed from three sources- the Central Government, internal savings of the organizations and directexternal invpftmpntsz ineluding loan ni equitv nartiC-ination and sunpliercredits. As noted, the Central Government will contribute Sh 525 million.A s;um of Rh 1003 millinn iq PexnArtpd tn hp PAnArAtpd internallv bv theparastatal organizations, leaving Sh 322 million to be raised from externalsourres. Tf acrounnt in also taken nf the ni,entB nf t he NationalDevelopment Credit Agency (NDCA) and the National Small Industries Corpo-ration (NSIC), a further sum of Sh 146 v114nr" ouilA have to be raised

from external sources, but this could well be a revolving credit involv-ing much smaller amounts. The miseion did not attempt an ±nAandentestimate of internal resource generation of the parastatal organlzatlons;it accepted those given in the plan. Any shortfall in *his reopect Uouldcorrespondingly increase the dependence on external sources.

- 52 -

170. Investment by the East African Community in Tanzania is expected

to be Sh 580 million. This must necessarily be a rough estimate, since

some of the investments by the Corporations do not lend themselves to

apportionment on a national basis. Tne investment program of the Community

does not call for any direct contributions from the Tanzania Government,

although the latter is required jointly and severaily to guarantee loans

contracted by the Communlty organizations. The Plan does not give a break-

down of the sources of finance tor the investment program. A very rough

approximation based on past experience and a review of the projects wihichare to be implemented by the Railways, Harbors, and Posts and Telecommunica-tions Corporations ind'cates that the ratio of local and external resources

would be in the region of 35 and 65 percent respectively. Hence, local

contributions may amount to about Sh 200 million and external sources for

the balance of Sh 380 million.

171. Private investment which is estimated to be Sh 2,150 million will

have to be financed almost entirely by domestic sources. The major field

which is likely to be of interest to foreign private enterprise is manufac-turing. Since virtually the whole of sucil investment is expected to be in

association with NDC, it is included in the financing arrangements for the

parastatal sector. Some direct foreign private investment may be feasiblein tourism but this would depend on Government policy. The mission esti-

mates that direct foreign private investment is unlikely to exceed Sh 100

million during the Plan.

172. In sum, external sources will provide about Sh 2,309 million or

31 percent of the total investment of Sh 7,435 million 1/, and internal

contributions will amount to Sh 5,126 million or 69 percent. The shares

of domestic and external finance is fairly close to the pattern evolved

during the First Plan, and is in keeping with the objective of the Govern-

ment to promote self-reliance. If the construction of the Tan-Zam Rail-

way proceeds as planned, there will be a substantial increase in the in-

vestment program, and in the share of resources raised externally.

173. The mission's estimates of total investments and output show that

investments will amount to 21.0 percent of GDP over the whole Plan

period. The ratio of total investment to the increase in GDP, the

capital-output ratio, will be 3.5. These two ratios correspond witht hp ratios imnlicit in the Plan magnitudes.

D. CentrAl urTernmennt Budgets

174. Th.e griT-th of t-he Central Government budgets during the Plan is

based on the assumption that the increase in recurrent expenditure will not

exceed, on an average, 7-5 percent a vear in real terms over the hane vyar(1969/70).

it Excluding the Pan-Z^ Railway Thle -rovision for local costs in theLI L U*."L …_

Central Government budget is deleted to the extent of Sh 200 million,

uoth fLrom the investmen.t and financing fi-ures.

- 53 -

175. In order to keep recurrent ex-enldtures within these limits theGovernment has established recurrent expenditure growth ceilings for each

Min4stryIDepartenft- Th,. -- t-h,,A -.ndtA de4 th4 specifi4 M44.4-,.y/

Department ceiling was designed (a) to allow a high rate of growth inrecurrernt spendirn orn progr-.ams th hte- . 4i-mprnt.. - socia -1ndr devel=

opment impact, (b) to provide for the growth in recurrent expenditures4Mpli2d 4r the _.ir.4ster431 --- - - - - -rosm foz the 1ar'-od, a 'to constrain all other recurrent spending to the lowest possible level.TInline withL these criteria, th-e hig-hest recurrent expend4iture grv-;hILLL ~ .LLL W.1U L.IL~ L S.L~A~ L FL& LL'.L ?,ILVo L &_ .WLL AJIULLL~~J

ceilings were assigned to (a) Consolidated Fund Services, with a ceilingof 8 percent, 'Large'Ly in aniL.Lcipato.L U of increased Udet 5sCVJL.C requireL-

ments; (b) Ministry of Regional Administration and Rural Development witha ce':L.L'ng o1 o perLcenLtL, 'LJ LLIL.LMLLy u. A5LAA;u±Lure, rFou aIIU L.0upUraLLVU

with a ceiling of 9 percent, in line with the increased effort to ensuresufficient food production arid the more widespread application of thecooperative method of production and marketing; (d) Ministry of EconomicA CCS~2~~ lr AffLl.airs and Development Planning witn o percent, reriLecting the need toimprove its capacity to prepare programs and projects; (e) Ministry ofuommunications, Transport and Labor with 10 percent; (f) Ministry of Land,Housing and Urban Development with 7 percent; and (g) Ministry of Health andSocial Welfare with 8 percent. Most of the other Ministries/Departmentswere placed under a 3 percent a year recurrent expenditure growth ceiling.If the C^overnment is abie to constrain recurrent expenditures to the ceil-ings, total recurrent expenditures would rise from the 1969/70 budgetfigure of Sh 1,425 million to Sh 1,892 million in i973i74, the tinal yearof the Second Plan. For the Second Plan period as a whole, recurrentexpenditures would amount to a totai ot Sh 8,248 million. Since themaximum level of recurrent spending envisaged in the Plan is based onadditions to recurrent expenditures stemming from projects underway and to beundertaken during the Plan, and given the modest increases projected for ex-penditure on the social services particularly in the light of the estimatedpopulation growth, the Plan's projection of the growth of recurrent expendi-ture should be regarded as the absolute minimum, and could well be exceededunless deliberately held down.

176. Total recurrent revenue during the Second Plan is implicitlyprojected by the Central Government at Sh 8,868 million. This figure isbased on the Government's projections of its total recurrent expenditures 1/and the total amount that it considers feasible to derive as a recurrentbudget surplus - the sum of Sh 620 million. To achieve a total of recurrentrevenue of this magnitude during the Plan, an average annual rate of in-crease in such revenue of 9.3 percent would have to be obtained.

177. On the basis of its estimates of monetary gross domestic product,the mission projects that total recurrent revenue during the Plan couldamount to Sh 8,746 million. The details of these estimates are set forth

1/ The figures were derived by the mission, by applying a growth rate of7.5 percent to the approved budget for 1969/70, of Sh 1,425 million.

in Table 10.9 - Statistical Appendix. If these projections are realized,recurrent revenue will increase at an average annual rate of 9.7 percent,which is adequate to meet the total recurrent expenditures and to makesome corntribution to the development bud-et. illwever, there is littlescope for increasing the ratio of government revenue to monetary grossdomestic product which a1 t 21 percent is already high. During the FirstPlan the Government made substantial changes in tax rates and introducedthe d ev e lopment wi,c, which was later 4 rcorporsted into th.e personal -ax.In 1969/70 the Government introduced a broad based sales tax both on do-mesticalI pr AUe an 4A L4.- _UL_.a.cup A.._ romthi. J kJ

item are expected to increase at a rapid rate. In view of the increase int tion w & .ich h'as a.lready beer. achieved , the GO-ern-mtent -ol.- be _ardpuL.ax aL±J t L.L &adL~U ~i LLLVU tE'~J~ U~ WUU.LU Ut: L1,dLU PUL.

to raise the level of taxation much further. It should be possible, however,to achieve some increase 'La recurrer.t revenue through improved tax admin-istration. If recurrent revenue of Sh 8,746 million could be achieved,ti'Lere wouU 'De a recurrent vuudget surplus of ;n S'o million during tnePlan, on the assumption that recurrent expenditure will be limited to Sh8,248 million.

710. LLIe proJect'Lon of Central %3oveLt!Vn dev.0eUoeLtL expe_nuiture

during the Second Plan amounts to Sh 3,380 million, including a contributionof Sh 525 million to tue parastatal sector (see paras 160 and 169), Themajor part of the expenditure will be incurred by the Ministries of Com-munications, Agriculture, Lands, National Education, Regional Administra-tion, and Health. The transfer to parastatal organizations is expectedto be Sh 125 million less than projected in the Plan, since parastatalinvestment may not exceed Sh 1,850 million, as compared with the Plantarget of Sh 2,300 million on which the Central Government contributionwas based.

179. The main sources of finance for the Central Government develop-ment program are recurrent budget surpluses, domestic borrowing and exter-nal assistance. The mission's projection of recurrent revenue would prod-uce an aggregate surplus of Sh 498 million. Internal borrowing couldamount to Sh 1,050 million, representing the estimated borrowing from theNational Provident Fund, the commercial banks and the insurance companies,through sales of Government securities. Miscellaneous local sources couldprovide about Sh 325 million. Domestic sources would then collectivelyprovide about Sh 1,873 million. This would leave Sh 1,507 to be obtainedfrom external assistance. If this pattern of financing is realized, in-ternal sources would have financed about 55 percent of the total programof the Central Government and external sources 45 percent. The share ofdomestic sources would be lower than it was during the First Plan.

180. Of the total Central Government program of Sh 3,380 million, pro-jects requiring investment of Sh 775 million are unlikely to attract finan-cing and would, therefore, have to be financed entirely from domestic re-sources. If this amount is deducted from available domestic resourcesamounting to Sh 1,873 million, there would be an amount of Sh 1,098 millionavailable for projects that will attract external assistance. Hence, thefinancing of projects of this type would involve participation by localand external sources in the ratio of 42:58.

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181 At the end nf Jimp 1QAQ PvtPrnal A-istgance smounting to Sh 821..4million was available for Tanzania's development program from existingcommitments. The breakdown of this assistance was: USAID - Sh 57,2 m41-lion; IBRD/IDA - Sh 206.7 million; SIDA - Sh 122.8 million; Canada - Sh 9.4million; Denmark - Sh 34.8 mill1on; Italy - Sh 71.0 millio-; People'sRepublic of China - Sh 179.9 million; and U.S.S.R. - Sh 139.3 millioni. Aidfrom. ',-Test-ern' cniintrles addeA up to Sh, f 51 . mli. n -4 s- for- _-_cfi

projects, some of which are being implemented. It may be assumed that thisa4A -woud1A b.e d1Jisbursed s Ie adily .A4d Afo -- and th U.. &_itue

LLWLJA.AU~ uJ.ULU %L4CAU4.L A A.U 'Lro CJIl 5Sl±Li aAALU -LLLe TUT * . 10 .s R . ~.MIJuntinto Sh 319.2 million does not appear to be earmarked for specific projects.Experience with aid frou- -hese sources suggests t-at -sburse--er-ts aarelikely to be slower than of 'Western' aid, particularly if it involves thesale of commoduiutiues to raise f inarice Lfor loca'l costs. Tlhis f'actor wouildhave to be taken into account in estimating new aid requirements. IE thesomewhat arbDtrary assumption is maue Lhat disbursements oi aid from (*ninaand the U.S.S.R. would be one-half of commitments, capital inflow from thesesources might amount to about Sh 155 million.

182. Tne mission has estimated that capital inflow amounting to bn 1,507million is required for the Central Government's development program.. Ifdisbursements from existing commitments are assumed to be about Sh 657 mil-lion (Sh 502 million from 'Western' sources and Sh 155 million from Chinaand the U.S.S.R.), trhis would leave a gap of Sh 850 million for whicth newcommitments would be required. It would be desirable to have a pipeLineat the end of the Plan for disbursements during the early stages of t:henext Plan. It appears realistic to assume that, by the end of the SeicondPlan, the annual level of development expenditure by the Central Governmentwould be not less Sh 600 million, with a foreign assistance requirement ofSh 360 million. On the assumption that a pipeline is required to coverinvestment during the first two years of the new Plan, additional corumit-ments of Sh 720 million would have to be found. Together, the 'gap' andthe pipeline would amount to about Sh 1,570 million for which new commit-ments are required during the present Plan. This estimate does not takeinto account the aid requirements of the Tan-Zam Railway project.

E. Balance-of-Payments

183. The Plan projections of the balance of payments (Table 10.' -Statistical Appendix) show that the growth of exports will be about 13.6percent annually 1/, while imports are expected to rise at an annual rateof 8.3 percent. However, in absolute terms, the growth of imports willexceed that of exports 2/. According to the Plan, there will be a sharprise in the imports of capital goods, the value of which is estimated tobe 61 percent of the total Plan investment, and of intermediate goods

1/ The growth rates of exports and imports are the result of comparingthe Plan projection with the actual 1968 results.

2/ Because of a sizeable excess of imports in the base year.

- 56 -

which are assumed to grow at about 13 percent a year. The Plan envisagesthat total imports can be kept within reasonable limits by a tight restrainton the import of consumer goods; it is intended to put a ceiling on con-sumer goods imports to average Sh 750 million a year throughout the Plan.This will be achieved partly by increasing domestic production of consumergoods but, if necessary, other steps will be taken to put a limit on imports.The net result of the Plan projections of exports and imports is that thetrade deficit will grow from Sh 78 million in the first year of the Plan toSh 249 million at the end of the Plan.

184. The Plan projections of invisibles show that there will be adeficit on services rising from Sh 37 million to Sh 92 million between thefirst and final years of the Plan. The Plan envisages that the deficit oncurrent account will be met by the net inflow of capital for the CentralGovernment and the Parastatals. The required inflow is estimated to beSh 1,629 million.

185. The mission's assessment of the export potential of the majorcommodities shows that Tanzania's exports could grow at 6.3 percent annual-ly, (Table 10.10 - Statistical Appendix). The mission also estimates thatimports will grow at 6.6 percent annually. Imports of capital goods havebeen scaled down to reflect the expected decline in the investment program,but the increase in the imports of intermediate goods as projected in thePlan is needed not only to support a higher level of economic activity, butto meet the growing needs of Zambia for crude oil, which Tanzania refinesand reexports. However, the flat figure of Sh 750 million a year includedin the Plan for consumer goods imports seems unrealistic, since it wouldimply that, in relation to 1968, imports of consumer goods in the firstyear of the Plan would grow by 32 percent. If, instead, it is assumedthat imports of consumer goods rise at an annual rate of 6.5 percentreflecting the increase in incomes and the expected rise of imports fromKenya and Uganda, the total value of consumer goods imports during the Planwould be Sh 3,438 million, or some 10 percent lower than the Plan estimateof Sh 3,750 million.

186. An to the invisible account; the Plan nrobably did not trak fullaccount of the favorable effects of increased tourism, as well as the transittratid to Zarhn_ Tanzaninia 8urnlu8 on non-fartor AprviupQ in 1968 is not

a temporary phenomenon. Non-factor receipts have grown at the rate of 20percent a year during 1963-68. FOr the purpose of pro4ection, they areassumed to grow at 15 percent annually, because Tanzania lacks facilitiesto receive a larger number of tourists, and all of the expansion plans maynot be completed before the end of the Plan. Non-factor payments are pro-4ected to grow at an ------ ra of 10 percent, o at th sa..e rate as i.

the last five years. Factor income receipts are projected on the basis ofthe A trend lnthe 1ast five -Y.14 leI ay,menc are. assum,.ed o grow at LIU

percent from the 1968 level. The net result 18 that Tanzania slhould hnve agroWing surplus on the seJmice account a..ountnl. to about Sh . 10t ',y tlie enCuIof 1973 (Table 10.11 Statistical Appendix).

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187. On these assumptions there will be a large trade deficit duringthe Plan which will be largely offset by the surplus on services leadingonly to a small deficit on the current account. To cover the deficit onthe current account, and to provide for the maintenance of foreign exchangereserves equal to four months imports, will require a net inflow of capitalof no less than Sh 646 million. Taking into account the repayment of ex-iernal nuhllc debt in^ludinc! comnensation n"-ents for the ninazeenterprises, this would require a gross inflow of Sh 1,003 million.

Table 15: SUMMARY OF MISSION PROJECTION OF BALANCE OF PAYMENTS(Sh mnlhlin)

Cumulative 1969 - 1973

A. Goods1.0 _fl J 'AG 7U , I ..$.

Imports (Adjusted) 10,868Bz'lar.ce or, tradue -,3

Receipts 2,985=-rayments Ju,30

Balance on services 682

C. T'ransfers (net) 116Balance on current account -335

D. Capital AccountInflow 1,003Outflow 357

Net inflow 646

E. Required increase in reserves -311- - increase)

a/ includes Tanzania's share (on a notional one-third basis) ofthe earnings of the East African Airways Corporation. Sincethe Corporation keeps all its revenues at its headquarters inNairobi, Tanzania's disposable foreign exchange earnings fromits exports of goods and services will be less by this amounit.There is no satisfactory basis for projecting Tanzania's shareof this item, but its non-availability to Tanzania means a cor-responding increase in its capital requirements. The balanceof payments of the three East African countries need to be re-constructed to take proper account of the operations of theEast African corporations.

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F. External Public Debt

188. At the end of 1968 Tanzania's external public debt amounted to$209.8 million. If account is taken also of Tanzania's liability l/ for thedebt (on a notional one-third basis) of the East African Community amountingto $65.0 million, it adds up to a total of $274.8 million. A completereport of transactions in 1969 is not yet available but, in the first sixmonths of 1969 Tanzania's debt increased by $51.9 million; this meant thatoutstanding public debt rose by 25 percent in a very short time.

189. In 1968 interest and amortization payments on Tanzania's own debtamounted to $7.4 million. Tanzania's notional one-third share of theCommunity's debt service was $11.0 million. This adds up to a debt serviceof $18.4 million. Foreign exchange earnings from the export of goods andservices in 1968 amounted to $274.8 million. Thus debt service paymentsabsorbed 6.7 percent of the foreign exchange earnings in the year.

190. Estimated future debt service indicates that there will be peaksin Tanzania's own debt service in 1972 and 1973 and in the Community'sdebt service in 1970, 1971 and 1975. The rate at which export earnings areprojected to grow should ensure that no problems are encountered in meetingdebt service payments.

191. The average weighted terms of external debt incurred in the period1964-68 is shown in the table below:

Table 16: AVERAGE WEIGHTED TERMS BY ORIGINAL AMOUNTS OF EXTERNALPUBLIC DEBT OUTSTANDING AS OF DECEMBER 31, 1968 a/

Year of Original amt. Maturity b/ Grace InterestCommitment (US $'000) (Years) (Years) (%)

1964 61,283 27.7 10.0 0.8961965 6,080 26.7 7.1 4.6761966 21,117 25.0 6.4 1.3411967 43!910 18.3 4.6 4.1901968 22,799 35.4 7.4 1.168

a/ Exeludina supnliers' credits with no nominal rate of interest(implying interest hidden in loan) and debts where the termsnf rnntract are not availabe.

hI Term from date of oAntrArt to mattirftyv

1/ External borrowing by the Community organizations - principally theself-cor.tained services - is u…ran.teed b- the three Partner St-te-s-both jointly and severally. HIence the apportionment of the Communi-ty's debt on a one-th4ird bnais does not fully reflect the legal lia-bility of the Partner States.

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192. There was some deterioration in the average weighted terms bet-ween 1964 and 1967. Both grace and maturity periods were shorter until1967, while interest rate did not show any trend. There was a subst-antialimprovement in all respects in 1968. Whether the improvement will bemaintained in the coming years can only be judged in the light of theterms on which new debt is contracted beginning in 1969. For example, newdebt contracted in the first six months of 1969 has relatively shortermaturit a ±"4-her za- .erage interest rate so that debt service paynentswill be significantly higher from now onwards.

G. Projection of Debt Service, 1970-1985

193. In view of the substantial improvement in the short-term prospectsfor Tanzania's exports and a lower growth rate thereafter, and also theneed to maintain a high level of imports for many years to come, an attempthas been made to project the country's debt service ratio during the period1970-1985 on various assumptions concerning the blend of capital and thegrowth of exports. The assumptions and the resulting debt service ratiosare shown in Table 10.12 - Statistical Appendix.

194. Two periods - 1968-73 and 1974-85 were chosen for the purpose ofselecting the blend of capital inflows. Four types of blends were chosenranging from hard (70 percent non-concessionary and 30 percent concessionary)to medium (50 percent each). Terms softer than this are unlikely to material-ize in view of Tanzania's joint and several liability for the debt of theEast African Community. The growth of exports was assumed to range from6.5 percent to 8.1 percent in period I and 5.5 to 6.5 percent in period II,and imports from 7.0 to 7.3 percent in period I and 6.0 to 6.8 percent inperiod II.

195. Starting with an equal blend of concessionary and non-concession-ary aid, the debt service ratio would remain under 10 percent until 1980under all assumptions, but would rise to 13.3 percent thereafter. As theblend becomes harder, debt service ratios in excess of 10 percent wouldappear even by 1980, but only when the assumed rates of growth of exportsare at the bottom range. By 1985, however, only the most favorable rateof growth of exports would keen the debt service ratio lower than 10 ner-cent; in all other cases, the ratio would range from about 10 percent to15.8 percent.

196, The foreaoing exercise clearly damonstraten that the debt serviceratio is sensitive both to the rate of growth of exports and to the terms oflendiFng Tt wYould also appear that the situation in likelv tn deterioraterapidly after 1980, if the terms become harder before then. Hence, ifTanzania'a deb1%t hurdern is to be kept within tolerable limits- it i8 desir-able that new commitments in the 1970's should be on relatively soft terms,and also that Tanzania should exercsae caution in the matter nf incuirringnew debt with short maturities and carrying high interest rates. This ispartlcularly 4mportant since, with a rather large conoftrstin of figri-cultural exports, Tanzania's exports might suffer unexpected declines onaccoun.t of extraneous factors sue..h as wfather anA f .lu.tuati-n onmwmditprices.

APPENDIX I

POPULATION

1J4.±*L + IJ -h oA +.J -W A . 4. .. w LiAA + '.M± . fitClicac ^f nnn

lation have been held in Tanzania - in 1948, 1957 and 1967. The resultso'fJ V1he '[ULree censuses are sho-JnW in lii ie 4l,aUble below.

Table 1: TANZANIAE' POPULATION CENSUS RESULTS, 1948-67

Census Itecorded Absolute Annual DensityYear Population Increase Growth Rate per sq. Rurle

(Number) (%) _ __

1948 7,480,429 .. .. 21.91957 8,788,466 17.5 1.0 25.81967 11,957,176 35.1 3.1 34.8

a/ Mainland only

Source: Background to the Budget, 1968/69, and Provisional Estimatesof Fertility, Yortality and Population Growth for Tanzania.

2. For the purpose of estimating the population in the inter-censa:Lperiod 1957-67, a growth rate of 2.0 percent a year had been used. Onthis assumption, the population in 1967 would have been about 10.6 million.On the other hand, the results of the 1967 census showed that the populatio,was close to 12 million. This would indicate an inter-censal growth rateof about 3 percent, which is probably too high particularly because ofthe poor quality of enumeration in 1957. A comparison of the inter-censal.growth rates during the periods 19L8-57 and 1957-67 in the MainlandRegions shows that in 7 Regions the annual growth was twice as high inthe latter period as in 1948-57. This is not realistic, and hence theapparently high growth rate is attributable, at least in part, to someunderenumeration in the 1957 census.

3. In view of the fairly clear evidence concerning the under-estimation in the 1957 census, and in order to derive the basic demographicfeatures for the purpose of projecting the population up to 1980, a samnlewas drawn from the census records, processed and tabulated, and theresults were analvyed with various techniques. This studya/ indiG2tedthat the annual growth rate for Tanzania during 1957-67 was about 2.5-2.6npercent- and that. the oric1de hirthrate w2S 416-)8 nper thcousnrL Tife

expectancy at birth was estimated to be 40 years, and infant mortality Debh as lno.T asc 16n npe +thousnand T'ho +.n+.tnl fecrtility is snmomewhe narine

6.5 births, corresponding to a gross reproduction rate of 3.2.

an/ R'vroiqi ni1 Estimat.Pq of Ferti1i tyv Mnrtplitv. and Popfulation J>.iwthfor Tanzan.ia" - Central Statistical Bureau, 1968.

- 2 -

4. Looking to the future, the above study points out that "thedevelopment of medical and social service will lead to a decline inmortality - and possibly somewhat higher fertility - which may accelerateslightly towards the end of the next decennium." The annual growth ratewhich was assumed to be 2.1 percent in 1948-57 and 2.5 percent in 1957-67is projected to be 2.7 percent in 1967-75 and 3.0 percent in 1975-dO.On this basis the population of Tanzania will increase to over 15 millionin 1975 and around 17.6 million in 1980 (see also Table 1.1 - StatisticalAppendix).

5. Among the significant conclusions of the stucdy are the following:

(a) the steady decrease in mortality combined with constantor rising fertility will change the age distributions in the directionof raising the proportions in lower ages. "The dependency ratio ofabout 89 'dependent' persons per 100 persons in the age 15-64 years willbe even higher, to reach in 1980 a value of 97. The absolute number ofchildren in school ages 5-14 years, will increase by 50 percent and thenumber of old people will be more than 25 percent higher";

(b) apart from the direct effect of the population growth oneconomic development, the changes in age distribution will be in adirection which will put even more pressure on the scarce resourcesavailable;

Table 2: ESTIMATED AGE DISTRThUTION 1967 AND 1980, ANDAR,T.T1TF POPTTT.ATTxTl TT\Tr.P7A.CT. BY Ar.C. A\ qY

Total Population % A.bsolute No. Absolute No. Totalof Males (t'oo) of Females ('000) Increase ('tOOoi

Age 1967 1980 1967 1980 1967 1980 1967 to 198x

o-4 17.9 19.3 1,097 1,687 1,102 1,696 1,1845-9 11I.3 15.1 871 1,319 882 1,335 901

10-14 12.2 12.6 740 1,098 751 1,114 721I1~- a~., -i r I . -inr A AIA aoo. ALI. o)-A A5-I 19 0.JA *4 0..L636 924 614449358

20-34 22.5 22.0 1,372 1,919 1,391 1,946 1,102-).47 1.2L. 2LC.L 17 1.L,051)C U820 1,U08 )14

50-64 6.8 6.o 399 500 438 550 213rl+ 2.6 21. 1.- 177 178' a1

L u C -~~~L4-L -L f-LfU C.

m_I - ,r n- L nrr-' 0 f,r' Z £ n^ 0 00 ro1Ula± UU I.UU UoqU u,Vg o,UUu u,Uu) ,syu

Source: "Provisional Estimates Of Fertility, Mortality and PopulationGrowth for Tanzania ".

(c) primarily as a result of declining mortality, the popu-lation growth for Tanzania may become even higher than 3 percent after1980. The study notes that, if there is no decline in fertility, thecomibined effect of population growth and redistribution between ageswill mean a heavy strain on efforts for economic development.

6. The total land area of Tanzania is 341,150 square miles.According to the 1948 census the density of population was 22 per squaremile, and it rose to 26 per square mile in 1957 and 35 per square milein 1967. In absolute terms, Tanzania cannot be considered to be over-populated. According to the 1967 census, only 7 out of the 17 Regionsin Tanzania had a population density exceeding the national average of35 per square mile. In these Regions, the population density has beenincreasing steadily, the highest densities in 1967 being in the Kilimanja:oand Ma'anza Regions at 127 and 139 per square mile respectively. Thechanges in t-.e icnsities in the census years 1948, 1957 and 1967 are shownin the table below.

Table 3: POPULATION DENSITY, 1948, 1957 AND 1967

Density per sq. mile1948 1957 1967

Mainland Tanzania 22 26 35

Selected Regions

Kilimaniaro 70 86 127M4ara 34 45 64wh^X>nza,qn 86 106n 139Tanga 46 56 74W.Prest Tnkc ),I )6 ,0

7. Altlhough Tanzania has plenty of land which can be brought intoArneino.1n aft vrelat+.i -volowv I mar rcos+t +he'rei 4 - iot-nani iSj r ,^- rof +.,a enormous

burden which a rapidly growing population would impose on the economr,-nes+; o1 tlarW n +hn st4vl +- r,w1l s+; r' Tvi- ; ve+veiAr.4 yb +h, Coroi, T _

r- -' r"-v' . .4. _ vv VlVVA.V. aV '.VW

Year Plan to the conference of the ruling party, the President of Tanzaniadrew atten.tio to t+hs point ad stated I4-4 4-1r --r ardspecially educating them for many years, is something which is a uniqueg-ift a-.d responsib Di.ity of. 1 Ill1 C,LL,e and 1o hienc L,4 1 1'is i.,Jljcu.lpota for- h

beings to put emphasis on caring for children and the ability to lookafuterl ther,l roel,aer '-- than Whrgonyofwe n--ilbers of% child renCLI. UCJ. Wi PU1IiL,Y, 1-LU1J1 4-i 4d1 I±U1AJ4inLv Oli±Jy UJ. Lai~ liUiu~L I. Cl1±LU'I

and the ability to give birth." Although the President was speaking intle context of tkhe problems of expandilg the educational system, it isclear that the ramifications of his remarks extend beyond the problemspurely of une educationaL program.

8. Despite the recognition of the population problem which isevident in the kresident's statement, Tanzania does not as yet have anofficial population policy. However, the issue of population growth andits impllcations have been discussed at seminars and conferences, atwhich Ministers and senior officials of the Governments were participants.The Government wishes to avoid a doctrinaire approach to the populationquestion but, instead, to examine the case for it within an Africancontext, on the basis of specific arguments which are within the com-prehension of the bulk of the population.

9. The Family Planning Association of Tanzania was established in1965. It commenced its operations with one clinic in Dar es Salaam,but the number had increased to 7 clinics by 1969 and, in addition,38 clinics were operating in up-country areas. Most of these clinicsoperate on a private basis with no direct financial support from theGovernment. The Dar es Salaam City Council has provided physical facil-ities to the Association to run a clinic. Family Planning is taught atmedical schools and as part of the training for nursing staff. It isintended that the up-countrv areas would be served by health educatorswho are now being recruited.

10. The Government's approach to a population policy appears to becautiousj hut constructive= It shows a clea .or reanition of the needto consider the implications of rapid population growth, although thereis-- -no pn-rfima facie -^vidence +V- nt-mrlat 1 pn n"essne i.Till develon in +he

next few years. The problem of population pressing against availableresources coA sld, e Tazi orly in the~ c 1 w longe v-,-- but +__eGovernment's approach to the problem gives promise that it can be ade-

U y -A 4 * 4 1quasfi-L ;witho.

APPENDIX II

HOUSING

1I-. l ' partv' yea_-s, Tanz4±a tas rto develop

a housing program aimed at meeting the needs of a rapidly growing popu-latLon h-rough thie creation oI an efficient, low-cost housing industryand the mobilization of self-help effort which would obtaiii the maximumadvantage fro-m such an industry. wnile recognizing that weii-conceivedurban housing programs are needed to prevent a rapid deterioration inliving conditions through the emergence of slums, tne uovernment is alsoaware of the complexity and the high cost of developing an adequateprogram. Moreover, there is a strong desire to ensure that the ruralareas get a fair share of the total investment. The Plan recognizesthat "improved housing provides both tangible current benefits and hopefor a better future, which can provide motivation to the people to promotecapital formation by contributing their labor and by mobilizing savingswhich otherwise would not flow into investment."

2. The National Housing Corporation (NHC) which was establishedin 1962 is the principal instrument for undertaking the public sectorinvestment program in housing. The functions of NHC are to:

(a) lend or grant money to local authorities for approvedhousing schemes;

(b) make or guarantee loans to individuals or corporations toacquire land and construct houses or carry out approved housing schemes;

(c) construct houses or other buildings; and

(d) advise and assist in the preparation of proposals forhousing and housing schemes.

3. During the First Five-Year Plan, NHC undertook the constructionof 6,327 low and medium cost houses. The breakdotam of this program byarea and category of housing is shown in the table below.

Table 1: CONSTRUCTION BY NHC

MediumLocation Low Cost rCst Total

Dar es Salaam ) 292 38 ),678Other Townships 878 204 1,082TR-ThnuTships 296 27 323Rural Areas 239 5 234

Total 5,705 622 6,327

4. In order to enable NHC to carry out its investment program, theGovernment made a contribution of Sh 69.3 million during the First Plan,and NHC raised the equivalent of Sh 19.4 million. Including investmentsfrom resources generated internally, NHC's assets grew to Sh 100 millionduring the Plan. Although NHC's investment fell very much short of thePlan target of Sh 360 million, it has succeeded in building up an efficientorganization which will enable it to increase its operations in the future.

5. Although it was not originally intended that NHC should undertakeany building contracting work, it wzas forced to do so owing to the lackof a suitable alternative institution. It has built up a labor force of2,000 - all Tanzanians with the exception of the General Manager. Althoug;hthe capacity of NHC to build houses has increased, it is able to copewith only a small part of the housing problem. NBC estimates that itneeds to build at least 6,000 housing units a year to cope with demand,but may be unable to build more than 1,500 units at tlhe outside. Thenumber of applicants on the waitina list in Dar es Salaam alone was about15,500 at the end of 1969.

6. In addition to the construction of houses, NHC has also estab-lished facilities for nrodncinp some of the materials used in bllildInpe.g. joists, cloor and window frames etc. This has enabled it to becomemore self-sufficient in its buiild.ing prograrm nnd, at the snme time; tomake a beginning in establishing a new industry. Ihlhen NBC started tohiiild houses a few years ago, +the i mnn-r+. i-ip rtcontent -f' +.he value of a complet.edpunit was 35 percent, but this has now been reduced to 23 percent. WRithf'-'ther developrennts in +the supporting builldng materiy insr BCexpects that the import content of its houses could be reduced to aslittlen as 10) nfpercentP of1 the vlue.

7. 4L4ing the Second 4.`.vecYO.r Plan it. is intended hat a public

development program of building 35,000-40,000 houses should be undertaken.Ir. 4u-e, -- ILTC will bu-ldL or'y- low-co h -uses -44. 1-J4i1 the r e of

Sh 6,000-11,000. It is also expected that NHC will eventually be ableto build about 2,000 houses a year, leavring a gap in the public housingprogram of about 20,000-25,000 houses. This shortfall will be met bydueve'loping- sit; e - ar. seric -aiiis ic-udn water, - airae

foundations. The actual construction of houses will be undertaken bylease-holders, WIho -will raise the required reso-urces either individuallyor as members of building cooperative societies. It is possible thatsomie houses could be built main'y through self-help.

O T__ - - _ _1*__ T_'n~ .- _ __ _ __ _1 ___ ____ __ *__ ___D_ __o In practUce, Inu wILi concen1rate on uluIng houses for tnerelatively low-income groups. Those whose incomes exceed Sh 6,000 ayear would obtain housing loans from the Permanent Housing FinanceCompany (which normally gives loans up to 75 percent of the cost of ahouse, but may advance as much as 95 percent in special cases) or otherinstitutions. A ceiling of Sh 75,000 is to be imposed on the cost ofhouses to be built by the Government and the parastatal sector so as toconfine the outlay of public moneys to houses of a relatively modest standard.

-3-

9. The housing policy of the Government is intended to give maximumencouragement to those who wish to own their houses. As a corollary, theGovernment has divested itself of the responsibility of providing housingto its employees, and the parastatal organizations are following suit.This represents a notable departure from the policy of providing housingfor civil servants, which continues in many African countries as a legacyfrom the days of colonial rule.

10. With regard to rural housing, the Government's policy is to"introduce irmrovements in the traditional house and in traditional buildingmethods," rather than design a "miodel" house from scratch. As far aspossible, it is intended to make maximum use of traditional buildingmaterials, and to determine in advance the specifications and quantitiesrequired during construction. There will be a program of research intoampronriate building materials and designs. After the required informationhas been mobilized, it will be disseminated through the community devel-opment approach. The regional buildinrg teams which at present complementthe self-help effort in rural school construction will be expanded toinclude self-heln housing nroijcts as wiTell. Tt is intended to make abeginning with the new rural housing program in the Ujamaa villages.

11. Tanzania's housing policy reflects the recognition that thecountry cou+ld 41-ai fford to allocate more than a modest proportion oftotal public sector investment to housing and that the initiative willhave to come largelyr from the peo-le. However, effoTrt7s wl be1 d_retedtowards the creation of basic facilities e.g. site and service schemes,which wll stiV.lae4 I-A I IS r a ity. MIh, efI . hl 'J Ibe 14 madeS ~during the Plan to develop improved rural housing by using traditionalLUL.LUd±inI I.mtI al.j.. a.InJ JIIm d 4U.roveJA-w , if sucess ', pa an

important part in improving rural living conditions.

APPENDIX III

PROJECTS FOR EXTERNAL FINANCING

volume II of Tanzania:s Second Five-iear Plan provides a detailedlist of projects which are to be implemented by the Central Governmentand the parastatal organizations during the period 196y/70-1973/74. Forsome of the sectors a two-year forward program has been drawn up, and itis intended to give priority to the preparation of projects inciuded inthis progran. The preparation of projects will be a continuing exerciseso as to ensure that the investment program in the coming year/s will bebased on a firm list of projects. It is also intended that the investmenl;program should be as flexible as possible, so that it can take accountof changes in the meritus of projects and programs and also in the capacityrfor implementation. The five-year program and, more particularly, thetwo-year forward program were based on (a) a judgment concerning thecapacity for implementation in each of the Ministries and the Divisionswithin the Mlinistries, as reflected in their performance during the FirstPlan, (b) the strategy, objectives and targets reflected in the SecondPlan, and (c) commitments already made, requiring the completion ofprojects under way.

2. In order to ensure that a steady supply of projects is forth-coming, the Plan provides for Ministerial Planning units to be set upwith the primary responsibility for project preparation. A nucleus ofplanning staff has been set up in the Ministry of *-griculture, Food andCooperatives, but substantially more staff will be required in this andother Ministries to speed up the preparation of projects. The capacityfor implementation will also depend on the effectiveness of the recruit-ment nrogram - particularly from overseas - since departures of expatriatestaff are believed to be far in excess of arrivals. By September 1969the average nlLrnbe of arrirvlS had decreased to 10-15 a month comnaredto about 20-25 a month up to the middle of 1969.

3. A list of higl priority projects which have already been prepared,or wdhose preparation is sufficiently advanred to ennble them to be submittedto external donors could not be included in the report because the bulkof the investment c-rrently *,vdr rr i rs a cotiruio-n nf programs which

were started towards the end of the last Plan, and for which the required4 inance hllas already been Tr t4 e-a nnted +tht+ +the 9Ta,n-in

Government will prepare such a list and distribute it to members of theEast A-ca Co-ns,I -tat-ve Co prio to +the G-ro-ps meetncng on T-an7,qniq±2: ~ U 2"L L± .J,O IJ±UL. V~ J V ~ JU~~"v ±1- -

at the end of April 1970. This would provide an indication of projectstuo wh'iLli l4iUle ) overnmIent atU0LachL'es high.l priloriU V . As n-ote in pr-a-7 -nh

85 of the report, external donors who are interested in financing projects3-wViLLtr a particul; field m.ght -ilsh to assist in the prepr ation ofprojects in that field, if a shortage of staff precludes Tanzania frompresenting fully prepared projects.

- 2 -

4. It is expected that the first list of projects prepared byTanzania, and also other projects which will be prepared in due coursewill be reviewed initially at meetings of local representatives of theConsultative Group countries, as has already been done for Uganda, Kenyaand the East African Community. These meetings will be held in Tanzaniaunder the auspices of the Bank's Permanent Iiission for East Africa, whichwill also assist Tanzania to prepare the lists.

APPENDIX IV

STATISTICAL TABLES

Index

Table No.

A. PAST PERFORMANCE

Area, Population, Employment

1.1 Estimated Mid-Year Population, 1950-19801.2 Population Den%sity by Reieon, 19671.3 Total Wage Employment by Industry, 196h-68

National Accounts

2.1 Industrial Origin of Gross Domestic Product at CurrentFactor Cost (196h-1968)

2.2 Industrial Origin of Gross Domestic Product in ConstantL7.AJ P ices, .L7"-W

2.3 GDP At Constant 1964 Prices, 1964-682- .L4 Niatid onal Incor.Ue by D.LQtr ib UUti.e SJ1haes at Curren't

Prices, 1964-19682u Gross "i'a PLlU;rodu L L 'uLrren4la Yr'ku u P rice, 196'-68

2.6 National Resources and Their Uses, 1964-682.7 National Sa-vings, 19%4-682.8 Gross Fixed Capital Formation, 1964-1968

A. By Socto wrB. By Type of Asset

External Trade, Balance of Payments

3.1 External and East African Trade 1964-19683.2 External Exports by Main Commodities, 19 604- 68

3.3 Tanzania, Total Imports by Major Categories, 1964-19683.4 Direction of External Trade, 1964-19683.5 Estimated Balance of Payments, 1964-1968

External Public Debt

4.1 Medium- and Long-Term Public Debt 19684.2 Estimated Service Payments on External Public Debt 1969--1983

Fiscal Statistics

5.1 Summary of Central Government Revenues, Expenditures andBalances, 1963/64 - 1968/69 (Functional Analysis)

5.2 Central Government Recurrent Revenues, 1963/64 - 1968/695.3 Central Government Recurrent Expenditures, 1963/64 - 1968/69

(Functional Analysis)5.4 Central Government Development Revenue by Main Source,

1963/64-1968/69(Continued)

Fiscal Statistics (Conttd)

5.5 Central Government Development Expenditures by Ministry,196L-1969

5.6 Summary Statistics of The Parastatal Sector, 1966-675.7 National Development Corporation

(A) Surplus Income and Its Appropriation, 1965-68(B) Financial Position. 196q-1968

Monetarv Statiqticq

621 Commircial Banks - Credit by Economic Sector- 196l-686.2 Commercial Banks - Assets and Liabilities, 1966-686=3 Commercial Bank Deposits and Advances, 1961,-686.4 Bank of Tanzania - Assets and Liabilities as at

30) November 1969

Wage &fQqR PricesP

9.1 Total Annual Wage Rill by Tndus try, 196-689.2 Adult Male Citizens Employees by Wage Group, 196h-689.3 Employ.rment anr Earnings by Economic Zon, I96A.689.4 A. Retail Price Index of Goods Consumed by Wage Earners,

B. Cost of Living Index of Goods and Services Consumed byMirirVlp. rlv.ndp (Iiwtil .0uy- n+-Q -Tn oql

Midde Grde ivilServnts- Dar Es Sl~aa~m

B. PLAN TARGETS

10.1 Output Targets at Constant 1968/69 Prices10.2 Estimated Non-Agrultraml +.1 n rcrea ses,

1969/70 - 1973/74 - Based on G.D.P. Targets10.3 Phasing of T-- .. e,- 1QAQ,/7r - 1071/7L

IX) * ) I11(2 .LW1 _J. LIAVYU WUULAUVI , 1./k7 - Ll I _)/ I .4

10.4 Parastatal Investment, 1969/70 - 1973/7410.5 ~Cap^lC_ Iv-nes+w-,me;ntk (All. Setrs y cn.c

Classification (1969/74)LA.). ..) it. jt 1.UJ 'JVIIIUI.L.01 2 d u- of Reso2urces10.6 A. CentLra-l UVvernme-,nt Soour-ces and o Use ofReource

B. Parastatals: Scheme of FinanceLV.7 DBalaice of PxaryILentUII2 PrrUJW.;tLU1U, 19767/70 - .L7 (_/74

C. MISSION PROJECTIONS

10.8 Mission Estimates of GDP by Sector10.9 Mission Estimates of Government Revenue, 1968/69 - 1973/7410.10 Mission Projection of Merchandise Exports10.11 Mission Projection of Balance-of-Payments10.12 Projection of Debt Service under Various Assumptions,

i970/19085

A. PAST PERFORMANCE

Table 1.1: EST1MATED MID-YEAR POPULATION 1950-1980-/

('000)

Year Mainland Zanzibar Total

1950 8.0LJ 272 8,313

1955 8,922 290 9,212

1960 10,016 312 10,328

1965 11.332 3l1 11.673

1967 11i905 35) 12;2p9

1968 12,927 361 12,588

1969 12,5 57 369 12,926

1970l 12 86 377 13 °73

1975 1lL, 733 421 15, lSL

o980 17 ORI h7A 17 ,557

a! Based on revisions made aftr the results ofth167ensusindiSateAthatpopulation had been growing at a higher rate than the assumed rate of 2.2percent. For th,1e p-- of- the tabove C-- + the ra-t of growth --from 195o(r

is assumed to be 2.1 percent and from 1957 to 1967 it is assumed to be 2.5-,e.n¶-r+ ctFo pllQoseo ofn +n 1 oRn a "-n+a n- cfr r.9+h o 5 7 s-nor'niLV u .. v ._ A s v, 1 v Lv v sv v 8 ̂ zva v J v v | v, . v v | S v v X v. v w .v E) > v vw v A .v | _, | rv fi _ v ....~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1- - _ - .- /__ - -, - & .- - - 1 Vis assumed for the period 1967-75 and 3.0 percent for 1975-1980.

Source: Central Statistisal Ba, Pea rovisional Estir,.ates of F-ert-lty,

Mortality and Population Growth for Tanzania

TABLE 1 .2: POPULATION DENSITY BY REGION, 1 967

( I co))

Pop.ulation Area

Region Number % Sq.Hiles % ]opul0ation, .ensity

Mainland

Arusha 601,515 4-9 31,700 9 19.0Coast 508,752 4.2 13,02() 3 39.0Dar es Salaami! 272,215 2.2 3() - 9,083.8Dodoma 708,422 5'.8 15, 950) 4 " -Iringa 683,555 5.6 21,95( 6 31.1Kigoma 470,773 33.9 1 ,30( 4 32.9Kilimanjaro 650,533 5.3 5,1Y0) 1 127.6Mara 535,882 .1-4 8,40t 2 63.8Meya 955,891 7.8 32,10t) 9 29.8

Morogoro 683,061 5.6 28,20() 8 24.2Mtwara 1,032,896 8.5 3'1,95( 9 32-3Mwanza 1,057,695 8.7 '7,600 2 139.2Ruvuma 392,812 3.2 2:3,65( 6 16.6Shirrvanga 888,209 7.3 19,600 5 45.3Singida 454,749 3.7 19,05( 5 23.9

Tabora 552,339 1p 5 h47,1 00 13 11.7Tanga 769,304 6.3 10,35( 3 74-3West Lake 658,079 5.4 1'1,10( 3 5

Total 11,876,982 34'1,150 34.8

Zanzibar and Pemba 3S4,,36 0 ,2.9 1,021 1 347.1

Total - Tanzania 12,231 1342 34:2,1 71 35.7

Source: Backgrouncd to the Budget, 1968/69

a/ Refers only to the municipal area of the city of Dar es Salaam

a/Table 1.3: TOTAL WAGE EMPLOYMT BY INDUSTRY,1964-68

('000)

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- _z . A1 n C o7 . n ZZe>s4 0Eindustry 1904 19.) 1976 1967 17uu

Estatf Agricul iure 163;,589 139;162 126,223 123;887 109;213

l'4ning and Quarrying 80o35 7-b18 6,191 6 43 6;.121

Manuf act-in- 23,583 259729Q 9Q,0 'A 31,18 A 35,3

Constructior.n 'A 740i 31, C7 37 ,4A6 )4, o9o 7 4 n7,

1hi Ii ^- TT+ i 1+Ac. 1, ~7 1, 7 C~9 c~ AniY 7 nflO 0 A(nVlublic -1-lties l,637I 4+,75 5,303 I,9 9,601

17 ')1 17 ,I84 2935O 0 2)0,77 2i 1,15Cormw r c e ~~~~~~~I I, J41 I I W, -) '4J j '/ 3,J r-W, ~I r 'J-'

i. .ansport anidu Comr.Icaons 25,67 I C U, L4L - I ,) 297, 3 7 64 I u4

Index (1964 = 100.0) 100.0 95.0 95.8 98.7 100.1

Non Agricul. Employ. 187,668 194,593 200,276 222,854 242,498

Index (196)4 = 100.0) 100.0 103.7 106.7 118.7 128.2

a/ The coverage of the data is significantly less than 100 percent of allemployment and thus the data are more accurate as to trends thanexact levels in any one year.

Source: The Annual Economic Survey, 1968

TaLble 2.1: hDUSTRIAL ORIGIN, OF GROSS DOMESTIC PRODUCTAll CURRENT FACTCh COST, 1 964-1968

(Sli mi:Llion)

Industry 1 964 1965 % 1966 1967 61968 %

Agriculture 2,805 57.99 2.,651 54.17 2,895 53.00 2,896 51.26 2,934 49-99

AirLing 121 2.50 121 2.47 159 2.91 161 2.85$ 111 1.89

'imary Sector 2,926 60.49 2,772 56.6L4 3,054 55.91 3,057' 54.11 3,045 51.88

Mariufacturi.ng 194 4.oi 234 4.78 283 518 332 5.88 377 6.42

ConrstruLction 1154 3.18 151 3.08 172 35.15 2 08 3. 68 221 3.77

Public Utilities 35 0.72 37 0.76 48 0.88 51 0. 90 60 1.02

Corrnerce 600 12.41 658 13.45 767 14.04 780 13-.1 853 14-53

Rent 222 4.60 246 5.03 276 5.05 293 5-19 302 5.15

Transport 197 4.07 216 4.41 247 4 .53 27$ 4.186 298 5.08

ServiLces $ 109 10 2 580 11.85 615 11.26 654 11.57 _713 1 2.15

Secondary and 1kij1 39-j 2,122 43.36 208 44.09 2,593 45.89 2,B24 48.12Tertiary Sectors

To-tal GDP 4,837 100 4,894 100C 5,462 100 5.,650 100 5,869 100

SRnlrne! The Annual Economic Suxvey, 1 968

Table 2.2: TNEDU5T1IAL CUI1tj-N CIF Gi.OS5 DOMaST3 P!iODUULTTY CCH.STA'..T 1960 i ;F,S, 196P o8

(Sh million)

1964 1965 X 1966 % 1967 % 1968 9

Monetary Sector

Private

Agriculture 1,172 40.14 ],210 32.56 1,342 40.36 1, 334 39.49 1,300 37.6,6

Mining 96 3.29 115 3.76 123 3.70 117 3.86 100 2.90

Manufacturing 162 5.55 173 5.92 20h 6.13 227 6.73 256 7.81

Construiction 2.02 o7 2.19 29 2.03 79 2. 3 4 2 3

Public UtilitieS 2L Oq & 5 3 9 5 1ol 9 '.

Commerce 528 13.03 5L8 17.91 610 18.35 598 17.70 633 13.34

Rent 85 2.91 90 2.94 92 2.77 97 2.37 98 2.981

Transport 95 3.25 97 3.17 111 3.34 119 3.52 127 3.68

Services 152 5.21 152 8.97 159 8.78 170 q.03 177 5.13

Total 2,373 81.27 2,L83 81.17 2,741 82.44 2,776 82.18 2,818 31.52

Public Sector 547 13.73 576 13.83 53) 8i 1 7 . 56 602 17.82 638 18 )(.8

Tot-s' Mcnet- - GDP 2,920 100 3,059 100 3,325 100 3,378 100n 3,1852 lO

X of Total Monetaryto Total GDP - 69.62 _ 71.47 71.21 - 70.68 - 70.74

Subsistence 1,274 30.38 12 23.53 1y . 1,81 2 1 21C)

qI. -1 'I nr\ 1. -I qn I /)r) 1. 4 c0 I nn I., 770 -1 1~0 I _.i

Source: The Annual Economic Survey, 196B

Table 2.3: GDP AT CONSTANT 1964 PRICES, 1964-1968

(Sh million)

1964 1965 1966 1967 1968

Monetary GDPValue 3424 3561 3869 3972 4040Index 100 104 113 116 118

SubsistenceValue 1413 1356 1484 1554 1597Index 100 96 105 110 113

Total GDPValue 4837 4885 5369 5514 5611Index 100 101 111 11i 116

Source! Derived from Table 2.2

I'able 2,,4: NATIONAL INCOM BY DISTRIBU'TVE SHARESAT CURRENT PRICES, 1964 - 1968

(Sh miiLlion)

1L964 .1965 1966 1967 1968

Monetary IncomEj

Rural Household 728 16.12 807 17.68 935 18.68 915 17.65 922 1.6.971

Compensation of'Rnployees a/ 1:, 315 29.11 1,L18 31.06 1,545 30.77 1,6214 31.33 1,68L 31.0o0

PuTblic SectorIncome 155 3.43 171 3.75 190 3.78 224t h.32 236 4 .3L3

Income fromiProperty 97 2.15 107 2.34L 115 2.29 123 2.38- 131 2.4L

Other Surplusf'rom Enterprises 309 17.91 709 15.53 727 14.48 722 13.93 796 L4h.65

SubsistenceIncomie 1,L13 31.28 1,353 29.64 1,506 30.00 1,575' 30.3c ],664 30.63

Total NationalIncome 4,517 100 i,5o5 CC 5,021 100C) 5,1233 iC) Y, 433 100

a/ Includes non-cash benefits and remuneration of irregulLar wage earners in small-holder airicu1tu-re.

3ource: The Annual Economic Surve-,, 196,

Table 2.5: CROSS NATIONAL PPODUTTT AT CTTRR1JTMARKET PRICES, 1964-68

(Sh million)

~~xur ab uuvueLlu ~~duuv uu~'~ i O). I o4t -1K o~y ,'J'R

+I~inQIreAu jd.Xeb - OUU~51U±t~) _____ L /U(, I4O'U UL,,j

196 196. 196 167 1

GDP at CUurrentu Factuor Cost 487 L9L 5462 5,650 5,86

+(Indirect Tlaxes - su-bsidieb` 477-- 46 ° 63

GDP at Current ilarket Prices 5,2i4 5,30i 3 ,92h 6,200 6,492

-Net Factor Income .v Rest ofthe World 76 142 138 94 43

GNP 5,138 5,159 5,786 6,106 6,449

Source: Derived from the Annual Economic Survey, 1968

Tbhl P 2=6: NATTONAT. PESOUIkCES ANT) 1ETHE tJSES. lc)61-(,,8

(Sh million)

IunT.nlv of Re2oiLr-es

(IMP ait (lnrrrent. i-Hr'rkn± R cPr.s- r .1 18 ACl nLt t-? ,7f.(, (,.f ,!!

Tmr~nrt.'s 1 ,I 3?7 1 )-(< 1 1)06 1 '! 2/

Tota.l Spnoly .> t 7 62 5 i '

L-2 L 2 -

ITse of Resouree.-

Private Consumption'-' ,606 3j•i8 3,?3).l X,lci2 ie! '

Public Consumpt-icjn2_/ o81 781 886, 27! -8

Gross Tnvestment f71 76L t34L 1,00(

Exports l,677 1, `QO 01 , 1 I 9! , )..'

Total Use of Re3ources 6 35 6 6 1l 7 ' 8 1 8 .72

§ Residual it.em.

Due to incomplete catFt on Public consumption. the total recurrentbudget of the Central Goverriment OT1LLuS pen (.4-cn: ;-IHn ,r:'11;fre.: io;

the development bu6vcets is tclzcn as,can inei>(t:;r ' t..-L publiccOnsumut ii u)n.

8ource: Deriveel from Background to the Ruciget:-

(9h million)

1964 1965 1966 1967 19,68

Gross National Product 5,138 5,159 5,786 6,106 6,1449

Less Total Consumption 4,287 4,299 820 5082 L8

Equals Gross National Savings 851 860 966 1,024 931

of which: a!Central Government Savings-' 36 36 27 54 51

- % to Total Savings 4.2 4.1 2.8 5.3 8.7

Others!Y 815 885 940 1,016 8151

- % to Total Savings 95.8 95.9 97.2 94.7 91.3

a/ Central Government savings are defined as the contribution of therecurrent budget to the development budget. The average of twofiscal years is used to derive the figures for the calendar years.

b/ These include the private business sector,household sector as wellas the parastatals.

Source: See Tables 2.5. 2.6 and 5.1

Table 2.8: GROSS FIXFD CAPITAL FORMATION, 1964 - 1968A - BY SSCTORa/

(Sh million at current market prices)

Sector 1964 1965 1966 196'i 1963b/

Household/Enterprise:buildin. 11[2 155 157 163 183

Conssucon t9 8, 51 66 29Machinery and Equipment 168 275 377 387 431

Total 379 516 585 616 643

PublJ,e:Building 614 99 82 84 104Construction 100 110 139 183 214Machinery and Squipment 28 140 49 120 84

Total 192 291.9 270 387 1902

Grand Total 571 765 855 1,003 1,045

i)ata excludes Tanzania's shrare in East African Airways VC-lOs and the East African NationalShippin-t Line vessels: Approximately Sh. 40 million in 1966 and Sh. 25 million in 196'7.

b/ Provisional.

Source: The Annual Economic Survey, 1965

Table 2.8: GROSS FIXED CAPITAL FORNATION, 1964 - 1965B - BY rTPE OF ASS3T

(Sh million at current market prices)

Asset 1964 1965 1966 1967 1968a/

Building:Residential 101 122 95 110 114Non-residential 105 132 144 138 173

Total- 26 2C14 239 21. 3 l 27

Construction:Water supplies 30 43 26 26 40Communicationnb/ 26 38 62 79 99Railwavs and Harbours 24 1$ 17 24 18Other 69 100 85 121 86

Total 1149 196 190 250 243

Fquipment:Transport 89 107 176 242 221Machinery 127 208 250 263 294

Total 216 315 426 505 515

Grand Total 571 765 855 1,003 1,045

a/ Provisional.

/ Excluding railways.

Source: The Annual Economic Survey, 1968

Table 3.i: VATVl1rAAL AIW EAST ArnICl' U-IAvE

1964 - 1968

(Sh million)

1964 1965 1966 1967 1968a/

Exports

Domestic Exports b/ 1402 1256 1582 1554 1585

Exports to Kenya 82 91 76 66 74

Exports to Uganda 20 27 17 15 17

Re-exports 26 26 110 33 41

Total 1530 1400 1785 1668 1717

Imports

Net Imports b/ 879 1001 1285 1301 1532

Imports from Kenya 266 282 266 228 261

Imports from Uganda 48 52 62 49 41

Total 1193 1335 1613 1578 1834

±L u L w--UU 6z;Ufl_LU&UI.

b/ Outside the East African Common Market

Source: East African Customs and Excise, Annual Trade Reports,1964 - 1968

Table 3.2: EXTERNAL EXPORTS BY MAIN COIODITIES, 1964-68

(Sh million)

19614 1965 1966 1967 168Quantity Va,lue Quantity Value Quan titj Value QvantiLty Value Quantity Value

Coffee (lOO tons) 32.7 221 27.8 172 4'9.8 301 43.7 237 43.4 255

Cotton (LOOO tons) 44.5 198 55.3 244 81.8 350 59.8 251 61.9 283

Sisal (1,00 tons) 208.9 437 210.2 286 19'7.8 235 201.2 201 186.1 159

Diar-onds (1000 tons) 6614.0 136 828.l4 142 90'5.7 186 987.6 223 632.7 135

Cashews (1000 tons) 55.8 66 63.6 83 7L.1 100 69.t 92 78.4 102

Meat and MNeat Prekarations (100() tons) 5.6 43 5.6 38 8.0 57 6.4 Ih 4.9 (3

Cloves (1000 tons) 8.1 1-3 8.'5 46 14.2 74 17.0 90 11.5 60

Oil Seeds, Nuts and Kernels (1000 tons) 63.4 61 47.6 57 5$0.7 53 LJ.9 45 34.9 4

Tea (1000 tons) lh.4 31 4.2 29 6.2 45 6.() 43 6.6

Hide3 and Skins (1l000 tons) '5.5 26 7.0 3CI 6.6 43 5.-2 259 6.8 31

Petrolemn Products .. .. . .. .. 5 . 133 *- 162

Tobacco (1000 lb.) 3815.0 1 3,674.() 10 5,232.0 16 9,032.0 34 :1.1,060.0

Other Cormrodities .. 193 * 176 .. 203 .. 215 .. 215

Includes Zanzioar.

Source: The Annual Economic Survey, 1963

Table 3.3: TANZANIA, TOTAL IMPORTS BY-/MAJUOR UATEwRUIES, 1.964-1968

(Sh million)

Item 1964 1965 1966 1967 1968

Food and Live Animals 110 127 159 150 138Beverages and Tobacco 49 37 29 31 14Crude Materials 12 14 15 16 29Mineral Fuels and Lubricants 76 82 108 139 167Animal and Vegetable Oil and

Fats 5 11 14 12 17Chemicals and Fertilizers 104 114 132 109 117Fertilizers 9 10 12 12Other Chemicals 95 104 120 97Manufactured goods 421 468 566 519 555Leather and Rubber 23 27 37 45Wood and Paper 27 34 45 44Special Textile Fabrics -8 11 -2 16Other Textiles 198 195 288 154Cement 16 18 17 11Other Non-Metallic

Mineral Manufacutres 1 15 18 14Iron & Steel Manufactures 61 62 58 139Non-Ferrous Manufactures 19 18 21 10Other Metal Manufactures 56 89 80 86

Machinery and TransportEquipment 266 324 422 476 526Cars 27 2L 33 27Other Transport 85 105 165 183Radios 12 10 6 5Other Machinery 142 185 218 261

Miscellaneous Manufactures 122 127 122 95 159Miscellaneous Transactions 29 30 47 30 56

Total 1,194 12335 1,613 1,577 1,778

Excludes Zanzibar.

Source: Derived from Background to the Budgets

Table 3 .: DIRECTION OF EXTRNA], TRADE, 1964 - 1968--

( Sh mi:Llion)

I. Destination of Exports 196 4 1965 :i 1966 1967 % 19685

United Kingdom 436 29.9 436 29.1 486 29.1 473 28.7 385; 24.3India 101 6.9 107 8.1 129 7.7 108 6.6 115 7.3Hong Kong 97' 6.7 103 7.8 141 8.4 113 6.9 126 7.9Other ',terling Area 91 6.3 91 6.9 61 3.7 193 11.4 237 14.9Europeen Economic

C ommm it' 31:2 21.4 241 18.4 224 13.4 250 1',.2 216 L3.6North America 167 11.5 117 8.9 169 10.1 117 7.1 93 5.9Japan 56 3.8 35 2.7 97 5.8 67 l.1 111 7.0C.M.E.AJ. Countries 33 2.3 22 1.7 36 2.2 56 3.4 35) 2.2China 47 3.2 95 7.2 69 4.1 59 3.6 55 3.5Other 116 8.0 120 9.1 256 15.3 209 12.7 212 :L3.4

Total '1,456 1,313 1,668 1,645 1,535: -= . _= = .=_

II. Source of Imports

United Kingdom 304 32.4 337 31.6 412 30.3 382 23.4 42)4 27.7IncLia 55 5.9 72 6.7 70 5.2 43 3.2 541 3.5Hong Kong 18 1.9 20 1.9 36 2.6 26 :L.9 4.3 2.3Other Ster:Ling Area 53 5.6 39 3 7 31 2.1 45 3.3 5L 3.3European Econonic

Cmmunmity 163 17.4 227 21.3 292 21.5 344 25.6 374 :24.4North America 60 6.4 63 5 .9 96 7.0 137 10.2 95 6.2Japan 151 16.1 100 9.4 ?3 6,.3 69 ,.1 131 3.6C.M.E.A. Countries 20 2.1 26 2.4 39 2.9 45 3.3 47 3.1China 6 0.6 40 3.7 80 5.9 72 4. 36 5.6Other 109 11.6 144 1_3 .5 210 1]5.5 132 1:3.5 227 lh .5

Total 939 13 1,359 L345 1,532

Includes Zaenzibar. External Tra6e is c-ief_nen .rSomest½i e!Xplo'tS and netC p'nDrT`, i.e., trade writhcowatriuee cuteice n the East African Comm Market.

Soiirce: The Amnual c r Survey, 1968

Tnb!0 3.5: FSTIMATID BALANCE OF -iaYMnNTS, 1964 - i9-O(Sh million)

191 n6 6C 196 1967 z' lz 196uJ.7 4 ±') ±700 ±701 L0ou

A. Goods ]/I.xports (includ-i:e; gold and re-exports) 1,521.4 1,421.4 1,774.9 1,653.3 1,613.11Tmnorts 1,22.1 1 3743 17 1 .

Balance on trade 269.3 47.1 36.2 -52.9 -213.2

B. ServicosTot,al earnings on services 195.7 212.8 296.5 328.5 404.8Freight nnd freij.;ht insur.ance 10.0 11.4 35.6 80.8 103.5Passenger tr 3;ipcrt.;tion., ctc. 52.1 61.4 78.6 11i.3 127.3Other carnings from foroi.:i visitors 47.9 40.7 70.7 54.3 65.5Interest, profits and dividends 4i0.0 Wi.3 5L.3 3h.6 56.nOther services 45.7 55.0 54.3 47.5 h7.5

Total pa,ymients on servccues -L26.4 -,u6.h -359ai -350.2 -3[2.9Passenger transportation, etc. ... ... ... -85..6 -95.0Expenditure for education ... ... ... -50..4 -47.6Other expens03 on travel abroad ... ... ... -32.7 -lho.oInterest, profits and dividends -115.7 -135.7 -192.1 -129.1 -98.8O+thnerx rve -l, -120.7 -167.3 Li. -61.5

Balance on services -65.7 -93.6 -62.9 -21.7 -61.9

C. TransfersTotal transfer receipts 154.3 166.4 125.7 169.4 107.3Private and parastatal 62.1 53.6 53.6 74.9 68.0Governncnt 92.2 112.8 72.1 94.5 39.3

Total transfer anvments -1322 -133. -135.0 -117. -. 7Private and piarestatal -57.9 53.6 -46.4 -46.o -44.6Government -74.3 -80.0 -B8.6 -71.0 -45.1

Net transfers 22.1 32.8 -9.3 -5P.), 17.6

Balance on curi-ent account 225.7 -13.7 -36.0 -22.2 -138.7

D. Government CapitalInflow 100.0 133.6 54.3 166.4i 196.0Outflow -,3.6 -17.1 -6.4 -7.6 -25.1

Net government. capital 96.4 116.5 47.9 158.8 170.9

E. Errors and Omissions 2/ (including privateand parastatal capital) -427.8 -130.0 181.0 -22.4 53.1

Balance on Ordinary rransactions -105.7 -27.2 192.9 lJih.2 85.3Redemption of 1E.A.C.B. currency ... ... ... 4>-° 6.3Loss on foreig;n oxchcu-1,e holding,s due todevaluation of b sterling -- -- -- -57-1 --

Net Change in Foreign Exchange Reserves of theMonetary Sectors 3/ 105.7 27.2 -192.9 -106.l -91.6

j Exports f.o.b. and imports c.i.f. 7xcludinq exports and imports by Zanzibar.2j T'hiis itemii includles adjustznents relatin-g to the exclusions of Zanzibar foreign trade.3/ Increase (-).

Source: Bascd or; International Monetary Fund - Balance of Payments Yearbook, and Data suppliedby the Government.

m I. . i-I M AI.' A 'TTr A T -V L1 kAT "f nlrI4Yd IM'LTVJY ^TTMOMn 1kn Y A LTrY( AC I1M' -%II~t7 -I f 0e a

T1U).i- 4-; - TJ:<U;AL ruDwL.v4r2l D U±1J U '4AJU K r AS OF D D 31, L7Q9

Detu Respayauble iLn rForeiLg Currency

(-In b6UOUSaTIU5 01 U.S. UdoLarsj

Debt Outstandingsource December 1. 1968

Disbursed Includingonly undisbursed

ATOAT YvTPWDTAT TVDTTC' nri -r13.53 n .2v9.775~W ZL LJ.iL U'~AJ AJJ% JLA J AJJ;&.LW L.7

Privately held debt 44,520 4,520Publicly-SSSUed bon.ds "' 9 on nSuppliers' - United Kingdom _5172 5,172Vi nfwnninl i nstitut% o.na M 1t R. A 1 o

Italy ;45l5;1Swi t.zvrlntd 2,062 2,062United Kingdom 886 886

loans from international organizations 18,974 31,800.L xuua (Y'~~~~~~~~ ),~~~AA.J4u

IDA 18,182 26,600

Loans from governments 68,029 133,455Canada 387 -2,266

China 7,531 40,800Denmark - 5,333Germany (Fed. Rep. of) 8,003 11,17Israel 641 650Japan 624 624Sweden 1s,339 8,235United Kingdom 28,325 29,522United States 19,853 30,027U.S.S.R. /3 81 3,333Yugoslavia 46 46Zambia 1,200 1,200

iDebt with an original or extended maturity of one year or more.$ Net of accumulated sinking funds of $10,106,000.LI An amount of $19,998,000 assumed to be a frame agreement with the U., . S.R.

has not been included above.

Statistical Services DivisionEconorrdsc Department

July 11, 1969

Table 4.2: TANEZANIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCUJDING UNI)ISBURSED) AS OF DECEMBER 31, 1968

Debt Repayable in Foreign Currency

(In thousands of U.S. do.llars)

MrBv ~ ~ ~ ~ ~ ~DEDT I, I S 1

(BEGIN OF PERIOD) PAYMENTS DURING PERIOUINCLUDING AMORTI=

YEAR UNDIS8URSED ZATION INTEREST TOTAL

'ir mw TV A L ' I nNAI IL rm 'V'C- LOEo E

1970 201.083 5P225 5.222 10.4471971 195,437 6v470 5;185 11i6541972 188,513 13.176 4J772 17.949i973 ir4P930 10,9545 4P333 i4#oTo1974 164.032 6.379 3*782 10.160; 97C a W -an5- 3hCC5 nan

7 f & : u ,*Va L v 05 244 .3i 14'u8v1976 146.T30 9*671 3*362 13>033;9rr i3voa34 9J0 3 3J 4'r 12P7501978 126,987 9,842 2,931 12.773

^~~~ as A a n,ee ._ . e

i % rY- -%A^8 ei 2,,A,,24zvfw~~~~~~~a *levv * ov; Jw su1980 106.941 9,292 2J511 11.806

1982 87*752 12.611 l1.79 14*490a n pf- ft OntW %no n ;v 3 refs'60' 903 a^9 ;0 ww1-j42'

Note: Includes service on all debt listed in Table 1 prepared July U, 1969, wlththe exception of the following, for which repayment term8 are not availablet

Suppliers' credits $ 269,000Financial institutions 2,o62,oooLoans from governments

Germany (Fed. Rep. of) 38,oooJapan 624,000

$2,993,000

Table 5.1: SUWARY OF C3NTRAL sCVEFP7NT REVENThhS, FXPENDITURES

AND BALANCES, 1963/64 - 1968/69(PEunctional Analysis)

(Sh million)

1963/64 196L/65 1965/66 1966/67 1967/68 1969/692/

A. Current Budget

Revenue a/ 717.8 839.5 897.5 102h.0 1129.5 129L.0

Xxpenditures 709.1 777.1 387.3 979.6 1065.0 1196.4

Surplus/Deficit 8.7 62.4 9.7 4h.4 64.5 97.6

B. Development 3xpenditure 145.3 203.9 230.0 294.4 344.1 424.3

0. Total Surplus/Deficit -136.6 -141.5 -22(a.3 250.0 -279.6 -326.7

D. Financed by

External Sources b/ 51.5 78.5 83.5 127.3 83.9 133.0

Internal Sources c/ 4o.4 17.2 87.14 79.7 122.5 1314.2

E. Overall Surplus/Deficit d/ -44.7 -45.8 -49.4 -43.0 -73.2 -59.5

a/ Including reimbursement and appropriations-in-aid

b/ Includes grants and borrowing

c/ Includes grants and medium and long-term Government Security Sales

d/ Covered by short-term local borrowing

e/ ReviBed Estimate

Source: Derived from Budget Survey 1965/66, Background to the Budget 1969/70 and Estimates of Revenule, Recurrent expenditure,

C.onsoi,at.ea iaLnd e-s and Develonment ExPendit -9 j 196Q/7n.

I'able 5.2: CENTRAL O VERNMEIT RECURREIT REVNIUE, 1963/64-1968/69(Sh million)

e/1963/64 1964/65 1965/66 1966/67 1967/68 19c68/69-/

I. T'axes 490.6 575.4 621.8 767.9 872 .1 104.91. Direc1t _7 1 1 i70.7 297 ' 390.0

Irncome and Corporation Taxes 1207 130.' 1 .91 1 C).0 28.5Personal Tax a/ 20.3 21.3 29.6 34.7 44 .7 86.5Development IABvy a/ 1i9.5 39.3DEeport Duties 18.1 29.1 12.3 37.9 33.5 55.0

2. Indirect 331.8 394.2 426.0 417.2 574.6 653.9liporlt Duties 2 .2 2 J 354010.1 Excise Duties 77.9 91.1 100.1 121.8 143.6 168.5Other Licences, Duties,

Taxe3s 29.1 40,0 46.13 54.6 565.6 61.9Distributable Pool and

Transfer Tax d/ 16.6 17.8 19.9 24.2 24.3 22.0

II. Other Revenue b/ 74.7 101.2 94.', 99.9 120.5 102.3Government Property 33.3 3 T-2 _317T 777- 7579 -477gInterest and Loan Payment c/ 18E.4 30.3 10.9 1L7.0 69.6) 55.1)Other 23.0 37,.7 49L 26.7 ) )

III. Appropriations-in-aid 152 .4 162.,9 ]L81.'2 1!56.2 136.5 147.8

Grand T'otal. 717.8 839.5 897.'5 1,024.3 :1,129.5 1,294.0

a/ 'rhe Development Levy was merged with the Personal Tax with effect f:rom the 1968/69 budget.ib/ Loans from abroad are treated as accruing to the Development Budget.c/ Includes dividends f'rom the East African Currency Board.d/ The Transfer Tax was levied with effect frora 1967/68, under the provisions of t'he Treaty for

East African Cooperation.e/ -Revised Estimate

Source: The Annual Economic Survey, 1968, and] Financial Statement and Estinates of Revenue

Tatble .: 3 P UsIEAL G0\RMKBXI' BloLrRRuy EXDUT1 °t < /6 I ~ l5 ;) t e,

1 ,jt/68 _1 -'. 1965 )T 7' TV F'

1963/6 I w5 ¶)/65 196r5/66 19?66"/67 1967/6 e 968/ 6

Socipl S3erviceS 289.7 288. 2957.5 275.6 336.3 37.6

rFcnouiicm ServiceS 132.0 219?.O 215.8 2•6.9 280. 1 308.9

Total 381.7 508 .3 51.2. 582.5 616.7 666.5

Administration 313.1 268.6 378.5 837.2 - 3.7 529.G

General 287.1 179.9 260.1 238.2 225.3 293.6

Debt SerVice 7!. 5 5/3. 70 .3 98.5 147.9 158.LDefense 18.6 35.5 88.1 5.- 5 75.5 77.7

Contribution to tevelopment 1L.2 62.8 9.7 44.5 64.5 97.6

Total Recurrent Expenditures 709.0 389.5 8917.5 1028.2 11i2.6 1298.0

Sources: Background to the Budgret, An Economic Survey, 196'7-68

The Annual Economic Survey, 19R68

TLoBle >5.4: vrDI4EL1PIx.T EVr1NUF, B1Y MAN SOlUi.E,196it/65 - 1968/69

196h/65 1965/66 1966/67 1967/68 il/-

Internal Sources: 125.3 146.5 167.2 260.3 291.!i

Surplus fron Recurrent budget 62.4 9.7 44.5 64.5 97.6Borrnwincn 16.3 86.h 78.7 120.8 1}0

Grants 0.9 1.0 1.0 1.8 4.2Other 45.7 49.4 43.0 73.2 59.6

External Sources: 8X, 127.3 84.0 132.9

Borrowing 59.1 75.7 119.9 81.5 127.2Crants 19+ 5 7.8 7.J, 2=5 5.7

Total 203.9 230.0 294.5 3h14.3 424.3

Major Extern,al SourcesGovernruilents

TY. K. 23.9 17.L 8.2 - -U.S.A. 20.0 30.0 17.4 24. 8 55.3Israel 8.5 2.2 --Germany 7.2 4.3 6.1 0.3 0.6Sweden - - 3.4 7.9 20.8

n //. , n , \ t n H~~~~~~, ~ l- n I n I ,>China (Mainland) 6.v - 4.2 3. 1.5

Multilateral

IDA 13.0 18.7 30.2 30.1 42.5UNESCO - 4.0 0.5 - -

a/ Revised Fstimate

Source: The Aru-al E-cono-c Sur-ey, 1968A ndReports of the Controller and Auditor General

TAsLI 5.5: C3iTRAL Y -w-E £v.7 DEVELC3ENT EXP:24DITURS BY MI.NIS;TRY, 1961-1969-

1961__'6- 1963,7 l?a.i/,,' 1 ly!4/7,h Relative share Fst ted Actual .stimated Est i;ated Planned 7Yoen- of Planned l9zn/(9 'erfz--enceMinistry Expenditure Kxpenditure Fcpenditure diture includinr' Expenditure Expend tur3

Three-Year Plan as % of thecarry-crer tot al

CovCorks (inc. Labour) 307,2'21 177,000 L48l,221 400,25>8 24.99 36.66 12'.5Tan. urvey 166,231 L3,131 214,712 .420,750 26.23 16.;24 51.vluc- ion 138,390 10,932 119,372 239,340 13.06 11.23 51.6A'ricutur e 92,117 1,71.6 136,333 1L26,170 7.38 10.35 1 1Defence and National Service 71,.67 28,000 9 9,67 60,662 3.79 7.53Hc- kffars 31,7,61 2,131 57,36 ,.59 3. 26 3.1* rean,ry 33,235 1,070 ,Lt,355 3,0('0 0.19 2.5; 1, 1Infer' :ation 27,777 1,100 29,377 20,880 1.31 2.L7 '6,.9Local Government and Housinrg 13, 177 5,20 23,681 5L0,ooo 3.37 1.'78 3j.M.Lncc- (inc. co-op.) 20,322 1,072 21,994 92,2o4 5.75 1.614 2. 7Maen. eleo (exc. Reg. A-.) 23,133 21,076 17,209 32,792 2.01 3.57H'gealth 13,722 3,320 17,542 31,300 1.99 1.30 55.1Davplan 12,525 1,L 0 13,965 - - 1.:L3 -F o re -a i ~m3,532 ]90 3,722 6,o0o 0.37 0.2s 6c2.0Second Vice-President's Office 1,137 - 1 4437 3,018 0.19 0.10 17.,Justice and Judiciarr 1,002 252 1,254 3, 198 0.20 0.05 359.2Central Establishnents 381 255 636 0.05

_____ _____ Total 970,116 351,292 1,321,708 1,601,558 100.00 loo.0o 52.6

a/ Not including (a) Central Goverrnent contributions to parastatals, and (b) direct to projectloans and grants. Including these items, total deveLopment expenditure during the Planwas Sh 1,196 million.

Source: Tanzania Second Five-Year Plan, Volume II

Table 5.6: 3UT24A3Y STATISTICS OF TER PAFASTATIAL S2TOFR , 1966-67

Nunber of EmpLoyment Wa,es and Current Receipts Net Surplus Fixed CapitalEnterprises (nimber) SaLaries Expenditure (Sh million) (Sh milion) Investnenta/

tndustA (Sh million) (Sh nillion) (Sh rnillion)1966 19,67 1966 1967 1966 1967 1966 1967 1966 1967 1966 1967 1966 1967

A1-riculturt b-/ 4 5 14,,736 4,847 12.1 16.4 25.7 35.5 27.7 32.5 2.0 -3.0 5-4 6.oYmLninC 2 2 2,795 2,638 26.:L 23.7 53.0 66.3 121.7 273.6 63.7 212.3 5-0 5.0',mufacturinng 17 26 3,619 5,302 23.2 36.7 261.5 392.9 287.C) 417.9 25.5 25.0 3h .2 27.0C,P-struction 2 2 5,076 5,027 13.0 13.2 47.2 53-. 49.5 54.3 2.2 0.9 3.3 6.0Electricityr 1 1 1, 310 2,010 12. 5 13.3 37.3 40.3 57.5 62.0 19.7 21.7 33.7 31.5Trade 11 14 971 3,299 6.7 15.3 777.5 "76.5 775.3 839.8 -2.2 13.3 4.2 21.4Finance 6 9 422 2,C 4 .5 ,0.5 13.2 85.7 32 .C) 159.9 15.d 70.2 -0.7 4,.3Transport -- 2 -- 95 5.3 -- 31.6 -- 31.3 __ C.2 -- 2.6Services 3 3 _ 6L 511 2.1 2. 3 5._ j l __ - 3 _-0 - 21.'

Total 46 64 19,390 26,61i5 100.3 162.7 1,231.8 1,592.7 1,358.1 1,933.2 126.3 3 0.. 86.9 126.0

a-/ Excludes ovsrseas share of Friendship Textile ,ill, private sector share of National Houstng Corporation building and East African/ corp-a taon

- Excludes Tanzania Sisal Corporation which was established in No'07aber, 1967.

Source: The Annual Econocv c Survey, 1963

Table .5.7 : NATIONAL DEVEL(;PMENT CORPORATIONA - SURPLUS J:rCI'E AND ITS

APP&P iAUilCU, 1965-68

(Sn million)

1965 1966 1967 - 1968

I. Surplus lnome

n,cr.ome ,from investments 14.0 .1 .7 46.8 40.3

Minus: Administrative1,ponses 3.1 2.2 j.* 1'

Operating Income 10.9 10.5 39.4 30.0

Minus: Provision fordoprociation ininvestmnents ---- 2.6 7.6 4.0

10.9 7.9 31.8 26.0

Plus: UnappropriatedProfits broughtforward 0.1 0.8 . o8

Total airrplus incomo 11.0 8.7 32.3 26.8

II. Appropr'intions

Transfer to Reservos 10.2 8.2 31.5 26.0

Unappropriated Profitscarriod forward .8 .5 0.8 0.8

Total Appropriations 11.0 8.7. 32.3 26.8

a/ The biG incruase in income from investments in 1967 was the result of the ArushaDeclaration as a soqual to which NDC acquired interests in many private companies.

Sourcet NDC Annual Reports

B - FINAiSCIAL POSITIONS, 1965 - 1968

1965 1966 1967 1968

1. Assets

Investmunts in Subsididarand Associated Companies- 102.4 113.7 197.9 279.8

Ependituzrea on -rg9QectsUndor Preparations- 0.5 0.7 3.7 17.8

Nebt Current Assets t.0 8.o ;2.7 22.6

Fixed Assets 6.3 6.6 8.6 7.4

Total Assets 123.2 129.0 242.9 327.6

Long Term Loans 9.3 6.9 78.8 108.8

Oovernment Grants and Shares 84.1 84.1 96.5 125.4

AeCumlted Reseves 29.8 38.o 67.6 ow9

123.2 129.0 242.9 327.6

A/ ..I .hS-,-i di Rry -pni care the comp_ries where NIX owns 50 percent or r.ore ofthe sharus, while associated coinpanies are the ones where NDC owns less than50 percent.

- b/ This amount will be converted into shares upon completion of the preparatoryworks.

O~ourca; NDLC Ainual Roports

Table 6,.L: CONIVECTAL B1PJiKS - C'JED:[T BY ECONOM"IC SgCTOR, 1964-63

(Sh mil:Lion)

EFnd of year 1964 1965 1966 1967a/ 1968

Agriculture 194.5 27f.4 317.6 239.0 316.5

Industry 55.a 74.6 1116.2 11.48 1]2.0

Commerce 173.2 265.5 316.3 303.6 339.4

Construction - 25.2 41.3

Transportation - --- - - - ---- 10. 4 15.6

Gover-ent 163.3 209.9 4.5 ----

HIouseaholdi ---- ---- 5.5 64.h

Other b/ 67.7 82.6 98.2

a/ See footnote to Tiable 6.3

b/ Includes ?Mining and quarrying, financial institutions and households.

Source: Background to the Budgets

Tabla 6.2: COMMERCIAL BANKS - ASSETS ANT) TLTABILITTES, 1.966-68

(Sh million)

1966 1967 1968

Assets

Domestic

Cash 32.3 27.5 39.8Depos--its- 4n6h Centra ' Bks I.Q.4 3.1 49.2n'V%;jV .L oo W..LIM 'LJL ±U O.. DO.C1Z**. £4. J. _' 47 * C

Treasury Bills 6.0 30.0 10h.0Ot.hler Govern.mnt QecuritiLes 0A.1 1I. 3

Loans and Bills 797.3 818.1 922.6,A.t1 n r--I irQ £ -I I

£L'q.LLU5. 138.8 114.2

Other 35.0 55.0 78.1

Fixed Assets 50.6 103.9 91.2

Total 1,327.3 1,297.7 1,582.1

Liabilities

Domestic

Deposits 922.9 1,013.8 1,284.5Due to Central Bank 90.2 53.3 81.9Due to Other Banks 113.7 13.8 12.6

Other 103.0 125.2 111.3

Foreign

Due to Foreign Banks 54.5 13.6 11.4Due to Other 7.8 30.3 30.6Capital and Reserves 35.2 47.8 49.8

Total 1,327.3 1,297.7 1,582.1

Source: Bank of Tanzania Report (June, 1969)

Table 65.3: CO]OIERCJIAL BANK DEPOSITS AND ADVANCES, 1964-68(Sh mil.lion)

End of the % of (1) Liquidity Net laternalYear Total Deposits Total Advances to (2) Ratio Balance

1964 82, .0 681.0 82.5 n.a.2.4

1965 961.0 913.0 95.2 24.0 :L2.0

1'966A' 927.3 852.0 91.8 33.0 iL7.

1967 LL,03.3.1 848.9 82.2 16.6 96.0

1968 .1,312.5 965.4 73.6, 25;.5 1122.0

a/ ]Egu;res after June 1966 are inot .fully comparable for: (a) the transfer of Central Gove:rnmentaccoint and iborrowings to the Baank of Tanzania; (b) the responsibilityJ for the bank-ingsstat:istics changed over from the East African Statiistical Department; to the Banlc of Tanzaniawhich are institiated on improved coverage series in Junei 1967e

Souree: Background to the Budget and Bank of Tanzania reports.

Table 6.L4: 'BANK OF TANZANIA. - A.SSE'S AND LlIABILITIES AS AT 30th NOVEMIER, 1L969(Sb. million)

LiLabili tie s Assets

Notes in Circulation 595 .7 Foreign Assets 488 .3

Coin in Circulation 53.9 Government SecuritiesTalcen over fromn E.A.C.B. 7.5

De,posits Others 118.4

Government 10.0 125.9

Banks 1.7Others 4.,9 Advances:

16.6 Banks 4,6.0

Foreign Liabilities 13.9 Revaluation Account

Other Liabilities 9.6 (in accordance withSection 15(3) of the

Capital 20.0 Bank of Tanzania Act1965) 33.9

General Reserve FEu-d 1.3.2Premises and Equipment 1.5.2

Other Assets 1-2.6

Total 721.9 Total. 7 21 .9

Source: Bank of Tanzania

Table 9.1: TOTAL ANNUAL WAGE BILL BY INWDUSTRY, 1964-68F

(Sh million)

Industry 1964 1965 1966 1967 1968

Estate Agriculture 269.6 262.3 255.7 248.6 214o5

Mining and Quarrying 33.8 36.4 32.8 33.3 33.1

ManufacturinG! 83.2 98.7 126.1 1l0.8 162.0

Construction 82.4 79.3 98.6 118.5 125.1

Public Utilities 17.2 17.1L 23.2 2h.8 32.1

Commerce 92.9 105c7 121 3 127.6 138=6

Tran.qmort and (ommirnir-ations 110.0 126 8 139Q I 5Z=3 171 .2

.qArvi esA.-, 286A1 3jj.o_7 17c5=O 4nnooA9_32

Total 975.2 1,0703 1,171.8 1,248.8 1,315.8

Tnfirn (1O64]1 00=0)l' 100. 109 1120.2 128.1 131,,9

ni Tnnl,,Aao cas0 h an&~ .,nA 4.ha w r +P 'u of a free -w.ons4

Source: The Annual Economic Survey, 1968

Trable 9.2: ADULT MALE CITIZENS EMPLOYEES BY WAGE MOUP, 1964-68 a/

1964 1965 1966 % 1967 % 19)68 %

Less than 100/- 54,950 17.8 19,639 7.7 15,003 6.4 13,866 5.9 12,714 15,3100l-149/- 143,547 46.4 81,6c)9 32.1 59,155 25i.1 52,074 22 .3 52,769 2:;L.8150.-199,/- 47,102 15.2 78,07'8 30.7 71,785 30.5 68,199 29.2 69,847 28.8200.-299/- 32,972 10.7 36,056 14..2 42,581 18 .1 43~,981 18.9 42,988 17.7300-399/- 14,368 4.6 17,367 6.8 18,113 ,.6 21,594 9.3 25,157 10.4400-499,/- 6,603 2.1 8,1 1i5 3.2 8,568 3.6 9,082 :3.9 10,062 4.2500-749,/- 5,315 1.7 7,482 2.9 10,686 l4.5 12,899 5.5 15,287 6.3750-999/- 1,954 o.6 2,417 1.0 3,701 1.6 4,391 1L.9 4,986 2.11,0)0/- and ove:r 2,246 _ 3,385 1.3 6,055 2.6 7,144 _3.1 8,283 3.4

Total 309,057 100.0 254,168 100.0 235,647 100.0 233,230 100.0 242,098 100).0

a/ Note: Th-e 1964 figures refer to both casual and permanently employed African wage earners.The 1965 figures refer to permanently employed AfricaLn wage earners.The 1966-:1968 figures refer to permanently employed wage earners who are Tanzaniacitizens.

Source: Background to the Budgets

Table 943: '1PLOYMgENT AND EARN TNS BY ECONONTIC ZONE, L964-68

:22.307! nTE. NT (NU-MBERS) JkAGS: BILL (Sh milli>on)

1964 ilQ-5 15,66 1967 :1963 29515 19 '65 1966 1967 1?62

ZONE I: 2 , . |Dar es Salaanr 1,6 V3 57Sh,ti4 59,124 65%-2k6 710,655' 251 3 L4 , 432Coast and Moro7oro 52, 422 [t,?53 65,463 h5,h27 h463: | 103 123) 129 2 lk$ I .3

SUP-TOTAL 99,062 102,'357 lo4,587 110,673 115,258 35k L31 4O7, 546 5$?

ZONE II:TangJa 30,729 69,516 65,4626 61,5041 51%,256 1 179 162 173 165 15.Arasha and Xiltmanjaro 59,073 t361 519 52,776 52,913 133 134 112 155 156

SIJB-TOT'AL 139,502 119,597 116,935 11L,280 107,167 311 302 315 320 31k

zoi;K, III:Mtwara and Ravuma, 20,159 13,596 20,502 13,371 20,151 l8 53 57 56 60

ZONE IV:Iringa and ?{beya 289,350 28,996 29,753 35,694 37,123 57 64 66 77 99

'ZONE V:Tabora and Kigona 13,852 14,632 15,122 15,266 17,559 44 46 50 51 62

ZONE VI:Nwanza, Nlara, Shinyang.a and We.st Lake 26,559 36,512 37,269 hv0, 4C4 hi,26L 128 133 11T 160 166

ZONE VII:DodLoma and SingicLa 1ll,)4,73 11,262 12,329 11, 993 13,159 33 36 43 ho _

TOTA'L 351,357 333';755 336,L9 39 6 ,7/41 351,711 975 1,070 1,172 2,2k? 1,1

Source: i3ackground to the Budgets

Table 9.4: (A) RETAI] PRICE INDEX OF GOODS CONSMEDBY WAGE EAIRIERS, 1964 - 1968

(A = Al1 items(December 1961 o100) (B - Food

…~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

JAN _ AR MAY J_NJEE JULY SEPT N)V DEC AVE

A B A B A B A B A B A B A B A B A B

1964 97 96 95 94 914 94 97 96 97 97 96 94 96 95 95 94 96 95,1965 99 98 99 98 1(00 98 102 101 1L02 101 10:3 102 1306 105 1C6 1L07 102 1011966 106 106 105 104 108 108 108 107 .108 107 108 107 106 103 109 1L07 102 1011967 106 103 106 103 1L2 111 112 110 L12 111 1L 110 110 107 122 1L08 LLO 1081968 114 112 111 107' LL5 112 1'12 1CI9 ]L14 110 2W4 109 116 11 1114 108 114 LLID

(B) COST OF LJINfG INDEY. OF GOODS AND SERVICESCON SUMED BY MIDDLE GRADE CIVIL SERVANTS -

DaR ES SAIAAY4

(Base: September 1964 = 100.0)

Middle of the Monta!_ _ _ _ _~ont

March June September Dece.ber Ave.

19614 102.1 108.1 109.5 :L07.51965' 109.9 1114.3 113.7 115.71966 117.6 118.1 119.3 120.o41967 121.8 125.6 124.1 :L26.31968 126.7 126.9 130.0 129.11969 129.4

a/ Price statistics are on.y coLlected iz the stated months.

Source: The Annual Economic Survey, 1968

B. PLAN TARGETS

Table I'':: OUTPUT TARiGElS AT CONSTANT 1968/69 PRICES-

(in Million)

Relative importance Relative Importance Change 1968/69- Per Cent Contri- Target 5rowth19ti8/69 196cI/69 per cent :L973/7ii 197'3/74 per cent 1973/74 bution cf Sectors Rate per cent

:c. Total, Growth per ia

Agri__' re:1,450 24.0 2,0?5 2li.8 615 27.CI 7.2

usI ster.ca 1,633 26.4 1,893 22.4 2&D 11 .L, 3.0in±g 125 2.0 110 1.3 -15 -0.7' -2.5

Manu fa:turing 384i 6.2 707 8.4 323 IL.2 13.0Zonstr-*tion 278 4.5 1"s 5.3 170 7.;5 10.0Public Utilities 62 1.0 109 41:3 4 2.1 12.0Co.rerce 830 13.5 1,220 15.4 390 17.1 8.0Rent 347 5.6 b6!4 5.5 117 5.1 6.oTrar,s,ort 316 5.1 L86 5.8 170) 7.5; 9.0Services 7'3 19, 9 8'

Total 33? 6.170 100 _2__ 2,27 1CC; S._

Monetary 4,51: 73.6 6,555 77.6 2,015 88.6 7.6Subsister.ce 1,630 26.4 1,890 22.4 260 11.1. 3.0

F'oo-.:.otes to Tablei 'ase year (1968/69) G.D.P. is estirmated by projection from the latest available estimates at tine of prepatation, those for 1967, plu.3 fragementaLry evidence on 1968 performance.

ii .he relative imartance of slub-sectors in manufacturing induistry Js based on the results of the 1965 survey Of industry as adjusted in light of mnown miajor investrents 1965-68.

iii :n the gross domestic lproduct estimates the total output of manufacturing is currently under-valued. The under-estimate is of the oxder o" 15 per cent.. Farther, the definition of-anufacturing activity is sonexhat arbitrary, including cotton ginning, grain millirig and cashewr processing, but excludaing sisal deccrtication, tea processing end sugar refining.Work is under-.ay to produce 4a revised G.D.P. series. ltearwhiLe, the existing series is used, although the percentage growth target JEor industry is constructed on the basis ofrelative weights refLecting the actual industrial structure. The relatiLve under-estimation of industrial output tends to lend a dowia.nard bias to the cverall, growth performance,as 3anufacturing is very ulich a leading sector. However, to prevent conifusion it is best to base projections on the existing, published G.D.P. series.

Source: Tanzanta, Second Five-Year Plan, 1 969-7L (Vol. I)

Table 10.2: ESTIMATP'D NON-AGITCULTIRAL Er PLOY'YENT INCT tPSZS -

1969/70 - 1973/74 - BASED ON G.D.P. TARGETSa/

1968/69Paso Y-ar 1973-7)i

'Estimated Annual Estimated Estimated

1Gmployment Rate of 1Employment I.nnual

Tndu~stry 1963/69 G.D.P. 1-97/77 IncreolnsCJGO Incra&se '000i

Per Cent ProductivityPer Cent

Mining-/Quarrying 6 -2.5 6 -2.5

Manufacturing 36 13.0 57 3.0

Construction 49 10.0 71 2.0

Utilities 10 12.0 18 -

Commerce 25 8.0 37 -

Transport/Co-mnmication 32 9.0 )t2 3.0

Services 92 5.0 117

Total 250 - 348

a Foo+notes to Table:

i. Per cent increase in non-agricultural employment - 7 per cent

per annum.

ii. The Industrial Activities of Goverrnment (e.g. Construction, etc.)

are included in the appropriate sectors above.

iii. The 1973/74 employment projections for the various industrial

sectors (except 3overnment and Services) have been estimated by

applicaticn of estirated annual increases in productivity. These

were derived from Tanzania's experience in the first four years

of the First Five-Year Plan. G.D.P. for Ser-vice industries is

primarily based on emoloyment and is not, as in the other sectors,

an evaluation of physical outputs or services rendered. Therefore,

a given growth in G.D.P. implies the same rate of growth in employ-

ment.

iv. 1968/69 employment is estinated from Centrel Statistical Bureau's

Annual Enumeration of Fmployment trends over the past several vears

including preliminary estimates for 1968.

v. In the case of mining one large project may involve substantial

employnent towards the end of the Plan period, although it will not

gencrate output until the Third Plan. The nct employment effects

of changes in mninin- are not yet evident; for the momernt it is

assumed that employment in mining reTmains unchan ged.

Source: Tanzania Second Five-Year Plan, 19f9-74 (Vol. I)

Yable 13.3: PHA:SiNG OF MVESTMENT, 1969/70 _ 1973/in

(Sh million)

Central-/ Parast,atals- EastYe;-r Government and Co-ops Private African2! Total

Community

106770 'o3O 300 370 100 1,300

1970/71 5 7 380 [O 120 1,!75

1971/72 '30 L60 L 30 120 1,6lho

1')72/7' 65( 56,0 6160 120 1,770

197V/O6 67( 620 490 120 1 ,900

'1'ntal '3,055 ,3 00 2,LI 50 8,085

Anrriu L GrV Imxrt,h:

1'o8, '6 - 77)/67) lOi, 0 7, 105

4Not, inducIinrg contribution to parastatals; including an estimatedSih, 30'5 mil]lion contribution to local costs of TanZam Railway.

- Triclurling contrihution from rGntrail GovernTnent=

U! Pha3ing of East African Communitv estimates represents a roughjudgement regarding likely implementation of plans. Howevererrors in this total do not greatlv effect the. ot,her ele nts inthe table as East African projects are mainly externally or self-finan.ed. 1972/73 and 1973/7L m.v well be higher' as a result ofsubsequent plans.

:,-uree: Tanzania Second Five -Year Plan , 196 9-74, (Vol. I)

a!Tbhlp 10.h: PARASTATAL INVESTKENT 1969/70 - 1973/71a

TotalParastatal Investment Government

Shs. Contributionthousand

TANESC0 456,900 17L,000N.D.C. 781,000 )N.S.I.C. 6;500 ) 2h0,000N.A.F.C.0. 112.300 )T.T.C. 203,000 )

S.T.C. 20.000 100T.S.C. 92,500 20,000L.S,M.B. 12,000N.A.P.B. 25,000Tobacro R,hard 7;100Tea Authority 88,500 10,000Dairy Board 9,000 _N.M.C. 10,100N.H.C. 278,000 ilo0nooNational Parks 29,600 21,000GomnuteRr ornp. o.000 -nonN.I.C. 15,000 -N--r 26 G= 2non -Bank of Tanzania W6500 -

N.D.C.A. 1,600 1,600Go-operatives nnd WcvrkerR

Development Corporation 100,000 -

-her l,0000nnn nnn

Total 2,28 9n 5,7nn

N.Dr.G, A (rt. lenr1ing L, -4 nnn 000ooN.S.I.C. (net lending) _ 3,600 _

2,b34,500 619,70o

a/ This table includes net medium and long-term lending by N.D.C.A.and N.S.I.C. which 4S r.o -4rec4 irrvest,,ent --tivi ty by t,hean-I Vd.U *.L.Q. WIYI.CL -Ls no ~k A L. b L WIMVV U I~I L, C UiLV _L U LJy LI

parastatal sector. For the overall targets, the total investmentL'rget flor Uhe =Ptuasa k-, secL tor_'u ha9 been0 ur-oulI e wutuU

Shs. 2,300,000.

Source: Tanzania, Second Five-Year Plan, 1969-74 (Vol. I)

':ble n.- : CAPITAL ThF SC'17E (ALL SECTOR3) R, cBCCC"i_4T

cll 3S:'E:!CATTrcI.! (L,6970; )

(Thoucsanrdi:-, Shill ing5)

;ent.ral East African RrivateGove7 nent Par t atals (Ihrport- tions ector Total Share

r-`rect'l- Pro-ductive Activi--ties ... ,,....... 2l7,1 53 l,16, 'L6 -I L,275,000a1 2,908,667 37-51

Research, :3urve!ys and In-vestigations, .......... , ,, , 17'1,^()1 2,:396 _ - _ 173,397 2.2

Po::er, alatejr anrid SanitaryServices_ . 2LL5,10 i 456,916 _ 702,02 51.0

Ct1her E:conormic Infi astruc-ture ............... 1,627,621 6l,000 580,000 275,000 2,5)h6,621 32'.8

Sorial InfrastructLere...... 3 5, 679 :34L8 , 000 600,000 1,263,675' 16.3AdM,inistration and Security 173,L46 ___ 173,4b 2.21

Tcotal...., 2 , 7 50 ,O(Oll 25287 1 8 0,5000 150,00C 727678508 100.00

Includring Tr ansport.

_ Excludes Shs. 305 m. local cost of Tanzam Railway.

Source Tanzania Second Five-Year Plan, Vol.1I.

Table 10.6: A.CENTRAL GOVERNYENT SOURCES AND USE OF RESOURCES/ l ]i -I1 _

Sources Uses

1. External (including 200 commodity 1. Central Government Progrmmune 3,055

credits) ....... 1,6002. Parastatals.6,o

2. Transfer from Recurrent Budget ... 620

3. Security Sales (including Provi-dent Funds, Insurance, N.B.C.,etc.) .1,335

4. Other Local . .150

Total 3,705 Total 3,705

Source: Tanzania Second Five-Year Plan (Vol. I)

B.PARASTATALS: SCHEME OF FINANCE

(Jh million)

Total

1. W.- resources (including bnk credit anddomestic borrowings) .................... 1,003 1.?

2. External sources ........................ 822 33.8

3. Government contributions ................ a! 6092-/ .0

Total 2,13 100.(J

-/ Government contributions to parastatal organizations is estimated at 3h 650 millionin Volume I of the Plan. The lower figure in section A of the table pre.;umably -im-plies that the difference is made uD of direct to project loasli.

Source: Tpnzan!R Second Five-Year Plan (Vol. IT)

a,/Table 10. 7: BAiTtG OF PATM O P Wayr .Q P-TTr.'TcnKT 1QAQ/70 - 1071/7b

(Sh Mi llior.)

1969/70 1970/71 1971/72 1972/73 1973/74

Total Exports 1,982 2,090 2,206 2,332 2,467fl¶~~~-a-.~~~l ~ ~ I nnV7 J) i ti - '314 L~7 . ' Z1.r±U'.Jd.J. II5J'.ULs -1,977 1 - 2,3I?I IU -2,4174 -f, JJ4

Adjustments - 63 - 66 - 69 - 72 - 76

Trade Balance - 78 - 127 - 179 - 214 - 249

Invisible receipts 332 351 385 419 458±I1V±sLU.Le pays-mnt's - 369 - 405 - 450 - 477 - 550

n~~~ - _ ... _n - 1. * n r- 0. id I I A d -' 4 UU-rreiIli accLL, o Culn - 1fi- 1 . 1 -C44 - <i4 - )41

Nvet capital iaulow 273 279 308 363 406

Overali surplus 1408 98 604 69 65Required increase inreserves 40 45 5° 56 63

Balance 108 53 14 13 2

a/ These projections were made before the balance of payments data for1968 were available wnicn showed a surpius on invisiDies.

Source: Tanzania, Second Five-Year Plan, 1969-74 (Vol. I).

C. MISSION PROJECTIONS

Table io.8: MISSION ESTIMATES OF GDP BY SECTOR

Actual % Relative % Relative Change GrowthSector 1968 Importance 1973 Importance 1968-1973 Rate

Agriculture

Monetary 1270 21.6 1874 23.4 604 8.1

Subsistence 1664 28.3 1929 2L.1 265 3.0

Mining 111 1.9 96 l12 -15 -2.5

Manufacturing 377 6.4 625 7.8 248 10.7

Construction 221 3.8 356 4.4 135 10.0

Public Utilities 60 1 0 16 1.3 L6 12.0

Commerce 853 I).1253 15.? 400 8.0

Rent 302 5.2 404 5.0 102 6.0

Tsnnnport 298 5.1 59 5.7 161 9.0

Services 7 -21 20713 . 1-1.4 197 5.0

Total GDP 5869 1.000 8012 100.0 21.43 __6=5 s:= = =

a/

Table 10.9: MISSION ESTIMATES OF GOVERNMET REVENUE1968/69 - 1973-74

(Sh million)

(Base Year) ProjectionsActual Total1968/69 1969/70 1970/71 1971/72 1972/73 197:3/74 1969/70-

1973/74

I. DIRECT TAXES

1. Income/Corp.Tax 251.6 286 325 370 421 478 18802. Personal Tax 87.0 94 101 108 117 125 5L,5Total I 338.6 380 426 478 538 60.3 2425

II. INDIRECT TAXES

1. Import Duties 368.6 393 419 447 476 507 22L22. Transfer tax 9.6 11 12 13 11 1,S 663. Excise Duties 161.5 173 185 198 212 22'S 9944i. Sales Tax 2.7 155 173 192 21h 239 9735. Other Licenses,

Taxesq etc. 69.9 74 79 84 89 QN 42'16. Distributable Pool 13.8 12 10 8 6 4 40Total TT 626.1 818 878 942 1011 1087 4736

TTT RXPCRT TDTTTIRE_ 53 °n 5 64 68 72 32i0

Total (T, TI:[ III) 1017.7 1254 1364 1484 1617 1762 7)431

1TV . OfThWTR RTP

1- Government Prnnperty 47.6 47 47 48 49 49 2402. Other 204.5 205 205 205 205 205 1025Total IV 252.1 252 252 253 254 254 1265

Grand Total (I - IV) 1269.8 1506 1616 1737 1871 2016 8746

oee notes on next- page.

Notes on revenue estimates shown in Table 10.9

I. Direct Taxes

(1) Income Tax: Elasticity of income taxes to growth inmonetary GIF computed at 1.8 over 1964-68period. This applied to a projected growthrate in monetary GDP of 7.6 percent givesan annual rate of growth in revenue fromincome taxes of 13.7 percent.

(2) Personal Tax: Elasticity of personal tax to growth inmonetary GDP is estimated at 1.0. Thisapplied to a growth rate of 7.6 percentgives a revenue growth rate of 7.6 percenta year. This growth rate takes into accountthe special effort which the Government intendsto make to improve the administration andicollection of Personal Tax.

II. Indirect Taxes

(1) Import Duties: To rise by 6.6 percent, which is the projectedgrowth rate for imports. While the componentsof imports may change over the Plan period,it is expected that the Government willadjust the tariffs to achieve a continuousincrease of this source of revenue.

(2) Transfer Tax: Expected to rise by 10 percent a year.

(3) Excise Dities: Projected to increase at 7 percent a year.

(4) Sales Tax: The sales tax elasticity is estimated atbetween 1.25-1 50. Taking the unnpr limit.and the projected 7.6 percent growth inmonpt,rv r(fP iYes in innu;fl grnwt.h ratpof 9.4 percent.

(5) Other Licenses and The two main items included are motorTaxes: vehicle tx ntnd water tax These are

estimated to grow at 10 percent and 2.5percer.t,O respc,fl,etivrel, per xro.

(6) stribu+able Pool: T h ls is expecd o+ decline over t Plarperiod.

III. Export Duties To rise by 6.3 percent, which is theprojected growth rate for exports.

!V. Ot"lLer Revernue

(l) Income rrouii Govern- Consists of' rerir orsb WIfr roy-I ieS,

ment Property: estimated to grow at 6 percent per year; diamondand mining levies to fall by 2.5 percent per year.

(2) Other Income: Estimated to remain relatively unchanged.

Table 10.10: MISSION PROJECTION OF MERCHANDISE EXPORTSa

1968 (Actual) i973 (Estimatey-Quantity Price Value Quantity Price Value

Commodit w000 tons (Sh) (an million) u00 tons (a) (2 million)

Sisal 186.1 864 159 160.0 864 138

Cotton 61.9 4,572 283 96.4 3,886 375

Coffee 48.4 5,479 265 67.9 7,197 488

Cashewnuts 78.4 1,296 102 126.3 1,296 164

Tea 6.6 6,814 45 8.7 6,o64 51

Tobacco 4.9 8,163 40 15.6 8,793 137

Diamonds - - 135 - - 94

Others - - 602 - - 768

Total 1,631 2,215

a/ For projection of quantities and unit values, see Chapter IV section B.

b/ For conversion into balance of payments filzures one percent lower valueis taken into account.

a/Table1 0. 1: c 0TT 'D O 'TUCT M C'DBATACTI' OF AVTATTQ

JdLUJ.e "I I DA.'J ±U Y±L'JI '. ~ ~ J1' C2

ActUaL Projection1968 1973 Cumulative

I 969-1973

A. Goods

Expor-ts 1,631 2,215 9,833Adjustments - 18 - 22 - 58

imports - 1,778 2,449 -10,3,Consumer (567) (777) (3,438)intermediate (312) (575) (2,285)Capital and Transport (899) (1,097) (4,627)

Adjus-tments - 54 - 122 - 518

Balance on Trade - 219 - 378 -1,133

B. Services

Non factor Receipts 349 d/ 7d/ 2,706Non factor Payments 244 393 1,638Factor Income Receipts 56 61 279F ector Income Payments 99 159 665

Balance on Services 62 211 682

C. Netl Transfers 18 27 116

Balance on current account -139 - 140 - 335b/

D. Capital Account

Inlflow 256 293 1, 003Outflow 25 86 - 357'

Net Inflow 231 207 646c/

E. Net Change in Reserves -92 -67 - 311

a/ See notes on next page

b/ For 1966 errors and omissions are included in the capital account

c/ Increase (-)

C.' See footnote to the Table on page 57

Notes on Table 10.11

I. Imports

(1) Consumer goods imports are estimated to grow at 6.5 percentreflecting the growth of inccme.

(2) Intermediate goods are projected to grow at 13 percent whichis the rate used in the Plan. Such a rate is believed to beadequate taking into account the expansion of production andalso the increase in the imports of crude oil for reexport toZambia.

(3) Capital imports including transport equipment are estimated as60.6 of the value of total investments. This is also the ratioimplicit in the Plan projections.,

(4) For Balance of Payments purposes, the adjustment for imports iscomputed at 5 percent of the value of imports which was theaverage for the last five years.

II. Services

(1) Non-factor receipts are estimated to grow at 15 percent which isless than the growth rate of 20 percent which occurred in theperiod 1963-1968. All indications point to a continuous growthin receipts frcm tourism and transit trade to Zambia. The growthrate of 15 percent takes into account the limited capacity of theexisting facilities and the possibility that sane of the proposedexpansions may not be completed before the end of the Plan period.

(2) Non-factor payments are estimated on the basis of the growth rateof the period 1963-1968, i.e., 10 percent.

(3) Factor inccme receipts are projected using the time trend of thelast five years. For factor incame payments the growth rate of10 percent which prevailed in the period before the nationali-zation measures was used.

III. Other Items

(1) Net transfers are expected to be&positive over the Flan period.

(2) The outflow of capital takes into account the conpensation pay-ments for the nationalized enterprises'.

(3) N,et change in reserves is to attain a level eauivalent of 4months of imports.

TABLE 1C.12:; PROJECTION OF' DEBT SERVIi_ UNDa VAR[OUS ASS'. I - 19"J70-1985

Terms of' Lending Annual Growth Rate Debt Service RatiosJ/

Cbnce!ssion / Nonl-conlcessionzry~b/ ;morts Ixporlts 1970 1972 1980 1985

Period I Period II Period I Period II1968-73- 197254 196 lt 19748_ 1968.-73 1974-8 1968Z73 17443

A. 30 40 l0 6c) 8.1 6.,5 7.3 6.8 5.7 7.2 7.3 8.874.6 6,0 7.3 6.3 5.7 7.7 8.8 11.17Ll 6,,0 '713 6.3 5.8 8.1 10.1 13.16.,5 5.5 '7.0 6.o 5.8 8.5 11.6 15.8

B. 40 40 60 6C) 8.1 6,,5 7.3 6.8 5.7 6.9 7.0 8.67.6 6,.0 7.3 6.3 5.7 7.3 8.5 10.97,1 6.0 7.3 6.3 5.8 7.7 9.7 12.76,5 5.5 '7.0 6.o 5.8 8.1 11.1 15.4

C. 40 ;50 60 5() 8,,1 6.5 7.3 6.8 5.7 7.5 6.3 7'.57.6 6.0 7.3 6.3 5.7 7.3 7.8 9'.77,, 1 6.0 '7.3 6.3 5.8 7.7 8.9 11.36,.5 5.5 7.0 6.o 5.8 8.1 10.2 13..6

D. 50 0 ;50 5() 8.1 6.5 7.3 6.8 5.7 6.7 6.3 7.57.6 6.0 '7.3 6.3 5.7 7.1 7.5 5'.47.1 6.o 7.3 6.3 5.8 7.4 8.6 11.06.5 5.5 7.0 6.o 5.8 7.8 5'.8 1,3.3

NotesaTThe breakdown of concessionary aid iS as fol:Lowsi: b/ The breakdown of non-concessionary aid is as follows:

(i) IDA terms - 66.6 percent. (i) IBRD 'Terms - 50 percent(ii) Other concessionary -- 33.4 percent. (ii) Orthers (1ncl. supplier credits)-50 percenLt.

c/ IDbt service as a percentage of exports of goods and non-factor services.

_ _ ~~~~~~~~~~~~~~~~~~~MAP I

U G A N D A- L-- ' IC 4 OK E hrtAKENYAi1AZNI 40a

~, ,b,J ,,8.;4c.*E/ri3ukobo __<s\Ctrrres REGIONS AND DISTRI(CTS

<E R W a N D A WE 05. U E9 R - cF MA\ gi_ Region boundaries

S $g('t' Ins;et7_ at NATE?O g) Jul \ t Proposed raiiNasy

> t~~~~/ (GAXCS nXS'>s? p~~~~~~~~~~~Lug' i -auwa (0E

B E U Ri U N 1) I _ \ lwIMs yliug Mondu A ;, ,

JiX / Kib~~~~~on oX < S G Ar rln t4' { XB N D O\ >+t.hi7 . . `\ 2 MiDulu N YL AhJ RO, 4_

\~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I \ UMANUA0 4MBA

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