A r-On e RESTRICTFD 'vOiurmo ~ Report No. AF-58b I Iuiiic; I I This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may | not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION PROSPECTS FOR ECONOMIC DEVELOPMENT IN EAST AFRICA (in four volumes) VOLUME III - TANZANIA (in seven parts) PART ONE: PROSPECTS FOR ECONOMIC DEVELOPMENT IN TANZANIA August 31, 1967 H I F I IVI Africa Department [HIL m EQUIVALENTS Currency 1 Tanzania Shilling U. S. $0. 14 U.S. $1 T. Sh 7. 14 T. 1 UT.S $12.O8 I 1 T. Sh 20.00 WEIGHT Throughout this report, unless otherwise stated, tons refers to long tons of 2240 lbs. COMPOSITION OF THE MISSION This report is based on the findings of a Mission to East Africa which did its field work in October. November and December 1966 and consisted of the following: John C. de Wilde, Chief of Mission (IBRD) Colin M. F. Bruce, Deputy Chief of Mission and Chief Economist - Kenya (IBRD) KudlapurG. V. Kr-ishna, Economist - Kenya (TRDT)) C. G. Akhurst, Agricultural Adviser - Kenya (FAO) Mauric FenTan,ri Agr:iL rtiil +.iiral P - Kenya (FlAO)I Per Tveite, Deputy Chief of Mission and Chief Economist = Tanzania (Consultant) Bruno E. Scheltema, Economist - Tanzania (IBRD) A rchi4e Forbes , A gri cult1uralI Advi;s er - Tzan za1n i a (FAOr) tiJ L.I.L~ JL' Li O ± . .L UL UL. L tLV .L ~ J 1OI Jt uJ Jacques Kahane, Agricultural Economist - Tanzania (IBRD) uU TDU ls, uJejJUU , Ui1 C.L UI lVL . iUll and Chief Economist - Uganda (IBRD) Ni-chlo'las arter, Econorist - Uganda (IBRD) David Vf. M. Haynes, Agricultural Adviser - Uganda (IBRD) Montague Yudelman Agricult-ural Economist - Uganda (Cons-ultant) H. David Davis, Acdviser on Tourism (IBRD) Bernard H. Decaux, Adviser on Industry (Consultant) Jack Derrick, Adviser on Industry (Consultant) Edward V. K. Jaycox, Adviser on Transport (IBRD) Aristides J. Macris, Adviser on Agricultural Training and Education (IFRD) David McLellan, Acdviser on General Education (Consultant) Lye!l H. Ritchie, Adviser on Industrial Finance (IFC) Gavin Wyatt, Adviser on Power (IBRD) The Missionis findings relate for the most part to the situation as of the end of 1966, although in some respects note has been taken of developments up to the middle of 1967. VOLUME III TANZANIA TABLE OF CONTENTS Page No. BASIC DATA SUIHMAfOY AID CONTCLUSIOINS I. Background Country and People 1 Political Developments 1 II. Recent Economic DeveloDments Growth in Output 3 Agriculture 3 Other Sectors h Investment 8 GCv~ernmen±t Finnce 9 11oney and Credit LL Ernrl n1mPen±, Wnages and Prices -L2 Foreign Trade and Payments 1L3 The Nationalization Measures of February 1967 :L) III. Prospects for Economic Gro^rth A. Gener-al Outlook ! B. Planning and Staffing Problems L9 C. Output,,4- -a Ir.vestm+ 2 'J - UJCU - ±t4 .144 V~ _-1 U±*ent D. Financing of Investments 26 E~.PeCentral Glov\ernAment Finnc -;'8- : 44 ~ 1, u. d.L 'JUV . i II1 U 12 L11L11II1U F. Balance of Payments 33 G. Exsternal A 6Required APDPDItMT CES a. taiLsUtical TuLes B. Projects for Possible External Financing MAP ANNEXES (under separate cover) III-A Agriculture III-B Industry III-C Tourism III-D Transport III-E Electric Power III-F Education BASIC DATA / Area: 361,800 square miles Population: 10.4 million (1966) Rate of growth: 2.2% (possibly an underestimate) Population density (per square mile): 28 Political Status: Independent since December 9, 1961 Gross National Product (1966: Drov.): E293 million (US$820 million) Rate of growth: 1960-62 to 1966. constant Drices L.8% est. 1966 t 8.8% Per capita: US$78 Gross Domestic Product at Factor Cost: 1273 million (1966) of which, in percent, Agriculture 53.5 Dvr,n ,, f tn,v. ncr E n .Mining 2.6 Percent of GDP at Market Prices: Average Grossb JJiveswiLeniL 1.0U 15.1 Gross savings 17.2 17.4 Balance of paymriernts current account surplus/deficit -0.3 1.4 Investment income payments (net) 1.8 1.6 Central Government current revenues 12.7 14.2 HIoney and Credit (T Sh mill:ion): End of Rate of cha:nge p.a. 196o l961-65 Total money supply 1523.4 n.a. Time and savings deposits 270.0 + 7 % Commercial bank credit to private sector 848.2 +53 % Rate of change in retail price index -- + 1.5% i/ Excluding Zanzibar Public Sector Operations (T Sh million): 1c66/67 1966/67 Rev.Est. rate of change p.a. Central Government currentu receipts 15001 +12i w6$ U/0 Central Government curren'ti expendiUtJuLres 975 2 !. Surplus 26 - uentura.l GUovernmLent capital expenditures 274 +13.4% lotal extuernal assistance to Central Government (gross) 138 - O.6% External Public Debt (in million US$); Average December 1966 1561-65 Total debt 159.9 100.0 Annual debt service, total 12.7 4.2 of which: (Tanzania) (6.8) (EACSO) (5-9) Debt service ratio 1/ 14.5 (Tanzania only) 2.4 Balance of Payments (T Sh million): 1966 1561-65 rate of change p.a. Total exports 1,730 +11.0% Total imports 1,710 +11.5% Net invisibles - 56 - 7.5% Net current account balance - 26 - Commodity concentration of exports (%) sisal 14.1 28.7 cotton 21.1 15.2 coffee 18.2 12.9 diamonds 10.8 9,7 Gross foreign exchange reserves (T Sh million) 420.7 (as of June 30,1967) 1/ Ratio to 1966 earnings from export of goods and services. -3- LY Position (million US$) 1966 1960-65 Quota 25 25 Drawings - - External Financial Assistance (million US$ equivalent) Item 1966 Commitments Total 1961-65 Incl. EACSO Excl. EACSO Incl. EACSO Excl. EACSO Share Share Share Share Soft Assistance 1/ 9.30 9.04 56.53 49.88 Hard Assistance 11.47 11.h7 96.17 64.30 Major Donors 2/ U.K. 3.33 3.07 81.85 56.18 West Germany 2.52 2.52 9.93 9.7l4 U.S. AID - - - - IBRD - 12.66 - IDA 5.00 5.0° 18.60 18.60 1/ Defined to include (a) loans repayable in foreign currency with a maturity of over 20 vears and a rate of interest of not more than 3 percent, (b) loans repayable in local currency. 2/ Loans only, soft and hard. - 1-1 - Settlement and Water Development in order to ensure a more coordinated and less wasteful approach to -gricutural de-el--et than in the past. O A+ c1 O .A- --fl+r,n -v-nl of Ac-r-i+rnl - Jmme mr c n +lrady mao -c4-;r aL Li.. ILL. vvajJ. I.)L4L..IL W V L.JAyILl Li VLixsla U J aP,L L V4lL 1 UW J. CI.tLi Li.)1U b1 -- anrnoin¶~ - fAnrcomn ncrrn -t,r-Ico ,nn-t -,~ - -0 likely that the output of the manufacturing sector will rise substantially be- UUVUU~11 _L,YLJ d.1ilu ..L7 'J~, V'i.. UUll ~Il1 JlO.1.L L- L U.L LLU-U. ..LlJlJi_ L PLJ .L U LU ULULl.LV1..U. * t- O.LJ Pj L LU this and a projected increase in total export value of abbut 4 percent annually, it is possib . le ta thle dLltiiLpad. inLcrase in IJ imot to meet the req uirement of the investment program and a further worsening of the terms of trade may turn thie pastu surp'lus or, thl-e c-arren'u accountu ba'lance of' paym,^ents irt a nresn deficit from 1967 onwards. 6. Central Government current revenue and expenditure may increase at an annual rate of 10 percent and 9 percent respectively thus yielding a growing, although modest, surplus on the current budget. Parastatal savings are expected to rise, but the Mviission's original expectations that more private savings would also be available for development may now have to be revised in the light of uncertainties arising from the recent nationalization measures and the consequent expectation of a continued expansion of public sector enterprise. 7. After considering the probable development of current account trans- actions and private capital movements, the Jlission estimates that Tanzania may need gross imports of capital on public account of E45 million in the four-year period 1967-70. A considerable amount of foreign aid is in the "pipeline," but a carryover into the period aftesr 1970 must, of course, also be expected. Assum- ing that a more rapid utilization of aid may reduce this carryover, the ihiission believes that the Central GovernTment may need new external financing of between f30 and fL40 million over the indicated period. 8. Some portion of foreign aid would need to be available to finance local expenditures, for even though it can be expected that the Government will make reasonable efforts to maximize the mobilization of domestic resources the latter are unlikely to be sufficient to cover all local, as distinct from foreign ex- change, costs of investment as well as the inevitable increase in closely assoc:L- ated recurrent expenditures. 9. Apart from the debt of the East African Common Services which has always and will presumably continue to be contracted on conventional terms, Tanzania's borrowing should for the most part be on concessional terms. How- ever, should a shortage of soft funds develop and threaten Tanzania's modest borrowing program, the country could afford to borrow a part of its capital requirements on conventional terms, provided the grace and maturity periods are reasonably flexible. Service on the total debt outstanding as of end-1966, including that on the third of EACSO debt for which Tanzania is assumed to have a contingent liability, is scheduled to rise from A12.7 million in 1966 to $1l.7 million in 1970 but will still amount to only 4.0 and 4.8 percent resnectivelv of the estimated exoorts of goods and services in eanh of these years. This may be considered a relatively light debt burden. In the past, Tanza.nials etey.Prnl ebt-. habn ontracted on teprms whiCh_ nn an PvPrn~ag have riot been very hard. A considerable margin for increased debt service is n-r-MvTr- Ibyr +.t)rh qh±.intial :nri fontiniino* ri in ther-' ionnrcfe a lable TI TTT PROSPECTS FOR ECONi\OMIC DEVELOPMENT IN TANZANIA SUI'X1A,RY AND CONCLUSIONS 1. In the past fi-ve -years, the economy- has gruon at an average annual rate of slightly over 5 percent, accelerating to an average of over 6.5 percent in the most recent years. Development was slowed by a bad crop in 1961 and there was another, although milder, setback in production in 1965 when a drought affected the harvest in general and export prices for sisal feii drastically. The economy has since regained momentum and in 1966 achieved an increase of 8.8 percent in output and 22.3 percent in exports - both of which are the highest on record. Although the rise in investments has been an important factor in stimulating growth, agricultural output has been affected more by other factors, particularly the growing response of farmers to market opportunities with the development of ar increasing desire for more cash income. 2. Although world market prospects for the main export crops - cotton, sisal and coffee - are not bright and a further decline in prices must be expected agricultural output as a whole is increasing satisfactorily and may rise over the period 1966-70 at an average annual rate of about 4.5 percent, with cotton taking the lead as the major export crop. An encouraging feature of development has beer the rapid expansion of manufacturing industry. Starting from a very low level, in 1960-62, manufacturing output increased by an average of about 16 percent a year with an exceptionally high growth of 22 percent in 1966. Total GDP may increase at 5,5 percent ainually durin- 19(6-70. For the Plan period 1964-1969 the grcwth rate wolulrl be a little over 5 percent annually compared with the target ot 6.7 percent. The nationalization measures taken in February 1967 may, however, adversely affect new investment and, in the longer run, manufacturing output. 3. Despite the acceleration in economic growth there was a marked drop in wage employment until the end of 1965. This appears to have been due primarily tc a rapid increase in wages which has stimulated employers to adopt labor-saving methods. The Government is aware of this problem and, on the basis of recomnenda- tions contained in a recent study on a national incomes policy, has alread.y imple- mented some initial measures with a view to restraining excessive wage increases. llage employvment in 1966 was fractionally higher than in 1965. Li. Rising investment is exoected to be a buoyant factor in the economy over the next few years. In 1967 and 1968 EACSO investment, particularly that hy the East African Railways and Harbours, will be at a high level. Tanzania Government development expenditures, which lagged greatly behind Plan targets in the first half cf thp Plan period, are now gathering momenrT tm and mny rise fro.m the 1966/67 level of about f13.5 million to perhaps as much as E25 million by 1970. A rise of this magnitude is contingent, however, on the availability of external finance and on the ability of the Government to carry out its intention to s+rcngthen the org-ization n-A staff fo r detailed plannirng and proj-ec+ r plementation, particularly in the ministries responsible for large sectors of thc development program. This will inrvolle not only the e stabli snnt or rein- forcement of planning units in the critical ministries but also a redistributiobn of fLunctions betWleen the Ainistry of Agriultue an. 4AlU the ToLands, - iii - to the economy in terms of gross domestic product, public savings and foreign ex- change from exports. On the other hand, a substantial hardening of debt terms should be avoided in view of the low per capita income level, the expectation of a much slower growth in export earnings following the high totals attained in 1966, the possible slackening of economnic growth toward the end of the sixties and the need for net capital imports over many years. 10. The full repercussions of the nationalization measures of February 1967 can be fully appraised only after some lapse of time. Much will depend on the terms of compensation, on the success of the Government in retaining and recruiting competent management and teclnical personnel for the nationalized undertakinlgs, and on the ability of the Government to convince the private sector that no further nationalization is contemplated. Recent nationalization may not significantly af- fect the rate of growth of private investment and production envisaged by thes Mis- sion for the years immediately ahead, since most of such growth will result from investment commitments already made and plans being carried out. The investment climate, which remained extremely favorable until the nationalization measures were introduced, has inevitably become somewhat clouded. Although there are some signs of a renewal of private investment activity in the economy, prospective entrenreneurs nontinue generally to he cautionus and somewhat iucertain of thn Government's future intentions. There are clear dangers inherent in any signi- finant withdraw1l of non-Afri-ca-n caitl and entrepreneurial abilitv from Tanzania. It is, however, reassuring that the Government has taken prompt steps to comnence negotiations on compensation with most of the firms which have been s_hject to varying degrees of public ownership, and also to declare that a substantial area of activity still remains open to private enterprise. In this connection, the Mission strongly recommends that the Government issue a white paper to clarify the positon concerning actvities whilch may be open exclusively to public or private enterprise, and others in which joint public-private participation could be promoltaeu. rDncID1Prnc T lMT -r? TTr`oigTnrT TWUPT1IDMIPT,m T a T'PATT7A -ITT A L .LLiVUJ L,LJ.L IJ i 1 . LM JV1±J LV iJLa V IV1u £ .LJLa 4. Li! | ±riIMLJnJ..L n I. BACKGROUND k.unUlIr:y aInu reUp-L 1. Tanzania 1/ occupies 361,800 square miles of East Africa between Lake Victoria, Lake Tanganyika, and the Indian Ocean. A large part of it consists of an arid high plateau with low soil productivity. Agricultural production is con- centrated in the more fer-tile areas on the periphery where rainfall is also more abundant: the Lake Victoria region (cotton, coffee), the highlands round Kilimanjaro (coffee), the Southern Highlands (tea, tobacco, pyrethrum), and the Northern Coastal district (sisal). 2. Tanzania's estimated population as of 1966 is iO.4 million and is said to be increasing at about 2.2 percent annually, although this may be an under- estimate. It includes 80,000 Asians who are predominantly engaged in commercial and professional pursuits and to some degree in industry, and some 17,000 Euro- peans who are employed in the public services, trade, banking and industry and to a lesser extent in large-scale farming and plantation enterprises. Although the country with 28 people per square rmile is sparsely populated, local popula- tion pressures exist in some agricultural areas. There are individual and in- heritable cultivation rights in land, but subject to overall government control. 3. Gross domestic product per capita is still very low - $75 in 1966. However, there are large differences in income: within the farming community depending on the degree to which production takes place for the market ra-ther than for subsistence; between the farming community and wage earners; and be- tween the business and professional classes on the one hand and the bulk of the population on the other. Even more important is the fact that wealth is still largely identified with the Asian and European communities. It is this factor that has produced strong pressures for increased African participation in all fields of economic activitly. 4. Agriculture is the principal economic activity in Tanzania. Crop production, animal husbandry, forestry and fisheries together account for about 55 percent of the countrylls domestic production. About one-half of total agri- cultuiral Droduction is consumed for subsistence. The main cash crops are cotton, sisal, and coffee. A little over 126,000 of about 336,500 wage earners in Tanzania are employed in agricu7lture. The small but rap-idly growing indus trial sector employs about 30,0(0 workers and accounts for some 5 percent of GDl'. iMiin- ing of diamoTnds and nldi -is of imnort-nir fnr the contry's xponnrts hlit. e:-nloifa- 0 ~ -- ---- C- 0 -~ -- _ - - - -- tion of other known mineral deposits is as yet insignificant partly due to their remote Ilocation anrd +he consquient higah cost of transport. Political DePvelopm-ents , - -r,rI., hl-T.h ,h ; ci rnv'+ o-f +h TTri +o,-1 R,oil-,l i ,' rvn- Tnn,'7Dnn n " n r, independence within the British Commonwealth in December 1961, when Dr. Julius i/ This report and the statistics contained therein cover only mainland Tanzanla, except were( sp -7eC;i JfiCally noteudu. - 2 - Nyerere became the first Prime Minister. A new constitution adopted in late 1962 made the country a republic and vested executive power in the President. Early in 1963 it was decided to modify certain features of the parliamentary system and to establish a one-party state with the Tanganyika Africarl National Union (TA1'U) as the only legal party. 6. Following the troubled events in Zanzibar early in 1964 which led to the flight of the Sultan and the establishment of African majority rule there, a union between Tanganyika and Zanzibar was proclaimed under the name United Republic of Tanzania. Dr. i§0yerere became the President of the new republic and Mr. Karume, leader of the ?evolutionary Council of Zanzibar,assumed the office of First Vice-President. Actual integration of the two countries was slow at first, but considerable progress has been achieved in recent months. Zanzibar continues to retain a wide measure of autonomy in some internal matters and also foreign affairs, but there is growing evidence that the economies of the two countries are being progressively interlinked. 7. In June 1967, the Governments of Tanzania, Kenya and Uganda signed a Treaty for East African Co-operation. 1/ The Treaty, which represents a milestone in East African co-operation, provides for the establishment of an East African Community which will ensure the continuation of the Common Market and Common Services in revised forms more satisfactory to Tanzania which, along with Uganda, had expressed dissatisfaction with the previous arrangements. Zanzibar's participation in the Community is secured by an arrangement whereby all East African Community functions are regarded as Union matters in Thnzaniq_ B. The basic tenet of Tanzaniats foreign policy is nonalignment c^mbined with determined opposition to all vestiges of colonialism. In pursuit of this poli^cy it. ha establihed politiical and trade relations with most+. "ISoviet Bloc" countries, the People's Republic of China, and the uncommitted nations. It has sou-ht and accented airl forvrr its. npresent. DCe1vTp mcen+. PI n fProynm bot+h W+astern ndl Western blocs. Tanzania's foreign policy has occasionally disturbed its rela- tions with certain Western countries9 but the country has continued to adhere strictly to the obligations it has voluntarily undertaken. 9. The strengthening of Tanzania's relationship with Zambia following DihCodesia's declaration of independence is of special significance. Tisj is likely to change gradually the direction of Zarmibia's trade from the south and ;UU 1lCdb U LU U ll Ul Ul1d.D U UU U _ LULL 1ZG L' 11_1 I U UL Li UU L1l'JUl UllCl.11 LlilU iad dallU Tanzania. It would require, however, large additional investments in transport -w^rhich are on'ly ve:y partiLa-l-ly Uarlenlnto II a c UoUUUU £iit U11is rLoU(JUeL U.nnex III-D). ]j Salient aspects of the Treaty are discussed in Volume I - Part one "Common M4arket, Common Services and Common Problems." - 3 - II. RECENT ECONIOMIC DEVELOPMENTS Growth in Output 10. After the serious drought in 1961 when there was an actual drop ir total production GDP in constant prices increased at a fairly high average annual rate of 6 percent in the following three years. In 196,5 however, there wa.s again a slowing down in the growth rate mainly due to poor weather conditions which according to official estimates reduced output in the subsistence sector by about 4 percent. Monetary GDP continued to rise but at a lower rate than before, and total GDP rose by less than 2.0 percent. 11. Another factor with serious consequences for the Tanzanian economy in 1965 was the drastic fall in the price of the main export crop, sisal. Together with lower coffee prices, this led to a reduction in the price index for expcort crops of 17 percent from the average level in 1963-64 with the result that (DP at current prices remained virtually stagnant between 1962 and 1965. In the nonagricultural sector, with the exception of private transport and services, there was a considerable increase in production in 1965, particularly in mining. construction, and manufacturing (which tog,ether accounted for about 10 percent of total GDP). 12 Becanus of fhe etbh2ck in agrimi1tnrr1 proclition and poTnrt Pqrn-in7n in 1965, the overall growth rate in the first two years of the Plan period, 1 QA -A9 was~ not as high as o-I-rlgc,i nally eTnvisaT1 ed.~ Howevet~~~r) in alhn -ai - - -ll - r,- cultural economy like the Tanzanian, fluctuations in output from year to year are to be expected. There was a good harvest in 1966 once more whichn, togeher with expansion in the industrial and other sectors of the economy, contributed tc an increaso in GMP of P8. p a nt p On A l-r basis o prl4 4rfl- estimates GDP at current factor cost ariow-uted to 1273 million in 1966. This IniunUdicae d a ii lsIgnifican i IiJv -tlV ritU U lUy ujLl,i tIh gVVwo- l 1 the previous years, but also the plarined groTth rate of 6.7 perceint. Aizri cul -tu 1- 13' The favorable trend n total production ln recent years was ac'eved despite the fact that investments, though rising rapidly, remained far below Plan targets. This - p----ibl particularly bece--- 4- the growth in the agr-icultural sector was achieved first and foremost by the increasing response of farmers to marklet opportunities andu tLo governmzent eff'ortLs tuo assist thlemL withi ext,nsio i-U. services, better marketing facilities and other measures which did not call for heabvy investmentslD. 14. In the Five-Year Plan the general approach to agricultural development was twofold, with emphasis on "improvement" on the one hand and "transformation" on the other hand. This was in conformity with the recommendation of the IERD Mission to Tanganyika in 1960 1/ but in practice too great a distinction was made J The EconoRic Development of Tanganyika, The Johns Hopkins Press, Baltimore, 1961, 548 pp. - - between the two approaches, particularly by entrusting responsibility for "im- provement" and "transformation" to separate ministries. In retrospect it is clear that investments in 'transformation," notably in the rather ambitious village settlement schemes. have been almost wholly ineffective in making worthwhile con- tributions to agricultural output. The Mission welcomes the intention of the %vernment ton nroceed more slowlyr with the settlement program in +.he coming years and to concentrate on a more efficient administration of on-going schemes. 15. The most encouraging feature in the development of Tanzanian agricul- ture isq- the inc-reaIse l-n smallhcoldris'I rn niike+fl+. Toup hich1 -in IQ9A T nhcint 75 percent higher than in 1960-62. Whereas the subsistence sector in 1960 accounted -o h ma,jor pa,r+. of the contribut-iion of aggriculture of ^G-DP, ti iu+o a now been reversed (see Appendix Table 6). 16. Among the smallholder agricultural items which have shown the biggest incrAse I'An output andA expos s nce the early 1960's are coittn and cAsh uAt. The export of cotton and cashew nuts has more than doubled in this period. In 1966, Ulthe outpuu Uof uuuuon exceedude I arLd- l cashJIew nuts closely appoUaChUe tiie IPlan target for 1970. On the other hand, the export value of oilseeds, other than cottonseed has declined froi-i t1he high le-vel atained in 1963 (see AppenLdix Table 22). 1 ~7 T -S _h rn. A- P' 4 A 4 _ _ A_4 A 1 4A A4 AA5|-> A 1, L * n11 t; iC D UpJ LU V1. L D1 U 1 AA U CLDUaL iLl -"1-I D O± d a. p 1-L.AZJ L C a D 1U UliEI Vzly favorable outlook for a large number of sisal growers in 1962-63 to a rather gloomy orne in 1964-66. Follow Lig a sharp increase in export prices for sisal in 1963, production reached a peak of 230,000 tons in 1964 but dropped again to its former level Of 214,000 tons in 1965 (see Appendix Table 17), when prices went dow-n by 30-40 percent. Because of the price decline, several estates are closing dowvn while others have had to increase their efiiciency markedly in order to operate at a profit. After having been Tanzania's largest export crop since before World War I, sisal has now been surpassed in export value by cotton and coffee. Despite fluctuations from year to year, there has been a considerable increase in output and exports of coffee. However, coffee production is now approaching market limi- tations. Production of tea, still largely grown on estates though also in increas- ing measure by smallholders has shown an upward trend. The prcduction of other crops grown by small farmers as well as on large farms and estates - wheat, sugar and pyrethrum - has increased steadily and rapidly. 18. Crops account for about four-fifths of total agricultural output and although this ratio has changed little in recent years, the volume of output in the other subsectors taken together, (livestock production, forestry and fisher- ies) has expanded at a somewhat more moderate rate. According to official out- put estimates, livestock production has barely kept pace with the population increase. The Plan emphasized improvement of the quality and live weight of cattle rather than an expansion of the total number. Some progress has been made recently in these respects but the improvement has been localized to a few scattered ranches, and much remains to be done in this sector. Other Sectors 19. In general, agriculture continues to be the dominant sector in the economy of Tanzania, and the level of activity in the nonaaricultural sectors has reflected as in 1961 and 1965 fluctuations in agricultural output. However, taking the period 1961-66 as a whole the nonagricultural sectors have increased their contribution to GDP from 40 percent to 47 percent. In particular, the output of the mar.ufacturir.g sector han s te-r.dedr +to progress Soe,iv1hat ;--ndepndntlyr nof 4-ho agricultural sector, mainly under the stimulus of import substitution. 20. Manufacturing output has increased rapidly in recent years, averaging a_.VL little L over 16 pecn ya ewen16-6 n 96.I o accounts 'or 7 percent of monetary GDP and a further increase in its share is expected in the com-ig years. ProductioL of manufacUtued goods for domestic use, to a larLe ex- tent based on processing of primary products of Tanzanian origin, covers the largest share of ma-ufacturing output. .IIhe cons-umer goods .tduU5 DVJeZ sUi-L:L account for most of the output and employment but the establishment of an oil refinery, a cement piant and some new metai products industries has recentLy broadened the base of the manufacturing sector. 21. Most of the manufacturing establishments are small and are concentrated in a few areas. In 1965, one-quarter of all establishments, employing 43 percent of the industrial workers were situated in Dar es Salaam, which is served by good port facilities and has a relatively large market for consumer goods. In- dustrialization is gradualLy spreading to other regions, such as the Arusha-Moshi area and Mwanza, where lower labor costs, growing markets and local supply of raw material provide some attraction. 22. Tanzania's Plan put much emphasis on industrial development, aiming at an annual growth rate of 14.8 percent. The public and parastatal sector program got off to a slow start because of lack of funds, inadequate project preparation and shortage of qualified personnel. It is, however, to be noted that several large joint undertakings such as the oil refinery and the cement plant became opera tional towards the end of L966, and two textile mills - one a public, the other a joint enterprise - are nearing completion. Other projects like the sisaL based pulp and paper scheme are under active consideration by the National Development Corporation (NDC), but no firm investment commitments have yet been made. 23. In practice, it :is difficult to distinguish between parastatal and purely private sector investment since NDC participates - in varying degrees - with pri- vate enterprise in industr:Lal promotion. Enterprises in which both the initiative and management were provided by private enterprise (often with a minority share for NDC) accounted for a substantial expansion of industrial production in the period 1964-66. Although policies such as the restriction imposed on the employment of foreign nationals had some inhibiting influence on local enterprise, the private sector benefitted substant:Lally from the Government's policy to protect the domes- tic market, thereby facilitating the establishment of import-substituting indus- tries. The nationalization measures, announced in February 1967, undoubtedly dampened, at least for the time being, private enterprise, though the Government has frequently reiterated the view that it continues to welcome private investment, both in partnership with NDC and, in some fields, even in wholly-owned private ventures. 24. Towards the end of last year it appeared that the outlook for Tanzania:s mining sector had proved less optimistic than was envisaged in the Plan. This was due mainly to the fact that diamond mining, which had been the mainstay of the mining industry, was being confined to marginal deposits and had fetched lower prices in 196O. On the other hand, a revaluation of known diamond reserves and prospecting suggests that the present level of production can be maintained for at least a decade. In 1966, diamond production increased by 26.5 percent and the unit sale price rose by about 15 percent. The output of the mining sector, which amounted to Sh2L6 million in 1966 has already exceeded the Plan target for 1970. 25. The sharp rise in total investments from their relatively low level in 1963 led to a corresponding large increase in construction activity. At the same time public construction, for which the Ministry of Communications and Works and more recently also the Ministry of Housing are primarily responsible, has lagged seriously owing to a severe shortage of government personnel qualified to prepare and carry out projects. In some cases delays in the supply of funds have also slowed public construction. At the end of 1966 sorme idle capacity in the private construction industry apparently developed, particularly after several large in- vestment projects had been completed. 26. Demand for electric power rose by an average of 10 percent annually over the past five years. In the Dar es Salaam area where there is a concentration of industrial activity, the growth was about 15 percent. In the other main consumer region, Tanga, demand rose more slowly and even decreased in 1965 as a result of the recession in the sisal industry. There is as yet no extensive electrification in rural areas. The generating capacity of the government-owned Tanganyika Elec- tric Supply Company (TANESCO), which increased considerably in 1964 with the addi- tion of the Hale hydroelectric pro.ject, has so far kept pace with increasing demand. A new major source of energy will, however, be required by 1971, and the Government is currently considering the merits of two alternative sites for the generation of hydroelectric power. To meet the anticipated shortage in the interim period, TANESCO has finalized plans to install a number of large diesel-driven generators. and has concluded negotiations with the World Bank for its participation in financing of the project. 27. The transnort system of Tanzania is extensive comnared to the voliume of traffic it is called upon to handle. This is due to the widely dispersed popu- lation and scattered nroduntion centers. The rallw2v svstem of about. 1,00 miles of track carries the bulk of long-distance, heavy traffic. The rapid growth in production and exports has more recently led to a shortage of rolling stock in peak periods and has caused serious problems for the marketing of cotton and other npr,may'r produc rctq+sa rliistvdr; +th cot+ ton seaon. An invrestment pY-orm for rolling stock is now under way. In the main harbor, Dar es Salaam, the limited euly td inpdlog capaogsio - deqhua te manager- and il bot at t--msh coas resulted in port congestion. Inadequate storage facilities, both at the coast -7- and inland, are also causing bottlenecks. On the whole, the increasing demand for long-distance road transport has been adequately met, but the maintenance of t4he roads hlas bVLeen insuffiAlcent. Also, there C is -e C- - ac - -A P cess 4to the mai traffic arteries as the expansion of minor road networks has not kept up with de- I opJ}III U- ofLL pr dUl Lk UJAJIi i 0 L ~ 1 C At -1~ , 4IIC , UIIC 4 - i U.) -- -4U ----LL ± - ve-lo,n oprdction 4n. local centers. Altogether thereO is 1 Ua. 8urn nee Ufo high investments in railways, harbors and roads which only amounted to some f2 mil- ±li1on -in 197UL4,/u) cUU rld4 .mLiL-Ullo _ln 1796/66. It J_ l U±V-Ls believed UIItL, a hlg lvel of.V -L investment was achieved in 1966/67 in the road program, mainly because of an im- pro-uvemenfl in uthe awuuinistrative anu techInical staffing position in thie mIinistry concerned. An allocation of 14.5 million has been made for roads in the clevelop- ment estimates of 1967/68. Higher investments are also projected for railway and harbor development, details of which are given in Volume III - Tanzania, EPart Five. 28. Of particular importance in the field of commerce has been the establish- ment of a large number of national marketing boards to handle sales of agricultural products. In addition to the already operating Lint and Seed Marketing Board and the Coffee B3oard, similar boards have in the past few years been established for sisal, sugar, tobacco, wheat, pyrethrum, tea and dairy products. To these must also be added the National Agricultural Products Board which handles major com- modities for the domestic market (e.g. 15 percent of the total maize produiction and over one-half of the rice production) as well as minor export commodities. The system of operations and the price policy of the marlceting boards vary con- siderably and some of them are not engaged in cormmerce at all but performa only an advisory role. The Lint and Seed MIarketing Board and the National Agricultural Products Board have maintained substantial Thnds for price stabilization mand support, although the funds of the former have shrunk rapidly in recent years owing to the fall in cotton prices. In 1966, however, prices paid to cotton producers were reduced, and the Lint and Seed Board achieved a surplus of Sh3 million, in con- trast to substantial deficits in previous years. 29. The marketing boards carry out their functions in close cooperation with the cooperatives which have growvm rapidly. The activities of the cooperat:ive-s have in many cases greatly expanded. In addition to marketing and processing, coopera- tives have assumed other functions such as credit administration and even the oper- ation of tractors. With the establishment of the Cooperative Supply Association of Tanganyika (COSATA) which was nationalized in February 1967, cooperatives also en- tered the field of retail trade. 30. The rapid eypansion of marketing boards and cooperatives has undoubtedly given farmers a more assured market for their Droducts and has given Africans important business experience. On the other hand, it has also created some serious problems including, inefficiency and mismanagement. The Government; has on a number of occasions intervened to curb abuses and stimulate greater eff'ciency, but not altogether with success. In 1966 a Special Committee of Enquirv was asked to review the staffing position and organizational structure of cooperatives and marketing hoards, andi to rrecommenc1 steps anmed at mxt mz hng benPfiits. to both pro- ducers and consumers. On the basis of the committee's report, various measures are to be taken to strengthen the staffinU of the cooperative movement which, in t.Prms of number of societies and volume of crops handled, has had a spectacular growth since 1961. The Committ-ee! also recommendeda thorough review of the st-ru1ture of' marketing boards with the objective of achieving a measure of rationalizaltion. It - 8 - is proposed to engage a team of management consultants to undertake this task. Investment 31. Gross capital formation which had slowed down in 1962-63 rose sharply in 1965 and 1966. In money terms, capital formation amounted to E24 million (14.5 percent of monetary GDP at current market prices) in 1961, but rose to B41.9 million in 1965 and E47 million in 1966. In the latter two years capital formation amounted to a little over 21 percent of monetary GDP (Appendix Table 10). 32. The 1964-69 Plan envisaged total investments of E253 million over the whole period, of which E137 million w¢as to be undertaken by the public sector. Provisional estimates indicate that about one-half of this investment will actually have taken place in the first three years. The "physical' performance will, however, be significantlyiower since building costs have risen sharply in recent years both as a result of higher import duties for scme building materials and a substantial increase in the wages of construction workers. 33. During the first three years of the Plan period, capital formation in the private sector is provisionally estimated to have reached about 55 percent of the Plan target for the five-year period 1964-69. Commitments already made and programs under way will ensure that the Plan targets will probably be fulfilled, despite the possibility that the momentum may somewhat suffer as a result of the nationalization measures. The pattern of private capital formation envisages in the Plan wasthat industry would account for 30 percent, housing 30 percent, agri- culture 7 percent and others 33 percent. It is likely that expectations of capital formation in the industrial sector will be met. In the field of housing, however, a shortfall appears likely. On the other hand, the anticipated small share of private investment in agriculture has been exceeded by a substantial margin. 34. Public investments by EACSO in railways, harbors, and telecommunications amounted to around E8.2 million in 1964-67 or nearly 46 percent of the five-year total of 118 million in the Plan. EACSO investments are expected to reach a peak level in 1967/68, and the Plan target will probably be surpassed. Capital forma- tion by local governments is running at about El million a year, or at about half the level envisaged in the Plan. 35. The 1964-69 Plan target for Central Government capital expenditure, as normally conceived in the hb1ret- amounted to Shl_580 million. 1/ At mid-noint i.e. December 1966, actual investment amounted to about 65 percent of investment proiented for the first half of the Plnn period. The actual cost of projects is, however, estimated to have increased by 10-15 percent and hence, in real terms, invest;+ment performance amountedr +.n onnlr cUQ-55 perrn+. nfw 1-lip +.nrget. upn ton the end of 1966. 1/ Including Shl40 million carryover from the previous Plan, but excluding shAn 1, illio l nr^nn conl[+r;hl;n i+^ o-4-4-+n 4- - 4--1- -, +-;4^-s - 9 - 36. This shortfall is, on the whole, not due to lack of funds except per- haps in a few cases. A much more important factor has been the bottleneck in detailed project planning. Shortage of qualified personnel made it difficult to get the Plan under way quickly. It is significant, however, that Central Govern- ment investment expenditure in 1966/67 amounted to an estimated Sh276 million, which shows a 25 percent increase over the level of Sh2l8 million attained in 1965/66 which, in turn, showed an increase of 19.6 percent over the level attained in the previous year. Despite the continuing deficiencies in the planning machin- ery and the staffing situation, i/ recent performance suggests that, with growing experience, the investment program has now gathered momentum. 37. The investment performance of parastatal organizations up to the end of 1966 was far from satisfactory. The Plan provided for an investment by these organizations of Sh830 million j over the period 1964-69, of which an investment of Sh320 million was projected up to the end of 1966. Actual investment was,however, bnly Shl106 ml].ion cr'33 percent of investmeeft projected for the first half of the Plan period. Apart from the usual organizational and management problems, parastatal bodies also suffered from financial constraints, owing both to inadequate contri- butions from the Government, and also the limited success in mobilizing resources on their own. The recent nationalization measures have imposed additional res- ponsibilities on some of these bodies, so that a greatly accelerated investment program would be required irL order to fulfil the targets in this sector. Government Finance 38. Since the early sixties, the size of Tanzania's recurrent and caD:ital budgets has been undergoing a steady increase (vide Appendix Table 11). Recur- rent revenue rose from Sh554 million in 1961/62 to Shl,102 million in 1966/67 or at an average annual rate of 14.8 percent. During the same period, recurrent exnenditures rose from Sh6lC, million to Sh975 million or at. an avernae annu,3l rqte of -9.8 percent. During the two years 1962/64, contributions from recurrent bud- getary surpluses accounted f'or an average of 23 nprcent nf' canital pYnPditiure. In 1964/65 - the first year of the Plan - a large proportion of the capital expendi- ture was financed f~rom short-term. local bo_r-.n-. In the budget of 196/66 a development levy was introduced anid bond sales to the National Provident Furd, fnTxrPrnment Prorvidn+. Fund, bhnks nnni innrcnY r-mnnn;e wpr t+nnnr iin AIl+-el,iIl the Plan anticipated that 78 percent of the expenditure would be financed from ex- ternal sources, the position at the end of the third year of the Plan shows that external sources accounted for only 44.3 percent of total development finance. In contrast, inter-na1 sourcsc haov contrvbuted 7 pevrcr.+ of t-he tot+l, thereb S -- .&S - - -- -- ~,- 'F - -~ -- - -.., - -',±' jJ greatly exceeding their an-ticipated contribution within this period. 39. The ratio of current revenue to monetary GDP has been showing an encourag- iJng increase in t.hLe past few ye- rising .ro.ml ao 20 percent in 19'6' to a lJitl over 23 percent in 1966. Total tax revenues as a proportion of monetary GDF' ac- countLedU for 11.7 percent- in _1963 and -16.7 -----cent4 in 1966 Ho-wever 4the overall U~L~IL~LI LUi4. I j± SIIULIL~ CiULU iLJ. jJ1 raiU21 7JJ*1i'V1 Ii VI! ,/ These problems have been under re-view for some tim_e, and there are indications that the Government is now actively addressing itself to their resolution. S/ Excluding the Cooperative and Development Bank. - 10 - increase in proceeds from taxation appears modest, when viewed against the in- crease in tax rates and the imposition since 1965/66 of the development levy. This is in part attributable to tax evasion and slackness in tax collection, particularly in the rural areas. With an improvement in the efficiency of the tax collection machinery, revenues from direct taxation should rise at a faster rate than in the past. 40. In the period 1961/62 to 1963/64 direct and indirect taxes accounted for about a third and two-thirds respectively of total tax revenues. These pro- portions have remained virtually unchanged despite measures taken in subsequent years to generate additional taxes. Over the past few years import duties have accounted for about 45 percent of total tax revenues. Current revenues other than taxes accounted for 17.2 percent of total revenue in the period 1961/62 to 1963/64, but their contribution fell to 11.3 percent of the total in 1966/67. In part this is due to the transfer of income-earning investments from the Government to parastatal organizations, although in 1966/67 there wias also a significant reduc- tion in proceeds from EACSO's Distributable Pool Fund. 41. In the period 1961/62 to 1966/67 total recurrent expenditure on social services doubled, while that on economic services more than tripled. In contrast, the cost of general administration has increased less rapidly. There was a big increase in defense expenditure between 1963/64 and 1964/65, with only a modest increase since then. The biggest increase has been in respect of debt servicing which rose from Sh37 million in 1961/62 to Sh9L million in 1966/67, and which is expected to be Shl45 million in 1967/68 or over 13 percent of total expenditure in that year. Part of the rise in overall expenditure is attributable to completed development projects, and the recent acceleration of the investment program may be expected to bring about a further corresponding increase in recurrent expenditure in the coming years. 42. Capital expenditures have been discussed in the previous section of this report= On th+e revenue side of the capital budget it is wornrth nnting that the Government managed to increase substantially its domestic borrowings - mainly through the sale of Government securities - which has now reacheda level of al- most Sh6O million per year. The National Provident Fund and the Government Provi- dent Fulnds are the principal buyers, while insurance co.mpannies and cormm.ercinl banks have taken a minor share. Contributions from the recurrent budget, which reached a peak of Sh)l million in 1964/61 declined to insignifica.nt mounts in the next two years, but are expected to be of the order of Sh4l million in 1967/68. 43. Foreign loans and grants for development expenditure fell sharply from Sh illlon in1.L..i..LJ 10i6 1,24 4to Sh2fL m i.lo 1 ° 6 3, but ha v e be risn si n c e then, reaching a figure of Shl39 million in 1966/67. Until 1963/64, the United Kingdom provided miUos u tL ofhe axternal assistance, but iUt shae V U.L J-nt UiI next two years. Following the rupture of diplomatic relations with the U.K., addlUtuIon aiLL cLU IorumiiteiUltl Uby lhiU U.K. IhaVe niUL, Ubeen fo1r1thcmin. SinceU1 196L4/658 the United States, West Germany, IDA and Sweden have become important sources of aId and C h i __ (MainlAnd) / p_ to poi I _ _:2 n i _. : _n 9 6/6. t is : ailU, v i it U lli-ld klslialll I ClU ) lLb .it'L;p U tU bu P.I'uv -LUt 0114U liTU l-llUIl - I1 -LYU f / UU . L LI -Lb also interesting that, on an average, internal sources have accounted for a greater proportion of development revenue in the past three years, in contrast to the situation in 1961/62 - 1963/b64, when external sources accounted for Et greater proportion (vide Table 14). 44. Tanzania's public foreign debt increased substantially in recent years to US$159.8 million equivalent at the end of December 1966, including an undis- bursed portion of US$44 million (see Appendix Tables 1 and 2). Borrowing was mainly for the implementation of the Development Plan but also for compensation of retiring expatriate employees. HowEver, servicing of Tanzania's ol%7n foreiSjn debt in 1966 was the equivalent of onlyr alboift 2.tL percent of total 1966 recei-pts from exports of goods and nonfactor services. Money and Credit 45. A radical institutional change took place in the monetary field ir 1965-66 with the establishment of a central bank, the Bank of Tanzania, 1 and the introduction of a national currency, the Tanzanian shilling. Legislaticn for the establishment of the bank was passed in December 1965, and as from June 1966 it started to issue the new currency. The central bank and the new cur- rency also cover Zanzibar as part of the United Republic. In the transitional period when Tanzanian currency as well as other East African currencies are legYal tender, it is not possible to obtain exact information on the money supply and on the transfer of money between Tanzania on the one hand and Kenya and Uganda on the other hand. Concurrently with the decision of June 1965 to establish separate cen- tral bankcs in the three East African countries. exchange control measures were in- troduced to regulate the outflow of capital to sterling area countries outside East Africa. The introdiition of these mpesnures anparently brought about.a sig- nificant reduction in the outflowT of private capital. 46. Tanzania has a substantial foreign exchange reserve. Its eventual share of the East African Curency Board's foreign assets mray be arouind r milllnI after taking into account the estimated proportion of East African notes ancl coins in circl a+i n in Ta.-,-m ni as well as +he -----rrn+ t'I. 1-la i+tso th+ - E- FACB. Although probably only a lit-tle over 80 percent of the old currency had been con- vertedbry mid-1967 and the distribution of E.ABIs assets was therefore by no means complete,the Bank of Tanzania was already holding at that time foreign exchange reserves amounting to Sh4,20 million (.21 m-illion) or the equivalent of 4 n.onthsI imports. Favorable developments in the balance of payments since June 1966 have rOtlh.er _nstitutionvaL chyang,es of -yimportan,-ce wero the ls4ablis"cn+ of Tanzania Bank of Commerce in 1965, with 60 percent of the equity capital owned by the ~ ~ ~ ~ ~~~- GoerLet an h raino he 1VCLtiona1 Provident UUnd whc- hsaled become an important channel for private savings. In February 1967, the commercial 1/ The Bank of Tanzania took over the assets and liabilities of the East African Currency Board, to the extent of the latter:s operations in Tanzania; th,- final position concerning this will not be evident for some time. - 12 - banking activity was nationalized, details of which are provided at the end of this section. 48. Over the last few years, advances by commercial banks have increased at a more rapid rate than deposits. While the ratio between advances and de- posits at the end of 1961 was 71 percent, it had increased to 92 percent at the end of 1966 (see Appendix Table 27). Total advances were then standing at a level of Sh85'2 million as against Sh392 million in 1961. The largest share of the increase went to the commercial sector. At the end of 1965 advances to the Government amounted to 2 npercent. of the total. From Sentember 1966. however. advances to the Government are being handled by the Bank of Tanzania, which is q1,o the ciennq!ttorv for government hqlances. )L9. The strain on the liquiditv of the onmm(-eroial banking system has been a reflection of the increasing monetization of the economy and the heavy demand for credit hy the private sector In peak seasons the advancer/deposjt ratio may even exceed 100 percent in individual banks. The Mission got the impression, however, that4 -e ; rar- cl --r-o- -- h-lr nravnces hocsnr+ kibn o nnn---+- nl oin vo-ry factor. In the past, borrowing by the Government from EACB and the banking system lias beLa±en modest anld now it --is l sev4erel r 4.st icd by 4 C entral Ba nl, A 1ct. The new central bank appears to be pursuing a realistic and cautious policy. Enployment, Wages and Prices 50. Recent development of wages and prices gives rise to some concern. LLi.uUUcL_;L±/lly, tUihere hIdas Ueen 11 rapid deterioraLtio -i' UteLrm1s oLf Ltuad s eL . 13ue to a combination of falling export prices and rising import prices (see Appendix Table 26.Itral,sapwg ncreases have wdndteicmgabtween wage earners and farmers, creating an add-itional pressure on prices by intro- ducing an elemrient of cost-inflation and induced labor saving in tne pri-vate sec- tor, anc_ hence leadi-jZ to a contraction ,n total wage-employmTemnt. In 1)66, holwever, ovaral-1 wage employ,ment showed a slight inicrease over tlhe 1965 level, despite a §tirther fall in a-riculilural ermployment. 51. From 1962 to 1965, median wage rates in the private sector increased by an average of 16.4 percent a year and in the public sector by 13.0 percent. Parallel with these large wage increases, the number of wage earners in the pri- vate sector declined by 16 percent over the same period. According to official records, the total number of wage earners and salaried employees in 1965 amounted to 334,000 (about Y percent of the estimated labor force) as against 412,000 in 1961. All of the reduction in employment has taken place in the private sector, public employment being slightly higher in 1965 than in 1961. The correlation between rising wages and falling employment is supported by the fact that employ- ment has gone down most strongly in years with particularly rapid wage increases. The largest contraction of emnployment in recent years is accounted for by the sisal industry which since 1963 has been squeezed between falling export prices and rising wages, and where output per employee has increased very considerably. 52. In the Plan, great emphasis is placed on the creation of remunerative job opportunities yielding money incomes. The fall in employment in recent years has, therefore, not only been at variance with national objectives, but has also - 13 - ever, to be noted that following an Interim Report on Wages Policy, the Government 1has bDeen energetically addrLe.ssing itsl 4- o- 4 he -1-1-lto o r icms oiy For instance, at the end of 1966 a Presidential Decree (1) linked wage increases 4- 0 pr d .4 4 -4 4_ ._ fn 4- - - - - -I - ff - - - - - -4. _ ~_4 T1 4 _ A_ __ - _- 4- - - - - - - - - 41 4. _ _- - t LU UUI5b D,'L V k. Ld, \ L / lIjU L CU d. J )Ul U11 D U U .L.L.L11r Ull W6 'IIU d VVJG WLi Liui U V ' OU that a rise in productivity beyond this percentage be compensated by workers' shl-ares ln buusiness underuakingss rather uthan uy wage increases-, (3)j pro,vided forL a thorough reorganization of NUTA, the country's only labor organization, and (4) initiated some steps wvhich may lead to the establishment of an Industrial Court. 53. The steep rise in urban wages also poses the probiem of a growing dif- ferential in the earnings of urban wage earners and the large majority of rural people, mainly the self-employed. winile uirban wages have increased about 50C per- cent between 1961 and 1966, rural incomes have lagged very much behind. Some of the more recent policy statements of the Government indicate that an effort will be made to improve the position of the rural population. 54. The impact of wages on prices is difficult to assess on the basis of available statistics. After a period of relative stability, the official retail price index for Dar es Salaam went up steeply in 1965 (see Appendix Table 25) and to a much lesser extent in 1966, but this increase was partly due to higher excise duties. Other price indicators confirm that there has recently been some increase in the cost of living. Foreign Trade and Payments 55. Tanzania's exports consist predominantly of agricultural products, which account for over 75 percent of the total. In the period 1961-65 sisal, cotton and coffee accounted for 57 percent of total merchandise exports (vide Table 22). The 36 percent fall in the price of sisal in 1965, and a further fall in 1966 have pushed sisal into third place as an export earner, after a long period during which it was the leading item. The fall in 1965 in the price also of coffee led to a sub- stantial decrease in the value of exports in that year. In 1966, however, higher prices for coffee, accompanied by an increase in volume both of coffee and cotton led to a substantial recovery and exports otlher than to Kenya and Tanzania showed a very large increase, rising to Shl,662 million, from Shl,313 million in 1965. 56. Despite the fluctuations in world prices for Tanzania's leading exports, the value of exports has, on the whole, shown a steady rise, which averaged about 12 percent a year during the period 1960-62 to 1966. Imports in this period in- creased at about the same rate. In particular, imports of capital goods and build- ing material rose substantially (vide Table 23), as a result of intensified develop- ment efforts. The rise in imports of consumer goods was kept below 5 percent a year. mainly as a result - in recent years - of import substitution, particularly from the other two East African countries. 57. In recent years, despite fluctuations in export earnings, Tanzania has mnnnagd +.n mnin+.tin n uirpluisz in n.uP overnal +.rnadi hbalani This ws particularly significant in 1965, when earnings from sisal exports fell to Sh286 million from .S1-1j7 mil1lionr -in+~ th p rrevios~ year.v The~ overall tradet cv'surplus vrose fvrom Sh60 m;l - lion in 1965 - the lowest in several years - to Shl77 million in 1966. What is of somae continued concern Pon for T-.nranin4 is. that A-ths.e trade ba-loance TTl-t th-,e rcsA of - i4 - Last Af ric a hiaas bee n snio±ng a grow=ng defici Ui9 DUa it is IIKeUI-y hlau i may now level off, consequent upon measures to replace imports, particularly of food, dr-ink, tobacco and clothing. )0. Altahough TanzaiaL s mercialadise balalnce hlua slhIow a consUisteUtUl surp lUs, the invisible account has been characterized by a deficit. Overall, the current account balance of payments shoiwed a surplus between 1963 and 1965 (vide Table 24), the size of the surplus being particularly high in 1963 and 1964. In 1966, how- ever, the current account balance showed a small deficit. It is conceivable that some of the figures, particularly those relating to the invisible account may be subject to a considerable margin of error. Iith the establishment of the Baikc of Tanzania and the introduction of stricter exchange control, it should be possible to effect substantial improvements in the collection of balance of payments data. 59. The present deficiencies in balance of payments data are particularly serious in the case of capital account. Thus, in 1964 there was an unexplained negative amount of over f18 million on the balance of payments. In considerable part this probably represented capital flight precipitated by the uncertainties generated by the armay mutiny early that year as well as the revolution in Zanzibar and the union of Zanzibar with Tanganyika. Apart from this, estimates of net private long-term capital movements in recent years show a continuous outflowi which, however, was more than offset by a net inflow of public long-term and short-term capital. Altogether, there has been a bu-ldup of reserves over the three-year period 1963-65 of E3.5 million. The decrease in reserves in 1964, when the capital flight appears to have been exceptionally high, was more than offset by ail increase in reserves in 1963 and 1965. Tndications are that there was a further marked increase of reserves in 1966. The lNationalization MIeasures of February 1967 60. Since achieving independence Tanzania has been intent on developing a mixed economy. In part this took the fomrm of stresing rthre 1 d ornPn+. of Afri- can cooperatives for the processing and marketing of agricultural products and, in one case, for the carrying on of wholesale and retail trade. In inusty the National Development Corporation (MDC) and its predecessor agency started or par- ticinpated in nmber of enterprises, usually n partnership with private business. In electric power the Government acquired through successive steps complete own- ership_ of TA-3ESC0 which has a on the - aon and distribution of electricity. The Govermment also established the State Trading Corporation and Lt,II lICL LI-O4.- JAInsU.rL aIII,C UVo4,yany ( the Ld. L,ater In par tidilipation wiuhi prlvaLte insuraice) to get some share in the handling of foreign trade and insurance. At the same time, lhowever, th11e Governrient notu oIly peLmitted biu utLUL auctiVely ecoiuragedu p.i-vaue foreign and domestic enterprise. The 1964/69 Five-Year Plan relied primarily on private investment for the accomplishirient of industarial targets, and in the years 19h4-66 private investment did indeed increase considerably, greatly outpacing public investment in industry (see Annex B to this report). 61. The nationalization measures announced on February 6, 1967 marked a substantial shift toward public ownership of business. They were immediately preceded by the so-called Arusha Declaration adopted, under the inspiration of President Myerere, by the national executive of TANU, the country's only - 15 - polli 44 calI partwy. This4 DeLrvo arunune as on fTIA\T'TTI! -ai 1-4 -- ctlve4 s .L.L UL.L UJO Y I1y. .L±O LJe1-LciL.L. d.IJULi dL111L'U1iUe1-U d.L LJLIC .L ltlliU - UCD-±i.; VJL)Jk. IL'/c:O "To see that the Government, exercises effective control over the principal means of production and pursues policies which facllltate the way to collective owner- ship of the resources of this country" and "to build Socialism" by ensuring "that tre mlajlor meness of1 prouuctiLon1 are ulnUdr thIe coUltrol adiu OWeIrshilp Of tIhe 1Ua:.J[e rb and workers themselves through their Government and their cooperatives." I-t de- fined these "major means of production" as "the iands; forests; mineral resources; transport; banks; insurance; import and export trade; wholesale business; the steel, machine-tool, arms, mnotor-car, cement and fertiliser factories; the tex- tile industry; and any other big industry upon which a large section of the popu- lation depend for their living, or which provides essential components for other industries; large plantations, especially those which produce essential raw materials." This statement of socialist objectives was only a small part of the Declaration which, in line with President Nyerere's fundamental philosophy, called on the Tanzanian people to control their own destiny, to work hard in a spirit of self-reliance and self-sacrifice and to eschew excessive dependence on foreign aid and foreign enterprise. In part it reflected a desire to "Africanize" economic life which it was felt had been excessively dominated by Asian and European interests and values. 62. Pursuant to the Declaration the Government took steps in February 1967 to (1) nationalize completeLy all the commercial banks, 8 flour and rice mills and 7 export-import firms, (2) acquire complete ownership of the National In- surance Company and give it a monopoly of all new insurance business, and (3) obtain a controlling share, up to 60 percent, in 7 of the larger manufacturing enterprises including two breweries, British American Tobacco, Bata Shoe Company, Tanganyika Metal Box, Tanganyika Export Company and Tanganyika Portland Cement. Finally, the Government announced its intention "to acquire a controlling interest in the sisal industry", although my mid-1967 no specific measures to this end had been decided. Subsequently - although this was not part of the nationalization program - the Government also decided to exercise its option to acquire a 5D per- cent share interest in the new TIPER refinery at Dar es Salaam which Italian in- terests had constructed with minority government participation. 63. By comparison with the much more sweeping Arusha Declaration these measures appeared modest in scope except in the field of banking. The nationalized milling enterprises probably accounted for considerably less than 10 percent of the net output of processing and manufacturing industries as a whole; and those in which the Government took a majority interest probably contributed no more than 20 to 25 nercent of total net output. The nationalized foreign trade firms had handled about 15 percent and 17-18 percent of the country's export and import bulsiness respectively. However. the Government and cooneratives already controlled a share of industry and trade previously. It was claimed therefore that the nation- ali7zat.ion mesuiires had raised to hbetween i5 cnd 5O nprcent. the nronortion *)f total net output in manufacturing and processing contributed by cooperatives and enter- prises in which thei (,rovernmnPnf. hldri mni-rito r interest+ f 1. Tn mnir oTrn+ + o P(tra"nme nf+ c,niifln+ niiL-Ii 'rlr +r r^C!il-n nhiic nnc. hn+c f+)in+ ther nationalization measures were not contemplated. President lyerere declared on Fdebruary 11 4hatio ad heade- t hatd"the key pofiti os ofligathe onoy hder bhee Arusha Declaration; and he added that "the key positions of the economy have been - 16 - secure u' anu "we can now welIcome tbie eunterprise o1 prIvaue inIvestors without reservations, because we no longer have any cause to fear the effect of their activities on our social purpose." Later, in presenting the budget in June 1967, the Finance Minister also alluded to "the intention of the Government to allow, and indeed encourage further expansion oI the private sector." The Government made clear its determination to operate all the enterprises it owns or controls in accordance with commercial principles. It expressed the desire to retain existing technical and managerial personnel. It has kept the manage- ment of the milling concerns which were vested in the Agricultural Products Mar- keting Board and the State Trading Corporation (STC) which took over the foreign trade firms has retained their existing personnel. Mlanagement of the STC itself is assured by a Dutch firm. The three principal British commercial banks - Barclay's, Standard and National and Grindlay's - who together accounted for the great bulk of the banking business, withdrew their expatriate staff soon after nationalization. However, the National Bank of Commerce which took over these banks has managed to recruit some new staff abroad, though as of mid-1967 it was still seriously short of qualified personnel. The Government also wants to continue the management of those enterprises in which it has insisted on acquir- ing majority control. 65. The Government has promised "full and fair compensation on the basis of "the full net value of assets less liabilities" inthe currency of the former owners and has engaged a Danish auditing firm to assist it in valuing assets and liabilities. By mid-1967 the rather small claims of two foreign banks, whose operations in Tanzania had been modest, and of the foreign shareholders of the National Insurance Company had been settled. Some progress had been made also toward a settlement of other claims. It appeared probable, however, that the claims of the three British banks which totaled E6 million would be difficult to compromise, particularly since these banks who consider that they have spent many years building up a profitable business throughout Tanzania consider that their profits during recent years rather than net assets over liabilities should be the principal determinant of compensation. The same difference may arise in eventual negotiations with the export-import firms which, like the major banks, have relativelv- modest fixed assets in relation to the volume of their opera- tions and profits. 66. As of mid-1967 the 1MJDC, acting as agent for the Government, had made some progress in negotiating the purchase price of the shares of manufacturing concerns in which the Government was determined to acquire a majority interest. Tn a number of cases, howevrer, at least a temporary deadlock had been reached. Some enterprises, particularly those with interests in other countries, have apparently been extremely reluct-nt to+ accept a minority position bcka-se +t,h fear that the Government as majority shareholder would exercise too much con- t;-rol 1over prices the ditrbuio -fpoisan es,e 67. It will be scme ';',e before the full &mun of cI w t Government will undertake to pay will be known. The Government obviously hopes to sett-le lthle bank, c'laims for cons-iderabl.yr less than 't-he 6u" mI-l-Llio thie t-hree British banks are asking. At the same time it hopes that the not insignificant arrioun'is whiciI wi`l bUe needuedU t±o p-urchase its majoritu y interest i1n bile se-ven manufacturing concerns will be found without any large cash outlays. Thus in - 17 - II-is budget, speech± on tJune 14., .LU I967 ; the L,e. Uof Finc dlcul the U hope that the burden could be kept at a minimum "by arranging firstly payments to be spread over a n-iUber ou yearis and secondly by enbuiLnlrg t;hat tU,e enuxepr±iwe con,- cerned make the maximum possible contribution to this compensation fund out of their earnings after meeting their normal tax liabilities and the requlrement of prudent financial management of the business." Under such an arrangement, the enterprises in question are being asked to make the Government a loan at 6 per- cent interest for the acquisition of its shares so that the Goverrnment can then use its portion of after-tax profits (less "prudent" reinvestment in the business) to meet the service on this loan. This would obviously be advantageous to the Government to the extent that its profits on the agreed value of the shares would exceed the interest it wouldc have to pay on the loan. 68. The nationalization measures had an immediate depressing effect on business which was greatly aggravated by measures which were taken against local Asian traders by various Tanzanian officials and which took the form of the ex- pulsion of Asian businessmen and denials of trading licenses. Trade and incLus- trial production slumped badly. However, the recovery of the business community from the initial shock to confidence and energetic government measures to curb unauthorized action against Asian merchants brought about a rather rapid revival of business, and by mid-1967 production and trade were nearly back to normal. 69. The longer-run eff'ect of nationalization on production and investment will be discussed in the ensuing section of the report dealing with the prospects of the economy. - 18 - TTT DOPcpenditure 801 1,088 4:;600 (c), 4 Curen Surlu --14.,- 70 122 486 ) C. uapltal ExpenditUreU LI 50 41 3 o88 3. FLnancedU bu ILnternal it'uL ___7_ (a) Budget Surplus (70) (122) (486) (b) Uthier Sources V (91 I106)LUUj 4) aternal 19 272 1,052e 4. Overall Surplus/Deficit 26 a/ let of Appropriations-in-Aid. W These figures exceed current revenue and surplus figures shown in Appendix Tables 11 and 12. The difference arises from the inclusion in this table of estimated Development Levy receipts amounting to Sh44 million in 1966/67. Since the Development Levy has been amalgamated with Personal Tax from 1967/68, the comparability of the 1966/67 and 1970/71 figures is improved, by the inclusion of Development Levy in the 1966/67 figure. c/ s1ainly sales of Government securities to National Provident Fund and Government Provident Fund. - 30 - The Current Budget 105. Total current revenue of the Central Government corresponded in 1965/66 to about 19.7 percent of monetary GDP (at market prices). In the Mission's pro- jection, about the same ratio is expected for 1970/71. In the period 1966/67 to 1970/71, Central Government revenue is expected to increase, as in the years 1965- 197, at an average annual rate of about 10 percent. In addition local govern- ments collect taxes and fees, and marketing boards impose cesses and levies. The budgeted revenue of the Central Government together with appropriations-in-aid, and local government and marketing board levies may well amount to about 25 per- cent of monetary GDP. 106. The Mission expects total tax receipts to increase from Sh732 million in 1966/67 to Shl12)i million in 1970/71 or by an average of 11.3 nercent. a vear. Other revenue is not expected to increase significantly. W4hile income from Govern- menF. nrtrnnp-r.v rnITTn n s1ih+.1v t.hp qhn1itAnn nf tThp FAfl.q n rihi±.sh1p nnnl will cause a drop in other revenue, at least in the first year of the period. 107. The Mission foresees no significant change in the pattern of Government revenue. Direct taxes, which together account for about one-quartcr of total revenue are expected to rise about pari passu with monetary GDP after the level- 1-i, off4 in lC OA 1n cu 2'7. b) Gross capital forma- tion General Government 7.1 6.7 6. 7 (15.7 ( 8 rublic enterprises 4. 5 4, I ( (l . Private 14.5 12.0 13.9 17.2 26.2 29.1 Total 26.5 24.4 24.3 30.1 41.9 47.2 Export of goods and non-factor services 59.7 59.8 73.4 83.9 80.0 99.9 Total uses 264.2 285.0 307.5 329.0 336.9 394.1 1/ Provisional 2/ Residual item Source: Derived from Background to the Budgets. Table 9: GROSS FIXED CAPITAL FORNATION, DOMESTIC AN]D NATIONAL SAVINGS, 1961-66 (at current market prices) (L million) 1961 1962 1963 1964 1965 1966 T= Gross fixA arpital formation 26.5 24.4 24.3 30.1 41.9 47.2 (% of monetary GD]?) (19.2) (16.4) (M1.5) (15v8) (2l.3 (21 o) (% of total GDP) (12.3) (10.9) ( 9.9) (11.7) (15.8) (16..) II. 'Balance of goods and non=factor services 0.6 -1.8 9.8 14.0 2_ 4.5z TTT G rt 2. A. 3 1 .1o 7L 7 51I 7 .L.LL* L'~~J~~J.J I1V~U4A -.I *J - L L.*. L..4I. . 141+ I " I (% of monetary GD]?) (19.7) (15.2) (20.4) (23.1) (22.7) (23.1) (%o oal GDP). I - (13.2) 0(-I0.1) (1,.9) (16.974 ) (-16.9 (17.2 IV. N et i nternatiLonal ±IcIom1e paid abroad 2.6 3.0 5.5 3.8 3.7 5.6 V. Gross National Savings 24.5 19.6 28.6 40.3 41.0 46.1 Source: Background to the Budgets. Table 10: GROSS CAPITAL FOPiIATION, AVERAGE 1960-62 3'^ 1 63-(a co-rent .naxiet res a) By Type of Asset Asset 1960-62 1963 1964 1965 1966-/ Building- Residential 4.01 3.40 5.05 6.10 4.85 Non-residential 4.38 5.00 5.25 6.60 7.80 Total 8.39 8.40 10.30 12.70 12.65 Construction IWater supplies 1.15 1.00 1.25 1.90 1.75 Communications 2/ 1.60 1.45 1.30 2.85 3.95 Railways and Harbors 2.11 1.20 1.20 1.24 1.25 Other 2.18 3.25 4.45 6.80 6.15 Total 7.0L 6.90 8.20 12.79 13.10 Eauinment Transport 3.10 2.95 4.45 5.50 8.45 llachinery 6.16 6.0o 7.15 10.95 12.95 Total 9.26 8.95 11.60 16.45 21.40 Grand Total 24.70 24.25 30.10 41.94 47.15 b) By Sector Sector Household/Enterprise Building 5.58 5.90 7.10 7.75 7.50 Construction 1 773 2.1 -I . l 5 4, O5 5 Machinery and Equip- ment 7.93 A.30 10.20 14.25 19.00 Total 15.24 16.35 19.75 26.25 29.05 Public BuildXlg 2.83~~~~ 2.50'r ,20 '-~ I.9 n 1 JJI LLg .) n.)U). U L4.7J .. Construction 5.30 4.80 5.75 8.50 10.55 Machiinery and Equip- ment 1.33 0.60 1.40 2.20 2.40 Total 9.46 7.90 10.35 15.65 18.10 Grand Total 24.70 24.25 30.10 41.90 47.15 Monetary GDP 139.93 167.10 190.05 196.95 223.60 Gross Capital formation as a percentage of mone- tary GDP 17.7 14.5 15.8 21.3 21.0 1/ Provisional. 1966 data excludes Tanzarnials £2 million share in the acquisition of two E.A.A. jet aircraft. 2/ Excludes investment in railways, harbors, posts and telecommunications. Source: Background to the Budgets. Table 11: SUJUITARY OF CENTRAL GOVERNMENT REVENUES, EXPENDITURES ANI) BALANCES, L961/62 . 1967/68 (Functional Analysis) (T Sh. Mil'lion) 1961L/6 1962/63 1963/64 1964/65 1965/66 1966/671- 1967/68J A. Current Budget,-/ Reve nue 554 . 0 66'7.7 717.8 839.5 8)97.5; 1, OCil. 3 1096.4 ExpEendit;ure 610O5 645o7 709.1 816.9 588A1 97'5I, 10)5.3 Surplus/Def icit -t 6.4 22.0. 8.7 22.6 91.1 2;.4 1.1 Bo, Capital Expenditure 146. 8 11:3.5 145.3 203.9 230.C 274.0 364.1 C. Total Surplus/Deficit -203.3 -9-L.5 -136.6 181.3 2220. 9 -247.6 -363*O D. Financ ed toy External Sources 1143.0 1014.4 51.5 78.5 8365 1388 217.9 Internal Sources 4/ 3.8 :2.1 40.4 19.7 1450C, 135.2 177.0 Ec, Overall Surplus/Deficit 5/ -56.5 115.0 -44.7V -83.15 7061 2.4 31*9 1/ Revised estirnate 7/ Estimate 3/ Includling Appropriations-iin-A:id 17/ Include reseres a.nd loca-L loans and Development Levy Fund 57 Covered by short-term local borrowing Source: Derived f'rom Budget 'Survey, L965-66 and BackgrGurnd to theX Budgets, 1966/67 and 1967/68. Table 12: CEiTFTRUL GOVETR71-IT RECURRENT REVEn''UE3 -1961/62 9- 1967/608 (T Sh. million) 1l961/62 1962/63 1963/614 196ih/65 19515/66 1966/67 1/ 1967/68 2/ I. Taxes 355--6 1414.5 474 14 557.6 60L.9 732.7 8441.6 1. Direct 120.5 136.3 1!i8e8 181. 19'i.8 262.4 296.66 Income and CorDoration I'ax 94.6 106.6 120.4 130(8 153.9 ( ( Personal Tax 24.8 16.7 20.3 2:1.3 29.6 (222.0 (250.0 Development Levy -- -- - __ . __3/ ( ( Exnort Duties 1.1 13.0 . L8.1 2'3.1 1:2.3 40.4 46.6 2. Indirect 235.1 278.2 315.2 376-.4 406.1 470.3 548.0 Import Duties 161-3 1,86.5 208.2 245.3 259.7 (420.0 (494.5 4/ Excise. Duties 50o.8 68.4 77.9 9:L.1 100.1 ( (5 Other Licenses, Duties & Taxes 234.0 23.3 29.1 4°.0 146.3 50e3 53.5 II. Other Revenue 82a0 865.1 91 -.3 112. 2 111l.14 94.3 94.8 Government Property 33.3 31.7 33.3 33,2 34.5 29.4 37.6 Interest and Loan RepanLents 171 114.3 18.4 30.3 10.9 19.5 3.5 Other 5/ 31.6 40.L :39.6 55.5 69.o 45.4 4/ 53.7 k/ III. Anpropriations-in-Aid 116,J3 1 175 125 16. 18:L.2 174.8 GRAND TOTAL L54.o 667.8 717.8 __ 897l5 1,001.8 1,0 X L/ Revised estimate ZI Estimate D/ Ieve:Lopment Levy is treated as accruing to the Development Budget I/ :ncludes certain revenues in respect of Zanzibar ' l ]ncludes share of Distributable Pool. Fund Source: Backgrouind to the Budgets Table 13: CENTRAL GOVER'T;iENtI REC,URREN,NT EXPENDITURE, 196:L/62 - 1967/658 (Functional Analysis) (T Sh . Million) 1961/62 1962/63 196 3/614 19614/65 1965/66 1966/67J1/ 1967/68- Social services 122.6 133. 7 163.1 232.9 245.1 274.1 248.7 Economic services 83.6 75.75 132.0 176.6 143.2 232.3 255-1 Total 206.2 209.2 R295.1 409.5 388.3 506.4 503.8 A dninis tration Law and Order 59.3 59.4 714.1 9'7.7 95.4 101.9 93.8 Revenue collectiom, etc. 5.3 7". 4.6 11.7 22.1 14.8 24.7 Local Government 12.,9 13.2 12.6 3.4 12.9 15.6 18.1 General 41.1 53.5 (52.7 45.7 98.9 71.9 117.C) Total 118.6 133.'3 1414.0 158.5 229.3 204.2 253-61 Defense 6.,5 12.3 :L8.6 3.55 42.8 45.2 62.7' Diebt Servicing 37.,0 40. 5 47.4 53.4 70.3 93.9 145.C Pensions and Gratuities 35.5 29.6 55.0 55.4 52.0 57.6 56-.5 Unallocated Items 90.,4 46.9 134.8 64.6 101.6 66.1 32.8 Total 169.,4 1'29.,3 255.8 208.9 266.7 262.8 297.i0 Contributions to Development Budget -- 7.( :L4.2 Ox.0 4.1 2.0 41.0 Adjustments 3/ 116-,3 7L67.2 -- -- -- Total Recurrent Expenditure 610.5 645.'7 709.1 816).9 888.4 975.4 1,095.3 ;T/hevised Estimate 7,/ B udget Estimate 7,/ For 1961/62 and 1962/63, Appropriations-in-Aid are included under this item. For the year 1963/64 onwards, all figures are gross of' Appropriations-in-Aid. Sources: Budget Survey, 1965-66 and Background to the Budgets, 1966/67 and 1961/68., TabLe 1iL: DEVELOPHEINT REV1ENUE ]3Y MAIN SOURCES 1961/62 - 1967/68 (T Sh. Million) 1/ 1961/62 1962/63 1963/64 15164/65 1965/66 1966/67- _ L967,/68- External Loansc 79.4 5.8 27.9 59.1 75.7 134.7 187.5 Grants 63.6 98.6 23.6 19.5 7.7 4.1 30.4 Total 143.0 1044. 51.5 78.6 83.4 138.8 217.9 Intern a:L Jontribution from Recurrent Budget -- 7.0 14.2 40.C) 2.8 2.0 41.0 Ilnternal Souwces 3.8 2.1 4O.4 19.07 145.0 133.2 177.0 iResidual finance -- -- 39.1 65.7 -- Total 3.8 5'.1 93.7 125.)4 147.8 135.2 218.0 Grand Total 146.8 113.5 145.2 204.C) 231.2 271h.O 435.9 Major External Sources Govein ments United Kingdom 61.6 93.7 22.7 23.>9 17.5 5.5 3.7 IJ. S. A. 2.2 5.0 5.24 20.0 30.0 29.1 23.5 WTest GermTany -- 2.5 16.4 7.2 4.3 )4.0 Ll1.3 Lsrael -- 0.7 8.5 6.3 -- Swed en -- - -- 1.6 18.0 25.6 .Netherlands -- -- -- ', .8 3.7 China (Mainland) __ 6.0 __ 16.7 40.5 ,Multilateral I DA -- 3.3 13.0 1L8.7 5L1.9 45.8 UJiIESCO -- -4.0 O.5 -- t1NDP -- -- -- 10.1 1Figures :For L9-66/7 and 19677TFare estimates. Other important sources of aid in 1967/68 were: Canada (20.2), U.S.S.R. (5.1), Zambia (3.0). Source: Budcget Survey, 1965/66 ard Background to the Budgets for later years. Table 15: CENTRAL GOVERNPIENT DEVELOP.ENT EXPENDITURE BY ,'LI*TD CATEGOFRIES. 1961/62 - 1967/68 (T.Sh. million) 1961/62 1962/63 1963/6)4 19611/65 196q/66 1966/67-V 1967/68%' Natural resources 39.6 33.4 40.8 53.2 46.1 74.1 123.9 Power 13.0 12.0 10.0 0 7 6.7 -3/ Communications 4/ 25.3 21.1 21.5 25.3 30.7 74.3 1.00.7 Township develop-m.ent 11.0 6.0 5.9 1. 16.0 1.2 6.AJ Public building and works A23. 12.5 3.0 3)4.1 7.0 39.2 12.3 Social services 29.3 26.1 25.2 47.0 46.3 18.4 42.6 Mi C-11 ),.O~~0 ' -3. o01 8 1) e 1.0 0 I O. f Al, O Nisce Utneous 1.4.° 2.8 2.2 I )n* 39.5 64.9 Total 2)46.9 ''3.)4 128.2 198.9 193.8 2)46.7 350.7 ParastUata-l orgari-z - ations - - 17.0 5.0 36.2 27.2 13.4 Grand Total 1462.9 113.4 145.3 203.9 230.0 2714.0 -.64.1 i/ Revised estimate. 2/ Budgetary allocation. 3/ Investment in Power in 1966/67 and 1967/68 was undertaken by TANESCO, a fully state-owned public corporation. 4/ Excluding investment in railways and harbors, and telecommunications, which are the responsibility of E.A.R. & H. and E.A.P. & T. Source: Budget Survey, 1965/66, and Background to the Budgets, 1966/67 and 1967/608. T'able 15a: ECONOMIC CLASSIFICATION OF PLANqNEDO ANDO ACTUAL PUBLIC SECTrOR INVESTMENT CATEGORY Original Each 1~964/65 1964/65 1965/66 1965/66 1964/66 1964/66 1966/67 Each 1964.167 Each 5-Year P:lan Category Actual Each Actual E7ach Actual Each Total of Category (64/65 + Category Development as a % of Developmient Category Development Category Development Category all funded as a % of 65/66 Actual as a % Expendituire the totall Expenditure as a % or Expenditure as zt % of Expe-nditure as a % of Projects the total Expenditure of the Estimates the total (Provisiona]. the total Provisional the total Priority + 66/67 lw (incI 3-Year) figure) figures) . Group A Group A Plari carry-o3ver) Proj ects) Shs. Shs. Shs. Shs. Shs. Slhs 1. Superstructure for final ouitput 254,000.000 10.4% 10,200,000 4.2% 12,719.90D 4.3% 22.919,900 4.3%1' 27.393.200 6.4% 50.3113.100 5.2 %~ A. Industry B. Agriculture 61,163,000 2.5% 1.659.7110 0.7% 14.011.220 4.7 % 15,671.000 2.9 %~ 18.350.660 4.4% 34.021.660 3.6 %1 C. Tusm9,460,000 0.4% 15,537,720 6.4%1 530.12u 0.2% 16,067,840 3.0%. 1,372,800 0.3%~ 17.440.640 1.8% D. Other 38,200,000 1.6-- 1,722,843 0.5% 1,722.840, 0.2% 1,971,600 0.5% 3,694,440 0.4 % Sub-total Categlory 362,823,000 14.9% 27,397,530 I 13% 28,984.080 9.7 56,381,580 104,0 49,088,260 II 14% 105,469,840 10.9%/ 2. (1) Ecnonomc Infrmmetructre r. echnical Education 42.986,400 1.8%1 6,280,480 2.6%1 7,930,320 2.70/ 184210,800 2.70/ 22.647,560 5.40/ 36.1158.360 3.8%1 B. Communications 273,502,600 1 1.2 % 26. 113.800 10.71,A 53.169.4010 17.9% 79,283,200 14.7% 82.364.140 :19.7% 161.647,340 1 6.9% C. E.A.C.S.0. 360.000000 14.7%1 39.200.000 16.1 ? 41.280.000 13.8% 803.480,00D 14.9% 64.000.000 :15.3% 144.480,000 15.1 % D. 'Water Supplies 191.542,000 7.8% 35.508.940 14.6%1~ 19,742,9410 6.6% 55,251,880 10.2% 34.356.860 8.2 % 89,608.740 9.4%, E. Rtesearch. 101,874,440 4.2%V 5,803,6.00 2.'4%, 29,632,4018 10.0%/ 3:5.436.008 6.4% 24,729,360 5.9% 60.165.368 6.3% F. EBasic Agricultural Improvements 238.274.400 9.7 % 18,916.500 7.80 5.953,190 2.0% 24.869.690 4. 7%?1 15.764.100 3.8%1 40.633,790 4,2% C. Others 168.736.000 6.9 y 9.674 500 4.00. 45699.06)9 15.40o. 55,373,369 10.2"' 26.086.860 63 30/ 81,460229 8.5,, H. EIlectricity Supplies 81.280.000 3.3.% 681 380 0.3" 21,838,920 0.60 2520,000 0.50 6.017.120 1. 5 8,537,120 0.9 0 Sub-total Category 1,458,195,840 59.6% 142,178,700 58.5` 205,246.247 69.0w0 347,424,947 6430 275,96600OC 65430 623,390.947 64.301 (2) (1) 2. (IT) Socni Infrastructure A. Non-Technical .Education 324,010,000 13.3%' 43,744,700 18.07 26,643,771 8.9 70,388,471 13.0%, 4e 457,389 1 11% 116.845.860 1 2.2% B. N4ational Service 14,500.000 0.6% 1,975,1180 0.8% 870.900 0.3%1 :2,846,080 0.5 % 262,200 0.1% 3.108.280 0.3%-1 C. liousing 105.860.000 4.3 %, 11,605,120 4.800' 9,6408(10 3.2% 21,246003D 3.9% 18.320,000 4.4 % 39.566,000 4~3% D. Ilealth 26.900,000 1 I' 1,505.140 0.60 3.737,906 1.3% 5.243.046, 1.0% 1,001,154 0.2% 6244200 0.70 E. ODthers 45,867,160 1 9 o 246 (900 0 10 1,920,70)0 07%0 2,167,600 04 40 3,510,000 0.901 5,677,600 0.6% Sub-total Category 517,137,160 212 ~ 59.077.040 24.30 42,814, 157 14.40, 101,891,197 18.800 69,550,743 16.2% 171,441,940 17.7% (2) (1) ……………… 3. SecujrIty A. 'Defence 46.000,000 1.9d 5737,100 2.40, 8.8651 160 2.9%1 18.60226') 2.70 20,000,000 4.800 34.602,260 3.6', D. Police 37,170400 1.5 t 6~270.440 2.6'~ 1,1,189,3(06 3.8 17459.745 3.21 13,034,640) 9. 30 0,494,386 3.2 ,..... .rlm0oll~~~~ 100.829.6OiJU 0, 0. i7802. 0. 450/It 2. :1038,601 0.40 1,329,980 0.30 3.388.580 033o, D. Others 3,198,000 0-1 800.180 0.30 100 01)0 900,183 0.2% 150,900 - 1,051,080 01 Sub-total Category 105 198 000 4.3% 14.385,740 59 90 20635,046 6.90 3 5,020,786 6.5% 34.515.520 8.10' 69,536,306 7.1 TOTAL 2,443.354 000 100.01 243,0384980 100.0% 297.679,510 1 00.00. 5403718,513 100-0o. 429,120,523 100.0"' 9691139,033 10300% Source: A mid-termn apporaisal of the achievemnents un-Fer thea Fivea-Year Plan, July 19614-June l1969. Table 15b: INVESTMIENT PERFORMANCE BY THE PUBLI1C SECTOR MINISTERIAL INVESTMlENT ]EXPENDITURE -- JULY 1964/DECEMBER 1966 ACTUAL INVESTMENT EXPEND)ITURE 19641/65 1965/66 JuIb-Dec 1966 3[u1y,1964 % of the of thc 5-Yer Plan 3-Year-Plan Total PLann-d Nilah" D~~~~~~~~~~~~~~~~~lec. 1966 total total rgecayfowdTret Ministry ~~~~~~Shsbh.Ss Ss luk actTalrSet carry fowad1are Targets exlpendituEre Ss h.Ss Devplan '560,140 182,305 303,096 1.045,541 .21 Makainu 1120,120 525,478 295,000 940, 598 .19 External 626,720 1,062,435 176,473 1,86'5.628 (31.10) .37 6,000.(00 6.000.000 Health min 1,572,880 2,503,058 471,032 4,546,970 (14.30) .92 31.800.000 31.800.000 Home 7,848,460 8,749,558 6,960,341 23,558,365 ( 4.10) 4.77 56,000,000 1,485,600 57,485.600 Comworks 46s435,120 49,212,438 36,212,375 131,859,933 (33.36) 26.72 362,180,000 33,132,300 395,312,300 Husbandry 16,547,160 16,666,130 9,354,285 42,56'7,675 (33.74) 8.65 120,520,000 5,650,000 126,170,000 Commerce and Co op. 655,520 732,996 750,03e 2,138,554 ( 8.10) .43 5,460,000 ,1,000,000 26.460.000 Education 43,126,800 43,840,660 10.0243,206 96,990,666 (33.52) 19.65 280.000,000 9.340,000 289.340,000 Landsurvey 34,751,580 42,971,491 8,871,171 86,594,242 (20.58) 17.55 416,700,(00 4,050,000 420,750,000 Codevmin 1,904,940 3,766,589 52,096 5,72:3,625 (17.45) 1.16 32,780,000 11,800 32,791,8()0 Housing (a) 3,806,580 (c) 987.933 8.320.728 13,115,241 (24.29) 2.66 40,000,(00 14,000.000 54,000,0()0 Impovwer + 926,960 1,323,279 250,620 2,500,859 ( 3.80) .51 13.280,000 52,464,000 65,744,0)0 Labourrmin 306,120 964,802 _- 1,270,922 (25.70:) .26 3,980,(00 966.000 4.946.000 Defence and NatSional Service 7,712,280 8,715,514 6,197,012 22,624,806 (36.45') 4.57 62,060,000 - 62.060.000 TreasLury - (lb) 26,000,041 26,000,041 (866.68) 5.27 3,000(100 0 3.000.000 Estabs _ _ _ __ _ _ Judiciary 800,180 368.239 1 1,1683,419 (36f46) .24 2,200,(100 998.000 3,198,01)0 Maclezo 15.609,440 10.716.141 .- 26,325,581 (126.10) 5.33 9,880,000 11,000,000 20,880,000 Utawala 341,660 476,065 1,836,525 2,654,250 .54 _ _ TOTALL 183,652,660 219,765,152 90,074,104 493,49:1,916 (30.84 ) 100.00 1,445,840,000 154,097,700 1,599,937,7()0 (a.) Does not include Shs. I0m. contribution to National Housing Corporation. (c) Does not includt Shs. 9.2m. paid l:o National Housing Corporation. + Tlnoe nAt incltncin .Shs. 102rm contrihn,tinn tc Tsnpannvika flevellonmnt ornrrration. (b) Does not include Shs. 1,025,533 paid to National Development Corporatiop. Source: A mid-term appraisal of the achievements under the! Five-Year Plan, July 196h-June 1969. Table 15$c: PARASTATAL ORGANIZA'TrIONS AC'TUAL AND PFLANNED INV]ESTMENTS INVESITMENIT EXPENDITURE Scheme cf Finance as Planred Actujal Finance made Jujly 1964 -- ~~~~~~~~~~~~~Total L Available Dec. 1966 Planned JulIy-December, 1 964 - 1 9655 1 966 | PProvisio-n Government Own Government Owfn _uly-December, 1964 .1965 1966 Total Contribution RC0UrCCS ContributionI Resources TANESCO 7.36 10.58 17.00 34.94 130.0 80.0 50.0 0.74 34.20 (26.8V) N.D.C.* 11.28 15.40 13.96 40.64 340.0 260.0 8(.0 8.22 32.42 (1 1.37) N.H.C. 3.90 10.68 15.60 3(.18 360.0 1 (0.() 26(0.0 24.20 5.98 (8.38) CO-OPERATIVE N ___ & DEVIELOPMvENT _ I _ _- - 150.0 I'i0.O __ _ _ TOTAL -2.54 36.66( 16.56 105.76 1 980.0 590.0 3900 33.16 72.60 _ _ _ ._ ~~~~~~~~~~~~~~ ~ ~~~~~~~ ~~(12.7-,) S30.0 + 440.0J+ . _ _ + Excluding Co-operatives and Developmnen. Bank. * Income from Government Investment portfolio han(ded over to N.D.C. in 1965 is included in 'OWIn Resources' and not as Government Contribution. Figures in brackets are percentagcs ot the total pilan provision in eaich case. Source: A mid-term appraisal of the achievements under the Five-Year Plan, Jully 196h.-June 1969. Table 16: REVENUE AND EXPENDITURE OF - URBAN AND RURAL LOCAL GOVERIN1ENTS I. Town and Municipal Councils 1961 1962 1963 1964 1965 Est. REVENUE Grants 296.1 252.0 241 442 520 Licenses, fees & charges 308.8 368.3 349 419 415 Fees, charges, etc. 171.9 175.h 242 277 321 Native .rates 23.6 -- 1 General rate & Urban House Tax 370.8 424.1 495 531 530 Contribhtion in lieu of ratps 103.0 87.0 217 227 227 Sewerage charges -- 41.0 26 44 47 Su rplus 219 35.5 9 16 83 Total Re-vtenue 1,296.1 1,383.3 1,580 1,956 2,11'3 EXPE ,IDITURE: general purpose 192.5 196 255 313 372 Public health. 3771 .7 Ai 03 '70 5°° 61 Primary education -- 2 9 259 339 Public- hi-X1---y &_ work 38.n 1. 1 o 1 2 75f 4 &4L ,v~ C'L WY VJ± _J *)-'LI.J L4~~Aj L4~4'. 4 4 1). Traffic, fire & lighting 59.9 65 83 84 93 r4 14U 1. ± I/ Othl ers 4.° 5 5 1 1 Contribution to cooperatives andU lloan chllrges 78U.U 89 101 12CU 15 3) Contribution to Capital 202.7 60 31 21 43 Contribution to Surplus 16.3 38 94 113 15 Total Expenditure 1,309.1 i,25B 1,4L8 1,843 o,121 II. District Councils REVENUE: Share of tax & local rates 2,438 1,973 2,067 4.031 1,,775 Produce cess 555 356 371 1,015 :L,145 Other recurrent revenue 1,957 1.8hL 1,928 3.108 3:379 Non-recurrent revenue 106 78 80 155 488 Total Revenue 5,056 4,251 4,446 8,309 9,787 EXIENDITURE: Local administration 1,522 1,198 1,244 2,2114 2,719 Miedical, sanitation & education 1,381 2,206 2,319 14,871 , ,870 Agriculture, forestry & veterinary 359 202 403 416 572 All other expenditure 363 467 323 444 482 Total Ex;enditure 3,625 4,073 4,289 7,945 9,643 Table 17: QUANTITY AND VALUE OF NARKETEI) CROPS AVERAGE 15160-62 AND 1963-66 ( Quantity O OC00 tons ( Value T Sh. Million Average 19560-62 19.63 196)4 :1965 1966 Qty. Value Qty. Value Qty. Value Qty. Value Qty. Value Sisal 205.6 285.3 21)4.3 441.9 229,,9 468.7 214.2 279.9 221.5 254.2 Lint cotton 34.0 114.0 46.9 1L48.2 52.)4 172.7 66.0 212.4 77.6 252.8 Clean coffee 24.0 109.3 28.2 133.3 33,,3 164.2 33.6 204.9 48.6 305-.4 Cashew nuts 45.8 26.5 56.5 28.2 72,.9 46.6 73.1 62.6 81.2 759.6 Sugar 32.2 29.0 L9.2 )45.2 60o.5 55.6 66.3 61.0 69.9 64.3 Tea 4.,1 30.7 4.9 36.3 4,.7 30.6 5.6 36.9 6.7 43.8 Tobacco, 2.2 10.6 2.3 7.7 2,.1 12.2 5.1 27.8 5.2 18.9 Pyrethrum 1.7 7.9 2.3 12.2 2.3 12.2 3.6 20.0 4.4 23.9 Wheat 11.5 6.1 1-9.3 8.3 19.1 12.5 30.1 17.8 32.8 1E.)4 Groundnuts 16.2 16.0 20.1 17.9 16.8 15.6 9.3 10.1 8.3 7.7 Castor Seed 14.2 10.6 26.8 16.1 14.6 9.3 13.1 6.8 12.8 6.1 Seed Beans 4.1 4.6 9.1 21.4 12,.3 20.6 5.0 5.8 3.6 3.5 Sesame and Sunflower 22.0 13.5 17.5 12.0 18.6 9.9 16.2 9.9 12.8 59.3 Source: Background to the Budget, 1967/68 Table 18: PRODUCTION ANI) SALES OF MINERALS, AVERAGE 1L960.-62 AND 1963-66 (T Sh. Mil:lion) Average 1L963 196)4 1965 1966 1960O-62' 0ty. Value Qty. Value Qty. Value Qty. Value Qty. Value Diamonds (1000 carats) 623 105.4 589 100.5 66t4 135.6 828 142.3 906 1o0.o Gold ('000 troy oz.) 10o4 2'i.9 103 :25.7 93 23.4 91 22.8 55 14.1 Salt (1000 tons) 32 '5.5 33 6.5 :32 6.5 38 7.8 37 6.2 Tin Concentrates (tons) 242 3.0 337 4.4 3'36 6.6 341 7.3 504 8.8 Mica Sheet (tons) 88 :L.7 105 2.0 9 1.8 102 2.1 87 1.8 Gemstones 0.5 0.7 0.7 2.0 2.2 Other 6.8 0.9 1.2 1.6 3.0 Total 148.8 1)40.7 175.8 185.9 216.1 Source: Background to the Buclget, 1967/68 Table 19: PRODUCTION OF SELECTED INDUSTRIES, 1963-66 1963 1964 -;1965 1966 Beer brewing ('OOO gallons) 1,962 2,249 2,673 4,137 Textiles ('000 yards) 5,863 8,552 11,663 16,610 Cigarettes (milflion nos.) 1,144 1,535 1,869 2,04g Paints (gallons) 95,357 96,981 162,573 221,020 Plywood (000 sq. ft.) 2,oo4 6,573 7,794 10,247 Sisal twine (tons) -- 658 4,162 9,965 Saw milling (COOO cu. ft.) 3,676 4,675 5,029 5,029 Wheat flour (tons) 28,378 29,818 38,433 39,714 Source: Background to the Eudget, 1967/68. Table 20: BALANCE OF EXTERNAL AND EAST AFRICAN TRADE,i/ 1961i - 1966u (T. Sh. million) 1961 1962 1963 1964 1965 1966 Exports External 1,034 1,076 1,305 1,156 1,313 1,662 East Africa To Kenya 143 56 62 87 914 81 To Uganda 7 9 10 20 27 17 Re-exports 47 52 42 34 31 108 Total 1,131 1,193 1, 459 i,597 i,1465 1,868 Imports External 888 885 895 939 1,068 1,359 East Africa From Kenya 184 207 216 271 285 269 From Uganda 35 35 42 49 52 63 Total 1,107 1,127 1,153 1,259 1,405 1,691 Balance External 193 243 452 551 276 4l1 Balance East African -169 -177 -186 -213 -216 -231 Overall Balance 24 66 266 338 60 177 F7 Includes Zanzibar Source: Background to the Budget, 1967/68 Table 21: DIRECTION OF EXTEENAL TRADE, AVERAGE 1961-62 AND 1963-66 (T Sh. Million) Average 196'1l-62 % 1963 % 1.964 % 1965 % 1966S % ]:. 'iource of imports United Kingdom- 308 34.7 300 33.5 304 32-4 337 31.6 41:2 30.3 India 60 6.8 59 6.6 55 5.9 72 6.7 70 5.2 Other Sterling Area 79 8.9 57 6.4 53 5'.6 39 3.'7 3:1 2.3 E.E C- 132 14.9 147' 16.4 163 17.4 257 24.:L 292 21.5 Japan 105 11.8 133 14.9 151 16.1 100 9.4 93 6.D North America 53 6.0 38 4.2 60 6.4 63 5.9 96 7.1 Mlainland. China -- -- 2 7 6 7 40 3. 7 80 5.9 Other 150 16.9 159 17.8 147. 15.7 :L60 15.L 285 21.0 'rotal 2/ 887 100.0 895' lo0.o 939 1OC).0 1,068 100.0 '1,359 '100.0 1I. D)estination of Exports United Kingdom 364 34.5 41t; 31.1 436 29R.9 382 29.1 480 28.9 IndiEL 74 7.C0 70 5.2 101 6.9 1L07 8.1 129 7.8 Hong Konig 73 6.9 96 9.2 97 6.7 :L03 7.8 14 8.5 Other Sterling Area 72 6.8 93 6.9 91 6.3 91 6.93 61 3.7 E .E.(. 232 22.0' 278 20.7 312, 2-L.4 241 18.4 2214 13.5 North America 115 10.9 138 10.3 167 11.5 117 8.9 169 10.2 Japarn 45 4-3 41 3.0 56 3.8 35 2.'7 97 5.8 Mainland China -- __ 75 5.6 47 3.2 95 7.2 69 4.2 Other 82 7.8 -136 7.9 149 10.2 .L42 10.8 292 17.6 Total 2/ 1,055 100.0 1,345 1C)0.0 1,456 10o).0 1,313 100.0 :1,662 100.0 1/7 Includes Zanzibar 2/ The percentage totals may not add up to 100 because of rounding. Source: Backg.rolund to the Budget, 1967-68 Table 22: EYTERiTiL EXPORTS BY MAIN COM4ODITIES,-- AVERAGE 1961-62 AND 1963-66 (T Sh. Million) Ave:rage 1961-62 1963 19614 1965 1966 % of, Total Qty. Value Qty. Value Qty. Value Qty. Value! Qty. Value 1966 1961-65 Coffee ('000 tons) 25.2 134 26.0 137 29.4 221 25.0 172 45.6 303 18.2 12.9 Cotton (tOC)O tons) 31.2 142 47.8 214 44.5 198 55.3 244 84.8 350 21.:L 15.2 Sisal (000) tons) 210.2 298 214.4 453 208.9 437 210.2 286 195.8 235 14.:L 28.7 Dianonds ('000 carats) 666.4 113 588.9 99 664.0 136 828.4 142 9055.7 180 10.l8 9.7 Cashewriuts (1000 tons) 149.5 42 42.5 40 55.8 66 63.6 83 71.7 100 6.0 4.4 Meat and Meat Prepa- rations ('o00( tons) 6.5 44 4.9 39 5.6 43 5.6 38 6.4 57 3.14 3.3 Clcoves ('0C00 tons) 8.2 45 11.2 61 8.1 43 8.5 46 13.1 79 14.8 3.9 Oil seeds, nuts and kernels ( 'OOC) tons ) 149.2 48 78.4 80 58.0 61 74.2 57 72.0 53 3.2 4.8 Tea ('000 tons) 3.6 30 3-9 31 4.4 31 4.2 29 6.2 44 2.6 2.4 Hidles and Skins; ('000 tons) 7.2 33 7.2 33 5.5 26 7.0 30 6.7 43 2.6 2.5 Gold (1000 troy oz.) 100.5 25 102.5 26 93.0 23 90.8 23 56.o) 15 0.9 2.0 Other commnodities ** 104 ** 132 -, 171 ** 163 ** 203 12.2 10.9 Total 1,055 1,345 1,456 1,313 1,662 loo.0 100.0 1/ Including Zanzibar T/ The percentage totals rnay not add -up to 100, because of rounding. Source: Background to the Budget, 1967-68 Table 23: TOTA:L IMPORTS BY MAJOR CATEGORIES, 1961-66 1/ (T.Sh. million) 1961 1962 1963 1964 19.65 1966 Food and live-animals 133 145 116 110 127 159 Beverages and tobacco 50 49 48 49 37 29 Crude materials 5 8 7 12 1 15 Mineral fuels and lub- ricants 72 77 76 76 82 108 Animal and vegetable .oil and fats 13 10 11 5 11 14 Chemicals and ferti- lizers 6 69 77 104 11 132 Manufactured goods 353 32 356 21 468 566 Machinery and t .rans- port equipment 207 201 233 266 324 422 Miscellaneous manuf- actures 83 93 107 1 127 122 Miscella.neous tU -.- sactions 26 26 25 29 30 47 To _tal- 2, 1,07 1,030 1,056 1,14 ,,3 161 1/ Excluding imports into Zanzibar Suce: B cluackr oun t-oorts froum 1e67ya and 'dg6da Soource: Back-grour,d to the BuUdgets, 7uI- 1966/67 znd 196 71/68. Table 24: ESTIMATED BALANCE OF FAYMNTS (L million) i9Si i9`2 196`3 194 Ji96 96-5 A. Goods and Services Exports (incl. gold) 54.3 54.2 66.4 76.1 71.0 86 Imports -52.7 _54.6 -,6.1 .62.6 -69.3 - Balance of visible trade 1.6 -0.4 10.3 13.5 1.7 1.0 Invisibles, net: freight, insurance - 0.1 0.2 0.3 0.4 1.7 other transportation -0.7 -0.3 -0.5 0.1 0.5 0.9 foreign travel -0.8 -0.5 0.1 0.4 0.6 0.2 Government, n.i.e. 1.6 0.6 0.9 0.9 0.8 1.1 Other non-factor services -1.1 -1.4 -1.2 -1.2 -1.2 -1.1 Investment income -2.6 -3.0 -5.5 -3.8 -3.7 -5.6 Total invisibles -3.6 -4.4 -6.0 -3.3 -2.6 -2.8 Total goods and services -2.0 -4.8 4.3 10.2 -0.9 -1.8 B. Transfers Private receipts 2.4 2.4 2.9 3.1 2.7 2.6 "1 Davments -2.8 -3.3 -2.8 -2.9 -2.2 -2.5 Government receipts 4.5 7.0 5.5 4.6 5.5 4.2 if navments -2.1 -3.0 -3.4 -3.7 -4.0 -4.1 Total net transfers 2.0 3.1 2.2 1.1 2.0 0.2 Balance current account - -1.7 6.5 11.3 1.1 -1.6 C. rivat longta term.calpi) inflow 1.2 2.1 4.3 6.1 4.4 5.0 outflow 3.7 14. 51.)4 8.9 59 7-, rnet -2.5 22 1.1 -2-- - 2.5 Public long-term capital, net 4.8 3.0 3.2 5.2 7.1 5.2 rublic shorit-U_um capital,ii,u 1- 0 3 -1.8 _ _ Change reserves (increase=-) -2.7 -1.3 -2.9 4.5 -5.1 6-6.7 Total net capital movement 1.1 -0.2 -2.6 6.9 0.5 -4.0 D. Errors and omissions -1.1 1.5 -3.9 -18.2 -1.6 5-6 1/ Figures relating to Capital Movements in 1966 are Mission estimates. Source: Budget Survey, 1965/66 and Background to the Budgets, 1966/67 and 1967/68. Table 25-: (a)} RzTAIL PRICE INDEX OF GOODS CONSUP-0) BY IWAGE EARNERS 1962-1966 (A = All items (December 1961 = loo) (B = Food JAN. MAR. MAY JUNE JULY SEPT. NOV. DEC. A B A B.- A. B. A B, . A .-B A . B. A B A B 1962 97 97 98 99 98 99 94 95 97 97 95 96 98 99 101 103 1963 95 96 94 95 94 93 94 95 95 96 94 94 94 95 94 95 1964 97 96 95 94 94 9b 97 96 97 97 96 94 96 95 9.5 94 1965 99 98 99 98 1QO 98 102 101 102 101 103 102 106 105 105 107 1966 106 106 105 104 108 108 108 107 108 107 108 107 106 103 109 107 (b) COST OF LIVING INDEX OF GOODS AND SEIiVICES CONSUMED BY MID:DLE GRADE CIVIL SER'LANTS - DAR ES SALAAM (Base: September 1963 = 100.0) Middlet of t.hp Month March June September December 1963 .. .. 100.0 102.8 1964 102.1 108.1 109.5 107.5 1965 109.9 114.3 113.7 115.7 1966 117.6 118.1 119.3 120.4 Source: Background to the Budget, 1967/68. Table 26: EXT1EM:AL TRADE INDICES, 1961-1966 (1960 = 100) 1961 1962 1963 1964 1965 1966 li/ Volume Exports 93 96 103 113 111 139 Imports 110 117 108 108 107 140 Value Exports 90 914 116 128 115 145 Imports 105 105 106 117 122 156 Price Exports 97 98 112 113 103 103 Imports 96 91 100 109 1lL 117 Terms of Trade 101 108 112 lOL 90 88 1/ Provisional Source: Background to the Budget, 1967/68. Table 27: COMMERCIAL BANKS--DEPOSITS AND ADVANCES June 1961 -April 1967 (T Sh. Million) Ratio of Advances Net External Balances Total Total to Liquidity Within Outside Deposits Advances Deposits Ratio E.A. E.A. Tota 1961 June 426 252 59.2 ,., 76.0 December 552 392 71.0 ... -14.0 92.0 78.0 1962 June 518 382 73.7 ,.. 98.0 December 642 466 72.6 0.. 38.0 58.0 96.0 1963 June 572 414 72.4 *.. 86.0 December 702 466 66.4 ... 84.0 46.0 130.0 1964 June 676 5]14 76.0 , 66.0 December 825 681 82.5 *- -59.6 112.0 52.4 1965 June 781 694 88.7 29 94.0 December 961 9:L3 95.2 24 -29.0 41.9 12.0 1966 June 928 849 91.2 33 70.0 70.0 December 926 85,2 92.0 33 0.7 16.4 17.1 19Q7 JTauary 863 784) 90.8 20 4.0 38.0 42.0 February 837 760 90.8 25 -4.0 51.0 47.0 M:-h 2R)9 74.7 R887 92 _-5.n 07.r n _.2 April 890 701 78.8 25 30.0 77.0 107.0 as^+n. o7~~77 nP+-^+A _Tin-7 104A a"t7- n^+ fliol-tr >>.-7l7hn7< ^e% +.ha +-r.nqfQ?r ,*vw. --3" * ;' .. .j . ..n '..J. u . I, ^ ^ w .& .J _*&| w - J^z. _AJ.5. Sd I,j. of Central Government account and borrowings to the Bank of Tanzania. Source: Background to the Budgetv, 1967/68 Table 2: BAI,rU OF TANZANIA - ±LsLITIES AI'vD AS5ZTSr AS AT JUThE 30, 1967 LIABILITIES T Sh Capital Fully Paid Up 20,000,000 Notes in Circulation 304, 371,zou Coin 23,942 ,0o4 Deposits (Government) (L8,895,817) (Banks) ( 1,179,910) Total 50,075,727 Other Liabilities 23,323,033 TOTAL LIABILITIES 501,712,034 ASSETS Fxternal Assets (Convertible Foreign Exchange and Foreign Securities) 420,719,297 Government Seeurities Taken Over from E.A. Currency Board 37,742,715 Othe.r (Government n. urities 10.116.532 Advances to Banks 8,850673 Gn Process o-f' Stt±lPment 6;953;726 Premises, Equipment, Costs of Notes and Coin and other For.mation Cost-s, Less A-mounts WpTritten Off 16, 225, 293 Other Asset 1,103,798 TOTAL ASSETS 501o,712,03h Table 29: GROSS DOMESTIG PRODUCT. 1966 and 1970 CONSTANT 1965 PRICES (L miilion) 1966 1/ 1970 1. Agriculture 73.7 101.2 2/ 2. Manufacturing 13.3 25.0 3. Mining 7.1 6.1 4. Public Utilities 2.4 3.5 5. Construction 8.4 13.2 6. Commerce, Banking 37.5 43.4 7. Transport 12.0 16.8 8. Services 30.7 38.9 9. Ownership Buildings 13.0 14.4 Total Mon. GDP 198.1 262.5 10. Subsistence 73.3 74.2 Total GDP. Factor Cost 271.L 336.7 !/ Provisional. 2/ See Table 30 The prices of leading agricultural exnorts are expected to fall between 1966 and 1970. The adjusted value of net output of mon-eta-rv agriculture in 1970 is T. 9q.3 millioni. Table 30: NET OUTPUT OF AGRICULTURE, CURRENT PRICES (:E million) Rate of Change % 1966 1970 1966-70 Gross Output: 1/ Sisal 12.5 12.2 -0.6 Coffee 12.2 12.9 1.1 Cotton Lint 2/ 11.7 14.3 5.2 Cashew Nuts 3.2 3.9 5.1 Oilseeds 2.9 3.5 4.8 Tea 2.0 2.6 6.8 Sugar 3.6 4.5 5.7 Tobacco 1.3 2.4 16.5 Pyrethrum 1.1 1.7 11.4 Total Main Cashcrops 5o.5 58.0 3.8 Staple Food, Others 71.7 91.1 6.3 Total Gross Output 122.2 109.4 Inputs 6.1 7.8 Total Net Output of Crops 116.1 1141.6 5.n Net Output of Livestock 20.6 24.3 4.2 Net Otput of Forestry 2.9 3e2 2.6 Net Output of Fisheries 2.9 3.6 5.6 Total 41 I) if '170 Public Agricultural Services 3.4 5.0 Total Value Added 145.9 177.7 5.0 Il. ~ r7 0 On I. r% 0 ou'sisOerLIce Produ-Cio-nl 7e4 - . 2e8 Value Added, Monetary 72.1 95.3 7.3 1/ For quantities see Annex III-A. 2/ Seed included in manufacturing. Table 1 TMrFTMI.NKT AT\M qAVTIrNS (1 million) 1966 1970 1966-70 I. Investments (at current prices) 1. Public 18.1 31.1 130.9 2. Parastatal 1/ 2.8 .4 15.6 3. Private 26.2 36h4 =h9.9 Total I 47.1 71.9 29/6.4 IH. Balance of Payments 4.6 -4.o -5.4 III. Savings and D)iscrepancies 51.7 67.9 291.0 (= I + II) 1V EACSO and Tanesco are included under I, 1. NOTES: I. See Table 37 of this Appendix. II. Represents deficit on goods and non-factor services. III. This line includes discrepancies and is affected by changes in stocks for which no past data are avai]lable. Table 32: PUBLIC SAViNGS 1/ (t million) 1966 1970 1966-70 1. Central Government 3.6 5.7 22.9 2^ Local Government 0.5 0.6 *2.6 3. EACSO (Tanz. share) 3.6 4.1 20.1 4. Tanesco 0.4 1.3 -4.9 Total 1 - 8.1 11.7 50.5 1/ Savings by parastatal organizations other than EACSO and Tanesco are shown together with private savings in Table II of the text. NOTES: 1. The totals in this line are derived from budget figures '. s to a ^-alen- ye.a basls. for 1966 includes the development levy which in -1041flAA was al'located to the capi+a" bdgt The figures do not represent savings in an economic sense -shi.ch are prbal sus- tal hihe (no4 - III I economic classification of Central and Local GovermR-Ient budgevs has been made in recent years). 2. nt.ati-velyt p-.,. at r, rlf p-vestmell. 3. Tanzanials share in total EACS0 savings taken in the sarne proportion as its share in total EACSO investments. 4. See Annex III-E. ThTlh II: UENTRAT, . GVVE.PNTT CAPTTAT, EXPEN)TTIMRIFS 1/ (T.Sh. million) Mi nistrY 1966,/67 1967/68 1968,/69 1969,/70 1970/71 1. Agriculture, Forests and Wildlife 34.o 48.9 47 55 60 2. Lands, Settlement, Water Development 27.1 67.,9 55 55 60 3. Communications and Works 8788 138.7 1i0 140 140 4. Education 37.3 23.5 50 55 60 5. Health 1.6 3.2 8 10 15 6. Defence, Home Affairs 12.4 30.2 50 60 65 7. Others and Unallocated 73.8 51.7 50 75 100 Total 27400 364.1 400 450 500 1/ Excluding contributions to parastatal bodies. Table 3L4: CENTRAL GOVERNYIENT CURRENT S-RPLUSES (T.Sh. million) 1.966/67 .1967/68 1968/69 1969/70 1970/71 1. Current Revenue 827 939 1,008 1,102 19209 2. Current Expenditures 1/ 799 897 912 996 1,087 .Current Surplus 28 42 96 106 122 1/ Excluding transfers to capital budget, but including debt servicing,, NOTES: 1 See AppendL-c Table 35. 2. See Appendix Table 36. (T.Sh. million) 1966/67 1967/68 1968/69 1969/70 1970/71 I. Direct Taxes 1. Income and Corp. Tax 176 198 222 2. Personal Tax 36) 40) .) 3. Development Levy 52) 62) 68) Total I 222.0 250o0 264 300 33h II. Indirect Taxes 1. Import Duties ho.02 43L 7 2. Excise Duties 4 h20.0 494.5 157 174 193 3. Other T.icenses, Duties and Taxes 50.3 53.5 63 69 76 Total II b70.3 548.o 622 677 743 III. Export Taxes 4o.4 46.6 39 42 47 Total Taxes (I-II:) 732.7 8L4.6 925 1,019 1,124 IV. Other Revenue 1. Government Property 29.4 37.6 37 37 38 ICUv Ul it,V UL4y £< 14 u4f Totual iV y94.) 9402 U) U.) u Grand Total I-vT 827.0 939.4 1,oo00 i,1iO2 i,209 1/ Excluding appropriations in aid. 2/ The Development Levy was amalgamated with Personal Tax in the budget of 1967/68. Projections of Development Levy for 1968/69 onwards are shown separately to avoid the implication that yields from Personal Tax alone would rise steeply relative to earlier years. Explanatory Notes to Table 35 1966-67: Figures are budget figures unless indi- cated otherwise in the notes below. I. 1. Income and Corporation Tax: Projected as 3.3, 3.h. 3.5 and 3.6% of GDP monetary, market prices. Small jump expected in 1967-68 because of the probable increase of rates for corporation taxes. 2. Personal Tax: Projected as 0.7% of GDP monetary, market prices. No rise is excneoted in the per- centage in this case because of a certain slackness i n coll ect,ion for the Central Government by the Local Governments. 3. Development Levy: Rates and structure were changed consider- ably in 1966-67. Projected as 1.0, l.0, 1.1, 1.1% of GDP monetary market prices. II. 1. Import Duties: Projected as 25% of "rest of the world" imports and 1lf% of EA imports; for 1966-67 the Treasury estimate is shown. 2. Excise Duties: Projected pari passu with manufacturing output in current prices., This is con- sidered as a target and if necessary to be reaehed through increased tariffs, etc. Treasury estimate for 1966-67 is T.Sh. iiO miilion. 3. Other Licenses, Duties, Taxes: Car licenses are the most important ele- ment; hle- target set in piujection is 10% p.a. III. Export Taxes: Pari passu growth with exports to countries outside East Africa is assumed a modest target. IV. 1. Income from Governmlent Property: Forestry and mining royalties projected pari passu with the growth of these sectors leading to T.Sh. 24 million in 1970-71. Others assumed to increase from T.Sh. 13.6 million in 1966-67 to T.Sh. 1h.0 million in 1970-71. 2, Others: The drop in 1966-67 is mainly due to trans- fer of shares in several companies to the parastatal organizations. The fall in 1967-68 is mainly caused by the abolish- ment of the distributable pool. Table 36': CEiq-RAL GCVER'IrTENT C'u-nR Ek-nX rEl%rr VmDITTU'MMES ±'/ (T.Sh. million) Budget Ministries 19606/67 1967/00 2/ 1968/9y 1969/70 1vl, 1L Agriculture, etc. 63.7 68.o 72.5 79.0 88.o Lands, etc. 30.2 31.5 33.0 35.o 37.0 Industry, etc. 5.5 6.o 7.0 8.5 10.( Commerce-and Coop. 1L.2 15.5 17.0 19.0 21.() Communications4 etc. 103.5 118.0 126.0 136.0 -102.() Education 149.9 160.0 175W0 190.0 205.() Health 6L4.9 66.5 69.0 73.0 80.0 Communitv Dev.. Information. Housing and Labor 31.7 36.0 4o.5 L.0 148.( Defence. Home Affairs. Justice. Judiciary 148.9 159.5 171.5 18L.5 198.0 Other. Including Consoli- dated Fund 328.3 3h4.o 362.0 383.0 403.01 Total Gross Expenditures 9L0.8 1,005.0 1,073.5 1,152.0 1,232.0 Annrnnriat.ion.s in niri 17 9 17N O 1800 o 18.0 190.0 Total MNet Expenditures 76609 830,0 893.5 967.0 .0oL2.o Contingencies and Price Increases 8.o 18.n 29. L Grand Total 7669 R8 3. Q911 5C oQl 1,08R7.0 1/ Excluding transfers to capital budget. 2/ The 1967-68 figures were estimates made by the mission prior to the ministerial changes effected in 1967. To maintain comparability through 1970-71, these figures have not been altered to take account of the 1967-68 hudget estimates. T>e 3 -`7-. Cn-QC CAPITALT VF'rDT?ArTOTj ±yOO iyo( ±ou Lyoy U£yg I. Public Sector 1. Central Government 14.3 17.1 19.2 21.4 2. Local Government 1.0 10 1.1 1.2 3. E.A.R. & H. 1/ 7.1 4.5 3.5 3.1 4. E.A.P. & T. 2/ 1.1 o.8 o.4 0.5 5. Tanesco 3/ 3.2 3.5 3.4 3.4 Total 18.1 26.7 26.9 27.6 29.6 II. Private and Parastatal h/ 29.0 29.1 30.6 3L.h 38.8 Grand Total l7.1 55.8 57.5 62.0 68.4 1/ See Annexn I-A, I/ See Ann TTIIE.T- T Inc,lude i -3 ili , ion16- fo-A .1r then Tp- F nditil Mill. Note: A An+njile1 rrfk1: for- pl ector grossnc capint+al frrv,rn ti n in 1966 is not yet available. Table 38: BALANCE OF PAVENTS (E million) 1966-70 1966 1970 cumulative A. Current Account 1. EKports 86.5 92.9 k81.0 2, Imports 85.5 103.8 I60.1 Trade Balance 1.0 -1ino -19.1 3. Non-factor SerVices, Net 2.8 3.L 13.7 Ii F ,vlrY,,cl/ThcAM -'-;F C.>^ onrA non-factor Services 3.8 -7>5 -5.4 5. Net Investment Income -5.6 -8.9 -33.8 6. Net Transfers 0.2 107 7.3 Total Current Account -1.6 -14.7 -31.9 B. Capitel Account 1/ 7. Private long-term Capital Inflow 5.0 7.0 29.3 Outflow -7.5 -9.2 -41.3 Net Inflow -2.5 -2.2 -12.0 8. Public Capital Infloar Inflow 6.0 1h.6 50.6 Amortization -0.8 -1.2 -h.8 Net Inflow 5.2 13.4 45.8 9. Change in Reserves (increase = -) -6.7 - -1.9 Total Capital Movements -4.O +11.2 +31.9 10. Errors and Omissions 5:.6 3.5 - 1/ I'ission estimates. NOTES: Item 1. See Table 39. Item 2. See Table 40. Table 39: C01-0DITY EXPORTS 1/ IV, IILL1LULI (JJ 0 rO.ilLi-uon) 195 9661667 Commodity actual actual 1970 cumulative Sisal 14.3 11.7 11.6 60.3 Coffee 8,6 15.1 12.4 62.6 Cotton Lint 12.2 17.5 16.9 86.1 Cashew Nuts 4.1 5.0 6.3 28.4 Oilseeds 2.8 2.1 3.1 13.4 Tea 1.5 2.3 2.3 10.7 Tobacco 0.5 o.8 2.1 7.7 Pyrethrum 1.0 1.4 1.7 7.6 M4eat and Meat Prep. 1.9 2.1 2.6 11.0 Hides and Skins 1.5 2.1 2.0 9.1 Forest Products 1.5 1.4 1.7 7.8 Gold and Diamonds 8.3 9.7 8.5 43.8 Others 5.1 7.9 11.5 43.1 Total Exports Outside Ea s+ Af-r-i A6 3. 70 'I 827 396A t?4-.-_ | T .i TTA . Az1t t-~ n A ) o 7 ff A:jAyLUVI1i LU 1c1A.V--.X0K i---- 5Y--- * -m Iouss~ .'; . .. .. . ] (y~~~~~~o 0t-h ' . ,,:'q:;. s , ' p 95% U;p taIJI .* . .. o 3 *.he.odHag *. : j. W| Bette than 95% e.pectat:i.i.,j _ **% : > o? 2Inches In Octobe- . , . * APRIL 1967 ISRD-2026