According to a recent report in Business Day, the recent global credit crisis has made it necessary for the government to seek new sources of funding for various Tanzania infrastructure projects, such as road and power maintenance and improvements.
In the same report, the country’s Finance Minister, Mustafa Mkulo, said that the shift in the global credit markets caused the overall borrowing costs to increase as well, which meant that government was forced to postpone its plans for a $500 million sovereign bond sale, thus creating the need for Tanzania to find a new source of funding to support its infrastructure and economic improvements.
Mr. Mkulo went on to explain that money acquired from the sale of the bonds would have been used by the government to ease the problems that have been caused by the electricity shortage as well as to help construct roads and railways in order to help ease the transfer and exportation of minerals, such as gold.
According to Mr. Mkulo, in order to find new sources of funding the government has approached lenders from institutions such as the African Development Bank and may also begin requesting funds from other governments.
“Infrastructure still has to be financed,” said Mr. Mkulo, “These projects are needed in order to steer economic development of the country [so] I have to explore other sources to get the funding.”
It is expected that Mr. Mkulo will very soon make an announcement concerning the country’s plans for an alternative source of funding for these projects.
In the meantime, Mr. Mkulo has said that, in spite of the global recession, he expects the country’s economy to expand by more than 7% beginning July 1, which marks the beginning of the country’s fiscal year.
Mr. Mkulo said that he expects this economic growth will come in spite of the fact that the economic recession has already cut the demand for one major source of economic growth in Tanzania, the commodities sector, specifically gold and diamonds.
According to Mr. Mkulo, while commodities such as gold and diamonds may not be as sought after at this time, the Tanzania economy will likely grow a result of expansions in the telecommunications sector, primarily through growth in the mobile phone industry, but also through potential growth in the tourism sector.
In addition, Mr. Mkulo said that he also expects that funding from donors will also be sustained in the coming months.
Currently donor funds account for approximately 34% of Tanzania’s budget and provide the government with funds for development projects within the country.
“We are confident of our growth forecasts even with the global financial crisis,” said Mr. Mkulo, “With donor funding being sustained that gives us some assurance that we can continue spending on projects.”