The World Bank and the government of Tanzania have signed a USD 100 million International Development Association (IDA) credit agreement to be used for improvements to the Tanzania investment climate in the hopes that it will help to stimulate growth in the second-largest economy in eastern Africa.
Philippe Dongier, the World Bank Tanzania country director who also serves as the director for Uganda and Burundi recently explained that the IDA credit agreement, or the ninth Poverty Reduction Credit (PRSC-9), will not only help to promote shared growth through sensible public finance management, but will also create a new platform in which to discuss policies and provide much needed support for private development reforms.
“PRSC-9 is the first in a series of three annual operations (PRSCC-9/11) supporting the implementation of Tanzania’s second national strategy for growth and reduction of poverty known as MKUKUTA II complemented by the first five year development plan,” said Mr. Dongier.
The PRSC series is reportedly in line with the General Budget Support (GBS) framework that the World Bank and 11 additional development partners help to support.
According to the Tanzania Finance Minister, Mustafa Mkulo, who spoke at the signing of the World Bank agreement earlier this week, the private sector should be responsible for helping to stimulate economic development and to generate new of job opportunities, which would in turn generate tax dollars to help strengthen the economy.
“The ninth poverty reduction support credit is expected to contribute to poverty reduction and improved social conditions in Tanzania,” said Mr. Mkulo, “which focus on two main areas namely, promotion of private sector growth and development and improvement of fiscal policy and management.”
According to the Tanzania Finance Minister, funding from the World Bank will be spread across multiple focal areas.
“Efforts in the first focal area will support improvements in the general investment climate, accompanied by specific reforms in land access, specific economic zones and facilitation of a regional transit hub,” said Mr. Mkulo, “Reforms in the second focal area will stress the need for consolidating the current efforts to improve public financial management and budgetary transparency [and] give attention to enhanced and transparent domestic revenue mobilization.”
With the creation of a regional transit hub, the World Bank program will help to stimulate a working collaboration between Tanzania and its neighboring countries.
The secondary focal area of the World Bank program will focus on the mobilization of domestic revenue, which will help stimulate improvements in the delivery of social services.
If the global economy continues to recover, the World Bank has predicted that the Tanzania economy will achieve 7 percent growth in 2012/13, with revenues from the countries booming gas sector also expected to help further domestic growth in the next decade.
Tanzania is currently listed as the fourth largest producer of gold in Africa; in fact, the African Barrick Gold has recently announced that they are certain that their Nyanzaga exploration project on the northeastern side of the Sukumaland Archaean Greenstone Belt will be their next Tanzanian gold mine.
In addition to the recent significant discoveries of gold in the country, the Tanzania economy is also very dependent on its tourism, mining and agriculture sectors with a first-time copper investor, Danformation (T) Ltd, just recently announcing their plans introduce between USD 15 and 20 million to construct an industrial copper smelting plant in the country in order to export more than 200 metric tons of refined copper blister per month during their first year of operation.
In addition to these booming sectors, the potential for FDI in Tanzania is becoming increasingly attractive to investors with the rising potential for investment in the country’s telecommunications, energy, manufacturing, financial services and transport sectors.