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ASSIGNMENT OF INTERNATIONAL FINANCE ON

BALANCE OF PAYMENT

SUBMITTED TO MS.DEEPTI THAKUR

SUBMITTED BY SONAL MBA 4TH


750

TANZANIA
Tanzania is one among the poorest countries of the world. Per capita income is estimated at about US$ 250 per year. Covering an area of 945,000 square kilometers, it has a population of about 33 million growing at about 3 percent a year. The economy is heavily dependent on agriculture (primarily, coffee, cotton, tea, cashew nuts, sisal, maize, rice, wheat, cassava, and tobacco), which accounts for about 50 percent of GDP, provides 85 percent of exports, and is by far the largest employer. Topography and climatic conditions, however, limit cultivated crops to only a small fraction of the land area. Industry accounts for some 15 percent of GDP and is mainly limited to processing agricultural products and light consumer goods. The mining sector has good potential, but has yet to be fully developed. Tourism is one of Tanzanias dynamic sectors and has shown significant growth in recent years. The service sector and the informal sector are an increasingly important source of employment. Form of state is republic, formed by the 1964 union of Tanganyika and Zanzibar. Legal system based on English common law, the 1977 union and 1985 Zanzibar constitutions, as amended. It lies on the east coast of Africa. Tanzania has a common border with eight countries and the capital city is Dodoma but Dar-as-salaam is the main port, the dominant industrial center, and the focus of government and commercial effort. Near its northern border the snow-capped summit of Kilimanjaro, the highest mountain in Africa. Although rainfall is variable from one year to the next within each type of area, more than one fifth of the country can usually expect to receive over 750 mm. There are approximately 120 different ethnic groups, each with its own language or dialect. Kiswahili and English are official languages. The religions are Christian, Muslim, and indigenous beliefs. The unit of currency is the Tanzanian shilling (Tsh), which divided into 100 cents.

Since independence in 1961, the government of Tanzania has been preoccupied with three Development problems that is: ignorance, disease and poverty. The national efforts to tackle these problems were initially channelled through centrally directed, medium-term and longterm development plans, and resulted in a significant improvement in per capita income and access to education, health and other social services until the 1970s. Thereafter, these gains could not be sustained because of various domestic and external shocks, and policy weaknesses. Indeed, despite sustained efforts since the mid-1980s, to address the countrys economic and social problems, one half of all Tanzanians today are considered to be basically poor, and approximately one-third live in abject poverty.

Tanzania is facing balance of payment problems from continuous years of years and this is shown in the data given below
Millions of USD

Item 1999 A. Current Account -846.2 Goods: Exports f.o.b. 543.3 Traditional 301.2 Non-traditional 242.1 o/w Gold 34.8 Goods: Imports f.o.b. -1,415.4 Balance on Goods -872.1 Services: Credit 600.3 Transportation 53.7 Travel 463.7 Other 82.8 Services: Debit -780.5 Transportation -175.4 Travel -369.7 Other -235.4 Balance on Services -180.2 Balance on Goods and Services -860.8 Income: Credit 32.4 -185.1 : Debit Balance on Income -53.6 Balance on Goods, Services and Income -1,013.5 Current transfers (net) 336.6 Current transfers: Credit 454.1 Government 411.4 o/w Multilateral HIPC relief 0.0 Other sectors 42.7 Current transfer: Debit -117.5 B. Capital Account 270.6 Capital transfers: Credit 270.6 General Government 256.3 Other sectors 256.3 Total, Groups A plus B -406.3 C. Financial Account, excl. reserves and related items 522.4 Direct investment in Tanzania 541.7 Other investment -20.5 Assets 14.8 Liabilities -35.3 Total, Groups A through C 116.1 D. Net Errors and Omissions -244.5 Overall balance -128.4

2000 -485.9 733.7 292.8 440.9 112.7 -1,367.6 -633.9 627.3 56.8 376.7 193.8 -682.4 -205.7 -337.3 -139.4 -55.1 -689.0 50.4 -240.9 -190.6 -879.5 393.6 472.1 427.8 40.6 44.3 -78.5 330.4 330.4 314.7 314.7 -155.5

2001 -237.4 851.3 231.1 620.2 254.1 -1,560.3 -709.0 914.6 105.9 615.1 193.6 -649.7 -194.2 -327.3 -128.1 264.9 -444.1 55.3 -243.8 -188.5 -632.6 395.3 474.8 418.4 71.3 56.4 -79.5 361.5 361.5 339.2 339.2 124.1

2002r 83.6 979.6 206.1 773.5 341.1 -1,511.3 -531.8 920.1 117.1 635.0 168.0 -632.5 -176.9 -337.5 -118.1 287.6 -244.2 67.9 -156.8 -88.8 -333.0 416.6 477.9 427.7 68.8 50.2 -61.3 785.7 785.7 755.6 325.3 0.0

2003r -87.5 1,216.1 220.5 995.7 502.8 -1,933.5 -717.3 947.8 138.9 646.5 162.3 -725.7 -214.7 -353.2 -157.8 222.1 -495.3 87.1 -236.2 -149.1 -644.4 556.9 619.9 553.3 68.2 66.6 -63.0 692.8 692.8 655.5 320.9 0.0

2004r -383.3 1,473.1 297.8 1,175.3 629.4 -2,482.8 -1,009.8 1,133.6 183.0 746.0 204.6 -974.7 -267.1 -445.3 -262.3 158.9 -850.9 81.8 -200.9 -119.1 -970.0 586.7 651.7 582.0 73.7 69.7 -65.0 459.9 459.9 420.0 253.7 0.0

2005r -881.6 1,675.8 354.5 1,321.2 655.1 -2,997.6 -1,321.8 1,269.2 222.9 823.6 222.7 -1,207.3 -319.5 -553.8 -334.0 61.8 -1,260.0 80.9 -198.0 -117.0 -1,377.0 495.4 563.0 478.4 75.7 84.5 -67.5 633.2 633.2 590.2 478.1 0.0

2006p -1,458.7 1,723.0 267.1 1,455.9 773.2 -3,864.1 -2,141.1 1,464.5 327.6 914.0 222.9 -1,247.3 -417.6 -534.5 -295.2 217.2 -1,923.8 80.3 -165.2 -84.8 -2,008.7 550.0 615.6 521.3 42.1 94.4 -65.6 5,292.9 5,292.9 5,254.3 292.6 0.0

187.8 282.0 -94.2 -134.0 39.9 118.7 -118.7 -86.3

-353.7 467.2 -829.1 -76.7 -752.5 580.0 -580.0 -809.6

255.4 387.6 -134.4 2.9 -137.3 1,124.7 -806.8 317.9

61.2 308.2 -249.7 -59.0 -190.6 666.5 -277.4 389.1

275.6 330.6 -57.4 -11.0 -46.4 352.3 -146.3 206.0

665.3 447.6 215.2 -61.5 276.6 416.9 -614.1 -197.2

-4,001.0 474.5 -4,478.1 -179.3 -4,298.8 -166.8 28.3 -138.5

E. Reserves and Related Items 128.4 Reserve assets -176.5 Use of Fund credit and loans 51.3 Exceptional financing 253.7 Rescheduled debt 129.4 Debt forgiveness 77.2 Interest arrears 33.0 Principal arrears 14.1 Memorandum items 6,432,91 GDP(mp) Mill.TZS 0.9 GDP(mp) Mill. USD 8,635.9 CAB/GDP -7.8 CAB/GDP (excl. current official transfers) -12.6 Gross Official Reserves 775.6 Months of Imports 4.5 Net International Reserves (year end) 405.1 Change in Net International Reserves -121.4 Exchange rate (end of period) 797.3 Exchange rate (annual average) 744.9

86.3 -198.8 49.4 235.7 10.1 49.4 81.2 95.0 7,277,79 9.9 9,092.7 -5.3 -10.0 974.4 5.7 542.7 -137.6 803.3 800.4

809.6 -182.2 15.6 976.2 131.4 642.1 67.4 135.2

-317.9 -372.4 26.0 28.5 9.8 0.0 18.4 0.4

-389.1 -508.8 -2.9 122.6 86.9 0.0 29.5 6.2

-206.0 -258.4 -33.8 86.2 0.0 0.0 21.9 64.3

197.2 247.7 -50.5 0.0 0.0 0.0 0.0 0.0

138.5 137.0 1.5 0.0 0.0 0.0 0.0 0.0

8,304,33 9,399,08 10,695,18 12,396,05 14,417,5516,742,40 8.6 5.8 7.2 8.7 9.7 7.9 9,475.6 9,724.0 10,297.9 11,379.4 12,772.1 13,373.7 -2.5 0.9 -0.8 -3.4 -6.9 -10.9 -6.9 -3.5 -6.2 1,156.6 1,529.0 2,037.8 6.3 8.6 9.2 761.2 -218.5 916.3 876.4 1,058.4 1,533.9 -297.2 976.3 966.6 -475.5 1,063.6 1,038.6 -8.5 2,296.1 8.0 1,786.9 -253.0 1,043.0 1,089.3 -10.6 -14.8 2,048.4 2,260.1 5.8 5.3 1,395.9 1,994.8 391.0 -598.9

1,165.5 1,261.6 1,128.8 1,251.9

Source: Bank of Tanzania Notes: 1. Revision is based on new data from the Private Capital Flows survey and adoption of new data sources for some other items in the services account 2. Change in gross official reserves will not necessarily be equal to reserve assets given a new methodology of computing reserve assets which nets out the impact of valuation was introduced beginning 2006 r = Revised p = Provisional

Conclusion
During the past eight -five years the Government committed itself to implement important measures under economic and financial reforms aimed at building a strong foundation for sustainable development. A number of strategic initiatives have been articulated and are being implemented, drawing on vision 2025, which sets the goals and objectives to be attained in the long-term. The key requirement for reducing poverty is to increase incomes of people and to improve delivery of social services. The only way to raise income is for our economy to grow faster than the current growth rate of 5 percent. need the economy to grow at more than 8 percent per annum in real terms, then can be confident of sustained basis for reducing poverty. When the economy grows at a higher rate, the tax base for domestic revenue expands and capacity of government to finance poverty reduction and other national development activities will increase. The main source of increasing economic growth is the revival of Agriculture, which supports 80 percent of Tanzanians. A sustainable growth rate of at least 5 percent in agriculture will have a significant impact on poverty reduction. The government also is doing strategy for economic growth in the promotion and strengthening of private sector, both domestic and foreign (e.g. macroeconomic reforms, privatization of government owned enterprises, reforms of the taxation system etc). The government will sustain this policy stance and further, enhance the reforms geared towards creating a more conducive environment for investment to facilitate growth. This will in turn contribute more to national development and poverty reduction. The government has prepared a comprehensive Poverty Reduction Strategy with participation of domestic and international stakeholders. In addition to implement specific poverty measures, they are continuing to implement sound macro economic, fiscal, and good governance policies. The important benchmarks are those related to fiscal management including increasing domestic revenue; controlling public expenditures; and improving business and investment climate, including the tax structure, economic and social infrastructures and other economic services.

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