Tanzania will achieve its economic growth forecast of 5 percent in 2009 thanks to tourism receipts and a rise in the value of its agricultural exports, central bank governor Benno Ndulu said on Monday. Tanzania, the second largest economy in the five-nation East African Community, is forecasting a slowdown in growth this year from 2008's 7.4 percent due to the impact of the global slump.
"We are on course (to reach 5 percent). We looked at what's happening in tourism, we looked at what happened on the side of agricultural exports, and it was good," Ndulu told Reuters. Hotels and lodges on the country's main tourism circuits had posted good occupancy rates in July, August and early September - a crucial time for the market - despite the global slowdown.
Ndulu said a bumper cotton crop had also helped offset the commodity's weaker price on the international market. Along with cotton, Tanzania's main agricultural exports are tea, coffee, tobacco, sisal and cashew nuts. "Traditional exports this year have reached close to $490 million, July to July, which is significantly higher than it has been in the last three or four years," Ndulu said.
Those exports earned the country $281.9 million over the same period a year earlier, according to central bank figures. Ndulu said tourism, gold exports, manufacturing and charges levied trade goods passing through its port at Dar es Salaam had been the other important earners for the Tanzanian economy.
He said inflation, at 10.9 percent in July, was high. But a review of the composition of the basket used to measure inflation would help tame the rate, he said, adding that food's weighting would be cut to about 42 or 43 percent from 55.7 percent.
"I can't be happy with the inflation not being in the low single digits. With revision, that will be in single digits. We hope that from October or November, the new numbers will start being operative," he said. Mining, which saw a slide in new investments due to the global financial slowdown, was starting to stir again as the crisis was bottoming out, Ndulu said.
"As the prices of these key mineral commodities start to strengthen again, we will see those (investors come) back," he said, adding that interest rates were also stabilising. The interbank overnight rate was about 1 percent average while the weighted average treasury bills of all maturities bill stood at 4.7 percent.
"They (T-bill yields) are probably going to stay within the range of anything between 4.7 and 5 or 6 (percent) for quite a while," Ndulu said, adding that targeted measures in the money markets had helped liquidity. "We took an easy position on liquidity which has meant that banks have more liquidity now than they would have if they are competing effectively for these instruments."
Tanzania is reviewing its rules to allow some foreign investment in treasury bills, which are not open to outsiders. "The basic philosophy is do this gradually and make sure you don't open up your small market to high volatility from some of these instruments, particularly hedge-funds that move in and out," he said. "That's really the part that we worry about."