The on-going financial turmoil in the US and European Union (EU) will make remittances from abroad into Tanzania hard to be realised, according to a senior Bank of Tanzania (BoT) official.
In an exclusive interview with the Guardian, the director of Economic Policy at the BoT Dr. Joseph Masawe said that in short term perspective, the crisis could impact on exports, imports and remittances.
Dr Massawe said the most direct short-term impact for the economy would be declining remittances from the Tanzanians living in developed nations who had invested into their real estates because of the financial crisis.
``Tanzanian families living in developed countries are currently experiencing the pinch of the financial crisis and so could see financial flows totally cut or greatly reduced as well as reduction in the other remittances for local investments``, he said.
Remittances from developed countries by Africans have recently risen to become significant components of their nations? economic gains with Ghana, Nigeria and Uganda being among the top beneficiaries.
Available statistics show that Tanzania`s annual remittances from abroad reached USD 313 million as of December 2006.
The turmoil is associated with a string of failures in large US financial institutions, prompting the US-government to bail-out of insurance giant AIG.
Over the weekend, the Congress authorized Treasury to spend up to USD700bn (?380bn) for buying bad debts from ailing banks in the US, lest the economy becomes paralysed, being the biggest intervention in the markets since the Great Depression in the 1930s.
The liquidity problems have not been limited to the US. By Monday afternoon trading in Japan, Tokyo`s main Nikkei 225 index was down 118 points or 0.8 percent to 11,776.
The fall on Hong Kong\'s Hang Seng was even more pronounced, down 383 points or 2 pecent to 18,230.
In the UK, mortgage lender Bradford & Bingley is set to be nationalised, with the savings part of the business to be sold to Spanish banking group Santander .
The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, in effect nationalising it.
However, economists have indicated that on a long-term basis, the financial crisis in developed nations could benefit importers of commodities from such markets.
This is from the fact that due to limited competition over some of their commodities, their prices could a little bit ease and become a blessing for importers from poor countries.
It is also possible for exporters to exercise a `wait and see attitude`, hoping situation would improve in some future dates.
Most likely, Tanzania`s economy could become solidly resilient because capital account is partially liberalised, as a matter of financial policy and law.
SOURCE: Guardian
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