Tanzania: New global economic crisis worries EAC

TANZANIA has said should the world experience a second economic downturn, the impact on East African Community (EAC) countries would be more telling as the economies of the five partner states were interconnected than never before.

The Minister for Finance, Mr Mustafa Mkulo told a sideline session of the 2011 IMF-World Bank annual meeting in Washington DC that shocks for Africa, especially the EAC members from a new economic downturn would be worse than in last crisis.


“Our economies are interconnected as never before in many ways, from trade to financial flows,” Mr Mkulo stated.

“In that regard, the risks to the African economies, and especially the East African economies, are considerable,” Mr Mkulo was quoted saying by the IMF Survey Magazine.

The Minister recalled that three years ago Africa was hit hard by the global economic crisis as exports dropped and financial flows declined.

“Our collective and bilateral responses helped to shield our economies from the deeper downturns. Our strong policy frameworks were supported by fiscal and foreign reserves buffers. As a result, our countercyclical policy responses helped to swiftly reverse the adverse trends,” he said.

Economic shocks from the euro zone crisis and from problems in other advanced economies could be stronger and possibly more severe than during the last crisis, Mkulo said.

“Our economies are still on the recovery path and in the process of restoring critical economic buffers.

There is real danger that the modest progress we have attained in meeting some of the Millennium Development Goals will be eroded by an ensuing global economic crisis.” IMF’s latest global economic forecast said the world economy was in a dangerous new phase.

The forecast said global activity has weakened and become more uneven, confidence has fallen sharply recently, and negative aspect risks are growing.

The report noted that emerging markets now face even more volatile capital flows and, along with low-income countries.

African Finance Ministers also stressed that Africa was bracing for adverse effects from the economic problems in the euro zone, with export receipts and remittances particularly vulnerable.

They noted that, as a new global downturn loomed high in the air, African countries were more interconnected than ever before with their neighbours and with their principal markets.

Mr Mkulo said energy was a problem for Tanzania, which experienced frequent power outages.

“If we improve energy, we shall improve production. If we improve production, we shall improve employment. A

nd if we improve employment, we shall create more economic growth,” Mkulo noted. He suggested that if the international community could invest in Tanzania’s power sector, the situation could be eased.

He added that Tanzania was opening up its energy production to private sector participation.

The Gambia’s Finance Minister, Mr Mambury Njie, observed that a decade of sound policies had enabled African countries to withstand the global economic crisis of 2008–09.

“The risks are even greater this time around as we have already used up large parts of our macroeconomic policy buffers, specifically fiscal space and external reserves, to mitigate the impact of the crisis,” Mr Njie said.