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In memory of my dear brother Joachim v Contents List of Tables vi List of Figures viii Acronyms and Abbreviations x Foreword xii Acknowledgments xiii Summary xiv 1. Introduction 1 2. From African Socialism to a Free Market Economy 7 3. The General Equilibrium Approach 27 4. A Social Accounting Matrix and General Equilibrium Model for Tanzania 45 5. The Effects of Macroeconomic Policies on Growth, Equity, and Intersectoral Shifts 78 6. Results, Achievements, and Conclusions Appendix A : Recent Economic Indicators and Policies vi Tables 2.1 Annual exchange rates, 1985-98 2.2 Monthly exchange rates, 1995-96 2.3 Deposit and lending rates, 1992-98 4.1 Macroeconomic social accounting matrix 4.2 1992 macrosam for Tanzania (millions of 1992 TSh) 4.3 Accounts of the 1992 microsam for Tanzania 4.4 New macrosam for 1992 (millions of 1992 TSh) 4.5 Parameters and variables of the Tanzanian CGE model 4.6 Initial macroeconomic model closures 5.1 Policy bias experiments from initial base: Flexible exchange rate 5.2 Policy bias experiments from initial base: Fixed exchange rate 5.3 Policy bias experiments from synthetic base: Flexible exchange rate 5.4 Policy bias experiments from synthetic base: Fixed exchange rate 5.5 Sectoral structure of the Tanzanian economy based on 1992 SAM 5.6 Agricultural terms of trade (TOT) (value-added) and price indices under mobile versus fixed sectoral capital demand in nonagriculture 5.7 Sectoral structure of total factor payments based on 1992 SAM 5.8 Average marketing margin coefficients and respective total values for aggregate agriculture and nonagriculture A.1 Country data for Tanzania: Economic and social indicators A.2 Tanzania: Recent policy performance A.3 Tanzania: Physiographic regions A.4 Tanzania's domestic tax policies during the 1990s C.1 Distribution of labor value-added (million TSh and percent) C.2 Final household consumption (million TSh and percent) C.3 Individual income tax (rates, values, and shares per household group in million TSh and percentage) C.4 Household savings (rates, values, and shares per household group in million TSh and percent) D.1 1992 social accounting matrix for Tanzania respect to σ C variation G.2 Percentage change of real value-added deviations with respect to σ T variation x
2014
his paper is also available as REPOA working paper no 14/3. The paper has also been used as background material in the preparation of Tanzania Human Development Report 2014:Economic Transformation for Human Development coordinated by ESRF. Our thanks go to the Executive Director of REPOA Prof.
2014
I n the 2000s, policy discourses on the macroeconomics of development in Tanzania tended to focus quite narrowly on the growth-poverty nexus. The usual argument was that the adoption of certain core macroeconomic policies (the so-called 'fundamentals' of low inflation, trade openness, market liberalization, sound financial policies and good governance) would induce economic growth, which, in turn, would lead to poverty reduction. More specifically, this argument stated that if GDP per capita grows significantly and if inequality as measured by the GINI coefficient derived from successive household budget surveys does not worsen significantly, it follows that the incidence of (absolute) poverty must fall.Given this premise, which had become a mantra in the international development industry, policy analysis then boiled down to monitoring the correlation between economic growth and changes in income consumption inequality, on one hand, and the incidence of poverty, on the other. When this presumed relation failed to hold-as it did in Tanzania-a policy paradox was said to exist. The problem with this approach, however, was that it makes a heroic jump from the growth in GDP per capita to the reduction in incidence of poverty without much specification of the actual mechanisms that supposedly link them together. It appeared, therefore, as if per capita GDP growth directly translates itself into improved standards of living of working people, regardless of the mechanisms through which these transmissions are supposed to take place. Growth is defined purely in terms of the quantitative expansion of output without much consideration of its character or content. Within this type of reasoning, therefore, there is little mention of how standards of living of the majority of working people-poor and non-poor alike-depend on how output growth divides between productivity growth and employment growth, on the composition of this growth across productive sectors in the economy, and, in turn, on how and to what extent productivity growth translates into the growth in labour earnings on which the large majority of the working population depends. Nor is there much, if any, discussion of how growth-induced changes in relative prices between broad categories of commodities may provoke favourable or adverse changes in the standards of living of working people and, by implication, in the incidence of poverty. In other words, the character of accumulation and the ways in which it shapes the structure of output and of relative prices, the employment relation and the productivity-labour earning nexus, including related modalities of social protection, is somehow left out of the equation. More recently, however, the policy focus in Tanzania has turned towards the challenge of economic transformation, which bringsconcerns with the nature of production and employment, and with the development of productive capabilities back into the centre of the policy arena. This recent shift in Tanzania towards greater policy concern with socioeconomic transformation is a welcome development, but it also appears to go together with putting matters of poverty and of human development on the backburner. The implicit assumption appears to be that the twin motors of economic transformation and economic growth will lead to human development and the reduction in poverty. This paper argues, however, that this cannot be taken for granted since whether or not economic transformation engenders human development depends upon the nature of the process of transformation.
2018
Tanzanian government targets to transform the economy into a middle-income and semiindustrialized state by 2025. As a policy measure to promote this transformation, the government exempted the Value Added Tax on producer capital commodities in 2017/18 fiscal year. This aims to promote utilization of these commodities by manufacturing industries and therefore generates growth, employment, and raises incomes. This study analyzes the impact of macroeconomic fiscal instruments on the Tanzanian economy, by applying a static PEP 1-1 standard CGE model. We simulate a reduction of the Value Added Tax rate on producer capital commodities (electricity, machinery, electrical equipment, vehicles and other equipment) under two different government closure rules. In the first simulation, government expenditures are fixed while government savings are flexible and adjust to changes in the government revenue. Results show a decline in investment expenditure following a decrease in government savings and thus a negative impact on macroeconomic indicators. However, real households' budget is positively affected due to a decline in consumer price index. In the second simulation, government savings are fixed to maintain the budget deficit. The results show a decline in real GDP partly because of a decrease in output in governmental, some agricultural and service sectors. Conversely, output increases for all industrial sectors, leading to a decrease in average unemployment rate. Real consumption increases for all household categories except for the richest households.
This is a report for 1st Economists Conference on Tanzania and the Global Economy hosted by Tanzania Institutional Economics Development Foundation (TIEDF).
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2019
The Tanzanian government has established a goal to transform the country into a middle-income and semi-industrialized state by 2025. To promote this transformation, the government exempted the Value Added Tax on capital commodities in FY 2017-2018 as a way to promote utilization of these commodities by manufacturing industries and generate growth, employment, and increased incomes. This study analyzes the impact of a reduction in Value Added Tax on capital commodities (electricity, vehicles, machinery, and equipment) under two different closure rules: (1) fixed governmental expenditures and flexible governmental savings (2) flexible governmental expenditures and fixed governmental savings. Under the first regime, government savings declined and industries that depended heavily on government investments suffered. In the second, output increased for all industrial sectors, leading to a decrease in average unemployment. Real consumption increased for all but the richest household categ...
L'instabilità dei prezzi internazionali delle commodities verificatasi fra il 2007 e il 2008 ha generato conseguenze negative per le economie deboli dei Paesi Meno Sviluppati (PMS), dipendenti dalle importazioni di prodotti alimentari ed energetici. Questo lavoro si propone di studiare le conseguenze dello shock sui prezzi internazionali e di offrire elementi per valutare scelte di politica economica come risposta allo shock in due PMS dell'Africa orientale: Malawi e Tanzania. Il lavoro poggia sull'analisi di scenari controfattuali simulati con un modello di equilibrio economico generale calcolabile -statico e riferito ad un singolo paese – che costituisce una versione modificata dello standard dell'IFPRI (Lofgren et al., 2002). Le matrici di contabilità sociale utilizzate sono quelle fornite da Thurlow e Wobst (2003) per la Tanzania, e da Thurlow et al. (2008) per il Malawi. Le matrici sono state aggiornate al 2007 mediante una procedura iterativa che ha anche conse...
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