COUNTRY REPORT Tanzania Comoros At a glance: 2001-02 OVERVIEW President Benjamin Mkapa was re-elected in October 2000. His priorities for the next five years will include the anti-corruption drive; further building of democracy; addressing human rights issues; and the union with Zanzibar. Political tensions on Zanzibar are unlikely to improve—the Zanzibari authorities and the mainland government have refused to re-run elections on the island. Real GDP growth in the outlook period will be driven by strong growth in agriculture and by expansion in the mining, manu- facturing and tourism sectors. Inflation will continue its downward trend. Key changes from last month Political outlook • The political violence in Zanzibar has worsened. The EU, the Organisation for African Unity and the Commonwealth are attempting to mediate and bring reconciliation between the Chama Cha Mapinduzi government and the opposition. However, progress is expected to be slow. Economic policy outlook • Economic policy will be led by the IMF‘s poverty reduction and growth facility. Further privatisations and other liberalisation measures are en- visaged, as are effort to attract foreign direct investment, particularly to the mining and minerals sectors. Economic forecast • In line with the effects of ongoing power cuts in Tanzania, economic growth has been adjusted downwards for 2001-02. Real GDP is forecast to grow by 5.3% in 2001, increasing to 5.9% in 2002. • Inflation will continue to fall, averaging 5.5% in 2001 and 5% in 2002, reflecting lower oil prices and tight monetary policy. • The current-account deficit is forecast to narrow to 5.7% of GDP in 2001 and to 4.9% of GDP in 2002. February 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. 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ISSN 0969-6776 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Tanzania 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2001-02 8 Political outlook 9 Economic policy outlook 10 Economic forecast 13 The political scene 21 Economic policy 24 The domestic economy 24 Economic trends 26 Agriculture 27 Industry and mining 28 Foreign trade and payments Comoros 31 Political structure 32 Economic structure 32 Annual indicators 33 Quarterly indicators 34 Outlook for 2001-02 35 The political scene 38 Economic policy and the domestic economy 39 Foreign trade and payments List of tables 10 Tanzania: international assumptions summary 11 Tanzania: forecast summary 16 Tanzania: Zanzibar election results, 2000 21 Tanzania: expenditure on priority items 22 Tanzania: projected government revenue and expenditure 22 Tanzania: resource balance, 1998-2000 22 Tanzania: projected foreign loans 23 Tanzania: government budget, 1998-2000 EIU Country Report February 2001 © The Economist Intelligence Unit Limited 2001 2 28 Tanzania: balance-of-payments data 29 Tanzania: trade data, 1998-2000 40 Comoros: external debt data List of figures 12 Tanzania: gross domestic product 12 Tanzania: Tanzanian shilling real exchange rates 22 Tanzania: donor support 25 Tanzania: electricity output, 2001 25 Tanzania: potential electricity output 26 Tanzania: exchange rate 27 Tanzania: forestry and hunting 33 Comoros: foreign reserves 33 Comoros: foreign trade 35 Comoros: gross domestic product 35 Comoros: Comorian franc real exchange rates EIU Country Report February 2001 © The Economist Intelligence Unit Limited 2001 3 Summary February 2001 Tanzania Outlook for 2001-02 In October 2000 Benjamin Mkapa was elected for a second term as president. He is expected to ensure that his new government is firmly established and ready to focus on a new set of priorities, including tackling corruption, building democracy, and economic reform. However, growing unrest in Zanzibar is expected to dominate the political agenda. Economic policy will be led by the poverty reduction and growth facility agreed with the IMF. Strong agricultural performance, increasing gold production and the production of traditional and non-traditional export commodities will drive economic growth, with real GDP forecast to rise by 5.3% in 2001 and by just under 6% in 2002. Imports and exports are both forecast to rise during the outlook period. However, the current-account deficit will be lower than it has been in the past; the EIU forecasts a deficit of US$480m in 2001 (5.7% of GDP), and US$410 in 2002 (4.9% of GDP). The political scene The situation on Zanzibar continues to deteriorate. Political violence has reached new heights, and neither the ruling Chama Cha Mapinduzi party nor the opposition parties appear to be willing to make concessions. The EU has attempted to mediate between the opposing parties, in an effort to facilitate reconciliation. However, it is unclear to what extent the Tanzanian government is willing to accept outside mediation. Economic policy Reconfirming its commitment to economic reform, the government has produced a poverty reduction strategy paper. The IMF Board of Governors has welcomed this as a good basis for continued co-operation with the Fund, and for helping establish sound policies for improving growth and reducing poverty, but notes that further work is needed on education, agricultural development, the rural sector, AIDS and gender issues. The domestic economy Towards end-2000 power rationing was introduced because poor rains reduced hydroelectric generation. However, the impact of the rationing on real GDP growth—estimated to have increased by 5.2% in 2000—has been limited. Foreign trade and The heads of state of Tanzania, Kenya and Uganda inaugurated the East Africa payments Community (EAC) in January. Some issues have yet to be resolved regarding the East African Co-operation Treaty, most notably external tariff levels and the abolition of tariffs within all three countries. Progress on the EAC has been good so far, but there is fear that it may be undermined by Tanzania’s desire for closer integration with the Southern African Development Community. EIU Country Report February 2001 © The Economist Intelligence Unit Limited 2001 4 Comoros Outlook for 2001-02 The Fomboni accord, signed by the Comoros president, Colonel Assoumane, and Anjouan’s secessionist leader, Colonel Abeid, in August 2000, is likely to bear fruit in the forecast period. Colonel Azali Assoumane’s military authorities in Moroni, Mohelian politicians and the Moroni-based opposition parties are all poised to sign a new agreement—based partly on the Fomboni accord—that would end the secession on Anjouan and usher in a new dispensation in Moroni. However, doubts about the long-term prospects of this agreement persist. President Assoumane has agreed to sign the document but it is not clear if he is willing to relinquish power, and nor is it clear whether he intends to run as a candidate in the presidential election scheduled to be held three months after the signing of the document. The opposition parties insist collectively that he should take no part in the election but should instead step down in favour of an interim national government. Economic prospects Economic prospects for Comoros remain bleak, hindered by poor economic policy, political uncertainty and a lack of donor support. The political scene A new agreement, which would end the secession on Anjouan and usher in a new dispensation in Moroni, has been established. It incorporates some of the clauses of the Fomboni accord and several clauses from the earlier Antana- narivo Agreement. Both leaders are to sign it in the near future. In line with the Fomboni accord, Colonel Assoumane has dissolved parliament and appointed a new prime minister.