COUNTRY REPORT Tanzania Comoros At a glance: 2000-01 OVERVIEW The ruling CCM party will win the national elections scheduled for October. Political violence may escalate over the succession to the Zanzibari leader Salmin Amour. Continued macroeconomic stability will ensure financial support from international donors during 2000-01. Real GDP growth is forecast at 5.2% in 2000 and 5.7% in 2001, driven by a recovery in agri- culture and expansion in the mining, manufacturing and tourism sectors. Key changes from last month Political forecast • Violence continues to plague Zanzibar. However, the decision by the CCM, to prevent the incumbent Zanzibar president, Salmin Amour, from standing for a third term has strengthened party unity. Economic policy outlook • Economic policy during the forecast period will be driven by the recently agreed IMF poverty reduction and growth facility. It aims to promote macroeconomic stability, high growth and public-sector reform. Economic forecast • GDP is forecast to grow by 5.2% in 2000 and 5.7% in 2001. • Inflation will continue to fall. An average of 5-6% is forecast for 2000-01. • The Tanzanian shilling will experience a gradual decline to an average of TSh830:US$1 in 2000 and TSh900:US$1 in 2001. • The current-account deficit will fall from an estimated US$911m in 1999 to US$541m in 2000 and US$595m in 2001. August 2000 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. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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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 2000-01 8 Political forecast 9 Economic policy outlook 10 Economic forecast 13 The political scene 16 Economic policy 21 The domestic economy 21 Economic trends 22 Agriculture 23 Financial services 23 Mining and energy 24 Foreign trade and payments Comoros 26 Political structure 27 Economic structure 27 Annual indicators 28 Quarterly indicators 29 Outlook for 2000-01 30 The political scene 34 Economic policy and the domestic economy List of tables 11 Tanzania: international assumptions summary 12 Tanzania: forecast summary 14 Tanzania: CCM candidates for the Zanzibar presidency, June 2000 17 Tanzania: government finances 17 Tanzania: financing the budget deficit, 2000/01 18 Tanzania: budgetary grants 19 Tanzania: estimates of foreign investment 21 Tanzania: gross domestic product 25 Tanzania: foreign trade, Jan-May EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 2 List of figures 13 Tanzania: gross domestic product 13 Tanzania: Tanzanian shilling real exchange rates 21 Tanzania: inflation 22 Tanzania: coffee prices 30 Comoros: gross domestic product 30 Comoros: Comorian franc real exchange rates EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 3 August 6th 2000 Summary August 2000 Tanzania Outlook for 2000-01 The ruling Chama Cha Mapinduzi (CCM) party will win an easy victory in the national elections scheduled for October 29th 2000. Predictions of renewed violence in Zanzibar have been re-evaluated after the decision by the CCM to select Aman Abeid Karume, the Zanzibari minister for transport and communi- cations, as its candidate for the Zanzibar presidency. Tanzania’s real GDP growth is forecast to be 5.2% in 2000 and 5.7% in 2001, driven by strong agri- cultural performance, increased gold production, and investment in tourism and gas production. Inflation will continue falling and is forecast to range between 5% and 6% in 2000-01. Although exports will grow during the out- look period, faster GDP growth will accelerate import demand and the trade account will remain in deficit. Increased revenue from tourism, high aid flows and reduced debt repayments, as a result of HIPC debt reduction, will all contribute to a reduction in the current-account deficit to US$541 in 2000 and US$595 in 2001. Despite a smaller current-account deficit, the Tanzanian shilling remains vulnerable to the weakness it suffered in 1999. We forecast a gradual depreciation to TSh830:US$1 in 2000 and TSh900:US$1 in 2001. Political scene In an extraordinary session of the CCM’s national executive in June, the president, Benjamin Mkapa, was selected as the party’s candidate for the all- union presidency. The favourite candidate for the Zanzibar presidency was Mohammed Bilali, Isles chief minister. However, his close association with the incumbent, Salmin Amour, put him at a disadvantage. As a result, Aman Abeid Karume, won the nomination. The nomination was broadly welcomed by the CCM, the general population and the opposition parties, as it holds out the prospect of reduced political confrontation and violence. Economic policy Economic policy during the 2000-01 outlook period will be driven by the commitments recently agreed with the IMF under the poverty reduction and growth facility. The government is also taking measures to boost foreign direct investment. These include port and airport rehabilitation, the development of power stations and the proposed establishment of export-processing zones. The domestic economy Despite adverse agricultural conditions and depressed prices for key commodities, exports have grown strongly so far in 2000. Total exports were US$259m in the first five months of 2000, compared with US$170m during the same period in 1999. This growth is forecast to continue into 2001. Foreign trade and The current-account deficit is forecast to fall from an estimated US$911m in payments 1999 to US$541m in 2000 and US$595m in 2001. Rising exports have been accompanied by subdued import growth, leading to a sharp reduction in the trade deficit, from US$401m in the first five months of 1999 to US$286m in the first five months of 2000. EIU Country Report August 2000 © The Economist Intelligence Unit Limited 2000 4 Comoros Outlook for 2000-01 The Comoros’ military ruler, Colonel Azali Assoumane, may be forced to reach a compromise with the Moroni-based opposition. He has proposed constitutional changes which would transform his ruling military council into a parliament and allow a civilian prime minister, with executive powers, to be appointed. Although these overtures were initially rejected by the opposition, protracted bargaining is expected, which may result in the end of military rule. The Organisation of African Unity has stepped up its efforts to mediate a return to civilian rule in the Comoros, and is considering military options in solving the Anjouan secession. The Comorian economy suffered negative per capita growth during 1998-99, and the situation looks set to worsen. The government has failed to reduce the civil service wage bill or increase the collection of revenue, which has led to an increased budget deficit. Economic policy and the The government’s efforts to control expenditure and improve revenue economy collection (1st quarter 2000, page 31) have stalled. The public-sector wage bill for 1999 was twice the value of collected revenue, and employees face four months’ salary arrears. These difficulties have contributed to the collapse of the government’s attempts