ECONOMY: Debt Relief Fails to Cut Tanzania’s Poverty – Report

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Jan 9 2002 (IPS) - The benefits of debt relief have failed to trickle down to Tanzania’s grassroots, where poverty remains rampant, according to the latest assessment by four anti-debt groups.

In large part, the groups have found, this is because much-touted social funds provided under the enhanced Heavily Indebted Poor Countries (HIPC) initiative have not been translated into better social services for the East African country’s 34 million citizens.

The study’s sponsors have called for not only a revision of Tanzania’s HIPC package but also a more realistic approach to political preconditions detailed in the country’s Poverty Reduction Strategy Programme (PRSP). The PRSP is to be discussed at the WOrld Bank next week.

The Tanzanian Social and Economic Trust (TASOET), the Debt and Development Coalition, Jubilee Ireland, and Oxfam Ireland have released the report.

Commenting on its findings, Francis Lemoine, debt policy analyst with the European anti-debt advocacy group Eurodad, said public investments in education, health, and rural development have remained virtually non-existent even after funds were released under HIPC.

“I doubt that given the financial flows freed by the HIPC Initiative, the government will be able to increase sufficiently these expenditures which are not directly productive while at the same time making the necessary investments to keep the economy growing at current rates,” Lemoine said.

Michael O’Brien, of Oxfam Ireland, said that contrary to the declared goals of the initiative, HIPC has failed to make a dent in poverty because it places a higher premium on economic restructuring than it does on public welfare.

“Even with the elimination of school fees for primary education, research by Maarifa, a local NGO (non-governmental organisation) supported by Oxfam Ireland, demonstrates how indirect costs like uniform, PTA (Parent-Teacher Association) fees etc. are continuing to deprive many of a basic education,” he said.

Simply put, researchers have found that despite promises that HIPC would boost social spending, HIPC funds contributed only up to 7.1 percent of the financing of the PRSP in 1999/2000. The rest had to come from domestic resources. They also said that even after taking account of HIPC funds and donor aid flows, the government has identified significant financing gaps that will straightjacket the financing of their PRSP.

Such claims are overly pessimistic, according to Ron Brigish, the World Bank’s Tanzania country director.

“While it is true that under the PRSP more funds are being allocated to the social sectors, we cannot expect to see the results of these reforms overnight,” Brigish said. “Moreover, given that budgetary reforms and social sector reforms are coinciding with decentralisation, it would be logical to expect some delays in the translation of enhanced resources at the macro level to better service delivery at the local level.”

Tanzania remains on track to achieving debt sustainability, according to Brigish. “Given the growth rate, current and projected, of Tanzania’s GDP (gross domestic product) and exports, Tanzania should easily be able to service this debt and keep its debt indicators manageable,” he said.

According to the International Monetary Fund (IMF), Tanzania’s GDP growth was 4.9 percent in 2000 and 2001, despite the negative effects of lower commodity prices and tourism revenues.

The Fund said inflation was reduced from seven percent to five percent from 1999 to 2001, and the current account deficit lowered from 12 percent of GDP in 1999 to less than 10 percent of GDP for 2000.

Tanzania has qualified for some three billion dollars in debt relief under HIPC. The World Bank and IMF have said this would cut Tanzania’s total current external debt stock of some six billion dollars by about 54 percent over time.

Yet, according to Lemoine, the rosy rhetoric conceals the fact that Tanzania’s development has been concentrated in a few sectors such as mining and domestic finance and has failed to make a dent in poverty.

Tanzania remains one of the world’s poorest countries and its economy is heavily dependent on agriculture, which accounts for half of GDP, provides 85 percent of exports, and employs 82 percent of the workforce.

Lemoine said that poverty rose from 48 percent in 1991/92 to 56 percent in 2000 on the back of the very policies that the Bank and IMF prescribed.

“This is partly due to economic policy choices such as the introduction of fees for primary education or the lack of attention paid to the agricultural sector,” she said.

“What is equally clear is that the beggar-thy-neighbour policies of the past did not work, and that reverting to them is not a recipe for success,” Brigish countered.