IMF emphasises agriculture, micro-finance

The International Monetary Fund said on Monday that while Tanzania was "on track" in its economic reform process, agriculture and the rural sector needed boosting, and the government's social partners emphasised the need for more progress on poverty eradication. Horst Kohler, Managing Director of the IMF, who was in Tanzania on the first leg of a five-country African tour to assess the impact of the organisation's policies, told journalists at a press conference in State House in the capital, Dar es Salaam, that he had travelled to the country to ascertain for himself that it was heading in the right direction. "From our meetings with government, parliamentarians, civil society and the private and financial sectors, I am very assured that Tanzania is on a good track," Kohler said on Monday. "It has embarked on what we call the poverty reduction strategy process and, out of the meetings this morning, it came very clearly that this approach is broadly backed by society," Kohler added. "The speakers said that there is a lot of room for improvement but the direction is accepted, seems to be appreciated and is already paying off." Noting the need to boost investment and the financial sector, Kohler stressed agriculture and micro-finance as important areas of focus. "There needs to be more dynamics and investment in the agricultural and rural sectors, and I'm very pleased to hear, from the president [Benjamin Mkapa] and officials, that the government is concentrating on growth and development in agriculture," he said. "I also urged officials to concentrate on micro-finance and financing small- and medium-sized enterprises, as these are the areas where jobs are created, and jobs are needed to fight poverty in order to create income," Kohler added. Tanzania's efforts at economic reform and poverty reduction have gained it a reputation as one of the IMF's "star pupils", the BBC reported on Monday. Yet, while there had been considerable progress in establishing economic stability, there had also been concern about social inequality, unemployment and poverty as a result of economic liberalisation, it added. In November last year, Tanzania qualified for the enhanced Highly Indebted Poor Country (HIPC) initiative status - which should mean a 47 percent reduction of the country's debt service, totalling about US $3 billion over time - largely as a result of its efforts in putting together a broad-based Poverty Reduction Strategy Paper (PRSP). The IMF said it believed that participation in public discussions leading up to the PRSP had been broad, and that the document represented a truly homegrown development approach to tackling poverty. In Dar es Salaam on Monday, Kohler stressed the advantages of the PRSP approach, saying it was a country-led and systematic process that was also a strong coordinating mechanism for all the organisations and agencies involved in Tanzania's development. African countries had self-confidence enough to reject any attempt to impose policies upon them, so it was nonsense to try and do so, he added. Mkapa, in turn, expressed the Tanzanian government's appreciation "for the way the IMF has improved and stepped up the pace of the reform approach, and how it has looked [again] at conditionalities so that only the necessary ones can be insisted on". Inevitably, the question arose of Tanzania's agreement with the British-based BAe Systems to buy a US $40 million radar system with military capability. Independent research has suggested that the system is ill-suited to civil aviation purposes in Tanzania, while domestic and international critics have argued that the country - one of the poorest in the world - could have procured a more suitable system for a quarter of the cost. The nongovernmental organisation Oxfam suggested that $40 million would pay for basic health care for 3.5 million Tanzanians. Britain's Department for International Development (DFID) delayed a 10 million pound sterling (about $14.3 million) tranche of budgetary support due to Tanzania back in March, because of concern over Tanzania's commitment to poverty reduction, and pending a review of Tanzania's air traffic control system. While Kohler's only comments on the issue were that such procurements needed to follow the correct procedures and had to be transparent, he took the opportunity to remind the donor community of its responsibilities. "There is a need for better and further coordination between the IMF, World Bank and the rest of the donor community," he said. "There is too much domestic-driven agenda. We should understand that to fight poverty and create better opportunities for the poor, we should have in mind the agenda that favours the poor and not the domestic agenda." Mkapa said the radar system would be purchased from Tanzania's own resources, as opposed to savings made from debt relief. He said that, as the national budget was indeed public, the government had the responsibility to - and would - prove that debt relief savings were being channelled into poverty reduction measures such as education, health and water provision, and the fight against HIV/AIDS. Mkapa said some might say that the debt relief had enabled his government to buy the air traffic control system [by releasing funds from debt service to social sector spending], but insisted that "that kind of prioritisation is the preserve of a national government". Also on Monday, Mkapa and Kohler signed an agreement to establish a pilot scheme under which a regional capacity building technical assistance centre will be built in Dar es Salaam. According to the IMF, the African Regional Technical Assistance Centre (AFRITAC) will help countries in the region improve local capacity for economic and financial management. It intends to do this through a combination of resident experts and short-term specialists who will focus on areas of macroeconomic policy, tax policy, revenue administration, public expenditure management and financial sector policies. The decision to establish the centre stems from requests made to Kohler last year by 12 regional heads of state for support in their efforts to promote economic growth and reduce poverty, the IMF added. Neither Mkapa nor Kohler would comment on questions about reportedly growing concern among western donor countries about Tanzania's strengthening links with Robert Mugabe's government in Zimbabwe. The EastAfrican weekly reported on Monday that the international donor community seemed increasingly worried about the growing links between Dar es Salaam and Harare since the controversial presidential elections in Zimbabwe in March. Mkapa offered his wholehearted support for Mugabe, while Tanzanian election monitors declared the controversial polls free and fair.