What were the causes, responses and impacts of economic crises which took place in Tanzania in the 1970s and 1980s? (Hi360)

After the independent of Tanzania, one of the great’s event in the history of Tanzania economy was the introduction of the Arusha declaration in 1967 with the aim of establishing the new economy from that inherited from the colonial power. It has attempted to restructure its institutions, its industries and its agricultural sector in a way that will allow the nation to transforms from the bleakness of its colonial past to the future that will represent the shared vision of its people.

 At the first decades of independence Tanzania development record the country economy was fairly successful in term of having basic human needs and perform reasonably well in term of achieving economic growth.  But between the 1970s and 1980s the country cut across the period of economic crisis. Economic crisis between the 1970s and 1980s were manifested by the following indicators includes the decline in real GDP growth from an average of 5.1 percent annual in 1970- 6 to less than 2 percent per annual between 1977 and 1986 when population growth was 3.2 percent per annual, The decline in the real per capital income by more than 15 percent over the 1976-86 period, The soaring of inflation from an annual average rate of less than 5 percent in the 1996-70 period, through 11 percent in the 1970-76 period to 3 percent after 1979, The pining of external imbalance on current account deteriorated abruptly from a deficit of $US49 million in 1977 to a deficit of $US539 million in 1982, hitting an all time low of $US565 million in 1980.and The growing overall deficit in public finance which rose by more than 6.5 times between 1978-9 and 1984-5 reaching an unprecedented 20 percent of GDP in 1980[1].

 These economic crises were attributed by both internally and externally factors. The following were the causes of the economic crisis which took place in Tanzania in the 1970s and 1980s.

Global inflation at the mid year of 1970s which attributed by high demand of manufactured goods and fuel for the national development, price of this commodities in the world market have been rising and this absolutely contributed to Tanzania domestic inflation. Inflation resulted to the rise in price for import while the price for export fall for example bill of oil import rise sharply from 26 percent in1978 to 56 percent in 1982[2], increase in the cost of importation led the decline in the fuel consumption, manufactured goods as well as industrial input which heavily impact the Tanzania infant industrial, distribution and adversely affect agriculture sector.

Military spending occasioned by the war with Amin’s Uganda was another factor for economic crisis of 1970s especially in depleting Tanzania domestic saving, the war with Uganda not only cause massive loss of life ,and disruption of the economic activity but basically affect the domestic saving were government spending and saving directed to the military spending  for example during the fiscal year of 1979 the share of defense  in total expenditure rose sharply to 23.3 percent from the 14.6 percent in 1978. And this spending was the main result for the increase in the budget deficit from about 10 percent of GDP in 1977 to 20 percent in 1979[3]. 

Increase in the external dept following the decline in the Tanzania exchange. Tanzania join the long list of countries that have increases their external dept. From the 1970 to 1980, Tanzania dept increases dramatically from US$ 248million to US$ 1,360 billion which was equivalent to 19.4 percent of GNP in 1970 to 31.4 percent in 1980. Burden of the external dept become visible when the world financial markets stank in the brink crisis which made them in the position of allowing the delayed payments on outstanding loans and even loaning new funds to be used by debtors include Tanzania to pay interest in old depts[4]. Under this situation experienced difficult in getting new loan from world banking communities as country tries to solve its foreign exchange problem.

 Another cause of the economic crisis of 1970s and 1980s were the too much emphasis of the government in the production of the cash crops over the food crops production for the purpose of earning the foreign currents. Emphasis in the production of the cash crops resulted to the food shortage which also attributed by the massive movement of the people in the villages. cash crops production require an infusion of capital both in the form of foreign aid and government credit, government service and also agricultural extension agents which could only draw those resource from food production thus cause this decline. Therefore food shortage as result of both government emphasis on cash crops production and massive movement of people in village cost the Tanzania economy because result to the massive food importation merely to prevent wide spread  starvation for example food shortage of 1970s caused Tanzania to import  over 550,000 tons of maize, 210,000 tons of wheat, and 130,000 tons of rice at the cost of over  1.4 billion Tanzania shillings which is four times than the amount  of the preceding four years[5].

 Tanzania economic crisis also attributed by the natural calamities mainly drought and flood between the 1973s and 1983s. Tanzania experience the prolonged drought between the 1973-4, 1981-82 and 1983-84, which affected both food production industrial activities as well as production for export but also occasional flood caused severe damage in roads and bridges[6]. This situation increases burden to the national economy by increasing the government spending in importing more food as well as capital to repair the destructed infrastructures.

 Tanzania introduced different measures or takes several responses to solve these crisis between 1970s and 1980s.

Introductions of the third five year development plan of 1975-81. Follow the little attention of the government in the industrialization as engine of growth under the Arusha declaration which causes the country to depend on the foreign importation. In 1975 government introduced the third five year development plan that include  the attempt to develop the light industries for the import substation , raw material processing  and labor intensive technique of production but also emphases were put in the production of the consumers goods by the villages themselves by using local material and local capital. The efforts were also tried to the attempt to substitute processing domestic materials and local capital which the country had been importing. And letter on the objectives of these plan into the long term industrial strategy of 1975-95, which also includes the plan for providing the basic need to the people of Tanzania include clothing, shelter, food, health survives, and water supply. Also includes the introduction of the intermediate industries which provide inputs vital to construction, agriculture, and manufacturing. Under this plan Tanzania wittiness significant average growth trends for example manufacturing sector  record an impressive  6.2 percent growth rates in 1976 as contrast to the 4.4 percent of 1975 although the emerging of the new economic crisis in the 1979 goes back the Tanzania economy to the declines.

Introductions of massive food production campaign of the1975 with the slogan of Agriculture for life and death (KILIMO KUFA NA KUPONA), and national maize project (NMP). To respond on the food shortage in the country government established different agricultural programs includes the agriculture for life and death and national maize project in 1975 but also National agriculture development project of 1976. All together these programs aimed to increase the level of food production for domestic consumption to solve the problem of food shortage throughout the country. For example National maize production project aimed at the production of maize in 13 selected region and 98 district from which 950 villages were selected, together with storage facilities, marketing and the financial support were provided[7].  In addition to this, 1976 National agricultural development project aimed at promotion of intensive farming which involves the use of different methods like crop rotation and soil conservation.

Adoptions of Structural Adjustment Programme (SAP) in 1983-1985. The program was to cover a three year 1983-5 period and was primarily and important effort seeking to restore output like before the time crisis. Intended to improve public sectors, financial sector, both external and internal balances, and reducing inflation. But also SAPs aim at restructuring the economic activities trough a system of incentives to producers, rationalizing government spending introducing measures to improve capacity, utilization and labor productivity, and strengthening the planning system  by instituting more effective budgeting, monitoring  and enforcement of priorities. For example government increases the level of investment in agriculture and incentives to producers and budget in the agriculture increases from 11.7 percent in 1982 to 23 percent in 1983 and then 28 percent in 1985[8].

Establishment of the economic recovery programs in 1986-1989. This adopted in July 1986 as an extension of the structural adjustment programs of 11983-85. Aimed at gradual attainment of sustain  growth  in real incomes and output through promotion of higher level of food production and cash crops by improving marketing structure, and increasing resources available to agriculture. In addition to this, aimed at correcting the external imbalances, reducing budget deficit, cutting down inflation and providing incentives to all types of producers. And all this measures were to be accompanied by reforms in the fiscal, monetary and interest rates structures in order to cut down inflation and to instill discipline and improve efficiency in allocation of domestic services[9]. Among of the reforms include exchange rate policy, partial liberalization of trade, streaming crop marketing and distribution, reducing budget deficit, and money and credit policy.

The impacts of this economic crisis categorized in two bases, first depended on the general impact of the economic crisis itself but on the other side were the impact associated with the measurers or responses taken to solve this crisis.

General impact of crisis include food shortage, increased inflation, government failure to provide services to their people, failure of the different development programs, balance of trade deficit.

But on the side of the impact associated by the responses of the crisis mainly we look on the interference of the internal development programs and strategies by the outside countries and financial institution  like World bank and IMF  for example the world bank report of 1974 and 1976 condemned against Tanzania agriculture collectivization and called for support of small privately hold farms but also called for the concentration in the processing industries rather than the heavy industries and total privatization  process as tool for economic development. Another big impact was that, the adoption of SAPs marked the end of socialist policy in Tanzania because most of the SAPs terms and condition such as privatization.

Generally

                                         REFERENCES

Maliyamkono, T. L. and M.S.D.Bagachwa,(1990).The second Economy in Tanzania. Dar es Salaam: ESAURP

Kahama, C.G, T. L. Maliyatabu&StuartWell,(1986).The challenge for Tanzanian’s Economy.Dar es salaam: Tanzania Publishing House

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