Transcript The Linkage Between Macro Policies and Poverty

The Linkage Between Macro
Policies and Poverty by Professor
Chami
A Conceptual Framework
• Growth pro-poor when broad based ie.
Have high backward & forward linkage
• PRSP identified agriculture, SMEs, and
informal non-agric. sectors as pro-poor
• Other sectors have grown – “pacemakers of
growth”, namely mining & tourism
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A Conceptual Framework (Ctd)
• Linkage between macro & micro can be
enhanced through mediation of government,
mainly through expenditure in priority
social sectors
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Macroeconomic Performance in
Tanzania
• Good progress achieved
• GDP growth averaged between 4.1% between
1995 and 2000
• Agriculture growth rate at 3.5%
• Mining growth rate at 14.6%
• Manufacturing growth rate at 4.6%
• Inflation fell from 33.5% to 4.5% 2002
• External debt (as a % of exports) fell from 88% in
1993 to 28.6% in 2000
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Linkage of growth performance
to Poverty
• Poverty has gone down significantly in Dar es
Salaam
• Not much reduction in rural areas
• Inequality has increased, especially in Dar es
Salaam
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The Pacemakers of Growth
• Tourism
– Concentrated in Northern wildlife area
– High growth recorded
– Tourist arrivals increased from 190,000 in 1991
to 502,000 in 2000
– Nominal earnings increased from $95 million to
$740 million during the same period
– Contribution of tourism to GDP from 1%
between 1986-92 to 12.4% in 1999.
– Share of earnings to total exports increased from
12% in 1990 to 40% in 2000
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The Pacemakers of Growth (Ctd)
• Tourism (Ctd)
• BUT
– Tourism employs less that 1%
– Has not benefited local people adequately
– Has had some negative impact on environment
and culture in some areas
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The Pacemakers of Growth (Ctd)
• Mining
– Increased mineral output between 1994-2000
• Diamond increased 15 times
• Gold increased by 400%
• Gemstones by over 200%
• Mining licenses increased by 65%
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The Pacemakers of Growth (Ctd)
• Mining (Ctd)
• BUT
– Share in GDP still small (2% in 1998)
– Large scale mining employs a small number of
local people
– Observed generosity in grating soft tax/royalty
package to foreign companies
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Pro poor sectors
• Agriculture
– Still the mainstay of the economy
– Has great linkages to the non-farm sector
– Has large employment linkages if direct
investment made to the sector
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Pro poor sectors (Ctd)
• Agriculture (Ctd)
– Implications of SAPs
• Removal of subsidy increased input prices
• Liberalization of agricultural market led to
market integration & high output pieces
• Cooperatives have ceased to be sole buyers
of crops and suppliers of inputs
• Loss making agric-based parastastals in the
process of being privatized
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Pro poor sectors (Ctd)
• Agriculture (Ctd)
– Agriculture performance still not satisfactory
• Heavy reliance on hand hoe and rainfed systems
• Falling Terms of Trade
• High transport cost
• Credit shortage
• Low investment
• Multiple & inconsistent taxation
• High power tariffs
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Priority Social Sectors
• Health
– When do expenditures in health fail to impact
the poor?
• They may be inadequate
• They may be used in wrong priorities
• There could be leakages
• Could be a combination of the above
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Priority Social Sectors (Ctd)
• Health (Ctd)
– Allocations do not make great impact because
the threshold is too high
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Priority Social Sectors (Ctd)
• Health (Ctd)
– Pro-poor criteria
• A move towards OC noted between 19972002
• A slight move noted in favour of Districtbased health facilities
• A positive trend towards preventive health
services
• Widespread leakages of funds noted
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Priority Social Sectors (Ctd)
• Education
– Pro-poor criteria
• Expenditure ratios allocated to primary
education increasing
• Expenditures moving in favour of OC as
opposed to PE
• However, widespread leakages of OC
expenditures noted
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Priority Social Sectors (Ctd)
• Education (Ctd)
– Education quality noted to be low
• Lack of qualified teachers (Grade 3A)
• Student/Teacher ratio still high in some areas
• Low transition to secondary schools
• Primary schools not transformed to meet the
needs of leavers
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