- Governor Ndulu says exports growing despite commodity slump
- Nation exploring other funding options after loan plan dropped
Tanzanian central bank Governor Benno Ndulu said the economy will expand about 7 percent this fiscal year and maintain stable growth in the future, as the negative impact of low commodity prices is offset by stronger manufacturing.
The inflation rate rose to 6.8 percent in December, from 6.6 percent, driven by increases in food prices that account for about half the weighting in the consumer price basket, Ndulu said in an interview in the commercial capital of Dar es Salaam on Thursday.
"This country and this economy will be quite strong, we will be reasonably stable," said Ndulu. “Inflation is a challenge in East Africa now across the board, mainly food-driven, but we still will remain" below 10 percent.
The economy expanded 6.3 percent on an annual basis in the third quarter of 2015 compared with 7.9 percent the quarter earlier, the statistics bureau said on Friday. Growth in agriculture, the biggest component of the economy accounting for about a third of gross domestic product, slowed to 2.7 percent from 4.2 percent.
President John Magufuli, who took office in November, has vowed to speed up growth by diversifying the mostly agrarian economy. His pledges include accelerating the development of deposits of natural gas, with an estimated 55 trillion cubic feet of reserves that are the biggest in East Africa after neighboring Mozambique.
Mining is a key source of foreign exchange for Tanzania, which is Africa’s fourth-biggest gold producer. Exports of the metal fell 7 percent to $1.3 billion in the year through October.
Plans for Tanzania to borrow as much as $800 million from commercial banks have been abandoned because market turmoil made the syndicated-loan market too expensive, the Finance Ministry said last month. “We are still looking and there are sources we are pursuing," to access financing, Ndulu said, without elaborating.
The current-account deficit has narrowed to about 8 percent of gross domestic product from as much as 13 percent to 14 percent, the governor said.
“It’s partly the fact that our exports have continued to grow,” he said. “Whatever that gold has lost, we have been able to make significant headway by raising exports from manufacturing.” Income from tourism, another top foreign-exchange earner, has surged over the past few years to about $2.1 billion annually from $1.3 billion, he said.
The central bank currently has adequate foreign-exchange reserves and it probably won’t need to dip into them at the same speed as in the past because the slump in oil prices has cut the country’s import bill, he said.
“We are at around $4.1 billion and this is against a significantly reduced import bill because the price of oil has gone down and a number of things that are not crucial in terms of importing, people are not bringing those in," he said. "So our $4.1 billion now can cater for our imports for a much longer period."
The Tanzanian shilling was little changed at 2,190 per dollar by 11:05 p.m in Dar es Salaam, the weakest level since Oct. 21, according to data compiled by Bloomberg.