Previous Quarterly Editions
Expropriation Risk: 80 78 77 74 Political Violence Risk: 42 42 40 42 Terrorism Risk: 38 40 40 43 Exchange Transfer and Trade Sanction Risk: 54 52 53 53 Sovereign Default Risk: 66 65 68 68
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Tanzania’s response to the COVID-19 pandemic has been characterised by a lack of transparency, ineffective implementation of limited lockdown measures, and a stronger government concern for limiting public criticism rather than protecting the country against the impact of the epidemic. President Magufuli and his government have been criticised for their inaction in response to COVID-19, and for failing to acknowledge the scale of the problem the country faces. Tanzania has not officially confirmed any cases in the country beyond the end of April 2020. There have been rumours of secret burials of those who have died from the virus, and few trust the government’s assertions that the crisis is under control. Magufuli publicly questioned the accuracy of the national testing centre and closed it at the start of May 2020, data has not been available since. The president also suggested that traditional remedies and prayer will protect people against COVID-19 before declaring on June 8 2020 that the country was free of COVID-19 without offering any supporting evidence. The Kenyan government, concerned by the lack of action, closed the border with Tanzania in mid-May 2020. Other land, air and water borders remain open, however, and the supposed 14-day quarantine for arriving air passengers is not being enforced as part of efforts to encourage tourism. The sector is crucial for Tanzania as the largest earner of foreign exchange and contributed 17% of GDP in 2019. Government policy has also allowed commerce through Dar es Salaam port to boom as it benefits from the re-routing of business through Tanzania as lockdown restrictions affect other regional ports. The only real restrictions on mass gatherings that have been uncompromisingly enforced have involved demonstrations against the government, of which has clearly been worried about its performance ahead of the presidential and legislative elections that are still scheduled for October 2020. As well as arresting opposition MPs on politically motivated charges, the government is also continuing to crack down on criticism from the media. The failed response to the COVID-19 pandemic is worsening its serious social and economic impact. The government claims that growth will only slip to 5.5% from 7% last year (2019), although the World Bank projection is more realistic at 2%. Although Tanzania and East Africa will still generally be outperforming most of Africa (even with a substantial fall in growth), a drop to 2% would translate into an additional half a million Tanzanians falling below the poverty line, mostly in urban areas. Opposition parties are discussing a coalition to fight the ruling CCM in the upcoming elections, but new laws on forming coalitions to fight elections have been specifically designed to make this difficult. Moreover, while the current situation should enable a unified opposition to mount a strong challenge, the government’s control over the media and its willingness to harass opponents and aggressively enforce the ban against public demonstrations, is likely to result a win in October 2020- though perhaps with a smaller majority. However a campaign that succeeds by using these tactics will only worsen the government’s international standing just as it becomes even more reliant on donor support.
The deal with Acacia Gold last October (2019) brought an end to the ongoing dispute over taxes and royalties, and there was a gradual loosening of restrictions on the export mining sector over the course of the first half of 2020. The government has relaxed the requirements for all processing to take place in the country and is again issuing export licences for gold and copper concentrates. Mining operations present a particular risk for infection rates which may dent government hopes for the sector to account for 10% of GDP by 2025, howeverhigh prices for gold may offset the fall in production in the short term. That said, the reputation of the government has fallen amongst international investors who see the unpredictability of government policy as presenting an increasing risk. This view will be strengthened if, as in the past, the government uses economic nationalist rhetoric as the election approaches.
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The government has continued to threaten force if demonstrations take place, and opposition parties in particular have been careful not to provoke it by avoiding holding illegal marches. However, with campaigning for the October 2020 elections about to start, tensions are likely to rise as opposition parties seek to mobilise their supporters. While coordinated political protests on a national scale are not expected, localised outbreaks of violence are possible. If the government is seen as rigging the elections, which it has done on the islands of Zanzibar in the past, opposition outrage combined with reduced concern of COVID-19 may produce post-election violence.
TREND ▲ OUTLOOK ►
The risk of significant international terrorist activity in Tanzania remains relatively limited. However, Tanzanian nationals have been implicated in regional terrorist, extremist or insurgency action across the region. Traditionally this has been linked to Somalia’s political crisis but over the past year the insurgency in Cabo Delgado in Mozambique has become more significant. In March 2020, Tanzanian troops were sent to the border to prevent cross-border raids, and Mozambican forces announced in May 2020 that two of the insurgency leaders killed in a skirmish were Tanzanian nationals. There are some concerns that the radicalised Tanzanians in neighbouring regional conflicts could return home to foment trouble in Tanzania, though there is no significant movement within the country at this time.
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The annual inflation rate remains under 4%, reflecting the falling of food price inflation and lower energy costs. However, the money supply has been growing as the central bank seeks to offset the economic impact of the COVID-19 pandemic. The bank reduced its minimum reserve requirements for the commercial sector in May 2020, when it also cut its discount rate from 7% to 5% to encourage more lending. The 50% surge in exports during the first half of 2020 has not been enough to counteract the damage done to the tourism sector. Although there has been strong growth in agricultural commodity exports over the last twelve months, demand is being effected by the pandemic and this sector is now looking weaker.
Although the government remains secretive with COVID-19 data, the pandemic will inevitably mean lower revenue and higher spending, particularly on the health sector. Reserves stand at 5.3 billion USD, and the government has so far avoided any significant drawdown, but that may change in the second half of 2020. The debt-to-GDP ratio was around 38% in 2019 and will reach 40% in 2020. While a substantial portion is owed to multilateral institutions on concessional terms, at least 10% is owed to China.
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