Dar Es Salaam — THE Bank of China has started negotiations with the Tanzania Investment Bank to help it develop credit line for farmers.

"The TIB will soon start borrowing a leaf from the Chinese Bank on the best practices of extending credit to farmers to boost the country's agriculture production," said the Deputy Minister for Finance, Mr Omar Yussuf Mzee today.

The Chinese bank has a vast experience in extending loans to farmers and it is expected that the move will enhance the TIB services to the farmers, he explained.

He said the government's commitment to help mitigate the country's impact of the economic crunch through agriculture development remains on top of its priorities.

The minister said that the country has started mitigating the impact of the crisis by addressing several issues.

On the issue of cost, he said, there was additional fiscal stimulus focusing on financing the agricultural sector - deemed critical and important to reduce budget deficit, he said.

"As a way to improve the balance of payment, the scope is to invest in some potential regions where there are favourable climatic conditions for agriculture," the minister said.

The modalities already in place include agriculture modernization process or green revolution already underway to avail modern agriculture equipment and techniques to the farmers.

He said other modalities were supplying fertilizers, high yield seeds and expanding farming land in several regions.

These regions include the Southern Highlands which include Mbeya, Iringa, Rukwa and Ruvuma. Others are Kigoma and Morogoro where they have been receiving reliable rains for many years.

The minister said the overarching objective of government's crisis response is to ensure that the progress achieved in recent years with the implementation of poverty reduction and growth strategy (MKUKUTA) does not go down to the drain.

The current budget approved by the National Assembly in July provides a fiscal stimulus to the economy, with total expenditures projected to increase to 28.3 percent of GDP and a resulting projected budget deficit of lower than 4.0 percent, he said.

Though the intended fiscal stimulus could not be fully executed, but right now the developed world economy is making an about turn as the demand for the country's cash crops has started shooting up, hence the need to make a quantum leap in agriculture, he said.

"This will lead to the stockpile of our cash crops fetching market and hence boosting the country's balance of payment which might reduce the budget deficit even further," he said.

The other mitigating factor was Foreign Direct Investment which Tanzania continues to attract investors in the country, he said.

This is another source of revenue for the country which can mitigate the country's budget deficit, he said.

Meanwhile, Tanzania was still targeting to reduce its inflation to 8.5 per cent from the current 12.5 per cent this year, despite the country facing drought in some regions.

"Inflation is measured by Consumer Price Index which 50 per cent is food prices, said the minister.

He added that the government's initiative to promote agriculture is meant to mitigate inflation too.

However, there was still a growing concern by consumers that food prices are still prohibitive in urban areas and places where drought has hit hard.

"Who says that inflation is going down, if an average family cannot afford to eat one decent meal a day," complained Juma Hassan, a resident of Kinondoni , in the outskirts of Dar es Salaam.

Many people have continued to attribute the poor state of economy due to scarcity jobs and very hard borrowing conditions from the financial institutions.

"These capitalist banks are not interested to give loans to ordinary farmers. How can we reduce inflation if the income generating activities are not being supported by the financial sector," pointed out Robert Kinyogoli , another resident of Dar es Salaam.

Preliminary data from the financial sector on budget execution for FY08/09 points to a significant under-execution of budget by some 1.5 percent of GDP, mainly due to significant shortfalls in project grants leading to restrained execution of budgeted development expenditure.