Dar es Salaam, Tanzania — The government of Tanzania has said its economy has been growing at an average rate of 6.9% in the second quarter of 2012, thanks to the better performance of the Foreign Direct Investment (FDI).
In order to attract investments in the country, the Minister for Lands, Housing and Human Settlements Development, Prof Anna Tibaijuka said in Dar es Salaam that the government had to enact in order to woo investors in the country.
She said the act provided incentives for foreign investment in the country with the purpose of enhancing FDI. "So far, a total of $7,691.3bn has been invested in Tanzania in various sectors," Prof Tibaijuka said in a speech read on her behalf by her deputy, Mr Goodluck Ole Medeye.
However, Prof Tibaijuka noted there has been little foreign direct investment in the housing sector compared to other sectors such as ICT, telecommunication, mining, gas and fuel.
Basing on recent statistics, Tibaijuka said, Tanzania economy has been growing at an average rate of 6.7% from 2000 to 2011. "This is encouraging to note that our economy is continuing to grow strongly as envisaged by the fact that real GDP grew by 6.4% in 2011 and 6.9% in the second quarter of 2012."
Prof Tibaijuka told East African Business Week that with rapid growth in FDI in the offshore gas sector, even stronger growth is projected in 2012 and beyond.
Inflation rose in 2011 due to higher global oil prices and surge in regional and global food prices. However, she said, "With tight fiscal and monetary policies, and slowing of food prices, headline inflation has gradually begun to fall."
She said credit to the private sector grew from 7.4% of GDP in 2003 to 16.2% towards the end of 2008. "Currently, it is 19.7% of GDP as of July 2012."
"Outstanding percentage of bank's portfolio of credit to building and construction was 3.4% in June 2011 and 4.2% in June 2012, she said, adding overall market interest rates declined with increased competition in the banking sector and available liquidity in the market."
The government securities market has been vibrant with many participants making the interest rates responding to the market conditions, she said. Tanzania has been implementing financial sector reforms since 1990 with the assistance from the World Bank and other development partners.
Notable achievements of financial sector reforms include enactment of Mortgage Finance Act and the Unit Titles Act both of 2008. The Mortgage Finance (Special Provisions) Act amended several sections in Land Act, Land Registration Act and Civil Procedure Act that were hindering housing market development.
The Unit Titles Act, 2008 provides for division of buildings into units, co-ownership and management of such structures.
On his side, the Bank of Tanzania's Deputy Governor, Mr Lila Mlala said that while the mortgage sector remains small, developments in many countries suggest that the reality on the ground is changing.
"There are key constraints to the mortgage market in Tanzania both from the demand side and the supply side, such as low level of income, access to long term funds, high prices, limited supply, credit risk due absence of historical information, high interest rates, property registration," Mlala said.
Bank of Tanzania prudential framework for microfinance institutions gives these institutions a solid base for becoming more active in the financial sector, benefiting the population at the lower end of the income distribution, he said.
To make more viable, the central bank is encouraging increased private sector credit, currently projected to grow by 20% in the 2012/13 fiscal year.