TANZANIA needs to strike the right balance between making large capital investments and maintaining fiscal discipline.
According to the report by the World Bank on Tanzania Economic Update launched over the weekend, the 2012/13 fiscal deficit was higher than anticipated, partly because ambitious revenue targets could not be achieved.
It said the official aid inflows to Tanzania are increasingly being replaced by non-concessional borrowing, thereby exposing the country to interest rate risks and high cost debt. Moreover, several state-owned corporations are running large deficits and represent major fiscal liabilities.
"Tanzania needs to maintain fiscal discipline and continue to keep the country's debt and debt-service at acceptable levels to consolidate the gains achieved over the past decade," it stated.
According to the report, the economic update discusses the state of the economy broadly where over the past two years it has helped to stimulate debate on topics that resonate with people's concerns, ranging from education to agriculture to the Dar es Salaam port.
The state of the economy provides a credible foundation to embark on an ambitious programme of high priority public and private investments and associated sector reforms. Such investments and reforms are necessary foundations to further stimulate economic growth for shared prosperity and poverty reduction.
The strong and stable economic growth and gradually declining inflation have been the hallmarks of the country's recent economic performance.
The special focus of the fourth economic update is as much a concern for policy makers as for ordinary citizens, as it discusses a bold new way of lessening extreme poverty by transferring cash directly to the most vulnerable people.
Cash transfer programmes have proven effective in other parts of the world like Brazil and Mexico. In Tanzania , the success of a similar programme piloted by the Tanzania Social Action Fund (TASAF) which includes conditional cash transfers as well as public works for productive infrastructure.