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The Linkage Between Macro Policies and Poverty by Professor Chami.

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Presentation on theme: "The Linkage Between Macro Policies and Poverty by Professor Chami."— Presentation transcript:

1 The Linkage Between Macro Policies and Poverty by Professor Chami

2 18/09/20022 A Conceptual Framework Growth pro-poor when broad based ie. Have high backward & forward linkage PRSP identified agriculture, SMEs, and informal non-agric. sectors as pro-poor Other sectors have grown – “pacemakers of growth”, namely mining & tourism

3 18/09/20023 A Conceptual Framework (Ctd) Linkage between macro & micro can be enhanced through mediation of government, mainly through expenditure in priority social sectors

4 18/09/20024 Macroeconomic Performance in Tanzania Good progress achieved GDP growth averaged between 4.1% between 1995 and 2000 Agriculture growth rate at 3.5% Mining growth rate at 14.6% Manufacturing growth rate at 4.6% Inflation fell from 33.5% to 4.5% 2002 External debt (as a % of exports) fell from 88% in 1993 to 28.6% in 2000

5 18/09/20025 Linkage of growth performance to Poverty Poverty has gone down significantly in Dar es Salaam Not much reduction in rural areas Inequality has increased, especially in Dar es Salaam

6 18/09/20026 The Pacemakers of Growth Tourism –Concentrated in Northern wildlife area –High growth recorded –Tourist arrivals increased from 190,000 in 1991 to 502,000 in 2000 –Nominal earnings increased from $95 million to $740 million during the same period –Contribution of tourism to GDP from 1% between 1986-92 to 12.4% in 1999. –Share of earnings to total exports increased from 12% in 1990 to 40% in 2000

7 18/09/20027 The Pacemakers of Growth (Ctd) Tourism (Ctd) BUT –Tourism employs less that 1% –Has not benefited local people adequately –Has had some negative impact on environment and culture in some areas

8 18/09/20028 The Pacemakers of Growth (Ctd) Mining –Increased mineral output between 1994-2000 Diamond increased 15 times Gold increased by 400% Gemstones by over 200% Mining licenses increased by 65%

9 18/09/20029 The Pacemakers of Growth (Ctd) Mining (Ctd) BUT –Share in GDP still small (2% in 1998) –Large scale mining employs a small number of local people –Observed generosity in grating soft tax/royalty package to foreign companies

10 18/09/200210 Pro poor sectors Agriculture –Still the mainstay of the economy –Has great linkages to the non-farm sector –Has large employment linkages if direct investment made to the sector

11 18/09/200211 Pro poor sectors (Ctd) Agriculture (Ctd) –Implications of SAPs Removal of subsidy increased input prices Liberalization of agricultural market led to market integration & high output pieces Cooperatives have ceased to be sole buyers of crops and suppliers of inputs Loss making agric-based parastastals in the process of being privatized

12 18/09/200212 Pro poor sectors (Ctd) Agriculture (Ctd) –Agriculture performance still not satisfactory Heavy reliance on hand hoe and rainfed systems Falling Terms of Trade High transport cost Credit shortage Low investment Multiple & inconsistent taxation High power tariffs

13 18/09/200213 Priority Social Sectors Health –When do expenditures in health fail to impact the poor? They may be inadequate They may be used in wrong priorities There could be leakages Could be a combination of the above

14 18/09/200214 Priority Social Sectors (Ctd) Health (Ctd) –Allocations do not make great impact because the threshold is too high

15 18/09/200215 Priority Social Sectors (Ctd) Health (Ctd) –Pro-poor criteria A move towards OC noted between 1997- 2002 A slight move noted in favour of District- based health facilities A positive trend towards preventive health services Widespread leakages of funds noted

16 18/09/200216 Priority Social Sectors (Ctd) Education –Pro-poor criteria Expenditure ratios allocated to primary education increasing Expenditures moving in favour of OC as opposed to PE However, widespread leakages of OC expenditures noted

17 18/09/200217 Priority Social Sectors (Ctd) Education (Ctd) –Education quality noted to be low Lack of qualified teachers (Grade 3A) Student/Teacher ratio still high in some areas Low transition to secondary schools Primary schools not transformed to meet the needs of leavers

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