Standard Chartered Bank Regional Head of Research Africa Global Research Razia Khan briefs journalists (not in picture) on global economic outlook in Dar es Salaam.
Estimates of the recoverable gas available in Tanzania, which range between 15 and 28.9 trillion cubic feet, could boost the country’s annual export earnings by as much as USD3bn once the resource comes on stream.
A World Bank statement issued in Dar es Salaam yesterday at a Global Research briefing said, availability of the cheap gas could bring additional economic benefits, boost power generation and address the long standing country’s deficit.
The briefing was organised by Standard Chartered Bank where Africa’s head of regional research, Razia Khan, gave a comprehensive presentation on various aspects of the country’s economy.
“The discovery of offshore gas in Mtwara Region will enable the country to sustain its economic growth which currently stands at 7 per cent,” she said.
She added that continued growth in agriculture and investment in other infrastructure and a successful cotton crop should also support the economic outlook, driving up the growth trend of around 7 per cent. Receipts from tourism, gold and manufactured goods are all expected to rise, she pointed out.
However, high imports of capital goods which are required to sustain long investment will keep the current account deficit in double digits as a percentage of GDP, she noted.
Inflation in Tanzania has proven to be stickier than in other East African economies. Nonetheless, a high base and continued tight monetary policy (with a slowdown in reserve money and private sector credit growth) should allow inflation to fall to single digit by now (the start of 2013) from a peak of 19.8 percent in December 2011. Inflation is likely to remain single digit for much of 2013, she said.
Commenting on the financial sector, Khan said: “Following the receipt of a single – B rating in 2011, Tanzania has not yet opened its domestic market fully to offshore investor participation. Nonetheless it may issue a Eurobond to raise funds for infrastructure development.”
Given the country’s public debt ratio of 41 percent to the GDP and strong growth prospects, the Eurobond is likely to be favourably received, she observed.
Plans are underway to establish a sovereign wealth fund to save a proportion of earnings from future production, Khan said.
Furthermore, tight expenditure controls are likely to be sustained in general, although the carryover of electricity-related arrears (c.1.1 percent of GDP) remains a key fiscal concern, she said.
With structural reforms in place, Tanzania should make further progress in raising its revenue collection to 16.7 percent of GDP in FY13 (ends June 30).
However, any unexpected revisions to the terms agreed with oil and gas and exploration firm may negatively impact investor sentiment, she claimed.
Tight monetary policy, with the active sterilisation of liquidity by the Bank of Tanzania, will persist, she noted.
Meanwhile, the Tanzanian shilling (TZS) has remained stable for now, supported by regulatory controls and increased gas related FDI, the statement said.
But with a significant current account deficit, some foreign exchange adjustment is likely to be needed over time, it further said.
Short term T-bill yields are expected to ease gradually, in line with a deceleration trend in inflation, it said.
Standard Chartered Tanzania Limited, which is often referred to as Stanchart Tanzania, is a commercial bank licensed by the Bank of Tanzania and is a wholly owned subsidiary of Standard Chartered.
It launched this Global Research meeting for the first time.