Despite sustained growth, Zanzibar likely to face tough times in 2016

13Jan 2016
Dickson Ng`hily
The Guardian
Despite sustained growth, Zanzibar likely to face tough times in 2016

AMID Zanzibar's positive expectations for continued economic growth in 2016 backed by falling prices for goods and services, official figures indicate tough times ahead.

Zanzibar Harbour

Last year Zanzibar started by recording an annual headline inflation of 3.5 percent which was down from 4.3 percent recorded in December 2014 thanks to falling sugar and fuel prices.
During the year ending January 2015, central bank figures indicated that Zanzibar’s food inflation declined to 5.0 percent from 5.1 percent recorded in the year ending December 2014.
But the report since last October, food inflation rose to 11.7 percent mainly driven by increases in prices of rice, wheat, banana, maize flour and potatoes.
The MER indicated an increase in imports of particularly petroleum products amounting to US$ 286.2 million compared with US$ 229.7 million over the same period,
Speaking over the phone last weekend, Mustafa Juma Duni, a petty trader at Darajani market said that the current situation is far from what they expected.
"Life isn't easy at all.., almost price of all commodities are high, one needs to have a lot of money to go shopping," Duni noted.
His claim is backed by Zanzibar's Price Data Department report which stated that prices of many essential commodities have increased due to poor supply as demand increased.
The PDD report points out several reasons which include the slowdown of importation of goods and services, poor infrastructure to allow smooth movement of goods and bureaucracy when it comes to importation.
"Mind you, this is a developing nation, bureaucracy has always been there since the first phase government and business people kept doing what they ought to do," Duni argued.
In a random survey by this paper learnt that the Zanzibar's economic slowdown is largely caused by the current political situation whereby as results of the October general elections were annulled by Zanzibar Electoral Commission (ZEC).
The stalemate has not only affected ordinary people but also government revenue because of poor tax collection and grant suspension by some donors.
“During October 2015, government resources comprising of taxes and grants amounted to 30.2bn/- , expenditure amounted to 47.0bn/- leading to an overall deficit of 16.8bn/-," said the MER.
In comparison, in January 2015, total revenue amounted to 39.3bn/- out of which 89 percent was domestic revenue and the balance was grants. Total expenditure during the same period was 37.9bn/- which meant that the government of Zanzibar’s budgetary operations recorded an overall surplus of 1.4bn/-.
Although revenue collection was at 0.5 percent below the target for January 2015, the situation worsened by October and resulted in poor revenue which was 16.9 percent below target.
While during the year ending January 2015, the current account deficit narrowed to US$ 51.9 million from US$ 69 million in the corresponding period of 2014, mainly because of an increase in export of goods and services. In the year ending October 2015 the said account widened to deficit of US$ 189.1 million.
MER points out reason behind as declining exports of goods while imports surged.
"Exports of goods and services declined by 21.1 percent to US$ 233.4 million in the year ending October 2015 from the corresponding period in 2014," the BoT’s MER report.
To avoid such vulnerabilities, analysts believe that government efforts should be directed towards economic diversification instead of over-reliance on key sectors such as tourism.
This is due to the fact that apart from being one of the sources of government revenue, tourism is increasingly becoming a major source of employment and has a spillover effect in other sectors such as agriculture, fisheries and services (transport, financial, cultural).
With a fishing ground of about 4,400 square kilometers for Unguja and 2,720 square kilometers for Pemba, the Spice islands have a high potential to develop a vibrant fishing industry.
However, Zanzibar’s fishing is almost an entirely artisanal affair and is conducted in the shallow areas along the coast.

Top Stories