Shame as rural economy grows by just 1 per cent

Despite recording an overall economic growth rate of seven per cent, Tanzania?s rural economy is still growing at barely one per cent.The Bank of Tanzania (BoT) Governor, Prof Benno Ndulu, said although the country has made strides in reducing other dimensions of poverty, income poverty is still higher in the rural areas, leading to increased pace of rural-urban migration.

He said despite a fairly impressive seven per cent average GDP growth rate, income poverty measured in terms of private consumption expenditure excluding social services had declined marginally to 33.4 per cent against the 25 per cent target set by the? Millennium Development Goal (MDG).

?To a very large extent, this slow achievement is driven by the fact that agriculture, on which 75 per cent of Tanzanians depend for their livelihood, grew at a low four per cent rate barely three per cent above the population growth rate,? said Prof Ndulu when delivering a keynote address at the international seminar organised by African Economic Research Consortium (AERC) yesterday.
Bank of Tanzania governor Benno Ndulu compares notes with Research on Poverty Alleviation executive director Samuel Wangwe during a seminar on economy in Dar es Salaam yesterday. PHOTO | MICHAEL JAMSON
In his analysis, Prof Ndulu who is also the former AERC executive director puts a clear picture on how the government?s efforts to reduce other poverty dimensions like health and education services delivery between the 2000 and 2010 fiscal years are yet to significantly tame income poverty at individual and macro-levels in the country.

?Thus although the national income growth per capita averaged nearly four per cent over this period, for the rural economy it was a low one per cent and poverty is significantly higher in the rural areas,? the central bank governor noted.

According to him, income poverty in the country cannot be seriously addressed without increasing significantly incomes from smallholder agriculture, informal and activities of Small and Medium Enterprises (SMEs) in urban areas, which have an increasing number of the urban poor.

Growth in the country has contributed a lot more to reduction of other dimensions of poverty through increased revenue collection from around 18 per cent in 2000 to 28 per cent in 2010/12, according to the BoT governor.

Prof Ndulu advised that more efforts are needed to increase revenue collection because like other African countries, Tanzania was still depending on the generosity of foreign donors to finance social services, including health.

According to a latest report by the ministry of Finance and Economic Affairs on the trend of economic growth, agriculture recorded a growth rate of four per cent in 2007 while in 2008 it grew at 4.6 per cent, in 2009 at 3.2 per cent, in 2010 at 4.2 per cent and almost at the same rate this year.

But most economists are of the view that such a rate of agricultural growth is not enough to overcome poverty, as it must grow at more than six per cent.

Opening the seminar on behalf of the minister for Finance and Economic Affairs, the deputy minister, Mr Gregory Teu, said the theme; ?Health, Economic Growth and Poverty Reduction in sub-Saharan Africa?, is relevant to Tanzania and other African countries because health is the major source of human capital.

?In general, a poor health condition is likely to have a negative influence on the productive performance of an individual. Such health conditions can lead to reduction of working hours or a number of activities and productivity,? Mr Teu said.

For his part, the AERC executive director, Prof William Lyakurwa, said for many years economists have argued that a healthy population is an engine for economic growth, yet for several decades they considered education as the main determinant of human capital.

However, he said it is only recently that economists have argued that without good health, education is not sufficient to produce the optimum output.He said since good health is both an input and output during the production process, it plays a very important role in ensuring economic growth and poverty reduction.

By Ludger Kasumuni
The Citizen Reporter