Tanzania’s over-reliance on gold exports and its rising oil imports are exposing the economy to global economic shocks more than ever before, the World Bank has warned.
Its latest report on the country’s economy, released last week, states that these risks have become more visible over the past few years with successive financial and fiscal crises in developed countries, as well as increased volatility in world commodity prices.
“That said, the heavy reliance on export of gold and the import of oil is currently a risk for Tanzania. Gold now accounts for more than 40 per cent of the total value of merchandise exports.
A sudden decline in the world gold prices would have a dramatic impact on the total value of Tanzanian exports. A decline in gold prices of 30 per cent would reduce this value by almost 15 per cent,” states the report.
“Similarly, with crude oil making up a third of the country’s imports, an increase in the price of this commodity could be destabilising,” the report says.
It also states that the inability to maximise benefits associated with openness to international trade is detrimental to Tanzania’s economy.
“One reason is that the vast majority of merchandise exported is low-value-added products such as minerals and unprocessed agricultural goods, which have minimal direct impact on the creation of employment and the development of technology in the domestic economy,” it says.
The report advises the country to diversify its exports and ensure that imports are accessible and cheaper.
“The priority of the country should be to reduce transport costs to facilitate trade with the rest of the world. Since approximately 90 per cent of Tanzania’s international transactions transit through the Dar es Salaam port, improvement of this facility should be prioritised by policy makers,” the report states.