African Journals Online
African Journal of Finance and Management

Volume 9 Number 1 July 2000
ABSTRACTS

THE CURRENT OF EXTERNAL DEBT MANAGEMENT IN TANZANIA.

Godwin D. Mjema.

Abstract: The Highly Indebted Poor Countries (HIPC) Initiative initiated mainly by the World Bank and the International Monetary Fund has two a features which distinguishes it from earlier attempts to deal with the external debt problem of developing countries. First unlike earlier strategies which resorted to dealing with bilateral or multilateral debt the HIPC initiative attempts to deal with the total debt. Secondly it recognizes that existence of poverty is a constraint to servicing debt.This paper analyses the HIPC initiative firm the context of Tanzania, a poor debt stressed and developing country and attempts to examine the country's indebtedness stance beyond the (HIPC) initiative.

THE INTERRELATIONSHIP BETWEEN BANK FAILURE AND POLITICAL INTERVENTIONS IN TANZANIA IN THE PRE-LIBERALIZATION PERIOD.

Dr. Marcellina M. Chijoriga.

Abstract: Over the years there has been an increase in the number of bank failures in both centralized and decentralized economies (Saunders, 1994; Williams, 1995; The Economist, 1992; European Bank of Reconstruction, 1993). Internal reasons given for the bank failures include reckless lending, corruption, non-use of prudent classification risk assessment methods, fraud and management deficiencies. External factors such as deregulation; lack of information among bank customers; homogeneity of the banking business, connections among banks do cause bank failure. For centrally planned economies government and political interference in the banking operations and policies also contribute to bank failure. Tanzania, which until recently was characterized by a centrally planned economy, and the government having majority (51%) share holding in parastatals and banks also experienced bank failure in form of non-performing assets (NPAs).

In Tanzania, bank policies reflected government directives and policies as well as political motives. Due to the dual government ownership of the bank and the parastatals, bank lending policies, procedures and regulations favored parastatal firms and agricultural marketing boards. For example, at the end of 1998, out of 78% NBC loan portfolio the majority went to parastatals and cooperative unions, with only 3% going to private firms. The majority of parastatals and cooperative unions were frequent loss makers and financially distressed. For continued existence they had to depend on the government subvention, which proved to be a heavy burden to the government. As a result, when the parastatals were experiencing financial difficulties and unable to pay the bank loans, the government solved the problem by directing the National bank of Commerce (NBC), the only commercial bank, to offer loans to the troubled parastatals and cooperative unions. By 1991, due to increased lending to financial distressed parastatals and cooperative unions, the NBC suffered large non-performing loans (NPAs) equal to 70% of the total bank NPAs. Considering the high rate of NPAs suffered by NBC, this paper has tried to show that government and political interventions and the non-use of prudent credit scoring methods had contributed to the NBC failure.

THE IMPACT OF FINANCIAL LIBERALIZATION: INTEREST RATES AND LENDING BEHAVIOUR 1984 - 1997 EXPERIENCE OF TANZANIA.

Fred Ruhara.

Abstract:The experience with financial liberalization is rather mixed. There are success stories and there are cases of failure. However financial sector liberalization school predicts improved performance if there is right sequencing of the reform programme. Increased savings following from increased positive interest rates, increased efficiency in the allocation of credit and financial integration in the economy are some of the expected outcomes.

Tanzanian experience and that of other countries show that the expectations about financial sector liberalization are not attainable even where there is the right sequencing of the reform process. In particular capital rationing under financial sector liberalization is not explained by this school. This paper studies the Tanzanian experience in light of the experiences form other countries and finds out that the expected results on interest rates and lending behaviour are not as predicted. These contradictory outcomes are explained using the new institutional school. The timing and sequencing of the reform programme is also analyzed to check whether it might have influenced the results.

SOCIO-ECONOMIC IMPACT OF PRIVATISATION: THE TANZANIA EXPERIENCE.

Adam M. Mwandenga.

Abstract: In Tanzania and during the short run period privatisation has been both positive and negative effects to the economy. The positive impact seems to outweigh the negative. Positive divestiture results can be measured by the number of firms that have been divested, performance of firms which have already been divested, performance of firms, particularly those involved in the supply of public utilities which for the time being remain in the public sector domain, and the degree of competition enhanced by privatisation in general. Negative divestiture results seem to hinge primarily on the number of retrenchees. This factor calls for further research to quantify the exact amount of loss of job opportunities, since there are cases where divestiture led to an increase in job opportunities. Indeed there are also cases where some of the retrenched were redeployed.

THE PARASTATAL SECTOR IN TANZANIA: FISCAL IMPACT, 1984-1995.

Dr. Richard Mushi.

Abstract: The parastatal sector in Tanzania grew at a tremendous pace in the last three decades. An inventory of the sector done by the Parastatal sector Reform Commission in the early 1990s came up with a figure of 425 firms. The large number of firms is also reflected in the large proportion of gross capital formation and high share in waged - employment. The strength in numbers and level of investment has not been matched with a positive fiscal impact on the government sector. The parastatals have consumed a disproportionately huge portion of the government's financial resources. Apart from failing to generate surplus to be transferred to the government as dividends, it continued to receive subsidies and grants to extend is survival. Furthermore, it continued to enjoy high tax exemptions thus accentuating further the government budgetary problems. On the external sector, the parastatals have left the government with huge external debts that are yet to be settled. The study has basically established the magnitude of the net fiscal transfers from the government to the sector. The findings tend to provide a further justification on the action taken by the government to either privatize the solvent commercial firms or liquidate the insolvent ones or restructure and rationalize the quasi-government firms. It is concluded that the pace of closing the parastatals has to be expedited to avoid further depletion of the remaining resources.

THE EFFECT OF INFLATION ON ECONOMIC GROWTH IN TANZANIA.

Dr. Joseph L. Shitundu and Mr. Eliab G. Luvanda.

Abstract: The question of the effect of inflation on economic growth is one of the issues that have been hotly debated in macroeconomics. While some scholars, particularly those learning towards the Keynesian and Structural perspectives tend to believe that inflation is not harmful to economic growth, other scholars, particularly those in the monetarist tradition, argue that inflation is harmful to economic growth. In this study, use is made of the Least Trimmed Squares (LTS) method, as introduced by Rousseeuw and Leroy (1987), which detects regression outliers and produces robust regression, to examine the impact of inflation on economic growth in Tanzania. The empirical results obtained suggest that inflation has been harmful to economic growth in Tanzania.

Key Words: Inflation, economic growth, regression outliers, robust regression.

AGENCY THEORY: ITS RELEVANCE TO TANZANIA'S ECONOMIC RESTRUCTURING.

Isaya J. Jairo.

Abstract:Tanzania's current restructuring programme entails not only private ownership but also a dispersion of ownership of companies to a wider public of private entrepreneurs. This paper uses agency theory to examine the contractual relationships between various parties in these privatized companies. An exposition of agency problem and costs is made and ways to reduce them are suggested and analyzed. The relevance of the theory to the restructuring programme is also examined. The paper analyses how privatization is going to define the agency relationships, thereby enabling the application to agency theory in the operations of these companies. This will mutually benefit both investors and management in these companies by providing investment opportunities and cheaper sources of capital respectively.

THE IMPACT OF INFORMATION TECHNOLOGY IN WORK PLACES: CONVERGENCES AND CONTRADICTION.

Emmanual Ndikumana.

Abstract: This paper attempts to discuss the impact of IT in work places generally and on employment and skills in particular. It provides, albeit briefly, an overview of the wind of change exacerbated by information technology across different countries, organizations and indeed cultures in the employment scene. This scenario is reflected through an array of optimist and pessimist views. The paper concludes by arguing that human choices.