Tanzania strengthening trade bonds

The government of Tanzania has been making concerted efforts to strengthen trade bonds with key partners in order to narrow the trade balance deficit, which rose to $1.5 billion in the first half of 2023. Trade relations between Mumbai and Dar es Salaam have flourished, with the total trade volume reaching $6.4 billion. Tanzania has emerged as a central point for India's engagement with the African continent. In a recent interview with Fortius Rutabingwa, Head of Research and Market Development at Orbit Securities, several critical issues related to Tanzania's trade challenges were discussed. Rutabingwa highlighted the challenges Tanzania has been facing in recent years, particularly in terms of a widening trade deficit. While exports have increased, they have not kept pace with the rapid growth in imports. The rise in energy prices and the need to import infrastructure equipment have contributed to this imbalance. Additionally, increased credit creation in the private sector has led to heightened lending and, consequently, higher levels of imports. The Tanzanian shilling has been experiencing depreciation, with the currency losing value, prompting concerns about trade projections and the country's ability to boost exports while reducing imports. Rutabingwa noted that the depreciation could potentially benefit exports by making them more competitive but cautioned that it could also lead to imported inflation, impacting overall inflation figures in the country. Despite ongoing efforts towards regional integration, trade barriers within the East African Community (EAC) continue to pose challenges. Rutabingwa emphasized the need to address these barriers and promote economic integration to leverage the larger market potential within the EAC, which comprises a population of approximately 300 million people. Removing trade obstacles and enhancing infrastructure development are crucial steps to support economic growth and bolster inter-regional trade. Tanzania's manufacturing sector, while showing some growth, still lags behind expectations in terms of its contribution to the GDP. Rutabingwa underscored the importance of regional integration and expanded trade partnerships to stimulate the manufacturing industry. With a relatively small domestic market, Tanzania's manufacturing sector requires access to larger markets and increased consumer demand to thrive. High costs of capital, with lending rates exceeding 15%, pose further challenges to the sector's competitiveness. Incentives such as tax breaks have been introduced by the Tanzanian government to attract investors and bolster the manufacturing sector. However, Rutabingwa emphasized that while favorable policies are essential, the key driver for success in the manufacturing industry lies in developing skilled human capital with the passion and drive to propel the sector forward. As Tanzania continues to navigate these economic challenges and strive for sustainable growth, the government's focus on forging stronger trade relationships, addressing trade barriers, and nurturing the manufacturing sector will be pivotal in shaping the country's economic landscape in the years to come.