How reforms in economic policies pay off

REFORMS in economic policies coupled with economic diplomacy being spearheaded by President Samia Suluhu Hassan’s government have started paying off, with a renowned global credit rating firm, Moody’s Investors Service, changing Tanzania outlook from stable to positive.

The positive ranking is poised to boost confidence of foreign investors to invest in Tanzania and also attract international lenders to provide concessional loans to the government and the private sector.

In its recent update, the firm said the outlook change to positive reflects Moody’s view that political risks have lessened under the government’s new approach to promoting economic development and engagement with the international community.

“The government’s efforts to improve the business and investment climate and attract foreign direct investment (FDI), most notably in the mining and hydrocarbon industries, offers the prospect for higher potential growth and improving international competitiveness,” it said.

The firm noted that Tanzania’s re-engagement with the International Monetary Fund (IMF) also has the potential to support higher government revenue generation capacity and unlock greater concessional financing from development partners, supporting debt affordability and increased social spending.

It pointed further that, after assuming power in 2021, President Samia began actively wooing international investors and since then nascent signs of improving investor sentiment towards Tanzania have emerged.

Moody’s mentioned the budding signs as several investments in the mining sector and renewed momentum behind the long-delayed energy projects.

President Samia has travelled extensively regionally and abroad in an effort to improve international relations and attract investment since assuming power, it noted.

Commenting on the development, Head of Research and Financial Analytics at Alpha Capital, Mr Imani Muhingo, recommended reforms that are being undertaken by the government.

“Reformation of economic policies and economic diplomacy is paying off. Moody’s are positive that the on-going re-engagement with the international financial and investor community could enhance inflows in FDIs (Foreign Direct Investments) and government revenues,” Mr Muhingo commented.

His comments were echoed by an economist-cum-investment banker, Dr Hildebrand Shayo, who pointed out that the uplifting of Tanzania outlook by Moody’s is good news for the country since it provides a great opportunity to benefit from global financial markets.

“The firm used a number of factors in assessing the Tanzanian economic situation before it changed its outlook from stable to positive. The rating is currently on a right path that will open up more opportunities.

“In the business world with various options of countries to invest, foreign investors and other international organisations strategically check the credit rating before deciding whether to start a partnership and put their money,” he expounded.

Dr Shayo therefore stated that the business mood uplift is a success since Tanzania’s financial and economic situation has been assessed.

“What is more, the positive outlook has come at a difficult time in which the country and the world are recovering from the Covid-19 pandemic and at the same time grappling with effects caused by the ongoing Russian-Ukraine crisis,” Dr Shayo commented.

The above factors, he said, have disrupted international logistics and caused high costs of doing business globally.

“Positive outlook rating is an indicator of promising general economic and financial conditions in addition to political and social status. The rating outlook indicates the potential direction of the country’s economic and fiscal performance.

“In other words, the higher the country’s reputation and participation in the international markets, greater the opportunities for its domestic businesses to grow further and in our case, this will generate employment opportunities,” he concluded.

Giving insight on the rating, the Dar es Salaam Stock Exchange (DSE) said the interesting point by Moody’s is on the ongoing efforts to improve the quality of national statistics which offers the prospect of delivering sustained increases to potential growth.

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