TANZANIA: THE second-phase president Ali Hussein Mwinyi ascended to power when the country was healing the wounds of the Uganda war that drove the economy into pretty bad shape.
At the same time, the economy was not performing due to the 1979 floods and the dry spells that followed added salt to the wound. Additionally, the geopolitics was not in favour of the country after the Union of Soviet Socialist Republics (USSR) collapsed.
Tanzania was then following the Ujamaa ideology. The new president, the successor of the first president of Tanganyika and later Tanzania after unification with Zanzibar, had no choice but to liberalise the economy and draw the foundation of the liberal economy seen today.
“During his presidency from 1985 to 1995, Mzee Mwinyi navigated Tanzania through a period of seismic changes,” said Abbas Mwalimu, a seasoned analyst of politics and diplomacy.
“As the world witnessed the decline of the Soviet Union’s power and the onset of globalisation, Mzee Mwinyi recognised the imperative for Tanzania to adapt.” This ushered in a new era of economic policies, encapsulated in his philosophy of “Mzee wa Rukhsa”, which aimed to liberalise and rejuvenate the country’s economy.
Later in Mbeya, Mzee Mwinyi, gave a speech saying it was Ruksha [permitted] to eat anything so long as it does not break the law of the land. That cemented his Rukhsa ideology. Mbeya’s speech followed mayhem engulfing the country, especially in Dar es Salaam, when one-quarter of the society wanted the government to ban pork butchers.
According to Dr Hildebrand Shayo, an economistcum-investment banker, said Mzee Mwinyi was a humble man whose significant contributions as a civil servant since 1963 quietly and strategically shaped the economic path, especially opening up many aspects of the economy hence termed Mzee Rukhsa.
“…These measures that unlocked the country’s economy will take many years to forget…so is Mzee Rukhsa,” Dr Shayo, a Daily News columnist, said.
The economist said the country experienced a remarkable national development, but underneath the spotlight are now acknowledged heroes who, by their quiet devotion, set the groundwork for future greatness and, above all, serve as a lesson to others.
The country embarked on a structural adjustment in 1986 after a decade of protracted economic decline. This was to avert the country from succumbing to recession. The economy between 1980 and 1985 grew on average of merely 0.6 per cent whereas after opening up the GDP went up by 3.8 per cent between 1986 and 1992. In 1983 the GDP grew by negative 2.35 per cent.
In 2000 IMF published a paper ‘Tanzania’s Experience with Trade Liberalisation’ showing the bold steps the country took after the economy deteriorated between the 1970s and early 1980s to liberalise trade.
Thus, the restrictions on the exports of nontraditional crops were also slowly relaxed, beginning with the introduction in fiscal year 1985/86 of a scheme allowing exporters to retain an increasing share of their export proceeds to finance their import requirements.
By 1993/94, the system of export licensing, including for traditional crops, was abolished, the requirement of registration of exporting companies was eliminated, and foreign exchange surrender requirements dropped.
“By the end of 1999, virtually all export restrictions had been eliminated,” an IMF paper written by Oussama Kanaan said.
The Mzee Mwinyi administration opened up the economy because it faced foreign reserve challenges brought mainly by the war in 1978-1979 against the invasion of Uganda’s Idi Amin. The war cost the country some 500 million US dollars and an additional 100 million US dollars to keep the new government in Kampala back to work.
“The gradual recovery in Tanzania’s exports led to a steady relaxation of foreign exchange constraints and facilitated the liberalisation of imports,” IMF said.
An important step was the 1988 rationalisation of import tariff rates, which reduced the trade-weighted average tariff rate to 23 per cent from 35 in 1986.
This reduction in the tariff burden was complemented during 1988-90 by two key liberalisation measures: The introduction of an open general licence system under which import licences were provided automatically for eligible imports; and the creation of the Own Funds Facility, under which import licences were provided freely to importers that used their foreign exchange holdings to pay for specified imports.
However, IMF said the scope of these facilities remained limited, however, until a major intensification of liberalisation efforts in 1991-93 eliminated all administrative allocations of foreign exchange and abolished import licensing.
“The relaxation of trade restrictions was supported by strong macroeconomic stabilisation measures, which brought about a substantial fall in inflation, as well as steps to correct the exchange rate misalignment, reflected in a sharp depreciation of the real effective exchange rate,” IMF report said.
“Owing to the increasingly favourable incentives to exporters, the average annual rate of growth of commodity exports also rose steadily in real terms.” These increases, in turn, contributed to the steady relaxation of the foreign exchange constraint, as evidenced by the increase in the country’s gross official reserves and the rebound in its commodity imports—thanks to the Rukhsa ideology.
“Trade liberalisation induced a pronounced shift in income from the public sector and areas of the private sector that could easily be tapped for revenue by the government, toward farmers, small enterprises and the informal sector. “Today [in 2000],” the IMF paper said, “a central objective in Tanzania’s development strategy is reducing the import tax burden, to further improve export incentives and raise allocative efficiency.”
Born on May 8, 1925 in the former British colony known as Tanganyika, Mwinyi moved to Zanzibar to study Islam, where his father hoped he would become a spiritual leader, but the young Mwinyi took up teaching instead, before entering politics in the 1960s after Tanganyika won its freedom.
Following the 1964 union between independent Tanganyika and Zanzibar to form Tanzania, he rose through the ranks to serve as ambassador to Egypt as well as the minister for health, home affairs and natural resources during the 1970s and early 1980.
