Ali Mwinyi completed his tenure as president of Tanzania in 1995
President Ali Hassan Mwinyi finalized his second and last five-year term as Head of State early in November 1995.
During his tenure (1985-95), economic growth averaged four percent. But, was he happy with that growth rate?
No. He was saddened by some of the things his government could not do well or complete - such as maintaining economic stability.
In his recently-launched memoir: ‘Mzee Rukhsa: Safari ya Maisha Yangu’ - roughly ki-Swahili for ‘Mzee Rukhsa: The Journey of My Life’ - he says they reduced inflation from 36 percent in 1985 to an average of 29 percent between 1986 and 1995. But even that was still not good enough.
“We reduced it, but not to satisfactory levels. And in fact there were years when the rate reached alarming levels, like in 1988 when inflation reached 48 percent, and 37 percent in 1994,” he laments.
In addition, Mzee Mwinyi recalls that there was no good balance between revenue and expenditure and thus leading to a very large national debt, both domestic and foreign where the external debt increased from 52.5 percent of GDP in 1985 to 94.4 percent in 1995.
The main reason, Mzee Mwinyi says, was the limited export capacity at a time while imports of such items as spare parts, and other services were high.
“Similarly, there was a time when donors were not fulfilling their promises for concessional loans for various reasons, including dissatisfaction with how we were managing the economy in the second term of our government, especially the period when I appointed Prof Kighoma Ali Malima (late) to be Finance Minister,” he writes.
He says, when he looks back, he sees that it was probably not right for him to appoint Prof Malima as finance minister in 1992, considering that in the past, during the first phase of government, he (Prof Malima) was a strong opponent of initiating economic reforms.
The former Head of State further writes that the economist’s opposition was no doubt based on ideology, not education. This is due to the fact that Prof Malima was a specialized economist, who trained at the famous Dartmouth College in the US.
“You expected such a scholar to be a beacon of economic transformation from socialism to capitalism. But, to him, it was not the case,” says Mzee Mwinyi in his 491-page memoir.
He writes that in the last years of the first phase government, during which the economic situation was very difficult, Mwalimu Nyerere appointed Cleopa Msuya as finance minister (1983-1995). In collaboration with the Bank of Tanzania, the ministry and the central bank drafted an economic reforms strategy.
He says, initially the proposal was strongly opposed by some ministers and leaders in the party. “Prof Malima, at the time the minister of Planning, was at the forefront of the opposition, accusing the reformers of being traitors,” he writes.
However, in 1992, when he (Mwinyi) was looking for a finance minister, he firmly believed that Prof Malima, after a long period of time and witnessing five years of successful economic reform, would be a believer in the reforms and would be very helpful.
“I’m not sure if it was because he still didn’t believe in reforms or didn’t get along with international financial institutions and donors, but his tenure as finance minister was full of tensions and confrontations with those institutions and donors,” Mzee Mwinyi says in the memoir.
“The government was seen in the eyes of donors and international financial institutions as having lost interest in reform, especially in the key areas of managing the central economy and controlling government revenue and expenditure,” Mzee Mwinyi, further regrets.
In this regard, Mwinyi says they were blamed for revenue and expenditure trends, which during the previous five years had strengthened donors’ confidence, however, that tax evasion had increased and there was not enough control over spending.
“There were allegations that the finance minister was giving too much tax exemptions. Donors also became increasingly aggressive and demanded things that seemed to interfere with our sovereignty. The International Monetary Fund suspended negotiations on cooperation and terminated lending us,” explains Mzee Mwinyi.
It did not end there, as he says when it came to November 1994, even the Nordic countries that were friends of Tanzania also cut off aid, with the exception of Denmark, claiming the government provided too much tax exemptions.
“Due to the decline in revenue, and the sharp reduction in aid, the government had to rely more on borrowing from the central bank and thus further affecting the stability of the macroeconomics,” reflects Mzee Rukhsa.
In addition, the situation was so difficult that after negotiations, Prof Malima resigned as finance minister, and was appointed Minister of Industry and Trade, a position he also resigned shortly afterwards.
Mzee Mwinyi says there were other adjustments they had made that in addition to bringing the intended benefits, caused other problems that they didn’t expect, especially with its level of impact.
He says one of the problems is after the depreciation of the shilling during the economic reforms, the currency was reduced by 89 percent in foreign exchange.
He writes that it was necessary to lower the value of the currency to a great extent as for many years they rejected the fact that the currency was worth more than the real economic situation of the country.
“When it came to lowering the value, the pain was even greater. Prices of imported goods, including agricultural inputs that we needed to boost production, were alarming. As a result, imports and use of fertilizers and pesticides were significantly reduced and production in agriculture was affected,” he explains.
In addition, he says the cars and spare parts needed to revive the transport and transportation sector were also very expensive. At the time, he says, they were buying cars and tractors for a small fee.
Due to the high price of the currency after lowering its value, applications for the purchase of trucks in the same order between June 1986 and July 1988, he said, dropped by 38 percent, and for tractors it dropped by 62 percent.
“The decision to devalue the currency was correct, but it had the other side that undermined other efforts to revive the economy… These are some of the most difficult decisions we had to deal with. Each had its advantages, but also its disadvantages. Being able to find the right balance of profit and loss is the measure of leadership,” believes Mzee Mwinyi.
The Retired Head of State is also saddened by the poor performance of exports. “Until I left office, and despite all efforts, our exports gave us foreign currency to cover only 37 percent of the cost of the goods and services we were importing.”
“I was also troubled by an increase in income inequality in the community, especially considering that one of the reasons was the process we had to establish for citizens to contribute to social services as well as dismissed public servants,” he says.
