Sleepless nights as US cuts MCC aid

It is premised on aborted popular vote in the Isles and draconian law on use of Internet data networking facilities.

A distinctly one party state kind of outlook that now prevails in the country, seeing opposition as a sort of luxury that should be kept a healthy distance from power, Tanzania is now being compelled to live with its means, that is, by its avowed political culture.

That is the vantage point from which the holders of power are defending their political actions that led to a rift with the Obama administration and the European Union (EU) whose some members have already taken measures to that effect, though short of specification as to the nature economic sanctions.

In a way the US measure has cooled political tempers somewhat in the country, judging at least from reported remarks by a senior official of the Civic United Front (CUF), Ismail Jussa Ladhu. He seemed to rule out any physical showdowns with those in power - left to fight their shadows first.

The significance of MCC sanctions on what happened in Zanzibar and what is still being pursued on the Mainland, for instance proscribing independent data collection centres and forcing organisations to a parastatal facility is to tone down internal criticism of such legislation.

By definition the opposition as well as critics have won the moral debate, and the government is left to decide which areas to prune in its budget effort, and it may have to prune a bit plentifully. Some economists were quick to give worst case scenarios already.

Mzumbe University business professor Prosper Ngowi was particularly acute when he projected a situation where total budget funds could steeply decline from Sh22trn last year to something like Sh15trn this year, that is, on the basis of actual tax collections. After a surge at the turn of the year as tax collectors moved to rake in arrears, an eerie calm was finally setting in.

When notice is also taken of mildly perceptible depreciation of the shilling by month, such that by midyear when the full effects of the MCC turn down and rethinking other programmes either tuned to the US aid facility or premised on the same disputes on democracy, disquiet was relevant.

How rapidly would decline take on in the wake of distinctly less likely flows of foreign exchange into government coffers? To what extent is foreign investment a replacement of substantial aid cuts and how quickly would such funds be made available?

There is also a genuine test of the 'turning eastward' outlook of East African Community (EAC)states all of whom have running disputes about democracy and human rights with the US or EU.

Their back seat posture, as in the case of Zimbabwe elder strongman Robert Mugabe, has been to dangle an eastward shift towards China, but with the Chinese economy in a profound slide and its import capacities sharply reduced in the aftermath of its own rout in exports to the West, nothing can be exaggerated. It is a global reality.

When it comes to using our plentiful natural resources to cover the gap in aid cutbacks, the government finds itself between a rock and a hard place. Rapid exploitation of natural resources would require quick licences and probably an extractive outlook as in the gold mines in the Lake Zone, where minerals are removed and nothing left in place.

In the absence of long lease of land for 99 years and not just a mining licence renewed after five or 10 years at most, no sustainable investment into natural resource areas is conceivable.

What local economic strategists do not realise is that one can't have it both ways in exploitation of natural resources, that is, keep licences to extractive activity and do without aid.

When a country has minimal land rights for the foreign mining companies, it has to obtain massive aid from the countries the firms come from, as if to plough back some of the profits.

When such aid is not coming, land rights ought to be deepened so that capital flows this way to be invested in durable activities, exporting jobs and investments from Europe.

So far Tanzania wishes to do big things in those fields but using parastatals, which is more wasteful in comparison with foreign investment and also needs optimal aid situations, as otherwise government will spread itself too much. If aid is cut markets have to be opened or else crumble public sector capacities.