Tanzania should re-think infrastructure aims: IMF

By Drazen Jorgic

DAR ES SALAAM (Reuters) - Tanzania's government, presiding over one of Africa's fastest growing economies, should borrow less in the future and instead turn to the private sector to build infrastructure, the International Monetary Fund said on Monday.

Tanzania's economy has been growing at more than 5 percent a year for nearly a decade but infrastructure spending has lagged, with poor transport links and energy shortages blamed for uneven growth in east Africa's second largest economy.

In the commercial capital Dar es Salaam, where U.S. President Barack Obama arrived on Monday on his three-country Africa tour, new skyscrapers and expensive high-rises cater for a growing middle class, but poor growth in the agriculture-focused countryside has left most Tanzanians in poverty.

The economy is seen expanding at around 7 percent over the next few years and the government has ramped up borrowing to fund Tanzania's growing infrastructure needs, bidding to diversify the economy before huge natural gas discoveries off its Indian Ocean coastline come into production.

Although President Jakaya Kikwete's government has spent the borrowed money "sensibly", it will not be able to maintain the same growth in borrowing, according to Thomas Baunsgaard, the IMF's Tanzania country representative.

"Tanzania's infrastructure gap is large and the capacity to borrow is not unlimited, so bringing in the private sector seem to be the obvious solution going forward," Baunsgaard said, referring to Public Private Partnerships (PPPs) where the government and the public sector jointly invest and share the risks with large scale infrastructure projects.

"It's about recognising that the debt stock is increasing and that it's hard to see room for the same kind of growth of borrowing going forward."

Tanzania has passed legislation outlining how PPPs will work but no large scale projects have been built using PPPs.

POWER GENERATION

Baunsgaard believes infrastructure projects which will generate immediate and clear revenue, such as airports, toll roads and ports, are obvious options for the government.

"Power generation is another great example where if you get the right kind of tariff framework in place, then this can be a very good candidate for attracting private sector expertise and capital, instead of having the government pay for everything."

Tanzania borrowed over $100 million from the World Bank in April to improve the management of its natural gas resources and to improve power supplies. Some of the money went to boost public-private partnerships for the power generation sector.

It borrowed a further $600 million in February in a much-criticised private placement.

Tanzania should still borrow from international lenders but also learn from South Africa, which created a regulatory framework enticing to private investors, Baunsgaard said.

"What would be helpful is to actually start seeing some sound proposals be successfully implemented and learn some good lessons about the role PPPs can play going forward," he said.

Huge gas finds have created a sense of optimism among the 45 million Tanzanians, although it will be about a decade before the biggest of the off-shore finds can be brought to market.

Analysts say Obama's visit to Tanzania, coming only months after China's new President Xi Jinping met with Kikwete in Dar es Salaam in March, underlines resource rich Tanzania's growing economic clout in sub-Saharan Africa.

Statoil and Britain's BG Group said in March they plan to build a $10 billion liquefied natural gas terminal in Tanzania.

Although Tanzania already has more than three gas fields and more than two dozen production sharing agreements, Baunsgaard said it was vital for the government to refine its existing gas laws, which were not designed for large projects or plants.

Source: http://news.yahoo.com/tanzania-think-infrastructure-aims-imf-153931719.html

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