Dar Es Salaam – The World Bank said on Tuesday that Tanzania’s gross domestic product growth dropped to an estimated 6.9 per cent in 2016 from 7.2 per cent the previous year due to policy adjustments.
The bank in its latest economic update for Tanzania, said that uncertainty over government policies slowed down private sector growth.
“Policy adjustments, if they occur frequently, could cause uncertainty for the private sector and this uncertainty could dampen private sector investment decisions.
“The government should pay more attention to and be more explicit about the potential unintended consequences of government policies on the private sector,” the bank said.
It said Tanzania’s economic growth in 2016 probably slowed to 6.9 per cent, slightly below the government forecast of 7.2 per cent.
“The negative business sentiment indicators point to the need for the government to promptly engage in public-private dialogue on investment climate.”
The bank said government cost-cutting measures, including restricting travel for officials, could hurt the private sector.
It said that Tanzanian banks had tried to shield themselves against a steep rise in non-performing loans by creating a large buffer in the form of high interest rates, increasing the cost of borrowing.
Government officials were not immediately available for comments.
But investors have been unnerved by unpredictable policies from the government of President John Magufuli, nicknamed “The Bulldozer” for his pugnacious governing style.
A steep drop in money supply and a spike in non-performing loans have also hampered private sector credit growth.
After coming into office in November 2015, Magufuli launched a crackdown on tax evasion targeting large companies.
Some foreign investors say they could now scale back operations or expansion plans because of tougher demands placed on firms, including higher tax bills. (