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The Linkage Between Macro Policies and Poverty by Professor Chami

The Linkage Between Macro Policies and Poverty by Professor Chami. A Conceptual Framework. Growth pro-poor when broad based ie. Have high backward & forward linkage PRSP identified agriculture, SMEs, and informal non-agric. sectors as pro-poor

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The Linkage Between Macro Policies and Poverty by Professor Chami

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  1. The Linkage Between Macro Policies and Poverty by Professor Chami

  2. A Conceptual Framework • Growth pro-poor when broad based ie. Have high backward & forward linkage • PRSP identified agriculture, SMEs, and informal non-agric. sectors as pro-poor • Other sectors have grown – “pacemakers of growth”, namely mining & tourism

  3. A Conceptual Framework (Ctd) • Linkage between macro & micro can be enhanced through mediation of government, mainly through expenditure in priority social sectors

  4. Macroeconomic Performance in Tanzania • Good progress achieved • GDP growth averaged between 4.1% between 1995 and 2000 • Agriculture growth rate at 3.5% • Mining growth rate at 14.6% • Manufacturing growth rate at 4.6% • Inflation fell from 33.5% to 4.5% 2002 • External debt (as a % of exports) fell from 88% in 1993 to 28.6% in 2000

  5. Linkage of growth performance to Poverty • Poverty has gone down significantly in Dar es Salaam • Not much reduction in rural areas • Inequality has increased, especially in Dar es Salaam

  6. The Pacemakers of Growth • Tourism • Concentrated in Northern wildlife area • High growth recorded • Tourist arrivals increased from 190,000 in 1991 to 502,000 in 2000 • Nominal earnings increased from $95 million to $740 million during the same period • Contribution of tourism to GDP from 1% between 1986-92 to 12.4% in 1999. • Share of earnings to total exports increased from 12% in 1990 to 40% in 2000

  7. The Pacemakers of Growth (Ctd) • Tourism (Ctd) • BUT • Tourism employs less that 1% • Has not benefited local people adequately • Has had some negative impact on environment and culture in some areas

  8. The Pacemakers of Growth (Ctd) • Mining • Increased mineral output between 1994-2000 • Diamond increased 15 times • Gold increased by 400% • Gemstones by over 200% • Mining licenses increased by 65%

  9. The Pacemakers of Growth (Ctd) • Mining (Ctd) • BUT • Share in GDP still small (2% in 1998) • Large scale mining employs a small number of local people • Observed generosity in grating soft tax/royalty package to foreign companies

  10. Pro poor sectors • Agriculture • Still the mainstay of the economy • Has great linkages to the non-farm sector • Has large employment linkages if direct investment made to the sector

  11. Pro poor sectors (Ctd) • Agriculture (Ctd) • Implications of SAPs • Removal of subsidy increased input prices • Liberalization of agricultural market led to market integration & high output pieces • Cooperatives have ceased to be sole buyers of crops and suppliers of inputs • Loss making agric-based parastastals in the process of being privatized

  12. Pro poor sectors (Ctd) • Agriculture (Ctd) • Agriculture performance still not satisfactory • Heavy reliance on hand hoe and rainfed systems • Falling Terms of Trade • High transport cost • Credit shortage • Low investment • Multiple & inconsistent taxation • High power tariffs

  13. Priority Social Sectors • Health • When do expenditures in health fail to impact the poor? • They may be inadequate • They may be used in wrong priorities • There could be leakages • Could be a combination of the above

  14. Priority Social Sectors (Ctd) • Health (Ctd) • Allocations do not make great impact because the threshold is too high

  15. Priority Social Sectors (Ctd) • Health (Ctd) • Pro-poor criteria • A move towards OC noted between 1997-2002 • A slight move noted in favour of District-based health facilities • A positive trend towards preventive health services • Widespread leakages of funds noted

  16. Priority Social Sectors (Ctd) • Education • Pro-poor criteria • Expenditure ratios allocated to primary education increasing • Expenditures moving in favour of OC as opposed to PE • However, widespread leakages of OC expenditures noted

  17. Priority Social Sectors (Ctd) • Education (Ctd) • Education quality noted to be low • Lack of qualified teachers (Grade 3A) • Student/Teacher ratio still high in some areas • Low transition to secondary schools • Primary schools not transformed to meet the needs of leavers

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