Browsing by Author "Mjema, Godwin Daniel"

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    Foreign assistance and economic development : the case of Tanzania
    (University of Dar es Salaam, 1985) Mjema, Godwin Daniel
    Like most Less Developed Countries, Tanzania, is constrained in her development goals by savings, investment and foreign exchange bottlenecks. These have, in turn, persistently continued to impair her development goals, It is now recognized that the availability of capital would have helped to ease the mentioned constraints. But, sufficient capital for development needs cannot be generated within Tanzania because the country is poor and foreign assistance hash in the course of trine, become an increasingly important source of capital for Tanzania and, indeed, for most LDCs. The theoretical setting has been that the inflows of assistance enable the recipient country to loosen the prevailing constraints by filling the resource gap thereby helping it to reach targeted growth rates. According to this theory, the inflows are supposed to be positively related to recipient's key variables, such as savings, investment and GDP growth rates. The mid-to-late 1960s witnessed an upsurge of literature that has either strongly supported or opposed this theoretical claim by using empirical evidence. Hence, the debate on the effect of foreign assistance on the mentioned variables goes on, and is at best inconclusive. Inflows of assistance to Tanzania in particular have attracted many writers whose claim has been that the inflows were obtained at relatively "better" terms compared to other LDC recipients. Trends and patterns in the inflows of assistance to other Less Developing regions observed in this study validate this claim. But no serious study has quantitatively analysed the impact of this assistance on Tanzania's savings, investment and GDP growth rates despite its importance. It is against such a background that our study takes to fill this analytical gap. This study defines assistance in terms of grants and soft loans and employs the period 1966 - 1982 as the sample period. The analysis is done by the widely used simultaneous equations model which is estimated by the conventional Two Stage Least Squares (2SLS) technique. The regression results obtained support the claim that the inflows substitute for the available domestic savings, but complement the investment and GDP resources. The multiplier analysis shows that the perceived variables were inelastic to changes in the inflows of assistance. These results compare favourably with, among other results, those of Gupta (1975 ) and Hyuha (1984 ) which were observed in countries with similar economic characteristics to those of Tanzania. In the light of the above findings two main policy implications can be drawn first, efforts should be made on domestic saving mobilization such that the acquisition of assistance complements the domestic saving effort. Secondly, the inflows should be used for investment purposes. The present Study has, therefore, pointed to an area within which subsequent research work may be concentrated .Much remains to be done in terms of analysing the importance and impact of foreign assistance on Tanzania's overall economic development.
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    Foreign capital flows, saving and investment rates and growth in Tanzania: 1961-1985
    (University of Dar es Salaam, 1993) Mjema, Godwin Daniel
    This study undertakes to analyse quantitatively and qualitatively the impact of foreign capital flows on Tanzania's savings, investment and income growth during the 1961-1985 period. Akin to a host of other Less Developed Countries (LDCs), Tanzania was, for this stated period of time, a recipient of multilateral and bilateral foreign capital, defined here to encompass loans of all categories and grants. The objective of such capital inflows was, like in many recipients, to relieve the country of the savings and foreign exchange constraints to economic growth claimed to prevail in a number of LDCs. With respect to the terms under which foreign capital was extended, this study has found that, compared to other Sub-Sahara Africa (SSA) recipients, foreign capital to Tanzania had relatively lower interest rates, longer maturity and grace periods, thus the inflows had the potential to increase the country's domestic savings, investment and income growth. There exists however, some theoretical controversies surrounding the impact of foreign capital flows on the savings investment and income growth of recipients. Whereas the 1960s was dominated by an upsurge of literature that supported the view that foreign capital would have a positive impact on the mentioned variables (Chenery and Strout, 1966), the 1970s was dominated by literature opposed to the above view. Griffin and Enos (1970) for instance showed empirically how foreign capital flows could have adverse effects on the recipients' savings. The late 1980s on the other hand, saw the emergence of studies searching for precedence between foreign capital flows and domestic savings of recipient countries (Bowies, 1987). The debate on the impact of foreign capital flows is thus more of an empirical question than a theoretical issue. In situating the debate on the impact of foreign capital flows within the Tanzanian context, this study has utilised a modified version of the Weisskopf (1972), Gupta (1975) and Hyuha (1984) models. The simultaneous equation model specified in this study employed time series data for the 1961-1985 period and was estimated by the conventionally used Two Stage Least Squares (2SLS) technique. The study has found, among other things that, during the 1961-1985 period, foreign capital flows were negatively related to the domestic saving effort in Tanzania. This finding, which is in line with the Griffin - Enos (1970) hypothesis, tends to suggest that the inflows were substituting for the domestically available savings. Where income growth and investment are concerned, the results obtained show that there was, during this period, a positive relationship between foreign capital flows and these variables. After carrying out precedence tests following the Granger (1967) and Sims (1972) tradition, the study has found that in Tanzania, and particularly during the 1961-19$5 period, precedence was running from low domestic savings to foreign capital flows. These results are in line with Bowies' (1997) results for Tanzania during the 1961-1984 period. The structural break test results confirmed the existence in Tanzania, of a structural break around 1971, a feature suggesting that the regression covering the 1961-1970 period could be structurally different from that covering the 1972-1990 period. The policy implications emanating from this study point at among other things, the need for the Tanzanian government to increase its efforts aimed at mobilising domestic savings so that the in-coming foreign capital flows supplement the existing domestic savings. Also there is an urgent need to see to it that the incoming foreign capital flows from various sources are efficiently and optimally used.