Tanzania and Morocco: Does Debt Relief Really Work?

The G8 Summit met this past summer in Gleneagles, Scotland in July for a week long summit in order to address pressing world issues. The BBC describes the G8, "With no headquarters, budget or permanent staff, the Group of Eight is an informal but exclusive body whose members set out to tackle global challenges through discussion and action," (Profile:G8). The forefront issue of the summit this year pushed especially by British Prime Minister, Tony Blair, was helping African countries through debt forgiveness, and aid. Among the goals set by the G8, was the pledged to give $50 billion in aid by 2010, and debt forgiveness for Africa's poorest 18 nations. (For a complete list of all the pledges see endnotes)

The majority of the goals were focused around the African continent. It called for debt forgiveness, a big boost in aid, improved access to HIV drugs, and encouraged African leaders to commit to democracy. A new element helped to push the awareness of the pressing needs in Africa. Sir Bob Geldof, a 70's British Rock/Pop star, organized a campaign called Live 8 which was a series of concerts all around the world, where celebrities put on performances and massive amounts of people gathered in support of putting pressure on the leaders of the G8 summit in order to bring awareness to the African cause. "A key part of the summit has been the unprecedented opportunity it offered for civil society to take part in the central deliberations," said Professor Kirton director of the University of Toronto G8 research group, "The Make Poverty History and Live 8 campaigns played the most important role thus far for any G8 summit by showing how civil society can exert real pressure and influence on the agenda and outcome." Though the question remains, is the G-8 as effective as Mr. Geldof believes or are his efforts whole heartedly ineffective? In order to answer this question we will compare two less developed African countries', Morocco and Tanzania, economic growth and development through recent history. We have chosen Morocco and Tanzania as the basis of analysis so to illustrate the difficulty of prescribing one solution for every African nation. The large variation between the African nations, in both growth and development, proves that there is no panacea towards the ultimate elimination of world poverty. In order to guide our question properly we will focus on government policy, history and culture of both Morocco and Tanzania.

Tanzania

Julius Nyerere became Minister of British-administered Tanzania in 1960, and continued as Prime Minister when Tanzania became independent in 1961. From independence in 1961 until the mid-1980s, Tanzania was a one-party state, with a socialist model of economic development. Nyerere introduced African socialism, or Ujamaa, which emphasized justice and equality, but proved economically disastrous, leading to food shortages as collective farms failed. Nyerere handed over power to Ali Hassan Mwinyi in 1985, but retained control of the ruling party, Chama cha Mapinduzi (CCM), as Chairman until 1990, when he handed that responsibility to Mwinyi. Under the administration of President Mwinyi, Tanzania undertook a number of political and economic reforms. In January and February 1992, Tanzania's one-party rule came to an end, the government decided to adopt a multiparty democracy. In 1995, Tanzania held its first multi-party general elections. The ruling CCM party's candidate, Benjamin W. Mkapa, won the presidential election, and has since continued to remain the leader of Tanzania.

Significant measures have been taken to liberalize the Tanzanian economy along market lines and encourage both foreign and domestic private investment since the fall of Neyrere's failed socialized economic policy. Beginning in 1986, under the guidance of Mwinyi, the Government of Tanzania embarked on an adjustment program to dismantle state economic controls and encourage more active participation of the private sector in the economy. The program included a comprehensive package of policies which reduced the budget deficit and improved monetary control, substantially depreciated the overvalued exchange rate, liberalized the trade regime, removed most price controls, eased restrictions on the marketing of food crops, freed interest rates, and initiated a restructuring of the financial sector.

Agriculture dominates the economy, providing more than 60% of GDP and 80% of employment. Cash crops, including coffee, tea, cotton, cashews, sisal, cloves, and pyrethrum account for the vast majority of export earnings. Low prices and unreliable cash flow to farmers continue to frustrate the agricultural sector. Tanzania's industrial sector is one of the smallest in Africa. It has been hit hard recently by persistent power shortages caused by low rainfall in the hydroelectric dam catchments area, a condition compounded by years of neglect and bad management at the state-controlled electronic company (would benefit greatly from privatization). Accounting for only 8% of GDP over the last decade is Tanzania's industrial sector. The main industrial activities are concentrated on the manufacturing of simple consumer goods such as food, beverages, tobacco, textiles, furniture and wood allied products. Most of the present industries were established in the light of import substitution strategy, whereas production focused in substituting previously imported goods in view of saving the country's foreign exchange. The manufacturing sector is of significant importance in the Tanzanian economy. Up to 1999, the sector employed 140,000 people or about 48%of total monthly wage earners, making it the largest urban employer. It remains to be the most reliable source of government revenue in terms of import sales, corporate and income taxes. It accounts for over half of government annual revenue collection.

Since 1963, the World Bank has made available over US$ 4.6 billion in credits and $127 million in grants from International Development Association (IDA) have been provided to Tanzania to support projects and programs identified as priorities by the Tanzanian Government's development agenda. The IDA It is responsible for providing long-term interest-free loans to the poorest of developing countries on terms more lenient than those of the World Bank, although it forms part of the World Bank Group. The IDA provides grants and "soft" loans, with repayment periods of some 30 years and no interest, to the poorest countries. IDA concessionary lending is funded by direct contributions from member states. Since 1963 the Tanzanian government has used the money granted by these organizations for projects mostly concentrated in the economic and social sectors, including roads, energy, water supply,