MONITORING THE IMPACT OF THEGLOBAL FINANCIAL CRISISON POVERTY IN TANZANIA

By: Rangya Kyulu MuroCBMS Team Leader, Tanzania.

A paper presented at the 8th Poverty and Economic Policy (PEP) Research NetworkConference.

Pullman Hotel, Dakar, Senegal (11th – 18th June, 2010).

1. Introduction:• Project sites• GFEC in Tanzania

2. Rationale of the study3. Objectives4. Methodology

• Selection of sites,• Indicators• Training (ToT and enumerators)• Data collection

5. Findings6. Concluding remark7. The way forward

Contents

• Dodoma, Morogoro and Lushoto

1. IntroductionProject sites

2nd Phase of CBMS:Extension to 3 areas

Dodoma Municipality:- 17 urban wards and 1 village- 36,380 households

Morogoro municipality :- 1 urban wards, 2934 households

Lushoto district- 1 urban ward, 3195 households

2. GFEC in TanzaniaSince reported around 2008 in USA, thecrisis has spread to other developedcountries and has kept on unfoldingto the developing countries

Economic downturn channels experienced(trade prices; remittances, foreign directinvestment and equity investment;commercial lending; aid; and other officialflows)

Tanzania’s economy is commodity-dependent(agriculture, minerals and fuel): thus can notescape the adverse consequences of the crisis:Until January 2009,• decline of exports by 44% in the cotton

industry;•• 138,011 bales of cotton (quarter of the total138,011 bales of cotton (quarter of the total

output for the 2008/09 season) were piled upoutput for the 2008/09 season) were piled upin ginneries due to lack of ordersin ginneries due to lack of orders

• tourism (28 percent of all revenue from28 percent of all revenue fromservice exportsservice exports) declined by 30%

GFEC in Tanzania

• Coffee industry declined by 32%;• Nile Perch fish industry declined by

50%;•• Decline in mining as investors failed toDecline in mining as investors failed to

source new funding from the capitalsource new funding from the capitalmarketsmarkets

• Kabanga Nickel project laid off over 150employees out of 200 Tanzanians

• Generally, export business earningshave dropped by 50%

GFEC in Tanzania

• Vulnerability of Tanzania to the crisis

• Need of determining the impact of crisis onpoverty

• Need of data for designing the necessarymeasures

• To inform the policymakers about prioritizingmeasures

3. Rationale of the study

To examine the impact of the globalfinancial economic crisis on poverty inTanzania and give policy recommendationson how to prioritize mitigation policies andprograms of the government.

4. Objective

5. Methodology1. Selection of sentinels (3 study areas)Criteria:

– representative (with relevant transmissionchannels for Tanzania)

– supporting CBMS processRelevant transmission channels for Tanzania:

– overseas employment and remittances– local employment,– foreign direct investment and aid,– exports and tourism– different coping mechanisms

Methodology cont’d

2. Designing of Indicators• CBMS core indicators (impact indicators),

• GFC specific outcome indicators(to determine how households are affected by theglobal crisis) based on transmission channels.

• Coping mechanisms(to determine how households were adopting inresponse to the crisis).

Methodology cont’d3. Data collection Instruments• CBMS Core questionnaires

(Household Profile Questionnaire and Ward ProfileQuestionnaire) to collect information on various povertydimensions- Global Crisis Rider Questionnaires(Household Profile and Ward Profile) to collectinformation on the indicators of the crisis as well as thedifferent coping mechanisms adopted.

4. Training sessions (ToT and enumerators)- on CBMS concepts- on enumeration activity- on encoding and processing

6. Findings

1. Impact on Households through Overseas Employment and Remittances

Reducedremittance

Returnedfrom abroad

Workingabroad

HHFMFM

2651524 31

Findings cont’d

42%

17%8%

33%Job loss

Salary cut

Inferior job

Returned home

2. Reasons of reduced remittances

Findings cont’d

Reduced amount and frequency

18%

21%

12%

49%

Not

Half

Quarter

All of it

Decline in the received amount and frequency by h/holds

Remittance account for only 3 percent of Remittance account for only 3 percent of forexforex earnings. earnings.

3. Impact on Households through Local EmploymentMembers who lost job

020.040.060.080.0

100.0

Members 52.5 47.5 100.0

Male Female Total

Findings cont’d

. 4. Impact on asset lossFindings cont’d

2.022.026Had loan

7.347.055Used savings

2.816.219Had savings

RuralUrbanTotalAccess tosavings and loan

5. Impact on Exports: convenience of selling cash crops

Findings cont’d

5.065.030.0Sugarcane12.056.032.0Fruits20.045.035.0Vegetables20.043.037.0Potatoes8.00.092.0Grapes0.055.045.0Groundnuts

Noselling

Waiting formarket

ReadymarketCrop

6. Impact on Tourism- Low demand of services from travel

agents/transporters (taxis, buses, car rentals,safari/tour operators)

- 60% cancellation of bookings in hotels andcamping sites

7. Foreign investment ventures had nosubstantial development

8. Reduced employment established and/orsustained by FDI projects

9. Financing FDI projects experienced difficulties projects experienced difficultiesto raise fund from banks which have beento raise fund from banks which have beenaffected by the crisis.affected by the crisis.

Findings cont’d

8. Impact on Foreign Aid: Decline 2007 towards 2009

0

10

20

30

40

50

60

2007 53 16 22 19

2008 49 11 12 16

2009 33 6 9 9

NGOsStudents

sponsorshipForeign experts Equipment

Findings cont’d

ODA flows are under pressure notwithstanding the commitments by donorsODA flows are under pressure notwithstanding the commitments by donors

Causes of deaths

49%

17%

11%

23%

lack of attendants

lack of transport

diseases

ignorance

9. Impact at Household LevelFindings cont’d

Lack of attendants (49%)

Findings cont’d

Volunteers: day care and old people centers• 41.3% reduced: 3 days to 1 day per week• 58.7% stopped workingSafety nets:• Sought education govt. support (46%)• Main reason (78.3%) - job loss• Paid after completing the studies.• Government subsidy: 38%, health, 37% food, 25%, transport.

10. Impact at community level

CBMS Core Indicators : GFC Impact on Poverty

• women who died due to pregnancy related causes increased by 0.3• children aged 0-5 years that died increased by 0.4• households without access to safe water and sanitary facility decreased by 0.1• children aged 3-6 years old who are not attending elementary school• children aged 7-18 years old who are not attending secondary school increased by 0.3

Findings cont’d

52.9Changed type of drinks57.3Reduced entertainments/recreation31.9Reduced clothing expenses32.1Boiled water at home and not bottled78.2Abandoned cooking with electricity62.4Reduced communication expenses51.3Used private car less frequently21.2Pawn assets78.3Borrow money32.5Shifted to generic drugs81.2New income activity (poultry/garden)13.2Shift from private to public school62.1Meet and milk taken only occasionally67.3Reduced the number of meals/less quality% H/holdsType of mechanism

11. Coping Mechanisms Adopted by H/holds

• Ward schools developed: to reduce distance andboarding costs

• Lunch to government day schools (from June, 2010)

• Provision of medical privileges to the employeeswho contribute 5% of salary - open to employedhousehold members plus four relatives

• Free family planning services and medication forpandemic diseases

• Subsidized extension services to farmers (poultryand cattle),

7. Mitigating the Impact of the Crisis: Council level

• Distribution of subsidized food (60%) topoor households - through wardcenters

• SACCOS (micro-credit organizations)for entrepreneurial activities, with lessinterest - already existing

Mitigating the Impact: Council level cont’d

• Stimulus package of 1.7 trillion TZS foragricultural sector (compensation for bigproducers and exporters who experiencedloss) – improved crop prices

• Provided relief to borrowers from financialinstitutions affected by the crisis through:

- Loss Compensation Facility- Loan Scheduling Guarantee Facility

• President’s Fund (1bn TZS per region) –already existing

Mitigation: National level

Mitigation: National level• Bridging the foreign exchange gap: A

loan amounting to $336 million fromthe IMF under the Exogenous ShocksFacility (ESF)

• Reduced the tax rate, such as the VATrate from 20% to 18% and income tax ofselected categories from 30% to 25%.

8. Challenges• Poor targeting of the programs.

leakages and exclusions (non poor couldaccess, some poor households had no access)

• Limited resource allocation to supportvulnerable groups by the local governments

• Donors’ withholding of USD 220m from 754m inGeneral Budget Support (2010/2011) –commercial loan to fill the gap

9. Conclusion and recommendations

• Nationally, there are specific economicsectors that have been already affected(agriculture, transport, education, health),requiring mitigation priority

• Overseas remittance had no significanteffect in most of the households,

• Local employment has been mostly feltthrough household members who lost job orreceived lower income

Conclusion and recommendations• Households adopted various coping

mechanisms, but some of which may bedetrimental and counter-productive in themedium- and long-run

• There is a need to be more proactive insteadof being reactive in addressing the crisis –awareness raising about the crisis in thecommunity is a good point of entry

• Medium and long term mitigation measuresmay need more data and even morecomprehensive analysis so that they canbetter be addressed by national level policies.

Conclusion and recommendations• Effective targeting mechanism is imperative

for social protection programs in order tominimize leakages and exclusion

• CBMS data at household level are relevant inidentifying eligible beneficiaries andevaluation of the effectiveness of currentprograms

10. Way forwardOngoing activities:- Second round of GFC by July 2010- CBMS database updating and dissemination- Revising the report

THANKS FOR YOURATTENTION

END