Tanzania’s Macroeconomic Outlook: Less Growth, More Repression

SOURCE: CGDEV

As economic indicators deteriorate, the Tanzanian government has jailed an opposition leader for questioning the Bank of Tanzania’s growth statistics. It’s time for the World Bank and the IMF to speak up. If it’s illegal to question a government’s statistics, why should anyone trust them?

Last week Zitto Kabwe, an opposition member of Tanzania’s parliament and former chair of the parliamentary accounts committee, posted on Facebook:

I am free, to report to police next week. Comrades, as you have been properly updated by the party, I was arrested by police at home around 6 in the morning. Charged with sedition at Chang’ombe police station based on the speech I gave at Mbagala. And charged with cybercrime and statistics offences based on the economic analysis I presented to the party central committee and later made public. Statistics act is being used for the first time since enacted. Let us test it in court.

One of the crimes Zitto allegedly committed was to question the GDP growth numbers published in the Bank of Tanzania’s quarterly report. The central bank says the Tanzanian economy grew at an annual rate of 5.7 percent in the first quarter of 2017. Zitto argues that this is implausible given the Bank of Tanzania’s own reports about the collapse of money supply growth since 2016, and calculates—with some bold assumptions we’ll revisit below—that the true GDP growth rate may be closer to 0.1 percent.

The government’s interpretation of the 2015 statistics act turns skeptics into criminals—myself included

As a former advisor to Tanzania’s National Bureau of Statistics, and someone who has conducted polling and RCTs in Tanzania as an independent researcher, I wrote back in 2015 when the new statistics law was proposed that it appeared to criminalize a broad swath of academia and civil society.

I asked Aidan Eyakuze, executive director of the Tanzanian civil society organization Twaweza, about this, and he noted that after the bill passed the National Bureau of Statistics clarified that the act “does not prohibit any agency or person from conducting their own research”—which Twaweza does frequently. Indeed, the final text of the act limits the criminal offense to anyone who “publishes or communicates official statistical information which may result in the distortion of facts” (p. 25, para. 5, emphasis added). That’s good news, but that last phrase is a little vague.

Unfortunately, the charges against Zitto Kabwe show that the government interprets that phrase to prohibit not just lying about, but even merely disagreeing with the Bank of Tanzania’s statistical findings.

If that’s the bar for breaking the law, count me guilty. I’ve previously questioned official statistics quite openly, noting that for years the National Bureau of Statistics’ official inflation rates appear to have been significantly underestimated. For that matter, note the massive, unexplained revisions to GDP growth figures from one quarter to the next in the Bank of Tanzania’s own reports (see graphs below). Maybe the Bank of Tanzania is guilty too.

Any application of the law premised on the infallibility of official statistics in Tanzania is a recipe for selective, politically motivated enforcement, which we’re now seeing.

Even if the official growth figures aren’t wrong, the opposition’s main critique still applies

So what did Zitto actually say? And is he right? His main critique is that government policy is leading to a decline in investment and slower growth. His narrower technical claim is that the GDP data is wrong. That claim is based on something called the quantity theory of money. It stipulates that the growth rate of real GDP should be equal to the growth of the money supply minus the inflation rate.

y = m – p

He notes that this relationship used to hold for Tanzania, but recently broke down. The growth of the money supply collapsed in 2016, while inflation and growth were fairly steady. It literally doesn’t add up. So either the theory is wrong or the data is wrong.

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