Editorial
Analysis
Shilling quieter, gains ground
During the course of this week, the FX interbank has been quiet, in marked
contrast to the flurry of activity last week, when corporate demand drove the
shilling to its lowest for some time now. This demand has been building up for
some time as corporate customers were expecting the shilling to continue
strengthening as it did in June, or at least for the Central Bank to intervene
at a lower level. However, this demand seems to have been satisfied for the
moment, and very little noticeable activity was seen this wek.
What was noticeable was that the Central Bank did intervene but at market
prices, which suggested that they were only intervening to cool the market down,
and not to influence its direction. However, this week they have come in only
once, on Monday; this did not have any particular effect on the market and the
shilling has gained a little ground; at the close of business on Wednesday, it
was being quoted in the interbank at levels of 1,138/1,145 against 1,142/1,147
on Monday.
Indicative TZS rates
As At 17.00 20/07/2005
USD 1,138/1,145
GBP 1,971/1,986
EUR 1,367/1,380
JPY 10.05/10.20
ZAR 169.50/172.50
KES 14.75/15.10
Local Money Markets
The money markets continue to remain sluggish, with no particular activity of
note. One more corporate bond, issued by Barclays Bank for TZS 10 billion,
closed this week with an oversubscription of 12.5% - this does not seem to have
affected overall liquidity in the market, which continues to remain healthy.
Highest volumes reported were on Monday with 13.7 billion traded; prices
remained within the range of 3% - 6% over the course of this week.
The BoT has been offering repos everyday this week, an amount of TZS 10 billion
everyday. They have been successful on Monday and Tuesday, at prices in the O/N
range above.
Government Securities
In the T-bill/bond auction held yesterday (auction number 608) the Bank of
Tanzania offered 48.60 billion of bills. Against that, 38.5 billion was
tendered, all of which was successful.
Yields crept up marginally across the board, suggesting that the Central Bank is
looking to reduce some of the excess money supply within the system; there are
no indications that this is a long-term policy move, and this may only be a
temporary move as the cash market remains healthy, as discussed above.
Global Markets
The US dollar got a boost on Wenesday against all major currencies after Mr.
Greenspan reported to Congress that US growth remained solid and the Fed should
keep raising interest rates.
But he warned "significant uncertainties" surround this positive prospect,
including the high price of energy, labour costs, the future behaviour of low
long-term interest rates and the danger this could spell for the country's
housing market.
Sterling was also impacted by minutes of the last Bank of England meeting, which
boosted expectations that UK rates were likely to be cut in the near future, to
provide some support to the housing market and the general economy overall.
In Japan, the Bank of Japan on Tuesday released minutes of its policy meeting
held in June that showed ongoing résistance among most policy board members to
pursuing an exit strategy to the central bank's near-zero interest rate policy.
This further cemented the market's view that Japanese interest rates will not
rise anytime soon. Coupled with continued gloom on growth prospects in the
Japanese economy, this continues to put pressure on the yen, which has hit lows
of below 113 against the US dollar.
Indicative Major Currency Exchange Rates
As At 17.00 20/07/2005
GBP/USD 1.7275/1.7325
EUR/USD 1.1990/1.2020
USD/JPY 113.50/113.75
USD/ZAR 6.6850/6.7234
USD/CAD 1.2210/1.2250
USD/KES 76.10/76.48
The above is for information purposes only. Barclays Bank (T) Ltd. And its
employees accept no liability whatsoever for any direct or consequential loss
that may arise from its use.Barclays Bank (T) Limited, Treasury Department.
Tel: 2129745/6/8 ;Fax 2129749 Reuters Dealing BBTZ
Analysis
The government
should repossess sold houses
In African tradition there are properties
that can be easily sold and those which are regarded as un-sellable unless a
dispute arises. This latter particular property is the house. Selling a house is
regarded as depriving the whole family of shelter and sometimes if the father,
who is regarded as the head of family, sells a family house and members of the
family complains silently, bad luck may befall him. Timothy Kitundu
looks at a recent move by the government.
A few months back, the government announced selling its houses which were used
by civil servants. It decided to sell the houses to the ‘tenants’ the very same
civil servants who were occupying the houses at that material time.
The reasons given by the government for the ‘disposing of’ the said houses was
that the houses were too old and too expensive to maintain, as such they were to
be sold and new ones to be built.
However, experts have quashed that reason as being unsubstantial because they
claim that in Tanzania, there is no policy or law that allows or gives guidance
about the sale of government houses. These houses belong to Tanzanians, hence
cannot be sold to a few individuals.
Let us ask ourselves a number of questions; was the proper disposal procedure
followed in accordance with the disposing of government property? Is it true
that selling an old house and building a new one is less expensive?
Are the new houses going to be built in the same well-developed, posh areas as
the old ones? Were the junior civil servants (who I believe are more pressed
with housing problems than senior officials) fully involved in this opportunity,
or was it just a plan of giving more to those who already have?
What if the ‘big wigs’ are reluctant to pay for the houses, and some of them
threaten to sue the government? These and many other questions have remained
unanswered and most probably the ‘small fry’ are complaining silently, scared of
raising their voices.
The problem started a few weeks back when the government, through the Ministry
of Works, gave an ultimatum of seven days for all those who had bought the
houses to conclude payment, lest the houses be repossessed by the owner (the
government).
In response to the ultimatum, some of the officials who had the intention of
buying their houses threatened to sue the government because, they claimed, it
(the government) had breached their agreement. They further claimed that the
houses were sold to them via loans.
But things changed when the government got tougher. Minister Magufuli’s
ultimatum was supported by the President himself when he was laying the
foundation stone for 129 housing units for civil servants. A week after the
ultimatum over Tsh. 1 billion was collected from arrears for sales of the
aforesaid houses.
The ultimatum apparently revealed some of the answers to the questions. …senior
government officials who are yet to settle the balances should do so as soon as
possible to avoid inconveniences…the ultimatum would not spare anyone. This
statement clearly reveals that the opportunity was for senior officials only.
The defaulters were further advised to source loans from banks so as to settle
the arrears. The government later revealed that Stanbic Bank was ready to
finance housing in the country to guaranteed pensioners. Such credit facilities
would have been provided to pensioners already, but not for buying old houses
only for building new ones.
At this juncture, it seems that the houses may in the future bring unpredictable
disputes. In the first place most of the senior government officials already
have houses. The best idea would have been to make a critical analysis before
disposing of the houses.
The best plan now, I think, is for the government to repossess its houses and
instead assist senior as well as junior government officials who are guaranteed
pensioners to secure housing loans, and provide them with surveyed plots for
building new houses.
More mountains to
climb
After privatising the post office and its related bank, which reforms should
Japan attempt next?
The vote looms so large that it is hard to see beyond it. By mid-August,
Japan's upper house must decide whether to privatise Japan Post, which,
along with delivering letters, oversees ¥331 trillion ($3 trillion) in
savings and life insurance accounts. Junichiro Koizumi, the prime minister,
has threatened a snap election if the reform bills—which cleared
parliament's lower house by only five votes earlier this month—fail in the
upper chamber. Chaos could follow for his party. So onlookers expect Mr
Koizumi to get his way, though a close vote is predicted. Having championed
postal reform for decades, he will no doubt celebrate if he does reach the
summit. On the other side of the mountain, however, lies an intimidating
range of other reforms that still need tackling.
Some involve the budget. After 15 years of economic torpor, Japan's gross
public debts exceed 150 per cent of GDP. Now that the economy is on a
slightly better footing, and the risk of a bank-driven downward spiral has
fallen sharply, the government is keen to start tackling that debt. If it
wants growth to take hold, however, Japan must do more than just fix its
finances. It must also deal with all of the barriers that still impede
competition and make it hard for dynamic firms to expand.
Two looming budget issues remain, however. One is sales taxes. Mr Koizumi
has said these will not increase on his watch. But LDP term limits require
him to step down by September 2006, and the finance ministry is itching to
raise taxes soon after he is gone. The worry is that this may clobber
consumption before economic expansion is assured—a hard risk to ignore,
since the government made just this mistake in 1997.
Health-insurance reform will probably prove even more contentious. Because
citizens must choose between the national system and private health
insurance, the current arrangement discourages people from insuring
themselves, thereby limiting market forces, stifling innovation and reducing
choice. Some reformists argue that a mixed approach—which gave people an
option to supplement government-funded care with private insurance—would
inject more competition and modern methods into Japanese medicine, without
straining government spending.
Medicine is not the only area in which Japan's government distorts
competition. Besides Japan Post's savings and insurance arms, for example,
there are nine other big financial outfits in the public sector. These lend
to a host of borrowers that the market shuns but politicians deem worthy,
from farmers, to small firms, to projects in the southern prefecture of
Okinawa.
Heizo Takenaka, the cabinet minister who has co-ordinated most of Mr
Koizumi's economic reforms, also wants to trim the state by subjecting more
government projects to a “market test”. Private firms will soon be allowed
to bid for a chance to take over some government services, he says. This
will not work, however, unless bidders have lots of information about
government; so the prime minister's office must show civil servants that it
is willing to crack the whip.
That is a big agenda to be getting on with. And it does not include a host
of other needed measures to boost competition, such as: detecting and
punishing collusion, preventing former civil servants from abusing their
public ties when they retire, encouraging foreign investment and promoting
economic diversity in Japan's regions. Mr Koizumi will hardly be able to
make a dent on these while in office. Before he can even begin, though, he
needs to win that upper-house vote.
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