Tanzania is among some African countries which may see a drop in development aid as the US is likely to expand fiscal stance and cut spending during Donald Trump’s presidency, a new report shows.
The move by the world’s largest economy might affect dependent countries such as Ethiopia, Kenya, Tanzania, Nigeria and DRC according to the Institute of Chartered Accountants in England and Wales (ICAEW) latest report released in London yesterday.
In its Economic Insight: Africa Q4 2016, the accountancy and finance body points out that signs of an expansionary fiscal stance under the Trump administration coupled with spending cuts to accommodate increased infrastructure expenditure are likely to lead to the decrease in aid.
“Aid is one of the main channels through which a change in US policy under the new president could impact Africa. Policymakers and businesses across the continent will be keen to see President-elect Trump’s plans for development policies once he takes office,” said ICAEW Middle East, Africa and South Asia regional director Michael Armstrong.
The report, commissioned by ICAEW and produced by partner and forecaster Oxford Economics, provides a snapshot of the region’s economic performance focusing specifically on Kenya, Tanzania, Ethiopia, Nigeria, Ghana, Ivory Coast, South Africa and Angola.
According to the report, and drawing on insights from the Organisation for Economic Co-operation and Development, the US is Africa’s principal benefactor in terms of bilateral official aid with over $9 billion distributed to the region.
The UK is second in line with just under $4 billion distributed, followed by France with just over $2 billion. Furthermore, in terms of official development aid receipts to East Africa, Ethiopia received the largest sum of over $3.5 billion in aid, followed by Kenya and Tanzania with over $2.5 billion and Uganda with $1.5 billion.
Trade is another area that is likely to be affected by the new US administration. Although US-Africa trade declined sharply in recent years, mostly due to the shale boom which decreased the need for African crude oil, countries on the continent still benefit immensely from the African Growth and Opportunity Act.
Considering the president-elect’s protectionist stance, African economies could be harmed by tighter policies towards agricultural and manufacturing trade.
The United Nations Conference on Trade and Development revealed that East Africa received $7.8 billion in foreign direct investment (FDI) in 2015, a 2 per cent decrease from 2014’s. East Africa is forecast to see an increase in net FDI in coming years with a 10 per cent rise expected in 2017.
FDI inflows to Central Africa and West Africa fell by 36 and 18 per cent respectively during the same period. Tanzania’s oil and natural gas sector is expected to attract more investment.