Tanzania

Approximate reading time: 4 minutes

Tanzania has sustained relatively high economic growth over the last decade, averaging 6–7% a year. But while the poverty rate in the country has declined, the absolute number of poor has not because of the high population growth rate. The country’s overall population is about 55 million (2016).

Political Context

In October 2015, John Pombe Magufuli was elected the fifth President of the United Republic of Tanzania. The 5th Phase Government, as it is called, has prioritized efforts to clampdown on corruption, improve public administration and manage public resources for improved social outcomes. Seventy-two percent of Tanzanians say corruption has decreased “somewhat” or “a lot” over the preceding year, compared to 13% in 2014. Similarly, 71% say the government is fighting corruption “fairly well” or “very well,” compared to 37% in 2014.

Economic Overview

Tanzania’s real gross domestic product (GDP) growth rate slowed in 2017. According to government data, growth for the first three quarters of 2017 stood at 6.8%, down from 7.3% during the same period in 2016. The decline is mainly due slower growth of services from the supply side and slower expansion of consumption and investment from demand side. Although Tanzania’s real GDP growth rate is estimated to have slowed, it was the highest in the East African Community (EAC) for 2017.

The inflation rate has remained stable, aided by low food prices. The current account deficit narrowed to 2.5% of GDP in 2017, down from 4.2% in 2016, with the decline in imports more than offsetting the decline in exports. The narrowing current account deficit was financed by foreign direct investment (FDI) and long-term loans. Gross official reserves were nearly US$6 billion by end 2017, equivalent to more than five months of import cover (excluding FDI-related imports).

The economic outlook is favorable, with downside risks that are largely under government control. The three most significant challenges facing the government to ensure growth momentum include:

  • Continuing to implement measures to ensure macroeconomic stability;
  • Intensifying efforts to implement its development-oriented budget, and
  • Urgently implementing measures to enable and encourage the private sector to play a more significant role in Tanzania’s development.

Private sector involvement in the country’s development can help finance the government’s ambitious investment plans, be a source of finance and innovation, and create jobs for new entrants into the job market. This will require addressing key impediments to higher private investment including low credit growth, high and persistent payment arrears, and the high cost of regulatory compliance and deficiencies in infrastructure services and skills.

Social Context

Poverty has declined since 2007 and continues at a modest pace, with a fall in the poverty rate from 28.2% in 2012 to 26.9% in 2016. This decline has been accompanied by improvements in human development outcomes and living conditions. Tanzania has recorded improved ratings according to the Human Development Index since the beginning of the new millennium, until a recent slowdown in 2010. Improved health outcomes have driven this progress, along with robust gains in education and incomes.

In primary education, levels of access, completion and equity improved during this period, as did levels of secondary educational attainment for both women and men. In 2016, 23.4% of women and 28.2% of men had completed secondary education, a significant increase from the figures of 16.2% and 22.8% recorded in 2010. There was also progress in the areas of housing conditions, the ownership of assets, and access to clean drinking water and sanitation, including for the poor and rural populations. Despite progress, significant geographical disparities remain; more than 13 million people remained below the poverty line in 2016.

Development Challenges

Tanzania embarked on its second Five-Year Development Plan, 2016/17 to 2020/21 (FYDP II), which picks up on interventions which fell short under MKUKUTA II and FYDP I. Many of the gains made over the past decade were unevenly distributed along rural-urban lines and across income quintiles. The modest poverty reduction was driven primarily by gains in income in Dar es Salaam and other large urban centers.

The quality and strength of Tanzania’s human capital needs to go hand-in-hand with infrastructure investments so that farmers in rural areas are linked to markets and people to services, and the resultant fruits of growth are shared with rural communities across Tanzania.

(World Bank, April 2018)

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