This East African nation of Tanzania has an estimated population of 47.4 million as of 2014. With the support of the International Monetary Fund (IMF), the World Bank Group (WBG), and other development partners, Tanzania has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread, and given Tanzania’s position as a net exporter of gold and a net importer of oil, the economy is not immune to external shocks.
Political stability has provided a solid foundation for Tanzania’s growth, and with its economic prospects, has raised Tanzania’s profile in the region and the world. On October 25, 2015, Tanzania held its 5th general elections since it transitioned to a multiparty democracy in 1992. Dr. John Pombe Magufuli, the ruling Chama Cha Mapinduzi (CCM)’s candidate emerged winner with 58.46% of the vote, while Mr. Edward Lowassa, a former CCM stalwart, behind whom a formidable opposition coalition united, got 39.97%.
The overall macroeconomic performance remains strong with a high rate of growth and a low rate of inflation. Real gross domestic product (GDP) growth is projected at 7% for 2015. From the supply side, the main drivers of growth recently has been several fast growing sectors, such as construction, transport and financial services. Inflation has gradually declined over the past 30 months due to tight monetary policy and falling international energy and food prices. While inflation has slightly increased recently largely driven by increase in domestic food prices and possible lagged effects of sharp depreciation of the local currency during the first half of 2015, the level remains relatively low at 5.6% in February 2016.
The external sector of the economy improved following a declining current account deficit that stood at 8.1% of GDP in 2015. Export growth driven by regional trade in manufactured goods and reduced imports bill from cheaper imported oil contributed to this decline.
Although revenue performance in 2015/16 has been better than in the past few years, shortfall has been experienced in the first quarter of the FY driven largely by weak implementation of the new 2015 VAT Act. The new government is committed to 4.2% of GDP fiscal deficit target for 2015/16. The government faces additional expenditure needs, equivalent to 0.7% of GDP, coming from expenditures carried over from last FY, payment of government arrears to TANESCO, and additional fiscal space needed for provision of free basic education and expansion of higher education students’ loans program (new presidential initiatives).
Approximately 28.2% of the population lived below the poverty line in 2012; a reduction from 34% in 2007. During the 2007/2012 period, there were improvements in living conditions, access to basic education, health and nutrition and, labor force participation in non-agriculture employment. Nevertheless, these benefits were not distributed equitably. Inequality has increased between urban and rural population and approximately 12 million Tanzanians are still living in poverty.
Tanzania’s main challenges include addressing infrastructure bottlenecks, improving the business environment, increasing agricultural productivity and value addition, improving service delivery to build a healthy and skilled workforce, and managing urbanization. The country also has a youthful labor force growing by approximately 800,000 every year and needs to increase the private sector’s role in employment creation for them.
The new administration has outlined among its priorities: increasing government revenues and reducing inefficiencies; investment in good health systems; raising education quality; increasing access to water and improving availability of electricity.
Last Updated: Apr 07, 2016