The East African nation of Tanzania has an estimated population of 50 million as of 2016. The country has made great strides in economic and structural reforms, which helped aid the country’s relatively stable and high growth performance over the last decade (6.5% per annum). While the poverty rate has declined recently, the absolute number of the poor has not changed given the fast pace of population growth (over 3% per annum).
Political stability has given Tanzania a peace dividend that continue to lay foundation for the strong economic performance. In October 2015, Dr. John Pombe Magufuli was elected as the fifth President of the United Republic of Tanzania.
Gross domestic production (GDP) growth remained strong at 7% in 2015 due to increased public consumption together with burgeoning construction, communication, financial services and mining sectors. While tourism is the top foreign exchange earner, agriculture, a mainstay of about 70% of households, has continued to post slower growth.
Inflation, at 6.5% in January 2016 due to higher domestic food prices and lagged effects of the Tanzanian shilling’s depreciation, declined to 4.9% in August 2016. Fiscal policy management remains a challenge owing to huge investments in the offing amid ambitious but feasible domestic revenue targets, diminishing aid flows, and volatile global financial markets.
The 2016/17 budget reflects the government’s high priorities in development expenditure in infrastructure while trimming nonessential expenses.
The revenue administration reforms that are in place since November 2015 continue to yield positive impact on monthly revenue collection, which has been on target for each month except a few. Sustaining these efforts remains critical for the government to achieve a revenue target of 16.3% GDP in 2016/17.
The poverty rate declined to around 28% in 2012, from 34% in 2007. However, approximately 12 million Tanzanians still live below the national poverty line, almost unchanged from 2007 due to high population growth. A significant proportion of the population also hovers just over the poverty line and risks falling back into poverty in the event of socio-economic shocks. Universalization of basic education by scrapping contributions requirements for primary and secondary education has drastically increased primary school enrolment.
The prospects of the economy lean on investing in bottleneck-releasing infrastructure, improving the business environment, increasing agricultural productivity and value addition, improving service delivery to build a healthy and skilled workforce, and better managing urbanization. With approximately 800,000 youth entering into labor force every year, nurturing a vibrant private sector to provide productive jobs to those new is critically important.
Tanzania embarked upon its second Five Year Development Plan 2016/17-2020/21 (FYDP II), which, among other things, picks up interventions which fell short under MKUKUTA II and FYDP I. With the theme Nurturing Industrialization for Economic and Human Development, the plan has three pillars: industrialization, human development, and implementation effectiveness. With FYDP II implementation based on a credible and realistic financing plan, the country’s fiscal and debt sustainability will be maintained. The private sector can also be leveraged, not only as a source of financing FYDP II through public private partnerships (PPPs), but also as the actual driver of industrialization.
Last Updated: Oct 17, 2016