Overview

  • Tanzania has sustained relatively high economic growth over the last decade, averaging 6–7% a year. But while its poverty rate has declined, its absolute number of poor has not because of its 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, ushering in a period of political change.

    Economic Overview

    At 7%, in 2016, Tanzania’s economy expanded quickly, putting it close to the top of the fastest growing economies in Sub-Saharan Africa. This expansion softened during the last quarter of 2016, however, and continued to do so into 2017.

    Since coming to office, President Magufuli has reoriented public expenditure toward development spending, reducing recurrent expenditure significantly, and intensifying efforts to mobilize domestic revenue. Government spending was cut back, and a cap put in place on the salaries of executive officers. Measures were introduced to control tax exemptions. 

    At 5.2%, the inflation rate has remained low and close to the Government’s medium-term target of 5%. This recent decline in headline inflation (from March/April’s 6.4%) has been driven by lower food and energy prices.

    The current account deficit also declined to about US$1.5 billion (equivalent to 3.1% of GDP) in June 2017, from about US$1.9 billion (equivalent to 4.2% of GDP) in June 2016. The value of exports dropped by 6.2% in the year ending June 2017, compared to the year ending June 2016, while the value of imports dropped by 16.7% over the same period.

    In an attempt to boost growth in credit to the private sector and ease tight liquidity, the Bank of Tanzania reduced the discount lending rate from 16% to 12% in March 2017, and followed it with another reduction to 9% in August 2017.

    Response has been limited, with the growth of credit to the private sector still very low at 2.8% in June 2017. Interest rates have remained significantly higher.

    The fiscal deficit declined to 3% of GDP, its lowest level over the past seven years. This resulted from increased domestic revenue mobilization and controlled recurrent expenditures. The level of payment arrears remained unsustainably high, at about 6% of GDP by June 2017. This includes arrears to suppliers to the central government, as well as suppliers to TANESCO and pension funds. Despite the Government’s effort to verify and clear payments to its suppliers, the emergence of new arrears has meant that the level of debt to suppliers has remained high at about 2% of GDP.

    Social Context

    Although Tanzania's poverty rate fell from 60% in 2007 to an estimated 47% in 2016, based on the US$1.90 per day global poverty line, about 12 million Tanzanians still live in extreme poverty on earnings of less than US$0.60 per day. Many others live just above the poverty line and risk falling back into poverty in the event of socio-economic shocks. Universal education, and the waiving of fees for primary and secondary schools, has drastically increased primary school enrolment.

    Development Challenges

    Tanzania's economic prospects depend on investment in more infrastructure, as well as improving the business environment, increasing agricultural productivity and value addition, improving service delivery (to build a healthy and skilled workforce), and managing urbanization. With approximately 800,000 youth entering the labor force every year, nurturing a vibrant private sector to provide productive jobs is critically important.

    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. Based on a credible, 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 for FYDP II through public private partnerships (PPPs), but also as the actual driver of industrialization.

    Last Updated: Oct 05, 2017

  • World Bank Group Engagement in Tanzania

    The World Bank Group’s (WBG) Country Assistance Strategy (2012–15), which is still in place, is aligned with Tanzania’s National Strategy for Growth and Poverty Reduction. It has focused on four, strategic objectives: to promote inclusive and sustainable private sector-led growth; build infrastructure and deliver services; strengthen human capital and safety nets; and promote accountability and governance as a crosscutting objective.

    The current IDA portfolio in Tanzania comprises 25 IDA projects, including five Program for Results (P4Rs) operations for a total net commitment amount of US$4.2 billion. Key sectors include: transport (29%), urban (21%), energy (13%), social protection (9%), and education (7%). The World Bank also has a commitment to Tanzania in seven regional projects amounting to US$535 million, supporting the transport/ICT, energy, environment, health and education sectors. A new Country Partnership Framework (2018–22) is currently being prepared.

    International Finance Corporation (IFC)

    IFC’s current portfolio in Tanzania is US$220 million and is based on a strategy to proactively develop infrastructure projects through investment and advisory (Public-Private Partnerships) interventions; the projects focus on power, oil, and transportation. IFC will also work closely with IDA to identify actions to promote the more rapid commercialization of agriculture. IFC’s strategy places an emphasis on strengthening financial markets, particularly in terms of access to finance for MSMEs. IFC is looking to forge partnerships with local banks that are aimed at supporting its initiatives in the financial sector with local currency financing, as well as developing products to support the microfinance, SME, and housing sectors in Tanzania. IFC seeks to provide advisory services to improve the investment climate through reform programs that cover licensing, regulatory reform and other areas tracked in the Doing Business indicators.

    Knowledge Products

    The Bank’s knowledge work has informed government-led reforms and helped design programs and projects. Recent analytical work includes work on poverty assessment, economic update pension reform, sanitation, Islamic banking, finance leasing, and climate change. The Tanzania economic updates have focused on select topics: productive jobs, unlocking the potential of the tourism industry, improving tax performance, and leveraging public private partnerships to finance development.

    Last Updated: Oct 05, 2017

  • The World Bank has been providing support to Tanzania for over 50 years and is currently among the lead partners to work closely with the Government of Tanzania (GoT) in its efforts to reduce poverty and promote economic growth.

    Improving health outcomes

    Between 1999 and 2015, under five mortality declined from 147 to 67 per 1,000 live births, and stunting among children under five from 48% to 34%. This has been mainly thanks to the higher coverage of bed nets, as well as vaccinations and vitamin A supplements for among children, and increased access to health facilities. Progress in reducing maternal mortality and neonatal mortality has been slow, however, something that is likely to be due to the low coverage of skilled deliveries and family planning. Worryingly, the use of insecticide-treated nets among children under five has decreased from 72% (2011/12) to 55% (2015/16), a trend that poses a threat to achievements made in the reduction of under-five mortality overall, given the fact that malaria is key contributor to infant mortality. Total fertility rates have also remained high at 5.2 children per woman in 2015 (only a little lower than 5.6 in 1999). The Universal Health Coverage by 2025, noted in the Government’s Health Sector Strategic Plan IV, has been anchored in the recently developed Health Financing Strategy, with a focus on smart, reliable, and sustainable health financing.

    The World Bank continues to support Tanzania to achieve its health sector objectives with several programs, including the Strengthening Primary Health Care for Results Program ($306m), the first Program for Results (PforR) in the health sector aiming to improve the quality of primary health care services nationwide with a focus on maternal, neonatal, and child health services. Progress made so far includes achieving Disbursement Linked Indicators, which incentivize performance at all levels of government. Early evidence shows that the government is placing a strong focus on improving the quality of services and on data-driven delivery and results. 

    The Bank is adopting a life cycle approach to its human development investments, entitled “Investing in Early Years”, by supporting nutrition and early childhood stimulation interventions in view of the large returns at the individual level and for economic development at large. Evidence shows that children who received these effective interventions and were not stunted had a 10% lower risk of living in poverty. The cost of not reducing childhood stunting to a 15% prevalence rate is estimated at about 11% of the country’s GDP.

    Increasing local government capacities

    Tanzania is rapidly urbanizing—over half of its population of about 55 million will live in urban areas as soon as 2030. The share of the country’s urban population increased from 18% to 27% from 1990—2012; 32% of the population lives within 100 km of the four largest cities (Dar es Salaam, Arusha, Mwanza, and Mbeya). Half of the population is expected to live in major and secondary cities by 2030. As with most developing countries, Tanzania has a dominant primary city—Dar es Salaam, which has about 40% percent of the country’s urban population, 17% of GDP, and 70% of taxes. Dar is the third fastest growing city in Africa, with growth of an average 5.8% annually in the decade from 2002 to 2012.

    Through a series of projects and programs, the World Bank has been expanding the capacities of local government in 29 Tanzania’s cities and towns to deliver improved services. These include the Dar es Salaam Metropolitan Development Project, the Tanzania Strategic Cities Project (TSCP), the Urban Local Government Strengthening Program, the Zanzibar Urban Services Project, and the Tanzania Urban Resilience Program. These programs encompass not only critical investment in urban infrastructure, including roads, drainage canals, street lighting, community parks, and the upgrading of low-income areas, but they also target strengthening institutional capacity through improving urban management systems.

    Under the TSCP, 143 km of urban roads, 26 km of major drains, eight bus stations, 231 solid waste collection points and five sanitary landfills have been completed, benefitting almost 1.5 million people to date. The design and quality of work (e.g. road investments with enhanced safety features and provisions for non-motorized transport) are setting a higher standard for infrastructure across all Tanzanian cities. The sanitary landfills the project built were Tanzania’s very first, and included developing a community of practice for landfill operators.

    TSCP piloted an innovative GIS-based Local Government Revenue Collection and Information System (LGRCIS), which has seen great initial success; estimates put the own-source revenue increase of cities at an average of 30% in the first three years. LGRCIS has been scaled up nationally and is also planned for Zanzibar. Under the GoT’s own initiative it is now in more than 160 local government authorities. This has great potential in helping address the central government’s fiscal pressures, and to help local government be less reliant on central transfers for service delivery.

    The Urban Local Government Strengthening Program (USGLP) has financed the rehabilitation of 93 kilometers of road (of which 46 kilometers were constructed to bitumen standard), 41 solid waste skips, 7 solid waste collection trucks, 6 bus stands, 3 markets and 2 abattoirs. At the start of the program, none of the Urban Local Government Authorities had General Planning Schemes; now nine of them have completed their final draft and are soon expected to be approved. The ULGAs made excellent progress at increasing their Property Tax Collection, utilizing transparent and efficient e-governance systems.

    Key results achieved to date on the Zanzibar Urban Services Project (ZUSP) include: the completion of about 7km of 19.5km drainage networks; of 11km of street lighting; the near completion of 340m of sea wall and a promenade in the UNESCO-registered Stone Town; the restoration of 3 municipal office buildings and completion of small-scale community infrastructure projects, such as footpaths, drainage, a marketplace and bus park. Zanzibar’s first sanitary landfill and transfer station is in the final stage of design.

    ZUSP-supported urban planning analytical work provided solid ground for the upgrading and redevelopment of critical urban areas that have great potential to contribute to Zanzibar’s social and economic development, based on the growing tourism sector. ZUSP also supports the introduction of a property tax collection system in a pilot area, and a new GIS-based revenue collection system integrating the new property tax administration.

    Last Updated: Oct 05, 2017

  • For the 2017/18 National Budget, the Government anticipated that development partners would contribute $1.7 billion, of which the International Development Association would contribute about $880 billion (equivalent to 46% of the total donor contribution). Other financing is also expected from AFDB (10%), DFID (9%), Sweden (4.3%), and the European Union (3.8%).

    The World Bank Group is an active player in the Development Partners Group, established in 2004 to strengthen development partnership and effectiveness of development cooperation. It also co-chairs the Public Expenditure Review, a joint Government-development partner platform for dialogue around fiscal policy and expenditure management.    

    Last Updated: Oct 05, 2017

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LENDING

Tanzania: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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In Depth

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International Development Association (IDA) in Africa

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World Bank Africa Multimedia

Watch, listen and click through the latest videos, podcasts and slideshows highlighting the World Bank’s work in Sub-Saharan Africa.

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Doing Business in Tanzania

The Doing Business report provides objective measures of business regulations and their enforcement. See where your country ranks.

Additional Resources

Country Office Contacts

Main Office Contact
50 Mirambo Street
P. O. Box 2054
Dar es Salaam, Tanzania
+255-22-216-3200
Tanzania
Loy Nabeta
Communications Officer
+255-22-216-3246
lnabeta@worldbank.org
Washington
Preeti Arora
Country program Coordinator
1818 H Street NW
Washington DC 20433
+1-202-458-4097
parora@worldbank.org