Country Overview

The 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 Context

Tanzania continues to enjoy a stable and democratic government. Since the end of its first post-independence government of Julius Nyerere in 1990, it has held five presidential elections and legislative elections peacefully. President Jakaya Kikwete is concluding a second five-year term in October, when the general elections are slated to be held.

Economic Overview

The overall macroeconomic performance remains strong. Real gross domestic product (GDP) grew by 7.3% in 2013 and 7.0% in 2014.The main contributors to growth were the construction, trade, agriculture and transport sectors. The headline inflation continuously declined from over 20% in 2011 to 4% in January 2015, largely due to the combined impact of prudent monetary policy and recent decreases in global food and energy prices. The rising local food prices have slightly pushed the inflation rate since early 2015 to 6.4% in July 2015.  

The Tanzanian shilling has lost value against major international currencies, resulting in a nominal depreciation rate of more than 20% since January 2015 against US dollar. Initially this depreciation reflected the relative strength of the US dollar on international markets as well as the decline in aid inflows, temporary loosening in monetary stance also accelerated the trend. This has increased the cost of imports and puts upward pressure on inflation as well. In spite of the fluctuations in exchange rates, the balance of payments remained stable with the current account deficit being around 10% of GDP. The reduced import bill due to the fall in oil prices on international markets, coupled with improved export performance in some food crops and manufacturing, has helped the current account deficit to decline from 10.3% of GDP in 2013/14 to 9.5% in 2014/15.

Over the past few years, Tanzania has increasingly faced challenges in achieving its desired level of fiscal deficit. While the government managed to keep its fiscal deficit at 3.3% of GDP for 2013/14 and 3.8% for 2014/15, this has come at the expense of accumulation of arrears to suppliers, raising public debt (currently 38% of GDP), and reduction in development expenditures and transfers to local governments. Tax performance is diminishing with tax revenue not growing fast enough to catch up with the speed of expenditure growth. Fiscal stance of some parastatals such as TANESCO and pension funds are also quite worrisome, but significant fiscal risks to the government.

Social Context

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.

Development Challenges

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 these youths.

Tanzania recently adopted the Big Results Now program, which focuses government efforts on accelerating delivery of selected priority results, with a major emphasis on leveraging private sector investment. Priority result areas include: increasing agriculture productivity, improving reliability and access to power supply, reducing transport costs, improving quality of basic education, increasing access to rural water supply, and improving the business environment. The government plans to add a new result area focused on reducing maternal mortality and improving nutrition standards across the population.

Last Updated: Sep 24, 2015

World Bank Group Engagement in Tanzania

The World Bank Group’s the Country Assistance Strategy (2012-2015) is aligned with Tanzania’s National Strategy for Growth and Poverty Reduction and focuses 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 promoting promote accountability and governance as a crosscutting objective. The current portfolio comprises of 25 projects for a total commitment of $3.95 billion. In addition, the country benefits from eight regional projects.. The main focus of WBG support is on: transport and ICT (23%); social, urban and rural resilience (20%); energy and extractives (11%) and education (10%).

International Finance Corporation (IFC)

IFC’s current total investment in Tanzania is $114.4 million which supports the strategic clusters of the World Bank’s Country Assistance Strategy thus: agriculture and forestry ($33.7 million), finance and insurance ($31.2 million), accommodations and tourism services ($27.4 million), oil, gas and mining ($15.3 million) and energy ($3.5 million).

Knowledge Products

The Bank’s knowledge work has informed government-led reforms and helped to design programs and projects. Recent analytical works include poverty assessment, economic update pension reform, sanitation, Islamic banking, finance leasing and climate change. The series of Economic Updates (7 reports so far) has focused on selected key issue topics: productive jobs, unlocking the potential of the tourism industry, and improving tax performance to finance economic development.

Last Updated: Sep 24, 2015

The World Bank Group (WBG) financing has contributed to Tanzania’s development performance in a number of areas, including:

Improving Infrastructure and Delivery of Services

Tanzania has been able to improve its national road network with the construction of more than 2,400 km of paved roads and 3,100 km gravel roads, and the heavy maintenance of more than 4,900 km of roads over the past 20 years. These works were done through six highway programs, two integrated road projects, two corridor transport projects and one transport sector support project. Currently, the percentage of roads in good and fair conditions as a percentage of total classified roads stands at 86%. These projects/programs have not only provided funds for the road works but they have generated institutional support as well as policy and strategy development and reforms needed to ensure the sustainability of benefits from these investments. 

The gas pipeline from Songo Songo in southern Tanzania to Dar es Salaam has attained the capacity to deliver 65 million cubic feet of gas for power generation. The WBG has also spearheaded the scaling up of the transmission capacity with a 400kV double circuit backbone transmission line capable of transmitting 2,000MW between Iringa and Shinyanga.

Support to Tanzania’s Water Sector Development Program (2007-2016) has seen an increase of 78% in the number of rural water collection points from 44,738 points when the project started in 2007 to 77,584 points in June 2014. A total of 32,846 additional rural water points were built/rehabilitated against a target of 41,900 points for this phase. On its urban component, the program has facilitated the connection of 236,541 customers and built 549 water collection points which by June 2014 had enabled 2.7 million urban residents to access clean and safe water.

Strengthening Human Capital

Important strides have also been made in the secondary education sector with 4,708 classrooms built under the Secondary Education Development Program (SEDP II) and 2,536 new degree-holding teachers hired to teach. The implementation of the Tanzania Social Action Fund (TASAF I & II) and the Productive Social Safety Nets (PSSN) project have helped to put in place the building blocks for a comprehensive safety nets system targeting the extreme poor. Community Driven Development (CDD) interventions implemented under this program have benefited 25.9 million. The current safety net program directly supports over 6 million beneficiaries (all living below food poverty line in Tanzania) through Conditional Cash Transfers, Public Works and Livelihood interventions.

WBG support to agriculture also directly contributed to the achievement of self-sufficiency in basic grains production (rice and maize) thereby contributing to lower food prices benefitting a large proportion of the poorer population. Maize yields increased by 27% in areas where the WBG provided support, while irrigation investments contributed to 48% increase in the total irrigated area.  

Last Updated: Sep 24, 2015

More than 40 development partners provide support to Tanzania, with four accounting for approximately 43% of total official development assistance (ODA). Of the $14.4 billion of ODA disbursed to Tanzania between 2005 and 2010, the International Development Association (IDA) is the largest financier, providing an average of 20%, followed by the United Kingdom providing 10%, the United States of America 9%, Japan 8%, and the European Union 7%. The World Bank Group (WBG) is an active player in the multi-donor General Budget Support (GBS) framework, which provides resources to support the poverty reduction strategy of the Tanzania government through the national budget. A donor’s joint monitoring mechanism known as the Performance Assessment Framework serves as an important tool to facilitate implementation of the GBS framework.

Last Updated: Sep 24, 2015


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

*Amounts include IBRD and IDA commitments