Overview

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 Context

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.  

Economic Overview

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.

Social Context

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.

Development Challenges

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

World Bank Group Engagement in Tanzania

The World Bank Group’s (WBG) 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 IDA portfolio in Tanzania comprises 25 International Development Association (IDA) projects including three PforRs, and one budget support operation with net commitments of $3.6 billion, including transport (27%), urban (22%), energy (12%), health (8%), and agriculture (8%). Tanzania also participates in seven regional projects ($556 million).

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 WB’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 Tanzania economic updates have 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: Oct 17, 2016

Strengthening Human Capital

The World Bank has supported Tanzania’s Productive Social Safety Nets (PSSN) program under which the Tanzania Social Action Fund has been providing conditional cash transfers (CCTs) directly to poor households. The program, which took off in 2012 with a targeted 275,000 households in eight districts, recently achieved a massive scale up to reach over 1.1 million households (approx. 6.6 million people) in all 161 districts and close to 10,000 villages throughout the country. To date, 16 rounds of CCT payments have been delivered to targeted beneficiaries in timely manner.

On both Tanzania Mainland and Zanzibar, the project has contributed to the reduction of extreme poverty especially among female-headed households and marginalized families. Beneficiaries are able to not only able to meet their food needs but their utilization of health and education services is also improving thus enhancing and protecting the human capital of their children. In addition, several beneficiaries are able to secure vital assets including land and livestock. Through the program’s innovative design, the role of women has been strengthened and the prospect of children completing school has greatly improved.

Infrastructure development

Access to affordable and reliable electricity is vital for Tanzania’s attainment of its socioeconomic goals. With only 36% of households currently having electricity, the World Bank is supporting the government through a program aimed at expanding access to affordable, reliable and modern energy; and ensuring operational and financial sustainability of the sector.

Through the Tanzania Energy Development and Expansion Project, 576,000 people including 125,000 women accessed electricity. The project’s off-grid component also stimulated private sector-led development in renewable energy and resulted in one of the strongest and most transparent enabling environments for small power producers (SPPs) in Africa.

With 22MW of SPP-generated renewable electricity now being sold to individuals and to TANESCO, the public utility company, and an additional 7MW due to be commissioned soon, a vital foundation has been established for the government’s ambitious rural electrification program.

Gas production has increased, and gas is now available to all power plants in the Dar es Salaam area, eliminating the need for costlier liquid fuels and significantly reducing the cost of generation. The need for expensive, liquid-fuel-based emergency power supply contracts, which in 2012 and 2013 exceeded 300MW, has now been eliminated. The cost of electricity supply was lowered from about TZS262 per kWh in FY2012 to TZS 229 per kWh in FY2015.

While the government also is remarkable strides on development of new infrastructure, delivering natural from the South to Dar es Salaam to generate electricity, the national electric utility, TANESCO, still struggling with substantial financial difficulties, related to the payments of arrears accumulated in 2011-2012, when expensive liquid-fueled power plants were contracted. Support provided under two development policy operations (DPOs), the gas-to-power program, is aiming to achieve a key medium-to-long-term cost reduction measure. The completed large gas transmission pipeline, connecting the nearshore/onshore producing fields at Mtwara and Songo-Songo to the new 150MW Kinyerezi I gas power plant in Dar es Salaam has provided cheaper fuel source for power generation. The construction of another 240MW gas power plant (Kinyerezi II) has started.

The construction of a 225km overhead 400kV double-circuit backbone transmission interconnection line between the central towns of Dodoma and Iringa, forming part of a 632km transmission network, connecting the mining region of Shinyanga with agricultural part of the country in Iringa, has been completed, thus securing supply to agriculture, industries and domestic users while promoting the sustainability of the government’s plans to increase overall connectivity to 50% by 2025.

Last Updated: Oct 17, 2016

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: Oct 17, 2016


LENDING

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

*Amounts include IBRD and IDA commitments