The East African nation of Tanzania has an estimated population of 50 million as of 2016. The country has maintained relatively stable, high growth over the last decade (averaging 6%–7% per annum). While the poverty rate has recently declined, the absolute number of the poor has not changed given the fast pace of population growth (over 3% per annum).
Political stability remains the cornerstone of Tanzania’s strong economic performance. In October 2015, John Pombe
Overall for 2016, the Tanzanian economy has shown resilience amid flagging growth in Sub-Saharan Africa. Real GDP growth for the year is estimated at nearly 7% despite a softening of growth in the second half of the year. Agricultural production increased over the previous year. Non-manufacturing industrial growth softened as a whole as the substantial deceleration of construction and slump in the generation of electricity more than offset strong growth in the mining and quarrying sub-sector. Services maintained solid performance overall.
The inflation rate has remained low and near the authorities’ medium-term target of 5%, although it has trended upward in recent months following a tightening of the food supply and rising energy costs. The current account deficit narrowed significantly in 2016 as exports grew modestly and imports fell significantly, especially for capital goods. Gross international reserves stood at $4.3 billion at the end of January 2017, a level sufficient to finance the equivalent of approximately four months of projected imports of goods services. The value of the shilling remained stable in 2016, following considerable volatility in 2015.
The last completed budget (2015/16) saw significant overruns in recurrent spending and significant shortfalls in development spending, with the latter due to delays in securing funding. The fiscal deficit stood at 3.5% of GDP. The 2016/17 budget called for a fiscal deficit increase to accommodate higher levels of public investment and the clearance of verified arrears. However, the implementation of it up until December 2016 also experienced significant development underspending, largely explained by external financing shortfalls. Domestic revenue mobilization has been bolstered by strong measures to reduce tax exemptions and curb tax evasion and corruption.
Though the poverty rate fell from 60% in 2007 to an estimated 47% in 2016, based on the $1.90 per day global poverty line, about 12 million Tanzanians still live in extreme poverty earning less than US$ 0.60 per day. Many hover just over the poverty line and risk falling back into poverty in the event of socio-economic shocks. Universal education, scrapping contributions for primary and secondary school, 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 to the labor market is critically important.
Tanzania embarked upon its second Five Year Development Plan 2016/17 to 2020/21 (FYDP II), which, among other things, picks up interventions which fell short under MKUKUTA II and FYDP I. With its 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
Last Updated: Apr 20, 2017