Overview

Country Overview

This 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

Political stability has provided a solid foundation for Tanzania’s growth, and with its economic prospects, has raised Tanzania’s profile in the region and the world. On October 25, 2015, Tanzania held its 5th general elections since it transitioned to a multiparty democracy in 1992. Dr. John Pombe Magufuli, the ruling Chama Cha Mapinduzi (CCM)’s candidate emerged winner with 58.46% of the vote, while Mr. Edward Lowassa, a former CCM stalwart, behind whom a formidable opposition coalition united, got 39.97%.

Economic Overview

The overall macroeconomic performance remains strong with a high rate of growth and a low rate of inflation. Real gross domestic product (GDP) growth is projected at 7% for 2015. From the supply side, the main drivers of growth recently has been several fast growing sectors, such as construction, transport and financial services. Inflation has gradually declined over the past 30 months due to tight monetary policy and falling international energy and food prices. While inflation has slightly increased recently largely driven by increase in domestic food prices and possible lagged effects of sharp depreciation of the local currency during the first half of 2015, the level remains relatively low at 5.6% in February 2016.

The external sector of the economy improved following a declining current account deficit that stood at 8.1% of GDP in 2015. Export growth driven by regional trade in manufactured goods and reduced imports bill from cheaper imported oil contributed to this decline.

Although revenue performance in 2015/16 has been better than in the past few years, shortfall has been experienced in the first quarter of the FY driven largely by weak implementation of the new 2015 VAT Act. The new government is committed to 4.2% of GDP fiscal deficit target for 2015/16. The government faces additional expenditure needs, equivalent to 0.7% of GDP, coming from expenditures carried over from last FY, payment of government arrears to TANESCO, and additional fiscal space needed for provision of free basic education and expansion of higher education students’ loans program (new presidential initiatives).

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 them.

The new administration has outlined among its priorities: increasing government revenues and reducing inefficiencies; investment in good health systems; raising education quality; increasing access to water and improving availability of electricity.

Last Updated: Apr 07, 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: Apr 07, 2016

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: Apr 07, 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: Apr 07, 2016


LENDING

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

*Amounts include IBRD and IDA commitments