Tanzania has seen reasonably robust economic development and reduced poverty rates over the past ten years despite its rapidly increasing population. Despite the country’s GDP per capita contracting in 2020 due to the worldwide pandemic, it still belongs to the lower middle-income group of nations. The country’s advantageous marine position, abundant and diversified natural resources, sociopolitical stability, and fast-expanding tourism all contributed to its success in growth during the past ten years. Tanzania has a population of roughly 61.5 million people and a land area of 947,000 square kilometers, with about a third of those people living in cities (World Bank, 2022).
The President has shown a strong commitment to promoting free trade, luring foreign investment, and fostering an atmosphere that is favorable to business. The new administration is also trying to finish important infrastructure projects and create policies to assist the industrialization of the nation. Foreign investors are reviving their interest in Tanzania in several industries like construction, agriculture, and manufacturing as a result of the dramatic changes in the country’s political climate since the previous government (Switzerland Embassy).
Tanzania’s economy is expected to expand this year at a slightly slower rate before accelerating in 2023, according to Finance Minister Mwigulu Nchemba. Tanzania’s economy is beginning to recover from the COVID-19 epidemic, which severely affected industries like tourism. However, the crisis in Ukraine, which caused the price of commodities like wheat and oil to surge, has had an impact on the recovery. The economy is expected to expand by 4.7% in 2022 and 5.3% the following year, according to Nchemba, compared to a 4.9% increase in 2021.
Nchemba said that initiatives such as the building of more than 2,500 km of roads, three hydroelectric facilities with a combined capacity of 2,695 megawatts, and 970 km (600 miles) of standard gauge railway would support the country’s anticipated economic growth. After the administration of President Samia Suluhu Hassan resolved a protracted tax battle with Barrick Gold, her administration is now attempting to expand the mining sector.
The government has adopted a strategy to limit the COVID-19 pandemic, including a COVID-19 National Vaccine Deployment Plan, and has restarted aggressive interaction with regional and international multilateral and bilateral development partners. In addition to making significant investments in the delivery of public services, notably in the areas of health and education, the administration has made efforts to reopen the media and civic space and increased accountability and transparency within the public sector. Removing significant barriers to private investment has also reinforced the role of the private sector as a generator of economic development.
According to the African Development Bank (AfDB) study, Tanzania’s GDP increased by 4.9% in 2021, up from 4.8% in 2020, thanks to the global economic recovery. Tanzania’s GDP is expected to rise by 5.6% in 2023 and 5.0% in 2022, according to the bank, as a result of faster vaccination rollouts, stronger tourism performance, and reopened trade routes. This is close to the AfDB’s predictions from 2021, which predicted that Tanzania’s GDP would increase by 4.9% and 6.3%, respectively, in 2022 and 2023.
Inflation is expected to rise to 4.4% in 2022 and 3.8% in 2023 as a result of increasing energy costs brought on by the war between Russia and Ukraine. Due to improved revenue performance, the budget deficit is anticipated to decrease to 2.7% or 2.8% of GDP in the same period and will be paid for with both domestic and foreign borrowing. Due to increasing oil prices, the current account deficit is anticipated to increase to 4.0% of GDP in 2022 before decreasing to 2.6% of GDP in 2023 as merchandise exports and tourism receipts stabilize and are mostly funded by external borrowing (AfDB, 2022).
Tanzania’s economy is strengthening. The recovery is being driven by the hospitality and restaurant, mining, ICT, transport, and electrical industries. High-frequency data imply that while economic activity was growing, pre-pandemic levels had not yet been achieved. Although activity in most sectors is still below pre-pandemic levels, leading indicators including cement output, power generation, private-sector lending, goods and services exports, nonfuel goods imports, telecommunications, and tourist arrivals have all increased since June 2022. The cost of living has gone up due to increasing energy and food prices, but inflation is still under control at 4.5%. (July 2022).
Official statistics for Zanzibar indicate that economic activity is resuming, similar to mainland Tanzania. Following a sharp slowdown to 1.3% in 2020 as a result of the COVID-19 pandemic’s effects on the tourism-dominated services sector, which accounts for close to 50% of Zanzibar’s GDP, real GDP expanded by 5.1% in 2021. In 2021, 35.5% of Zanzibar’s population worked in agriculture, forestry, and fishing, 47.4% in services (including hospitality), and 17.1% in manufacturing. The resurgence of the tourist industry and agricultural exports are expected to propel Zanzibar’s GDP to rise by 6.8% in 2022 and 7.2% in 2023 (AfDB, 2022).
Tanzania’s producing sectors will be given priority in the national budget for 2022–2023. The amount of money allotted for the agriculture sector will nearly double to USD 407 million. The envelope will be raised over USD 60 million for the cattle industry. Additionally, the Budget presents two 2030 targets in this area: 1) boost agricultural exports to $5 billion (from USD 1.2 billion now) and 2) boost exports of horticulture goods by around 170% (to USD 2 billion). To achieve this, the government mandates that irrigated lands are increased to 8.5 million hectares and 10,000 large-scale farms are built (100 in 2020). Edible oils will be the main topic (palm and sunflower). Through these efforts, the government will aim to ensure food security, boost employment (since this industry employs 60% of Tanzania’s workers), and explore new markets like Oman and Egypt (AfDB, 2022).
Tanzania’s producing sectors will be given priority in the national budget for 2022–2023. The amount of money allotted for the agriculture sector will nearly double to USD 407 million. The envelope will be raised over USD 60 million for the cattle industry. Additionally, the Budget presents two 2030 targets in this area: 1) boost agricultural exports to $5 billion (from USD 1.2 billion now) and 2) boost exports of horticulture goods by around 170% (to USD 2 billion). To achieve this, the government mandates that irrigated lands are increased to 8.5 million hectares and 10,000 large-scale farms are built (100 in 2020). Edible oils will be the main topic (palm and sunflower). Through these efforts, the government will aim to ensure food security, boost employment (since this industry employs 60% of Tanzania’s workers), and explore new markets like Oman and Egypt (AfDB, 2022).
As of September 10, 2022, the World Bank-financed program in Tanzania consists of 24 national projects with a total commitment of $6.19 billion and 6 regional projects with a commitment of $780.30 million, for a total portfolio of around $6.97 billion. Transport (31.0%), education (25.5%), urban (14.2%), water (9.3%), social protection (7.3%), energy (5.2%), government and statistics (2.6%), environment/natural resources (2.4%), and digital development (2.4%) are some of the major areas sponsored. Energy (72.8%), education (12.7%), environment, natural resources, blue economy (4%), poverty and equality (10.5%), and regional initiatives in Tanzania are allotted to these sectors.
Tanzania Country Partnership Framework (CPF) 2018-2022 was approved in March 2018 by the Bank’s Board of Executive Directors. The CPF was influenced by in-depth discussions with a diverse group of stakeholders and a national opinion poll. The World Bank is assisting the CPF in three areas, in line with the priorities outlined in Tanzania’s Second Five-Year Development Plan and Zanzibar’s Third Strategy for Growth and Reduction of Poverty: (1) boost productivity and accelerate equitable and sustainable growth; (2) promote human capital and social inclusion; and (3) modernize and improve the effectiveness of public institutions.
To considerably scale up human capital development, the task involves increasing investments in energy, information, communication technology, and transportation to enable equitable growth and spatial change. With the help of these initiatives, the gap between rural and urban areas will be bridged, and factors that impact access to social services, infrastructure, and well-paying employment will be improved. The framework strives to maximize access to financing and create jobs for Tanzania’s growth given the crucial role of the private sector.
The Government of Tanzania’s Vision 2025 and the World Bank Group’s CPF 2018–2022, which are both aligned with International Finance Corporations’ (IFC) strategy in Tanzania, support the country’s efforts to reach middle-income status and a high level of human development by transforming a low productivity agricultural economy into a semi-industrialized one that is driven by modernized and highly productive agricultural activities that are effectively integrated and substantiated by supportive industrial and service activities in the region.
The three primary pillars that make up the IFC’s investment strategy in Tanzania are (1) proactive development and investment in agriculture, light manufacturing, and infrastructure; (2) strengthening financial markets, notably through investing in the financial sector to help MSMEs’ access to credit; and (3) collaboration with local banks and government organizations to raise local currency funding through the capital market to support on-lending to MFIs and mortgage borrowers.
Tanzania is 67th on the 2021 Global Climate Risk Index (GCRI). In its most recent analysis of 2015 Nationally Determined Contribution (NDC), it pegged the costs of climate shocks to the economy at around 1% of GDP. The National Climate Change Strategy 2021–2026, the Zanzibar Climate Change Strategy (2014), and the Environmental Management Act Cap. 191 are only a few of the policies the government has created to boost climate resilience. Tanzania’s National Development Plan (NDC) aims to reduce greenhouse gas emissions by 10–20% by 2030 through measures including the development of green technology and renewable energy sources. The NDC objectives, however, face considerable obstacles due to the rapid population expansion and the large financial shortfall for renewable energy. Tanzania estimates that by 2030, investments in mitigation will require about USD 60 billion, necessitating a scaling-up of climate finance that has already been mobilized.
Empowering women and girls is a crucial tool for opening up economic opportunity and prosperity in Tanzania. This is reflected in the Tanzania Development Vision 2025, which lays out ways to improve human capital with a heavy emphasis on gender equality and women’s emancipation. In a report recently commissioned by The World Bank Titled Gender Assessment for Tanzania 2022, several challenges that women continue to encounter are highlighted along with hopeful chances for growth.
The emancipation of women and girls from gender-based violence is inextricably tied to issues of women’s economic empowerment. The Gender-based Violence (GBV) Assessment 2022, which was commissioned by the World Bank, identifies Tanzania’s GBV policies and programming’s achievements, weaknesses, and possibilities. A framework for combating GBV and violence against children has been provided by the recent approval of National Plans of Action (NPAs) in Tanzania and Zanzibar to eliminate violence against women and children. This action shows a strong government commitment to tackling the issue.
Development partners continues to employ analytics to direct operations under the current CPF, working closely with the government, as well as practical technical support, impact assessments, policy notes, and larger studies to drive lending programs and policy discussions. The design and implementation of government initiatives were guided by high-quality, unified information products, which aided in facilitating and deepening policy discourse. Plans for tourism-led expansion and initiatives in the areas of energy, government, education, and natural resources were all informed by these goods. The Tanzania Economic Update series has concentrated on a variety of subjects, such as the value of investing in females and the development of human capital, financial inclusion, water resources, agricultural transformation, tourist transformation, and dealing with the COVID-19 effects.
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