the united republic of tanzania … · 2014-11-12 · gdp fc gross domestic product, at factor cost...
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THE UNITED REPUBLIC OF TANZANIA
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Table of Content
TABLE OF CONTENT................................................................................................................................................1
ABBREVIATIONS AND ACRONYMS ...................................................................................................................2
I. OVERVIEW OF ECONOMIC PERFORMANCE...............................................................................................3
II. RECENT MACROECONOMIC DEVELOPMENT ........................................................................................7
2.1: GDP GROWTH ...........................................................................................................................................7
2.2: INFLATION .................................................................................................................................................9
2.3: GOVERNMENT FINANCE...........................................................................................................................10
2.4: PUBLIC DEBT ...........................................................................................................................................12
2.5: MONEY AND CREDIT................................................................................................................................13
2.6: SECOND GENERATION FINANCIAL SECTOR REFORMS................................................................................17
2.7: EXTERNAL SECTOR DEVELOPMENTS .......................................................................................................18
2.8: POVERTY REDUCTION EFFORTS..............................................................................................................24
2.9: FOREIGN DIRECT INVESTMENT ..................................................................................................................26
2.10: INVESTMENT..............................................................................................................................................26
2.11: EMPLOYMENT AND ECONOMIC EMPOWERMENT .....................................................................................30
2.12: PRIVATE SECTOR DEVELOPMENT.......................................................................................................30
2.13: NATIONAL IDENTITY CARDS PROJECT .....................................................................................................31
2.14: REGIONAL COOPERATION...........................................................................................................................31
2.15: RESEARCH AND DEVELOPMENT.................................................................................................................32
III: EMERGING MACROECONOMIC POLICY ISSUES, CHALLENGES AND STRATEGIC DIRECTION..............................................................................................................................................................33
3.1: GLOBAL FINANCIAL CRISIS ....................................................................................................................33
3.2: ECONOMIC GROWTH ....................................................................................................................................34
3.3: RESEARCH AND DEVELOPMENT FOR SUSTAINABLE DEVELOPMENT ..........................................................37
3.4: FUEL PRICES ............................................................................................................................................38
3.5: POVERTY REDUCTION EFFORTS..............................................................................................................39
3.6: EMPLOYMENT AND ECONOMIC EMPOWERMENT .........................................................................................40
3.7: ENHANCED RURAL FINANCIAL SERVICES DELIVERY ..................................................................................41
3.8: COST SHARING AT HIGH LEARNING INSTITUTION.....................................................................................41
3.9: REGIONAL COOPERATION.............................................................................................................................43
3.10: SOCIAL PROTECTION FRAMEWORK ..........................................................................................................43
IV: MEDIUM TERM ECONOMIC OUTLOOK: 2009-2012 ...........................................................................44
4.1: THE WORLD ECONOMIC OUTLOOK.........................................................................................................44
4.2: GDP GROWTH .........................................................................................................................................46
4.3: SECTORAL ASSUMPTIONS AND THE MEDIUM TERM OUTLOOK .............................................................46
4.4: INFLATION ...............................................................................................................................................53
4.5: GOVERNMENT FINANCE...........................................................................................................................53
4.6: MONETARY POLICY .................................................................................................................................56
V: MACROECONOMIC ASSUMPTIONS AND POLICY TARGETS ........................................................56
5.1: MACROECONOMIC ASSUMPTION..................................................................................................................56
5.2: MACROECONOMIC PROJECTIONS AND POLICY TARGETS ...........................................................................57
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Abbreviations and Acronyms ASDS Agriculture Sector Development Strategy
BEST Business Environment Strengthening for Tanzania
BoT Bank of Tanzania
CIF Cost, Insurance and Freight
CPI Consumer Price Index
EAC East African Community
EPZ Export Processing Zone
FoB Free on Board
FDI Foreign Direct Investment
GDPfc Gross Domestic Product, at factor cost
GDPmp Gross Domestic Product, at market price
GFC Global Financial Crisis
HBS Household Budget Survey
MDAs Ministry, Departments and Agencies
MKUKUTA Mkakati wa Kukuza Uchumi na Kupunguza Umaskini Tanzania
MKURABITA Mpango wa Kurasimisha Rasilimali na Biashara za Wanyonge Tanzania
MTEF Medium Term Expenditure Framework
NACSAP National Anti-Corruption Strategy and Action Plan
NEEC National Economic Empowerment Council
NSGRP National Strategy for Growth and Reduction of Poverty
OECD Organization for Economic Co-operation and Development
PEDP Primary Education Development Programme
PSDS Private Sector Development Strategy
SACCOS Savings and Credit Cooperative Societies
SADC Southern African Development Community
SEZs Special Economic Zones
SMEs Small and Medium Enterprises
TANESCO Tanzania Electric Supply Company
THIS Tanzania HIV/AIDS Indicator Survey
TIC Tanzania Investment Centre
TRA Tanzania Revenue Authority
USD United States Dollar
VAT Value Added Tax
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I. Overview of Economic Performance
1. In 2008, Tanzania's macroeconomic performance continued to be strong, despite
the global price pressure on oil and food products. Economic growth has been resilient to
shocks over the past seven years with GDP growth averaging 7.2 percent between 2002 and
2008. This performance has been spurred by sustained structural reforms, coupled with prudent
fiscal and monetary policies; all geared to investment and export promotion; employment
creation; infrastructure and human capital development. Inflation on the other hand has
emerged as a major source of concern in macroeconomic stability, rising from an annual
average of 7.0 percent in 2007, to 10.3 percent in 2008.
2. Performance in the implementation of MDGs was moderate satisfactory though the
pace has been slow. Commendable progress has been made in primary education, women
empowerment, and child mortality. However, owing to the likely impact of the global economic
recession, some MDG targets may not be attained by 2015 including poverty reduction and
reducing maternal mortality.
3. GDP Growth: During the year 2008, real GDP growth was 7.4 percent compared
to 7.1 percent in 2007. In particular, good performance was recorded in services economic
activity whose growth rate increased to 8.5 percent in 2008 from 8.1 percent in 2007.
Agriculture economic activities also grew by 4.6 in 2008 compared to 4.0 percent in 2007 owing
to improved weather condition and the deliberate efforts by the Government to ensure good
supply of agricultural inputs such as the improved seed, small tractors and subsidised fertilizer
mainly in the “big four regions” of Iringa, Ruvumba, Rukwa and Mbeya. The growth rate of
industry and construction economic activities declined from 9.5 percent in 2007 to 8.6 percent
in 2008.
4. Inflation: During the same period, the economy experienced substantial
inflationary pressure, emanating mostly from high energy and food prices. During 2008,
monthly headline inflation increased from 8.6 percent in January to 13.5 percent in December
2008 and averaged 10.3 percent for the year. The increase in inflation during the year was
fuelled by high world prices for oil and food stuffs. Annual average food inflation was 12.7
percent while non-food inflation was 6.7 percent. The food price inflation was exacerbated by a
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hike in transportation costs due to increased in oil and fuel prices in the first half of 2008, as
well as food shortages in neighbouring countries.
5. Government Finance: During the first half of 2008/09 (July – December, 2008),
domestic revenue amounted to Tshs. 2,162.2 billion, equivalent to an increase of 22 percent
over the amount collected in the corresponding period in the preceding year. However, this was
below the target of Tshs. 2,319.3 billion for the period largely caused by low performance in
import taxes, income tax, and non tax revenue. Tax revenue accounted for 95.3 percent of the
total revenue collected for the period. As of March 2009, the cumulative total revenue was Tsh.
3,199.1 billion, equivalent to 9 percent below the target and 20 percent above the amount
collected in the same period the year before.
6. Total expenditure during the first half of 2008/09 amounted to Tshs. 3,124.3
billion, being 8.6 below the target for the period. Out of the total expenditure, recurrent
expenditure amounted to Tshs. 1,956.5 billion, equivalent to 62.6 percent while development
expenditure was 1,167.9 billion, equivalent to 37.4 percent. By end March 2009, total
expenditure amounted to Tsh 4,656.8 billion, equivalent to 87 percent of the estimate for the
period.
7. Money and Credit: During the first half of 2008/09, extended broad money
supply (M3)1 grew by 23.9 percent, compared with 21.6 percent recorded in the same period in
2007/08. On the other hand, broad money supply (M2)2 grew at an annual rate of 29.7 percent
compared with 27.0 percent in the same period last year. The increase in money supply is
partly due to the increased demand for Tanzanian Shilling to facilitate increased transactions for
the expanding economy, as well as improved interest rates.
8. Commercial bank credit to the private sector increased by 47.0 percent between
July and December 2008. Most of this credit was extended to the manufacturing, trade,
agriculture, transport and communication activities. Consistent with Government policy to
1 M3 consists of broad money (M2) + Foreign Currency deposits. 2 M2 consists of narrow money (M1) + savings deposits + time deposits.
M1 Consists of currency in circulation outside banks + demand deposits of residents in deposit money banks
M0 Consists of currency in circulation outside banks + deposit money banks’ deposits with the Bank of Tanzania
5
enhance macroeconomic stability, Central Bank credit to the government has been curtailed and
commercial bank credit to the government reduced, thus allowing credit expansion to the
private sector.
9. External Trade. Total export earnings (goods and services) increased by 26.9
percent from USD 4,102.3 in 2007 to USD 5,205.6 in 2008. Total imports of goods and services
increased by 28.1 percent in 2008 as compared to 22.7 percent, in 2007. This was caused by
increased imports of intermediate goods, oil in particular, as well as capital goods. The increase
in import of capital good is consistent with the increase of domestic investment.
10. Debt: The public debt stock as at December 2008 stood at USD 6,329.03 million,
equivalent to 32.7 percent of nominal GDP compared with 31.8 percent in 2007. The increase in
debt stock is a result of new disbursements from local and concessional foreign sources,
exchange rate depreciation and accumulation of arrears to non Paris club and commercial
creditors. External debt accounted for 76.2 percent of the total debt while domestic debt was
23.8 percent of total debt.
3 Figures does not include private debt
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Table 1: Trends in Selected Macroeconomic Indicators, 2000 – 2008
2000 2001 2002 2003 2004 2005 2006 2007 2008*
Real GDP Growth - % 4.9 6.0 7.2 6.9 7.8 7.4 6.7 7.1 7.4
Inflation - annual average - % 6.0 5.1 4.3 5.3 4.7 5.0 7.3 7.0 10.3
Exchange Rate (shs/USD) -
annual average 803.3
877.3 967.1 1,038.9 1,089.1 1,129.2 1,253.9 1,244.1 1,196.3
Exchange Rate (shs/USD) – end
of period 803.3
916.3 976.3 1,063.6 1,043.0 1,165.5 1,261.6 1,132.1 1,280.3
Merchandise Exports (mil. USD) –
FOB 663.3 851.3 979.6 1216.1 1481.6 1,679.1 1,743.3 2,024.2
2688.9
Merchandise Imports (mil. USD)
– FOB 1367.6 1560.3 1511.3 1933.5 2482.8 2997.68 3864.1 4860.6
6,439.9
Export/Import ratio (Goods) - % 49.6 54.6 64.8 62.9 59.7 56.0 45.1 41.6 41.8
Current Account (% of GDPmp
including transfers -6.9 9.3 9.4 2.0 -6.1 -6.1
-8.0
-9.4
-11.0
Investment/GDP ratio - % 17.6 17.0 18.9 18.5 21.0 22.0 23.4 24.4 26.3
Foreign Direct Investment (FDI)
– mil. USD 463.4 467.2 387.6 308.2 330.6 447.6 616.6 653.4
695.5
Foreign Reserves (months of
imports) 5.7 6.6 8.7 9.2 7.7 6.0 5.0 4.8
4.6
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Total Revenue (% of GDPmp) 10.8 10.7 10.8 11.2 11.8 12.4 14.1 16.0 15.9
Total Govt. Expenditure4 (% of
GDPmp) 15.1 15 15.4 19.3 21.2 23.5 23.0 22.8
26.6
Fiscal Balance (before grants) -
% of GDPmp
-4.3 -4.3 -4.6 -8.1 -9.3 -11.1 -8.9 -6.8 -10.9
Fiscal Balance (after grants) - %
of GDPmp -1.0 -0.4 -0.2 -2.8 -4.5 -5.1 -3.9 0.0
-4.7
Growth of Money Supply (M2)- % 14.9 23.0 19.6 22.6 26.8 25.9 21.1 26.1 27.1
Average Deposit rate - % 4.2 3.5 3.1 2.4 2.5 2.61 2.54 2.59 2.68
Average Lending rate - % 19.6 16.4 15. 7 14 14.4 15.4 16.4 16.03 16.05
Domestic debt/Total public debt 12.5 11.1 13.2 13.8 16 21.2 37.8 38.0 34.7
External Debt/Total Public Debt 87.5 88.9 86.8 86.2 84 78.5 62.2 62.0 64.6
Total Public Debt/GDP 65.6 61.6 58.4 53.5 48.9 50.8 48.2 32.0 30.0
External debt services/Exports 18.2 11 13.7 11.3 8.7 5.7 2.5 2.1 2.4
Domestic debt services/domestic
revenue
26.7 25.4 51.6 28.1 28.8 53.7 39.7 38.1 12.3
* Provisional results
4 Excluding amortization
7
II. Recent Macroeconomic Development
2.1: GDP Growth
11. Annual GDP growth averaged 7.2 percent over the last seven years (2002-2008).
Over this period, the economy has registered sustained higher growth as evidenced by
macroeconomic stability. Despite the slowdown in the world economy resulting from the recent
global financial crisis, real GDP growth rate increased by 0.3 percentage points from 7.1 percent
attained in 2007 to 7.4 percent in 2008. The revised target for 2008 was 7.5 percent. The
increase emanated mostly from agriculture and services economic activities.
12. Agriculture: Growth in the agriculture activities increased by 0.6 Percentage
points from 4.0 percent in 2007 to 4.6 percent in 2008 due to improved weather condition
particularly on the first quarter of the year and the deliberate effort by Government to supply
farm implements including subsidised fertilizer particularly to the big four regions of Iringa,
Mbeya, Ruvuma and Rukwa, availability of good seeds and implements. Developments during
the first three quarters of 2008 indicated that food crop production has increased by 2.0
percent from 10.66 million tons in 2006/07 to 10.87 million tons in 2007/08, with food self
sufficiency reaching 105 percent. It should however be noted that the old notion of categorizing
crops between cash and food crops is no longer holding since many food crops such as maize,
paddy and beans are now treated as cash as well as food crops. As a result, a large portion of
maize harvested by farmers is sold out as cash crops, in some cases leaving inadequate stock of
food for their consumption before next harvest. The USD value of traditional and non-traditional
exports, on the other hand, registered sharp increase, from 19.7 and 15.5 percent in 2007 to
29.5 and 28.7 percent in 2008 respectively. However, bearing the impact of the Global Financial
Crisis (GFC) which started from the last quarter of 2008 on cash crops (which account for
roughly 10 percent of total crop production), growth of the crop sub-activity is estimated to
decline to 3.2 percent in 2009 compared with 5.1 in 2008.
13. Livestock activities grew by 2.6 percent in 2008, compared to 2.4 percent in 2007.
The sustained performance has been attributed by improvements in extension services in
livestock areas including vaccination, marketing, and water supply. On the other hand, hunting
and forestry sub-activity increased by 3.4 in 2008 compared with 2.9 percent in 2007 mainly
8
due to mainstreaming forest and hunting regulations which reduced the numbers of logs
exported illegally, as well as rationalisation of licence fees for forestry and hunting activities.
14. Fishing: Growth of fishing activities increased by 0.5 percentage point from 4.5
percent in 2007 to 5.0 percent in 2008, mainly on the account of Government effort to combat
illegal fishing practices, trafficking of fish and fisheries products across the borders,
strengthening aquaculture production and promoting environmental conservation.
15. Industry and Construction. The growth rate of industry and construction
economic activities declined from 9.5 percent in 2007 to 8.6 in 2008 mainly on account of low
performance in mining and quarrying sub-activity. Mining and Quarrying sub-activities
registered growth of 2.5 percent in 2008 which is 8.2 percentage points below the 2007
performance. The reasons for the bad performance were due to the closure of Buhemba gold
mine, change of share hold of Williamson Diamond and the closure of the potion of
underground mining infrastructure for the Geita gold mine, the biggest gold mine in the
country.
16. Construction and manufacturing sub-activities contributed immensely in the
positive performance of industry and construction economic activity, bolstered by expansion in
road construction, the on-going rehabilitation of defunct industries following state divestiture, as
well as the operationalization of Special Economic Zones (SEZs) under the Mini Tiger Plan.
Government policies to promote SMEs, as well as favourable trade and tax policies have also
contributed to the robust performance of the manufacturing sub-activity.
17. Services: The services economic activity continued to expand and the growth was
8.5 percent in 2008 compared to 8.1 percent in 2007. The growth in this activity mostly
emanated from trade and repairs, transport, communication, and the pull effect of increased
growth in the industrial economic activity, international trade and tourism.
18. Public administration, education and health grew by 7.0, 6.9 and 9.0 percent
in 2008 compared to 6.7, 5.5 and 8.8 percent in 2007 respectively. The sustained performance
is attributable to increased government spending to finance public service reforms and new
employment to replace retirees for local and central governments, social services particularly
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primary and secondary education development programmes and immunization programme,
control of malaria, tuberculosis (TB) and HIV/AIDS in health sector.
2.2: Inflation
19. In 2008, inflation has taken a much higher path than projected earlier due to
persistent increase in oil prices in the world market; increase in electricity tariffs and food
prices. The annual average rate of inflation for 2008 was 10.3 percent, compared to 7.0 percent
registered in 2007, hence raising serious concern for macroeconomic stability. Annual average
food inflation was 12.7 percent while non-food inflation was 6.7 percent in 2008 compared to
7.1 percent each for the two categories in 2007. The food price inflation was exacerbated by a
hike in transportation costs following increased in oil and fuel prices, and food shortage in the
neighboring countries following the persistent draught in 2007/08 season.
20. The rate of inflation has shown upward trend from 8.6 percent in January 2008 to
9.1 percent and 9.8 percent in May and August 2008 respectively. For the first time in more
than a decade, the inflation rate for September recorded a double digit increase to 11.6
percent, and rising further to 11.8 and 13.5 percent in October and December 2008
respectively. The trend however declined to 12.0 percent in April 2009.
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21. The world price of crude oil was at its peak of USD 150 per barrel in July 2008 and
thereafter dropped to less than USD 50 by the end of the year. Despite the decline in world oil
prices, the domestic pump prices did not decline commensurately as expected, hence forcing
the Government, through EWURA5, to intervene in ensuring that the global decline in oil prices
is adequately reflected in domestic oil prices.
Figure 2: Monthly Inflation Trend 2007 _ 2008
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2008
MonthsHeadline Food
Non_food Fuel, Power and Water
2.3: Government Finance
22. The total domestic revenue in 2007/08 was 15.9 percent of GDP compared to 14.1
percent of GDP in 2006/07. Total Government expenditure as a percentage of GDP was 22.8
percent in 2007/08 compared to 23.0 percent in 2006/07.
23. In the first half of the year 2008/09, fiscal performance was characterised by a
decline in domestic revenue collection, while expenditure was limited to the resource envelope.
Both total revenue and expenditure for the period under review were below the target but
higher than the amount of the corresponding period in 2007/08. The budget deficit during the
5 EWURA is an abbreviation for Energy and Water Utilities Regulatory Authority
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period July - December 2008 was Tshs - 962.2 billion and Tshs -95.3 billion before and after
grant respectively.
24. Revenue: During the period July - December 2008, domestic revenue amounted
to Tshs 2,162.2 billion, equivalent to an increase of 22 percent over the amount collected in the
corresponding period in the preceding year. This was however 6.8 percent below the target of
Tshs 2,319.3 billion for the period largely caused by low performance in import duties, PAYE,
domestic and petroleum excise, and non tax revenue. Tax revenue accounted for 95.3 percent
of the total revenue collected for the period and 6.1 percent below the target. Non tax revenue
decreased by 14 percent during the period under review and was 82.1 percent of the estimate.
25. By March 2009, cumulative revenue collection for 2008/09 was Tsh 3,199.1 billion
which was equivalent to 91.0 percent of the target of collecting Tsh 3,529.2 billion. Total
revenue collection by the end of the year is expected to be 10 percent below the target,
equivalent to Tsh 480 billions. The amount collected was however 20.4 percent higher than the
amount collected in the corresponding period of 2007/08. For the first nine months of 2008/09,
monthly average collection amounted to Tsh 355.5 billion compared to Tsh 289.0 billion in the
same period in 2007/08.
26. Generally all tax categories showed continued improvement in the period under
review (July – March) compared to the corresponding period of the fiscal year although they
were below the target. The collection of corporate income tax, PAYE, and domestic VAT were
impressive. This is attributable to improved tax administrative measures coupled with the
implementation of the 2004 New Income Tax Act that expanded the income tax bases. Trends
in the collection of domestic revenue suggest that targeted revenue estimates may not be
achieved by the end of the fiscal year partly on the account of falling import tax following the
current global economic recession.
27. Expenditure: Total expenditure decreased from 23.0 percent of GDP in 2006/07
to 22.8 percent in 2007/08. The total recurrent expenditure decreased from 16.2 percent to
14.9 percent of GDP while development expenditure increased from 6.9 to 7.9 percent of GDP
in 2006/07 and 2007/08 respectively.
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28. The overall likely outturn for 2008/09 is projected to increase slightly to 24.8
percent of GDP. Total expenditure in the first half of 2008/09 amounted to 3,124.3 billion, being
8.6 below the target for the period. Out of the total expenditure, recurrent expenditure
amounted to Tshs. 1,956.5 billion, equivalent to 62.6 percent. Government expenditure on
wages and salaries reached Tshs. 872.3 billion, equivalent to 102.0 percent of the estimated
amount of Tshs. 855,269 million. This included salary arrears payable to government employees
from January to June 2008. Interest payment on domestic debt during the period under review
reached Tshs. 81.0 billion, equivalent to 83 percent of the total estimated amount of Tshs.
97,613 million. Interest payment on foreign debt amounted to Tshs. 15.2 billion, equivalent to
103.0 percent of the period estimate.
29. Development expenditure was 1,167.9 billion, equivalent to 37.4 percent of the
total expenditure, out of which Tshs. 455.0 billion (39%) was local funds, while Tshs. 712.9
billion (61%) was foreign financed.
30. As of March 2009, the cumulative total expenditure was Tsh 4,656.8 billion
equivalent to 87 percent of the total estimate of Tsh. 5,364.9 billion. Recurrent expenditure
amounted to Tsh 3,142.3 billion while development expenditure was Tsh 1,514.5 billion.
31. External resources: The cumulative end year performance showed that total
grants increased to 6.9 percent of GDP in 2007/08 compared to 5.0 percent realized during
2006/07. The deficit after grants was 3.9 percent of GDP in 2006/07 and was 0 percent in
2007/08 while it is expected at 4.8 percent in 2008/09.
32. Net foreign borrowing remained at 3.2 percent of GDP for 2007/08, including GBS
loan (1.6 percent), project loans (0.9 percent) and basket support (0.9 percent). The GBS and
Basket loans performed at levels significantly higher than the preceding year partly a result of
some disbursements that were originally budgeted for 2006/07 materializing during 2007/08
fiscal year.
2.4: Public Debt
33. The public debt stock as at December 2008 stood at USD 6,329.0 million compared
to USD 5,891.8 million, at end-December 2007, equivalent to 7.4 percent increase. This is
13
however equivalent to 32.6 percent of nominal GDP compared with 31.8 percent in 2007.
Though the debt stock is increasing, it is however sustainable. The increase in debt stock is a
result of new disbursements from local and concessional foreign sources, exchange rate
depreciation and accumulation of arrears to non Paris club and commercial creditors. Out of
total debt stock, external debt amounted to USD 4,822.1 million, equivalent to 76.2 percent of
the total debt, or 24.9 percent of GDP, while domestic debt amounted to USD 1,506.9 million
(or sh. 1,929.3 billion), equivalent to 23.8 percent of total public debt and 7.8 percent of GDP.
Domestic debt as of December 2008 increased by sh. 35 billion, equivalent to 1.8 percent
increase. This was due to the inclusion of previous unrecorded special bonds and External
Payment Arrears (EPA) stocks.
34. Out of the total external debt by December 2008, USD 3,861.9 million was
disbursed outstanding debt (DOD), equivalent to 80.1 percent while interest arrears were USD
960.2 million, equivalent to 19.9 percent. Total external debt increased by 14.3 percent in 2008
from USD 3,861.9 million as of December 2007.
2.5: Money and Credit
35. Money Supply: In the second half of 2008, the annual growth of extended broad
money (M3) and broad money (M2) averaged 23.9 percent and 29.7 percent respectively. This
was up from an average of 21.6 percent and 27 percent for M3 and M2 respectively recorded
during the second half of 2007.
36. During the year ending December 2008, the growth rate of M3 decelerated to 24.0
percent from 26.0 percent in November 2008, while that of M2 decelerated to 28.4 percent
from 32.7 percent recorded in the previous month. The rate of growth of both broad money
supply was however higher than the targeted growth rate of 23.4 percent for the year ending
December 2008. The main driving factor behind the growth in monetary aggregates was the
strong growth of credit to the private sector in line with the expanding economic activities, as
well as improved interest rates.
14
Table 2: Trend in Selected Money Supply Components
Billions of Tzs
Items
Monthly Stock Monthly Change Annual Growth Rates (%)
Dec-07 Nov-08 Dec-08 Nov-08 Dec-08 Dec-07
Nov-
08 Dec-08
Extended broad money (M3) 5.993.3 7,418.20 7,430.7 23.4 12.5 21.9 26 24
Broad Money (M2) 4.259.9 5,532.60 5,467.70 102.3 -64.9 29.4 32.7 28.4
Currency in circulation (CC) 1,162.40 1,452.20 1,438.70 0.6 -13.6 19.4 26.6 23.8
Demand Deposits (DD) 1,414.90 1,788.90 1,745.30 35.9 -43.6 46 31.7 23.4
Time deposits (TD) 618.3 1,012.80 993.1 40.5 -19.7 27.5 66.8 60.6
Savings deposits (SD) 1,064.20 1,278.70 1,290.70 25.3 12 22.9 20.9 21.3
Foreign Currency deposits (FCD) 1,733.50 1,885.60 1,963.00 -79.0 77.4 6.8 9.9 13.2
FCD in million of USD 1,531.20 1,498.00 1,533.20 -39.3 35.2 19 2.2 0.1
Total deposits in the Commercial banks 5,147.90 6,234.20 6,390.60 28.3 156.4 23.3 22.7 24.1
Private sector 4,830.90 5,996.00 5,992.00 22.8 26.1 22.5 25.8 24
Government 317.1 268.2 398.6 5.6 130.4 35.5 -21.9 25.7
Net foreign assets of the banking system 3549.9 3628.4 3997.1 124 368.7 4.2 0.4 12.6
Bank of Tanzania 2,930.90 3,117.90 3,413.60 191.8 295.8 24.7 1.8 16.5
Commercial banks 619 510.6 583.5 -67.8 72.9 -41.4 -7.2 -5.7
Net domestic assets of the banking system 3,052.70 4,399.00 4,042.80 -100.6 -356.1 44.1 52.7 32.4
Domestic credit 2,814.30 4,557.30 4,420.60 -85.3 -136.7 25.7 65.5 57.1
Claims on government 2,013.10 2,256.40 2,071.10 189.7 -185.3 29.1 9.1 2.9
Government deposits 2,175.10 1,924.80 2,026.90 282.3 102.2 53.7 -12.2 -6.8
Claims on Private sector 2,976.30 4,225.60 4,376.40 7.3 150.8 42.2 46.8 47
Source: Bank of Tanzania
37. Credit to Private Sector: From July to December 2008, loans and advances
extended to the private sector increased by Tshs 989 billion. On average, credit to private
sector grew at an annual rate of 47 percent between July and December 2008 compared to the
average growth rate of 38 percent recorded in the corresponding period in 2007. The growth
was attributed by number of factors which includes the Government stance to reduce domestic
borrowing; increased number of credit-worthy borrowers; sustained moderate negotiated
lending rates; existence of credit guarantee schemes; availability of syndicated loans to
corporate customers; and implementation of the ongoing second generation financial sector
reforms. Although loans to the various sectors of the economy were more broad based, the
bulk of the total credit was channelled to finance personal activities (20 percent), trade (16.8
percent), manufacturing (14.5 percent), agriculture (11 percent) and property development (4
percent).
38. Financial deepening: Notwithstanding the robust performance of credit to
private sector, the level of monetization of the economy is still low as reflected by the ratio of
M3 to GDP, which stood at 30.03 percent in 2008, compared to 29.7 percent in 2007. Total
15
deposit mobilization to GDP ratio improved by 1.5 percentage point from 20.8 percent in
December 2007 to 22.3 percent in December 2008. Meanwhile, the private sector loans to GDP
ratio, has increased to an average of 13.6 percent in 2008 from 9.6 percent in 2007.
39. Interest Rates: On the interest rates offered by commercial banks, the overall
time deposit rate declined to an average of 6.39 percent in December 2008 from 8.28 percent
registered in December 2007. Similarly, negotiated deposit rates decreased from an average of
11.04 percent in December 2007 to 10.23 percent in December 2008. Savings deposit rates
have generally stabilized at around 2.6 percent during the year ending December 2008. On the
other hand, interest rates charged by banks have remained fairly stable, with the overall
lending rate increasing from an average of 15.25 percent in December 2007 to 16.05 percent in
December 2008, while the short term (up to one year) and negotiated lending rate dropped
from 14.17 and 11.98 percent to 13.56 and 11 .19 percent respectively in the same period.
Based on the above trend, the spread between saving and overall lending rate averaged 12.3
percent during the period under review.
Table 3: Tanzania Commercial Banks - Interest Rate Structure Dec-07 Jan-08 Jul-08 Aug-08 Sept-08 Oct-08 Nov-08 Dec-08
Domestic Currency
Savings Deposit Rate 2.65 2.79 2.66 2.63 2.64 2.61 2.63 2.68
Overall Time Deposits Rate 8.28 6.66 6.58 5.86 6.43 6.22 6.38 6.39
Call Accounts 0.78 0.80 0.76 0.75 0.76 0.83 0.64 0.65
1 Month 9.26 6.05 5.96 5.79 6.10 6.48 6.24 6.53
2 Months 6.97 6.90 8.69 6.79 8.14 7.07 7.31 7.96
3 Months 9.33 7.92 7.11 7.36 7.30 7.22 7.80 7.38
6 Months 8.66 8.97 8.91 7.03 7.61 7.25 7.93 8.20
12 Months 10.08 8.29 8.17 7.48 8.05 8.20 8.76 8.29
24 Months 12.92 7.71 6.49 5.82 7.07 6.52 5.96 5.75
Negotiated Deposit Rate 11.04 10.62 9.26 9.63 10.27 10.11 10.26 10.23
Overall Lending rate 15.25 14.76 15.05 14.83 14.91 14.82 14.30 16.05
Call Loans 19.25 19.25 19.25 19.25 19.25 19.25 19.25 19.25
Short-term (up to 1 year) 14.70 13.93 13.35 13.86 14.04 13.27 13.57 13.56
Medium-term (1-2 years) 16.60 15.56 15.72 15.82 15.74 15.40 15.38 16.57
Medium-term (2-3 years) 15.48 14.58 15.28 15.65 15.66 15.39 14.62 17.18
Long-term (3-5 years) 16.66 16.64 16.92 15.80 15.94 16.32 15.69 16.52
Term Loans (over 5 years) 12.84 13.07 14.00 13.01 13.18 13.69 12.22 16.43
Negotiated Lending Rate 11.98 13.07 11.01 12.18 12.68 13.38 11.96 11.91
Source: Bank of Tanzania
16
40. Foreign Exchange: By December 2008, the value of the Shilling had depreciated
by 13.1 percent to an average of Tshs. 1,280.30 per USD, from Tshs. 1,132.09 in December
2007 mainly on account of speculation in the financial markets to hedge against the likely
impact of the GFC. Despite the relatively higher demand for foreign exchange in the year under
review, the Shilling exchange rate maintained its strength against the dollar, which is in line
with the sustained tight monetary policy stance by the Bank of Tanzania. The annual exchange
rate averaged Tshs 1,196.3 per USD in 2008, (period average) compared to an annual average
of Tshs 1,244.1 per USD in 2007. The stock of gross official reserves stood at USD 2.9 billion at
the end of December 2008, enough to finance imports of goods and services for 4.5 months.
Figure 3: Commercial Banks Interest Rate Structure
0
2
4
6
8
10
12
14
16
18
Dec-07 Jan-08 Jul-08 Aug-08 Sept-08 Oct-08 Nov-08 Dec-08
Percent
Savings Deposit Rate Overall Time Deposits Rate Overall Lending rate
17
Fig 4: Tanzania: Monthly Average Exchange Rate Movements (e.o.p)
2.6: Second Generation Financial Sector Reforms
41. Progress towards the implementation of the Second Generation Financial Sector
Reforms (SGFSR) is on track. The Social Security (Regulatory Authority) Act was passed
by the parliament and assented by the President of the United Republic of Tanzania on 06th
June, 2008. The Act provides powers to the Bank of Tanzania to regulate and supervise all
financial matters of the social security funds. Other powers vested in the Bank according to the
Act include issuance of investment guidelines; monitor and ensure compliance to the
investment guidelines; and inspect and examine schemes in all financial matters. Furthermore,
the Government is in the process of establishing the Social Security Regulatory Agency (SSRA)
and its regulatory framework.
42. In 2008, the Bank of Tanzania engaged a consultant (CRISIL Risk and
Infrastructure Solutions Limited from India) to assist in determining the best way to transform
Tanzania Investment Bank Ltd into an effective and sustainable Development Financial
Institution (DFI) and define the parameters within which TIB may operate successfully as a DFI.
18
The Consultant recommended among other things that TIB be positioned as an umbrella DFI
that will focus more on SME sector and provide long term financing. The government is in the
process of analysing the recommendations of the consultant to ensure smooth transformation
of TIB.
43. Regarding the capitalization of TIB, by December 2008, the Government
disbursed sh. 15 billion to TIB and additional sh. 3 billion from EPA for agriculture financing. TIB
opened an interim window for financing agriculture while waiting for the establishment of a
specialised agriculture bank.
44. The financial Leasing Act was passed by the National Assembly during April
2008 session and came into force on 1st July 2008. The draft regulations have also been
prepared. One of the aims of the regulations is to regulate financial leasing operations by
entities other than banks and financial institutions. In 2008, several education campaigns have
been conducted to stakeholders on the concept and importance of leasing finance.
45. Bills for the Mortgage Financing (special provisions) Act and Unit Titles Act were
passed by the National Assembly during its November, 2008 session, assented by the president
and are waiting to be gazetted to become operational.
2.7: External Sector Developments
46. Exports: Total export earnings increased by 26.9 percent in 2008 relative to 2007.
In particular, merchandise exports increased by 36.4 percent in 2008, driven by a strong
performance in manufactured goods which account for 25 percent of total merchandise exports.
On the other hand, service receipts increased by 15.6 percent following improvement in travel,
insurance and other business services receipts.
47. Traditional exports: Traditional exports increased by 30.9 percent from USD
319.7 million in 2007 to USD 418.4 million in 2008. The strong performance is primarily driven
by an increase in the value and volume of exports of cotton and cashew nuts. The two crops
accounted for 37.1 percent of the overall traditional export earnings in 2008. Cotton emerged
as the main driver of traditional export growth, increasing by 73.2 percent in its value and 47.3
19
percent in its volume. The value of cotton export increased from USD 66.4 million in 2007 to
USD 115.0 million in 2008 while the volume increased from 59,100 tons in 2007 to 87,000 tons
in 2008. Cashew nuts also increased by 33.3 percent in its volume from 41,300 tons in 2007 to
55,000 tons in 2008 and the value increased by 56.7 percent. This was partly outweighed by a
decline in value of sisal exports by 62.3 percent in 2008.
48. Non-Traditional Exports: During 2008, earnings from non-traditional exports
increased by 33.2 percent to USD 2,270.6 million from USD 1,704.5 in 2007. Much of the
increase was driven by manufactured goods export which significantly went up by more than
100 percent from USD 309.8 million in 2007 to USD 662.3 million in 2008. Minerals continued to
dominate non-traditional exports, accounting for 43.8 percent of non-traditional export
earnings, followed by manufactured goods which accounted for 29.2 percent. With the
exception of value of fish and fish products which declined by 13.5 percent in 2008, all other
non-traditional exports recorded positive growth in 2008.
49. Service Exports: During 2008, service receipts amounted to USD 2,168.9 million
up from USD 1,875.7 million in 2007, equivalent to an increase of 15.6 percent. This increase
was mainly driven by higher receipts from travel and other business services. Receipts from
travel including tourism accounted for 62.4 percent of total service receipts, and increased from
USD 1,198.8 million in 2007 to USD 1,354.0 million in 2008, equivalents to an increase of 12.9
percent. This development is partly a result of the on-going promotional campaigns of
Tanzania’s tourist attractions.
20
Table 4: The Value, Volume and Price of Tanzania’s Major Exports
2001 2002 2003 2004 2005 2006 2007 r 2008 P
2007-2008 (% Change)
Traditional exports
Coffee
Value (US$ million) 57.1 35.2 50.0 49.8 74.3 61.4 98.1 97.5 -0.6%
Volume ('000 tons) 48.4 36.4 46.2 38.6 46.1 31.5 45.0 44.2 -1.7%
Price (US$ per ton) 1,179.1 968.4 1,081.7 1,289.6 1,613.6 1,953.1 2,177.6 2,203.4 1.2%
Cotton
Value (US$ million) 33.7 28.6 46.5 74.6 111.5 55.8 66.4 115.0 73.2%
Volume ('000 tons) 36.8 33.3 46.9 77.6 112.9 55.0 59.1 87.0 47.3%
Price (US$ per ton) 915.3 859.4 992.0 961.1 987.9 1,014.2 1,123.8 1,321.4 17.6%
Sisal
Value (US$ million) 6.7 6.6 7.3 7.2 7.3 6.1 8.8 3.3 -62.3%
Volume ('000 tons) 13.9 12.7 13.9 12.0 9.3 8.0 9.5 2.7 -72.0%
Price (US$ per ton) 482.0 516.4 523.5 602.8 781.7 766.7 928.4 1,251.4 34.8%
Tea
Value (US$ million) 29.0 29.6 24.8 30.1 25.6 31.0 28.7 40.8 42.1%
Volume ('000 tons) 23.0 24.3 21.2 24.3 21.8 22.4 21.5 25.9 20.4%
Price (US$ per ton) 1,264.4 1,217.8 1,170.3 1,237.3 1,178.0 1,384.9 1,334.8 1,575.3 18.0%
Tobacco
Value (US$ million) 35.7 55.5 39.9 57.6 80.8 65.2 87.8 108.1 23.1%
Volume ('000 tons) 18.7 25.4 18.3 27.2 31.1 25.0 37.9 35.6 -6.2%
Price (US$ per ton) 1,906.2 2,188.6 2,177.0 2,119.4 2,593.1 2,611.4 2,318.1 3,041.2 31.2%
Cashewnuts
Value (US$ million) 56.6 46.6 41.8 68.1 46.6 39.4 25.6 40.2 56.7%
Volume ('000 tons) 95.0 79.0 65.1 83.6 62.0 66.3 41.3 55.0 33.3%
Price (US$ per ton) 595.4 589.7 641.6 814.2 751.1 594.4 621.1 730.1 17.5%
Cloves
Value (US$ million) 12.3 4.0 10.3 10.3 8.5 8.2 4.2 13.5 219.9%
Volume ('000 tons) 2.5 1.2 5.6 4.3 3.0 2.4 1.4 3.8 165.5%
Price (US$ per ton) 5,026.8 3,237.2 1,845.2 2,367.3 2,863.5 3,346.2 2,968.3 3,577.5 20.5%
Sub Total Value (Traditional exports) 231.1 206.1 220.5 297.8 354.5 267.1 319.7 418.4 30.9%
Non-traditional exports (US$ million)
Minerals 302.2 383.8 552.2 680.2 711.3 836.8 848.7 995.5 17.3%
Gold 254.1 341.1 502.8 629.9 655.1 786.4 788.2 932.4 18.3%
Diamond 27.1 22.0 28.6 31.6 24.4 22.2 26.0 20.2 -22.3%
Other minerals 21.1 20.7 20.7 24.8 31.4 28.3 34.4 42.8 24.3%
Manufactured goods 56.2 65.9 83.8 110.1 156.1 195.8 309.8 662.3 113.8%
Fish and Fish Products 96.8 116.8 136.2 125.7 147.5 145.9 163.6 141.6 -13.5%
Horticultural Products 11.0 10.9 13.7 14.3 18.3 15.4 19.1 32.2 68.4%
Re-Exports 74.9 77.0 86.9 137.0 127.1 128.3 149.7 160.3 7.1%
Other Exports 79.2 119.2 122.9 108.1 161.5 154.0 213.7 278.7 30.4%
Sub Total (Non-traditional) 620.2 773.5 995.7 1,175.4 1,321.8 1,476.2 1,704.5 2,270.6 33.2%
GRAND TOTAL 851.3 979.6 1,216.2 1,473.2 1,676.3 1,743.3 2,024.2 2,688.9 32.8%
Source: Bank of Tanzania
21
Figure 5: The Composition of Goods Exports by Major Category: 2002-2008
Figure 6: Share of Exports by Type of Commodity (2008)
50. Imports. The value of merchandise imports (f.o.b) increased from USD 4,860.6
million in 2007 to USD 6,439.9 million in 2008, equivalent to an increase of 32.5 percent.
Capital goods imports increased from USD 1,765.0 million in 2007 to USD 2,648.6 million in
2008, equivalent to an increase of 50.1 percent. This increase was mainly driven by increased
transport equipments, building and construction equipments and machinery imports, consistent
22
with the sustained growth in investment. Intermediate goods imports increased from USD
1,970.7 million in 2007 to USD 2,514.9 million in 2008, equivalent to an increase of 27.6
percent. Oil imports in particular went up by 25.7 percent from USD 1,462.1 in 2007 to USD
1,838.6 million in 2008. The increase was driven in part by the increase in the price of oil in the
world market and volume of imported oil. Consumer goods imports increased from USD 1,122.7
million in 2007 to USD 1,274.2 million in 2008, equivalent to an increase of 13.5 percent.
Import of food and food stuffs however decreased by 7.8 percent.
51. Services payments increased by 12.9 percent from USD 1,415.4 million in 2007 to
USD 1,598.0 million in 2008, largely due to increase in payments in transportation and travel
services.
Table 5: Imports by Major Category USD million
Import Category 2002 2003 2004 2005 2006 2007 2008
Provisional
2007-2008 (%
Change)
Capita Goods 656.3 741.5 860.0 1,078.1 1,435.1 1,765.0 2,648.6 50.1%
Transport Equipment 198.6 212.5 229.0 289.6 374.8 477.8 787.8 64.9% Building and Construction 122.6 151.3 185.5 257.2 338.0 416.7 619.5 48.7%
Machinery 335.1 377.7 445.5 531.3 722.4 870.5 1,241.3 42.6%
Intermediate Goods 384.9 618.4 856.0 1,166.3 1,576.9 1,970.7 2,514.9 27.6%
Oil Imports 177.3 367.0 575.0 847.3 1,146.5 1,462.1 1,838.6 25.7%
Fertilizer 18.3 26.0 54.1 64.6 53.9 59.1 150.4 154.4%
Industrial raw materials 189.3 225.4 227.0 254.4 376.5 449.4 525.9 17.0%
Consumer Goods 467.9 571.4 764.7 751.0 849.9 1,122.7 1,274.2 13.5%
Food and Food stuffs 134.0 166.0 248.8 168.4 249.2 315.4 290.9 -7.8% All other consumer goods 333.9 405.4 515.9 582.6 600.7 807.3 983.4 21.8%
Grand Total (F.O.B) 1,511.3 1,933.5 2,482.8 2,997.6 3,864.1 4,860.6 6,439.9 32.5%
Grand Total (C.I.F) 1,660.8 2,124.7 2,728.4 3,294.0 4,246.3 5,341.4 7,076.8 32.5%
Source: Bank of Tanzania
23
Table 6: Balance of Payments (BoP) US D million
2002r
l 2003r
l 2004r
l 2005r
2006r
l 2007r
2008p
Goods Balance (531.7) (717.3) (1,001.2) (1,318.5) (1,946.5) (2,634.1) (3,403.2)
Export (fob) 979.6 1,216.1 1,481.6 1,679.1 1,917.6 2,226.6 3,036.7
Import (fob) 1,511.3 1,933.5 2,482.8 2,997.6 3,864.1 4,860.6 6,439.9
Service Balance 287.6 222.1 158.9 61.8 278.7 460.3 570.9
Receipts 920.1 947.8 1,133.6 1,269.2 1,528.1 1,875.7 2,168.9
Payments 632.5 725.7 974.7 1,207.3 1,249.4 1,415.4 1,598.0
Income (88.8) (149.1) (112.4) (102.0) (64.1) (58.1) (118.1)
Receipts 67.9 87.1 81.8 80.9 80.3 107.3 121.6
Payments 156.8 236.2 194.2 182.9 144.4 165.4 239.7
Current transfers 416.6 556.9 588.8 495.7 588.7 651.5 617.0
Inflows 477.9 619.9 653.8 563.3 654.6 724.0 697.2
O/W Government 427.7 553.3 581.7 477.9 559.7 626.9 594.2
Outflows 63.0 63.0 65.0 67.5 65.9 72.5 80.2
CURRENT ACCOUNT BALANCE
83.6 (87.5) (365.9) (862.8) (1,143.2) (1,580.3) (2,333.4)
Capital transfers 785.7 692.8 459.9 393.2 5,183.5 923.7 637.5
Inflows 785.7 692.8 459.9 393.2 5,183.5 923.7 637.5
Government 755.6 655.5 420.0 350.1 5,135.0 870.5 577.7
O/W debt forgiveness incl. MDRI
430.3 334.6 166.3 112.1 4,961.7 523.0 0.0
Other Sectors 30.1 37.3 39.9 43.1 48.6 53.2 59.8
Outflows - - - - - - -
Financial account 255.4 61.2 306.3 555.6 (3,954.6) 946.0 1,883.3
Direct Investment 387.6 308.2 330.6 494.1 597.0 647.0 744.0
Portfolio Investment 2.2 2.7 2.4 2.5 2.6 2.8 2.9
Other Investment (134.4) (249.7) (26.7) 59.0 (4,554.2) 296.3 1,136.4
Errors and Omissions (806.8) (277.4) (116.3) (313.7) 375.0 123.3 (78.7)
OVERALL BALANCE 317.9 389.1 284.0 (227.8) 460.7
412.6 108.81
Financing (317.9) (389.1) (284.0) 227.8 (460.7) (412.6) (108.8)
Reserve Assets (372.4) (508.8) (308.2) 253.1 (126.5) (419.4) 108.3
SDR and loans 26.0 (2.9) (33.8) (50.5) (334.2) 6.7 (0.4)
Exceptional Financing 28.5 122.6 58.0 25.1 0.0 0.0 0.0
Source: Bank of Tanzania r revised p provisional
24
52. The trade balance account registered a deficit of USD 3,403.2 million in 2008
compared to a deficit of USD 2,634.1 million in 2007. The service account surplus increased
from USD 460.3 million in 2007 to USD 570.9 million in 2008, while the balance on current
transfers decreased to USD 617.0 million from USD 651.5 million recorded in 2007.
53. The current account balance. The current account deficit increased from USD
1,580.3 million in 2007 to USD 2,333.4 million in 2008, equivalent to an increase of 47.7
percent. The deficit is equivalent to 12.1 percent of GDP. The deterioration of current account
balance is due to the larger increase in merchandise imports and the slower growth in exports.
2.8: Poverty Reduction Efforts
54. Since the inception of the National Strategy for Growth and the Reduction of
Poverty (NSGRP) in 2005/06, there has been progress towards attaining its targets. NSGRP
areas that have recorded good performance include real GDP growth, domestic revenue
collection and related revenue services, education, water, health, infrastructure development
and public expenditure management. Although commendable achievements have been
recorded, numerous challenges remain to be addressed, creating a need for even greater
efforts over the medium term. Some of the challenges include the issue of quality social service
provision as well as addressing pro-poor growth. The general overview of performance on
cluster wise is detailed below:
55. Cluster I: Between 2001 and 2007 income poverty declined marginally with
variations across strata and regions. According to preliminary estimates from HBS (2007), the
proportion of people living below food poverty line declined from 18.7 percent to 16.5 percent
while those living below basic needs poverty line declined from 35.7 percent in 2001 to 33.3
percent. Furthermore, income inequality in overall terms declined from 0.35 in 2000 to 0.33 in
2007. Inequality in Dar es Salaam and other urban areas registered a decline between 2000
and 2007 but in the rural areas, it increased from 0.33 in 2000 to 0.35 in 2007.
Table 7: Incidence of Poverty Mainland Tanzania
Dar Es Salaam Other Urban Rural Areas Total
2000/01 2007 2000/01 2007 2000/01 2007 2000/01 2007
Food 7.5 6.7 13.2 12.9 20.4 18.4 18.7 16.5
Basic needs 17.6 16.2 25.8 24.1 38.7 37.4 35.7 33.3
Source: NBS – HBS 2007
25
56. Cluster II: The enrolment in pre-primary schools increased by 9.9 percent
between 2007 and 2008 and the net primary school enrolment rate has been on increase and
towards the targeted rate of 99 percent. Primary pupil - teacher ratio has increased slightly
from 53:1 in 2007 to 54:1 in 2008 away from the targeted proportion of 45:1. The proportion of
children with disability attending primary schools reached 41 percent in 2007, two times the
MKUKUTA target of 20 percent by 2010. The rate of students completing standard seven has
declined from 68.7 percent in 2005 to 56.7 percent in 2007 far from the targeted rate of 90
percent by 2010. Also, the percentage of transition from standard VII to form I have declined
from 67.5 percent in 2006 to 56.7 percent in 2007.
57. By December 2007, 75 percent of health facilities were providing vaccination
services. The health sector trained 2,100 service providers in the areas of safe child delivery,
family planning and reproductive health for youth. Additionally, HIV/AIDS prevalence amongst
15-24 year old blood donors has remained constant at 7.4 percent for the four consecutive
years i.e. 2004-2007. The 2007/08 THMIS found that 6 percent of the population aged 15-49 in
Tanzania is HIV/AIDS positive. HIV prevalence is higher among women than men (7 percent
and 5 percent, respectively). These rates are slightly lower than those recorded in the 2003/04
Tanzania HIV/AIDS Indicator Survey (THIS) 7 percent overall, 8 percent for women and 6
percent for men.
58. There are improvements in provision of clean and safe water where population
with access to piped water has increased from 78 % in 2006 to 79.9 % in 2007 in urban areas
and from 55.7 % in 2006 to 57.1 % in 2007 in rural areas.
59. Cluster III: In 2007/08, the government continued to strengthen democratic
participation in decision making. This was manifested in participatory planning and dialogue,
continued observance of the rule of law, freedom of expression, and provision of feedback
through monitoring, evaluation and reporting. This has resulted in enhanced transparency and
accountability in the conduct of public affairs.
60. During the implementation period of MKUKUTA, the Government reviewed and
amended 12 laws, 23 bills were passed out, of which 17 were assented; and about 422
26
subsidiary laws and notices were gazetted. There is increasingly improvement in vital
registration whereas the Registration Insolvency and Trusteeship Agency (RITA) issued the
following certificates: 2,268,272 for births, 117,295 for deaths, 12,295 for marriages and 48 for
divorces in 2007/08.
61. NACSAP II was adopted to strengthen anti-corruption landscape. PCCB
investigated a total of 2,887 cases, out of which 1,009 investigations were completed, which is
about 35 percent of the total backlog. Meanwhile, in a bid to reduce bulkiness of court cases, a
total of 15 high court judges were appointed; while 95 resident magistrates and district court
magistrates; and 128 lower court magistrates were employed in 2008. As a result, the pace of
disposing cases increased. The Director of Public Prosecutions reviewed a total of 106 case files
from the PCCB, out of which 34 cases were filed and forwarded to the High Court for further
action. Resident Magistrates’ and District Courts disposed 17,595 cases out of 30,615 registered
cases and Land Court disposed 736 cases out of 5,013 registered land cases. On the other
hand, High Court disposed 4,863 cases out of 14,152 registered cases.
62. The Government has continued to implement measures to ensure participation and
representation of all, including the most vulnerable in decision making. The proportion of
women in higher decision making level accounted for about 25 percent in 2007/8, whereas at
LGAs level women accounted for about 22 percent.
2.9: Foreign Direct Investment
63. In the past five years, FDIs into Tanzania have been increasing, with an average of
USD 414.7 million annually during the period 2003 to 2007. On average, FDI growth recorded a
growth rate of 7.2 percent per annum for the same timeframe. This is attributed to the
improvement of the investment climate in the country, coupled with enhanced investment
promotion. In 2008, the value of FDI increased by 15.0 percent to USD 744.0 million from USD
647.0 million in 2007.
2.10: Investment
64. In 2008, the Tanzania Investment Centre (TIC) approved 871 projects including
621 new, and 250 for either rehabilitations or expansions. Of the approved projects in 2008,
27
450 were local, 208 foreign and 213 were joint ventures. Those projects worth Tshs.
8,016,116.4 million with employment potential estimated at 109,521 jobs, compared to 701
projects worth Shs. 7,221,666 million with employment potential of 103,958 jobs in 2007. Of
the approved projects in 2007, 533 were new and 168 were either rehabilitations or expansions
and project ownership indicates that, 376 were local, 147 foreign and 178 were joint ventures.
The sectors that attracted the most investors in 2008 were tourism (with 268 projects
approved), manufacturing (221), commercial building (141) and transportation (93) and
agriculture (45). On regional distribution of projects, Dar es Sallam region led with 472 projects,
Arusha 149 and Mwanza 60 projects.
65. Tables 8 - 10 below show the number of approved projects, the sectoral
distribution of projects and the regional distribution of projects respectively.
Table 8: Approved Projects (1996-2008)
Year
Approved
Projects
Local
Projects
Foreign
Projects
Joint
Ventures
Total
Employment
Value Shs.
(Million)
1996 111 49 17 45 19,745 376,979
1997 199 90 53 56 37,311 602,642
1998 213 111 46 56 35,010 447,275
1999 181 81 43 57 12,933 399,138
2000 1624 745 343 536 241,250 4,957,288
2001 220 87 53 80 24,699 1,091,805
2002 311 126 104 81 33,132 1,024,536
2003 372 155 109 108 198,458 1,669,363
2004 454 208 119 127 55,057 1,245,040
2005 550 281 131 138 55,663 1,651,063
2006 679 345 161 173 74,946 7,052,749
2007 701 376 147 178 103,958 7,221,666
2008 871 450 208 213 109,521 8,016,116
Source: TIC
28
Table 9: Registered Projects by Sector: January-December 2008
SECTOR PROJECTS APPR.
NEW PROJECT
EXP/REH PROJECTS
LOCAL PROJECTS
FOREIGN PROJECTS
JOINT VENTURE Jobs
INVESTMENT US$ MLNS
1 Agriculture 45 31 14 18 11 16 8,584 167.00
2 Natural Res. 6 3 3 0 2 4 554 5.36
3 Tourism 268 190 78 167 45 56 17,822 569.04
4 Manufacturing 221 161 60 83 80 58 26,451 1,827.09
5 Petrol & Mining 1 0 1 0 1 0 58 2.1
6 Comm. Building 141 108 33 73 34 34 10,214 662.74
7 Transportation 93 66 27 60 18 15 7,265 344.93
8 Services 26 16 10 7 8 11 3,699 165.74
9 Computor 0 0 0 0 0 0 0 0
10 Financial Inst. 13 6 7 4 2 7 1,095 61.88
11 Telecoms 6 3 3 1 0 5 2,878 1,086.33
12 Energy 4 3 1 1 2 1 357 33.40
13 H. Resources 32 24 8 24 5 3 2,660 183.70
14 Ec. Infrastr. 8 5 3 5 0 3 27,739 1,564.43
15 Broadcasting 7 5 2 7 0 0 145 6.355
Total 871 621 250 450 208 213
109,521 6,680.097
Source: TIC
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Table 10: Regional Distribution of Registered Projects: January to December 2008
S/NO.
SECTOR
D'SALAAM
MWANZA
MOROGORO
ARUSHA
K/NJARO
TANGA
MBEYA
IRINGA
DODOMA
S'NYANGA
TABORA
KIGOMA
KAGERA
RUKWA
MTWARA
LINDI
RUVUMA
COAST
MARA
SINGIDA
Manyara
TOTAL
1 Agr. & L'stock Dev. 6 2 7 7 2 3 0 3 1 0 0 0 1 0 0 0 0 4 2 0 1 39
2 Nat. Resources 2 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4
3 Tourism 108 25 7 82 15 4 5 1 2 3 0 0 0 2 0 3 1 10 4 0 1 273
4 Manufacturing 124 16 2 22 5 11 2 5 5 5 1 4 4 2 1 1 16 2 0 0 228
5 Petrol & Mining 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
6 Commercial Bld 107 5 2 14 2 1 1 1 2 1 0 1 0 0 0 0 0 0 0 0 0 137
7 Transportation 62 6 4 11 1 1 1 1 0 0 2 0 0 0 0 0 0 3 0 0 0 92
8 Services 22 1 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 26
9 Computer 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
10 Financial Insts 10 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12
11 Telecoms 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6
12 Energy 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 5
13 Hum. Resources 12 1 0 6 3 1 2 1 1 1 0 0 3 0 0 0 0 1 1 0 0 33
14 Ec. Infrastructure 8 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 10
15 Broadcasting 1 2 0 4 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8
TOTAL 472 60 22 149 29 23 12 7 11 10 7 2 8 6 2 4 3 35 10 0 2 874
30
2.11: Employment and Economic Empowerment
66. The overall unemployment rate for Tanzania Mainland fell from 12.9 percent in
2001 to 11 percent in 2007 but with a much larger decline in urban than in rural areas
according to the Integrated Labour Force Survey (ILFS) 2006 Report. Women experienced a
bigger drop of 1.8 percent points than men which is only 0.9 percent points. This was attributed
to increased level of awareness amongst employers to recruit women from the labour market
and deliberate women’s efforts to access credit from the financial institutions for creating self
employment.
67. On the other hand, the government has continued to implement the National
Employment Creation Programme 2006 - 2010 which is appropriately complemented by
Properties and Business Formalization Program (MKURABITA); National Economic
Empowerment and Job Creation Program (JK Fund); and other initiatives. The objective of this
program is to increase the number of people employed in the formal sector.
68. On 23rd January, 2008, the Mwananchi Empowerment Fund was launched with a
capital of Tshs 400 million. The main objective of this Fund is to guarantee small and medium
entrepreneurs who are unable to get credit from the banking system due to lack of collateral.
The Government through NEEC entered into agreement with CRDB whereby the Bank will give
loans three times the amount deposited that is, Tshs.1.2 billion. By December 2008, a total of
Tshs 772.6 million was disbursed as loans to SACCOS in four regions of Lindi, Mtwara, Manyara
and Rukwa. This is equivalent to 64.4 of the target. The National Economic Empowerment and
Job Creation Fund (commonly known as J.K Fund) on the other hand has extended loan
through CRDB Bank and NMB worth Tshs 37.1 billion as of December 2008, equivalent to 17.8
percent higher than the target of extending loan worth Tshs 31.5 billion. The number of
entrepreneurs benefited from this loan was 44,224.
2.12: Private Sector Development
69. The regulatory climate for private sector development in Tanzania is improving
through dialogue between the Government and private sector under Tanzania National Business
Council (TNBC) and Business Environment Strengthening Programme (BEST). However as
indicated in the “Doing Business 2009 Rankings” by World Bank, the overall “ease of doing
31
business” rank declined marginally from 124th out of 181 countries in 2007, to 127th out of 181
countries in 2008. The Government has prepared Regulations in line with Business Activities
Registration Act (BARA) 2007 and the implementation of the Act will be piloted in 24 LGAs and
will reduce cost and time of starting business. This process will potentially allow to better
appreciate the benefits and problems with the current legal, institutional and physical
infrastructure set up, and substantive revisions and amendments to the Act and Regulations will
be made where necessary, based on the lessons drawn from the pilot.
70. The government seeks to promote Public Private Partnership (PPP) to meet the
increasing demand for financing infrastructure development. This will increase participation of
the private sector in the implementation of infrastructure projects, while ensuring a fair sharing
of risks associated with such projects. To this end, the government is finalising the PPP policy
and is expected to be approved by June 2009.
2.13: National Identity Cards Project
71. The government has continued to implement the National Identification and
Registration of person’s project to ensure that all eligible Tanzanians aged 18 years and above
have access to national identity cards by 2015. The National Identification Authority (NIDA) has
been established in July 2008 to oversee preparation and issuing national identity cards to all
eligible Tanzanians.
72. Other key milestones which are at different levels of implementation include:
establishment of technical infrastructure; web enabled customer service system; data collection
system; birth, death and marriage registration system; instituting ICT security and maintenance
standards; establishing an interfacing among government major systems such as passport,
driving licence, visa, tax payer identification numbers; and conducting national ID awareness
campaign and training to Tanzanians on the importance of the project to the country.
Furthermore, procurement process for a competent company which will prepare national
identity cards is in progress.
2.14: Regional cooperation
73. Tanzania will continue to strengthen regional integration including AU, SADC and
EAC, with the view to promote economic partnership among member states. Thus, the
32
government will continue with negotiations to reach the Economic Partnership Agreement
(EPA). Further, the government will ensure redeployment of highly qualified and experienced
officials especially in the fields of economy and trade for diplomatic missions. The process of
establishing East African Common Market is at advanced stage and Tanzania will cooperate in
this endeavour.
74. The implementation of EAC Customs Union Protocol commenced on 1st January
2005, after its ratification by the EAC Partner States. The basic elements of the EAC Customs
Union under implementation are the Common External Tariff, Programme for Elimination of
Internal Tariffs, Non-tariff Barriers and a Common Customs Law.
75. Tariffs on intra-EAC trade are being progressively phased out and will be fully
eliminated by 2010. Generally the implementation of the Customs Union has triggered positive
change, including boosting trade and revenue levels in Tanzania and East Africa as a whole.
Revenue collection in Tanzania has grown from 1.6 trillion in 2004/2005 to 4.6 trillion in
2008/2009. The Ministry of East African Cooperation is in the process of carrying out an
evaluation of the impact of the Customs Union.
76. The third EAC Development strategy (2006-2010) has put emphasis on the
implementation of the projects and programmes in the areas of infrastructure and energy. The
Heads of States of the East African Community inaugurated the rehabilitation of the Arusha-
Namanga-Arthi River Road in April 2009. The road has a total of 375 kilometres.
2.15: Research and Development
77. Expenditure on Research and Development (R&D) is often a critical determinant of
the pace of technological progress in an economy. R&D spending fosters the development of
new products and processes, boosts productivity and raises the returns to capital and labour. It
is therefore a vital determinant of an economy’s competitiveness and long-run growth
prospects.
78. Total domestic R&D allocation in Tanzania is estimated at between 0.01 percent
and 0.24 percent of GDP. However the Government is committed to increasing this allocation to
1.0 percent of GDP by 2009 in response to its commitment to attain the MDGs. Public sector
33
spending on R&D is dominated by medical research which accounts for 74.7 percent of total
spending on R&D. This is followed by agricultural sciences, which accounts for 14.6 percent of
R&D spending, engineering sciences & technology (10.31 percent) and social sciences (0.39
percent).
79. Technological transfer remains a problem due to lack of link between research and
usage of research findings. Other problems are inadequate funding and ineffective coordination
amongst institutions dealing with R&D. It is therefore vital that efforts be made to facilitate the
effective utilization of research findings, coordinate research endeavours and mobilise financial
and academic support in favour of research.
III: Emerging Macroeconomic Policy Issues, Challenges and Strategic Direction
3.1: Global Financial Crisis
80. The currently flagging global economy means different stories to different
individual economies. GDP growth in OECD countries has contracted (US 0.3, UK 0.5,), while
slowing down in others, especially China. The current situation has revealed that industrial
production in USA has dropped by 5 percent, unemployment has reached 8.5 percent by March
2009 and about 650,000 people have been retrenched so far and the same trend is expected to
continue in 2009 and stretching to other developed countries. Both portfolio and direct foreign
investment have dropped dramatically in several countries as investors shy away from markets
that are perceived to be riskier.
81. The likely impact to Tanzania can be viewed in two perspectives, - on performance
of the real economy and on the financial sector. The decline in incomes and thence demand in
developed countries have impacted negatively exports of our goods and services. Prices of key
export commodities are falling as consumer demand continues to decline. Some of the major
cotton dealers in the world market for instance have cancelled orders of cotton from Tanzania
and leading to stock pile up due to lack of orders. As a result, some dealers are unable to
service their debts borrowed from banks particularly CRDB, NMB and EXIM. Other commodities
affected are coffee, cashewnuts, sisal, and horticulture (flowers) and gemstone. In connection
to this, the number and level of spending by tourist coming to Tanzania has started to decline
as tourists cut back on holiday making. Earnings from tourism which account for 28 percent of
34
all proceeds from service exports are therefore likely to fall. Remittances from Tanzanians
working abroad which account for about 3 percent of exports proceeds may also fall. It is most
likely that the crisis will result in less FDI because financing for such investment may be difficult
to raise from banks which have been severely affected by the crisis. ODA may also be affected
as increased expenditure by governments in developed countries to bail out banks may limit
their capacity and willingness to increase development assistance.
82. On the financial front, the financial sector in Tanzania remains sound and safe and
has not been significantly affected so far. As of December 2008, most key indicators in the
financial sector remained sound. The Tanzania’s capital and financial markets have not been
affected significantly so far because of the low level of integration with the international capital
and financial markets. In addition, commercial banks in Tanzania are licensed, regulated and
supervised under Tanzania Law. They do not operate as branches of parent banks abroad but
as independent subsidiaries regulated and supervised by Tanzanian law. Furthermore, the
financial system in Tanzania had low exposure to the crisis because it had limited amount of
foreign borrowing and none holds securities of the international banks which were affected by
the crisis. Though the current status indicates positive progress, the second round impact has
already affected the banking sector as borrowers from the export crop trade are failing to repay
the loans. The recent appointed committee under the chairmanship of the Governor of the Bank
of Tanzania is looking into this problem so as to come up with the solutions.
3.2: Economic Growth
83. The target for GDP growth in 2008 was 7.5 percent but the actual outturn slipped
slightly to 7.4 percent. However, the decline was not associated with the impact of the global
financial crisis. The impact is most likely be revealed from 2009. Bearing the impact of the GFC,
efforts should be taken to address development in each sector of the economy as follow;
Agriculture
84. Agricultural activities in Tanzania continued to be subsistence in nature and
characterised by low productivity. The use of modern farming techniques remains limited and
large scale irrigation farming is virtually absent. The GFC impact may add the mess to this
sector, which is the most important source of employment, accounting for more than 70
35
percent of the population. It is in this context that the Government has decided that the theme
for 2009/10 will be “agricultural first”. In that regard, strategic efforts will be taken in the
following areas:
i. Expand irrigation infrastructure to improve the production of food and cash crops;
ii. Improve product quality and market access through improvements in supportive
infrastructure (roads, railways, ports and telecommunications);
iii. Increase credit accessibility and affordability to farmers through community based
funds such as SACCOS, the Agricultural Input Trust Fund and establishment of
agriculture development bank;
iv. Modernise agriculture through provisioning of modern farming implement;
v. Enhance the effectiveness and accessibility of extension services to farmers;
vi. Expand and diversify exports production and marketing;
vii. Promote Agro-processing industries;
viii. Promote Research and Development (R&D) in agricultural; and
ix. Ensure timely availability of essential inputs to agriculture i.e fertilizer and seeds.
Livestock Development
85. Improvements in extension services in livestock areas including vaccination,
marketing, water supply, animal feeds, improved ranches, water charcos (malambo), abattoirs
and storage facilities and promote commercial livestock rearing.
Tourism
86. Measures to revamp tourism which has already affected by GFC includes ;
i. Upgrading facilities and standards;
ii. Reducing administrative costs;
iii. Promoting conference tourism;
iv. Promoting local tourism; and
v. Identify other market destinations.
Mining
87. To continue reviewing mining contracts so as to improve contribution of mineral
earnings to the nation.
36
Energy
88. Currently, only 10 percent of the Tanzania population is connected to the national
grid. The medium term objective is to ensure availability of reliable and sustainable power
supply. Concerted effort in the medium term will be geared towards increasing generation,
improving transmission and expanding distribution.
Infrastructure
89. Main focus will be on the implementation of plan and strategies that seek to
significantly remove infrastructural bottlenecks so as to catalyse sustainable economic
transformation and enhance the country’s international competitiveness. In the Medium term,
strategic investment direction will focus on the following: Improvement of Supportive Transport
and Communication Infrastructure (roads, railway, and ports/harbours); Irrigational
Infrastructure; Reliable and Affordable Power Supply; Logistical Hub for Fuel Distribution in the
Region; Spinning-off Benefits from the Mineral Wealth; and Skills Development.
Communication
90. Development of the National ICT Broadband Infrastructure Backbone Network
(fibre – optic) in Tanzania is being perused in order to foster the achievement of goals and
objectives of poverty reduction and building of the information society. The Backbone will be
7,000km length terminating to headquarters of each district in Tanzania mainland and Tanzania
Zanzibar for easy connectivity of network services for enhanced use of internet and ICT
services, e-learning, e-medicine, e-schools, e-health, e-tourism, e-voting, e-census, e-
procurement etc. Construction of the project is expected to commence in this year (2009/10)
and all preliminary works are in place.
Land Development
91. With regard to land development, the focus will be on preparation of district land
use plans, establishment of district land and housing tribunal offices, and demarcation
of village boundaries. A total of 9,850 villages have already been surveyed and there
are about 1,500 villages remained to be dermacated in the medium term.
37
Social Sectors
92. Various interventions by government and other actors will continue to be directed
to improve the health sector, particularly in areas of health infrastructure, control of endemic
diseases, by providing preventive education to communities. Other efforts will be geared
towards the control of malaria and infectious diseases such as tuberculosis and HIV and AIDS.
With regard to education, the major focus will be in implementing the national programs such
as the Primary Education Development Program Phase II (PEDP II 2007-2011), Secondary
Education Development Programme (SEDP), Teacher Development Program (TDP), the
Complementary Basic Education Programme in Tanzania (COBET) and to improve teaching and
learning environment in the education sector. Furthermore the government will continue to
support the expansion of technical and higher education system.
Environment
93. Priority areas under environment will be to conduct awareness campaign programs on
environmental issues as well as implementing the: Marine and Fresh Water Bodies Strategy;
National Waste Management Strategy; Strategy for Urgent Actions on Land Degradation and
Water Catchments (SUA-LWC); Environmental Management Act (EMA) of 2004; and
multilateral environmental agreements.
3.3: Research and Development for Sustainable Development
94. In order to effectively apply findings derived from Research and Development (R&D)
institutions for sustainable development and attainment of the MKUKUTA Goals in the country,
the Government had developed a number of Programmes such as the establishment of an
efficient education and training system that will produce more and highly qualified graduates
capable of conducting quality research. Similarly, a state of art research facilities for
advancement of Science, Technology and Innovation (STI) need to be put in place. Policies and
acts will be formulated and reviewed in order to create improvement in Research and
Development (R&D) coordination, management, monitoring and evaluation. This will include;
putting in place effective mechanism for coordination and management of Research and
Development institutions, proper management of the National Fund for the Advancement of
Science and Technology (NFAST); establishment of R&D forum, Monitoring and Evaluation;
38
audit, accreditation, establishment of National Science, Technology and Innovation Indicators
and production of regular network reports.
95. Also, the Government will establish strong Research and Development linkages with the
private sector in order to increase generation and diffusion of knowledge and technologies that
address problems of national priority. Given the aging Human Resource among R&D personnel,
it is important to cultivate interest of youth to pursue science education, training and career
developments which lags behind art and humanity programme enrolments that attracts more
students than science subjects at tertiary education regardless of gender. STI education and
training should therefore, be among the top priorities so as to prepare the next generation into
research professions. Hence, there is a need to increase public awareness about the importance
of research and its role in the national development.
3.4: Fuel Prices
96. In 2008, the domestic market witnessed sharp increases in the prices of petrol,
diesel and kerosene. The aggregate increase in fuel prices in world market in 2008 marked
sharp price fluctuations over the course of the year. Globally, fuel prices surged over the first 7
months of the year, peaking at USD 147/barrel in July 2008, and then declined sharply over the
next 5 months as the global financial crisis unfolded, collapsing to a low of USD 33/barrel in
December 2008. This pattern has been somewhat mirrored in the domestic market, though the
magnitude of price fluctuations has been less marked, and the extent of the global price decline
in particular, has not been fully reflected. (Figure 6 below)
Figure 6: Petrol and Diesel Price Indices: January 2008- January 2009
40
60
80
100
120
140
160
J F M A M J J A S O N D J
Petrol Domestic Petrol World
Source: EWURA Note: All prices are normalised so that the price index in Jan 2008 = 100
40
60
80100
120
140
160
J F M A M J J A S O N D J
Diesel Domestic Diesel World
39
97. Furthermore, current procurement of fuel is done by each company importing from
its supplier and from its own schedule at its own price. This again raises import bills, increased
congestion at the port and also increases demurrage charges and ultimately contributes to the
rise in domestic petroleum products. Bulk procurement can not only address these challenges
but also reduce importation of substandard products.
98. In addressing this problem, the Government in collaboration with ORYX has
converted TIPER storage facility into National Strategic fuel reserve facility, where as fuel
importers may use it to store their product tax free until it is sold. This will allow oil importers to
bring in large volumes of products and hence enjoy lower import prices compared to the
current situation. In addition, the Government has approved a project by NOOR OIL Company
to build an oil pipeline from Dar es Salaam to Mwanza as well as the construction of an oil
refinery plant in Coastal Region. Those two initiatives are expected to bring some relief on oil
prices when they are completed. The existence of local oil refinery plant will also be useful if
Tanzania discover oil.
3.5: Poverty Reduction Efforts
99. Reducing income poverty is one of the key objectives of the Government of
Tanzania. According to the results of the 2000/1 and 2007 Household Budget Surveys (HBS),
there are indications that welfare has improved (education; ownership of assets) but that
household income has remained largely unchanged. It thus appears that the transition that has
been observed at the macro level does not translate into increased household incomes. This is a
major challenge as the latter is the only sustainable driver of poverty reduction.
100. According to the HBS 2007 results, national poverty has declined marginally, which
is statistically not significant at 5 percent level. The Government has noted with concern the
following analytical questions: firstly, why a marginal poverty decline while the economy has
been growing at an average of 7 percent over the period. Secondly, there has been
disproportionate decline in poverty in rural areas where both food and basic need poverty are
above the National average as opposed to Dar es Salaam and other urban areas. The main
reason for the discrepancies is however based on the methodologies used, and hence, it is
40
important to be careful when making interpretation on, and drawing conclusion from these
results.
101. Given the fact that the majority of the poor live in rural areas where the incidence
of poverty is prevalent and high; and small farmers are the main producers, there is a dire need
to address the difficulties they face in the production process. Increased investment in
agriculture will help small farmer adopt new technologies and modern farming methods as well
as getting access to agriculture extension services, more storage facilities and reduce post
harvest losses and better roads access to markets. The ongoing process of preparing MKUKUTA
II is expected to draw down measures of increasing the pace of poverty reduction in both rural
and urban areas.
102. As part of the review process, the Government has prepared a note that (i)
provides rationale for a review of MKUKUTA/MKUZA (ii) initiates a structured dialogue and
process on the issues pertaining to review of MKUKUTA/MKUTA in order to build consensus on
the process, contents and key issues for review, and (iii) charts the way forward in developing
successor strategies which are more focused and prioritized.
3.6: Employment and Economic Empowerment
103. In 2008, the Government through National Economic Empowerment Council
(NEEC) conducted a study on the empowerment funds established by the Government in the
recent past. The objective of the study was to assess the impact of these Funds and then
advice appropriate measures for improvement. Preliminary results showed that there has been
moderate achievement and some challenges still persist. Some of the identified challenges
include:
i. There is a problem in the coordination of economic empowerment Programmes/Funds
established by the Government. To address this problem, it is recommended that,
relevant institutions should provide adequate cooperation to the NEEC, which is an
apex body mandated by the National Economic Empowerment Act to supervise,
coordinate and monitor all economic empowerment activities in the country;
ii. There are many Government Funds with common objective of empowering the people
but with very little resource envelope to bring about the desired changes to the
41
society. For instance, the allocation for Youth Development Fund and Women
Development Fund is between Tshs 100m and Tshs 500m each per annum for the
whole country. The Government is reviewing the Funds for the purpose of
harmonising and improving them to bring about the intended results;
iii. Lack of National Identity Cards and credit reference bureau. To alleviate the problem,
the Government is in the process of introducing National Identity Cards and
establishment of credit reference bureau in order to reduce or eliminate the problem
of creditworthiness of the people;
iv. The concept of empowerment is still new to the public; the Government will intensify
advocacy on economic empowerment in order to have common understanding;
v. The modality for channelling empowerment funds to the beneficiaries is not well
streamlined. In addition, the funds are not adequately appropriated in accordance
with the intended objectives of improving the welfare of the society. Thus, the
modality is being established to better manage empowerment fund.
3.7: Enhanced Rural Financial Services Delivery
104. The Government aims at deepening of financial services both formal as well as
informal ones to those areas with low access especially rural areas and not promotion of formal
financial services only. Among the strategies that have been proposed in order to ensure this
wider outreach is the establishment of the National Whole Sale Fund and Microfinance
Regulatory Authority in order to license and regulate microfinance activities in the country. It is
further expected that this strategy will be complemented by retaining the existing staff of the
Rural Financial Services Programme and rolling out the Programme activities countrywide.
Nevertheless, in order to operationalise these strategies, the Government will review and make
amendments to the current National Microfinance Policy (NMP) after a wide consultation with all
stakeholders.
3.8: Cost Sharing at High Learning Institution
105. The Higher Education Students’ Loans Board (HESLB) is mandated to assist, on a
loan basis, needy Tanzanian students who secure admission in accredited higher learning
institutions, but who have no economic power to pay for the costs of their education. The loans
provided intend to cover for the costs of tuition fee and Special Faculty Requirements (SFR).
The HESLB is also entrusted with the task of collecting due loans from previous loan
42
beneficiaries since 1994. Since the Board begun its operations in July 2005, it has continued to
issue loans to cover for these items in all study programmes and those that require SFR to
students as requested by the institutions. Up to June 30th 2008 students granted loans were
54,670 and the total loanable fund disbursed was Tshs 108,658.0 million.
106. The Board inherited loans which were issued to students from 1995-2004.
However, loan beneficiaries perceived these loans as grants. Thus, collecting these loans at this
time is a challenge. In the bid to trace loan beneficiaries, HESLB has formulated appropriate
mechanisms including establishing network with employers, tracing employees, utilizing TRA
database and information from Pension funds. As at 30th June 2008, a sum of Tshs 912.6
million had been collected from loans repayment. More effort need to be taken to recover the
loan so that it can be rolled over to other needy students.
107. The other challenge faced by the Board include the absence of a National
Identification system which contributes to difficulties in verification of information provided by
the loan applicants as well as information needed for repayment of the loans. The information is
useful in establishing the income abilities and the levels of cost sharing in higher education.
Currently the Board is using information regarding educational background of applicants to
determine their income ability. The ongoing process of establishing National Identity Cards will
address this problem.
108. Another challenge relate to the low level understanding of the concept of cost
sharing. Though the cost sharing policy has been in existence for over ten years, still the
proportion of the public with clear understanding of the concept has remained low. Higher
education students have continued to demand 100% loans for all loanable items and even for
items which are supposed to be covered by themselves on “cost sharing basis”, such as medical
capitation and student government fees. The Government will intensify public awareness
campaign on this to increase the understanding level of the cost sharing policy and the role of
each part.
109. Mismatch between the demand for loans and the availability of funds is also
another challenge. Of recent, there has been increasing number of loan applicants from both
private and public higher education institutions. Basing on the enrolment projections trends, the
43
number of loan applicants will keep on increasing year after year thus increased financial
requirements to meet the demand. Due to budget constraint, the Government will continue to
sensitize the public on and implement the cost sharing policy.
3.9: Regional Cooperation
110. Currently the East African Partner States are negotiating an EAC Common Market
Protocol which will lead to Free Movement of Labour, Services, Capital and Right of
Establishment. The Common Market Protocol is expected to be signed in November, 2009. As
negotiations on the EAC Common Market Protocol are being concluded, Sector Ministries
responsible for Economic and Social Affairs would be required to mobilize resources and prepare
for effective the implementation of the Common Market Protocol.
3.10: Social Protection Framework
111. The Government is in the process of developing “National Social Protection
Framework” (NSPF) to establish guidelines for stakeholders involved in the funding, planning
and provision of social protection interventions in Tanzania. The focus is to address
comprehensively structural and multi-causal vulnerabilities that can lead to persistent poverty
and generalized insecurity. The framework complements the ongoing poverty reduction process
undertaken by different stakeholders. It is also a means of building the capability of the poor to
engage in production so that they become effective participants in and beneficiaries of the
growth process. NSPF, therefore, is part of national efforts to eradicate poverty and its primary
aim is to reach the most vulnerable and ensure their protection.
112. The NSPF defines social protection to include traditional family and community
support structures, and interventions by state and non-state actors that support individuals,
households and communities to prevent, manage, and overcome the risks threatening their
present and future security and well-being, and to embrace opportunities for their development
and for social and economic progress.
113. NSPF recognizes that sound investments in social protection can empower
individuals and communities to protect and manage their livelihoods, enhance their capabilities,
expand their access to economic opportunities, and realize their rights and entitlements. The
44
need for social protection systems is consistent with MKUKUTA’s objective to address
vulnerability, which calls for effective risk-reduction mechanisms for all vulnerable members of
Tanzanian society – both poor and non-poor. MKUKUTA clearly states the need for a social
protection policy framework that will ensure that the needs and rights of the poor are
adequately protected and addressed: including preventing the population from falling into
poverty and vulnerability.
IV: Medium Term Economic Outlook: 2009-2012
4.1: The World Economic Outlook
114. There is evidence that the world economy is now in recession. As hinted in part III
above, this will affect the Tanzania economy in three different ways:
� The world demand for exports will weaken in particular agricultural and mineral
products, tourism and other services;
� Less buoyant flow of remittances, Foreign Direct Investment (FDI) and foreign loans
and;
� Less Official Development Assistance (ODA).
115. Consequently, economic activities are expected to soften, especially in the trade
sectors, which would result in a slower growth than in previous forecasts. In order to mitigate
the impact of the crisis especially to the vulnerable society,
the Government is committed to take deliberate measures aimed at: ensuring food security;
protecting employment in the sectors where the demand of goods and services has declined;
continue supporting critical social programs; and protecting potential investment for the
development of the country. More specifically, the measures will be in the following susceptible
areas:
116. Value Addition and Marketing of Cash Crops: To prepare the strategy to
reverse the situation of persistent lack of markets to the cash crops. This will include searching
for markets in Asia and elsewhere and promote trading in regional blocks. Moreover, special
efforts need to be taken to encourage domestic industries to engage in the processing so as to
45
increase the value of products such as processing of cashew nuts, fruits and horticultural
produce, cotton spinning, weaving and the manufacture of garments.
117. Food Security: Inflationary pressures have in most cases emanated from
increasing food prices. To contain the pressure arising from food, we need to ensure sufficient
food supply. In this case, all sector involved will be required to put in place specific strategies to
attain this goal. This will be done in collaboration with six regions which are major producer of
food in the country namely Morogoro, Iringa, Ruvuma, Mbeya, Rukwa and Kigoma.
Furthermore, incase of the food shortages in some areas, necessary measures will be taken by
transporting food from surplus areas.
118. Agriculture Financing and Productivity: The Government will continue with
the strategies to raise productivity in the main sectors of the economy including recapitalizing
the TIB, opening a window for lending to the agricultural sector and ultimately establishing the
agricultural bank; promote the use of mechanized and appropriate technology; and improving
productivity of existing irrigation schemes.
119. Financial Stability: Continue to be vigilant to the financial sector in order to
safeguard it against adverse impacts that may arise. Other measure include undertaking “early
warning” and continuous supervision of banks and other financial institutions to determine signs
of weakness.
120. Revenue: The Government will continue to strengthen domestic resource
mobilisation so as to finance increasing level of expenditures and scale up investment funded
from domestic sources. In addition, the Governmnet will continue to seek additional financing in
the form of concessional loans and grants from Development Partners and other sources to
compliment govermennt efforts in MKUKUTA and infrastructure implementation.
121. Expenditure: To ensure that budget allocation focus on the institution’s core
activities, it is necessary to ensure adherence to approved budgets and exercising high degree
of financial discipline. The Government will also ensure proper management of public
expenditure through capacity building and ensuring adequate staffing of accountants and
auditors in all MDAs.
46
122. Development Financing: There is indication of falling ODA due to the likely
impact of GFC. This necessitates the need to find alternative source of financing the
development program/project in infrastructure, agriculture, industries etc which include
promoting ‘PPP’; establishing Development Finance Institution (DFI); and liquidity facility to
cater for the need of long term financing.
123. Tourism: As indicated in section 3.2, the focus will be to enhance efforts to
market our tourist attractions, look for other destinations, promote local tourism, reduce
administrative costs, intensify conference tourism, and upgrade facilities and standards.
4.2: GDP Growth
124. Simulation results indicate that with the advent of the world economic crisis, real
GDP growth will be affected and thus slow down to 5.0 percent in 2009, against the real growth
of 7.4 percent in 2008. However, performance of the economy is expected to improve in the
medium term in the wake of recovery of the world economy, improved agricultural production,
and continued strong performance in manufacturing and service industries. As such, real GDP is
projected to grow by 5.7 percent in 2010 and reach 7.5 percent growth rate by 2012.
4.3: Sectoral Assumptions and the Medium Term Outlook
125. The Agricultural economic activity is expected to decline to 3.0 percent in
2009 compared to 4.6 in 2008 due to uncertainty in weather conditions (failure of short rains
and delays in long rains) and the current global financial crisis which has started to affect the
prices of traditional exports, and hence lowers the export earnings. However, the activity is
expected to pick up slowly in the medium term (2009 - 2012) to 5.5 percent by 2011 mainly on
the assumption that world economy will recover. Furthermore, the ongoing initiative to establish
Agriculture Bank and accessibility of inputs through Agricultural Input Trust Fund will also boost
agriculture performance in the medium term. In addition, current programs under ASDP (such
as rehabilitation of rural roads, development of irrigation infrastructure); rationalisation of
license fees for forestry and hunting activities; and improvements in extension services in
livestock areas including vaccination, marketing, water supply, improved abattoirs and storage
facilities are expected to boost performance in agriculture in the medium term. Due to the
47
diversification of the economy, contribution of the agricultural economic activity to GDP is
expected to decline, and industry and service economic activities are expected to pick up.
126. Fishing: Given the current global financial crisis, demand for fish is expected to
slow down, hence reducing the growth rate to 3.7 percent in 2009 from 5.0 percent in 2008.
However, subsequent to the Government's efforts to modernise fishing activities through the
use of modern fishing gears and availability of proper storage facilities; increased demand for
fish and fish products, both domestic and foreign markets; implementation of supply-enhancing
sector policies; as well as curbing illegal fishing practices, fish production is expected to rise in
the medium term. As such, fishing activities are expected to rebound to 7.4 percent by 2012.
127. The industry and construction economic activities are poised for higher
growth, projected to maintain an annual average of around 7.0 percent in the next four years.
Growth of the sector is expected to accrue from all its sub-activities. In particular, improved
performance of manufacturing will result from improved power supply, development and
expansion of the EPZs and SEZs, implementation of the SME policy and the Tanzania Trade
Integrated Strategy (TTIS) and other supportive trade policies.
128. The construction economic activity will continue its strong growth path,
buoyed by increased investment in infrastructure, especially in roads, bridges, water supply
projects, commercial and residential buildings and other land developments. The sub-activity is
expected to maintain an annual growth of 8.4 percent in the medium term.
129. The electricity and gas economic activity has emerged from a deep
experience during the 2006 power crisis, and is now poised for expansion following major
reforms in the sub-sector, including implementation of the TANESCO Financial Recovery Plan
and enactment of a law providing for private sector participation in power generation, to meet
the growing demand for power in the country. In the medium term, the growth is expected to
stabilize at an average of 6 percent. This follows the concerted efforts by the government to
implement measures aimed at addressing the power crisis by installing additional gas-based to
complement the hydro-based power generation capacity.
48
130. The services economic activity is projected to continue growing by an average
of 8.4 percent in the medium term. Growth is expected to be driven by increased export
promotion initiatives, construction of new hotels, improvements and scaling-up of investments
in transport and communication infrastructure. The activity will also be bolstered by expansion
of education and health services, increased demand for financial intermediation in response to
growth of other economic activities in the country, and sustained implementation of public
service reforms. Tables below, summarise performance of economic activities and the projected
outlook in the medium term.
49
Table 11: GDP at 2001 Prices by Economic Activity (Growth Rates)
Actual Projection
Economic Activity 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Agriculture, Hunting and Forestry 4.1 4.5 4.9 4.9 3.1 5.9 4.3 3.8 4.0 4.6 3.0 3.2 5.5 4.4
Crops 4.5 4.7 5.3 5.6 3.2 6.6 4.4 4.0 4.5 5.1 3.2 3.6 6.4 5.0
Livestock 3.5 3.9 4.0 2.8 2.2 4.1 4.4 2.4 2.4 2.6 2.5 1.6 2.3 1.9
Forestry and hunting 2.4 4.8 3.6 3.3 3.0 2.7 3.6 4.6 2.9 3.4 2.3 2.8 3.5 3.5
Fishing 3.2 2.9 4.8 6.8 6.0 6.7 6.0 5.0 4.5 5.0 3.7 4.6 6.2 7.4
Industry and construction 6.7 4.5 6.6 9.4 10.9 10.9 10.4 8.5 9.5 8.6 5.4 6.4 8.0 7.9
Mining and quarrying 9.1 14.3 13.9 16.9 17.1 16.0 16.1 15.6 10.7 2.5 2.9 3.3 4.2 0.9
Manufacturing 6.0 4.8 5.0 7.5 9.0 9.4 9.6 8.5 8.7 9.9 5.7 7.4 9.5 9.5
Electricity, gas 4.0 6.2 5.9 6.2 7.2 7.5 9.4 -1.9 10.9 5.4 4.2 4.2 4.5 4.8
Water supply 3.0 3.4 3.5 2.8 4.5 5.2 4.3 6.2 6.5 6.6 5.0 6.1 7.6 8.4
Construction 8.7 0.8 7.6 11.9 13.8 13.0 10.1 9.5 9.7 10.5 6.3 7.0 8.5 9.0
Services 4.6 5.4 6.4 7.7 7.8 7.8 8.0 7.8 8.1 8.5 5.9 6.6 7.7 8.5
Trade and repairs 6.0 4.3 6.4 8.3 9.7 5.8 6.7 9.5 9.8 10.0 6.8 7.8 8.9 10.1
Hotels and restaurants 6.0 4.1 4.8 6.4 3.2 3.6 5.6 4.3 4.4 4.5 1.1 1.4 2.6 3.9
Transport 3.8 4.3 4.9 5.9 5.0 8.6 6.7 5.3 6.5 6.9 5.2 5.7 6.4 6.7
Communications 6.6 5.6 8.7 10.4 15.6 17.4 18.8 19.2 20.1 20.5 13.5 15.0 17.0 19.9
Financial intermediation 4.0 3.9 6.9 10.1 10.7 8.3 10.8 11.4 10.2 11.9 7.4 8.4 10.4 12.3
Real estate and business services 4.0 4.9 4.2 7.1 6.5 6.8 7.5 7.3 7.0 7.1 4.9 5.8 6.9 6.8
Public administration 2.7 10.7 10.5 9.2 9.6 13.6 11.4 6.5 6.7 7.0 5.2 4.9 5.1 5.3
Education 3.6 4.0 11.4 7.0 2.8 4.0 4.0 5.0 5.5 6.9 5.3 5.9 6.8 6.6
Health 3.2 5.1 5.6 8.6 8.7 7.8 8.1 8.5 8.8 9.0 6.9 7.5 8.0 9.3
Other social and personal services 9.5 3.1 3.1 2.1 2.0 3.0 2.6 3.7 3.2 3.1 2.6 3.1 4.0 4.1
Gross value added before adjustments 4.8 4.9 6.0 7.2 6.9 7.8 7.4 6.8 7.3 7.5 5.0 5.7 7.2 7.4
less FISIM 3.4 1.4 2.5 8.7 11.7 10.1 11.8 14.9 15.3 11.0 7.6 5.5 4.9 2.0
Gross value added at constant 2001 basic prices
4.8 4.9 6.0 7.2 6.9 7.8 7.4 6.7 7.2 7.4 5.0 5.7 7.2 7.4
Add Taxes on products 4.8 4.9 6.0 7.2 6.9 7.8 7.4 6.8 6.9 7.8 5.7 6.2 7.5 7.8
GDP at constant 2001 market prices 4.8 4.9 6.0 7.2 6.9 7.8 7.4 6.7 7.1 7.4 5.0 5.7 7.2 7.5
50
Table 12: GDP at 2001 Prices by Economic Activity (Shares)
Actual Projection
Economic Activity 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Agriculture, Hunting and Forestry 30.2 29.5 29.0 28.6 28.7 29.5 27.6 26.2 25.8 25.8 23.0 22.5 22.0 21.2
Crops 22.6 21.7 21.4 21.4 21.8 22.4 20.5 19.2 19.0 19.0 17.5 17.2 16.9 16.4
Livestock 4.8 5.1 5.0 4.8 4.7 4.8 5.0 4.8 4.7 4.7 3.6 3.5 3.3 3.1
Forestry and hunting 2.8 2.7 2.5 2.4 2.3 2.3 2.2 2.2 2.1 2.0 1.9 1.8 1.7 1.7
Fishing 1.9 1.8 1.7 1.7 1.6 1.5 1.4 1.3 1.3 1.2 1.5 1.5 1.4 1.4
Industry and construction 18.3 17.9 18.0 19.6 21.0 20.8 20.8 20.8 21.2 21.0 20.7 20.9 21.0 20.9
Mining and quarrying 1.4 1.5 1.8 2.1 2.4 2.6 2.9 3.2 3.5 3.4 2.5 2.4 2.4 2.2
Manufacturing 9.1 8.8 8.4 8.3 8.3 8.1 7.9 7.8 7.8 7.8 9.2 9.4 9.5 9.6
Electricity, gas 1.9 2.1 2.2 2.0 1.9 1.8 1.7 1.5 1.6 1.7 2.0 2.0 1.9 1.8
Water supply 0.4 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
Construction 5.6 5.2 5.2 6.8 8.0 7.9 7.8 7.8 7.8 7.7 6.7 6.8 6.8 6.8
Services 44.9 45.3 45.5 44.2 42.7 42.0 42.5 43.3 43.3 43.8 47.1 47.6 47.5 47.7
Trade and repairs 13.1 12.8 13.0 12.4 12.0 11.4 11.0 11.4 11.5 11.6 14.1 14.4 14.5 14.8
Hotels and restaurants 2.9 2.8 2.8 2.6 2.4 2.3 2.5 2.6 2.7 2.6 2.2 2.1 2.0 1.9
Transport 5.6 5.5 5.4 5.0 4.8 4.6 4.4 4.3 4.2 4.2 5.0 5.0 4.9 4.8
Communications 1.2 1.2 1.2 1.2 1.3 1.5 1.7 2.1 2.3 2.5 2.5 2.7 2.9 3.2
Financial intermediation 1.6 1.6 1.5 1.7 1.7 1.6 1.7 1.7 1.6 1.6 1.9 1.9 2.0 2.1
Real estate and business services 10.0 10.7 10.3 9.7 9.4 9.1 9.5 9.6 9.5 9.6 9.9 10.0 9.9 9.7
Public administration 6.4 6.6 7.0 7.2 7.2 7.7 8.0 8.0 7.9 8.2 7.8 7.7 7.5 7.3
Education 2.1 2.1 2.1 2.0 1.8 1.7 1.6 1.5 1.4 1.3 1.8 1.8 1.7 1.7
Health 1.1 1.2 1.3 1.5 1.4 1.4 1.5 1.5 1.6 1.5 1.4 1.4 1.4 1.5
Other social and personal services 1.0 0.9 0.9 0.8 0.7 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6
Gross value added before adjustments 95.3 94.6 94.2 94.1 94.0 93.7 92.3 91.7 91.6 91.6 92.3 92.5 91.9 91.3
less FISIM -1.2 -1.0 -0.9 -0.9 -0.9 -0.9 -0.9 -0.9 -1.0 -1.0 -1.2 -1.2 -1.2 -1.1
Gross value added at constant 2001 basic prices
94.1 93.5 93.3 93.3 93.1 92.8 91.4 90.7 90.7 90.6 91.1 91.3 90.8 90.2
Add Taxes on products 5.9 6.5 6.7 6.7 6.9 7.2 8.6 9.3 9.3 9.4 8.9 8.7 9.2 9.8
GDP at current market prices 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
51
Table 13: GDP at 2001 Prices by Economic Activity, Mil Tsh
Economic Activity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Agriculture, Hunting and Forestry 2,512,168 2,636,193 2,766,479 2,850,956 3,017,988 3,148,383 3,268,238 3,399,648 3,554,488 3,661,585 3,778,780 3,987,723 4,163,330
Crops 1,847,571 1,945,945 2,055,634 2,122,361 2,262,724 2,361,930 2,457,373
2,567,955
2,698,921
2,785,394
2,884,786
3,069,562
3,222,788
Livestock 441,860 459,448 472,500 483,001 503,000 525,109 537,498
550,398
564,708
578,750
588,166
601,678
612,847
Forestry and hunting 222,737 230,800 238,345 245,594 252,264 261,344 273,367
281,295
290,859
297,441
305,829
316,483
327,694
Fishing 146,675 153,660 164,050 173,893 185,543 196,676 206,510 215,734 226,521 234,907 245,665 260,788 279,984
Industry and construction 1,536,952 1,638,460 1,792,024 1,988,081 2,204,619 2,433,261 2,639,902 2,889,519 3,138,241 3,306,984 3,519,933 3,802,707 4,103,817
Mining and quarrying 140,400 159,979 187,000 219,000 254,000 295,000 341,000 377,559
386,998
398,069
411,123
428,378
432,109
Manufacturing 726,358 762,400 819,200 893,000 977,000 1,071,000 1,162,000 1,263,435
1,388,515
1,467,625
1,576,138
1,725,475
1,889,353
Electricity, gas 185,847 196,860 209,000 223,953 240,708 263,218 258,347
286,507
301,978
314,656
327,749
342,400
358,809
Water supply 42,363 43,841 45,084 47,128 49,557 51,700 54,905
58,474
62,333
65,446
69,442
74,746
80,999
Construction 441,984 475,380 531,740 605,000 683,354 752,343 823,650
903,544
998,416
1,061,188
1,135,482
1,231,708
1,342,547
Services 3,890,050 4,139,962 4,460,699 4,806,587 5,182,093 5,596,784 6,035,932 6,527,561 7,085,136 7,505,099 8,003,209 8,616,045 9,348,905
Trade and repairs 1,111,165 1,182,797 1,281,544 1,405,698 1,486,931 1,585,906 1,736,631 1,906,821
2,097,503
2,240,117
2,415,153
2,629,186
2,894,072
Hotels and restaurants 239,528 250,978 267,162 275,836 285,732 301,873 314,921 328,859
343,658
347,371
352,397
361,498
375,706
Transport 464,481 487,062 516,000 541,901 588,574 627,951 661,000
703,965
752,539
791,788
836,829
890,752
950,593
Communications 103,716 112,783 124,549 144,039 169,158 200,900 239,537
287,684
346,659
393,538
452,380
529,170
634,555
Financial intermediation 131,000 140,000 154,108 170,643 184,775 204,694 228,000
251,280
281,120
302,013
327,326
361,327
405,698
Real estate and business services 898,961 936,440 1,003,260 1,068,732 1,141,013 1,226,790 1,316,000 1,408,120
1,508,097
1,582,352
1,673,524
1,788,732
1,910,954
Public administration 580,000 640,649 699,561 766,760 871,169 970,786 1,033,488
1,102,951
1,180,158
1,241,310
1,302,285
1,368,299
1,440,536
Education 169,462 188,733 202,000 207,606 215,910 224,547 235,774
248,742
265,905
280,001
296,586
316,694
337,727
Health 112,629 118,972 129,229 140,437 151,370 163,572 177,520
193,142
210,525
225,062
242,001
261,464
285,678
Other social and personal services 79,108 81,548 83,286 84,935 87,461 89,765 93,061
95,998 98,974 101,546 104,727 108,922 113,384
Gross value added before adtmnt 8,085,845 8,568,275 9,183,252 9,819,517 10,590,243 11,375,104 12,150,582 13,032,462 14,004,385 14,708,574 15,547,587 16,667,263 17,896,035
less FISIM -78,049 -80,000 -87,000 -97,154 -106,931 -119,497 -137,287 -158,292 -175,704 -189,019 -199,481 -209,205 -213,478 Gross value added at constant 2001 basic prices 8,007,796 8,488,275 9,096,252 9,722,363 10,483,312 11,255,607 12,013,295 12,874,170 13,828,681 14,519,555 15,348,106 16,458,058 17,682,558
Add Taxes on products 577,542 612,000 655,926 701,372 756,422 812,482 867,868 927,751
999,664
1,056,259
1,121,630
1,205,507
1,299,466
GDP at constant 2001 market prices 8,585,338 9,100,275 9,752,178 10,423,735 11,239,734 12,068,089 12,881,163 13,801,921 14,828,345 15,575,814 16,469,736 17,663,565 18,982,024
52
Table 14: Nominal and Real GDP (Actual and Projection)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
GDP at constant 2001 market prices
8,585,338 9,100,275 9,752,178 10,423,735 11,239,734 12,068,089 12,881,163 13,801,921 14,828,345 15,575,814 16,469,736 17,663,565 18,982,024
GDP at current market prices
8,152,789 9,100,274 10,444,507 12,107,060 13,971,591 15,965,293 17,941,268 20,948,403 24,754,457 28,675,580 32,216,402 36,279,230 40,936,57632
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
GDP at constant 2001 market prices
8,383,505 8,842,807 9,426,227 10,087,957 10,831,735 11,653,912 12,474,626 13,341,542 14,315,133 15,202,079 16,022,775 17,066,650 18,322,795
GDP at current market prices
7,687,675 8,626,532 9,772,391 11,275,784 13,039,326 14,968,442 16,953,281 19,444,835 22,851,430 26,715,018 30,445,991 34,247,816 38,607,903
53
4.4: Inflation
131. In the wake of recent increase in fuel and food prices, inflation target has been
revised upwards to 11.0 percent by June 2009 from 7.0 percent targeted earlier. In order to
keep inflation in check over the medium term, the Government has resolved to take measures
that will improve food supply in the country, including waiving import duty on imports of cereals
to reduce food shortages, and improvement of rural roads to ease transportation as well as
food prices. Inflation is therefore targeted to decline slowly to 6.5 percent by June 2010 based
on the above initiatives and on the assumptions that price of oil will stabilize especially in the
domestic market; the exchange rate will remain stable; weather will remain favourable
(including in the neighboring countries); and prudent monetary and fiscal policies will prevail.
Furthermore, the recent dramatic turnaround in global fuel prices provides an opportunity for
the attainment of this goal.
4.5: Government Finance
132. The main thrust of the government policy objectives over the period 2009/10-
2011/12 is to maintain macroeconomic stability, in particular improving the revenue yield (i.e.
ratio of domestic revenue to GDP) and containing the fiscal deficit. The Government will
continue implementing credible macroeconomic policies while development partners will
continue to support government efforts.
133. Domestic Revenues: With favourable economic conditions coupled with
improved power supply and stabilization in fuel prices, the expected sustained growth will boost
income taxes and VAT collection over the medium term. Introduction of alternative minimum
corporate tax and government’s intention to amend the Finance Act 2001 to ensure that other
government institutions and agencies contribute part of their revenue to government
consolidated fund is expected to boost revenue.
134. Moreover, the ongoing strengthening of tax administration will also boost revenues
collection. The gains achieved in recent years are expected to continue, with the revenue to
GDP ratio expected to be 15.9 percent in 2008/09 and increase to further to 16.4 percent and
19.0 percent by 2009/10 and 2011/12 respectively. However, the current level of revenue
collection as a percent of GDP is low relative to other EAC and SADC member countries. This
54
calls for more efforts to increase efficiency in the tax system. The ongoing tax policy reforms,
modern tax administration, enforcement in non-tax collection measures are expected to
increase efficiency and thus boost revenue.
135. Expenditure: Total expenditure is projected to increase from TShs 7,265.3 billion
in 2008/09 to TShs 9,424.8 billion in 2009/10 with the ratio to GDP averaging 27.0 percent
annually. The recurrent expenditure is expected to increase from 17.4 percent of GDP in
2008/09 to 19.4 percent in 2009/10.
136. CFS and wages and salaries are projected at around 4.9 percent and 5.7 percent
of GDP respectively in 2009/10. The expenditure on goods and services (OC) is protected at
around 12.4 percent of GDP in 2009/10 and in the medium term, it will be maintained at a level
sufficient to cover the operations of Government, while freeing more resources to cater for
development projects, in line with MKUKUTA growth objectives.
137. Total development expenditure is estimated to decrease from 9.1 percent of GDP
in 2009/10 to 7.4 percent in 2010/11 mainly on the account of unpredictability of foreign
inflows. Foreign development expenditure is estimated to decrease from 6.0 percent of GDP in
2009/10 to 3.3 percent in 2010/11 while local development expenditure will increase from 3.1
to 4.1 percent of GDP in that period.
55
Figure 7: Government Finance: Ratios to GDP
-
5.0
10.0
15.0
20.0
25.0
30.0
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
Total Expenditure Recurrent Expenditure Development Expenditure Total Revenue
138. Grants and Financing: In the medium term, the ratios of foreign grants to GDP
is expected to increase from 6.0 percent in 2008/09 to 6.7 in 2009/10 while loans are projected
to decline from 3.8 percent to 3.3 percent in that period. Development partners have indicated
their willingness to continue supporting the budget despite the likely impact of the world
financial crisis. These projections provide for adequate funding of MKUKUTA interventions and
in line with the JAST principles. IMF has already committed to provide USD 340 millions for BOP
support while World Bank will provide USD 76.8 million for agriculture including ASDP and USD
30.0 million for TASAF. In line with revenue and expenditure projections, the overall budget
deficit after grants is projected to decline gradually from 4.7 in 2008/09 to 2.4 percent by
2011/12. This trend is consistent with convergence criteria of 2.5 percent of GDP and the
operationalisation of the East Africa Customs Union.
139. The projections provide for domestic borrowing of 1.6 percent of GDP in 2009/10
and 1.0 percent of GDP in the medium term (2009/10 and 2011/12) for the purpose of
financing government operations particularly infrastructure developments.
56
4.6: Monetary Policy
140. In recognizing continued inflationary pressures in the economy triggered by high
international fuel and food prices, the Bank of Tanzania will remain cautious in liquidity
management in order to mitigate the second round effect of the exogenous price shocks. Going
forward, the monetary policy projections are hinged around the following key assumptions: -
• Velocity of money will continue to decline at a steady rate as observed in the past. This
reflects the continuation of the economic monetization process;
• Allow domestic borrowing of 1.6 percent of GDP to finance budget operations;
• Money multiplier will remain stable.
141. Correspondingly, annual growth rate of extended broad money supply (M3) and
broad money supply (M2) are projected at 22.0 percent and 22.4 percent by end of June 2009.
These assumptions provide a room for credit to the private sector to grow at about 39.8
percent by end June 2009 in support of private investment. Given the money multiplier
assumption, the annual growth rate of reserve money by end June 2009 is projected at 28.9
percent. In line with the envisaged donor inflows, and exchange rate developments, the annual
growth of net foreign assets (NFA) of the banking system is projected to pick up to 6.6 percent
by end of June 2009 from an annual growth rate of 4.7 percent registered in June 2008.
V: Macroeconomic Assumptions and Policy Targets
5.1: Macroeconomic Assumption
142. In the medium term (2009/10-2011/12) key macroeconomic assumptions
underlying macroeconomic projections and policy targets are as follows:
(i) The impact of the GFC will affect the economy in 2009 and thereafter will stabilize;
(ii) Macroeconomic stability will be sustained and socio-economic development will continue
to be improved;
(iii) Priority projects as stipulated under section 3.2 (Economic Growth) will be implemented;
(iv) Increased impetus in the implementation of NSGRP and resource allocation in areas that
have rapid multiplier effects in the economy;
(v) Increased momentum in the implementation of ASDP with the main objective of
addressing the adverse impact of the GFC;
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(vi) Increased progress in private sector development, including further improvements in the
business environment;
(vii) A supportive monetary policy reflected in an appropriate fiscal framework, low inflation,
a narrowing interest rate spread, and increased credit to the private sector;
(viii) Domestic revenue collection will be enhanced;
(ix) In the wake of GFC, foreign inflows may be affected;
(x) Political stability will be maintained; and
(xi) Strengthened monitoring and evaluation to ensure effective use of public resources.
5.2: Macroeconomic Projections and Policy Targets
143. More specifically, the macroeconomic projections and policy targets for the period
2009/10– 20011/12 are as follows:
i. Attain a real GDP growth of 5.0 percent in 2009, 5.7 percent in 2010 and 7.5 percent
by 2012;
ii. Control Consumer Price Inflation (CPI) at 11.0 percent by end of June, 2009;
iii. Increase domestic revenue collection to the equivalent of 15.9 percent of GDP in
2008/09, 16.4 percent in 2009/10, 17.2 percent in 2010/11 and 18.3 percent in
2011/12;
iv. Contain the growth rate of M2 consistent with GDP growth and inflation targets;
v. Maintain adequate official foreign reserves of not less than a value equivalent to five
months worth of imports of goods and non-factor service;
vi. Maintain a market determined realistic exchange rate, with Bank of Tanzania’s
interventions exclusively limited to smoothing wide fluctuations and/or liquidity
management purposes; and;
vii. Accelerate reforms to the requisite legal and regulatory framework for enhancing access
to credit by the private sector.