I S SU E 4 83172 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Raising the Game Can Tanzania Eradicate Extreme Poverty? December 2013 TH E WORLD BANK GR OUP AFRICA REGION POVERTY REDUCTION & ECONOMIC MANAGEMENT PAGE http://www.worldbank.org/tanzania/economicupdate. http://www.worldbank.org/tanzania/economicupdate http://www.worldbank.org/tanzania/economicupdate a TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N PAGE http://www.worldbank.org/tanzania/economicupdate. b T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Table of Contents Foreword............................................................................................................................... iii Acknowledgments............................................................................................................vi Key messages.....................................................................................................................vii Part I: The State of the Economy.................................................................................. 1 1.1 Recent developments: Stable growth, low inflation and the need for economic ....................................................................................... 3 expansion drive policy reversals. 1.2 Looking forward: Good prospects, with oil revenues on the horizon - but watch out for commodity prices................................................................................................ 14 1.3 Poverty in Tanzania: Still too many poor Tanzanians, despite growth and other improvements......................................................................................................... 19 Part II: Money to people: Can conditional cash transfers make a difference?... 23 2.1 The vision: The elimination of extreme poverty in Tanzania. ............................... 27 2.2 The rationale for cash transfer programs: Higher levels of consumption and investment in human capital................................................................................. 31 2.3 Implementing effective cash transfers programs: Targeting, transfers and monitoring. ............................................................................................................. 37 2.4 Scaling up the cash transfer program to benefit all Tanzanians.......................... 41 Statistical annexes.......................................................................................................... 47 1. Macroeconomic indicators..................................................................................... 48 2. Real GDP growth rates. .......................................................................................... 49 3. Shares of economic activities in GDP (current market prices)............................. 50 4. Quarterly GDP growth rates 2002-2012................................................................ 51 5. Fiscal framework as percent of GDP...................................................................... 52 6. Provisional monthly government expenditures 2012/13...................................... 52 7. Balance of payments (percent of GDP unless indicated). .................................... 53 8. Monthly imports of goods and services 2012-2013 (in US$ million)................... 54 9. Monthly exports of goods and services 2012-2013 (in US$ million)................... 55 PAGE http://www.worldbank.org/tanzania/economicupdate. i TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 10. Inflation rates. ......................................................................................................... 56 11. Monthly food crop prices (wholesale)................................................................... 57 12. Average wholesale prices (2012-2013).................................................................. 57 13. Interest rates structure........................................................................................... 58 14. Monetary aggregates............................................................................................. 59 15. Poverty by Geographic Regions . ........................................................................... 60 List of Figures Figure 1: Annual rates of GDP growth in Tanzania: a steady-state performance close to 7 percent. .................................................................................................................... 4 Figure 2: Quarterly GDP growth: More rapid, less volatile growth than in Kenya and Uganda. ........................................................................................................................... 4 Figure 3: Sector growth in the first two quarters of 2013............................................. 5 Figure 4: Most leading GDP indicators are on the rise.................................................. 6 Figure 5: Inflation trends: Stricter monetary policy and a decline in food and energy prices result in a declining rate of inflation..................................................................... 7 Figure 6: Headline inflation and rising credit costs........................................................ 8 Figure 7: Improved external balance in 2012/13............................................................ 9 Figure 8: Overall fiscal deficit of the central government.............................................11 Figure 9: Rising debt stock and debt service payments...............................................13 Figure 10: An international comparison of expenditure on social security programs.22 Figure 11: Cash transfers have helped to reduce poverty during the 2000s.............. 32 Figure 12: Mexico – Impact of CCT in years of schooling............................................ 35 Figure 13: Cost of CT and CCT Programs..................................................................... 39 List of Tables Table 1: Recent growth patterns in exports and imports.............................................10 Table 2: Central Government operations, Percent of GDP. ..........................................11 Table 3: Macro-economic projections ..........................................................................15 PAGE http://www.worldbank.org/tanzania/economicupdate. ii T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Foreword Over the past two years, the Tanzania more and better food and to pay for the Economic Update series has helped to education requirements of their children. stimulate debate on topics that resonate The commitment of local communities was with people’s concerns, ranging from also impressive as they enthusiastically education to agriculture to the port of Dar participated in identifying the poorest es Salaam. families amongst them and in making sure that the cash payments got to the right The special focus of this fourth economic people, in a timely manner. update is as much a concern for policymakers as for ordinary citizens. Indeed, the approach holds the promise This Economic Update discusses a bold of reducing extreme poverty in Tanzania. new way of lessening extreme poverty There are approximately four million by transferring cash directly to the most Tanzanians today who have barely enough vulnerable people. food to survive. They are without access to roads, electricity, and water. Necessities There are good reasons to be excited such as soap and clothing are a luxury for about this approach, because cash them. Unhealthy and malnourished, their transfer programs have proven effective children often do not attend school and are in other parts of the world such as Brazil prone to diseases. and Mexico. In Tanzania, the success of a similar program piloted by the Tanzania Although cash transfers are promising, Social Action Fund (TASAF), which includes as this update discusses, there are risks conditional cash transfers as well as public associated with implementation on a large works for productive infrastructure, is scale. It will be essential to ensure effective also very encouraging as shown by an targeting and sound monitoring. And the independent evaluation. decision to scale up needs to be embedded in strategic thinking about medium-term During field visits, I have personally met fiscal sustainability. several households whose lives have changed dramatically as a result of this Above all, cash transfer programs, even program. It has allowed families to buy when well managed, should be viewed PAGE http://www.worldbank.org/tanzania/economicupdate. iii TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N as only one element of a comprehensive private investments and associated sector strategy to reduce poverty. Cash transfers reforms. These investments and reforms can provide incentives to keep children are necessary to create the foundations in schools. Roads and electricity are to further stimulate economic growth, for also needed to ensure opportunities shared prosperity and reduction of poverty. for all. The business environment for But Tanzania needs to strike the right agriculture and other industries, and the balance between making large capital associated infrastructure, should also be investments and maintaining fiscal enhanced. This will be critical to mobilize discipline. In 2012/13, the fiscal deficit was private investment, increase agriculture higher than anticipated partly because productivity among small holders, and ambitious revenue targets could not be create productive jobs for the rapidly achieved. Official aid inflows to Tanzania multiplying, young labor force. are increasingly being replaced by non- The Economic Update also discusses concessional borrowing, thereby exposing the state of the economy more broadly. the country to interest rate risks and high Strong and stable economic growth and cost of debt. Moreover, several state-owned gradually declining inflation have been the corporations are running large deficits and hallmarks of Tanzania’s recent economic represent major fiscal liabilities. performance. The country’s economy has Tanzania needs to maintain fiscal discipline been growing at about seven percent. and continue to keep the country’s debt Inflation is now in single digits, contributing and debt-service at acceptable levels to to a stable exchange rate and to macro- consolidate the gains achieved over the stability. past decade. The state of the economy provides a credible Philippe Dongier foundation to embark on an ambitious Country Director for Tanzania, Uganda and program of high priority public and Burundi PAGE http://www.worldbank.org/tanzania/economicupdate. iv T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Abbreviations and acronyms BoT Bank of Tanzania BRN Big Results Now CCT Conditional Cash Transfer CMC Community Management Committees CPI Consumer Price Index CSG Child Support Grant CT Cash Transfer DSA Debt Sustainability Analysis FDI Foreign Direct Investment GDP Gross Domestic Product IMF International Monetary Fund LGAs Local Government Authority MDG Millennium Development Goals MOF Ministry of Finance NBS National Bureau of Statistics PEDP Primary Education Development Program PEFA Public Expenditure and Financial Accountability PNPM Program Nasional Pemberdayaan Mandiri (National Program for Community Empowerment or Program) PPPs Public-Private Partnerships PSPF Public Service Pension Fund PSSN Productive Social Safety Net SAGCOT Southern Agricultural Growth Corridor of Tanzania TANESCO Tanzania Electrical Supply Company TASAF Tanzanian Social Action Fund Program TSh Tanzanian Shilling UCT Unconditional Cash Transfer US$ United States Dollars VAT Value Added Tax PAGE http://www.worldbank.org/tanzania/economicupdate. v Acknowledgment This fourth edition of the Tanzania Economic Update was prepared by Jacques Morisset. The author acknowledges the contributions of Victoria Cunningham, Manuel Salazar, Loy Nabeta, Emmanuel A. Mungunasi, Goodluck Mosha, and Yutaka Yoshino. The report benefited from the insights of several peer reviewers, Theresa Jones and Carolina Renteria, as well as from the comments shared by Sajjad Shah and Ida Manjolo. The team received guidance from Albert Zeufack and Philippe Dongier. Irfan Kortschak edited the report, while Justina Kajange provided invaluable assistance during its preparation. PAGE http://www.worldbank.org/tanzania/economicupdate. vi T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Key messages It is late evening in Chanzulu, in the Kibaha a conditional cash transfer pilot program District, about 60 km from Dar es Salaam. currently being implemented in 40 villages. Mama Shida has just finished a hard day’s With the demonstrated success of this pilot work. She has tended her crops as well as program, the Tanzanian authorities are now her chickens and prepared the evening planning a scale up to ensure that many meal for her family which has four school- more Tanzanians receive the same benefits going children. Since 2010, Mama Shida as Mama Shida. has been a beneficiary of the conditional The planned scale up of this program cash transfer program managed by the represents a radical new approach to Tanzania Social Action Fund (TASAF). Under poverty eradication in Tanzania. For the the pilot program, Mama Shida receives the first time in recent history, the Government equivalent of US$ 18. is taking measures to introduce a This is not a large amount of money, but comprehensive social protection program it is sufficient for her to provide her family to the country. Scaling up the existing with more food, and food of higher quality, conditional cash transfer program to than was previously the case. The money achieve national coverage could result she receives also frees her from the need to in real, significant improvements to the constantly engage in cultivating subsistence quality of life of Tanzania’s poorest citizens, crops, giving her time to raise chickens and potentially facilitating transformations thereby to generate additional income. in their lives that could allow them to With a group of other women, she has escape the poverty trap. The program established an association to transport eggs will cost approximately US$250 million and chickens to nearby markets. Mama per year, equivalent to approximately 2.5 Shida’s life is still hard, but it has improved. percent of the Government’s budget. This She has high hopes and aspirations for the is a significant expenditure, but one that future, and a potentially realizable path to would be justified for a program that is achieve these aspirations. potentially transformative. While results from the recently completed 2011/12 Mama Shida’s is one of thousands of Household Budget Survey indicate a decline households receiving benefits under TASAF, PAGE http://www.worldbank.org/tanzania/economicupdate. vii TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N in Tanzania’s poverty rate, approximately 12 also contributed to this improvement to a million Tanzanians still live below the poverty minimal level as the total value of imports line, a similar number to that of 2000/01. growing by only three percent in dollar terms The new program has the potential to drive during this period, compared to 30 percent a significant reduction in the number of poor in 2011. However, in the first eight months of Tanzanians, making its implementation a 2013, the rate of growth of exports declined matter of top priority. by five percent, while the rate of growth of imports declined by 2.7 percent. The Part 1: The state of the economy decline has been noted for all categories of Throughout 2012 and in the first half of 2013, exports except services, while the decline in the Tanzanian economy has remained on the imports has disproportionately affected the same growth trajectory as in the recent past, import of capital goods. This development The deterioration in expanding by a rate of approximately seven may have serious implications for economic the fiscal accounts percent per annum. As in the recent past, growth and requires close monitoring. might be due to this growth has been driven by a number of In another disturbing development, the fiscal something of a capital intensive sectors whose activities are deficit has grown from a value equivalent paradigm shift in predominantly located in cities and a small to five percent of GDP in 2011/12 to 6.2 policy making in number of growth centers, with most of the percent in 2012/13. This was caused by the Tanzania. growth being driven by the communication, Government’s failure to achieve its revenue transportation, construction, and retail targets, while public expenditure was higher trade sectors. than targeted. Largely due to a fall in food prices and the The composition of the state’s finances implementation of a tight monetary policy, is also changing, with further potentially the inflation rate remains under control, unsettling implications. Official aid now declining to 6.3 percent by October 2013. contributes to a smaller proportion of the This declining inflation rate has contributed state’s finances, with Government securing to the stabilization of the real exchange rate, relatively expensive commercial loans on the which appreciated by more than 20 percent domestic and foreign markets to cover the in 2012. However, the cost of credit has risen shortfall. As a result, the public debt ratio significantly, from a negative five percent to rose to 43.4, while the debt-service to GDP a positive seven percent, as adjustments to ratio rose to1.8 by the end of June 2013. nominal lending interest rates do not yet reflect the deceleration in domestic prices. The deterioration in the fiscal accounts might be due to something of a paradigm shift in In terms of external trade, the current policy making in Tanzania. The authorities account balance improved significantly in increasingly appear to be implementing 2012, largely due to the strong performance prudent monetary policy, mainly to keep of the export sector. The relatively low inflation in check, while at the same time rate of growth in the value of imports has implementing a more accommodating fiscal PAGE http://www.worldbank.org/tanzania/economicupdate. viii T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n policy. This is a direct reversal of previous The rapid urbanization process can policies, which were characterized by tighter generate agglomeration effects, leading to fiscal policy and less restrictive monetary the development of industrial and services policy. The justification for this new stance activities. This potential will be greatly is that public expenditure is necessary to influenced by the Government’s capacity address the current deficiencies in physical to improve connectivity and access to and human capital and thus to boost future electricity. economic growth. The recent Presidential The economy remains vulnerable to initiative, called ‘Big Results, Now’, is a clear external shocks, particularly fluctuations in example of this approach, with the initiative commodity prices. Thus, variations in gold involving the implementation of a large and oil prices have to be monitored closely, volume of public investment projects in six given the significance of these commodities priority sectors over the next couple of years. to Tanzania’s trade balance. Looking forward, the economy is likely to However, the major risk is fiscal. The remain on its current growth trajectory into Government will need to adjust its accounts the near future, with the rate of growth in the next couple of years so as to keep its averaging around seven percent per year. debt and debt-service to reasonable levels. Inflation should stabilize at around five The necessary adjustments will require percent, while the current account deficit a combination of increased domestic should remain equivalent to a value of 13-15 revenues and controlled expenditures, percent of GDP, unless there are significant particularly expenditure on the wage bill. changes in global commodity prices and the The Government must be prepared to resist demand for Tanzanian products. Looking forward, political pressure to loosen its control over the economy is There are a number of possible developments expenditure, particularly in the context of likely to remain on that could help promote more rapid growth the forthcoming elections. its current growth in the near to medium term. FDI associated Another area of risk involves the trajectory into the with the recent discoveries of natural gas deterioration in the financial situation of near future, with may drive activities in the construction several parastatals and public agencies. In the rate of growth sector in the near future, but the magnitude particular, the public electricity company averaging around and the timing of these flows remain TANESCO had accumulated an operational seven percent per uncertain. deficit of US$ 240 million and arrears year. Even small improvements in the levels of amounting to US$ 276 million at the end of productivity of the agricultural sector may 2012. TANESCO’s financial state improved be highly significant in terms of both their only marginally during 2013, as the cost social and economic impact, given the of electricity supply continues to be higher contribution of this sector to GDP and, more than the revenues derived from its sale. To significantly, as a provider of employment. date, the gap between revenues and costs PAGE http://www.worldbank.org/tanzania/economicupdate. ix TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N has been partially met by transfers from goals. As expected, they have resulted in the central Government and commercial increased levels of household consumption, borrowing by TANESCO. particularly amongst the poor. In addition, they have encouraged poor households to In addition to the situation of the parastatals, invest in their human capital, particularly by the central government has accumulated enabling and encouraging them to ensure significant arrears, notably as a result of that the children attend school and health its commitments under the public pension clinics. This outcome has been particularly scheme. apparent when the payment of benefits is In the coming years, the Government will made conditional on specific behaviors that have to balance the tradeoff between encourage these outcomes. public expenditure and both fiscal and debt International experience has shown that sustainability. At present, Tanzania has the performance of cash transfer programs As a conditional a relatively low public-debt to GDP ratio, is closely associated with three capacities: cash transfer pilot standing at slightly more than 40 percent. (i) targeting; (ii) transferring; and (iii) program, Tanzania’s However, fiscal space is closing rapidly, at monitoring. To be successful, programs Social Action least until revenues derived from natural gas need good targeting so the money goes to Fund Program has production begin to flow. the people who need it most. It is equally benefited close to Part 2: Money to people: Can conditional important that payments are delivered 20,000 households. cash transfers make a difference? in a regular, predictable, timely manner. Finally, these programs must be subject Cash transfers are based on the simple to strong checks and balances and to premise that poverty can be reduced by credible sanctions imposed in a consistent, giving money directly to the poor. Until transparent manner in cases of abuse, quite recently, this concept was rejected corruption or capture. by development experts, aid agencies and governments, on the grounds that the funds As a conditional cash transfer pilot program, would be misused and that they would Tanzania’s Social Action Fund Program create dependency. However, the success has benefited close to 20,000 households. of two cash transfer programs, in Brazil and A recent independent evaluation has Mexico, in the late 1990s has resulted in a concluded that good targeting, transferring paradigmatic shift in thinking. and monitoring mechanisms are now in place, largely due to close collaboration Today, there is a vast number of cash transfer between central and local governments, programs around the world. In Tanzania, this and communities. program is being piloted under the Tanzania Social Action Fund on a limited scale since The scaling up of this program to achieve 2009. Overall, cash transfer programs national coverage could result in significant have successfully achieved a number of reductions in extreme poverty without PAGE http://www.worldbank.org/tanzania/economicupdate. x T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n excessively high expenditure. By allocating extent by development partners. In the approximately US$ 250 million per year medium-term, it may be possible to devote to facilitate transfers to around 700,000 a share of the revenues derived from natural households, Tanzania could implement an gas exploitation to financing it. effective safety net program. This would However, conditional cash transfer programs be the country’s first comprehensive social should not be regarded as a panacea. These assistance plan. Scaling up the existing cash programs will achieve optimal outcomes transfer program would require developing only if they function as one component of targeting, transferring, and monitoring an integrated national strategy to alleviate capacities within a number of agencies poverty. in all districts, a process that would take approximately two years. In particular, on the supply side, the provision of basic social services of an appropriate A conditional cash transfer program requires quality remains an essential requirement sustained, long-term commitment. Once to effectively alleviate poverty. While cash the program has been established, the transfers may increase the demand for such Tanzanian Government will be committed to services, it is important to be able to meet allocating public resources to this program this demand. for the long term. Once such programs However, have been established, they are difficult conditional cash In addition, other elements, such as the to abolish, for both political and economic transfer programs existence of a good business climate and reasons. should not be good infrastructure, play a vital role. Of regarded as a However, if the program is well designed course, overall economic growth is also a panacea. These and implemented, it offers a potentially crucial driver of poverty reduction. Thus, programs will excellent return on investment, requiring while a cash transfer program may be a vital achieve optimal resources to a value of approximately 0.5 component in a well-designed program to outcomes only if percent of GDP per year. It is highly likely reduce poverty, this program must include they function as one that foreign assistance will be available a range of complementary measures to component of an to support the program during the initial facilitate the emergence of Tanzania as a integrated national period of development. During the pilot prosperous, just, equitable nation in which strategy to alleviate phase of the program, the Tanzania Social the benefits of economic growth are enjoyed poverty. Action Fund has been financed to a large by all citizens. PAGE http://www.worldbank.org/tanzania/economicupdate. xi TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N PAGE http://www.worldbank.org/tanzania/economicupdate. xii T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 1 The State of the Economy PAGE http://www.worldbank.org/tanzania/economicupdate. 1 Part I: The State of the Economy  In 2012 and into 2013, the Tanzanian economy has expanded at an annualized rate of approximately seven percent, with the same sectors (communication, transport, construction, and retail trade) driving economic growth as in recent years. The inflation rate remains at a reasonable level, declining to 6.3 percent by October2013.  On the external front, the current account balance improved significantly in 2012. However, during the first eight months of 2013, the value of merchandise exports declined significantly, by more than 20 percent. This situation requires close, ongoing monitoring.  There has been a significant deterioration in the overall fiscal deficit, which rose from a value equivalent to five percent of GDP in 2011/12 to 6.2 percent in 2012/13. This was the result of the Government’s failure to achieve revenue targets and of higher than forecast levels of expenditure.  In the absence of major external shocks, particularly those related to fluctuations in the price of commodities, Tanzania’s economy is likely to retain its current rate and pattern of growth into the short and mid-term future. However, the Government will need to adjust its accounts so as to keep its debt and debt- service at reasonable levels. In order to achieve this, the Government will have to address issues related to the financial situation of several parastatals and public agencies.  According to the latest Household Budget Survey, there are still approximately 12 million Tanzanians living below the poverty line, which is around the same number as in 2001. Many households, particularly those in rural areas, have not benefitted from economic growth, which has largely been driven by non-labor intensive sectors whose activities are concentrated in urban areas. PAGE http://www.worldbank.org/tanzania/economicupdate. 2 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Haijalishi nini unachokiona, bali kile The second change is that the economic usichokiona (‘What really matters is strategy implemented by the Government not what you see, but what you don’t over the past decade may have begun see’). Despite its apparent stability, the to facilitate reductions in poverty. The Tanzanian economy is currently undergoing recent Household Survey indicates that significant transformations, with further approximately 28.2 percent of the population transformations almost certain to take place lives below the poverty line, considerably in the coming years. Arguably, the most lower than the corresponding figure of 33.6 significant transformative factor has been percent in 2007. Caution must, however, the discovery of large natural gas reserves. If be applied in assessing the magnitude of managed well, these gas reserves have the the apparent reduction, as the two figures potential to transform Tanzania’s economic are not directly comparable, due to changes future. However, the large scale exploitation in survey methodologies and tools. More of these resources is unlikely to begin for at measurements and analysis are required to least 7-10 years. It is only after this point that determine whether these figures indicate a significant revenues will be generated from sustainable, ongoing trend. However, if real this source. While even the expectation of reductions in poverty have been achieved, the significantly increased revenues from these reductions are likely to be the result of Overall, the Tanzanian economy natural gas may be transforming Tanzania’s rapid urbanization, a gradual improvement in has performed well economy, a number of other possibly the stock of physical and human capital, and over the past year, interrelated factors are also contributing to the expansion of priority economic sectors. with rapid and change. stable economic While any real reduction in poverty is to growth and a The first change has involved a shift in be applauded, it must be reiterated that declining rate of the Tanzanian Government’s economic even according to the most optimistic inflation. policies. For many years, the Government figures, at least 12 million Tanzanians has implemented a combination of loose remain poor. Improving the socio-economic monetary policy and prudent fiscal policy. circumstances of this large group of citizens This policy approach was justified on the must therefore remain a top priority for basis of low rates of inflation and regular, Tanzanian policy makers. predictable increases to official aid inflows. These factors enabled increasing levels of Recent developments: Stable 1.1  public expenditure without threatening growth, low inflation and the need fiscal stability. However, for a number of for economic expansion drive reasons, the Government’s policy approach policy reversals has begun to change. In the past couple of years, the Government has begun to Overall, the Tanzanian economy has reverse its previous strategy, implementing performed well over the past year, with a prudent monetary policy together with a rapid and stable economic growth and more accommodating fiscal policy. a declining rate of inflation. The current PAGE http://www.worldbank.org/tanzania/economicupdate. 3 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N account balance has improved, even though recorded in 2011/12. the rate of growth in the value of exports Stable economic growth has decelerated in recent months. The most notable recent change has been a relaxation Tanzania has continued to achieve a high in the Government’s fiscal stance, which led rate of economic growth. The rate of growth to a public deficit estimated to reach a value in GDP in 2012 stood at 6.9 percent, close equivalent to 6.2 percent of GDP in 2012/13. to the historical average over the past This is considerably higher than both the decade and significantly higher than the figure of 5.5 percent initially targeted by rate achieved in neighboring countries (see the authorities and the figure of 5 percent Figures 1 and 2). Figure 1: Annual rates of GDP growth in Figure 2: Quarterly GDP growth: More Tanzania: a steady-state performance rapid, less volatile growth than in Kenya close to 7 percent and Uganda Source: World Bank, IMF, and MoF However, the rate of economic growth is employment to more than a small portion considerably less impressive when adjusted of the 700,000 additional workers who enter for the rapid rate of population growth, the domestic labor market every year. As a which currently stands at 2.7 percent. In result, many young workers find themselves The main drivers terms of per capita income growth, the engaged in small-scale, informal activities of Tanzania’s rapid figure achieved for the period from 2008 of limited productivity. Over the past few economic growth to 2012 is a more modest average annual years, employment in household enterprises continue to be a small number of fast rate of 3.6 percent. In these terms, Tanzania (including self-employment) has been the growing, capital ranks 13th out of 47 sub-Saharan African fastest-growing provider of employment for intensive sectors, countries, higher than Kenya (1.04 percent) the labor force. These household enterprises particularly the and Uganda (2.9 percent) but far lower than generally engage in agricultural and trading communications, top performing countries such as Ethiopia activities, operating at small scale, with little financial services, (6.2 percent), Ghana (6.1 percent) and specialization, and with short survival rates. construction, Rwanda (5.1 percent). manufacturing and The main drivers of Tanzania’s rapid economic retail trade sectors. This growth in the economy has not growth continue to be a small number been sufficient to provide full, productive of fast growing, capital intensive sectors, PAGE http://www.worldbank.org/tanzania/economicupdate. 4 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n particularly the communications, financial agricultural sector, in which approximately 80 services, construction, manufacturing and percent of households are primarily engaged, retail trade sectors (see Figure 3). The service recorded an average annual growth rate of sector, driven by the expansion of transport, only 4.2 percent. Similar trends, with higher communications, retail trade and financial rates of growth recorded by the less labor services, recorded the highest rate of annual intensive sectors, were observed across the growth in 2012, at 8.0 percent. By contrast, board during the first two quarters of 2013 labor intensive sectors, particularly the (see Figure 3). Figure 3: Sector growth in the first two quarters of 2013 Fishing     Hotels    and  restaurants   Other  services   Mining  and    quarying     Electricity     Q2  2013      Public  administra5on   Educa5on   Q1  2013   Wholesale  and  retail   Construc5on   The positive state Manufacturing     of Tanzania’s Transport  and  communica5on   economy is also -­‐10.0   -­‐5.0   0.0   5.0   10.0   15.0   20.0   25.0   indicated by the   World Bank/ Source: National Bureau of Statistics KPMG ‘Pulse of the Economy’. A set of leading indicators can be used to indicators, with the exception of capital predict short-term economic growth, since goods imports, has accelerated since the last quarterly GDP data in Tanzania is generally quarter of 2012, suggesting that the rate of published only six months after the period growth of overall GDP is also accelerating covered. A recent IMF study has identified a (see Figure 4). strong positive correlation between economic The positive state of Tanzania’s growth and the following indicators: (i) economy is also indicated by the World travel receipts; (ii) M3 growth; (iii) value tax Bank/KPMG ‘Pulse of the Economy’, the revenues; and (iv) capital goods imports.1 findings of which are summarized in the The annualized growth rates for all of these Box on page 6. 1 1 Tracking Short-Term Dynamics of Economic Activity in Low-Income Countries in the Absence of High-Frequency GDP Data, Maxwell Opoku-Afari and Shiv Dixit. IMF working paper, WP/12/119 1 Tracking Short-Term Dynamics of Economic Activity in Low-Income Countries in the Absence of High- Frequency GDP Data, Maxwell Opoku-Afari and Shiv Dixit. IMF working paper, WP/12/119 PAGE http://www.worldbank.org/tanzania/economicupdate. 5 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Figure 4: Most leading GDP Indicators are on the rise Source: BOT, IMF, and World Bank Pulse of the economy (KPMG/World Bank) The views of the business managers of the top 100 mid -sized companies in Tanzania were collected in mid-November 2013 (*). More than half of these business leaders consider that the overall economy is improving and performing better in 2013 compared to 2012. They are also positive about 2014, for the whole economy and their own business, with 85 percent respondents believing that they will perform bett er in 2014 than in 2013. Business leaders are more optimistic than they were in April 2013 when the first survey was conducted. How do you believe the Tanzanian economy is performing compared to last year? A total of 55 percent of the respondents feel that the economy is performing better in 2013 than in 2012, while 26 percent feel it is the same compared to 21 26% Better percent said that it is now worse than in 2012. 53% Worse 21% Same How do you expect Tanzanian economy to perform in the coming year? 55 percent of the respondents were optimistic 35% Better that the Tanzanian economy will perform better Worse in 2014. However, 10 percent of the 55% Same respondents believe that the economy will decline compared to 35 percent who believe 10% that the economy will remain the same. Respondents are more optimistic about the future of the economy; up by 12 percent compared to April 2013 survey. PAGE http://www.worldbank.org/tanzania/economicupdate. 6 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n How do you think that your business will perform during the next 12 months compared to now? 85 percent of the respondents were optimistic 11% that their business will perform better in the 4% Better coming 12 months compared to 11 percent who believed that their business will remain the Worse same. Only 4 percent of the respondents Same 85% believed that their business will be worse off in the coming 12 months. By far, business leaders continue to be highly optimistic about their future performance, up by 17 percent, compared to the results from the first survey conducted in April 2013. (*) Data was compiled by KPMG, through electronic questionnaire. Responses were anonymous. Tanzania’s rate Lower inflation, rising real interest rates neighboring Uganda and Kenya (see Figure 5). of inflation is now roughly Headline inflation has continued to fall The decline in the inflation rate is good equivalent to that over the past 18 months, declining to an news, especially for consumers and non- of neighboring annualized rate of 6.3 percent by October indexed wage workers. The decline has also Uganda and Kenya. 2013, down from almost 20 percent at the contributed to the stabilization of the real end of 2011. This steady and significant exchange rate, which appreciated by almost decline has been the result of a combination 20 percent in 2011/12 as the result of the of the implementation of stricter monetary large inflation differential between Tanzania policy and a decline in food and energy and its trade partners. This stabilization prices. As a result, Tanzania’s rate of of the real exchange rate also has positive inflation is now roughly equivalent to that of implications for exporters. Figure 5: Inflation trends: Stricter monetary policy and a decline in food and energy prices result in a declining rate of inflation Source: IMF, Ministry of Finance PAGE http://www.worldbank.org/tanzania/economicupdate. 7 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N However, the decline in the rate of inflation lag between inflation and financial variables, has yet to be reflected by a corresponding it also reflects a prudent policy of the Central adjustment in nominal interest rates. As Bank to keep its directing interest rates at a a result, real lending rates surged from a relatively high level. However, if sustained negative five percent in November 2011 to higher credit costs will increase the financial a positive seven percent in July 2013 (see burden on enterprises, leading to a reduction Figure 6). This has encouraged savings but in borrowing for the development of their discouraged borrowing. While the increase in businesses. real interest rates may reflect a transmission Figure 6: Headline inflation and rising credit costs Source: BOT Improved current account balance the lion’s share of these exports going to despite a recent dip markets within the region. Over the past decade, Tanzania’s economy After a deterioration in 2011/12, the current has become significantly more open. The account balance improved significantly in After a trade-to-GDP ratio has increased from 13.5 2012/13, declining from a value equivalent deterioration percent in 2000 to more than 30 percent to 16.5 percent of GDP to 13.9 percent. in 2011/12, the in 2011, the highest rate among the East The improved current account balance has current account African Community countries, with the been largely due to a significant increase in balance improved value of Tanzania’s exports multiplying by the volume of merchandise exports, up by significantly in a factor of five over this period. The largest 6 percent in current dollar terms, and by a 2012/13, declining contributors to the export basket continue corresponding deceleration in the growth from a value to be primary commodities, particularly in value of merchandise imports, with the equivalent to 16.5 gold, coffee, tea, cashew nuts and cotton. At rate of growth of such imports standing at percent. the same time, the volume of manufactured only 3.6 percent in 2012/13, compared to exports has surged in recent years, with 32 percent in 2011/12. An increase in net PAGE http://www.worldbank.org/tanzania/economicupdate. 8 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n service exports and in current transfers also the level of international reserves increased contributed to this improvement. In terms from a value of US$ 3.7 billion at the end of the capital account, FDI increased by 9.6 of 2011/2 to US$ 4.3 billion at the end of percent, while (net) public sector borrowing 2012/13, a value equivalent to 4.1 months increased by 34 percent relative to the of total imports. figures recorded in 2011/12. As a result, Figure 7: Improved external balance in 2012/13 10.0 -20.0 Months of Imports 8.0 CA (% of GDP) -15.0 6.0 -10.0 4.0 2.0 -5.0 0.0 0.0 Gross Official Reserves (months of imports) Current Account (% of GDP) Source: BOT and IMF However, there are some signs of a reversal value of exports is partly explained by in these trends. Over the first eight months lower world prices for some commodities, The general decline of 2013, the total value of international trade particularly gold. This overall decline may in the value of between Tanzania and the rest of the world also reflect a decline in regional trade for exports is partly explained by lower has declined significantly (see Table 1). This some manufacturing products. world prices for is particularly apparent with exports, with The total value of imported goods and some commodities, the total value of sales of Tanzanian good services also declined in the first eight particularly gold. and services abroad declining by 5.3 percent months of 2013 (see Table 1). While the compared to the value in the same period decline in exports was apparent for exports in 2012. in all categories, the overall decline in the The decline in exports has affected total value of imports has been largely exports from all sectors, with the solitary driven by a decline in the value of capital exception of the transportation and travel goods, especially of machinery, and, to a services sector, including: agricultural lesser extent, of consumption goods (down (-25.3 percent), minerals (-18.6 percent), by 2.3 percent). By contrast, the total value and manufacturing (-9.1 percent) exports. of intermediary imports increased by more Bucking this trend, the transportation and than 17 percent, with this increase largely travel services sector recorded increases driven by increases in the value of imports of 15 percent. The general decline in the of oil and fertilizers. PAGE http://www.worldbank.org/tanzania/economicupdate. 9 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Table 1: Recent growth patterns in exports and imports January- January- January- January- August August August August 2012 2013 2012 2013 Exports, goods & 5077.1 4808.2 -5.3% Imports, goods & 8321.7 8093.0 -2.7% services services Agricultural 553.3 413.0 -25.3% Capital goods 2385.4 2190.6 -8.2% exports Coffee, value 100.2 114.6 14.4% Transport equipment 700.1 683.5 -2.4% Cotton, value 62.4 40.8 -34.5% Building and 512.3 620.9 21.2% construction Tea, value 39.3 44.2 12.3% Machinery 1173.0 886.1 -24.5% Tobacco, value 199.7 91.3 -54.3% Intermediate goods 2883.1 3386.2 17.4% Cashew nuts, 105.0 100.5 -4.3% Oil imports 2270.7 2845.7 25.3% value Minerals 1470.6 1196.3 -18.6% Fertilizers 59.0 88.4 49.7% Gold 1416.8 1111.5 -21.5% Industrial raw 553.3 452.0 -18.3% materials Manufactured 756.0 686.9 -9.1% Consumer goods 1548.3 1512.1 -2.3% goods Fish and Fish 112.0 88.5 -21.0% Food and foodstuffs 457.2 433.1 -5.3% Products Horticultural 18.2 19.5 6.9% All other consumer 1091.1 1078.9 -1.1% Products goods Other Export 376.1 344.9 -8.3% Imports, services 1504.1 1584.5 5.3% Products Re-Exports 137.2 123.2 -10.2% Transportation 687.7 722.2 5.0% Services receipts 1653.4 1935.5 17.1% Travel 586.3 627.9 7.1% Transportation 405.5 498.8 23.0% Travel 981.8 1135.3 15.6% Source: BOT The Tanzanian A policy reversal: prudent monetary a means of controlling the rate of inflation, Government policies, relaxed fiscal stance while it has used fiscal policy as its principal instrument to impact the real side of the has successfully Governments have two main classes economy. controlled the of policy instruments to influence the inflation rate economy, these being monetary policy The Tanzanian Government has successfully over the past two instruments and fiscal policy instruments. controlled the inflation rate over the past years through the Following the lessons learnt from economic two years through the implementation of implementation theory and experience (see a classical paper a prudent monetary policy. Specifically, of a prudent by R. Mundell from 1962),2 the Tanzanian the Bank of Tanzania has implemented a monetary policy. Government has correctly assigned one relatively tight monetary policy to reduce key objective to each of these instruments. monetary expansion and has increased Over the past two years, the Tanzanian guiding interest rates. The annual rate of Government has utilized monetary policy as growth of average reserve money was 14.5 1  , Mundell, Appropriate Use of Monetary and 2 R Fiscal Policy under Fixed Exchange rates, IMF, 9, R 2  , Mundell, March 1962,Appropriate 70-9. Use of Monetary and Fiscal Policy under Fixed Exchange rates, IMF, 9, March 1962, 70-9. PAGE http://www.worldbank.org/tanzania/economicupdate. 10 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n percent for the year ending June 2013, a a decline in total credit of 10 percent will significant decline over the rate of 19.3 only lead to a corresponding decline in GDP percent recorded in the year ending June of 2.4 percent, all other factors being equal. 2011. The rate of growth of broad money has However, on the fiscal side, there is a need fallen as well, from more than 22 percent to to carefully monitor the situation and to 15 percent over the same periods. respond appropriately. The overall fiscal As a result, the inflation rate has declined deficit for 2012/13 is estimated to reach significantly. As noted earlier, the measures a value equivalent to 6.2 percent of GDP The deterioration implemented to achieve this have resulted (see Figure 8). This represents a significant in the fiscal in increases to the cost of credit, imposing increase compared to 2011/12, when the accounts during increased burdens on borrowers and thereby deficit stood at a value equivalent to only five 2012/13 has been negatively impacting the expansion of the percent of GDP. This deterioration was both the result of the real economy. However, the magnitude of unexpected and considerably higher than Government’s this negative impact may not be dramatic, targeted, with the initial target established overestimation as the ratio of total credit to GDP was only by the authorities in consultation with the of revenues and 24.8 percent in 2012, compared to a figure of IMF set at a value equivalent to 5.5 percent underestimation of more than 130 percent in emerging counties of GDP. expenditure. such as Thailand and Malaysia. To illustrate, Figure 8: Overall fiscal deficit of the Central Table 2: Central Government operations, Government Percent of GDP 2011/12 2012/13 Variation Domestic revenues 17.6 17.8 0.2 Total expenditure 27.1 27.8 0.8 Grants 4.5 3.8 -0.7 Overall balance -5.0 -6.2 -1.2 Financing 5.0 6.2 1.2 Foreign (net) 4.2 3.9 -0.3 Domestic (net) 0.8 2.3 1.5 Source: IMF and World Bank The deterioration in the fiscal accounts 27.8 percent of GDP. Significant adjustments during 2012/13 has been the result of the occurred to the financing side of the budget, Government’s overestimation of revenues as the value of foreign inflows in the form of and underestimation of expenditure (see grants and loans declined by one percent in Table 2). In this period, as a proportion of proportion to GDP. The resulting gap was GDP, domestic revenues only increased by met through domestic financing, with the 0.2 percent of GDP compared to the previous value of public borrowing reaching a figure year, despite ambitious initial targets. At the equivalent to more than 2.3 percent of GDP, same time, as a proportion of GDP, the total exceeding the ceiling of one percent agreed value of public expenditures increased by upon with the IMF. 0.8 percent reaching a value equivalent to PAGE http://www.worldbank.org/tanzania/economicupdate. 11 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N The recent shift in the Government’s fiscal (education, water, energy, agriculture, stance may reflect a deeper policy shift. Until resource mobilization and transport), each very recently, the Government has made the of which has generated results frameworks. achievement of fiscal sustainability its main Progress towards the defined results will be priority. However, there are signs that the monitored and supported by the Presidential Government is placing an increased priority Delivery Bureau. The approach hinges on on the use of fiscal policy as an instrument prioritization, monitoring and accountability to promote economic growth. Fiscal policy in terms of performance. can have an impact on both the demand The promotion of more rapid and equitable and supply sides of the real economy, economic growth is a popular goal, but also thus potentially contributing to more rapid a perilous one. The Government must tread and more sustainable economic growth. An accelerated the tight rope and find the balance between On the demand side, an increase in public drive for the the use of public expenditure to promote expenditure will automatically lead to higher development of economic growth and the need to maintain aggregate demand and thus stimulate the fiscal and debt sustainability over time. This social and physical economy, this being the classical Keynesian requires intense coordination between a infrastructure is multiplier effect. On the supply side, higher range of measures and actions and close underway on the levels of public expenditure can generate an monitoring over time. The first required recently launched increase in the stock of social and physical action is to ensure that increased public ‘Big Results, Now’ infrastructure, which in turn will boost private sector development in the medium expenditure is used to finance productive initiative. projects, or projects whose rates of return are to long term. The economic literature is full of higher than the cost of financing them. This examples quantifying the long-term effects simple rule is not always easy to implement, of improved human capital (see R. Barro)3 as rates of returns are sometimes difficult and physical infrastructure (see L. Serven)4 to calculate. This is particularly so, as the on GDP growth and poverty alleviation. Government may want to differentiate An accelerated drive for the development between financial returns on the one hand of social and physical infrastructure is and economic and social returns on the underway on the recently launched ‘Big other. For example, the construction of a Results, Now’ initiative (BRN). The BRN school might be subsidized because of its initiative is inspired by a similar Malaysian expected positive impact on education and program with the stated aim of facilitating long-term economic growth, despite low or the achievement of Tanzania’s Development non-existent financial returns in the short Vision 2025 through the identification of term. The rates of return and the financing a series of priority areas for expenditure. costs associated with individual projects The approach involves the establishment may also fluctuate during the period of their of delivery laboratories in six areas implementation, as both costs and returns 3 Barro) R. 1 andJ.physical Barro, Robert infrastructure 2001. “Human (see L. Serven)2 on GDP growt Capital and Growth.” American Economic Review, 91(2): 12-17. Barro,A. 4 Cesar 3 Calderon Robert & Luis J. 2001. Serven, “Human 2014. and Capital “The Effects American Economic Review, 91(2): 12-17. Growth.” of Infrastructure Development on Growth and Cesar A. 4 Income Calderon & Luis Distribution,” Serven, Annals 2014. “The of Economics Effects of Infrastructure Development on Growth and Income and Distribution,” Annals Finance, Society vol. 15(2), and of Economics for AEF, Finance pages , Society for AEF, vol. 15(2), pages 521-534, November. 521-534, November. PAGE http://www.worldbank.org/tanzania/economicupdate. 12 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n may be influenced by exogenous factors. sufficient fiscal space is needed to repay the loans over time. As clearly demonstrated Even if the Government is capable of by Figure 9, the fiscal cost associated with identifying and implementing appropriate the public debt service has increased from investment projects, it is vital to consider a value equivalent to one percent of GDP in timing. Indeed, the costs of financing even a 2009/10 to a projected value equivalent to potentially productive project generally have 2.5 percent of GDP in 2013/14, mainly due to be paid before that project is finalized to the increased proportion of financing and its benefits realized. To the extent that derived from the use of non-concessional costs are supported by the Government, loans on foreign and domestic markets. Figure 9: Rising debt stock and debt service payments 48 3 Debt service, % of GDP 2.5 Debt, % of GDP 38 2 28 1.5 1 18 0.5 8 0 2009/10 2010/11 2011/12 2012/13 2013/2014 Given the increased (p) fiscal risks, notably Total debt service (right handed axis) Domestic public debt (left handed axis) in the context of Total public debt (left handed axis) External public debt (left handed axis) the forthcoming Source: IMF and World Bank national elections of 2015, fiscal The Tanzanian Government is fully aware of fiscal risks, notably in the context of the deficits need the trade-off between debt and expenditure. forthcoming national elections of 2015, to be carefully This is demonstrated by its commitment fiscal deficits need to be carefully monitored. monitored. to maintaining the overall fiscal deficit at a The challenge in the management of the reasonable level in coming years, including trade-off between public investment and in 2013/14. The authorities are currently fiscal sustainability requires a great deal of completing the annual debt sustainability attention to a number of relationships that analysis with the IMF and World Bank and go beyond the budget, as illustrated in the are in the process of setting up a debt box overleaf. management office. Given the increased PAGE http://www.worldbank.org/tanzania/economicupdate. 13 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Public investment, growth, and debt sustainability: Achieving the right balance The macro-economic effects of public investment can be captured through four relationships: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv) the macroeconomic adjustments required to ensure internal and external balance. Well-executed, high-yielding public investment programs can substantially raise output and consumption and may be self-financing in the long run. However, despite potentially positive impacts in the long term, transition problems can be formidable, particularly when concessional financing does not cover the full cost of the investment program. Covering the resulting gap with tax increases or spending cuts requires sharp macroeconomic adjustments, crowding out private investment and consumption and delaying the growth benefits of public investment. Covering the gap with domestic borrowing may not be helpful either: higher domestic rates increase costs, while still crowding out private investment and consumption. External commercial borrowing, on the other hand, can smooth these difficult adjustments, reconciling the scaling up with feasibility constraints on increases in tax rates. However, this strategy may also be risky. With poor execution, sluggish fiscal policy reactions, or persistent negative exogenous shocks, this strategy can easily lead to unsustainable public debt dynamics. Front-loaded investment programs and weak structural conditions, such as low returns to public capital and poor execution of investments, make the fiscal adjustment more challenging and the risks higher. Source: IMF working paper, N. 12/144., June 2012. Buffie, Edward F. ; Berg, Andrew ; With Tanzania’s Pattillo, Catherine A. ; Portillo, Rafael ; Zanna, Luis-Felipe current rate of growth of GDP Looking forward: Good prospects, 1.2  growth standing at with oil revenues on the horizon - do so into the future. Economic growth approximately but watch out for commodity prices will also be driven by increased activity 7 percent per within the construction sector, particularly annum, no major The baseline scenario: A resilient with Tanzania’s rapid urbanization and changes are trajectory the Government’s renewed focus on the expected in the development of public infrastructure. With Tanzania’s current rate of growth of next few years. GDP growth standing at approximately Unless global food and energy prices rise seven percent per annum, no major dramatically, the inflation rate should remain changes are expected in the country’s approximately at its current level, in the growth trajectory over the next few years range of five percent. The external balance (see Table 3). The sectors which have driven should not be subject to major pressures, Tanzania’s economic growth over recent as long as exports grow. If global prices and years, particularly the capital intensive and the demand for Tanzania’s outputs remain rapidly expanding communications and stable and the regional integration process financial services sectors, will continue to continues, such growth is likely. The value PAGE http://www.worldbank.org/tanzania/economicupdate. 14 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n of imports is also likely to increase, mainly contributing to the stabilization of (gross) financed by higher FDI inflows. In other international reserves at around US$4.5 words, the current account is expected to be billion. financed by corresponding capital inflows, Table 3: Macro-economic projections (% of GDP, unless indicated) 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 (e) (p) (p) Real GDP growth 6.5 6.7 6.7 7.0 7.0 7.0 Inflation (CPI, %) 10.5 7.0 17.8 11.3 6.1 5.3 Broad money (M3) 25.1 22.0 11.8 13.0 -- -- Revenue (excluding 15.9 16.4 17.6 17.6 18.3 18.8 grants) Total Expenditure 27.5 27.0 26.3 27.8 26.8 26.7 Overall balance -6.4 -6.6 -5.0 -6.2 -5.5 -5.0 (including grants) Investment 30.6 34.5 35.5 34.4 39.0 38.5 The Government Current account balance -9.0 -9.4 -16.5 -13.9 -15.2 -14.3 should also Gross official reserves 3,483 3,610 3,797 4,230 4,480 4,710 (US$ million) maintain the ratio Source: World Bank of public debt to GDP at a level On the fiscal side, the Government is current ratio between its wage bill and below 50 percent expected to reduce the overall deficit from GDP is maintained. It will also have to keep over the next two a value equivalent to 6.6 percent of GDP to development expenditure at a reasonable years. somewhere between 5.5-5.0 percent. The level. This will only be achieved through Government should also maintain the ratio the implementation of efficient selectivity of public debt to GDP at a level below 50 mechanisms and the development of Public- percent over the next two years. However, Private Partnerships (PPPs) to reduce the the attainment of these levels is dependent financial burden of such expenditure on the on higher levels of revenue mobilization and budget. controlled expenditure. The achievement of The fiscal adjustments planned by the higher levels of revenue mobilization is highly Government can be justified as a means dependent on the Government’s capacity to to maintain Tanzania’s current risk of debt reduce the level of tax exemptions, which distress at a low level. The findings of the currently cost the equivalent to three to new debt-sustainability analysis (DSA), four percent of GDP per year. In addition, which is currently under preparation, are the Government will have to successfully not expected to be significantly different implement reforms to the country’s VAT from those reported in the latest official system and to collect higher levels of non- DSA produced in April 2012. However, the tax revenues. In terms of expenditure, the main difference concerns the increasing authorities will have to ensure that the PAGE http://www.worldbank.org/tanzania/economicupdate. 15 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N sensitivity of the external debt outlook to Tanzanian workers, the future development the magnitude of the fiscal adjustment in of the agricultural sector and the levels the coming years. Compared to the recent of productivity it will achieve remain very past, the initial fiscal deficit has deteriorated uncertain. While no major breakthroughs and the level of public debt has increased to are expected in the coming years, even small a value in excess of 40 percent of GDP at the changes may have a significant impact on end of 2012/13, with a higher proportion Tanzania’s economic and social landscape, of non-concessional loans. Outstanding considering that this sector contributes pension liabilities also have a negative to approximately one quarter of GDP and impact on the level of public debt. For these provides employment to approximately three quarters of all Tanzanian workers. On reasons, fiscal consolidation is critical to the positive side, the Southern Agricultural ensure fiscal and debt sustainability in both Growth Corridor of Tanzania (SAGCOT) the short and longer terms. initiative may facilitate the establishment Possible areas for increased growth of linkages between small-holders and For these reasons, large commercial farms, thus promoting fiscal consolidation The baseline scenario assumes continuity productivity gains. The increased use of is critical to ensure in policy-making by the Tanzanian modern irrigation systems and modern authorities. However, there are a number fiscal and debt inputs (seeds, fertilizers) may also result of developments that could drive a higher in increased productivity, at least in some sustainability in rate of economic growth. Among these specific areas. Nonetheless, this sector both the short and developments is the possibility of increased remains highly dependent on climatic longer terms. FDI inflows as a result of the recent discovery conditions, particularly levels of rainfall. of natural gas reserves in the south of the The rapid development of the country. While the most significant impacts communications and financial services of this discovery on the local economy will sectors may also contribute to an not be felt for at least seven to ten years, acceleration in overall economic growth. when exploitation will start at full scale, the Not only does the growth of these sectors discovery will nonetheless drive increased contribute directly to increases in GDP, it economic activity during the construction also has an indirect, positive impact on phase. In the long term, the magnitude and other sectors. For instance, there is a clear timing of the impact of the discovery remain positive correlation between monetization uncertain. Careful management of the and economic development.5 Advances revenues derived from the newly discovered in mobile technology and a dramatically natural resources will be required to ensure increased rate of usage of this technology the optimal use of these revenues and to has driven the development of new business achieve inclusiveness. systems, enabling the establishment of linkages between entrepreneurs with Despite its importance as the most their customers, suppliers, bankers, and significant provider of employment for 1 5Monetization in Low- and Middle-Income Countries, Cameron McLoughlin and Noriaki Kinoshita, IMF Monetization in Low- and Middle-Income Countries, Cameron 5 McLoughlin working Noriaki Kinoshita, IMF working and 2012. paper, June paper, June 2012. PAGE http://www.worldbank.org/tanzania/economicupdate. 16 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n government officials. Today, approximately Salaam and the Zambian border. The costs half of all Tanzanian adults use mobile associated with the inefficiency of Dar es telephones, with around 80 percent of users Salaam’s port are estimated to reach a value having utilized mobile technology to send in excess of seven percent of Tanzania’s GDP or receive money. Rates of penetration and (see Third Economic Update for details). usage are expected to continue to grow, Another important issue, one that has been particularly in rural areas and amongst low identified as the most significant constraint income households. on growth by 80 percent of businesses operating in Tanzania, relates to the Future economic growth will also depend provision of electrical energy. Addressing on the ability of the Government to remove this constraint should also be a high priority existing constraints on businesses. In for the Government. particular, the poor state of Tanzania’s physical infrastructure, especially its road Risk factors: revenue collection, the energy and transportation infrastructure, is a sector, government arrears and debt critical constraint that must continue to While Tanzania’s economic prospects be addressed. The significance of this are generally good, they are subject to constraint is indicated by the fact that up a number of external risks. In particular, to one third of the revenues of non-farm significant fluctuations in commodity prices, businesses in urban areas is absorbed by particularly in the prices of gold and oil, may congestion costs, which refer to the financial affect the trade balance. The magnitude and and time costs associated with moving from Future economic timing of anticipated FDI inflows resulting one place to another.6 growth will also from the development and exploitation of depend on the In rural areas, the geographical isolation natural gas resources will also impact the ability of the of farmers is a major constraint to the local economy, especially in geographical Government to development of their activities, with the areas where related activities will take place. remove existing average distance of farmers from the The value of new investments related to nearest village standing at 18 km, acting these resources is expected to be in the constraints on as a constraint against access to markets region of US$ 4-5 billion per year. It is likely businesses. and service providers. This isolation is that the majority of these funds will be used exacerbated by the limited use of motor to purchase imported goods. Even so, the vehicles, with only 4.2 percent of farmers magnitude of these investments will alter owning a car. Other factors, including poor the current equilibrium in domestic financial road infrastructure and roadblocks, further markets and possibly have an impact on exacerbate this isolation and constrain the exchange rates. These potential impacts development of economic activities. To will have to be carefully managed by the indicate the magnitude of this problem, authorities. there are 29 roadblocks between Dar es 1 6 On average, people spent 170 minutes per day in transport in Dar the area. This is equivalent to a lossaverage, 6 On of USD17people per month, spent equivalent 170 minutes 34 percent toper day in transport in Dar the area. This is equivalent to a loss of of average USD17 month, equivalent per monthly salary to 34 percent of average monthly salary PAGE http://www.worldbank.org/tanzania/economicupdate. 17 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N As stated earlier, the appropriate projected financial gap, which will grow management of growing fiscal risks is by approximately US$ 260 million in 2013. of paramount importance. While the The required actions may involve politically Government appears to be committed to contentious measures, such as tariff the necessary fiscal adjustments, there may increases or budget reallocations involving be a temptation to delay implementation significant expenditure cuts in other areas. due to political pressures related to the Alternatively, these actions may involve non- forthcoming national election, which is concessional borrowing at a high future scheduled for November 2015, with recent cost. history (see Third Economic Update) Secondly, the size of the TANESCO deficit showing that public expenditure is is itself sensitive to a number of factors generally higher in the months preceding outside the Government’s control, including elections. The prospect of significant future hydrology conditions and world oil prices. A gas revenues might also encourage the combination of bad luck and delays in the authorities to borrow excessively, despite implementation of the TANESCO action the uncertainty regarding the timing and plan would add significant risk to the magnitude of these revenues. Government’s fiscal accounts. The first short-term risk to the fiscal stance The third short-term risk to the fiscal stance relates to shortfalls in revenue collection relates to the accumulation of arrears by the together with the implementation of action The prospect of Government. In particular, these risks relate plans related to the ‘Big Results, Now!’ to the pension sector and the management significant future (BRN) initiative. The 2013/14 budget is of contingent liabilities from the parastatals. gas revenues might predicated on the implementation of new The overall value of the Government’s arrears also encourage tax measures which, although necessary, grew substantially during 2012/13, reaching the authorities to may be somewhat ambitious. Furthermore, to a value of almost Sh650 billion at the borrow excessively. implementation of BRN initiative action plans end of December 2012, before including may require the reallocation of funds and/or arrears from the Public Service Pensions the development of new source of revenues. Fund (PSPF) pre-1999 liabilities, which are If the value of collected revenue is less than estimated to reach to a value of a further anticipated, the Government will need to Sh1.3 trillion. Unless the Government reduce non-priority expenditure to achieve implements rigorous measures to include the targeted level of deficit. Alternatively, it the future stream of pension payments may also elect to borrow more (see fourth in the existing fiscal space or otherwise risk below). implements major reforms to the sector, Financial distress within the energy unpaid pension liabilities will continue to sector, particularly related to TANESCO’s add to the stock of public debt. financial difficulties, presents a second The latest Public Expenditure and Financial short-term risk to the fiscal stance. In Accountability (PEFA) Assessment addressing these difficulties, there are two underscores the fiscal risk to the budget inherent uncertainties. Firstly, decisive posed by some public enterprises. As a actions will be needed to close TANESCO’s PAGE http://www.worldbank.org/tanzania/economicupdate. 18 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n measure towards addressing this, the be applied when comparing the two sets of Government must act to consolidate figures, with further in-depth analysis being financial accounts, including those of the required to evaluate changes in poverty main parastatals. In addition, it should between the two points in time. If the strengthen its financial oversight of these reduction in poverty is as significant as the parastatals. above figures suggest, this reduction has almost certainly been driven by the rapid The fourth risk to the fiscal stance is linked urbanization process, gradual improvements to the central government’s level of debt, to the stock of human and physical capital, the value of which stood at the equivalent and the expansion of specific economic of more than 40 percent of GDP by the sectors, including the transportation, end of 2012/13. Given the considerable communication, construction, and financial need for investment in infrastructure, the services sectors. Government may be tempted to engage in increased borrowing to finance these However, regardless of the significance in projects, especially if it fails to achieve its the decline of poverty over recent years, ambitious revenue collection targets for Tanzania remains a poor country. In 2012, 2013/14 and 2014/15. its average per capita income stood at US$ 570, placing it in the 176th position out of Recently, non-concessional domestic and 191 countries in the world. Even according foreign borrowings have contributed to to the most optimistic estimates, there are a significantly increased proportion of still approximately 12 million poor people the financing of the budget. This can be living in Tanzania, which is approximately expensive, as demonstrated by the sharp the same number as in 2001. Furthermore, increase in debt servicing costs, which Recently, non- the country is unlikely to achieve many of increased from a value equivalent to one the MDGs by 2015, with many Tanzanians concessional percent of GDP in 2009/10 to a projected failing to benefit from traditional growth domestic and 2.5 percent in 2013/14 (see Figure 9). mechanisms and requiring access to foreign borrowings effective social safety nets. have contributed Poverty in Tanzania: Still too many 1.3  to a significantly poor Tanzanians, despite growth Achieving Inclusive Growth: Addressing increased and other improvements the rural-urban gap, promoting the labor proportion of the intensive sectors On November 14, 2013, the Government financing of the announced the new official poverty Despite relatively high growth rates, the budget. figures for Tanzania. With the recorded concentration of economic growth in urban rate of incidence of poverty standing at areas and in capital-intensive sectors, 28.2 percent in 2011/12, there is cautious such as the mining, communication, evidence for a recent decline in poverty, construction, and banking sectors, explains with the equivalent rate in 2007 standing the prevalence of poverty. Growth in at 33.6 percent. However, changes to agricultural value added activities has survey instruments and poverty estimation lagged behind other sectors, at less than methodologies mean that caution should two percent per worker per year during the PAGE http://www.worldbank.org/tanzania/economicupdate. 19 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 2000s. This growth has not been sufficiently productive income generating activities. high to facilitate a significant reduction in This will require a substantial effort to poverty in rural areas, where more than 80 upgrade their human capital, particularly percent of the country’s poor reside, with by facilitating increases in their levels of most rural residents dependent on this educational attainment. Today, the skill sector for their livelihoods. structure in Tanzania is equivalent to that of Thailand’s approximately 40 years ago. In The large gap in the living standards of particular, the proportion of the labor force residents of urban areas compared to those with middle to high level skills is only about in rural areas is clearly demonstrated by a 10 percent. Over the past forty years, the number of social and economic indicators: proportion of Thai workers with such skills Only four percent of rural households have has grown to almost 40 percent. access to or utilize electricity, compared to 46 percent of households in urban areas. It will also be vital to link poor Tanzanians to While the proportion of rural residents who markets by creating new physical and virtual own a mobile telephone is increasing rapidly infrastructure. To achieve this, advances in and has reached the level of 51 percent, it mobile technology and the rapid increase is still significantly lower than the figure of in the rate of use of mobile phones create 87 percent in urban areas. People in urban new opportunities. Another positive factor is areas generally eat better than those in rural the ongoing process of urbanization, which areas, with 79 percent of urban households can be expected to generate agglomeration reporting that they usually have three meals effects that may be indispensable to the per day, compared to only half of rural achievement of sustainable economic households (based on the 2011/12 Tanzania development. To make growth HIV/AIDS and Malaria Indicator Survey). more inclusive, Taking care of the extreme poor: social the Government Furthermore, recent measures to improve protection and safety nets needs to consider human capital, particularly through Since the creation of new opportunities a number of improvements to primary and secondary for income generation requires long- measures to education, will only have a significant impact on income generation in years to come, term, sustained efforts, there is a create new as it will take time for cohorts of children need to provide safety nets to protect opportunities for benefiting from improved education to pass vulnerable groups in the short and poor Tanzanians through the education system and enter the medium term. Currently, approximately to engage in labor market. 4.2 million people live in extreme more productive poverty in Tanzania, with these people income generating To make growth more inclusive, the receiving barely enough food to survive. 7 activities. Government needs to consider a number The majority of those living in extreme of measures to create new opportunities poverty are located in rural areas (11.3 for poor Tanzanians to engage in more percent of the total rural population) 1 7 The extreme poverty line is equivalent to Tsh 26,085 per month and per adult. 7 The extreme poverty line is equivalent to Tsh 26,085 per month and per adult. PAGE http://www.worldbank.org/tanzania/economicupdate. 20 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n and secondary cities (8.7 percent). By themselves often poor or vulnerable to contrast, extreme poverty is almost poverty and thus cannot always provide non-existent in Dar es Salaam, with the support. Informal collective mechanisms rate of incidence standing at only one may be of use when a small proportion of a percent in 2012/13. defined community is affected by personal misfortune, but less so in the face of major Those living in extreme poverty are often or sustained shocks, particularly when they caught in persistent poverty traps and affect entire communities, as may be the lack the ability to take advantage of the case with climatic shocks, for example. In emerging opportunities created by growth cities, informal protection networks also and structural transformation. Ill health or tend to be either less effective or non- disabilities on the part of a poor household’s existent, leaving individuals with little or no major breadwinner, for instance, can protection in the case of disease, job loss, force families to withdraw children from or other catastrophes. Private sector led school, impairing their future labor market mechanisms, such as insurance schemes, The Government opportunities. Likewise, persistent hunger remain limited to a small proportion of has created and malnutrition discourage risk taking privileged households. a number of and diversification in agriculture, as families programs, often prefer to grow low-yielding staple crops The Government has created a number funded by donors, in order to attain a minimum level of food of programs, often funded by donors, to support security, even if this means ongoing low to support vulnerable groups. However, vulnerable groups. economic returns. In addition, extremely these programs remain very limited in However, these poor families are also often highly exposed scope. An examination of the 2013/14 programs remain to risk and adverse shocks and lack the budget indicates that the funding for such very limited in means and strategies to cope with such programs represents only one percent of scope. shocks. In such a context, social protection total public expenditure, a figure equivalent programs can play an important role by to less than 0.3 percent of GDP, with two reducing insecurity and guaranteeing a programs, managed by the National Food minimum level of consumption. In turn, Reserve Agency and Social Action Fund this enables and encourages families to respectively, accounting for three quarters of make longer-term investments and better the resources allocated to social protection. economic choices, thereby escaping their poverty traps. Figure 10 below describes social spending as a proportion of GDP across regions. On Traditionally, most vulnerable Tanzanians average, sub-Saharan African countries tend to rely on their families and on informal spent sums equivalent to approximately networks as a mechanism for coping three percent of GDP on social assistance with shocks and insecurity. While such programs. In Ethiopia and Malawi, the mechanisms may provide some security, respective governments spend sums they are affected by a number of important equivalent to approximately 4.5 percent of limitations. The most important is that their GDP (including international aid) on the families of vulnerable Tanzanians are social protection programs. PAGE http://www.worldbank.org/tanzania/economicupdate. 21 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Figure 10: An international comparison of expenditure on social security programs Source: Weigand, C. and M. Grosh (2008) ‘Levels and Patterns of Safety Net Spending in Developing and Transition Countries’ The next part of this update looks at one managed conditional cash transfer system, possible option for the development of a implemented in conjunction with measures formal social safety net system in Tanzania, to develop better basic services and to with this option involving conditional promote inclusive growth, could play a cash transfers. Recent international and major role in the achievement of poverty national evidence suggests that a well- reduction in Tanzania. PAGE http://www.worldbank.org/tanzania/economicupdate. 22 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 2 Money to People: Can Conditional Cash Transfers Make a Difference? PAGE http://www.worldbank.org/tanzania/economicupdate. 23 Part II: Money to people: Can conditional cash transfers make a difference?  Cash transfers programs involve giving money directly to people to raise their standard of living. Specifically, such programs increase the levels and quality of consumption of the poor; provide them with security in the case of unforeseen shocks; improve education and access to health services; enable them to spend more time engaged in potentially more productive activities; and allow them to save the financial capital to support the establishment of small businesses.  Cash transfer programs have become popular around the world since the significant, well documented initial successes of such programs in Brazil and Mexico during the 1990s. They can now be found in many countries, including in Tanzania.  Scaling up Tanzania’s existing cash transfers pilot, as part of the popular TASAF program, to achieve nationwide coverage may be part of the solution in helping about 700,000 households that continue to live in extreme poverty.  However, cash transfer programs are not a panacea. To be truly effective as a means of achieving poverty reduction, they must be implemented in coordination with a range of complementary measures. In particular, the availability of basic services, particularly health and educational services, is essential. By themselves, cash transfers cannot resolve supply-side issues that constrain service delivery. In addition, access to markets and strong institutions are essential for success. Economic growth needs to be focused on labor intensive sectors to create jobs and reduce poverty permanently. PAGE http://www.worldbank.org/tanzania/economicupdate. 24 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Until recently, economists and development through the provision of direct, regular experts have believed that the primary and predictable non-contributory cash means of facilitating economic growth payments to poor members of society to and alleviating poverty should be through enable them to purchase basic goods, measures to build the capacity of a state to access basic services and invest in their make optimal investments in human and own future and that of their children. physical capital. This implies a top-down Initially, there was considerable resistance approach to the provision of development to this concept, with many arguing that the aid, with significant proportions of such aid direct provision of funds to the poor would being channeled through budget support create dependency and that the funds In the late 1990s, instruments and through traditional would not be used for productive purposes. a complementary public investment projects. However, the However, the initial success of two large new paradigm for effectiveness of this approach as the sole scale cash transfer programs, in Mexico and the provision of aid means of achieving poverty reduction has Brazil respectively, went a long way towards began to emerge. been challenged on a number of grounds, addressing these criticisms (see Box). including its limited effectiveness in The programs in these countries clearly achieving the desired outcomes. While the demonstrated that providing funds directly approach is valid in certain contexts and to poor households that fulfilled certain for certain purposes, there are numerous basic conditions, such as ensuring that their case studies involving countries that have children attended schools or health clinics, received massive amounts of aid but whose had a significant positive impact on poverty populations remain mired in poverty. alleviation. Most notably, it was clear that these programs resulted in significant and In the late 1990s, a complementary new durable increases in both the quantity and paradigm for the provision of aid began quality of consumption amongst poor to emerge. This new paradigm suggested households. that poverty could in part be addressed Brazil’s Bolsa Família, a successful cash transfer program Bolsa Familia is the largest conditional cash transfer program in the world. This program currently benefits approximately 14 million households and more than 50 million people. Bolsa Familia was created to consolidate four demand-side programs operating since the 1990s and to replace them with a single conditional cash transfer program. Prior to the implementation of Bolsa Familia, these programs involved cash transfers, voucher programs and demand subsidies to promote school enrollment and attendance (Bolsa Escola), a voucher to support household consumption (Cartão Alimentação), a food subsidy (Bolsa Alimentação) and a cooking gas subsidy (Auxílio gas). The Bolsa Familia program aims to address three dimensions of social progress: (a) poverty mitigation in the short term through the direct impact of cash transfers; (b) human capital formation in the mid-term to reduce the inter-generational transmission of poverty through the provision of incentives to poor families to invest in the education, health and nutrition of children and youth; and (c) integration of other social and economic strategies into the PAGE http://www.worldbank.org/tanzania/economicupdate. 25 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N program in order to build the capacity of beneficiary families to generate their own income in the long term. Bolsa Familia forms the core of the social safety net strategy in Brazil, with the Brazilian government building upon this program through the implementation of other social protection initiatives and through enhancements to the program’s processes to enable other income generation and skills development interventions at federal and state level. The aim of the program is to empower the poor by providing them with the tools and the responsibility for using the cash they receive and for making decisions on how spend it. The co-responsibilities defined under the Bolsa Familia program serve as mechanisms for changing behaviors and attitudes as a means to generate the long-term changes necessary to promote equitable growth. The program monitors compliance with the education co-responsibility for more than 15 million children (6-15 year old), out of which more than 85 percent complied with the attendance and enrollment conditions. In addition, approximately 2 million 16-18 year old youths are registered for the variable youth benefit. The level of compliance with the school attendance condition is almost 80 percent, while the level of compliance with health conditions is close to 100 percent. Less than 0.5 percent of registered families’ benefits are cancelled annually for failing to comply with co-responsibilities, with this low level being largely due to measures implemented under the program to ensure beneficiaries’ participation. In addition to improving education and health outcomes in terms of defined indicators, the Bolsa Familia program has been successful in reducing poverty and inequality more broadly. It is estimated that the program contributed to a reduction in inequality in Brazil of more than 15 percent between 2003 and 2008. Even though the contribution of the program to the reduction of poverty was less than five percent, it contributed to 15 percent of the reduction in extreme poverty in Brazil and to almost 35 percent of the reduction in the extreme poverty gap (Paes the Barros, et al, 2009). Other side effects of the BFP include positive impacts on the local economy where the program is implemented. Even more importantly, there is no evidence that BFP has a negative impact on labor participation. PAGE http://www.worldbank.org/tanzania/economicupdate. 26 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n The successes of the programs in Mexico the positive results from the evaluation of and Brazil went a long way towards justifying the TASAF program, the scale up of this the use of cash transfers as an instrument program is now a significant priority for both to achieve poverty reduction. While 20 policymakers and development partners. years ago, the provision of support for direct cash transfers would hardly have been considered by any development agency, a The vision: The elimination of 2.1  significant number of such programs now extreme poverty in Tanzania exist in many countries, including in East Tanzania has recorded excellent rates of Africa and Tanzania, with the total number economic growth over the past decade, of beneficiaries of such programs estimated with the average annual rate standing at to reach up to one billion. around seven percent. Despite this high rate Tanzania’s first Many of these programs are supported by of growth, levels of poverty have remained experience with major multilateral and bilateral agencies, stubbornly high. In 2012, the estimated cash transfer with the approach now considered average per capita income was only US$ programs of this mainstream and effective, at least at the 570, with approximately one third of the sort has begun conceptual level. While state investments population living in poverty. This places with a pilot led in human and physical capital remain a key Tanzania in the poorest 20 countries in the by the Tanzania strategy for the achievement of poverty world. Beyond these stark figures, the extent Social Action Fund reduction, particularly for addressing and impact of poverty in Tanzania are clearly (TASAF). supply-side issues, the effectiveness of cash demonstrated by the poor living conditions transfer programs as a parallel mechanism of the vast majority of people living in rural to generate demand for services has been areas, who comprise approximately three widely acknowledged. quarters of the country’s total population. Tanzania’s first experience with cash People in rural areas are unlikely to have transfer programs of this sort has begun access to electricity and water; are unable with a pilot led by the Tanzania Social Action to buy essential goods such as soap Fund (TASAF). Over the last four years, the and clothes; children are typically poorly Community Based Conditional Cash Transfer educated, malnourished and unhealthy; program has facilitated the provision of cash malaria is endemic and kills tens of transfers to poor households. More recently, thousands of people each year; and one in the program has been broadened to include every 25 women dies during child birth. A labor intensive work programs, designed significant proportion of the rural population to provide gainful employment to the poor relies on subsistence agriculture and is through their participation in public works highly vulnerable to climatic shocks. projects. The failure of economic growth to facilitate To date, the program has remained modest poverty reduction is partly because growth in scope, reaching only a limited number has been limited to capital intensive sectors, of households. However, given the high such as mining and telecommunications (see levels of extreme poverty in Tanzania and previous Economic Updates). By contrast, PAGE http://www.worldbank.org/tanzania/economicupdate. 27 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N levels of growth in labor intensive sectors extreme poverty, the threshold for which is such as agriculture and manufacturing defined in terms of a consumption of less remain modest or even negative, resulting than 2,000 calories per day. in the failure of economic growth to facilitate a high level of job creation. This is One means of facilitating a reduction compounded by demographic pressures, in extreme poverty in Tanzania may be with Tanzania’s population forecast to nearly to implement an effective cash transfer double by 2030, a rate of growth far higher program as part of a mix of aid instruments. than that of the rate of growth of jobs. One means of With an expenditure of approximately US$ 250 million per year, it might be possible to facilitating a The Tanzanian Government, with the significantly reduce the rate of incidence of reduction in assistance of development partners, has enacted a number of measures to extreme poverty in Tanzania. This amount extreme poverty develop human and physical infrastructure. would only represent 10 percent of the total in Tanzania may However, despite some progress, Tanzania value of official aid delivered to the country, be to implement still lags behind other sub-Saharan African or about 1.5 percent of the Government’s an effective cash countries. The size of the country, combined annual budget. The first step would be to transfer program as with the poor state of its infrastructure and identify the most vulnerable households part of a mix of aid its growing population, makes the universal in the country, or those living in extreme instruments. provision of basic services extremely poverty. difficult. The second step would be to finance cash While the Government has implemented transfers to these households to facilitate programs to educate people, to build roads increases in their consumption basket and and to develop power networks, it will to enable them to invest in human and take considerable time before any positive physical capital. On average, the provision of impacts from these programs become funds to a value of US$200 dollars to each manifest. Thus, approximately 4.2 million household living in extreme poverty would people, or approximately 10 percent of the be required to lift 4.2 million people out of total population, appear to be trapped in this state. PAGE http://www.worldbank.org/tanzania/economicupdate. 28 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Cash Transfer Programs: What do Tanzanians think? The rationale behind cash transfer programs is that state funds belong to the country’s citizens, and that these citizens can and should be empowered to determine how these funds can best be utilized for their benefit and that of their families and communities. To determine the views of Tanzanian citizens regarding the implementation of such a program, the uses to which it would be put and the conditions that should apply to it, Twaweza and the World Bank conducted a phone survey in November 2013 of 1,598 Tanzanian households (*). A large majority of Tanzanian households believe that they are responsible for providing for themselves and their family members. Even if they do not have enough money to feed their children, only 12.9 percent responded that another individual or agency should be obliged to assist. In cases where the respondents believed that they should be provided with assistance, the vast majority believed that the party providing assistance should be family (81 percent) or friends (61 percent), with less than half (49.2 percent) proposing that the Government should provide assistance. These responses may be the result of the lack of coverage of social protection programs in Tanzania and consequent low expectations regarding the role of the Government. Are you aware of the following programs? Respondents were asked if they were aware of the existence of a Open Government Initiative (OGI) 19.0 number of different mechanisms National Agricultural Voucher Program 44.5 (NAIVS) used by the Tanzanian Government to provide assistance to poor General Budget Support (GBS) 14.6 communities, including the Tanzania Social Action Fund (TASAF) 56.0 conditional cash transfer programs implemented through the Tanzania Big Results Now Initiative (BRN) 6.8 Social Action Fund. Of the total 0.0 10.0 20.0 30.0 40.0 50.0 60.0 number of respondents, 56 percent were aware of the existence of the TASAF, despite its current status as a pilot program. This was a higher proportion than for any other government program, including the national agricultural voucher program (44 percent) or General Budget Support (14.6 percent). Whom would trust the most to manage a program than money to households The survey reveals that 45.0 40.9 40.9 percent of Tanzanians 40.0 would trust the Government 35.0 to manage a cash transfer % of responses 30.0 25.0 20.0 program more than any other 15.1 15.0 body or agency, a significantly 10.0 5.0 0.6 2.4 1.8 4.1 higher proportion than those 0.0 Government Political TASAF Religious International Tanzanian who stated that the fund parties organizations donor agencies NGOs would best be managed by religious organizations (15.1 PAGE http://www.worldbank.org/tanzania/economicupdate. 29 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N percent) or Tanzanian NGOs (4.1 If you were to receive money, every month from the percent). The vast majority of Government, how would you use it? respondents claimed that if their Give the money to other family… 0.7 household was provided with Save the money 7.2 funds by the Government, these Buy non-food items such as fuel or… 2.7 funds would be used to buy food Buy durable goods, e.g. clothes or… 0.4 (57.2 percent), with a further 18.4 Spend the money on health 4.6 percent stating that they would Pay school fees 18.4 use the money for school fees. Buy food 57.2 Savings, health, and the purchase 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 of non-food consumer non- durables all received significantly lower priority rankings. If the Government decides that poor people who receive money are required to do something in return, which of Approximately two-thirds the following do you think they should be required to of respondents believe do? 60.0 that cash transfers should 50.1 50.0 be conditional, with 40.0 29.2 school attendance (50.1 30.0 percent) and community 20.0 10.0 9.8 8.1 work (29.2 percent) as 0.0 requisite conditions for Ensure that their Get medical check-ups Search for work and Do work for the children regularly for their children participate in job community (e.g. repair the receipt of benefits. attend school trainings the road) If the Government decides to give the 10 poorest A higher proportion of households in your community money, how should it respondents stated that the select these households? targeting of eligible recipients should be implemented by A community meeting should decide 31.2 village leaders (37.5 percent) who gets the money or communities (31.2 percent) Village leaders should identify who gets than by assessments by the the money 37.5 Government on the basis of The Gov't should look at characteristics objective criteria, such as age or than can easily be observed (e.g. 22.2 the condition of housing. housing or age) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 (*) The findings presented here are based on data collected by Sauti za Wananchi, Africa’s first nationally representative mobile phone survey fielded by Twaweza. The findings, interpretations, and conclusions are entirely those of the authors and do not necessarily represent the views of Twaweza. PAGE http://www.worldbank.org/tanzania/economicupdate. 30 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 2.2 The rationale for cash transfer and engage with structural influences, programs: Higher levels of consumption including fiscal space, the structure of the and investment in human capital labor market and the provision of basic services. All these influences can constrain The success of cash transfers programs or enable transformative outcomes. Social has been linked to their positive results safety nets should be only one component on the ground. They have proved to be of a comprehensive strategy for poverty an effective means of reducing poverty, The success of cash resulting in increases and improvements reduction. It is vitally important to consider transfers programs the relationship between this component in food consumption and a higher level of has been linked and others in the overall strategy. For social investment in human capital, both over to their positive safety nets to work, there must be an the short and longer terms. This can be adequate supply of social services, access to results on the demonstrated by a review of a wide range markets and capable institutions, amongst ground. They have of international experiences with such other conditions (see Box). Furthermore, proved to be an programs over the past 15 years. economic growth, particularly in labor effective means of However, when designing a social safety intensive sectors, is essential to create jobs reducing poverty. net program, it is essential to factor in and reduce poverty in the longer term. Demand and supply factors: Two sides of one coin In some cases, cash transfers may result in an increased demand for services without corresponding increases in the supply of such services. For example, health clinics may not have the capacity to treat the increased number of patients able to seek their services, potentially reducing the overall quality of these services. This is particularly the case for conditional cash transfers, which incentivize the use of particular services, usually health and/or educational services. Thus, to strengthen the supply side to meet increased demand, significant complementary investment in basic services is essential to optimize the success of social safety net programs. In part, the success of a cash transfer program depends on the particular market failure policymakers are trying to address. In the unlikely event that the only problem facing the poorest members of society is lack of access to funds, cash transfers will go a long way to reducing poverty. If there are other issues, such as limited access to health care and educational services, cash transfers may be a significant component of a social safety net program, but they will not by themselves be sufficient as a means of eliminating extreme poverty over the long term. In such cases, measures must be implemented to address both demand-side and supply-side constraints at the same time and in tandem, with direct transfers serving to address demand-side constraints and improvements in health and education services addressing supply-side constraints. PAGE http://www.worldbank.org/tanzania/economicupdate. 31 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Reducing poverty, hunger and inequality of cash transfer programs around the world shows that, if well designed, cash transfers The use of direct financial transfers to are directly associated with reductions reduce extreme poverty is attractive for a in extreme poverty, the poverty gap, and number of reasons. Cash transfers enable inequality. For example, in Nicaragua, the the poorest members of society to meet Red de Proteccion Social program reduced their immediate income needs, to access the number of people below the poverty Cash transfers basic services, and to sustain spending line by 5-7 percent; in Colombia, Familias enable the poorest on food without needing to sell assets or en Accion reduced the poverty gap by members of society accumulate debt. Thus, by ensuring higher nearly seven percent; while in South Africa, to meet their levels of certainty and security, resilience the Child Support Grant has reduced the is improved and vulnerable households immediate income poverty gap by 47 percent. are not forced to resort to negative coping needs, to access strategies. In this way, cash transfers directly Figure 11 below illustrates the extent basic services, reduce poverty, hunger and inequality. to which cash transfer programs have and to sustain facilitated reductions in poverty at the spending on food Available evidence from rigorous evaluations national level. without needing to sell assets or Figure 11: Cash transfers have helped to reduce poverty during the 2000s accumulate debt. (% change in national poverty rate) Source: A. Fizbein et al. (Nicaragua and Colombia), Conditional Cash Transfers: Reducing Present and Future Poverty, 2009; S. Levy (Mexico), Social Security Reforms in Mexico, 2006; Samson et al. (2004), “The Social and Economic Impact of South Africa’s Social Security System”, Finance and Economics Directorate, Department of Social Development, EPRI, Cape Town; Paes de Barros, R., M. de Carvalho et a; (Brazil), 2010. “A Short-Term Cost-Effectiveness Evaluation of Better Quality Daycare Centers.” IPEA: Rio de Janeiro, 2010). Note: For Brazil, extreme poverty is used as reference. PAGE http://www.worldbank.org/tanzania/economicupdate. 32 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n In a sense, cash transfer programs are reduced risk and vulnerability among young guaranteed to succeed: if you give someone children, which in turn has a positive impact money, they will be richer. However, this on their learning capacity and performance does not necessarily mean that they will be at school. healthier, more productive, better educated, or even happier. Therefore, it is vital to look In Brazil and Nicaragua, following the at wider poverty measures. It is necessary implementation of cash transfer programs, to address the following questions: Does levels of food consumption increased nutrition improve? Are children better by between 23 to 48 percent. In Kenya, educated? Does health improve? Is there an overall per capita consumption and food upturn in business activities? What about consumption both grew by about 19 percent social cohesion? Do people graduate from as a result of such a program. There is also the cash transfer program? evidence that cash transfer programs have a positive impact on consumption not only Nutrition: Stronger, taller, better in quantitative terms, but also in qualitative nourished children terms, particularly with food. For instance, Cash transfers Cash transfers facilitate higher levels of in Malawi, approximately 75 percent of facilitate higher household consumption, particularly in the transfer was spent on groceries, while levels of household terms of the quality and quantity of food in Zambia, 12 percent more households consumption, consumed, thus resulting in reductions in consumed proteins and 35 percent more particularly in terms food insecurity and chronic malnutrition. oil if they received the transfer. By contrast, of the quality and From this perspective, cash transfer there is no evidence that the cash benefit quantity of food programs contribute not only to the has increased spending on alcohol or other consumed. alleviation of poverty in financial terms, non-basic goods, as impact evaluations in but also, and even more importantly, to Colombia and Tanzania show. Cash transfer children are taller Probably one of the most important impacts of targeted cash transfers is in terms of the prevention and alleviation of chronic malnutrition amongst young children. Given that numerous studies demonstrate that good nourishment amongst children of less than three years of age has a significant, lasting impact on their learning capacity, future productivity, and earnings into adulthood, this has significant long-term implications for the development of human capital. These studies also show that the first three years of life of a child are a critically important window of opportunity, beyond which further interventions will be dramatically less significant in terms of long-term impacts on productivity and learning outcomes. Thus, chronic malnutrition during childhood is closely linked to poverty levels, so measures to address it are likely to reduce poverty levels over the long-term. PAGE http://www.worldbank.org/tanzania/economicupdate. 33 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N In South Africa, the CSG has been a key factor in achieving reductions in the rate of incidence of chronic malnutrition among children younger than 36 months. An evaluation of the program shows that children who have been exposed to the program for about two thirds of the nutritional window of opportunity are up to 3.5 cm tall than children not participating in the program. The evaluation also found that a) the earlier in the life of the child that participation begins, the greater the impact; b) reductions in the incidence of chronic malnutrition are not significant in cases where participation in the program covers a period shorter than 50 percent of the nutritional window of opportunity. In other words, for a cash transfer to be effective in reducing chronic malnutrition, targeting the nutritional window of opportunity is vitally important. Even though few cash transfer programs are explicitly linked to nutritional outcomes, a number of such programs have shown to be effective in reducing chronic malnutrition (as measured in terms of height for age) amongst the young children of beneficiary households. In Latin America, in México, beneficiary children are on average 1 cm taller than non-beneficiaries after 2 years; in Colombia the probability of chronic malnutrition Additional cash for children younger than 2 years can also enable and of age is 6.9 percentage points encourage poor Mexico Nicaragua Colombia Indonesia* Phillipines* lower among children registered households to invest in the conditional cash transfer in their children’s program compared to those out of education. the program. In Nicaragua, stunting among beneficiaries is 5.3 percentage points lower than non-beneficiaries. Even more importantly, the evaluation showed that even after the benefit was suspended, the behavior of the beneficiary households and the impact on chronic malnutrition was sustained. Similarly in Asia, in Indonesia, the PNPM Generasi CCT program resulted in a decline in the rate of incidence of severe stunting of 21 percent, while in Philippines the reduction in severe stunting attributable to the conditional cash transfer intervention was 10 percent. Education: More children going to school pay fees or other costs associated with and achieving better results attending school. It also reduces the burden on children, particularly girls, to contribute Additional cash can also enable and to the family income, enabling them to encourage poor households to invest in their participate in school. Of course, the impact children’s education. This positive outcome is more significant when cash transfers are is more visible in the longer term. Increased made contingent on behavioral changes income security enables households to specifically involving children’s participation PAGE http://www.worldbank.org/tanzania/economicupdate. 34 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n in educational programs. Conditional cash sample of Latin American countries. Thus, transfers have contributed to increased cash transfers, particularly if they are made enrollment in primary and secondary conditional on children’s participation in educational institutions, as well as to education, can be an important complement reductions in the number of number of to direct investments in educational systems dropouts and grade repeaters in a selected and facilities. Malawi: Cash Transfers Lead to Increased School Enrollment Malawi’s social cash transfer program shows that targeting households with children led to an increase in school enrollment of five percent among children aged 6-17. Targeting orphans yielded an increase of 4.2 percent. Figure 12: Mexico – Impact of CCT in years of schooling Source: Government of México (2008) "Evaluación Externa del Programa Oportunidades 2008. A 10 años de intervención en zonas rurales", Tomo Another lesson is that the impact of cash provision of cash to poor households, they transfer programs, particularly conditional are explicitly intended to change behaviors Cash transfers cash transfer programs, becomes for sustained impact. enable members of increasingly significant over the medium Better use of health services poor households and long term. For instance, in the case of to travel to clinics Colombia, the impact of the program was Positive benefits have also been observed and to pay for found to be considerably more significant in health, with significant improvements in health services and after four years of implementation than immunization rates and the use of health medicines. after one year. A similar pattern can be services in Latin America, Turkey, and India. observed in Mexico and Pakistan. In the case Cash transfers enable members of poor of Mexico, the impact of the program for households to travel to clinics and to pay for older children in secondary education was health services and medicines. There is also found to be substantially higher after ten evidence of increased use of preventative years than after seven years (see Figure 12). health services, particularly by children and These programs do not merely involve the expectant mothers. PAGE http://www.worldbank.org/tanzania/economicupdate. 35 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Bangladesh The Ultra Poor Program in Bangladesh directly links transfers to the use of health services and has been associated with the following results: An 18.6 percent increase in the use of modern contraceptive methods; an increase of 45 percent in immunization coverage; 95 percent of under 5s receiving vitamin A coverage; and 96 percent of pregnant women now receive antenatal care and 93 percent post natal care. Enabling the poor to engage in business from Zambia (see Box) and Mexico seems and more productive economic activities to confirm the value of cash transfer programs in facilitating the development of Direct cash transfers can increase the entrepreneurship. Furthermore, households likelihood of poor households engaging may be able to obtain access to credit on in savings activities, thus facilitating better terms if they have greater income Cash transfer their accumulation of financial capital, security. Additionally, the increases in levels programs may which may in turn enable them to start of consumption may facilitate structural also generate a small business or to engage in other reforms that support long-term growth by social benefits, economic activities requiring an initial stimulating local demand and hence local empowering poor financial investment. Recent evidence market development. individuals to take a higher level of Zambia: Cash transfer program recipients have more goats responsibility for In Zambia, the Kalomo Social Cash Transfer Scheme led to an increase in the ownership their financial of goats from 8.5 percent of households to 41.7 percent. It also led to four times more decisions. households engaging in investment activity and a doubling of the amounts invested. Improved social cohesion and political longer require assistance and can be said stability to have graduated from the program is of central importance. Specifically, this applies Cash transfer programs may also generate to those who are able to work, rather than social benefits, empowering poor individuals older people or those with disabilities to take a higher level of responsibility for their that constrain their ability to engage in financial decisions. Ultimately, a reduction in productive activities. For full graduation, the inequality will reduce social fragmentation, recipient of the transfer would no longer crime and political instability, all of which need or qualify for support. have implications for macro-economic development. The family would move out of poverty and away from dependence on social protection Do beneficiaries graduate from cash transfers and into an independent and transfer programs? sustainable livelihood. The available evidence The question of whether cash transfer suggests that if cash transfer programs are programs improve beneficiaries’ economic implemented in isolation from other poverty circumstances to the point where they no alleviation interventions, they are unlikely PAGE http://www.worldbank.org/tanzania/economicupdate. 36 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n to result in graduation. Therefore, one of (a) appropriate targeting; (b) transparent the most important lessons to be drawn and timely transfers; and (c) reliable from the experience of existing programs is monitoring. that cash transfer programs by themselves Targeting: The appropriate selection of are not an effective means of achieving a beneficiaries is a core prerequisite for cash sustained reduction in poverty. transfer programs to operate effectively. Rather, these programs should be an integral It is vital that the appropriate selection of component of a broad, comprehensive beneficiaries takes place at the onset of strategy for poverty reduction, the goals the implementation of the program, as of which should be to ensure an adequate experience shows that correcting targeting supply of social services, to foster increased systems once the program has been scaled awareness by the community of the up is extremely difficult and expensive in importance of these services and their rights terms of financial resources, as well as to access them, to maintain and develop having the potential to create social unrest. infrastructure, and to develop access to If targeting is too broad, the cost of running markets, and to mitigate the impact of the program may be excessive. However, shocks, among other aspects. the targeting process itself is expensive. International experience shows that the Finally, the achievement of overall economic geographic identification of the poorest growth will continue to be a critically areas combined with poverty rankings important factor in achieving poverty at the household level is a very effective reduction, particularly if it enables pro-poor means for the targeting of beneficiaries. In expenditure and is leveraged to facilitate job Africa, given the social and administrative creation. If the economy is not generating context at the local level, targeting usually jobs, the full returns of the investment in involves community-based selection or pre- human capital, from both traditional and cash selection of beneficiaries as part of a three- transfer programs, will not be realized. step process. Good targeting requires an assessment of the distribution of poverty, of For a conditional 2.3  Implementing effective cash targeting costs, and of political acceptability. cash transfer program to be transfers programs: Targeting, Furthermore, there is evidence to suggest transfers and monitoring effective it needs that at the household level, it is important to to ensure that target the appropriate decision maker within Cash transfer programs are based on the the targeted poor households. In particular, evidence payment of direct, regular and predictable groups receive the suggests that when the main recipients of cash benefits to extremely poor and adequate benefit at transfers are women, children’s needs are vulnerable households. Therefore, for a more likely to be prioritized. the right time. conditional cash transfer program to be effective it needs to ensure that the targeted With regards to the appropriate groups receive the adequate benefit at the determination of the value of funds to be right time. There are three prerequisites for transferred to beneficiaries, experience such programs to function well, as follows: shows that the cash benefit should be high PAGE http://www.worldbank.org/tanzania/economicupdate. 37 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N enough to be a good incentive for families to families to invest in the human capital of invest in the education, health and nutrition children through boosting demand for of children, but not high enough to create education, health and nutrition services. At dependency. Therefore, the level of targeting the same time, the benefit should be low may have an impact on graduation. If the enough to avoid being a negative incentive level of transfer is high enough to allow which may affect household decisions in low levels of saving, this in turn may allow terms of job seeking or engagement in for investment in small businesses and/ income generating activities. Experiences or an emergency fund for one off essential in other countries shows that cash benefits expenditure (health emergencies and so varies from the equivalent to above 10 on). percent of the targeted households consumption up to about 30 percent. Transfers: A transparent, predictable and secure payment system is an essential Monitoring: Adequate monitoring is an prerequisite for the success of a cash essential prerequisite for the implementation transfer program. Such a system means of an effective program for a number of that beneficiaries will know when and how reasons, including the following: (i) the The program needs much they will receive, enabling them to program needs to be monitored to check if to be monitored plan accordingly. Various programs have the cash transfers have reached the intended to check if the adopted different options for the payment beneficiaries in a timely manner. There is cash transfers of cash benefits to beneficiaries, including always a risk of political or elite capture at have reached bank transfers, biometric electronic cards or different level of implementation, notably the intended mobile banking systems, among the most because of asymmetric bargaining power beneficiaries in a commonly used methods. Direct payments among communities and households. Not timely manner. through program staff are increasingly only do monitoring mechanisms need to implemented on an exceptional basis only in be in place, but delays should be kept to a areas where other options are not available. minimum. In addition, sanctions applied Of 40 transfer programs launched in the past in the case of misappropriation should be decade, almost half feature the electronic effective, consistent and visible; (ii) In the delivery of cash payments. Such a system case of conditional cash transfers, cash of delivery is not only more cost efficient benefits are conditional on beneficiaries’ than most alternative systems, it reduces compliance with certain requirements, opportunities for leakage. In South Africa, such as ensuring that their children attend one quarter of payments to the country’s schools and/or health clinics to participate nine million social transfer recipients involve in specified activities and programs. electronic transfers to a financially inclusive Compliance with these requirements needs to be closely monitored. An efficient bank account. monitoring system, while requiring In addition to increasing household significant investment during the design consumption, the benefit in a conditional and early implementation stages, is a cash transfer program should be high necessary requirement for the successful enough to be an incentive for beneficiary implementation of any cash transfer PAGE http://www.worldbank.org/tanzania/economicupdate. 38 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n program. Therefore, the development from government funds, given the level of of such a system requires a high level of uncertainty associated with donor funds in attention, careful management, and the the longer term. In the case of Tanzania, it allocation of the appropriate resources. is also important for expenditure on safety net programs to be included in the medium- A further consideration in the design of term expenditure framework and in the debt cash transfer programs is to ensure their sustainability analysis, as there is a potential sustainability. Thus, in the design of a cash widening of the fiscal deficit due to TASAF. transfer program, the Government must identify the impact of the program on the There are no simple answers to the question budget over time, with careful consideration of the level of expenditure that should be to its viability under changed circumstances devoted to social assistance. However, a in the future. Funds for such programs ballpark figure for the potential spending usually come from two sources, these being: share on social services (including cash (i) Government own raised funds, including transfers as well as other programs) is funds derived from efficiency savings in below one percent of GDP in most low and other programs; and (ii) funds provided by middle income countries.8 The table below development partners. In order to ensure compares the level of expenditure on cash long-term sustainability, funding for the transfer programs in a number of countries. program should be sourced to a large extent Figure 13: Cost of CT and CCT Programs The Government must identify the impact of the program on the budget over time, with careful consideration to its viability While a variety of factors may result in over the long term, as it may be politically under changed the allocation of a varying proportion of difficult to scale back a program once it has circumstances in been implemented. In addition, anticipated available resources to safety net programs, the future. the important point is that each individual expenditure should factor in the need for a country is able to afford anticipated program to evolve to meet future needs. expenditure, not just in the short term, but 1 DFID (2013) ‘Guidance on measuring and 8 maximizing value for money in social transfer 8 programs’. DFID (2013) ‘Guidance on measuring and maximizing value for money in social transfer programs’. PAGE http://www.worldbank.org/tanzania/economicupdate. 39 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N Conditional and unconditional cash between CCTs and unconditional cash transfers: Should cash transfers be transfer programs have only recently been conditional on attendance at schools and implemented, initial pilots suggest that health clinics? the impacts of conditional cash transfers seem to be more significant and more Cash transfer programs can be non- sustained in terms of sector outcomes, in conditional, in which case beneficiaries particular education, health and nutrition, are merely required to satisfy the selection when compared with unconditional cash criteria used to determine eligibility (such transfers. Evaluations in Mexico and as being poor, orphaned, or elderly). In Ecuador in Latin America and in Malawi and addition, they may be encouraged or Burkina Faso in Africa show that levels of required to participate in counseling to school attendance and enrollment improved improve household consumption, child to a greater extent amongst beneficiaries care and investment in human capital of CCTs than of UCTs. Specifically, a recent (soft-conditions). Cash transfer programs systematic review looking at the impact can also be conditional, in which case of cash transfer programs on educational beneficiaries, in addition to satisfying the outcomes suggests that when programs are selection criteria, are also required to fulfill explicitly conditional and when they monitor specified requirements, such as engaging compliance and penalize non-compliance, in or refraining from certain activities. they have significantly greater impact, in Conditional cash transfer (CCTs) programs the region of a 60 percent improvement in usually provide a cash incentive to targeted levels of enrolment. Available evidence also poor households, with the payment of the Cash transfer suggests that CCTs are more likely to result benefit being contingent upon beneficiaries’ in behavior change and to have a sustained programs can be compliance with a set of requirements to impact on the availability of information non-conditional, build human capital. Usually, CCTs require and on the long-term demand for social in which case beneficiaries to ensure that their children and health services. There is some initial beneficiaries are attend school and visit preventive health evidence that the impact of cash transfers is merely required service providers. higher under schemes in which the benefit to satisfy the is subject to strict compliance with co- selection criteria Evidence from rigorous evaluations shows responsibilities. used to determine that both conditional and unconditional cash transfer programs may contribute eligibility. A key consideration when choosing between to improvements in the welfare of conditional and unconditional transfers beneficiaries, provided that these programs is whether basic services will be able to are well designed and implemented. In cope with the rise in demand resulting terms of increasing levels of consumption from the mandated use of these services and alleviating the impact of poverty in the by beneficiaries of conditional programs, short term, the impact of unconditional particularly basic education and maternal cash transfer and CCT programs appears and infant health services. CCTs are likely to to be roughly similar. However, although require public service providers to increase studies involving direct comparisons the supply of services more rapidly than UCTs. PAGE http://www.worldbank.org/tanzania/economicupdate. 40 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n If service providers are unable to cope with Careful consideration must be given to the the increased demand, there is a risk that institutional challenges of a larger scheme CCT programs will result in a deterioration when scaling up a pilot program. in the quality of public services. In addition, In addition, coordination with the education there must be the institutional capacity or and health/nutrition sectors at the central the potential to develop the institutional If service providers level is necessary to ensure the provision capacity for government agencies to are unable to cope of adequate services and to collect the coordinate information on scheme with the increased necessary information to register and enroll enrollment, compliance and payment. demand, there is a households in the program and to monitor risk that Conditional The importance of institutional compliance with the specified conditions. Cash Transfer arrangements for a nationwide cash While most conditional cash transfer programs will result transfer program programs are centrally managed, these in a deterioration in programs still require careful coordination To implement cash transfer programs, the quality of public and adequate institutional capacities at sub- particularly conditional cash transfer services. national levels. Successful conditional cash programs, there is need for strong, well defined institutional arrangements. Such transfer programs, such as Brazil’s Bolsa programs require the participation of a Familia and Colombia’s Familias en Accion, number of government agencies at both are predicated on the active involvement the central and sub-national levels. The of local government agencies in the larger and more extensive the program is, implementation of the program. The role of the higher the required level of involvement local agencies is usually related to interactions of sub-national agencies, particularly at the with beneficiaries and other matters related to the practical implementation of the municipal and sub-municipal levels, will program on the ground. This may include be. Given the number of agencies whose key processes such as the collection of data involvement is required in extensive cash to identify eligible households, to register transfer programs, it is vitally important them as beneficiaries, and to monitor their that the roles and responsibilities of each compliance with the specified conditions. of these agencies are clearly defined to Creating coordination between local and avoid the risk of both the duplication of central ministries may also have other activities and of leaving gaps. At the central positive externalities. level, close coordination with the ministry responsible for the management of the Scaling up the cash transfer 2.4  national budget is particularly vital. The program to benefit all Tanzanians provision of timely, regular cash benefits is vital to the successful implementation of a The Tanzanian Government is strongly CCT because, for the program to achieve its committed to overcoming the country’s intended aims, beneficiaries need to be able persistent extreme poverty through the to plan a clear timetable of payments and implementation of a comprehensive social because the link between conditionalities safety net program, known as the Tanzania and payments is of critical importance. Productive Social Safety Net (PSSN). This PAGE http://www.worldbank.org/tanzania/economicupdate. 41 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N program is fundamentally a conditional short-term extreme poverty and food cash transfer program, complemented by insecurity; and (b) creating incentives for a seasonal intensive public works labor families to invest in the human capital of program. While the latter is intended to their children through the utilization of provide income for poor households during education, health and nutrition services and the annual lean season, the conditional thus reducing poverty over the long term. cash transfer program aims to accomplish The box below illustrates the positive impact two year-round objectives: (a) increasing that the pilot program has already had on an household consumption, and thus reducing individual Tanzanian family. Mwanjala Mohamed, 60 Mwanjala Mohamed is a widowed grandmother in Fukayosi village with six children. She has been registered with the TASAF cash transfer program for several years. When she registered for this program, she received Sh12,000 each month, with an extra Sh7,000 for each child. Since then, the value of benefits has been increased so that she now receives Sh21,200, with an extra Sh10,000 for each child. She has used this money to meet her family’s immediate needs, ensuring that they now have enough food to eat. Her children are also able to attend school regularly. In addition, the scheme has indirectly benefitted Mwanjala, as she is able to spend more time on Preliminary estimates activities other than agricultural labor. This means she has been able to develop her mat indicate that the weaving and duck rearing businesses. The profits from this have allowed her to renovate expansion of the her house. She feels more secure and less vulnerable now, viewing her ducks and mats program to reach as assets that can be converted to cash during hard times. approximately 4.2 million people living The Tanzanian Government has committed 200 per beneficiary household. However, in extreme poverty to scaling up this program. To ensure optimal outcomes will only be achieved if has the potential to optimal outcomes, the design of the the selection of beneficiaries is accurate and reduce the proportion program will be critical. Thus, recent the program is able to reach the poorest of households living design missions have spent considerable members of society on a sustainable basis. below the food time addressing the challenges involved poverty line by half. in scaling up the program. Preliminary The Community Based-Conditional Cash estimates indicate that the expansion of Transfer pilot targets extremely poor the program to reach approximately 4.2 households whose members include million people living in extreme poverty has children and/or elderly individuals (65 years the potential to reduce the proportion of of age or older). The pilot program was first households living below the food poverty implemented in 2009 to cover approximately line by half. As stated earlier, this goal could 2,000 households in 40 villages in three be achieved by allocating US$ 250 million districts (Bagamoyo, Chamwino and per year to facilitate the payment of a cash Kibaha). Since then, the program has been benefit to a value of approximately US$ expanded to cover approximately 20,000 PAGE http://www.worldbank.org/tanzania/economicupdate. 42 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n households. Under the initial design, the (2) Transferring: As stated above, under program involved a bimonthly payment to the initial design, the program involved poor families, conditional on their ensuring a bimonthly payment to poor families, that children aged 7-15 achieved a rate of conditional on their ensuring that children attendance at primary schools of at least aged 7-15 achieved a rate of attendance at 80 percent and on their ensuring that primary schools of at least 80 percent and children under the age of six visited health on their ensuring that children under the service providers for regular check-ups of age of six visited health service providers for children at least three times per year and regular check-ups of children at least three that elderly members of the household times per year and that elderly members received checkups at least once per year. of the household received checkups at The payment was calculated on the basis of least once per year. The institutional the composition of the household, with the framework for the implementation of the value set at the equivalent of US$ 3 per child program is based on existing community and US$ 6 per elderly individual per month. and local institutional arrangements (the The program developed a formal protocol Community Management Committees, to manage benefits for families failing to or CMC, and the Districts, or LGAs). comply with the mandated conditionalities Working under the supervision of TASAF, without reasonable cause. In terms of the the CMCs would collaborate with LGAs to three prerequisites for a good cash transfer register families in the program; to collect system defined in an earlier section, the pilot information to monitor compliance with co- program appears to be well designed and responsibilities; and to pay the cash benefit. implemented: While the payment scheme implemented during the pilot phase and based on the (1) Targeting: During the pilot, the selection existing community arrangements was of beneficiaries was implemented through effective during the pilot stage, it is clear community-based mechanisms, subject that a nationwide program requires a more to verification by the TASAF staff to reduce formal payment system to ensure security, For the design inclusion errors and using defined tools to transparency and the timely and predictable of a nationwide estimate poverty at the household level. delivery of cash to beneficiaries. program, program The need for a combined mechanism was two-fold: (a) Even though the difference For the design of a nationwide program, designers plan to between a large proportion of the program designers plan to take advantage take advantage of population living close to the poverty line of the recent boom in the use of mobile the recent boom in or the food poverty line is very small, these money, since almost half of Tanzanian the use of mobile small differences may be very significant; adults are now transferring money through money, since almost and (b) the existence of budget constraints this new channel (Tanzania is arguably half of Tanzanian means that not all households in each the second largest user of mobile money, adults are now village would be able to participate in the behind Kenya, in the world). In South Africa transferring money program, making prioritization vital. Levels and Namibia, recipients of social grants through this new of payment were estimated on the basis of can choose between alternative delivery channel. household composition and the number of routes and have control over when and eligible members. where they collect payments. This replaces PAGE http://www.worldbank.org/tanzania/economicupdate. 43 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N distribution through government offices at conditions every two months, working in predetermined time and places, a system coordination with the education and health that involves high travel costs and long services providers. Payments are authorized queues. It also reduces the risk of capture after monitoring and failure to comply and monitoring costs. results in either a warning, partial reduction or cancellation of the cash benefit. (3) Monitoring: Under the pilot, the program developed a formal protocol to manage In line with experiences with other cash benefits for families failing to comply with transfer systems around the world, the pilot any conditionality without reasonable has led to a range of positive outcomes cause. The monitoring system under the for poor Tanzanian households (see box). pilot was based on the existing institutional Recipients have benefited not only from arrangements at the community and increased levels of consumption (the district levels and was supported by a simple income effect), the program has also management information system at central increased the likelihood of their sending level specifically developed for the pilot. A their children to schools and health centers. comprehensive management information In addition, the use of insurance schemes The monitoring system is under development to ensure has increased significantly, contributing to system under the that the nationwide program is properly reductions in vulnerability to shocks and pilot was based on the monitored. Following best practices, the external events at the household level. existing institutional Tanzanian program verifies compliance with arrangements at The success of the Tanzania Social Action Fund pilot the community Before the roll out of the PSSN as a nationwide strategy, which will include the expansion and district levels of the conditional cash transfer pilot to become a nationwide program, the program was and was supported piloted in a limited number of districts. An evaluation was completed between 2010 and by a management 2013 to measure the impact of the program in terms of outcomes and to serve as input information system for the final design of the expanded program. at central level The impact evaluation of the pilot shows important gains in education, health and nutrition specifically developed outcomes. On average, children in the 15-17 age bracket from beneficiary households are 15 percent more likely to complete standard 7 grade compared to non-beneficiaries. The for the pilot. difference is even higher among girls (24 percent). Furthermore, the CB-CCT seems to be responsible for significant increases, particularly among the poorest beneficiaries, in non- banking savings and in the diversification of productive assets, with this diversification serving as a self-insurance mechanism in case of shocks affecting regular incomes. The pilot has also resulted in the increased use of insurance by households, thereby reducing their vulnerability. On average, the rate of use of medical insurance was significantly higher amongst participating households than non-participating households. Specifically, the rate of use was 28 percent higher for medical insurance to finance medical care for children younger than 18 and 17 percent higher for medical insurance to finance medical care for the elderly. The difference in the level of utilization of medical insurance is even higher among the poorest households in the program (53 percent for children requiring health attention). Source: Evans, D., S. Hausladen, K. Kosec and N. Reese (2013) “Tanzania Community Based Conditional Cash Transfer Program. Impact Evaluation. Preliminary Endline Results, The World Bank and IFPRI. Power point presentation, June 17, 2013. PAGE http://www.worldbank.org/tanzania/economicupdate. 44 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Despite the challenges of a large scale to 5.1 percent of GDP for education and 2.3 operation, economies of scale resulting from percent in health in 2012/13. While not large the expansion should reduce the proportion compared to expenditure on these sectors, of the budget allocated to administrative expenditure on the safety net program will costs compared to the pilot. Currently, still be significant and must be incorporated when the roll out is still in progress and the into the Government’s budgetary planning program has not yet been fully implemented, process and debt sustainability analysis. the proportion of the budget utilized for Part of this cost, at least during the first implementation, monitoring and evaluation few years of expansion, can be supported is in the range of one-third of total costs, by donors, who have already expressed which means that for every US$ 2 dollars their interest in participating, at least during transferred to households, one is spent the development and initial stages of on administrative costs. This is roughly implementation of the program. However, similar to the proportion thus allocated in following experiences elsewhere in the successful programs elsewhere in the world world, in the longer run, the bulk of financing at a similar stage. Scaling-up represents will have to come from national sources, an opportunity to reduce this ratio due to including efficiency savings from other the economies of scale to be realized in programs. The authorities can modulate the areas such as training, monitoring systems, fiscal impact of the program by reducing and evaluation mechanisms. Preliminary the coverage of beneficiaries and by setting estimates indicate that the expansion of conditions for graduation from the program the program to approximately one million over time. However, it must be recognized households would reduce administrative that implementing such programs is a long- If Tanzania were term commitment, as graduation rates can costs to well below 10 percent of total able to redistribute be expected to be low in the short term. costs, a level similar to programs elsewhere 10 percent of the in the world. These economies can be revenues derived In seven to ten years, one potential source further improved by promoting synergies from natural gas of financing for cash transfers could be on the ground, notably between the World the fiscal revenues that will eventually be to the poorest, Bank and UN agencies, as well as with the derived from natural gas. These revenues are this would amount extensive network of NGOs operating in expected to be significant, at approximately to US$ 15 per Tanzania. US$ 2 billion per year. Of course, there will household per year, Affordability: The fiscal implications of be competing demands on these funds, but or 26 percent of the the redistribution of even a small proportion the cash transfer program average poverty of these revenues could help promote gap. In designing social safety net programs, accountability mechanisms in this sector. If the Tanzanian Government must carefully Tanzania were able to redistribute 10 percent analyze the fiscal implications and of the revenues derived from natural gas to sustainability of the program. Initial modeling the poorest, this would amount to US$ 15 suggests that the fiscal implications are per household per year, or 26 percent of acceptable, involving expenditure in the the average poverty gap. If Tanzania were range of 0.5 percent of GDP. This compares to bring all of its poor up to the poverty PAGE http://www.worldbank.org/tanzania/economicupdate. 45 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N line using cash transfers, this would absorb poverty reduction can only be achieved about 40 percent of the natural resource through a range of complementary, fiscal revenue. Tanzanians will monitor mutually supporting initiatives that address their policymakers more closely and hold the multifaceted nature of poverty and its them accountable to a higher degree when diverse causes and impacts. In particular, the deviations from good governance directly availability of basic services is essential when impact their wallet -- and when they are implementing a comprehensive strategy aware of this impact. Any misappropriation for poverty reduction. By themselves, cash of funds will automatically translate into transfers cannot resolve supply-side issues a monetary loss, as cash transfers will that constrain service delivery. In addition, be reduced. Ultimately, intelligent self- access to markets and strong institutions interest provides the strongest basis for the are essential for success. Finally, economic achievement of accountability. growth is essential for poverty reduction, particularly when such growth is leveraged Cash Transfers: Only one component of to foster the growth of labor intensive an integrated poverty reduction program sectors in a manner that ensures that these sectors can provide productive employment The evidence suggests that a cash transfer to the vast majority of Tanzanians. Not only program in Tanzania, if designed well, should will this sustain its economic growth and have a direct, positive impact on poverty enable the country to achieve its aspirations reduction. However, such a program cannot of attaining middle income status, it will and should not be regarded as a panacea. It also ensure that Tanzania becomes a just, needs to be reiterated that such programs humane, stable nation in which prosperity cannot be implemented in isolation. Rather, is shared by all. PAGE http://www.worldbank.org/tanzania/economicupdate. 46 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n Statistical Annexes PAGE http://www.worldbank.org/tanzania/economicupdate. 47 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 1. Macroeconomic indicators Notes /1 Fiscal year is used, and it ends June 30th of mentioned year /2 Calendar year is used, and it ends December 31st of mentioned year * Preliminary actual Source: IMF, World Bank and Tanzania Authorities (MOF, BoT and NBS) PAGE http://www.worldbank.org/tanzania/economicupdate. 48 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 2. Real GDP growth rates PAGE http://www.worldbank.org/tanzania/economicupdate. 49 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 3. Shares of economic activities in GDP (current market prices) PAGE http://www.worldbank.org/tanzania/economicupdate. 50 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 4. Quarterly GDP growth rates 2002-2012 PAGE http://www.worldbank.org/tanzania/economicupdate. 51 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 5. Fiscal framework as percent of GDP Source: Ministry of Finance 6. Provisional monthly government expenditures 2012/13 Source: Ministry of Finance and Bank of Tanzania Note:/1 Includes LGAs /2 Exclude Amortization and Expenditure Float, includes Road fund and Retention expenditures PAGE http://www.worldbank.org/tanzania/economicupdate. 52 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n  alance of payments (percent of GDP unless indicated) 7. B PAGE http://www.worldbank.org/tanzania/economicupdate. 53 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 8. Monthly imports of goods and services 2012-2013 (in US$ million) PAGE http://www.worldbank.org/tanzania/economicupdate. 54 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 9. Monthly exports of goods and services 2012-2013 (in US$ million) PAGE http://www.worldbank.org/tanzania/economicupdate. 55 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 10. Inflation rates PAGE http://www.worldbank.org/tanzania/economicupdate. 56 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 11. Monthly food crop prices (wholesale): Tanzania shillings per 100 kg Source: Ministry of Trade, Industry and Marketing 12. Average wholesale prices (2012-2013): Tanzania shillings per 100 kg Source: Ministry of Trade, Industry and Marketing PAGE http://www.worldbank.org/tanzania/economicupdate. 57 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 13. Interest rates structure PAGE http://www.worldbank.org/tanzania/economicupdate. 58 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n 14. Monetary aggregates PAGE http://www.worldbank.org/tanzania/economicupdate. 59 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N 15. Poverty by Geographic Regions Poverty Distribution of Distribution of Headcount the Poor Population HBS 2011/12 HBS 2011/12 HBS 2011/12 Poverty line/1 = Tshs 36,482.0 Urban 15.5 15.9 28.8 Rural 33.3 84.1 71.2 Regions Urban 21.7 14.4 18.7 Rural 33.3 84.1 71.2 Dar-es-salaam 4.1 1.5 10.1 Total 28.2 100.0 100.0 Poverty line/1 = Tshs 26,085.5 Urban 6.0 17.7 28.8 Rural 11.3 82.3 71.2 Regions Urban 8.7 16.7 18.7 Rural 11.3 82.3 71.2 Dar-es-salaam 1.0 1.0 10.1 Total 9.7 100.0 100.0 Source: National Bureau of Statistics 1/ Monthly Expenditure Per Adult PAGE http://www.worldbank.org/tanzania/economicupdate. 60 T h e Wo r l d B a n k Po ve r t y R e d u c t i o n a n d E c o n o m i c M a n a g e m e n t U n i t Af r i c a R e g i o n PAGE http://www.worldbank.org/tanzania/economicupdate. 61 TA N Z A N I A E C O N O M I C U P D A T E • D E C E M B E R 2 0 13 , 4 T H E D I T I O N http://www.worldbank.org/tanzania/economicupdate PAGE http://www.worldbank.org/tanzania/economicupdate. 62