Public Disclosure Authorized 73339 I S SU E 1 T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Fiscal Prudence, Value for Money in Education, Economic Transformation of Firms February 2012 Public Disclosure Authorized TH E WORLD BANK GR OUP AFRICA REGION POVERTY REDUCTION & ECONOMIC MANAGEMENT Public Disclosure Authorized Public Disclosure Authorized PAGE a http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE b http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Table of Contents FOREWORD.............................................................................................................. iii ACKNOWLEDGEMENTS............................................................................................ v KEY MESSAGES ....................................................................................................... vii PART 1 – THE STATE OF THE ECONOMY ................................................................. 1 1.1 Recent developments up to 2011 ....................................................................3 1.2 Economic outlook and short term risks ............................................................6 1.3 In the search of new drivers of growth: A shift in policymaking? ...................10 PART 2 – GETTING MORE VALUE FOR MONEY IN THE EDUCATION SECTOR......13 2.1 Government’s drive to increase �nance for service delivery ............................15 2.2 Money has put children in schools, but learning outcomes are lagging .........16 2.3 Understanding the variations in education ef�ciency across districts ..............19 2.4 Higher value for money through a three-step approach.................................21 PART 3 – HARNESSING THE POWER OF ECONOMIC TRANSFORMATION ...........23 3.1 Is the Tanzanian economy on the move? ......................................................25 3.2 Four early signs of transformation .................................................................27 3.3 Smart policy: three guiding principles ...........................................................29 STATISTICAL ANNEXES...........................................................................................33 1. Key macroeconomic indicators ......................................................................34 2. GDP per capita over the past two decades ....................................................35 3. Growth performance: Regional comparison...................................................35 4. Growth and structure of the economy ...........................................................36 5. Fiscal framework as % of GDP .......................................................................37 6. Public Accounts –real annual increase ............................................................38 7. Balance of payments, % of GDP unless otherwise indicated ...........................39 8. International commodity prices, 2004-12 ......................................................39 9. Annual inflation rates .....................................................................................40 10. Inflation Rate (CPI): Regional comparison, 2010-11 .......................................40 11. Monthly Food Crop Prices (Wholesale) in Arusha, Dar es Salaam, and Mbeya: Tsh per 100 kg. .............................................................................................41 12. Inflation rates (selected items of the CPI basket) ............................................42 13. Average Wholesale Price (January to October 2011) in TShs./100kg ..............42 14. Nominal exchange rates and T-Bill Rates........................................................43 15. Monetary indicators.......................................................................................44 PAGE i http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 LIST OF TABLES Table 1: Tanzania macro-performance, 2007-12 LIST OF FIGURES Figure 1: Tanzania growth performance tops world and regional standards Figure 2: Export Earnings up in contrast to the region, 2009-104: Figure 3: Sustained capital inflows Figure 4: Growing �scal de�cit Figure 5: At the current pace the debt ratio will return to its pre-HIPC peak by 2016 Figure 6: Volatile �nancial indicators Figure 7: GDP growth by sectors, June-September 2011 Figure 8: Government spending -- the engine of growth since 2007/8 Figure 9: The declining share of of�cial aid in the budget since 2008 Figure 10: Virtuous circle #1: education, skills and jobs Figure 11: Virtuous circle #2: Firm transformation, �scal revenues and basic services provision Figure 12: Almost 200 percent real increase in social sector spending Figure 13: Education expenditure per capita Figure 14: Pupils in primary schools Figure 15: Secondary Student Numbers Figure 16: Primary cycle: Less graduates and lower pass rates since 2007 Figure 17: Secondary cycle: more graduates but steep deteriorations in pass rates Figure 18: Expenditure per PSLE passer Figure 19: Expenditure per CSEE passer Figure 20: Private returns to education in Tanzania – well below the SSA average Figure 21: Unequal distribution of resources across districts Figure 22: Children are attending primary schools Figure 23: Almost half of Tanzanians use cellular phones Figure 24: Lack of structural transformation since the early 1980s Figure 25: Moving up the industrial ladder – Tanzania vs. Malaysia Figure 26: Average annual growth rate in employment by type of employer, 2000-6 Figure 27: Manufacturing exports emerge PAGE ii http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Foreword The World Bank Of�ce in Tanzania is to the country. In these turbulent times, pleased to launch the Tanzania Economic Tanzania has one of the fastest growing Update, which will be published biannually. economies in the world, with a growth in This �rst edition addresses issues related GDP of 6.5 percent in 2010/11. to inclusive growth, outlining a series of However, �scal and monetary prudence policy recommendations that suggest is vital in the management of potential how such growth might be achieved. external and domestic risks. After three In particular, it focuses on how ef�ciency years of an intensive �scal stimulus gains in the education sector might be program, �scal buffers have now been achieved and how structural changes are exhausted. required to support the activities of the Any slippage could result in a rapid private sector. decline into macroeconomic instability, as The publication of economic reports of occurred in the second half of 2011, when this nature constitutes an important aspect Tanzania experienced high inflation and The Economic of the World Bank’s analytical program in exchange rate volatility. Update aims a number of client countries, including If economic growth cannot be achieved at fostering a Kenya, Rwanda, and South Africa. Such through �scal expansion, the policy constructive reports aim at fostering a constructive emphasis needs to shift to longer term dialogue policy dialogue between stakeholders and structural issues. For Tanzania, addressing between policymakers and to stimulate debate on these structural issues involves the stakeholders and essential economic issues. more ef�cient use of public resources, policymakers particularly in the areas of social services. The Tanzania Economic Update has two primary objectives. The �rst objective The authorities need to ensure a higher is to offer a perspective on the recent degree of cost ef�ciency in the delivery of economic developments, with a particular education services. If they do not achieve examination of the interplay between this, they will be not able to respond to global and domestic trends. The second the challenge posed by the massive arrival objective is to conduct an examination of of new students in secondary schools over topics of special interest and high relevance the next decade. PAGE iii http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 The crucial challenges associated with decisions for sustainable and equitable structural changes in the private sector, development in Tanzania. such as the emergence of small informal �rms and manufactured exports, are covered in this inaugural issue. We hope Mercy Miyang Tembon that this Economic Update will contribute Acting Country Director to the national debate on an important for Tanzania, Uganda and Burundi topic and help shape informed policy The World Bank PAGE iv http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Acknowledgement This �rst edition of the Tanzania Economic Husain, as well as from the comments Update was prepared by Jacques Morisset shared by David Rohrbach, Barjor Mehta, and Stevan Lee. The authors acknowledge and Arun Joshi. the contributions of Emmanuel A. The team received guidance from J. Mungunasi, Josaphat Kweka, Goodluck Humberto Lopez and Mercy Tembon. Mosha, and Yutaka Yoshino. Irfan Kortschak edited the report, while The report bene�ted from the insights of Agnes Mganga and Mwanaisha Kassanga several peer reviewers, including Wolfgang provided invaluable assistance during its Fengler, Zeljko Bogetic, and Sarwat preparation. PAGE v http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE vi http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Key Messages • Among the best performers In response, the Government announced measures to limit and Tanzania’s GDP growth in the reduce the budget de�cit to begin last 12 years has been extremely in late 2011. Spending will be cut by strong, averaging close to 7 approximately one percent of GDP, while percent annually. This rate is high, taxes will increase. Concurrently, the but still lower than that of successful Central Bank of Tanzania has tightened emerging countries when the nation’s its monetary policy, raising interest rates high population growth rate of about to control a rate of inflation that reached 3 percent is factored into the equation. close to 20 percent at the end of 2011. Economic growth has failed to eradicate poverty, with one third of households still • Positive outlook in a dangerous world living below the poverty line. If Tanzania Tanzania’s rate of economic growth If Tanzania aims aims to reduce the income gap between is forecast at approximately six to reduce the itself and middle income countries, it will percent in 2011/2012, with falling income gap have to grow faster and better. inflation. In the current global economic between itself Tanzania’s economy was highly context, this could be considered very and middle resilient to the global �nancial good. In addition, growth is expected to income countries, accelerate in 2012/13. However, it would crisis of 2008/9. This resilience was it will have grow also be the slowest rate of growth for largely due to its relative isolation from faster and better international markets, favorable events, the Tanzanian economy since 2000. The and the relatively large �scal stimulus explanations for the lower rate of growth package launched by the Government. are the slowest �scal expansion, non– The problem is that the stimulus package, accommodating monetary policy, and which was rightly intended to be a the costs associated with the ongoing temporary response to global economic energy crisis. This slowdown was already conditions, became permanent. This demonstrated in the third quarter of 2011 resulted in a deterioration of the �scal when GDP grew by 6.4 percent, down situation. The level of concern increased from 6.7 percent in 2010. This is the third when the budget de�cit, after grants, slowest quarterly increase since 2002. reached 6.9 percent of GDP and the debt Despite the positive forecast, risks level exceeded 40 percent of GDP by threaten Tanzania. While in the past, mid-2011. PAGE the Tanzanian economy has shown itself to vii http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 be resilient to global downturns, this may are more productive and therefore play a not hold into the future, as any new global major role in making business enterprises downturn may be qualitatively different become more competitive. The reverse is from previous experiences. In addition, also true, since more competitive business climatic catastrophes (such as the recent enterprises can invest more in human floods in Dar es Salaam) or unexpected capital. Those synergies are at the heart of costs associated with the emergency economic development. energy program and road contracts, may • Getting better value for money in the result in increased �scal pressure. educational sector In case of new shocks, the Education accounts for the largest Government may have no options share of the massive increases except adherence to �scal discipline in public spending 2000-2011, and prudence. Any deviation from these accounting now for about 20 principles is likely to result in higher inflation percent of the total budget. Despite and interest rates, possibly destabilizing this investment, the education system has the current macroeconomic framework. not yet succeeded in delivering a large Poor households and businesses would number of graduates. Worse, the pass suffer the most. rates in primary and secondary schools • The quest for new drivers of growth have actually declined since 2007. Much of the growth of the 2000s The major challenges in the was driven by �scal expansion and educational sector are limited massive aid inflows. The impact of �scal resources and fast-growing school expansion has been particularly signi�cant populations. Fiscal conditions will since 2008/9. However, these are unlikely severely limit the potential for growth to continue to drive growth to the same in expenditure on education in coming If economic extent in the tougher economic climate of years. However, the student population is growth cannot be the 2010s. Aid may increase more slowly increasing rapidly, growing by more than achieved through than in the past due to the current �scal 30 percent per year at secondary school. It �scal expansion, state of many donor nations. Therefore, is dif�cult or impossible for the government the policy the Tanzanian Government needs to �nd to control this population growth. emphasis needs new drivers of growth. International experience shows that to shift to longer This Tanzania Economic Update a number of steps can be taken term structural focuses on the need to transform to improve the ef�ciency of the issues the education system and to educational system. Evidence show foster growth amongst business that in Tanzania these include (i) a better enterprises. These are the two vital regional allocation of �nancial and human elements by which Tanzania will achieve resources; (ii) improvements in teachers’ accelerated and shared growth. There capabilities and in �nancial management; is a synergistic effect between these two and (iii) synergies with the private sector elements, since better educated people and parents. PAGE viii http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n • Harnessing the power of economic recent initiatives have led to productivity transformation gains in the agricultural sector. The success of emerging economies in Indications of the transformation of Asia is embedded in their businesses’ the business sector are encouraging, capacity to transform and adapt but the foundations for ongoing over time. Tanzania’s small business growth are not �rmly entrenched. Small �rms have sector has begun to show incipient signs The growth of the business sector needs of similar capacities. The development to be supported by smart public policies become the of these new capacities has been driven that emphasize (i) innovation through fastest growing by technological improvements. This competition; (ii) training, training, and source of is indicated by the following: small training, and (iii) diversi�cation of exports. employment �rms have become the fastest source These three areas are self-reinforcing as they of employment; manufactured exports should lead to more and better jobs. This have been booming since 2005; options is necessary to absorb new entrants on the for �rms’ �nancing have expanded; and labor market and reduce poverty levels. PAGE ix http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE x http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 1 The State of the Economy PAGE 1 http://www.worldbank.org/tanzania/economicupdate. Part 1 The State of the Economy Following three years of a high rate Main points of economic growth, Tanzania’s • Tanzania’s economy has economy is forecast to grow by resisted regional and global approximately six percent in 2012. turbulence, as GDP is expected That rate may appear higher in the current to expand around 6 percent in global context, but it would represent the 2011/12. slowest rate of growth in Tanzania since • Short-term policy options have 2000. The challenge for policymakers will been exhausted –except for be to resist new external and domestic adherence to �scal prudence shocks with a drastically reduced �scal and discipline. buffer. Looking forward, additional drivers • Economic growth will have to of growth are needed to diversify the come from additional drivers economy, to provide more extensive and after three years of rapid �scal better social and infrastructure services and expansion. to promote job growth and innovation. Fig.1: Tanzania growth performance tops world and regional standards Source: World Development Indicators, 2011 PAGE 2 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 1.1 Recent developments up to 2011 • The combination of exogenous factors has helped to stabilize Over the past decade, despite global the trade and capital accounts: and regional economic turbulence, In terms of balance of trade, the Tanzania’s economy has been one increased price of gold is more of the fastest-growing in the world. than compensated for the lower Over the past two years, the GDP grew international demand for crops (see by 7.3 in 2009/10 and by 6.5 percent Figure 2). At the same time, decreased in 2010/11 (Figure 1). This rate of crude oil prices have reduced the total growth was achieved largely through the value of imports. In terms of capital, combination of the relative isolation of the donors continued to provide �nancial domestic economy from external shocks assistance. The concentration of FDI and through effective demand policies. in the mining sector at least partially explains those flows’ resilience during There are three main reasons to explain the crisis (Figure 3). As a result, the Tanzania’s resilience in the face of global current account balance remained economic turbulence: stable at approximately 10 percent of GDP in 2009 and 2010. The level • The domestic economy is of international reserves stayed at a relatively isolated from global GDP grew by 7.3 comfortable level, equal to the value of trade and �nancial markets: The in 2009/10 and approximately 4.5 months of imports. cumulative GDP ratios of trade and by 6.5 percent in �nancial flows in Tanzania represent • Local banks had a low level of 2010/11 only 60 percent. By comparison, they international exposure, which exceed 100 percent in small, open limited the risk of �nancial economies such as Mauritius, Lesotho contagion: The ownership structure or Congo Republic. of Tanzanian banks kept them at arm’s PAGE 3 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 length from international banks. As and 2008. Concurrently, aid inflows have a result, very few Tanzanian banks failed to keep pace with the surge in public have been involved in large-scale expenditures. In 2010/11, these inflows international �nancial transactions. actually fell by 11 percent in real terms. Furthermore, most local banks have The stagnation or decline in aid inflows, managed to remain �nancially sound, combined with ambitious investment well capitalized1, and with a low level plans, has meant that the authorities of non-performing loans.2 have had to turn to �nancial markets for �nancing for the �rst time since the early The �scal stimulus package �rst 2000s. In the period between 2008/9 and launched by the authorities in early 2010/11, the government borrowed more 2009 and implemented throughout than TSh 2,500 billion to close the �scal 2010 and the �rst half of 2011 also gap. contributed to economic growth. By mid-2011, �scal indicators The ability of the government to launch demonstrated a disturbing decline: this �scal stimulus package was based on the country’s strong �scal position, • The �scal de�cit reached a value equal characterized by a low de�cit and a low to 6.9 percent of GDP, up from 1.7 level of debt. The �scal stimulus package percent of GDP in 2007/08 (Figure 4); generated an unprecedented increase • The public debt-to-GDP ratio increased in public expenditures, exceeding four from 35 to more than 40 percent percent of GDP between 2007/8 and between 2007/8 and 2010/11 (Figure 2010/11. It also resulted in a concurrent 5). increase in aggregate demand. This increase was concentrated on recurrent • Arrears increased substantially spending, which increased by more (reportedly in the magnitude of TSh400 than 50 percent in real terms during billion or over 1 percent of GDP in this period. It was also concentrated in a 2010/11 alone), especially in the road limited number of Ministries, including sector. The �scal Foreign Affairs, Finance, Energy, and the • The share of development spending stimulus package Prime Minister’s Of�ce. accounted for approximately one generated an quarter of the executed budget, unprecedented Unfortunately, the cost of three years despite the fact that such expenditure of �scal stimulus led to the gradual increase in public wasabout one third of the initially deterioration of the �scal balance. expenditures, approved budget. This raises serious The spending drive wa not accompanied exceeding four concerns regarding the degree to which by a higher revenue-to-GDP ratio, with percent of GDP the budget remained aligned with the this ratio standing at approximately 16 nation’s priority, especially since only between 2007/8 percent because of lower tax rates and around half of the development budget and 2010/11 additional tax exemptions. This contrasted is considered to be “true� capital sharply with the six percentage points of GDP increase recorded between 2000 investment. 1 Reporting a ratio of overall capital to risk- weighted assets of 17.4 percent. 2 8 percent of total loans by September 2011. PAGE 4 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n The deterioration of �scal accounts for 2011/12 was revised to 6.6 percent was accompanied by increasing of GDP, downwards from 6.9 percent volatility on the local �nancial in 2010/11 and the 8 percent initially markets (Figure 6). The inflation rate projected in the 2012 Finance Law. The increased gradually to almost 20 percent combination of spending cuts for about by the end of 2011, largely as a result of one percent of GDP and higher �scal regional food supply shortages due to revenue collection was announced by the droughts and higher fuel prices. The rate authorities as part of the IMF program. of foreign currency exchange fluctuated widely, depreciating by approximately 30 percent between August and October 2011 and then appreciating by about 20 percent between October and December 2011.3 The T-bills returns reflected the pattern of inflation, booming from four percent in June 2011 to almost 18 percent in December 2011. This volatility was partly the result of higher fuel and food prices and various other factors, but it was also the consequence of major shifts in �scal and monetary policies. By November 2011, the Government rightly recognized that its �scal stimulus was no longer sustainable. The �scal de�cit target 3 The depreciation partly reflected demand for foreign currency to pay oil import bills inflated by high global prices and demand linked to back-up generators operated by businesses and households during load-shedding. PAGE 5 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 As a result, Foreign and domestic non- of approximately four months of imports concessional borrowing should not at the end of 2011. exceed 3.1 percent of GDP in 2011/12. 1.2 Economic outlook and short This is intended to stabilize the public term risks debt-to-GDP ratio and consequently the Government’s level of exposure. According to the World Bank’s Global Economic Prospects,5 the Tanzanian The Central Bank of Tanzania has economy is expected to continue to also tightened its monetary policy by expand by approximately 6 percent The Tanzanian increasing interest rates and deposit in 2011/12 (Table 1). While this rate is economy is requirements. This is intended to good, it is lower than the rate recorded expected to reduce monetary expansion and last year. In fact, if achieved, it will be continue to control inflationary pressure. The the lowest annual rate of growth for the expand by authorities have succeeded in keeping Tanzanian economy for the past nine approximately core inflation (excluding food and energy years. The decline in the rate of growth 6 percent in prices) below 10 percent, preventing any had already become visible in the third pass through effect from higher food 2011/12 quarter of 2011, when growth stood at and energy prices to other items.4 By 6.4 percent compared to 6.7 percent for October, the monetary authorities had the same period in 2010 (Figure 7). also intervened directly in the foreign In particular, electricity, manufacturing, exchange market, sending the value of hotels and restaurants have been adversely the local currency back to its August 2011 affected by the energy crisis. Stronger level. The level of international reserves growth was achieved in the mining, declined slightly, but remained at a �shing, �nancial and telecommunication comfortable level equivalent to the value 4 This contrasts sharply with Uganda where the core inflation rate surged to close 30 percent in the last quarter of 2011, following the initial path of food 5 Global Economic Prospects 2012, World Bank, and energy prices. January 2012. PAGE 6 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n sectors. In the remainder of the year, the same sectors are expected to drive economic growth, while agriculture should perform at similar levels as in recent years, assuming good rainfall and favorable harvests in early 2012. In 2012/13, GDP growth is forecast to revert to its longer trend of approximately 7 percent following the projected recovery of developing and world economies. The ongoing energy crisis has contributed to the slowdown in economic growth. The economy suffered frequent fuel shortages in the second semester of 2011, as reflected by the 22 percent decline in electricity output during the third quarter, even though only 13 percent of the population has access to electricity. In August 2011, the Government implemented an emergency program to rehabilitate and construct new power supplies. This program has gradually helped resolve this problem. In January 2012, to support this program, electricity tariffs were increased by an average of 40 percent. This measure should help cover the costs of emergency power supply and of longer term investments. In the shorter term, it will protect the public company (Tanesco) from acute insolvency. Most of the additional short term cost will be borne by The economy consumers in the top 10 percent income bracket and a few energy-intensive industries. suffered frequent Today, at USD 0.17 per kilowatt-hour, Tanzania’s average electricity tariff is still half fuel shortages of the tariff in Uganda and about 20 percent lower than that of Kenya. This indicates in the second that it is lack of access, and not high prices, that is the real problem for private sector semester of 2011, development and sustainable economic growth. 6 as reflected by the 22 percent The second explanation for the slower rate of growth is the recent decline in adjustment to unsustainable �scal and monetary policies. Public spending electricity output expansion will have to be more moderate than initial projections, lowering its impact on the aggregate demand. The restrictive monetary policy has already pushed interest rates up and reduced credit to the private sector. The recent slowdown in construction (down by 5.2 percent in the third quarter of 2011 compared to last year) and manufacturing (down 0.7 percent) may reflect higher energy and borrowing costs. 6 Only 13.5 percent of Tanzanians have access to electricity with a high inequality depending on the household income levels. While almost 3 out of four wealthy households report to be connected to the national grid, the access rate is close to zero for the 80 percent poorest households in the country. PAGE 7 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 The overall �scal balance should be prices, with the core inflation rate better than last year, reversing the (excluding food and energy prices) deteriorating trend observed since remaining below 10 percent during 2011. 2007/8. Following the recent agreement The prices of food and energy are expected with the IMF, the �scal de�cit is forecast to decline slightly on international to improve to 6.6 percent of GDP, down markets, lessening the upward pressure from 6.9 percent in 2010/11. As described on the domestic inflation rate in the near earlier, the public debt should increase future. Such stability is reflected by the only moderately. This is the result of a World Bank’s Global Economic Prospects, highly appropriate government endeavor which forecasts oil prices to average to restore creditworthiness and limit the US$98/bbl in 2012, assuming the political crowding out of credit to private sector. unrest in the Middle East is contained and Libyan crude exports return to the Similarly, the external balance of market. In 2012, international food prices trade is expected to remain at are expected to average 11 percent lower acceptable levels. The current account than 2011. At least equally important, should stabilize at around 10 percent domestic food production should remain of GDP. Historically, there has been a constant or improve following the poor close historical correlation between the harvests in 2011, with lower food prices variations in the volume of exports and potentially pushing inflation down in imports. No major changes are expected 2012. The recent increase of 40 percent in in Tanzania’s terms of trade, as the domestic electricity tariffs should not have impact of the small projected decline in a signi�cant impact on inflation because agricultural and gold prices should be of the low weight of energy in most balanced by lower energy prices.7 Exports households’ consumption basket. of merchandise are projected to increase by 26 percent in 2012, while imports should Despite the relatively good rise by 22 percent. Similarly, �nancial flows forecast for Tanzania’s economic should not be signi�cantly affected by performance, careful management short-term events, as FDI reflects longer is required in a risky global term commitments in the mining sector, environment. A number of different and donors have committed to disburse factors could adversely affect the economy, at approximately the same level than and drive growth down. A combination of 2010/11. Other movements of capital floods in urban areas, such as experienced will continue to have merely a marginal recently in the Dar es Salaam conurbation, influence on the country’s capital balance. the monetary troubles in Europe, and lower gold prices, could all have a negative The restrictive policy stance of the impact on the Tanzanian economy. Those Central Bank should bring inflation exogenous shocks may be accompanied back to single digit �gures by mid- by additional internal �scal pressures June 2012. The current high rate of emanating from the energy emergency inflation has not impacted all domestic program and road contracts. 7 For more details on international commodity prices, see Global Economic Prospects 2012, op. cit. PAGE 8 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n The resilience of the Tanzanian The Government is aware of these economy to external shocks in the risks, as its recent prudent policy past does not necessarily guarantee stance demonstrates. This policy immunity in the future. The looming stance guarantees a certain degree of global recession may have a greater stability in the macroeconomic and negative impact on the Tanzanian �scal environment. Any deviation economy as a result of one or more of would be reflected almost immediately the following: on local �nancial markets, leading to The World Economy in 2012 The World Bank Prospects Group projects that, even in the absence of a credit “event� in Europe, persistent uncertainty will dampen business and household spending in high- income economies and lowering growth in developing countries. Growth for high-income countries in 2012 is projected at 1.4 percent for 2012 including -0.3 percent in the Euro Area. Developing country growth projections have been revised down from 6.2 to 5.4 percent in 2012. World trade is projected to grow at 4.7 percent in 2012 compared to 6.6 percent in 2011. China and other dynamic emerging economies in Asia and Latin America, though not directly affected, will see their high rates of economic growth dented through lower exports growth, and lower capital inflows. Like Tanzania, the big developing economies have less �scal space than in 2008. Recent data suggest a certain amount of contagion from the European sovereign debt crisis, with spread on T-bill for emerging economies on the increase, falling stock markets worldwide and a 55 percent decrease in gross capital flows to developing countries. Source: World Bank Global Prospects, January 2012 • The �scal crisis in donors’ higher inflation and interest rates, and countries may push them to possibly to a loss in the value of the local reduce aid inflows; currency, as experienced between June The looming • The global recession may extend and October 2011. Donors are also likely to emerging countries, thereby to react negatively, as budget support is global recession affecting negatively Tanzanian highly sensitive to the macroeconomic may have a exports toward those markets; environment. And stability matters for greater negative • Prices of gold and oil can move the poor because they are most affected impact on the in directions that will destabilize by price volatility. Stability also matters Tanzanian Tanzania’s current account for business. What is the worst enemy of economy balance since those commodities private investors? Taxes, administrative count respectively for one third burden, limited access to credit? All are and one quarter of the country’s important but good businessmen can exports and imports. navigate through those obstacles. Their worst enemy is uncertainty. Uncertainty it The Government is well positioned pushes entrepreneurs to adopt a “wait and to manage these risks individually see� attitude, and inaction kills business. if their magnitude is limited. However, it may be considerably At this point in time, the Government more dif�cult to manage several may want to consider the path major shocks that coincide. followed by the countries that have PAGE 9 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 entrenched rules of �scal discipline creates a sense of long term commitment in their legal framework. For example, to guide policymakers. Of course, to be Mauritius has entrenched a ceiling on credible, as the experience of the EU shows, its public debt to GDP ratio through such legislation needs the inclusion of legislation (see Box). Other countries sanctions or remedies to be applied in case (e.g. UK, Germany, and Switzerland) have of deviations from those rules. However, adopted legislative measures to entrench the trade-off of such legislation is the loss the “golden �scal rule� that caps their of some �scal flexibility, although this level of recurrent spending at a given ratio flexibility can be retained through careful to domestic revenues, or other �scal rules. formulation of legislation. The adaptation Entrenching such measures to achieve of such measures in Tanzania requires �scal stability through legislation limits cautious and analysis, with adjustments the possibility of political interference and for Tanzania’s reality. Mauritius: The Public Management Act 2008 This Act does set up a ceiling on public debt but also speci�es a number of principles in terms of debt policy and management. • Medium term planning. • Close monitoring and supervision. • Power of Ministers and public agencies must be limited. • Public debt should include contingent liabilities of local governments as well as public enterprises and agencies (including social security and saving schemes). • Flexibility should be provided for exceptional circumstances (natural disasters and emergencies, large priority investment projects). • Remedies measures should be explicitly incorporated in the Law as well as the responsibilities and eventual sanctions. • Debt management (currency mix, interest rate-mix, maturity pro�le). 1.3 In the search of new drivers of Moreover, a slowdown in government growth: A shift in policymaking? spending could add downward pressure on the forecasted growth The Tanzanian economy is growing �gure. Fiscal expansion has been a major at a high rate. Mining pro�ts are at driver of growth over the past decade, record highs. The nation’s construction particularly during the last three years. and �nancial service �rms are humming While �nancially prudent policies are vital, along. But for many Tanzanians, even these �scal policies will reduce the stimulus those with jobs, the “economic growth� in the short term. In the longer term, this has been hardly worth celebrating. This driver of growth is also likely to diminish disconnect calls for a shift in policy- as aid inflows are unlikely to grow as fast making as recently recognized by national as they did in the past decade (Figures 8 policies, including MUKUTA II. and 9). External �nancing declined since PAGE 10 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 2008, and this trend is likely to continue agricultural activities).8 Over the medium in the near future due to the current �scal term, the Government will bene�t from distress in most OECD countries. Public the prospects of natural gas exploitation spending may stabilize as a share of GDP but the associated burst in �scal revenues at little more than current levels. is not expected to take place before the end of the decade. Opportunities exist for other sources It is dif�cult to forecast future of public �nancing, but those appear aid inflows and other sources of relatively limited in the short term. funding. However, if recent trends Non-traditional foreign assistance, while are an indication, it will become growing, is unlikely to transit through increasingly dif�cult for the the national budget. Additional no government to utilize such resources concessionary borrowing would be to facilitate a sustainable rapid �scal dif�cult to obtain at large magnitude expansion in the near future. If the due to volatile international markets and government’s capacity for expenditure the thinness of the local �nancial market. becomes increasingly limited, it will Ultimately, public spending patterns have to adjust and to �nd new drivers of should be more closely associated with growth. Otherwise, the economy may go the Government‘s capacity to raise again through its traditional cycle of lower additional �scal revenues. If policy and aid and growth episodes, such as occurred administrative reforms (including the in 1993 and 1996.9 The search for new rationalization of existing tax exemption drivers should also aim at becoming more regimes) can be pushed more actively, inclusive, particularly considering that the the margin of progression will become narrower after substantial gains achieved 8 For more details on the link between tax performance and the structure of the economy, see: over the past decade and given the IMF, Revenue Mobilization in Developing Countries, Fiscal Affairs Department, March 8, 2011. current structure of the economy (high 9 For a historical perspective of the link between informality, non-monetary economy, Tanzania’s economic cycles and aid inflows, see S. Edwards, Tanzania: A Success Story? NBER working paper, 2011. PAGE 11 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 overall poverty rate has remained constant productive workers and �rms, which at around one third of the population in turn will increase the potential for throughout the rapid economic expansion government revenue collection. For recorded during the 2000s. Tanzania, the development of such virtuous circles is a means of connecting It is only a matter of time before good macroeconomic performance and a healthier economy encourages improved living standards for the majority businesses to hire more workers. of the population. Through such means, In the end, this will improve the Tanzania may succeed in its ambitious to fortunes of poor households. reach middle income status by 2025. However, time is short for Tanzania. The experience of successful emerging countries suggests that the cost-effective management of public resources and the productivity gains of the private sector will continue to drive economic growth. Therefore, Tanzanian policymakers must focus on the implementation of policies that encourage these outcomes. If the The next sections contain detailed government’s analyses of how more effective capacity for management of public resources expenditure may be achieved in the education growth becomes sector and of how to encourage positive changes in the private increasingly sector. These two issues are central to the limited, it will building of two virtuous circles for shared have to adjust to and sustainable growth (see Figures 10 �nd new drivers and 11). The �rst circle underscores the of growth links between improved education and skills, which in turn generate jobs and improved incomes that facilitate further investments in human capital. The second virtuous circle relates to the role of the private sector in the generation of additional tax revenues, which will �nance additional education expenditures. This expenditure will lead to improved educational outcomes and so more PAGE 12 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 2 Getting more value for money in the education sector PAGE 13 http://www.worldbank.org/tanzania/economicupdate. Part 2 Getting more value for money in the education sector Main points • Tanzania has selected education as a priority area for its development, spending close to 20 percent of its budget. • While attendance has boomed, pass rates remain low both in primary and secondary schools. • Urgent actions are required to address the triple challenge of limited resources, quality upgrade, and fast-growing school populations. Over the past decade, the Government If the Government cannot spend has launched an unprecedented �scal more, other means of delivering effort to provide more and better more and better public services infrastructure and social services. The and infrastructure will have to Tanzanian State has expanded rapidly, found. One such means may be through from 15 percent of GDP in 1998 to almost partnerships with the private sector, with 30 percent in 2011. Unfortunately, this such partnerships bene�ting from the has not yet resulted in it catching up with private sector’s expertise and �nancial most developing countries in terms of resources. The second means may involve infrastructure and social services provision. the improved management of investment At present, in terms of road infrastructure, projects in terms of their selection, Tanzania has 9 times less paved roads implementation, and maintenance. The per km2than Uganda; in terms of electric third means would be to ensure that power capacity, it has 10 times less Kwh greater value for money is derived from per habitant than in Mozambique; while the delivery of social services. in terms of medical services, it has 40 percent less hospital beds per capita than The attainment of a high level in Burkina Faso.10 Equally worrisome is of pro�ciency in the education that due to �scal adjustment and slower sector is particularly important, external capital inflows, the public sector considering that the development is unlikely to grow much faster in the near of the educational sector has been future. a main focus of policymakers over 10 Source: World Development Indicators. PAGE 14 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n the past decade.11 The level of public policymakers. Thus, these policymakers expenditure per student has more than have directed signi�cant resources doubled since 2005. Despite this increase, towards improving the national education approximately half of all students still do and health systems over the past decade. not graduate at the end of the primary The goal of policymakers is to increase cycle and only around 10 percent the capacity of the education and health successfully graduate from secondary systems by �nancing both recurrent and school. There is an increasing demand capital spending to enable members of the for better results now. A failure to rapidly community to attend schools, hospitals improve the ef�ciency and effectiveness and health centers to receive good of the educational system will result in quality education and health services. government failure to meet the challenge The availability of such services is rightly created by the massive arrival of new seen as a means of improving the stock of students in secondary schools. Given the human capital in the country. importance of this sector and the level of resource devoted to it, such a failure may Since 2005, combined expenditure on result in the destabilization of the entire education and health has increased budget.12 by 190 percent in real terms. In the education sector, this increase in expenditure is equivalent to an average 2.1 Government’s drive to increase growth of 10 percent per capita per year. �nance for service delivery Initially, the increased expenditure was the result both of the increased deployment The development of human capital of teachers and increased investment is vital for Tanzania’s long term The level of in new schools. In more recent years, economic development. Ef�cient the school building program has slowed public public service delivery is the key down dramatically. In fact, the great expenditure to achieving this development. expansion of primary education occurred per student This double causal relationship has before 2005. While the proportion of has more than been well understood by the Tanzanian expenditure on primary education has doubled since 11 This section of the economic update is based on slowly decline, it still accounts for half 2005 the analysis carried in the 2010 World Bank Public Expenditure Review United Republic of Tanzania of the total expenditure on education in Public Expenditure Review 2010, September 2011/12. At the same time, expenditure 2011, World Bank Report Number 64584-TZ.) It focuses on education, while the same approach on post-primary education has increased. is currently developed to assess the value for money in the health sector. The result of this Initially, expenditure on higher education analysis will be part of the forthcoming 2011 amounted to more than 30 percent of Public Expenditure Review. 12 The issue of upper education and its adaptability frontline spending, whilst the proportion to the need of the labor market is not directly of expenditure on secondary education addressed in this section. There is no need to stress that skill developments through the declined to about 13 percent in 2009/10. education system and close partnerships with Since 2010/11, efforts have been made the private sector are crucial for job creation and productivity improvements. The opportunities for to accelerate the funding of secondary private �rms’ participation in skill development education. programs are discussed in the next section of this economic update. PAGE 15 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 Development Partners have been total number of primary school students highly supportive of the expansion in the country. of the Tanzanian educational system. This support was initially channeled In secondary schools, the proportion of through earmarked investment projects, students at such institutions is somewhat although an increasing proportion is higher, with students at these institutions now provided through general budget constituting 15 percent of the total support. Since 2010/11, the World Bank numbers of students. Household spending has introduced a Secondary Education on education remains very low, although Development Project (SEDP) to address it is rapidly increasing amongst higher the low level of resources and the poor income households. It is estimated that the quality of secondary education. average monthly spending on secondary education per 13-19 year old is just TSh While private educational service 2,000 in poorer households, compared to providers are important in Tanzania, TSh 33,000 in richer households. they are less so than in many other Source: World Bank, 2010 PER 2.2 Money has put children in developing countries. Historically, the schools, but learning outcomes are expansion of the Tanzanian educational lagging system through cooperation between public and private educational service The Tanzanian government has providers has been less important in been very successful in increasing Tanzania than in other East African the proportion of students initially countries, especially Kenya. enrolled in primary school. The Millennium Development Goal of In recent years, private schools have achieving universal registration for boys become increasingly signi�cant in urban and girls in primary schools came close centers, although the proportion of to being achieved by 2005 (Figure students enrolled at such schools still 14). Increases in rates of enrolment at accounts for less than two percent of the secondary school have come later: while PAGE 16 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n only 5 percent of 17 year olds were pass rates at the exam taken at the end of enrolled at secondary schools in 2005, this the primary cycle (the PSLE exam) (Figure had increased to more than 30 percent by 16). Until 2007, results steadily improved, 2010 (Figure 15). with more than 70 percent of 13 year olds passing the exam. However, since then, Despite the rapid increase in rates pass rates have declined, not only in terms of enrolment, results in terms of of the proportion of candidates, but even average learning outcomes have been in terms of the proportion of the entire mixed both in both the primary and 13-year-old population. In secondary secondary educational sectors. After a schools, CSEE pass rates declined from dramatic improvement in the early 2000s, 34 to 9 percent between 2005 and 2010, learning outcomes in primary education although there are now considerably more actually declined, at least in terms of the graduates than in 2006 (Figure 17). PAGE 17 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 Despite the additional expenditure level of more than TSh 2,400 billion at on education, pass rates have the current “cost per successful student�. actually declined: in other words, the This exceeds the current budget for the government’s return on investment entire education sector! It is impossible to in the educational sector is achieve secondary education goals simply decreasing. The value of public resources by allocating additional resources to the spent for each successful candidate of the sector. For these goals to be achieved, PSLE exams has increased in real terms by ef�ciency must improve. more than 41 percent since 2007 (Figure The deterioration in the cost 18). In parallel, the expenditure for each ef�ciency of the education system successful candidate of the CSEE exams may partially reflect the expected has skyrocketed to more than TSh 8 million lag between current efforts and �nal in 2010, from only TSh5 million (Figure Quality of pass rates. Building schools takes time 19) in 2005. These rising costs almost education in and teachers need time and experience to certainly depress the private and social become fully effective. Thus, expenditure Tanzania’s primary returns to education since 2007. Figure on current projects, particularly at the education system 2013 shows that even then, returns to secondary level, may generate a visible was signi�cantly primary were particularly low in Tanzania, return on investment only after several worse than possibly linked to poor learning outcomes. years, when the current cohort of students in Kenya and This decline means that achieving desired begins to graduate. Nevertheless, a Uganda, as educational outcomes will become highly regarded pan-East-African survey increasingly expensive and will ultimately measured by a conducted by Uwezo shows that the become unaffordable. For example, to see performance in quality of education in Tanzania’s primary 300,000 secondary graduates with CSEE maths and English education system was signi�cantly worse passes (�gure equal to about one third of by second grade than in Kenya and Uganda, as measured the country’s population of 17-year-olds) students by a performance in maths and English would require an annual expenditure by second grade students.14 Tanzanian 13 Figure 15 rates of return are derived from the 14 These results were challenged in all three relationship between earnings and education participating countries but another survey, reevaled in household budget surveys 2001 and SACMEQ, Tanzania con�rms the above ranking 2007. even though Tanzania performed relatively better. PAGE 18 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n pupils showed lower average levels of or teachers.15 The more resources each While low rates achievement in Kiswahili compared to district receives, the more likely it will be of return are the their Kenyan counterparts, even though ef�cient. On average, after accounting result of multiple Kiswahili is the primary language of for social and economic factors, up to 70 factors, they are instruction in Tanzania. percent of the variation in PSLE pass rates partially due to can be explained by the level of public The return on investment for spending and/or the level of deployment the persistent students and their families remains of personnel in a district. This correlation low quality relatively low. This reinforces the is obvious as one can expect better of education, need to improve the ef�ciency of educational outcomes with more teachers, with many the educational system. As a general books, and schools. school leavers rule, a household is more likely to invest unprepared for in education if its future earnings exceed However, the positive correlation the direct and indirect cost of schooling. the labor market between deployment of resources Unfortunately, in Tanzania, these rates of and performance is not linear: at a return are comparatively very low and have certain point, return on investment not improved over time, except for tertiary declines. This reflect a simple rule education (Figure 20). While low rates of of economics: there is likely to be a return are the result of multiple factors, decreasing level of returns, as each they are partially due to the persistent low additional teacher or book will have a quality of education, with many school more dramatic impact in a district where leavers unprepared for the labor market. these resources are extremely limited than If this is the case, households may rightly when they are widely available. Empirical determine that they are not getting value for their money in terms of their investment in education. 2.3 Understanding the variations in education ef�ciency across districts The ef�ciency and effectiveness of the education system fluctuates enormously across districts. In order to increase the ef�ciency of the education system as whole, these variations need to be understood by policy makers. There is a strong correlation evidence suggests that returns from between the level of performance incremental changes in resources decrease of schools in different districts and quite rapidly when a district receives more the distribution of resources and/ 15 The inequality of resourcing is largely a function of unequal distribution of teaching personnel. PAGE 19 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 than TSh 18,000 per capita. This indicates graduates correlate strongly with that a higher level of return on investment the level of deployment of resources, will be achieved from allocating resources it is also influenced by other factors. to underserved districts. This has to be expected because ef�ciency depends on the context in which the In addition to this, performance is education system has to operate. For also highly variable in some districts example, signi�cant factors may include with very similar resources, so the level of literacy of parents and their technical and �nancial management income and their children’s health. Figure ef�ciency is also an issue. The vertical 21 shows large variations in pass rates box in Figure 18 shows that some districts between districts that have received spending roughly TSH13,000 per capita almost the same level of resources. on primary education achieve pass rates Interestingly, if the context does matter, it of around 30 percent, compared to others seems that the internal ef�ciency of each with 100 percent pass rates with the same education system plays an important role, level of resources (top of the box). The latter particularly for districts that receive more are districts with really ef�cient schools. resources than the average. For example, Something must be undertaken to improve the districts of Mblulu and Masani the way schools are managed or teachers receive approximately the same level of are motivated in the inef�cient districts. resources (TSh 12,000 per capita) and are While the capacity of the educational characterized by roughly the same social system of each district to produce context, but the pass rate is three times higher in Mblulu than in Masani. Further This Figure illustrates the 1.2 Same resources but close and positive relationship huge variations in between resources (recurrent Decreasing pass rates LUDEWA ROMBO expenditure per capita) and returns the ratio of primary graduates 1 MUFINDI MBEYA URBAN Kyela Iringa Rural KIBAHA RURAL (PSLE pass rate) in each MOSHI URBAN MUHEZA SUMBAWANGA URBAN MWANGA district (red line). This PSLE passes per 13 year old 2008 MBULU KIGOMA URBAN SONGEA URBAN relationship varies BABATI URBAN KIBAHA URBAN Arusha Urban NJOMBE RURAL KILOMBERO RUNGWE MUSOMA URBAN SONGEA RURAL nonetheless depending on .8 Morogoro Urban the level of resources. In an TARIME MBEYA RURAL MAKETE MOSHI RURAL BUKOBA URBAN KARATU Kisarawe underserved district (receiving less than Tsh18000 per HAI BAGAMOYO MKURANGA SHINYANGA URBAN BUNDA BIHARAMULO TEMEKE Serengeti ILALA IRAMBA SAME capita), the pass rate is more .6 MBINGA MONDULI Mvomero KILOLO HANDENI LUSHOTO MBOZI MUSOMA RURAL TABORA URBAN Ileje KOROGWE URBAN sensitive to a change in KARAGWE LIWALE resources than in an MAGU MAFIA BUKOBA RURAL KWIMBA Dodoma Urban ULANGA Morogoro Rural SIMANJIRO SENGEREMA MULEBA MISUNGWI NGARA ILEMELA MTWARA RURAL RUFIJI SINGIDA RURAL NEWALA LINDI URBAN over-served districts (this is KILWA Chunya NAMTUMBO KILOSA GEITA MBARALI KINONDONI NGORONGORO MANYONI TANDAHIMBA SUMBAWANGA RURAL captured by the slope of the MPWAPWA .4 MASWA NKASI URAMBO TUNDURU green lines). Lastly, variations NACHINGWEA IGUNGA LINDI RURAL KIGOMA RURAL KONDOA Kongwa UKEREWE SIKONGE in pass rates do exist even if BUKOMBE KAHAMA Mpanda Rural KASULU MASASI KISHAPU SHINYANGA RURAL two districts are receiving the Uyui MEATU KIBONDO RUANGWA same amount of resources, NZEGA suggesting that other factors .2 influence the system 5000 10000 15000 20000 25000 efficiency (this is illustrated by Recurrent expenditure, per capita, primary education 2008 the vertical box in purple). PAGE 20 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n analysis revealed that the administrative performance of the educational and technical capacity of local staff and systems in different districts could synergies between the public system, be measured. Currently, policymakers, private service providers and households teachers and students are not able to are more developed in the district of determine the level of ef�ciency of their Mbulu than in Masani. schools or districts largely because there is no meaningful system by which this 2.4 Higher value for money through ef�ciency can be measured. Ideally, a three-step approach stakeholders should have access to These three �ndings indicate information by which to assess the directions for improving the performance of their school compared ef�ciency of the education system to others. In order to facilitate this, in Tanzania. To achieve a higher the Government should collect and level of cost ef�ciency and to conserve disseminate information by which the �nancial resources, a three-step approach performance of each district may be is proposed. The value of savings may assessed. Such an effort would increase reach up to one quarter of the existing accountability both at the national and budget for the education sector. With local levels and would foster healthy these savings, freed up �nancial resources competition between schools and districts. could be used to address the formidable Secondly, it is necessary to reallocate demographic challenge that the secondary �nancial and human resources education system will have to face in the towards relatively underserved coming years, with the student enrolment districts. A more equal distribution increasing by approximately 30 percent of resources between districts would each year. improve outcomes without requiring A signi�cant step would involve additional public expenditures (see box the development of an information for a quantitative example). system by which levels of Savings from reallocation of resources across districts Ef�ciency gains from re-allocation of resources amongst district could be substantial as illustrated by the following numeral example. Take �rst the group of 20 “underserved districts�, where mean expenditure per 7-13 year old was TSh82450 and the average pass rate was 53 percent in primary school lever’s exams in 2008/9. Then, compare this group with the sample of 20 relatively “overserved� districts with average spending at TSh146000 and pass rates at 80 percent. If resources, say TSh10 billion, are re-allocated from the second to the �rst group, the net increase of passers will be as much as 3827 or over 200 percent gains for those 40 districts. This net increase accounts for the gain of 5606 in underserved districts and the loss of 1779 in over served ones. For larger sums the amount of gain would diminish but ef�ciency savings of around TSh240bn per annum might be possible just from geographical re-allocation. Source: World Bank, 2010 Public Expenditure Review. PAGE 21 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 Thirdly, the government should Indonesia, also pay substantial incentives take steps to replicate and spread to teachers and other staff working in the practices of districts that dif�cult areas. To achieve this objective, achieved relatively good results not the necessary steps are clear: there should immediately explainable in terms be suf�ciently high incentives available of the level of �nancial and human to encourage teachers to seek posts in resources that these districts receive. understaffed districts. In addition, there A close monitoring of districts which needs to be disincentives and effective achieve lower than average results relative limits on hiring levels in relatively to the level of resources they receive overstaffed districts, including limits on in- may also result in improved ef�ciencies. year staff transfers. Ef�ciency gains can be achieved through The effective implementation of (i) internal management of �nancial policies to achieve increased ef�ciency and human resources (including in the educational system requires expanded teacher training programs); a strong degree of commitment. At (ii) partnerships with private providers present, accountability and responsibility through performance contracts; and for educational outcomes is diffused (iii) participation of households through between local and central authorities incentives schemes, including vouchers and between a wide range of various and conditional cash-transfers. The close institutions at the central level (Ministry of partnership with the private sector is an Education, Finance, Prime Minister Of�ce, opportunity in growing markets, such as and President’s Of�ce). in urban centers due to migration flows. There is an urgent need to assign clear If the education At the higher educational levels, it roles and responsibilities so that decisions system continues becomes increasingly important to are taken with the objective of improving to fail to produce ensure the compatibility of syllabuses the ef�ciency of the education system. with the demand from the labor market. a suf�cient Private sector participation is even more Despite the challenges and number of essential for technical and vocational dif�culties of improving the graduates, the training. Ensuring that a greater number ef�ciency of the educational system, availability of the of districts achieve results commensurate the success of such endeavors is necessary human with the level of resources invested in their vital to the future of the Tanzanian resources will educational systems could result in savings economy and of the nation itself. If remain limited of up to TSh 340 billion per year. the education system continues to fail to International experience demonstrates produce a suf�cient number of graduates, that countries implementing the the availability of the necessary human appropriate policies can achieve resources will remain limited, which in ef�ciency gains from their educational turn will limit the potential for growth system. For example, Uganda and Brazil of the Tanzanian economy. On the other include an equalization element in their hand, if the number of graduates increase local government funding formula to too fast, the cost will be unbearable for the move �nancial and human resources from State. The only solution is to generate a over-served to under-served areas. Many higher level of return on public investment countries, such as Norway, Australia, and in education. PAGE 22 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 3 Harnessing the power of economic transformation PAGE 23 http://www.worldbank.org/tanzania/economicupdate. Part 3 Harnessing the power of economic transformation Main points • The Tanzanian economy is on the move thanks to technology and education improvements. • Emerging signs of transformation in the private and �nancial sectors. • Smart supportive policies are needed based on innovation, training, and diversi�cation. “How was school today? Don’t forget only one out of two children attended a to bring home the milk!� This simple primary school. These days, access to both conversation between Halima, a 36-year- facilities is entirely unremarkable, with old woman from Dodoma, and her around half the population having access young daughter on their mobile phones to a mobile telephone and almost all demonstrate how much has changed in children of primary school age attending Tanzania over the past 15 years. Firstly, schools (Figures 22 and 23). Daily life has the conversation was conducted on a changed dramatically in Tanzania, and mobile telephone: 15 years ago, only technology and education have been the 2 percent of Tanzanians had access to a main drivers of change. mobile telephone. Secondly, 15 years ago, Education and technological improvements over the past decade PAGE 24 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n However, the questions remain: Have Discouragingly, at �rst glance, there these changes led to productivity have been few indications of positive gains in the domestic economy? structural changes and productivity Will they do so in the future? How gains in Tanzania over recent years. can policymakers encourage such Between 2000 and 2008, the proportion positive developments? This section of the GDP derived from the agriculture will attempt to demonstrate that there and �shing sectors declined only slightly, are encouraging signs of emergence in falling from 29.5 to 24.6 percent.17 the Tanzanian economy that are as yet Conversely, the proportion of the GDP not reflected in national accounts and/or derived from the industrial and services international statistics. These encouraging sectors increased only slightly, with the signs of development should be promoted proportion from the industrial sector through supportive policies based on increasing from 19.9 to 22.0 percent; three guiding principles that international and with the proportion from the services experience shows have been central in the sector increasing from 45.3 to 43.6 success of emerging countries. percent (Figures 24). 3.1 Is the Tanzanian economy on the This lack of structural transformation move? which could drive economic renewal contrasts sharply with the situation Advances in technology and in Malaysia over the past three improvements in the educational decades (Figure 25).18 In all sectors of system have the potential to facilitate the Tanzanian economy, productivity improvements in productivity in gains have been limited. The performance Tanzania’s private sector. International There are of the agricultural sector has been poor, experience shows that successful emerging while the services and industrial sectors incipient economies have been able to achieve have been characterized by a lack of signs of productivity gains by (i) by adopting dynamism resulting from technological, transformation more ef�cient production functions and administrative, infrastructure, �nance, in the (ii) by shifting their private resources and regulatory constraints (see Box). The Tanzanian to most productive sectors. The shift productivity of Tanzanian manufacturing economy should be moving away from traditional businesses was roughly 50 percent and agriculture and other low-productivity 30 percent lower than those of similar primary activities and developing the “modern� sectors (including non- 17 This decline my capture the recent emerge traditional agriculture, manufacturing and of non-farm activities in rural areas and the growing urbanization –two phenomena further services). As Mc Milan and Rodrik observe: discussed later as emerging signs of economic “The speed with which this structural transformation. 18 African economies exhibit signs of limited transformation takes place is the key factor structural transformation that explain why progress has remained slow since independence. that differentiates successful countries from In 1965, agricultural value-added represented 22 unsuccessful ones.�16 percent of SSA’s gross domestic product (GDP), services 47 percent, and industry 31 percent (of 16 McMillan, M. and D. Rodrik, 2011. Globalization, which manufacturing contributed 17.5 percent). Structural Change and Productivity Growth, In 2007, it was estimated that agricultural value- mimeo, February. See also, Ndulu, B. et al., added still contributed a healthy 15 percent of 2007. The Political Economy of Economic Growth in GDP while services contributed 52 percent and Africa, 1960-2000, vol. 1, New York, Cambridge industry 33 percent (of which manufacturing University Press. represented less than 15 percent). PAGE 25 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 businesses in China and in Kenya in the mid-2000s.19 In 2009, in terms of value added per worker, the level of productivity of the Tanzanian agricultural sector was only 4 percent of that of Malaysia’s agricultural sector. Productivity was also signi�cantly lower than in Kenya, despite agricultural endowment advantages.20 However, despite these discouraging �gures, there are signs of incipient growth in the Tanzanian economy. The dramatic advances in technology, indicated by the equally dramatic expansion in the rate of usage of mobile communications, and improvements in education have resulted in signi�cant structural transformation. While the results of this transformation have not yet been reflected in national accounts, they are likely to shape the future of the Tanzanian economy.21 19 Source: Investment climate assessment, Improving Enterprise Performance and Growth in Tanzania, the World Bank, November 2004, 20 Source: Word Development Indicators 21 Major structural changes are also expected to emerge from recent gas and oil discoveries, but those will take time to materialize while dangers in terms of corruption and misallocation of funds are already imminent when contracts are being negotiated. PAGE 26 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 3.2 Four early signs of OECD crisis and as a result of ongoing transformation efforts to promote regional integration, this expansion of manufacturing exports Signi�cant early signs of a forthcoming is focused on markets in neighboring structural transformation of the countries. Approximately 55 percent of Tanzanian economy include the all manufacturing exports in 2009 and following: 60 percent in 2010 were sold to East 1. The dynamism of informal �rms, African Community and South African especially those operating in off- Development Community trading blocks. farm activities; Small �rms do create jobs and 2. The emergence of manufacturing manufacturing exports are emerging exports; 3. Increased options for �nancing; 4. New pilot projects to improve the productivity of crop agriculture. The dynamism of informal �rms, especially those operating in non- farm activities: The agricultural sector remains the largest provider of jobs in Tanzania. However the most dynamic source of employment in recent years has been household enterprises, with the number of jobs in such businesses rising by approximately 13 percent per year, or 3 times faster than the national average (Figure 26).22 This expansion reflects both a diversi�cation of economic activities in rural areas, particularly on the part of agricultural households seeking complementary income and a rapid process of urbanization. Many informal businesses have been established in or around cities to take advantage ready access to markets and supportive infrastructure. The emergence of manufacturing The data shows that while a small number exports (Figure 27): With the decline of existing companies dominate the in purchasing power of markets in the manufacturing export market, their range of products is becoming wider. In particular, 22 For a detailed discussion, see recent paper by J. these products range from cement to Kweka and L. Fox, The Household Enterprise Sector plastic items, steel and iron products. The in Tanzania: Why It Matters and Who Cares, World Bank Policy Research Series, n. 5882, November increase in the volume of exports from the 2011. PAGE 27 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 manufacturing sector may reflect recent New pilot projects to improve the improvements in productivity and the productivity of crop agriculture: improved competitiveness of Tanzanian With modern irrigation systems, it has �rms. been possible to increase the productivity of rice crops: the country is now virtually Increased options for �nancing: In self suf�cient in rice production and can 2005, the total value of net credit to the become a major regional exporter. A private sector was just TSh 1.4 trillion. more intensive use of fertilizers has been By 2010, this had increased to TSh 5.2 encouraged by so-called �smart farming trillion, or 17 percent of GDP. Such an contracts�, while the implementation of increase, while still marginal by regional mobile phone in the Rungwe District25 have standards, demonstrates the growth and encouraged productivity gains. Improving pro�tability of the �nancial sector, with connections between farmers and input increasing competition among banks. In as well as consumer markets is now a addition, as in many African countries, major priority of the Southern Agricultural alternative forms of �nancing have Growth Corridor of Tanzania project become available, including microcredit (SAGCOT). Despite such encouraging for small �rms and regional stock markets signs, many of Tanzania’s farmers face for large enterprises.23 In addition, new untenable transport costs and insuperable sources of �nance have become available tariff and non-tariff barriers to accessing for large projects in infrastructure, international markets. One of the more agriculture, mining and manufacturing signi�cant of such barriers is the cereal activities. Chinese investors, for instance, export bans, which make it unpro�table have become active business partners in a Most emerging for Tanzania’s low-cost food producers to number of signi�cant Tanzanian enterprises sell to regional markets. countries with recent deals amounting to more than displayed similar US$5 billion.24 These new developments These trends are small but signi�cant trends in the may help relieve the country’s �nancial signs of incipient structural phases of their constraints and encourage further private transformations. Encouragingly, transition sector development. most emerging countries displayed similar trends in the earlier phases of their transition. Malaysia, for example, 23 For example, Precision Air (a joint venture relied on: (i) a dynamic, innovative and between Tanzania and Kenya’s private capital) recently launched an initial public offering (IPO) expansive Small and Medium Enterprises on the local market. (SME) sector, with one of the greatest 24 China’s Sichuan Hongda Co. Ltd. signed a $3 number of new SMEs created per year billion contract with Tanzania to mine coal and iron ore in a deal that has been dubbed as the single-biggest investment transaction in East Africa. In parallel, China and Tanzania have signed 25 For details, see A. G. Mwakaje, Information and a $1 billion loan agreement to build a major Communication Technology for Rural Farmers natural gas pipeline that will lay a 532-kilometre market Access in Tanzania, Journal of Information pipeline from Mnazi Bay and Songo Songo Island Technology Impact, vol. 10, n.2, 2010. in southern Tanzania to the country’s commercial capital, Dar es Salaam. PAGE 28 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n in the developing world 26, (ii) a rapid • Promote what is already moving. increase in the contribution of the The private sector is generally better manufacturing sector to total exports, than the Government at identifying with this proportion increasing from 20 opportunities for growth. In recent If the majority of percent to more than 75 percent of total years, SMEs and manufacturers have school graduates merchandise exports between 1980 and been expanding, with this expansion and others of 2000, (iii) an unprecedented increase in expected to continue into the future the volume of credit made available to the as the result of demographics. With working age private sector, with the total value of this the entry of six million post-primary are employed credit increasing from the equivalent of 20 educated youth into the workforce productively, percent of the national GDP in 1970 to 85 this decade, the rate of growth of the youth bulge non-agricultural sectors is likely to percent in 1985 and close to 120 percent will yield a become increasingly signi�cant. If in 2009; and (iv) rapid increases in the demographic the majority of school graduates and productivity of the agricultural sector, with dividend others of working age are employed the productivity of this sector in Malaysia productively, the youth bulge will yield being six times more productive than the a demographic dividend. However, if a world average. signi�cant proportion of school leavers and other young people cannot �nd 3.3 Smart policy: three guiding employment and earn a satisfactory principles income, it may instead become a Structural transformations are highly potential source of social and political sensitive to the policy environment instability. For the government, policy should focus not so much on in which they are embedded. While encouraging the establishment of the appropriate policy environment can small innovative businesses, but on encourage structural transformations staying out of the way to allow them that facilitate economic growth, an to expand and become competitive. inappropriate policy environment can stifle However, there is evidence to suggest or even destroy such transformations. The that policymakers can assist innovative debate is not whether or not Tanzania businesses by facilitating access should have an industrial policy: rather, it to credit, information, skills, and should focus on how to design and govern markets.27 Such assistance should be sectoral policies in order to encourage provided in a fashion that encourages competition and growth. competition: otherwise, it may have a negative impact on productivity, In Tanzania, the following underlying productivity growth, and product principles are the key to encouraging a innovation.28 virtuous cycle of growth: 27 M. Dutz, I. Kessides, S. O’Connel, and R. Willig, Competition and Innovation Driven Inclusive 26 The registration rate of new SMEs per 1000 Growth, World Bank. Policy Research Working habitants is about 2.5 in Malaysia in 2009, Paper, N. 5852, 2011. which is four times faster than in Uganda or 28 In other terms, targeted assistance should not 3 times faster than in Kenya (Tanzania is not occur in sector with low competition or should in the sample). Source: World Bank Group not be concentrated on one or small number of Entrepreneurship Snapshots 2010. �rms in the sector. See, P. Aghion et al., Industrial Policy and Competition, mimeo, June 2011. PAGE 29 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 How to get long lasting bene�ts from foreign investors: The lesson from Asia Foreign �rms are mobile, and they may locate in a country on a temporary basis. This is especially true in textile, ICT or light manufacturing where �xed capital requirements are small and obsolete very quickly. The challenge for the host country is therefore to get long-term bene�ts from possibly short term investments. The lesson from East Asia is straightforward: success lies in the number of locally trained workers because they are the country’s main asset. Not only training of local workers employed by the foreign company but also of those used by local suppliers and distributors. The good news with training is that it is also bene�cial to investors since trained local staffs are generally more productive and cheaper than expatriates. Yet, there is a risk that training will be underused since �rms might be afraid to see their employees leaving the company or they might reluctant to spend short �nancial resources on a long term gain. Malaysia offers an example where training was part of its central strategy. Not only this activity was explicit in every contracts negotiated with potential investors, including for public works, but also the Government took initiatives towards providing training, aimed at encouraging the role of the private sector and reducing the role of the government in training activities. The following initiatives were introduced: • Promoting private sector participation in human resource planning through membership in institutions such as the National Vocational Training Council. • Promoting the role of the private sector in the provision of training through tax deduction on training expenses in approved institutions; the establishment of a Human Resource Development Fund (HRDF) with private sector steering imposing a levy of 1 per cent of employees’ wages which employers can partly reclaim for training budgets; as well as through a liberalization of regulation of private sector training. • Promoting the sharing of public and private sector training resources, through exchange of trainers or allowing the use of public training facilities. • The encouragement of skill and should be a top priority of Tanzanian technology transfers: In addition to policymakers, as these workers will providing �nancing, outside investors become an important part of the may facilitate skill and technology nation’s human capital and provide a transfers. The Government should basis for ongoing, future growth (see establish the appropriate regulatory box). As the experience of the Asian and institutional framework to tigers demonstrates, every trained minimize possible conflicts of interests employee has the potential to serve and abuse of powers in sectors with as a teacher and/or entrepreneur. The quasi-natural monopoly structures appropriate transfer of skills through and to encourage skill and technology partnerships will result in a upgrading transfers. Encouraging the provision of of the country’s skill base and will skills to and training of local workers PAGE 30 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n ensure a more ef�cient and effective to successfully seize the opportunity use of technologies and machines.29 to encourage and direct the incipient transformation of the nation to • Diversi�cation of exports: The recent ensure that this transformation dramatic increase in the volume of the results in both economic growth manufacturing exports to non-OECD and an improved standard of countries is good news for Tanzania. living for all members of society. First, opportunities for spillovers An increasing number of Tanzanians are boosted through job creation have access to the Internet, mobile and supplier as well as distribution phone technology, and an improved networks.30 Second, the growing intra- transportation infrastructure, fostering regional trade encourages increased a dramatically higher degree of virtual product diversity because trading and physical connectivity. Urbanization is partners have similar endowments and encouraging the development of small, factor allocation.31 Finally, a decreased innovative businesses and facilitating the emphasis on the OECD market allows movements of goods, services, and ideas. for the decoupling of the Tanzanian An increasing number of Tanzanians have economy from business cycles in the received the education required to increase North and for increased participation their productivity. These changes have in the highly prospective regional and resulted in irreversible structural changes Asian markets.32 to the way people live, communicate and think. It is the responsibility of Tanzanians This economic update indicates that policymakers to ensure that these structural with care, diligence and commitment, changes yield the highest possible level of Tanzanian policymakers may be able bene�ts to all of the nation’s stakeholders. 29 These complementarities between skills and capital are at the basis I economic development for Damon Acemoglu. See, D. Acemoglu and F. Zilibotti, Productivity Differences, Quarterly Journal of Economics, 116, pp. 563-606.May 2001 30 For more empirical evidence, see Hausmann, Ricardo, Jason Hwang, and Dani Rodrik. 2007. What You Export Matters. Journal of Economic Growth 12(1): 1–25. 31 For such argument, see J. Regolo, Export Diversi�cation: How Much Does the Choice of the Trading Partner Matter?, November 2011. 32. O. Canuto, M.Haddad, and G.Hanson, Export-led Growth v2.0, PREM Notes, N. 148, March 2010. PAGE 31 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE 32 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Statistical Annexes PAGE 33 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 Statistical Annexes 1. Key macroeconomic indicators Indicator Unit 2000 2005 2007 2008 2009 2010 2011* Population (Mainland)/2 Millions 31.9 36.2 38.3 39.4 42.9 43.7 45.0 Per capita Income/2 US$ 319.3 390.7 439.3 525.4 498.1 524.0 523.6 GDP Growth/2 % 4.9 7.4 7.1 7.4 6.0 7.0 5.8 Gross Domestic Savings/2 (as a % of GDP) 10.1 16.2 12.8 16.1 17.0 16.9 16.2 Gross Investments/2 (as a % of GDP) 16.8 25.1 29.6 29.8 29.0 28.9 28.6 Inflation/2 (period average) % 6.0 4.4 7.0 10.3 12.1 7.2 12.0 Exchange Rate/1 (period average) TZS/US$ 800.4 1128.9 1245.0 1197.2 1320.3 1410.2 1578.2 External Sector Exports - Goods & Services/1 Mil. US$ 1307.1 2843.4 3750.7 4834.0 5086.4 5736.7 7099.3 Imports - Goods & Services/1 Mil. US$ -2063.9 -3852.7 -5684.4 -7541.9 -7875.9 -8334.4 -9951.3 Current Account Balance/1 Mil. US$ -437.8 -703.9 -1,575.6 -2,255.7 -2,237.9 -2,085.4 -2,283.2 Balance of Payments (Overall balance)/1 Mil. US$ 56.9 55.5 232.6 500.2 18.1 477.6 99.7 Foreign Reserves/1 Mil. US$ 1,183.8 2,247.4 2,157.3 2,660.0 2929.8 3,482.6 3,610.3 External Debt/2 Bil. US$/1 6.9 8.3 4.7 5.8 7.0 8.2 10.0 Foreign Direct Investment/1 Mil. US$ 463.4 689.0 492.3 490.8 407.8 423.8 443.6 Tourism Earnings/2 Mil. US$ 739.1 823.6 1037.0 1198.8 1160.0 1250.0 #N/A Monetary Sector Average Deposit Rate/1 % 7.4 4.7 8.7 8.3 8.0 6.6 #N/A Average Lending Rate/1 % 21.6 15.2 16.1 15.0 15.0 14.5 #N/A Growth in Money Supply (M2)/1 % -1.7 22.6 25.9 20.5 26.6 19.5 26.2 Government Finance Total Domestic Revenue/1 (as a % of GDP) 10.0 11.8 14.1 15.9 16.2 15.9 16.5 Tax Revenue/1 (as a % of GDP) 9.0 10.8 13.0 14.7 15.3 14.6 15.2 Non-Tax Revenue/1 (as a % of GDP) 1.0 1.1 1.1 1.2 0.9 1.2 1.3 Total Expenditure/1 (as a % of GDP) 17.0 22.3 23.0 22.8 25.7 27.5 27.2 Recurrent Expenditure/1 (as a % of GDP) 10.5 15.4 16.1 14.9 17.7 18.8 19.2 Development Expenditure/1 (as a % of GDP) 4.7 6.3 6.9 7.9 8.0 8.6 7.9 Grants/1 (as a % of GDP) 4.0 6.8 4.9 6.9 4.7 4.6 4.7 Fiscal Balance (after grants)/1 (as a % of GDP) -3.0 -3.6 -4.0 0.0 -4.8 -7.0 -6.0 Note /1 Fiscal year is used, and it ends June 30th of the mentioned year /2 Calendar year is used, and it ends in mentioned year December 31th. * Preliminary estimates Source: IMF and Tanzania Authorities (MoF, BoT, NBS,). PAGE 34 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 2. GDP per capita over the past two decades 1990 1995 2000 2005 2006 2007 2008 2009 2010 Constant 2005 international $ Tanzania 860 798 866 1065 1105 1151 1201 1237 1286 Sub-Saharan Africa 1617 1504 1569 1759 1831 1909 1966 1967 2017 Uganda 563 671 774 911 977 1025 1079 1121 1141 Kenya 1421 1315 1283 1346 1395 1455 1441 1440 1477 East Asia & Paci�c 1394 2123 2730 3911 4303 4793 5162 5507 5991 In comparison to Tanzania (multiplier) Sub-Saharan Africa 1.9 1.9 1.8 1.7 1.7 1.7 1.6 1.6 1.6 Uganda 0.7 0.8 0.9 0.9 0.9 0.9 0.9 0.9 0.9 Kenya 1.7 1.6 1.5 1.3 1.3 1.3 1.2 1.2 1.1 East Asia & Paci�c 1.6 2.7 3.2 3.7 3.9 4.2 4.3 4.5 4.7 Source: World Bank Indicators 3. Growth performance: Regional comparison Source: World Bank, Global Economic Prospects, 2012. PAGE 35 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 4. Growth and structure of the economy Economic Activity 2005 2006 2007 2008 2009r 2010p 2011* Real GDP growth rates (%) Agriculture and �shing 4.3 3.8 4.0 4.6 3.2 4.2 3.6 Industry and construction 10.4 8.5 9.5 8.6 7.0 8.2 7.0 Services 8.0 7.8 8.1 8.5 7.2 8.2 6.4 Gross domestic product at 7.4 6.7 7.1 7.4 6.0 7.0 5.8 market prices Shares of GDP (%) 2001 prices Agriculture and �shing 27.7 27.0 26.2 25.5 24.8 24.1 23.6 Industry and construction 20.2 20.5 20.9 21.2 21.4 21.6 21.8 Services 46.4 46.9 47.3 47.8 48.3 48.8 49.1 FISIM and net taxes 5.7 5.7 5.6 5.6 5.5 5.5 5.4 Contribution to real GDP growth ( %) Agriculture 1.3 1.1 1.1 1.2 0.8 1.0 0.9 Industry 2.0 1.7 1.9 1.8 1.5 1.8 1.5 Services 3.7 3.6 3.8 4.0 3.4 3.9 3.1 FISIM and net taxes 0.4 0.3 0.3 0.4 0.3 0.3 0.3 Shares of GDP by type of expenditure (%) Final consumption expenditure 83.8 85.5 87.2 83.9 83.0 82.8 83.4 Households 66.3 68.0 67.9 66.4 65.5 64.7 65.2 Government 17.6 17.5 19.3 17.4 17.5 18.2 18.2 Gross capital formation 25.1 27.6 29.6 29.8 29.0 28.9 28.6 Gross �xed capital formation 24.7 27.2 29.2 29.4 28.4 28.4 28.1 Changes in inventories 0.4 0.4 0.4 0.4 0.5 0.4 0.4 Net exports -8.9 -13.1 -16.9 -13.6 -11.9 -11.7 -12.0 Gross domestic saving (% of 16.2 14.5 12.8 16.1 17.0 17.2 16.6 GDP) Public -3.0 -2.1 -1.4 1.1 0.5 -0.2 1.7 Private 19.2 16.6 14.2 15.1 16.6 17.3 14.9 Key: *= estimates, r= revised, p= preliminary actual Source: National Bureau of Statistics, IMF and Bank Estimates PAGE 36 http://www.worldbank.org/tanzania/economicupdate. 37 PAGE 5. Fiscal framework as % of GDP 2005/06 2007/08 2008/09 2009/10 2010/11 2011/12 Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Total domestic revenue 12.2 12.5 15.3 15.9 17.9 16.2 16.9 15.9 17.8 16.5 17.7 Tax revenue 11.2 11.5 14.0 14.7 16.8 15.3 15.6 14.6 16.2 15.2 15.8 Nontax revenue 1.0 1.1 1.4 1.2 1.1 0.9 1.3 1.2 1.5 1.3 1.8 Total expenditure 23.8 22.8 26.3 22.8 26.9 25.7 29.8 27.5 31.0 27.2 32.1 Recurrent expenditure 15.6 15.7 16.6 14.9 17.6 17.7 20.7 18.8 20.0 19.2 19.6 Development expenditure 8.2 7.1 9.6 7.9 9.3 8.0 9.1 8.6 11.0 7.9 12.5 Overall de�cit before grants -11.6 -10.3 -10.9 -6.9 -9.0 -9.5 -12.9 -11.6 -13.2 -10.6 -14.5 Grants 6.1 5.4 7.4 6.9 5.4 4.7 6.7 4.6 5.8 4.7 6.9 Program 2.1 2.0 2.7 2.7 2.0 2.3 2.7 3.1 1.8 3.1 2.8 Project 2.0 1.9 3.0 2.8 2.3 1.2 2.7 1.5 3.4 1.1 2.9 Basket support 1.4 1.0 0.8 0.9 0.8 1.0 0.9 0.9 0.6 1.0 1.0 HIPC, MDRI (IMF, IDA and Afdb) 0.6 0.5 0.9 0.5 0.2 0.3 0.4 0.1 0.0 0.0 0.0 Overall de�cit after grants -5.6 -4.9 -3.5 0.0 -3.6 -4.8 -6.2 -7.0 -7.4 -6.0 -7.6 Expenditure float 0.0 -0.9 0.0 -1.3 0.0 -0.8 0.0 -1.4 0.0 -1.4 0.0 Adjustment to cash 0.0 0.4 0.0 -0.3 0.0 1.0 0.0 2.0 0.0 0.5 0.0 Overall balance -5.6 -5.5 -3.5 -1.7 -3.6 -4.5 -6.2 -6.4 -7.4 -6.9 -7.6 Financing 5.6 5.5 3.5 1.7 3.6 4.5 4.9 6.4 7.4 6.9 7.6 Foreign (net) 3.5 3.3 3.6 3.2 3.5 3.6 3.3 4.6 5.6 3.3 6.1 T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Domestic (net) 2.1 2.1 -0.1 -1.5 0.1 1.0 1.6 1.9 1.8 3.6 1.0 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 6. Public Accounts –real annual increase 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total domestic revenue 16% 23% 26% 10% -3% 13% Tax revenue 16% 24% 27% 12% -2% 9% Import Duty 67% 22% 13% 16% -10% 12% Value Added Tax 14% -2% 19% 10% 1% 0% Excise Duties 5% 93% 21% 7% -2% 15% Income Tax 18% 24% 31% 16% -3% 14% Other Taxes 0% 54% 69% 12% -4% 10% Nontax revenue 8% 12% 25% -18% -18% 79% Total Expenditure 18% 10% 10% 22% 8% 5% Recurrent Expenditure 23% 12% 2% 29% 7% 10% Wages and salaries 15% 43% 10% 33% -5% 26% Interest 49% -7% 17% -17% -9% 31% Domestic 83% 7% 22% -21% -12% 27% Foreign -5% -50% -16% 19% 5% 56% Goods, services and transfers 24% 3% -4% 33% 15% 1% Development Expenditure 9% 5% 29% 9% 11% -5% Locally �nanced 19% 64% 6% 51% -1% -12% Foreign �nanced 6% -14% 43% -10% 19% -1% Overall de�cit before grants 22% -6% -16% 52% 28% -5% Grants 22% -1% 59% -28% 0% 5% Program -13% 39% 24% -12% -2% -1% Project 145% -32% 157% -58% 32% 13% Basket Support 9% -42% 71% 25% -14% 19% HIPC, MDRI (IMF, IDA and Afdb) 2% 50% -10% -49% -79% -111% Overall de�cit after grants 22% -12% -106% 103304% 55% -12% Expenditure Float 8% -22% 121% -36% 90% 0% Adjustment to cash -16% -140% 220% -460% 107% -84% Overall balance 23% -4% -66% 209% 49% 13% Financing 23% -4% -66% 209% 49% 13% Foreign (net) -8% 22% -5% 21% 34% -27% Program Loans 290% -2% 30% -18% 57% -79% Project loans -34% 26% -58% 125% 31% -18% Basket Support -52% -48% 318% -33% 16% 3% Domestic (net) 146% -45% -265% -182% 105% 112% Source: Ministry of Finance PAGE 38 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 7. Balance of payments, % of GDP unless otherwise indicated 2011/12 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Proj 1. CA balance -8.2 -10.4 -11.9 -10.7 -9.2 -9.8 -10.1 (including grants) Exports of Goods 12.5 13.4 15.3 15.6 16.8 21.0 24.5 o/w Gold 4.8 5.4 5.5 4.4 6.6 7.7 9.3 Import of Goods -24.0 -28.6 -31.6 -29.7 -29.0 -34.5 -37.8 Services ( net) 1.1 2.4 2.1 0.8 0.8 1.2 1.4 Trade balance -10.4 -12.7 -14.2 -13.3 -11.5 -12.3 -11.9 Income ( net) -1.2 -1.1 -1.2 -0.9 -0.7 -0.8 -1.2 Current transfers ( net) 3.4 3.4 3.6 3.5 2.9 3.3 3.1 2. Capital and 9.3 9.8 11.3 8.0 9.9 9.4 11.2 �nancial account Capital account 4.1 31.6 3.6 1.8 2.7 2.4 2.6 Financial account 5.2 -21.7 7.7 6.2 7.2 7.0 8.6 o/w Direct investment 4.7 3.2 2.6 1.9 1.9 1.9 2.3 3. Overall balance 2.4 1.5 2.6 0.1 2.1 0.4 1.1 Gross international 1863 2157 2660 2930 3483 3610 3868 reserves(Mil USD) In months of imports 4.8 4.6 4.2 4.5 5.0 4.4 4.1 (current year) Source: BoT, IMF and World bank 8. International commodity prices, 2004-12 Source: World Bank. PAGE 39 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 9. Annual inflation rates Percentage changes 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* CPI (annual average) 5.1 4.6 4.4 4.1 4.4 7.3 7.0 10.3 12.1 7.2 12.0 CPI (end-of-period) 4.9 4.4 4.6 4.1 5.0 6.7 6.4 13.5 12.2 5.6 15.6 Food ( end of period) 6.1 2.9 5.8 5.0 7.2 6.6 6.6 18.6 14.5 7.3 20.1 Non Food ( end of period) 1.5 8.8 1.1 2.9 2.0 6.8 6.2 5.8 8.5 3.8 11.3 * Estimates 10. Inflation Rate (CPI): Regional comparison, 2010-11 Source: World Bank Global Prospects, 2012. PAGE 40 http://www.worldbank.org/tanzania/economicupdate. 41 PAGE 11. Monthly Food Crop Prices (Wholesale) in Arusha, Dar es Salaam, and Mbeya: Tsh per 100 kg. Crop Maize Rice Wheat Beans Sorghum Month- Dar es Dar es Dar es Dar es Dar es Arusha Mbeya Arusha Mbeya Arusha Mbeya Arusha Mbeya Arusha Mbeya Year Salaam Salaam Salaam Salaam Salaam Oct-11 40,250 47,896 39,917 151,458 142,083 148,500 73,542 108,333 93,750 107,083 141,625 143,125 48,833 71,750 - Sep-11 43,308 47,673 38,385 143,462 128,500 114,769 76,154 96,923 83,269 124,808 127,269 121,000 53,000 78,731 - Aug-11 43,778 51,778 37,636 134,444 132,944 109,591 73,889 98,333 77,273 107,222 133,222 121,136 55,611 73,333 - Jul-11 49,636 50,313 37,227 130,000 124,583 108,500 80,000 92,000 89,545 106,000 128,000 115,682 49,688 75,208 - Jun-11 43,000 41,500 33,000 125,000 115,000 90,000 60,000 85,000 45,000 100,000 111,500 120,000 45,000 40,000 - May-11 46,904 44,271 38,375 122,292 122,500 108,125 71,667 86,875 82,083 109,167 127,500 123,292 49,500 65,208 - Apr-11 40,000 42,700 37,135 116,750 128,000 112,250 70,000 84,722 65,500 105,000 112,250 124,500 52,889 59,480 65,000 Mar-11 35,875 40,625 39,206 111,875 115,625 113,125 75,000 75,000 63,438 94,429 128,125 135,000 54,375 57,500 70,000 Feb-11 32,361 39,000 33,500 109,000 111,300 104,650 60,556 79,722 60,100 108,056 109,550 121,000 42,278 57,750 50,800 Jan-11 31,083 35,479 32,208 117,667 99,167 97,833 57,917 93,917 51,375 100,625 99,167 100,938 41,250 65,000 25,000 Dec-10 28,500 32,400 30,100 102,800 99,500 90,075 57,700 94,000 50,000 97,000 106,000 98,525 47,000 62,250 Nov-10 27,083 32,958 29,000 99,667 93,958 89,042 57,917 88,333 50,000 88,542 100,417 94,583 52,708 58,750 Oct-10 26,750 32,813 28,583 93,700 82,550 78,675 60,000 82,100 48,722 94,600 87,889 88,750 48,500 60,000 81,000 Sep-10 28,800 29,650 29,100 97,000 88,250 79,025 55,000 87,000 46,222 89,600 99,500 90,500 40,500 59,000 56,250 Aug-10 26,923 28,981 29,442 95,000 94,231 79,000 53,923 83,692 46,500 83,962 103,462 85,923 46,769 54,423 Jul-10 24,500 27,375 24,708 95,000 96,325 77,396 57,500 81,708 85,500 103,042 85,000 49,000 53,875 Jun-10 26,000 28,269 22,962 95,000 102,731 80,308 57,500 81,173 49,000 95,625 112,538 88,636 45,000 55,696 May-10 31,042 33,875 24,208 101,042 102,783 89,750 65,313 85,208 51,875 96,667 111,875 89,438 48,571 56,614 Apr-10 37,917 34,875 32,125 105,417 107,667 95,000 62,500 90,000 49,583 100,000 112,500 90,917 52,250 54,750 Mar-10 39,904 36,455 35,808 105,577 110,923 103,942 61,538 85,000 49,308 114,231 94,712 47,308 58,846 Feb-10 44,500 47,270 35,625 110,000 115,833 105,000 65,000 85,313 107,500 111,479 101,250 46,250 58,625 T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n Jan-10 43,625 48,021 37,125 110,000 111,625 107,708 64,750 85,000 48,083 111,250 116,583 104,458 48,250 58,292 Source: Ministry of Industry, Trade, and Marketing (MITM), Government of Tanzania http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 12. Inflation rates (selected items of the CPI basket) 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 Inflation rates( y/y), end of period Oct Nov Dec Jan Feb March April May June July Aug Sept Oct All items ( end period) 4.2 5.5 5.6 6.4 7.5 8.0 8.6 9.7 10.9 13.0 14.1 16.8 17.9 Food 4.4 6.0 6.3 6.7 8.6 8.3 9.2 10.1 11.7 14.8 17.4 21.3 22.8 Non food 3.9 4.9 4.7 6.1 6.1 7.7 7.8 9.3 10.0 10.8 10.2 11.5 12.2 Energy and Fuel 6.8 14.6 12.3 19.1 13.0 17.2 22.1 24.5 29.0 34.2 30.1 33.1 37.4 Transport -1.0 0.1 0.6 0.3 0.3 3.3 3.9 8.0 8.4 9.9 8.8 10.8 11.8 Housing, water, electricity and Gas 10.2 14.4 12.1 17.7 11.1 13.6 13.4 15.7 18.8 21.3 19.7 21.7 22.0 Furnishing, housing equipment 3.5 4.6 5.7 7.2 13.9 14.5 13.6 14.1 14.4 14.5 13.9 14.2 15.4 Excluding food and energy 3.5 3.7 3.7 4.4 5.2 6.3 5.7 7.1 7.2 7.4 7.3 8.2 8.5 Source: NBS and IMF 13. Average Wholesale Price (January to October 2011) in TShs./100kg Jan Feb Mar Apr May Jun July Aug Sept Oct 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 Maize 35,086 37,451 40,252 41,841 41,943 41,915 44,639 41,994 42,195 42,453 Rice 104,134 105,614 113,578 119,119 123,767 112,200 126,505 121,561 129,661 143,233 Beans 115,624 121,572 116,873 115,640 119,515 110,667 112,420 116,519 119,917 124,831 Round Potatoes 61,058 63,311 57,607 56,014 55,372 49,737 49,737 60,189 59,205 59,770 Bullrush Millet 51,300 52,651 58,222 56,540 58,495 56,773 67,526 65,284 59,166 67,642 Finger Millet 75,871 75,779 74,276 73,011 70,453 68,750 78,486 71,047 69,542 74,426 Sorghum 51,348 53,940 58,568 62,766 61,582 54,821 59,133 53,589 53,839 54,671 Wheat 74,559 74,604 85,484 87,978 90,594 78,875 89,977 86,354 81,252 81,139 Source: Ministry of Industry, Trade, and Marketing (MITM), Government of Tanzania PAGE 42 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n 14. Nominal exchange rates and T-Bill Rates Tshs/USD* Tshs/EUR* T-Bill Rate Jan-10 1,332.4 1,914.7 7.2 Feb-10 1,338.5 1,845.5 6.3 Mar-10 1,338.5 1,840.8 4.2 Apr-10 1,352.0 1,838.6 2.7 May-10 1,372.9 1,791.5 2.7 Jun-10 1,391.8 1,782.3 3.3 Jul-10 1,395.1 1,919.9 3.9 Aug-10 1,455.1 1,959.0 3.9 Sep-10 1,495.6 1,986.3 5.1 Oct-10 1,495.5 2,078.8 5.7 Nov-10 1,417.3 2,037.6 5.9 Dec-10 1,397.2 1,938.2 6.3 Jan-11 1,486.8 1,998.2 7.1 Feb-11 1,505.5 2,058.0 6.6 Mar-11 1,508.5 2,118.2 5.5 Apr-11 1,510.4 2,181.1 4.8 May-11 1,521.5 2,187.9 4.5 Jun-11 1,562.0 2,281.4 4.8 Jul-11 1,577.3 2,259.8 6.4 Aug-11 1,617.0 2,313.5 7.3 Sep-11 1,636.5 2,258.9 7.8 Oct-11 1,671.0 2,294.6 11.6 Source: IMF, period average PAGE 43 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 15. Monetary indicators 2005/0 2006/0 2007/0 2008/0 2009/1 2010/1 6 7 8 9 0 1 2011/12 P Monetary aggregates M3 as % of GDP 26.0 26.7 26.7 27.8 30.4 32.2 34.1 M2 as % of GDP 17.6 18.2 19.5 20.4 22.5 23.3 24.4 M3 growth rate (%) 31.3 20.1 18.1 18.5 25.1 22.0 20.0 M2 growth rate (%) 26.8 25.9 20.5 26.6 19.5 26.2 19.1 Domestic credit Total Domestic credit (% of GDP) 9.7 10.8 13.2 12.9 16.2 18.3 25.0 Total domestic credit growth ( %) 24.7 42.3 15.7 43.4 29.0 57.3 7.4 Private credit ( % of GDP) 11.7 14.0 16.0 18.0 18.4 22.9 21.5 Private credit growth ( %) 31.3 34.5 32.9 33.1 16.7 42.6 8.0 Interest ratse structure/1 Overall Tbills rate (%) 10.7 11.6 13.4 8.1 7.1 3.9 N/A Average lending rate (%) 15.2 15.7 16.1 15.0 15.0 14.5 N/A Average deposit rate( %) 4.7 6.7 8.7 8.3 8.0 6.6 N/A P= Projections Source: BoT, IMF 1/ Data in calendar year, e.g 2005/06 = 2005 PAGE 44 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n PAGE 45 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE 46 http://www.worldbank.org/tanzania/economicupdate. T h e Wo r l d B a n k P o v e 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 A f r i c a R e g i o n PAGE 47 http://www.worldbank.org/tanzania/economicupdate. TA N Z A N I A E C O N O M I C U P D AT E • F E B R U A R Y 2 0 1 2 , E D I T I O N 1 PAGE http://www.worldbank.org/tanzania/economicupdate. 48 http://www.worldbank.org/tanzania/economicupdate.