The World Bank in Tanzania

Tanzania’s growth has remained resilient, accompanied by low Inflation. Fiscal and current account deficits are narrowing, driven by improved tax collection and strong trade performance. Pressures in the foreign exchange market persist, albeit with some promising signs of moderation. The medium-term outlook is positive, with GDP growth expected to align more closely with its long-term potential (estimated at around 6%), supported by ongoing structural reforms and an improved business environment.

In the first quarter of 2024, GDP growth accelerated to 5.6% year-on-year, building on 5.1% growth in 2023. Leading indicators affirm that the economy has maintained this strong momentum in the second quarter. On the supply side, growth was primarily driven by manufacturing, electricity, construction, tourism, trade, and financial services. Inflation declined from 3.3% in July 2023 to 3.0% in July 2024 (y-o-y), well below the Bank of Tanzania’s medium-term target of 5%. The Bank of Tanzania continued to tighten its monetary policy stance to restore the equilibrium in the Forex market.

Despite a 0.3 percentage point increase in interest payment as a share of GDP, Tanzania's fiscal position has strengthened. The overall fiscal deficit declined from 4.0% of GDP during the first 11 months of FY2022/23 to 3.3% during the first 11 months of FY2023/24, driven by improved tax collections coupled with spending restraint in primary expenditure. The primary fiscal deficit declined from 2.1% of GDP to 1.2% over the same period.

Bolstered by favorable terms of trade, the Current Account Deficit narrowed from 4.2% of GDP in Q1-2023 to 2.4% of GDP in Q1-2024. Net FDI inflows continued to recover after a long decline and are estimated at around 2% of GDP. While Forex tensions persist, there are positive signs of moderation. Strengthened external conditions and greater flexibility of the exchange rate, which resulted in an over 12% depreciation of the Tanzanian shilling during the past year, have moderated the tensions in the Forex market and reduced the parallel market premium from an estimated 8-10% in Q1 to 4-5% as of September. Maintaining this momentum will be necessary to eliminate Forex distortions.

The present value of the public debt-to-GDP ratio is projected to remain comfortably below Tanzania's debt-carrying capacity benchmark of 55%. By the end of FY23, total debt held by the central government was increased by 44.3% of GDP, up from 42.5% of GDP in FY22, and reached $34.5 billion in nominal terms, marking a 12.3% rise from the previous fiscal year. External debt grew by 8.2%, while domestic debt surged by 20.3%.

Over the medium term, growth is expected to average around 6%, as improvements in the business environment and full implementation of reforms are likely to attract more investment, including Foreign Direct Investment (FDI). Headline inflation is projected to stay low and stable, anchored by a newly adopted interest rate-based framework. Going forward, the focus needs to be on translating the strong economic performance into poverty reduction, which has been a challenge for Tanzania. This requires further prioritization of human capital development, agricultural productivity, and strengthening of social protection and climate resilience.

Last Updated: Oct 01, 2024

Tanzania has made significant social and economic progress in recent decades, achieving lower-middle-income country status in 2020. Between 2000 and 2020, life expectancy improved from 52 to 67 years, and school attainment from 3.8 to 6.4 years. The share of Tanzanians with access to electricity increased from 7% in 2011 to 43% in 2021. Despite impressive achievements in the past three decades, Tanzania has yet to fully realize its significant growth potential to build a more prosperous, inclusive, and resilient economy.

A new Country Partnership Framework (CPF) for the period 2024-2029 was endorsed by the World Bank Board of Directors in July 2024 and aims to tackle Tanzania’s binding constraints. In line with the World Bank’s Evolution priorities, the CPF focuses on three mutually reinforcing high-level outcomes: (i) enhancing human capital to boost labor productivity, (ii) catalyzing private sector-led growth, and (iii) enhanced resilience to shocks and climate impacts. Progress in these areas is underpinned by two cross-cutting priorities: increased empowerment of women and youth and improved government effectiveness with more efficient, transparent, and accountable institutions. The CPF is aligned with the Government of Tanzania’s Development Vision 2025, the Third Five-Year Development Plan (FYDP III) for 2021/22-2025/26, and Zanzibar’s Development Vision 2050. Consultations with the government on the Tanzania Development Vision 2050, which is currently under preparation, also informed the CPF.

As of August 2024, the World Bank financing commitments for operations in Tanzania amount to $9.8 billion, including 29 national operations ($8.7 billion) and six regional operations ($1.1 billion). Key sectors include infrastructure (45%), human development (27%), equitable growth, finance, and institutions (13%), and sustainable development (15%). The investment portfolio combines Investment Project Financing for public physical and social infrastructure​; Development Policy Financing providing budget support for policy reform and institutional actions​; and Program-for-Results financing supporting program design and implementation with emphasis on strengthening institutions, systems, and building capacity.

International Finance Corporation (IFC)

IFC’s operations in Tanzania are guided by the World Bank Group (WBG) CPF, endorsed by the board in July 2024, and the Government of Tanzania’s Vision 2025. Activities focus on developing the agricultural sector (with an emphasis on improving aggregation, warehousing, and logistics infrastructure), expanding access to financial services, supporting infrastructure development in power and telecommunications, and supporting the business-enabling environment by promoting regulatory reforms to ease licensing requirements and by building capacity in agribusiness and tourism. Additionally, IFC seeks gender-inclusive and climate-sustainable investments and advisory projects.

IFC's portfolio in the country is well-diversified, covering all major sectors with a total exposure of $431 million, including $129 million in short-term funding as of July 2024. IFC has committed $29.5 million so far in FY25 with an investment pipeline of $134 million. IFC’s advisory portfolio stands at $7.8 million, with an additional $6.3 million approved to increase women’s economic inclusion. IFC is delivering its financial institutions and manufacturing, agribusiness, and services advisory programs in Tanzania, with $8.8 million budgeted for FY24-26, excluding ongoing projects and client fees. Going forward, IFC will focus on enhancing value addition in agribusiness and light manufacturing, supporting the development and rollout of digital information platforms and solutions for agribusinesses and their supply chains, and improving access to finance by working with microfinance institutions. IFC also leverages its partnerships, working with international partners (CIDA, EU, GIZ, DIFD, Japan Trust Fund, and USAID) to support and implement private sector development initiatives.

Multilateral Investment Guarantee Agency (MIGA)

In 2024, MIGA issued three new guarantees to clients investing in Tanzania, with an exposure of $151 million as of August 30, 2024. In April 2024, MIGA issued a political risk insurance guarantee for TPG’s investment in Airtel Mobile Money Tanzania. In June 2024, MIGA issued a political risk insurance guarantee to ABSA Bank of South Africa to add its two subsidiaries in Tanzania to an existing capital optimization guarantee. In addition, MIGA is also working with an investor to support a distributed energy project (including hydro and wind power) in rural southern Tanzania. As part of the new World Bank Group Guarantees platform, which will be housed in MIGA, MIGA will also leverage deeper collaboration across the WBG to de-risk foreign investment, paying close attention to projects that support climate finance and boost job creation.

Analytics and Knowledge Products

The Bank continues to use analytics to guide project operations, along with hands-on technical assistance, impact evaluations, policy notes, and broader reports to inform lending and policy dialogue. The Tanzania Economic Update (TEU) flagship series has focused on a range of topics, including the impact of investing in water supply, sanitation, and hygiene; the importance of investing in girls and human capital development; financial inclusion; agriculture for inclusive growth and poverty reduction; transforming tourism; addressing the impacts of COVID-19, and expanding women’s access to assets and economic opportunities. The 21^st edition of the TEU, which is the latest in the series, is titled, ‘Harnessing the Opportunity for a Climate-Smart and Competitive Livestock Sector in Tanzania’. It discusses how Tanzania can boost its livestock sector's economic contribution with a bold and comprehensive plan that emphasizes climate-smart strategies and innovations. A Country Climate and Development Report is among the analytical works currently under preparation, with its completion planned for later in 2024.

Last Updated: Oct 01, 2024

The World Bank has supported the improvement of health outcomes in Tanzania through several operations. The IDA-financed Strengthening Primary Health Care for Results program in Tanzania (SPHCforR), which concluded in 2022, aimed to improve the quality of primary health care services across the country, with a focus on maternal, neonatal, and child health and Nutrition (MNCH -N) services. The program also aimed to improve health and nutrition outcomes and, at the same time, reduce inequalities across the districts. Among the achievements registered were:

·       Expanded access to Comprehensive Emergency Obstetric and Newborn Care (CEmONC): Over 100 new health centers were constructed and equipped to provide critical CEmONC services.

·       Improved maternal and newborn health outcomes: Nearly 300,000 women received life-saving caesarian sections at these facilities.

The program also supported the delivery of essential primary health services through the Health Basket Fund, with the following achievements:

·       Improved safe delivery: Over 4.7 million pregnant women received antenatal care, and half a million delivered safely with skilled attendants.

·       Increased immunization rates: The project exceeded its target by immunizing around 11 million children.

·       Improved postnatal care: The age of newborns receiving postnatal care within 48 hours of delivery, including those born at home, surged from 40% to 72% between 2015 and 2020.

The World Bank is building on these achievements through the Tanzania Maternal and Child Health Investment Program (TMCHIP), a five-year program worth $275 million that aims to improve the quality and scale up essential healthcare services in Tanzania. The program includes a $250 million Program for Results (PforR). With only seven months of implementation, these initial results have started to emerge:

·       Strengthened capacities for the health facilities: 73% of dispensaries nationwide now have at least two qualified health providers (nurse/midwife and clinician). An additional 300 staff were recruited and deployed to primary healthcare facilities.

Improved delivery of quality health services: Healthcare workers in four regions have undergone mentorship and attachment programs, which equipped staff with the skills and hands-on experience needed to improve service delivery capabilities.

Last Updated: Oct 01, 2024

Partnering with other development organizations has been a key emphasis of WBG's Country Partnership Framework in Tanzania. The Development Partners Group, chaired by the UN and co-chaired by a bilateral partner, serves as an important forum to discuss development issues as well as engage with the government on strengthening partnerships between the government and its development partners. Several large lending programs, such as the Productive Social Safety Net Project, the BOOST Primary Student Learning Program-for-Results, and the Dar es Salaam Maritime Gateway Project, are co-financed by bilateral donors, including Sweden and the United Kingdom. The Msimbazi Basin Development Project has been co-financed by the Netherlands Ministry of Foreign Affairs and the Spanish Agency for International Development Cooperation.

Last Updated: Oct 01, 2024