Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized THE WORLD BANK GROUP AFRICA REGION MACROECONOMICS, TRADE AND INVESTMENT GLOBAL PRACTICE JULY, 2019 ISSUE 12 Human Capital: The Real Wealth of Nations TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION PAGE ii The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Table of Contents Abbreviations and Acronyms...................................................................iv Acknowledgements.................................................................................... v Overview......................................................................................................1 Part One: The State of the Economy.........................................................7 ............................................................................................ 8 1.1 Recent Economic Developments. 1.2 Macroeconomic Outlook and Risks......................................................................................24 Part Two: Human Capital..........................................................................29 2.1 Introduction...............................................................................................................................30 2.2 Raising the Productivity of Future Workers – The Human Capital Index......................32 2.3 Improving the Productivity of Workers and Human Capital Wealth..............................42 2.4 Conclusion.................................................................................................................................47 Statistical Annexes...................................................................................49 References..................................................................................................63 PAGE i TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION List of Boxes ...................................................................................... 13 Box 1: Tanzania is Nearing Lower Middle Income Status. ...............................................................................................................20 Box 2: Tanzania’s Cashew Exports in 2018. ....................................................................................................................21 Box 3: FDI Inflows: Services on the Rise. Box 4: The Human Capital Index.................................................................................................................................32 .........................................................................37 Box 5: Investing in Human Capital: The Experience of East Asia. Box 6: Basic Infrastructure, Education, and Health Outcomes.............................................................................39 Box 7: Deepening Productive Safety Nets to Improve Human Capital................................................................40 Box 8: Strategies and Commitments to Improve Reproductive, Maternal, Neonatal, Child and Adolescent Health and Nutrition (RMNCAH-N) Outcomes. ......................................................................41 List of Figures Figure 1: Global Trends in GDP Growth.......................................................................................................................8 Figure 2: Energy and Metal Prices, US$.......................................................................................................................9 Figure 3: GDP in 2017, Rebased Sectoral Shares, Percent...................................................................................... 10 Figure 4: Real GDP Growth Rates, 2010-17, Percent................................................................................................ 10 ............................................................................................... 10 Figure 5: Drivers of Lower GDP Growth, 2015-2017. Figure 6: GDP Growth by Sector, 2017 and 2018, Percent.....................................................................................12 Figure 7: Annual Real GDP Growth in EAC, 2016-2018, Percent...........................................................................12 Figure 8: Low Inflation, Much Higher Energy Prices, 2018–19, Percent.............................................................. 13 .......................................................................... 15 Figure 9: Domestic Payment Arrears, 2015–18, Percent of GDP. .................................................................................................................. 16 Figure 10: Public Debt, 2015–18, Percent. Figure 11: NPLs and Growth in Private Sector Credit, 2015–18, Percent............................................................. 17 Figure 12: Interest Rates on Loans, 2018–19, Percent............................................................................................. 18 Figure 13: Current Account Deficit, 2016–19............................................................................................................ 19 .............................................................................. 19 Figure 14: Growth of Exports and Imports, 2016–19, Percent. Figure 15: Stability of the Tanzanian Shilling, 2018–19...........................................................................................20 Figure 16: Gross Official Reserves, 2016–19..............................................................................................................20 Figure 17: FDI in Tanzania, Aggregate (Left Side) and Shares by Sector (Left Side)........................................21 Figure 18: Value-Added by Sector...............................................................................................................................21 Figure 19: Distance to the Frontiers, Ranked........................................................................................................... 22 PAGE ii The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Figure 20: Hours to Prepare and Pay Tax, 2014-18..................................................................................................22 Figure 21: National Poverty, Percent and Absolute Number of Poor, 2007–16..................................................23 Figure 22: GDP Per Capita and International Poverty Headcount At US$1.90 a Day.......................................23 Figure 23: Human Capital Index Across Countries (Red Dot = Tanzania)..........................................................35 Figure 24: Fertility and Population Growth Rates....................................................................................................44 List of Tables Table 1: Fiscal Trends, Percent Of GDP...................................................................................................................... 14 ..................................25 Table 2: Medium Term Outlook, Annual Percent Change Unless Otherwise Indicated. Table 3: Human Capital Index Estimates for Tanzania, 2012 and 2017..............................................................34 ....................................36 Table 4: Human Capital Index Estimates for Tanzania and Selected Other Countries. Table 5: Estimates Of Tanzania’s Total and Per Capita Wealth (US$, Millions).................................................43 Table 6: Fertility Rates and Population Growth for Tanzania and Selected Other Countries..........................45 PAGE iii TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Abbreviations and Acronyms BoT Bank of Tanzania CAG Controller and Auditor General CAD Current Account Deficit DHS Demographic and Health Survey EAC East African Community ECD Early Childhood Development EGRA Early Grade Reading Assessment FBEP Fee-Free Basic Education Policy FDI Foreign Direct Investment FYDP Five-Year Development Plan GDP Gross Domestic Product HBS Household Budget Survey HC Human Capital HCI Human Capital Index HCP Human Capital Project HCW Human Capital Wealth ICT Information and Communications Technology IMF International Monetary Fund LMIC Lower Middle-Income Country NBS National Bureau of Statistics NPL Nonperforming Loan PPP Purchasing Power Parity RMNCAH Reproductive, Maternal, Newborn, Child and Adolescent Health SACMEQ Southern and Eastern Africa Consortium for Monitoring SSA Sub-Saharan Africa SMART Specific, Measurable, Attainable, Realistic, Timely SMRR Statutory Minimum Reserve Requirement TASAF Tanzania Social Action Fund TANESCO Tanzania Electric Supply Company Limited UNICEF United Nations International Children's Emergency Fund US $ United States Dollar VAT Value-Added Tax WDI World Development Indicators PAGE iv The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Acknowledgments The twelfth edition of the Tanzania Adugna (Practice Manager for MTI, Economic Update was prepared by a joint Africa), and Preeti Arora (Country World Bank team of the Macroeconomics, Program Coordinator) provided Trade and Investment (MTI), Poverty guidance and leadership throughout (GPV), Education (GED), Health (GHN), the preparation of the report. and Social Protection (GSP) Global Practices. The team included Quentin Anne Grant provided editorial Wodon, Nadia Belhaj, Pancras Mayengo, assistance, while Faustina Chande, and Emmanuel Mungunasi. The team Lydie Ahodehou, Caroline Kingu, Diana appreciates inputs from Neema Mwingu, Mwaipopo, Neema Clarence, Abdul Solomon Baregu, Yutaka Yoshino, Wendy Muhile, and Loy Nabeta managed Karamba, Elizabeth Talbert, Cornelia Jesse, design and printing. Alex Kamurase, Laura Rawlings, Chiho Suzuki, and Inaam Ul Haq. Habib Rab, Salman Asim, and the IMF Tanzania team The analysis of human capital and also provided useful insights. William the ways of improving Tanzania’s Battaile provided overall supervision. Human Capital Index (HCI) builds in part on work on child marriage and Bella Bird (Country Director for Tanzania, girls’ education with support from the Burundi, Malawi, and Somalia), Abebe Children’s Investment Fund Foundation. PAGE v TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION PAGE vi The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Overview PAGE 1 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Overview State of the Economy financing, which together with high payment arrears raise questions High-frequency official data suggest about budget credibility. The deficit that the pace of economic activities for the first half of the fiscal year was softened in 2018. The Tanzania a low 0.7 percent of GDP, against a National Bureau of Statistics reports budgeted 1.6 percent, with revenue that real GDP growth was 7.0 percent shortfalls relative to budget even larger in 2018, slightly higher than 6.8 percent than spending shortfalls. Domestic in 2017.  However, official demand revenue, especially tax collections, side data, including data related to underperformed by about 12 percent consumption, investment and net trade against mid-fiscal year targets, and suggest that growth softened in 2018.1 external financing underperformed by The softening of consumption growth more than 80 percent. As result, the is supported by TRA data showing budget has been significantly under- lower consumption tax collection, executed, especially for capital projects as well as tight controls on public needed for growth and job creation. consumption expenditures. Investment Government arrears—to contractors growth remains positive but dampened and suppliers, to pension funds and as indicated by significant under- by utilities such as TANESCO to their execution of public development plans, suppliers—remain unsustainably high lower levels of FDI inflows and improved at an estimated 5.7 percent of GDP in but relatively low private sector credit mid-2018. And although the level of growth. The trade balance deteriorated public debt is currently sustainable, in 2018, with exports contracting by recent changes in its composition raise 3.9 percent in gross value and imports concerns about liquidity risks. increasing by 7.8 percent. The external position is challenged by Mid-year fiscal accounts for 2018/19 an expanding current account deficit show a low deficit and significant and declining reserves. The value of shortfalls in both spending and exports has fallen partly due to lower 1 Using demand side data, World Bank staff estimate that real GDP growth for 2018 was 5.2 percent, lower than the NBS estimate but still more than double the SSA average of 2.3 percent. PAGE 2 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region cashew exports, and imports have gone as the population rises faster than the up because of capital goods brought supply of the services. in to supply development projects. The current account deficit has increased to Reforms to relieve the regulatory 5.2 percent of GDP for the 12 months burdens on businesses are moving ending January 2019, up from 3.2 slowly. Government has also abruptly percent a year earlier. With low foreign introduced new laws affecting mining, exchange inflows from exports and public-private partnerships, and FDI, official gross reserves have been statistics that have raised private sector used to help finance the deficit, falling concerns about policy predictability. from US$5.8 billion to US$4.9 billion at Tightened government controls on end 2018 but remaining adequate to crop and foreign currency markets have cover 4.8 months of imports of goods further affected private sector growth and services. The shilling has remained and investment. Together with the relatively stable because of Bank of elevated arrears in VAT refunds and to Tanzania interventions in the interbank suppliers, these developments have foreign exchange market to, and the dampened private sector investment Bank of Tanzania has also tightened and growth; as a result, fewer jobs controls on foreign exchange bureaus. are being created and government revenues have been lower than High population growth is expected. Although credit to the private undermining the reduction of poverty. sector has broadened recently, it is still Despite efforts between 2007 and subdued because of the magnitude 2016 that have reduced the country’s of nonperforming loans and high poverty rate from 34.4 to 26.8 percent, borrowing costs. the absolute number of poor people has held at about 13 million due to Growth prospects depend on the high population growth. The most pace of reform implementation. recent poverty measures based on the Annual real GDP growth is projected to Household Budget Survey of 2017/18 gradually improve to 6 percent over the are still being processed, but it seems next few years, assuming modest but likely that the downward trend in the steady improvements in accomplishing poverty rate continues but has become reforms. Faster reform action could more gradual. Government efforts to raise this outlook. Major downside risks expand access to social services like include lack of government action to education, health, and water have been improve the business environment and undermined by their declining quality fiscal management, including lowering PAGE 3 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION the costs of regulatory compliance, expected number of years of education reducing domestic arrears (VAT completed by youth; (3) the quality of refunds and payments to suppliers), learning in school; (4) how long workers preventing new arrears, and ensuring will remain in the workforce, as proxied a prioritization of investment projects by adult survival past 60; and finally based on sound criteria and growth (5) prevention of stunting in young enhancing prospects as well as securing children. The HCI measures the likely adequate and affordable financing to productivity of future workers based complete these projects on schedule. on a comparison of current health and External threats to the outlook include education outcomes versus outcomes weaker global demand, tighter financing that would lead to full productivity. The conditions, and higher international HCI takes a value between zero and energy prices, which could adversely one, with a lower value suggesting likely impact growth. losses in productivity in adulthood. For Tanzania, the HCI is estimated at Special Focus: Human Capital 0.40, which means that children and Investing in human capital is essential youth may reach only 40 percent of for Tanzania. To generate future income the earnings that they could aspire and achieve sustainable development, to with full health and education. people are the most important asset In comparison to other countries, countries have. Part 2 of this economic Tanzania does especially poorly in update discusses where Tanzania terms of the number of years of stands in terms of its investments in schooling that children complete and human capital for both children and the risk that children under the age adults. The analysis is part of the World of five will be stunted. However, even Bank Human Capital Project (HCP), in other dimensions, outcomes tend which relies on both the Human Capital to be poor. Given its level of economic Index (HCI) and data on human capital development, Tanzania’s HCI value is wealth (HCW). below expectations, putting the country in the bottom 35 countries globally. The HCI focuses on the children and Both sector-specific and multisectoral youth who will be workers in the future. interventions are required to improve the The HCI was launched in October 2018 HCI, and to increase the future earnings as part of the new World Bank Human potential of young Tanzanians. Capital Project, an effort to encourage countries to invest in their people. The HCI is based on five variables likely to affect future earnings: (1) the survival rate of children past age 5; (2) the PAGE 4 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region „„ Improving education outcomes In addition to an analysis of the HCI requires gains in both the length for Tanzania, the report also briefly of schooling and the effectiveness discusses estimates of human capital of learning. Priorities for schooling wealth, a key component of the include solving the early-grade country’s total wealth. Human capital “traffic jam,” reducing drop outs, wealth—the value of the future earnings and broadening system capacity, of today’s labor force—accounts for especially for secondary students. two-thirds of total global wealth. As For learning, priorities include countries develop, human capital recruiting more teachers to meet wealth becomes ever more important. standards and emphasizing Although Tanzania’s wealth has mathematics, science, and other increased by 45 percent over the last two areas where the shortages are decades, per capita wealth decreased acute, building up in-service training from US$20,900 to US$17,451 due in as well as recruiting more female part to high population growth, which teachers. in turn depends on fertility rates— the number of children women have „„ Investments in early childhood on average over their lifetime. While development are especially fertility rates declined from a peak of important to improve the HCI 6.8 children per woman in the 1960s to survival and health components. 5.0 in 2016, the pace of the decline is High rates of under-5 mortality and slow, and Tanzania’s fertility rate is still stunting are graphic demonstrations slightly higher than the SSA average of of the lack of investment in young 4.9. Better access to reproductive health children, especially in the first 1,000 services would help to reduce fertility days of a child’s life. For stunting, rates, but improving girls’ educational both nutrition-specific and nutrition- attainment and reducing child marriage sensitive interventions are needed. would have even larger impacts toward Nutrition-specific interventions lower fertility and reduced population include promotion of exclusive growth rates. Universal completion of breast-feeding for six months, secondary education for girls could micronutrient supplements, and reduce the fertility rate by 21 percent proper hygiene, feeding, and versus current levels. caregiving practices—most of which are accessed through the health sector. Emerging evidence suggests, however, that certain nutrition-sensitive interventions are also beneficial, especially in agriculture. PAGE 5 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Also limiting the ability of Tanzania to increase human capital and overall wealth per capita is gender inequality in earnings. Human capital as a share of total wealth is lower in Tanzania than in comparison to most other countries. Increasing the earnings of both men and women would help increase human capital wealth per capita, but given the prevailing gender inequality in earnings, the priority should be increasing the earnings of women. In 2014, women accounted for 35.5 percent of Tanzania’s human capital wealth and men 64.5 percent. Losses in human capital wealth due to gender inequality in Tanzania are estimated at up to US$111 billion. Interventions in three main areas could narrow the gender earnings gap: (1) reduce the time women spend in unpaid work and redistribute care responsibilities so that they can spend more time in the labor market; (2) give women more access to and control of productive assets; and (3) address market and institutional failures. PAGE 6 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 1 The State of the Economy PAGE 7 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Part One: The State Of rich countries. Current account deficits The Economy (CADs) in the region, particularly in non- resource-intensive countries, are rising. 1.1 Recent Economic Fiscal consolidation continues, so that in Developments SSA the median fiscal deficit is expected to fall from 3.8 percent of GDP in 2018 The external environment for to 3.0 percent. But debt vulnerabilities Sub-Saharan Africa remains are still high. challenging. Figure 1: Global Trends in GDP Global growth continues to decelerate. Growth The global economy slowed slightly in 2018, growing at 3.0 percent, and the trend is expected to continue downward as advanced and many emerging economies slow (Figure 1). Growth in advanced economies is expected to reach about 2 percent in 2019, with growth in the United States and China responding to strong domestic demand and supportive fiscal and monetary policies. In emerging and developing Source: World Bank Global Africa’s Pulse, April 2019. economies, uncertainty in global trade is contributing to an expected slowdown in growth to 4.2 percent as external Volatile global commodity prices demand ebbs, the cost of borrowing and declining external demand have rises, and policy uncertainties persist. negatively impacted Tanzania’s external sector. Tanzania’s external Although recovery in Sub-Saharan sector is particularly vulnerable to Africa (SSA) weakened in 2018, the changes in the world prices of oil outlook for faster growth is positive and gold. The benefits of falling oil assuming reduced policy uncertainties prices in 2018 Q4 and a concomitant and increased investments. Growth lowering of Tanzania’s import bill in SSA is estimated to have been 2.3 have been reversed in the start of percent, dampened in part by slackening 2019. The cost of oil imports has exports of several large oil exporters. In risen by 8 percent in the year ending 2019, growth is expected to pick-up to January 2019 (Figure 2). Declining 2.8 percent, mostly driven by higher gold prices, reaching US$1,202 an growth in large economies like Nigeria ounce in September 2018, have and Angola but also in non-resource- bounced back and recovered to PAGE 8 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region almost the same level as in early released in February 2019, producing 2018. This volatility, together with a slight 2 percent increase in nominal a drop-off in external demand from 2017 GDP and significant changes in stagnating global growth, has led the structure of the economy (Figure to the value of exports falling by 4 3). From the supply side, manufacturing percent in the year ending in January and services activities now account 2019 and a widening of the CAD. for larger shares of economic activity, with the share of non-manufacturing Figure 2: Energy and Metal Prices, industries declining.2 From the demand US$ side, the weight of investment in the economy rose, and there was a decline in the share of consumption, especially government consumption. The NBS rebasing produced historical annual GDP growth rates that are lower and more volatile and made significant changes to sectoral growth rates. The rebased GDP series shows that over the last decade real GDP growth averaged 6.3 percent annually, Source: World Bank Commodity Price Data (The Pink Sheet). 0.3 percentage points (pp) lower than the previous series (Figure 3). From GDP rebasing was recently the supply side, these lower annual completed but there are concerns GDP growth rates are due largely to about the source data. less growth in services than with 2007 as the base year (Figure 4). From the The recent Tanzania National Bureau of demand side, the drop in growth is due Statistics (NBS) GDP rebasing exercise to less consumption, especially in 2016 produced significant changes in and 2017, which more than offset higher structural weights of the economy. In net exports and investments. Large line with East African Community (EAC) changes in sectoral growth rates include harmonization efforts, NBS started the an increase in real growth in agriculture rebasing exercise in September 2017 from 3 percent to 6 percent in 2017 and to update the GDP base year from a decrease in mining real growth from 2007 to 2015. The rebased series was 24 percent to about 5 percent. 2 Non-manufacturing activities consist of construction, mining and gas. PAGE 9 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Figure 3: GDP in 2017, Rebased Sectoral Shares, Percent Source: Tanzania National Bureau of Statistics. Figure 4: Real GDP Growth Rates, 2010-17, Figure 5: Drivers of Lower GDP Growth, Percent 2015-2017 Source: Tanzania National Bureau of Statistics. Source: Tanzania National Bureau of Statistics. While the methodology used for production and expenditure. However, rebasing GDP was sound, the quality the quality of source data used for the of some source data undermines compilation is weak in some areas, the reliability of GDP and growth including consumption, investment, estimates. NBS used the Supply and Use employment, manufacturing, and Tables (SUTs) framework for systematic services. This significantly undermines and consistent estimation of GDP by the quality of GDP and growth estimates. PAGE 10 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region For instance, there are problems related World Bank staff estimates using to the poor quality of business surveys high-frequency official data related to and to differences between financial the expenditure side of GDP suggest statements and VAT data. Technical that growth in 2018 was 5.2 percent. review also noted the need for NBS to Growth is lower than indicated by official introduce a policy for revising quarterly statistics, but still more than double the GDP rather than the current practice SSA average of 2.3 percent (Figure 7). The of not revising quarterly estimates until estimate is based on application of the data for all four quarters are available. World Bank’s internal macroeconomic model, including data related to NBS reports that growth was 7 per- consumption, investment and net trade. cent in 2018 but high-frequency data The softening of consumption growth suggest a slower pace of economic is supported by TRA data showing lower activity. consumption tax collection, as well as tight controls on public consumption According to official statistics from expenditures. Investment growth NBS, real GDP grew by 7.0 percent remains positive but subdued as in 2018, slightly higher than 6.8 indicated by significant under-execution percent growth for 2017. NBS reported of public development plans (37 percent that slower growth in agriculture below targets), lower levels of FDI and non-manufacturing industrial inflows (below 2 percent of GDP in 2018 production was more than offset by a compared to above 4 percent of GDP in strong expansion in services. In 2018, 2013) and private sector credit growth agricultural value-added growth slowed in 2018 of less than 4 percent compared to 5.3 percent from 5.9 in 2017 (Figure to 20 percent average annual growth 6). Growth in mining and construction during 2013-16. Additionally, Bank of also slowed. Manufacturing industries Tanzania data show the trade balance value added growth remained at 8.3 deteriorated in 2018, with exports percent, the same as in 2017. The contracting by 3.9 percent in gross value expansion of service activities of 6.5 and imports increasing by 7.8 percent. percent, which was significantly higher Using these high frequency demand than the 5.2 percent recorded in 2017, side data, the World Bank estimates that was supported broadly by the health, real GDP growth in 2018 was around 5.2 ICT, transport, education, and public percent. administration sectors. Finance and insurance activities were a noteworthy outlier, which continued to contract but by a slower pace than in 2017. PAGE 11 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Figure 6: GDP Growth by Sector, 2017 and 2018, Percent Source: Tanzania National Bureau of Statistics. Figure 7: Annual Real GDP Growth in EAC, 2016-2018, Percent Source: World Bank staff and government sources. PAGE 12 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region With food prices falling, inflation has Figure 8: Low Inflation, Much Higher Energy Prices, been low and stable. Headline inflation 2018–19, Percent was 3 percent in February 2019, less than the official target of 5 percent (Figure 8), and food inflation was only 2.3 percent, down from 5.4 percent the year before. Energy inflation has fallen to 15.4 percent, down from 19.5 percent in October 2018, when the global oil price soared to about US$77 a barrel. The good rainy season in 2018 made adequate food available in most parts of the country, bringing food prices down. The prices of major food crops Source: Tanzania National Bureau of Statistics. like maize, rice and beans were lower in December 2018 than in December 2017 by 10–20 percent. Box 1: Tanzania is Nearing Lower Middle-Income Status Tanzania’s GNI per capita is expected to cross the threshold for lower middle-income country (LMIC) status in the next 1-2 years, ahead of the Tanzania Development Vision (TDV 2025) goal. This is due both to the country’s growth performance of over 6 percent real GDP growth on average for the past decade, as well as several data and methodology issues. The latter most notably includes lower population figures released by the UN, down by 4.5 percent for 2017 compared to previous figures. In addition, the GNI per capita is measured in US$ terms and is directly affected by exchange rate movements. Effects of the 20 percent depreciation shock that occurred in 2015 were smoothed over three years under the Atlas methodology, and this impact will end in 2018. The 2018 estimate for GNI per capita will be made public in July 2019.  Per capita income is the formal criteria for LMIC classification, however, the quality of social economic development is important.  In fact, TDV 2025 envisions Tanzania as a middle-income country in 2025, characterized by high-quality livelihoods; peace, stability, and unity; good governance; a well-educated and learning society; and a competitive economy capable of sustainable growth and shared benefits. Investing in both human development and physical capital is key to ensure high quality of social economic developments while remaining in the MIC status. Tanzania needs to sustain its growth momentum to remain in LMIC status.  Historically, there have been 23 cases in the past 10 years of countries slipping back from MIC status to LMIC, or from upper-income status to MIC.  This has occurred for a variety of reasons.  Some are exogenous (eg, natural disasters and conflicts), but a significant number are also due to macroeconomic instability from high reliance on natural resources (commodity price shocks) or weakened debt sustainability due to mismanagement of macroeconomic policies. Hence continued prudence on macroeconomic management should be a priority for Tanzania even after reaching this milestone. PAGE 13 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Mid-year fiscal accounts show The domestic revenue effort was major shortfalls in both spending below both the current budget target and financing. and the actual collection in H1 of previous year. Revenues amounted In the first half (H1) of 2018/19, the to 7.0 percent of GDP, down from 7.4 fiscal deficit was a low 0.7 percent percent a year earlier because tax fell of GDP (Table 1). This deficit was short (Table 1). Tax collection, which significantly below the target of 1.6 was below target by about 12 percent, percent but higher than 0.2 percent underperformed in all departments— achieved in H1 of 2017/18. The main domestic revenue, large taxpayers, and cause was under-collection of revenue customs and excise – which is partly due since the total spending as a share to unrealistic high targets. Moreover, of GDP remained almost the same according to monthly revenue reports of during H1 of 2017/18 and 2018/19. the Tanzania Revenue Authority (TRA), The lower than budgeted deficit mirrors the major reasons for the shortfall were budget credibility challenges, among the financial difficulties of taxpayers; them steep shortfalls in revenue and reduced production; less employment financing, under-execution of the tax revenue as employees, especially in budget (especially priority projects) mining, were retrenched; and delayed and accumulation of domestic payment exports of cashews, which reduced arrears. income from export duty. Table 1: Fiscal Trends, Percent of GDP 2017/18 2017/18 2017/18 H1 2017/18 H1 2018/19 H1 2018/19 H1 Plan Actual Plan Actual Plan Actual Revenue 16.5 14.9 8.2 7.4 7.7 7.0 Tax 14.1 12.6 7.2 6.4 6.6 5.9 Non tax 2.4 2.3 1.1 0.9 1.1 1.1 Expenditures 21.2 17.0 10.8 8.0 9.6 7.9 Recurrent 11.2 10.7 5.7 4.8 5.5 5.2 Development 9.9 6.3 5.2 3.1 4.2 2.7 Local 7.4 4.5 3.8 2.2 3.4 2.0 Foreign 2.5 1.8 1.3 0.8 0.8 0.6 Grants 0.9 0.8 0.8 0.5 0.4 0.2 Overall balance -3.8 -1.9 -1.8 -0.2 -1.6 -0.7 Financing 3.8 1.9 1.8 0.2 1.6 0.7 Foreign 2.8 1.4 1.0 0.2 0.4 0.0 Domestic 1.0 0.5 0.9 0.0 1.2 0.7 Source: MoFP. PAGE 14 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region In 2018/19 H1 both recurrent the major reason for slow progress on and development budgets were priority projects, many of which are significantly under-executed, causing crucial to drive economic growth and delays in completion of capital job creations. projects. Of the 5.5 percent of GDP allocated to recurrent spending in H1, Thus far in 2018/19, there have been the government managed to spend 5.2 major shortfalls in both external and percent of GDP, 0.4 percent more than in domestic financing of the budget. 2017/18 H1. All major recurrent budget Disbursements of external loans and categories, among them wages and grants have been minimal—only 0.2 salaries, interest payments, and goods percent of GDP out of a budgeted 0.8 and services, were underspent because percent for H1 (Table 1). Disbursement of lower release of funds than approved of concessional loans and grants was in the budget. This underspending, delayed by slow project preparation and together with significantly reduced implementation. Delayed disbursement spending on wages and salaries and on of external non-concessional loans non-salary goods and services raises reflects government caution in concerns about the quality of service contracting such loans because their delivery, especially education and health costs have been rising. Lengthy loan care. Development spending reached negotiations have also affected the 2.7 percent of GDP, considerably less schedule of disbursements. However, than both the 4.2 percent current at 0.7 percent of GDP, disbursement budget target and the actual 3.1 percent of domestic loans in H1, though lower spent in 2017/18 H1. Under-spending than target, was higher than in 2017/18 on development, about 37 percent, is H1. Figure 9: Domestic Payment Arrears, 2015–18, Percent of GDP Source: MoFP, CAG Report 2017/18 and World Bank estimates PAGE 15 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Government domestic payment good practices in risk management and arrears remain unsustainably high, is difficult to operationalize given TRA’s totaling nearly 6 percent of GDP. current level of staffing and expertise. The most recently available data show The result has been a drop in the amount arrears of the central government (to of paid VAT refunds from TZS570 billion contractors/suppliers and pension in 2016/17 to TZS36 billion in 2017/18. funds) and utilities such as TANESCO to their contractors/suppliers were Public debt is currently sustainable 5.7 percent of GDP at end-June 2018 but recent changes in its composition (Figure 9). This is down from the raise concerns about liquidity risks. previous year due to clearance of arrears The IMF–World Bank debt sustainability to pension funds, while payment arrears analysis, updated in January 2019, found to contractors and suppliers increased that all debt burden indicators were substantially. Government adopted below the policy-determined thresholds a strategy in May 2018 to speed-up set in the baseline scenario. The 2018 verification of these payment arrears to public debt-to-GDP ratio was estimated the private sector and payoff existing at 40.1 percent, well below the 70 obligations. Roughly TZS1 trillion was percent benchmark but up from about allocated for this purpose in the 2018/19 37 percent in 2017 (Figure 10). However, budget, however in the first half of the the share of commercial financing of fiscal year the government had only the budget, which was just 4 percent in paid down TZS322 billion, or about one- 2010/11, went up to about 30 percent third of this annual target. In addition to in 2016/17, up from just 4 percent in payment arrears, there have been delays 2010/11. As a result, in 2018/19 debt in verifying and paying VAT refunds due service is consuming 43 percent of in part to TRA audit of nearly all refund domestic revenues. applications. This policy is contrary to Figure 10: Public Debt, 2015–18, Percent Source: World Bank and IMF Debt Sustainability Analysis, March 2019. PAGE 16 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Private sector credit is slowly (M3) to 3.3 percent in the year ending recovering. January 2019, down from 9.5 percent in the year ending January 2018. Private sector credit growth has shown some recovery in early 2019. By Relatively high nonperforming loans January 2019, it had risen from 2 percent (NPLs) and banking sector concerns the year before to 7.3 percent3, largely about asset quality explain the high driven by loans to individuals, farmers, cost and limited availability of credit and manufacturers which together to the private sector (Figure 11). The accounted for about 50 percent of all NPL ratio declined to 10.4 percent in bank outstanding loans. The increase December 2018, down from about 12 in private sector credit is partly a result percent a year before but double the of monetary policy easing, especially indicated threshold from the Bank of a lower discount rate4 and a lower Tanzania (BoT). In February 2018 the statutory minimum reserve requirement BoT directed banks to draw up and (SMRR). The drop in real yields on apply time-bound strategies to reduce treasury bills is also forcing banks to NPLs to less than 5 percent of gross look for higher returns from lending.5 loans. It also required banks to establish Figure 11: NPLs and Growth in Private Sector Credit, permanent recovery functions, give 2015–18, Percent high-risk cases management priority, establish policies for classifying and provisioning NPLs, develop policies for early warning systems, and identify improvements needed in managing credit risk. The other measures include regulatory forbearance, which provided for loan classification and restructuring as well as allowing commercial banks to upgrade loan classification of NPLs and recognize the interest on such loans as Source: Bank of Tanzania. income. The BoT has followed up later on with the guidance note to banks to The modest growth in private sector specify which loans can be restructured credit, coupled with a decline in the net and upgraded. The ability of borrowers foreign assets of the banking system, to service their loans has been negatively slowed the growth in the money supply impacted by government arrears to private suppliers and contractors. 3 It should be noted that the recent data on private sector credit growth remains inconsistent with information on monetary aggregates, which have not picked up yet as expected. As growth in M3 remains subdued, it is not clear what is a source of the recent credit growth. 4 The BoT reduced the discount rate twice in 2017, in March from 16 to 12 percent (the first reduction since 2013) and in August to 9 percent. The BoT also reduced the SMRR from 10 to 8 percent. 5 Nominal T-bills rates averaged about 18 percent in the first quarter of 2016, with real yields of about 12 percent. In the first quarter of 2018 real yields on T-bills declined to less than 1 percent; though they improved to about 5.5 percent in January 2019, they are still far below the early 2016 levels experienced. PAGE 17 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Lending rates remain high despite Figure 12: Interest Rates on Loans, 2018–19, Percent BoT interventions. In response to BOT monetary easing in 2018, nominal lending rates fell slightly, to an average of about 16 percent (Figure 12). The discount rate, already down to 9 percent, was cut again to 7 percent and the SMRR was reduced from 10 percent to 8 percent. Still, lending rates stayed high partly due to concerns about loan recovery and the high NPL ratio that made banks cautious about lending. The system-wide indicators of Source: Bank of Tanzania. banking stability and profitability mask vulnerabilities of individual According to the recent IMF- banks. For example, the capital and World Bank Financial Sustainability the liquidity levels are above regulatory Assessment Program report, to requirements. At yearend 2018, the ratio expand access to formal financial of core capital to total risk-weighted services and credit to the private assets and off-balance-sheet exposures sector, measures are needed to lower stood at 16.3 percent, comfortably costs and broaden access to finance. above 10 percent regulatory minimum. It is necessary to address financial The ratio of liquid assets to demand infrastructure gaps, bring under the liabilities was 35.6 percent, also well regulatory and supervisory umbrella above the 20 percent regulatory nonbank providers of credit to smaller minimum. Moreover, return on assets firms, beef up consumer protection, was 1.3 percent and return on equity and in general raise the financial literacy was 4.5 percent but down from 3.0 of Tanzanians. Allocation of pension percent and 15.8 percent respectively funds’ investments should be revisited in 2015. In 2018, the BoT closed five to ensure that the funds contribute community banks and resolved two centrally to meeting the long-term banks, including one larger institution. financing needs of the private sector Additionally, the FSAP team calculated while ensuring that the pension system that correcting for under-provisioning is sustainable. Simultaneously, it will of NPLs, six additional banks would fall be necessary to identify measures to into category of undercapitalized, and enlarge the supply of liquid securities. as a result 10 percent of assets in the system would be below the regulatory threshold for capital. PAGE 18 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Declining exports and surging the US$56 million rise in payments for imports are widening the services. The earnings from services current account deficit. were largely driven by travel activities, especially more tourist arrivals, and The CAD has widened because of transportation of goods to and from lower cashew exports and higher neighboring countries. The small rise imports of capital goods. It reached in payments for services was mainly for 5.2 percent of GDP in the year ending transport and related services. January 2019, up from 3.2 percent a year earlier, as exports declined and imports The BoT has tightened controls on surged (Figure 13 and Figure 14). The foreign exchange bureaus. Since 2017, value of exports dropped 3.9 percent, the BoT has changed the guidelines for largely because cashew exports shrank bureau operations, raising the capital from US$529.6 million to US$196.5. requirement from TZS100 million to Meanwhile, the value of imports went TZS300 million for class A bureaus and up by 7.8 percent as capital imports rose from TZS250 million to TZS1 billion for from US$2.7 billion to US$3.2 billion. class B bureaus. The intent is to ensure Launch of major public investment that bureau do not launder money. As projects, such as the standard gauge a follow-up, in January and February railway and expansion of the port of 2019, the BoT inspected all Tanzanian Dar es Salaam, has required imports of bureaus for irregularities in their foreign building and construction materials and currency operations. As a result, 188 transport equipment. bureaus out of 297 were deregistered while 109 were re-issued with new Unlike goods exports, earnings from licenses to continue their operations services exports have gone up. Though after meeting all requirements. The BoT slight, the US$189 million increase in has also asked the Tanzania Postal Bank earnings from services more than offset and other banks to conduct foreign Figure 13: Current Account Deficit, 2016-19 Figure 14: Growth of Exports and Imports, 2016–19, Percent Source: Bank of Tanzania. Source: Bank of Tanzania. PAGE 19 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION exchange operations; they must identify Figure 15: Stability of the Tanzanian Shilling, 2018–19 customers by name, phone number, and full address before buying or selling foreign currency. The shilling has remined relatively stable. Between February 2018 and February 2019, the shilling fell by about 3 percent against the currencies of major trading partners, especially the U.S. dollar, and by about 5 percent against the Kenyan shilling (Figure 15); however, Source: OANDA Corporation and World Bank estimates. it appreciated 2–8 percent against the euro, Chinese yuan, and Indian rupee. Figure 16: Gross Official Reserves, 2016–19 To ensure the stability of the shilling, the BoT has intervened to smooth out fluctuations and maintain an orderly interbank foreign exchange market. Gross official reserves have fallen recently. Reserves dropped from US$5.8 billion in January 2018 to US$4.9 billion in January 2019 but are still sufficient to cover 4.8 months of imports of goods and services, which is above the country benchmark of 4 months (Figure 16). The decline is partly in response to lower foreign currency receipts due to falling Source: Bank of Tanzania. exports and less foreign financing of the budget from both concessional and non-concessional sources. Box 2: Tanzania’s Cashew Exports in 2018 Cashew exports are a major source of foreign exchange for Tanzania. However, government intervention in the sector in 2018 has caused cashew exports to plunge and affected the balance of payments. When the world price of cashews dropped and traders offered farmers lower market prices, the government decided to intervene to protect farmers by banning the export of raw cashews in favor of domestic processing of the crop. Government also committed to buying raw cashews directly from farmers at prices higher than the world market price. These purchases have taken time due to the need for verification of the farmers and cashew amounts before paying. According to authorities, the cashew market will be allowed to operate normally after this intervention. The delay in cashew exports has pummeled Tanzania’s export earnings. For the 12 months ending January 2019, the value of cashew exports was only US$196.5 million—far below the previous year’s US$529.6 million. The government intervention has also had significant fiscal costs: in addition to the direct cost of cashew purchases, estimated at US$300 million, there are foregone export levies and the cost of collecting and transporting the cashews. PAGE 20 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Box 3: FDI inflows: services on the rise Since 2013 Tanzania’s FDI inflows have shifted from relatively strong growth to decline. For 2006–13, FDI averaged annual growth of 33 percent; in 2014–17 fell by 12 percent a year, from a peak of US$2.1 billion in 2013 to US$1.2 billion in 2017. FDI as a share of GDP has fluctuated somewhat over the same time but is at par with the regional average of 3 percent. FDI has also been quite volatile, mainly because of high-value, capital-intensive extractive projects. The recent decline in total FDI since 2013 is partly explained by foreign investment in extractives. Figure 17: FDI in Tanzania, Aggregate (Left side) and Shares by Sector (right side) Source: UNCTAD Stat and Bank of Tanzania. Increased FDI in services can contribute to growth and diversification of Tanzania’s economy. Collectively, since 2013 the largest share of FDI has gone to services. Finance and insurance services (18 percent) became a top FDI sector (16 percent of total), followed by Information and communication (16 percent). This bodes well for adding value to the domestic economy and exports. In 2014 services were contributing 53 percent of domestic value-added (2014, WITS Export Value Added Database). More precisely, services in Tanzania create significant value addition in services, manufacturing and direct value-added. Direct value-added refers to value added within the same service sector’; services value-added refers to value added across service sectors. Services also contribute more than one-third of value added to exports, above agriculture, extractives and manufacturing. Figure 18: Value-added by Sector Source: Bank of Tanzania. The business environment is still concerns about policy predictability. difficult for private sector. Recent government interventions in crop and foreign currency markets The business environment continues have compounded the problem for to be challenging. The government has businesses. Meanwhile, in just the last in recent years introduced policies related two years, Tanzania’s Doing Business to mining, public-private partnerships, ranking has dropped 12 places mainly and statistics that have raised business because of downgrades on trading PAGE 21 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION across borders, taxation, and starting a Delays in reforming business business (Figure 19). It also now takes regulation is also clouding the longer for businesses to prepare and pay business environment. The taxes due to multiple visits and audits Blueprint for Regulatory Reforms by the tax agents (Figure 20). endorsed by the Government in May 2018 specifies actions to rationalize Delayed payment of VAT refunds and, in some cases, abolish licensing and arrears to domestic suppliers is requirements. The Government preventing private sector growth and began to act on the Blueprint by investment by tightening the cash abolishing 32 taxes, fees, and flows of some businesses. It has also licenses in the amended Finance Act, 2017/2018; the changes included pushed up NPLs, contributing to limits zero-rating the VAT on ancillary on lending to the private sector and transport services and license/fees in relatively high interest rates on loans. the coffee sector. However, majority Exporters and small and medium firms reforms are still pending, among have suffered most. As a result, private them reforms at individual ministries investment has slowed, reducing growth using current legislative powers, in industrial production and exports especially related to enhancing the of manufactured goods. Progress in functions of the Tanzania Bureau of clearing payment arrears to contractors Standards, Weights and Measures and suppliers, as well as speeding up Department, and the Tanzania Food processing of VAT refund applications, and Drug Authority. Reforms that should improve private sector liquidity require legislative changes or cross- and reduce NPLs. ministerial actions are likely to face even more delays. These are reforms that matter to private sector. Figure 19: Distance to the Frontiers, Ranked Figure 20: Hours to Prepare and Pay Tax, 2014-18 Source: World Bank Doing Business 2019: Training for Source: World Bank Development Indicators database Reform (October 2018) PAGE 22 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Figure 21: National Poverty, Percent and Figure 22: GDP per Capita and International Absolute Number of Poor, 2007–16 Poverty Headcount at US$1.90 a Day Source : HBS 2007 and 2012 ; DHS 2016 ; and WDI 2018. High population growth is among the vulnerable and rural undermining efforts to reduce residents. After 2000, the Human poverty. Development Index for Tanzania sustained positive momentum but Tanzania is continuing efforts began to slow in 2010. However, to improve its people’s living robust gains in health, education conditions and reduce poverty, and income are now stimulating but the pace is slow. Between 2007 progress. Access, completion and 2016 the national poverty rate rate, and gender equity in primary eased down gradually from 34.4 education have all improved, and percent in 2007 to an estimated attainment in secondary education 26.8 percent.6 The most recent has been notable for both girls and poverty measures based on the boys. In 2016, 23.4 percent of girls, Household Budget Survey (HBS) of up from 16.2 percent in 2010, and 2017–18 are still being processed, 28.2 percent of males, up from 22.8 but the downward trend is expected percent, were in secondary schools. to have continued, though more Tanzanians, particularly those who gradually. The decline in poverty was are poor or live in rural areas, also saw driven by improvements in access to improvements in housing conditions, basic services and assets and gains asset ownership, access to clean in human development outcomes drinking water, and sanitation. and living conditions, particularly 6 The poverty estimate for 2016 is based on imputation of the HBS 2012 data in the Demographic Health Survey (DHS) of 2016, using the small area poverty mapping technique. The imputation approach was discussed with the National Bureau of Statistics and was validated. PAGE 23 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION However, poverty declined more steady implementation of reforms, slowly than the population grew, so especially for improving the business that the absolute number of poor environment and fiscal management. people remained stagnant. Despite the Policies have been adopted to lower country’s significant progress in living the costs of business compliance with conditions and human development, in regulation, reduce domestic payment 2016 over 13 million Tanzanians were arrears and prevent new arrears.7 If still poor (Figure 19). Tanzania’s poverty fully implemented, these reforms can rate (at the 2016 international rate at help push annual economic growth to US$1.90 a day in 2011 PPP) and the total 7 percent. Our baseline outlook for the number of poor people are higher than next 2-3 years assumes that only part both the averages for SSA and what of the reform agenda will be realized might be expected given the country’s (see paras 35 and 38 below), given income level (Figure 22). The growth progress to date has been relatively elasticity of poverty has remained at less slow. This will drive a gradual increase in than unity, which means that a 1 percent annual growth 6 percent, with a modest increase in economic growth reduces improvement of the business climate the poverty headcount by less than 1 and a pick-up in FDI and other private percent. It appears economic growth investment (Table 2).8 Given continuing is not generating enough opportunities financing constraints, execution of the for the poor to make their assets more development budget is also expected to productive and increase their incomes. improve only modestly. In the medium Further progress in reducing poverty will term the fiscal deficit is expected to require accelerating the momentum of widen to about 3-4 percent of GDP. human development to speed up the Higher imports to support capital shift to more productive jobs and make projects will likely expand the CAD to 6-7 economic growth more inclusive. percent of GDP. 1.2 Macroeconomic Following recent trends, poverty Outlook and Risks reduction is expected to remain slow. Up to 2021 the poverty rate is predicted Growth prospects depend on the to decline by about 3 percentage points pace of reform implementation. and the number of poor Tanzanians will be roughly constant as population Real GDP growth is projected to growth continues high and steady. The rise gradually over the medium economic prospects of the poor—who term, assuming modest but are mainly employed in low-productivity 7 Regarding business regulation reforms, Cabinet endorsed the Blueprint of Regulatory Reforms on May 18, 2018. Government also adopted Treasury Circular No. 1 of 2018/19 on the Strategy to Control Government Arrears that was distributed to MDAs on May 9, 2018. 8 The IMF has a growth outlook of 4-5 percent for 2019-21, as reported in the latest WEO. This outlook is based on consideration of a consistent set of underlying structural reform factors as the World Bank outlook (eg, related to private sector investment), though with a somewhat less optimistic view on reform implementation over the period. PAGE 24 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region farming or urban informal service jobs— Poor management of public are not to brighten as long as growth investments can also create debt continues to be concentrated in capital- servicing problems, notably currency intensive sectors and in large urban and maturity mismatches. Large areas. infrastructure projects are expected to generate returns that can be used to The downside risks are largely service the loans that finance them. under government control. If projects are not properly vetted or completion is delayed, loan repayments Fiscal management: Delays in scheduled may begin before adequate addressing continued unrealistic cash flows and foreign exchange forecast and shortfalls of budget earnings are generated. That may cause execution and financing will continue maturity and currency mismatches at to jeopardize completion of major a time when Tanzania’s fiscal space is infrastructure projects and clearance already limited by high debt service, of domestic arrears. The government is falling external grants, and rising costs undertaking priority projects in human of providing services to a growing development and infrastructure to population. support growth and job creation over the medium to long term. However, if they To address these fiscal issues, if the are to have maximum impact they must country is to reach its development be adequately financed and completed goals Government must intensify on schedule. Shortfalls in financing its efforts to improve fiscal policy could add new domestic arrears to an design and implementation. The already unsustainable stock. FYDP II is rightly directed to facilitating Table 2: Medium Term Outlook, Annual Percent Change Unless Otherwise Indicated 2018e 2019f 2020f 2021f Real GDP growth, at constant market prices 5.2 5.4 5.7 6.0 Private Consumption 8.8 8.6 8.1 8.1 Government Consumption 4.2 4.0 3.8 4.0 Gross Fixed Capital Investment 3.4 3.4 3.5 4.3 Exports, Goods and Services -3.9 1.0 1.5 2.5 Imports, Goods and Services 7.8 7.9 8.0 8.1 Inflation (Consumer Price Index) 3.5 4.9 5.1 5.2 Current Account Balance (% of GDP) -4.9 -6.5 -7.3 -7.4 Net Foreign Direct Investment (% of GDP) 2.0 1.9 2.1 2.2 Fiscal Balance (% of GDP) -2.7 -3.1 -3.3 -3.6 Debt (% of GDP) 40.1 40.1 40.0 40.2 Primary Balance (% of GDP) -1.2 -1.5 -1.6 -1.7 Source: World Bank staff estimates and forecasts. PAGE 25 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION an ambitious increase in investment in Business environment: Failure to human and physical capital. However, reform the business environment is the national budget has for several years the largest risk to the growth outlook. been significantly under-executed, With the environment for private delaying completion of priority projects businesses deteriorating, the economy and helping keep growth below has been driven more by the public potential. The baseline outlook assumes sector—a growth model not likely to modest but steady progress on the be sustainable. Although important following short- and medium-term reforms to support the private sector options to enhance fiscal policy: have been adopted, including the Short term: Improve budget credibil- Blueprint for Regulatory Reforms and ity. the Strategy to Control Government Arrears, those agendas have not been „„ Improve revenue collection to meet moved forward enough. The baseline the target. macroeconomic outlook assumes that „„ Improve budget execution across progress in rolling out these reforms will the board, but in particular the be modest. capital expenditures. Government urgently needs to identify „„ Prepare and act on realist budget, and adopt measures to foster greater with credible revenue forecast and private sector participation in the borrowing plans. economy. The recent difficulties of the „„ Clear both the VAT refund and private sector and the barriers preventing domestic payment arrears and it from flourishing are recognized. The prevent future accumulation. baseline outlook assumes progress on the following government actions to „„ Introduce risk-based auditing of VAT address these issues: refunds. Short term: Heighten liquidity and Medium term: Invest in a balanced bolster private sector confidence in program of human capital and infra- the economy. structure services. „„ Give precedence to paying verified „„ Intensify mobilization of domestic arrears to private contractors and revenue to finance investments. suppliers (see para 35). „„ Prioritize public investments that „„ Speed up the release of verified VAT deliver high return and growth- refunds (see para 35). enhancing impact and manage them effectively to be delivered on „„ Ensure that tax administration is budget and on time. predictable and that tax agents collect taxes from private businesses fairly (see para 35). PAGE 26 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region „„ Enhance the current public-private External shocks: Finally, other dialogue on the effects of recent exogenous events outside the control government policy changes on of the government can adversely private businesses and the business impact the growth outlook. Among environment. external threats to the outlook are more erosion of global demand, tighter Medium term: Continue reforms to financing conditions, and higher address structural constraints on pri- vate investment. international energy prices. Slowdowns in major economies, especially the Euro „„ Create a more predictable business area and China, are already dampening environment; avoid sudden changes demand for Tanzania’s exports. Higher in policy. costs of commercial external loans can delay completion of capital projects that „„ Reduce the high cost of compliance such loans have been financing. Rising with regulations by fully global energy prices could also push up implementing the Blueprint for the import bill, worsen the CAD, and Regulatory Reform. further reduce official reserves. „„ Improve investment policies for To improve the sustainability of future non-extractive sectors to support growth over the medium term, Tanzania economic diversification. will need to address key structural Financial sector: Financial sector gaps in infrastructure and human capital (see Part Two). Huge shortfalls vulnerabilities could jeopardize macro in infrastructure and human skills have stability and push growth below the suppressed industrial development and baseline medium- term outlook. growth, and better human development High NPLs and high interest rates may outcomes will be critical if Tanzania is to depress the fragile recovery in credit reach its development potential. Human to the private sector. Tanzania’s bank- capital wealth—the value today of the dominated financial sector is small, future earnings of the labor force— concentrated, and at a relatively early is demonstrably the most important stage of development. Asset quality is a component of the wealth of nations. continuing concern, and high NPLs are Tanzania needs more engineers, restricting the ability of banks to provide technicians, and doctors. However, more, and more affordable, financing to improving skills in education, languages, businesses. The current vulnerabilities IT, communication, and technical of the financial sector underscore the and work ethic will require massive importance of strong financial system improvements to education and training oversight and regulation to gradually systems. Part Two of this economic lower NPLs to the BOT indicative update sheds light on these critical threshold of 5 percent, grow credit to aspects of human capital development. the private sector, and preserve financial stability. PAGE 27 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION PAGE 28 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 2 Human Capital PAGE 29 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Part Two: Human Capital Tanzania’s human development outcomes have improved over the last two decades, but progress has been uneven. This section provides a diagnostic of outcomes in human development. In October 2018, the World Bank launched the Human Capital Project to encourage countries to invest more and better in their people. It also introduced the Human Capital Index, which ranks countries according to their investments in children and youth. The index estimates Tanzania’s performance at only 0.40, implying that in adulthood today’s children and youth may reach only 40 percent of their full productivity potential due to shortfalls in education and health. This section reviews how Tanzania has been investing in its people, and options it could consider for future investments to improve the Human Capital Index. In addition, the section also briefly considers human capital wealth as a component of the nation’s wealth which is the asset base that enables Tanzania to produce future GDP in a sustainable way. The data on human capital wealth confirm that the country needs to invest more in its people. 2.1 Introduction Investing in human capital is essential protection, and labor, contribute to if Tanzania is to develop economically, worker productivity. In Tanzania, it reduce poverty and achieve the appears that both the HCI and HCW per aspirations articulated in Development capita are low. To boost investments Vision 2025. This economic update in human capital, the report suggests discusses where Tanzania stands in a variety of policy options for, e.g., terms of its investments in human enhancing access to and quality of capital. The analysis is part of the World health care, improving children’s Bank Human Capital Project (HCP). It nutrition, the quality of education, relies on both the Human Capital Index gender equality, and worker skills. At (HCI) and data on human capital wealth this time, options suggested are simply (HCW). One HCP aim is to measure indicative; they will be explored in detail how much social sectors, among them by sector in analytical work planned in health and nutrition, education, social coming months. PAGE 30 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region To make the case for Tanzania to invest they remain healthy and productive. in human capital, this report combines Social protection and labor market insights from several recent studies policies can expand their earnings and datasets with a lifecycle approach. opportunities and protect them Calling for a “whole of government” when they are out of work. approach to tackling national barriers to human capital development, the „„ In addition, two major cross- approach has two main components, sectoral issues affect both the HCI each of which is discussed in the report. and HCW: (1) High rates of fertility spur population growth, which „„ The HCI quantifies how well especially in low-income countries countries are preparing the reduces the value of human capital workforce of the future. The index and total wealth per person; high has five components: the expected fertility rates also have negative number of years of education impacts on several components of youth complete, the quality of the HCI. (2) Acute gender inequality what they learn in school, what in terms of, e.g., labor force percentage of children survive past participation and earnings, reduces age 5, prevention of early childhood HCW below what could be achieved stunting, and how long workers with gender equality. Through lower remain in the workforce, as proxied earnings and issues such as child by adult survival past age 60. While marriage and early childbearing, HCW measures current productivity gender inequality also affects the in adulthood, the HCI measures the components of the HCI for boys likely productivity of workers in the and girls alike. The two issues are future. One goal of the index is to related, since gender inequality create political space for national and prevailing social norms push leaders to make more and better up fertility rates, and high rates of investments in human capital a fertility may limit opportunities for priority. women in adulthood. „„ Human capital wealth (among the The structure of the report follows adult population): HCW consists these two components. In the first in the value today of the future section, the focus is on investments in earnings of the current labor force. children and youth, with a discussion Though most of today’s workers of trends in the HCI and each of its are finished with school, their HCW five components and suggestions can be enhanced by continuous for relevant strategic investments. education and training programs. Thereafter, a review of HCW trends Access to health care ensures that PAGE 31 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION over the last two decades shows that Box 4: The Human Capital Index Tanzania is lagging behind other SSA countries and could be doing far better. The HCI is constructed by multiplying The discussion then moves to high the contributions of survival, school, and health to expected relative productivity: fertility and population growth rates HCI = Survival × School × Health. Survival and gender inequality as they affect per = 1 minus the under-5 mortality rate. capita wealth and the earnings of men School = the expected number of school and women. years youth will complete adjusted by 2.2 Raising the Productivity student performance on international of Future Workers – The assessments as follows: Human Capital Index Health = expected adult survival and The HCI focuses on the children and the likelihood of avoiding stunting as youth who will be workers in the follows: future. The HCI was launched in October 2018 as part of the new World Bank The components of the index are meant Human Capital Project, a collaborative to capture contributions in childhood to effort to encourage countries to invest adult productivity relative to complete high-quality education and full health. in their people. The HCI is based on five variables likely to affect future earnings: The parameter φ = 0.08 measures (1) the survival rate of children past age the expected labor market returns to 5; (2) the expected number of years an additional year of schooling: γASR of education completed by youth; (3) = 0.65 and γNSR = 0.35 measure the the quality of learning in school; (4) improvements in productivity associated how long workers will remain in the with an improvement in health, using workforce, as proxied by adult survival adult survival and stunting as proxies past 60; and finally (5) prevention of for health. Complete high-quality stunting for young children. While education = 14 years of schooling and a HCW measures current productivity in harmonized test score of 625. Full health adulthood, the HCI measures the likely = 100 percent survival into adulthood productivity of future workers based and a stunting rate of zero percent. More on an index that takes a value between details on the HCI and the rationale for zero and one. That value is the ratio of its definition are available in World Bank 2018. the expected productivity of today’s children and youth to the productivity they could reach if they achieve their full potential (Box 4). PAGE 32 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region In Tanzania, the HCI is estimated at thus be less precise than the others 0.40, which means that children and in the index. In addition, while youth may reach only 40 percent of the HCI data suggest a decline the earnings that they could aspire to in performance over time, other with full health and education. Table 3 data suggest gains as test scores shows the HCI estimates for 2012 and in English, Math, and Kiswahili for 2017 and the variables that affect the Standard four pupils have improved index value. Tanzania’s 0.40 HCI is low. over time according to the Service For perspective, since the HCI is meant Delivery Indicators panel data. to predict future earnings potential, a These gains are associated with value of 0.40 essentially means that improvements in teacher effort and Tanzania’s HCW could increase by a subject knowledge. factor of 2.5 if its HCI were to increase to 1.0. „„ Health: For the HCI, health is measured by prevention of early „„ Child survival (under-5 mortality): childhood stunting (noting that Tanzania has achieved major gains stunting and early childhood in this area. The probability that development experiences have children in 2017 will survive past a profound impact on brain age 5 is estimated at 0.943, up from development, affecting learning, 0.934 in 2012. In other words— health, behavior and ultimately under-5 mortality has been reduced. income), and the likelihood that adults will survive past 60. A gain in „„ School: Education is measured adult survival and a small reduction as learning-adjusted years of in under-5 stunting rates are positive schooling, a function of both outcomes over the last few years, but the expected number of years of stunting levels remain unacceptably schooling for youth and how much high. This is encouraging, but it is they learn in school. Between 2012 still especially important to reduce and 2017 years of schooling went high stunting rates. On survival in up from 7.4 to 7.8 years, but student adulthood, while there has been performance declined substantially little analysis of factors related below 500, the global average. It to age-specific mortality rates in should be noted, however, that the Tanzania, one major issue related 2012 analysis was based on the to female mortality is maternal SACMEQ student assessment and mortality, especially for mothers the 2017 assessment was based on giving birth at a young age. This is EGRA so that comparability could also related to under-5 mortality and be an issue even if the assessments the prevalence of stunting among were later standardized for the HCI the children of young mothers. estimations. This estimate may PAGE 33 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION „„ Estimates by gender: In 2012, men 2012, is not statistically significant given had on average a higher HCI than the confidence (uncertainty) intervals. women, but this was reversed in There were gains in most components of 2017. Though typically differences the index, but reduction in the learning by gender tend to be small, that performance measure did offset the does not mean that gender does gains in the other variables, although not matter given gender disparity as mentioned earlier other data suggest in the use of accumulated human gains in learning outcomes. Without capital, which leads to gender the apparent decline in learning inequality in earnings and human performance, there would have been capital wealth. In addition, gender a substantial gain in the value of the inequality leads to child marriage index, suggesting that gains can indeed and early childbearing for mothers, be achieved over time. which in turn leads to higher risks of under-5 mortality and stunting for Given its level of economic both genders. development, Tanzania’s HCI value is slightly below predicted values given While there was only a small gain in GDP per capita, putting the country Tanzania’s HCI values between 2012 in the bottom 35 countries globally. In and 2017, there were noticeable Figure 23, countries are positioned for changes in some components of the total HCI and each of the five HCI variables index. The difference between 0.40, according to the logarithm of their GDP the value in 2017, and 0.39, the value in per capita in purchasing power parity Table 3: Human Capital Index Estimates for Tanzania, 2012 and 2017 2012 2017 All Men Women All Men Women Survival           Probability of surviving 0.934 0.930 0.938 0.946 0.942 0.950 past age 5 School           Expected years of 7.4 7.5 7.4 7.8 7.7 7.8 schooling Harmonized test 434 425 443 388 382 395 scores Health           Survival to age 60 0.713 0.674 0.752 0.792 0.770 0.814 Probability of avoiding 0.652 NA NA 0.655 0.633 0.678 stunting Human Capital Index 0.390 0.370 0.390 0.400 0.390 0.410 Uncertainty interval [0.38,0.41] [0.35,0.38] [0.38,0.41] [0.39,0.41] [0.38,0.40] [0.40,0.42] Note: HCI Value rounded. Source: World Bank 2018. PAGE 34 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region (PPP) terms on the horizontal axis, with years of schooling and a high stunting the HCI or the variable on the vertical rate. Table 4 shows comparisons with a axis. Trendlines through scatter plots few African and Asian countries; the HCI provide the expected value of the HCI for Kenya is 0.52, more than 20 percent given country economic development. higher than the value for Tanzania. Tanzania, identified by a red dot, falls In comparison to other countries, slightly below predicted values on the Tanzania does especially poorly in terms overall index, due mostly to too few of the number of years of schooling Figure 23: Human Capital Index Across Countries (Red Dot = Tanzania) Source: World Bank 2018. PAGE 35 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Table 4: Human Capital Index Estimates for Tanzania and Selected Other Countries Africa Asia Tanzania Kenya Senegal Cambodia Nepal Vietnam Survival           Probability of surviving 0.95 0.95 0.95 0.97 0.97 0.98 past age 5 School     Expected years of 7.8 10.7 7.2 9.5 11.7 12.3 schooling Harmonized test scores 388 455 412 452 369 519 Health     Survival past age 60 0.79 0.79 0.82 0.83 0.85 0.88 Probability of avoiding 0.66 0.74 0.83 0.68 0.64 0.75 stunting Human Capital Index 0.40 0.52 0.43 0.49 0.49 0.67 Source: World Bank 2018. that children complete and the risk and behavioral constraints due, to, e.g., that children under the age of five will social norms or inadequate knowledge be stunted. However, even in other about, good nutritional practices as dimensions, outcomes tend to be poor. well as water supply, sanitation, and hygiene. To benefit from synergies Both sector-specific and multisectoral across interventions, programs such as interventions are required to TASAF (Tanzania Social Action Fund) improve the HCI, and to increase the could continue to serve as a platform to future earnings potential of young deliver multiple interventions directed Tanzanians. Not all the options can especially to vulnerable children and be discussed here, but a few pointers families. can be provided based both on studies elsewhere and the specific characteristics Improving the School Component of of Tanzania today. The discussion below the HCI starts with sector-specific interventions. Relieving some binding supply-side Improving the school component constraints related to service delivery requires gains in both the length of will require better schools and health schooling and the effectiveness of facilities and depend on reliable learning. This will require not only provision of quality basic services, such specific interventions, some of which as clean water. Other challenges are are outlined below, but also consistent, on the demand side due to, e.g., basic expanding, and smart investment in services not being affordable because education, supported by efficiency of out-of-pocket and opportunity costs, gains. Secondary education in particular PAGE 36 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Box 5: Investing in Human Capital: The Experience of East Asia The four countries that top the HCI ranking—Singapore, South Korea, Japan, and Hong Kong—are all in East Asia; Singapore’s HCI value of 0.88 is more than twice that for Tanzania. Tanzania and other African countries can learn from the East Asia experience. Part of the success of these East Asian countries in achieving high values on the HCI and high growth rates for GDP per capita is that they made investing in youth a high priority. As they went through rapid industrialization from the early 1960s to the late 1990s, they invested heavily in education and labor force skills acquisition. The successive development plans of South Korea, for example, emphasized education and training. Initially, governments focused on improving and universalizing basic education to ensure that labor-intensive industries would find the employees they required. As the focus for growth shifted progressively to more technology-intensive industries, governments invested more in upper secondary and tertiary education and in technical and vocational education and training, giving more attention to the quality of the education provided. The rapid decline in fertility rates was also important because it limited the size of new cohorts entering the education system, thus making it more affordable. Education and training policies required substantial budget allocations, but expanding the role of the private sector in education was also crucial. is expected to grow substantially in and overcrowded classrooms in the the coming decade due to population early grades result in poor learning, growth, rising primary completion grade repetition, and ultimately rates, and the fee-free education policy dropouts. These problems can recently adopted. Budget allocations be eased by expanding access must rise to track the expansion, and to preprimary education so that efficiency gains are necessary to ensure children are prepared for primary that the expansion is sustainable. school, and making the environment Attention will need to be paid to the conducive to learning with smaller cost effectiveness of various programs, class sizes, better-trained teachers, reducing investments in costly programs and reliance as needed on the with limited impacts to invest in more language children speak at home. promising alternatives. Apart from fiscal constraints, simply achieving quality in „„ Reducing dropouts: Throughout schools with an influx of new students primary and secondary education, will be a challenge. students drop out, but risks are largest when children transition Priorities include solving the early- from one cycle to the next. One grade “traffic jam,” reducing drop common reason for dropping-out outs, and broadening system capacity, is that the cost is not affordable, especially for secondary students. though the Fee-Free Basic Education Policy (FFBEP) and „„ Relieving the early-grade traffic Tanzania’s conditional cash transfer jam: In Tanzania, as in many other program are now helping with African countries, large class sizes this problem. Child marriage and PAGE 37 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION early childbearing also cause girls There are also program options to to drop out of secondary school. enhance student learning. In Tanzania Getting the most out of FFBEP and as in many other countries, within Africa other programs requires a focus on and elsewhere in the developing world, narrowing gender disparities, e.g., student learning outcomes, as measured by allowing young mothers to return by national and international student to formal education and improving assessments, are poor. Among priorities access to comprehensive education for action in this area are recruiting on sexual and reproductive health more teachers to meet standards and and services.9 Schools should also emphasizing mathematics, science, provide access to water, latrines, and other areas where the shortages and separate hygienic facilities, are acute. Efforts to build up in-service especially for adolescent girls. teacher training should continue, Finally, physical, sexual, or other in order to increase teacher subject harassment of girls at school or knowledge. Outcomes for girls could be while travelling to and from school helped by in-service teacher training that must be prevented. challenges gender differences in teacher expectations and by appointing teacher „„ Expanding capacity: Secondary mentors to support girls. Nonmonetary education completion rates are awards for teachers based on student low for both boys and girls in part performance could also improve because of shortages of both learning outcomes, generating gains schools and teachers. A school in teacher effort. Combining teacher construction strategy is being incentives with additional resources to drafted to bring schools closer to improve the learning environment has children’s homes so they do not have already proved successful in improving to travel so far to school. The pupil- outcomes. To measure learning in basic teacher ratio, which has risen, needs education, it should be assessed more to fall back again. Equitable teacher frequently. Finally, there is a need to deployment should be accompanied ensure that skills training programs are by an effective capitation grant responsive to demand from the labor formula. But at a more basic level, a market, possibly by creating sector skills major task ahead is to train all the councils with private participation and new teachers that will be needed to providing incentives for aligning skills accommodate the rapidly increasing training with the labor market through number of students in secondary competitive funding. schools. 9 When considering programs, possible impacts and costs should both be analyzed. The impact of some programs has been promising. This proved true for Camfed programs to cover the direct and indirect costs of schooling for girls as well as community-led initiatives to engage parents and train teacher mentors, staff, and parents to use low-cost resources to improve the quality of education. The program has helped narrow gender inequalities and raised secondary student learning (Alcott et al. 2017), yet was more cost-effective than conditional cash transfer programs (Sabates et al. 2018). However, this type of program could also be high cost; detailed cost-benefit and sustainability analyses are necessary to assess the potential for scale-up. PAGE 38 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Box 6: Basic Infrastructure, Education, and Health Outcomes Simple hand washing with soap can substantially reduce the risk of diarrhea and acute respiratory infections for children, which both reduces child mortality and encourages better attendance and performance in school. But hand washing depends on good-quality water and sanitation infrastructure. As another example of interaction between basic infrastructure and human development outcomes, lack of adequate toilet facilities has an impact on girls in particular who are less likely to attend school during their menstrual cycle and particularly impacted by a lack of cleanliness or privacy. Clearly, multiple programs, including investments in basic infrastructure, need to be effectively in place to ensure child survival and favorable nutrition outcomes. In Tanzania, the new Sustainable Rural Water Supply and Sanitation Program has focused on improving targeting of WASH services to vulnerable populations, but progress in increasing access to improved water and sanitation has been slow. Dialogue with the government has helped identify target areas for WASH investments under the Rural Water Supply and Sanitation Program-for-Results operation. Building up Tanzania’s HCI Survival problems. Furthermore, to accelerate and Health Components progress in the areas of both nutrition and the health of women and children, Although additional efforts are needed in 2018 the government-initiated to improve health and nutrition compacts and performance contracts outcomes, efforts already underway with regional commissioners to hold should be acknowledged, among them them, and district commissioners, Health Sector Strategic Plan (HSSP) III accountable for results and for tracking 2014-19, the Reproductive, Maternal, progress against scorecards containing Newborn, Child and Adolescent Health key indicators. (One Plan II – 2016-20), the 2016–21 National Multisectoral Nutrition Action Investments in early childhood Plan launched in September 2017, and development (ECD) are especially the 2019–22 National Accelerated important to the HCI survival and Action and Investment Agenda for health components. High rates of neo- Adolescent Health and Wellbeing, natal mortality and stunting are graphic which was drafted to focus the country demonstrations of the lack of investment on gaps in adolescent health and well- in young children. Yet investing in young being that need to be addressed (Box children is one of the best investments 8). While mobilizing the necessary countries can make because a child’s resources to fully implement the Plan earliest years open a unique window and the Agenda will not be easy, they of opportunity to address inequality, do reflect the government’s vision break the cycle of poverty, and improve and commitment to addressing these a wide range of lifecycle outcomes.10 10 Black et al. 2017. PAGE 39 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Box 7: Deepening Productive Safety Nets to Improve Human Capital The Tanzania Social Action Fund (TASAF) was established in 2000 and implemented through 2012. After the evaluation of a pilot cash transfer program that showed positive impacts on education and health outcome for children, the program evolved into a productive social safety net (PSSN) intervention. The PSSN has since then been providing conditional cash transfers together with public works and livelihoods services, reaching one million households (15 percent of the poor). A recent impact evaluation found that the program had positive impacts on savings and asset accumulation, farming practices and the utilization of agricultural inputs, and higher rates of self-employment. Food consumption and dietary diversity, enrolment of children in school, and health visits and health insurance registration also improved. Building on these strong results, a second generation PSSN could include: (i) enhanced capacity, skills and knowledge to improve productivity and enable households to shift towards more lucrative activities that would also improve consumption smoothing when faced with shocks; (ii) support to children in early childhood and for continued schooling; and (iii) asset accumulation and diversification for households to manage risks. Expansion in the coverage of the PSSN is needed to reach larger vulnerable groups. The program could play a major role for multisectoral interventions in communities – thus achieving with efficiency and effectiveness the goal of investing in the human capital of the poor and vulnerable. Investments in ECD usually have high For reducing stunting, both nutrition- economic rates of return, particularly specific and nutrition-sensitive compared to investments made later interventions are needed. Nutrition- in life. Programs that address multiple specific interventions include promotion drivers of malnutrition simultaneously of exclusive breast-feeding for six and combine services across sectors months, micronutrient supplements, such as health and nutrition, and access to clean water and proper psychosocial/early stimulation, and sanitation and hygiene practices improved water supply and sanitation, feeding, and caregiving practices – and that extend to communities can be which are provided primarily through especially beneficial.11 It should also be the health sector. Emerging evidence recognized that there are social barriers suggests, however, that certain in improving ECD outcomes, as parents nutrition-sensitive interventions are also are often not aware of what they could beneficial, especially in the agriculture do – such as ensuring sufficient early sector through, e.g., biofortification to stimulation – to improve outcomes for enhance the micronutrient content of their children. Improving ECD outcomes staple foods. Similarly, education can thus requires mechanisms to inform be nutrition-sensitive by distributing, parents apart from other interventions. where needed, deworming tablets to 11 As guidance for policy makers, Denboba et al. (2014) suggest 25 interventions that are essential for young children and can be delivered as five integrated packages at different stages in a child’s life: (1) a family support package, provided from gestation until the child enters primary school; (2) a pregnancy package; (3) a birth package, from birth to six months; (4) a child health and development package; and (5) a preschool package. PAGE 40 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Box 8: Strategies and Commitments to Improve Reproductive, Maternal, Neonatal, Child and Adolescent Health and Nutrition (RMNCAH-N) Outcomes Several strategies and new policies have recently been adopted by the government to improve education and health/nutrition outcomes. As an example, in the area of RMNCAH-N, the following strategies and commitments can be mentioned for the mainland: (1) Health Sector Strategic Plan (HSSP) IV for 2015-20; (2) National Road Map Strategic Plan to Improve Reproductive, Maternal, Newborn, Child and Adolescent Health (One Plan II) for 2016-20; (3) National Multisectoral Nutrition Action Plan (NMNAP) for 2017-2; (4) National Accelerated Investment Agenda for Adolescent Health and Wellbeing (NAAIA) to be launched for 2019- 22; (5) National Family Planning Costed Implementation Plan to be launched for 2019-23; and (6) Joint Health Policy Commitments for 2019-2. For Zanzibar, strategies and commitments include (1) the Health Sector Strategic Plan (HSSP) III for2014-19; and (2) the Multi-sectoral Nutrition Action Plan to be launched for 2020-24. The challenge will be to succeed in implementing these strategies at scale. school children, which also contribute to accelerate the demographic to better health outcomes and transition, which would help improve higher productivity later in life. Social survival and other health and nutrition protection programs such as PSSN indicators. Three types of interventions can be designed to condition cash can accelerate the demographic transfers on uptake of basic health transition: (1) family planning and and nutrition services, thus helping reproductive health services; (2) services to dismantle demand-side barriers to for maternal and child health and these services. Simple hand washing nutrition; and (3) efforts to improve girls’ with soap can substantially reduce the education and empowerment to delay risk of diarrhea and acute respiratory marriage and childbearing.12 Targeted infections for children, which both and integrated support programs are reduces child mortality and encourages needed to address the needs of poor better attendance and performance and vulnerable households especially in school. But hand washing depends for women in lagging regions. This could on good-quality water and sanitation be complemented with information infrastructure (Box 7). Clearly, multiple campaigns on girls’ education, children’s programs need to be effectively in place health/nutrition, and population. Many to ensure child survival and favorable of these areas, as well as broader nutrition outcomes. interventions for health and nutrition (Box 8), are already being considered Finally, it should be acknowledged by the government, but the challenge again that more can be done will be to succeed in implementation at scale. 12 See Schneidman et al. 2018. PAGE 41 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION 2.3 Improving the Productivity to 2014. All estimates are in real terms of Current Workers and (constant 2014 US dollars). In absolute Human Capital Wealth value, Tanzania’s wealth in 2014 was US$904 billion—45 percent more in Apart from investments in children, real terms than in 1995. However, due investments in adults are also an to high population growth, per capita essential component of a human wealth decreased substantially, from development strategy, including for US$20,900 to US$17,451. Since wealth increasing human capital wealth. per capita is what matters for future Estimates of the changing wealth of standards of living, Tanzania’s progress nations from 1995 to 2014 are available toward sustainable development was for 141 countries, including Tanzania.13 A minimal. Even moving the base from country’s wealth mainly consists of three 1995 to 2000 is no help: there was types of capital: Produced capital comes virtually no increase in per capita wealth from investments in assets like factories, by 2014. Findings are similar for SSA as equipment, or infrastructure. Natural a whole, although many countries in the capital consists of agricultural land region made substantial progress. High and both renewable and nonrenewable population growth can make it harder natural resources. However, globally the for many countries to increase wealth largest component of national wealth per capita. Even in comparison to SSA is typically a country’s people. Human countries that tend to have low levels capital measured as the present value of human capital wealth, the profile of of the future earnings of the labor force Tanzania’s wealth by asset categories accounts for two-thirds of global wealth. shows a smaller share of human capital in Human capital accounts in high-income total wealth. The estimates call for more countries for close to 70 percent of total investment in human capital, which as wealth but in low-income countries for countries develop tends to represent a only 40 percent. As countries develop, larger share of total wealth. Tanzania’s the share of natural capital declines, limited HCW also has implications for making way for a larger share of human whether it can reduce the share of its capital in total wealth. population in poverty since labor market earnings and productivity are what Although Tanzania’s wealth increased mainly drive household consumption. by 45 percent over two decades, high population growth kept wealth per A first factor limiting the ability of capita at best stagnant. Table 5 provides Tanzania to increase wealth per absolute value and per capita estimates capita and thus raise standards of of Tanzania’s national wealth from 1995 living is persistently high fertility and 13 Lange et al. 2018. PAGE 42 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Table 5: Estimates of Tanzania’s Total and Per Capita Wealth (US$, millions) 1995 2000 2005 2010 2014 National wealth (Millions, constant 2014 US$) Total wealth 624,992 556,715 602,406 737,857 904,336 Produced capital (including urban land) 84,600 112,412 108,369 122,371 165,784 Natural capital 355,426 234,184 242,603 328,736 416,615 Human capital 209,877 224,138 265,175 300,762 347,525 Net foreign assets -24,912 -14,019 -13,741 -14,012 -25,588 Population (millions) 29,903,329 33,991,590 39,065,600 45,648,525 51,822,621 Per capita wealth (constant 2014 US$) Total wealth 20,900 16,378 15,420 16,164 17,451 Produced capital (including urban land) 2,829 3,307 2,774 2,681 3,199 Natural capital 11,886 6,889 6,210 7,201 8,039 Human capital 7,019 6,594 6,788 6,589 6,706 Net foreign assets -833 -412 -352 -307 -494 Source: Lange et al. (2018). population growth. High population still growing at 3.1 percent annually, growth makes it harder to raise per with little change over time. Tanzania’s capita wealth. Population growth in turn population growth is also above the depends in part on fertility rates—the SSA average of 2.7 percent a year. High number of children women are expected population growth has implications for to have on average over their lifetime Tanzania’s ability to reap benefits from (i.e., throughout their childbearing years the demographic dividend.14 At some according to age-specific fertility rates). point the past decline in fertility rates will translate into lower annual population While most countries in East Asia, growth rates, but for population growth the Pacific region, Latin America, to decline faster, fertility rates must fall and North Africa and the Middle East further and faster. have gone through a demographic transition, this is not yet the case in Better access to modern contraception Tanzania and much of the rest of SSA. would help to reduce fertility rates. As shown in Figure 24 despite declining Proximate determinants of fertility fertility rates, Tanzania’s population is include the national marriage rate, the degree of contraceptive use, 14 For Tanzania specifically, see Schneidman et al. 2018. PAGE 43 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Figure 24: Fertility and Population Growth Rates Source world Bank, World Development Indicators the abortion rate, and the average constraints will help relieve the unmet duration of post-partum infecundity demand for contraception, which would (Bongaarts model). It is estimated that to some extent help to bring down women’s desired fertility (4.5 children in fertility. Reducing the unmet need Tanzania) is lower than observed fertility for contraception and changing the (5.0), but not by much. As a result, contraception method mix could help while better access to contraception accelerate the demographic transition. would help reduce fertility, that may not be as effective as interventions to Improving girls’ educational delay marriage and childbearing. Still, attainment and reducing child improving access to contraception will marriage would also lower fertility help, and it will require both demand- rates and reduce population growth. and supply-side interventions. The The earlier women marry, in Tanzania share of adult Tanzanian women using and elsewhere, the more likely they are modern contraceptive methods is 32 to bear children early.16 This ultimately percent, and unmet need is estimated leads women to have more children at 22.1 percent. Demand factors over their lifetime. Depending on age, limiting contraceptive use include both child marriage increases the average a lack of knowledge of sexual and number of children Tanzanian women reproductive health and also gender bear over their lifetime (total fertility) by norms that discourage women from 11 to 24 percent; simulations suggest using contraception.15 Supply-side that eliminating child marriage could factors include unavailability of modern reduce the national fertility rate by contraception, stock-outs, and lack of 6 percent. Universal completion of qualified health staff, such as midwifes, secondary education for girls could have to counsel women on, e.g., adoption an even larger impact, reducing the of longer-term contraceptive methods. fertility rate by 21 percent. Elimination Solving both supply and demand of child marriage and early childbearing 15 As noted in the 11th Tanzania Economic Update (World Bank 2018), ending child marriage could increase the use of modern contraceptives slightly, but more education for girls does not have a systematic impact on contraceptive use—primary education is associated with higher use of contraception, but not secondary. 16 According to analysis adapted from Onagoruwa and Wodon 2018. PAGE 44 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Table 6: Fertility Rates and Population Growth for Tanzania and Selected Other Countries Africa Asia Tanzania Kenya Senegal Cambodia Nepal Vietnam Fertility rate 5.0 3.9 4.8 2.6 2.1 2.0 Population growth (%) 3.1 2.5 2.8 1.5 1.1 1.0 Source: World Bank 2018. in Tanzania could reduce the annual rate are disempowered in ways that deprive of population growth by 0.17 percentage them of their basic rights, which affects points—a reduction in the annual rate of not just them but also their children. For population growth of about 5.5 percent example, children of young mothers are from the base value (3.1 percent).17 This often at higher risk of dying by age 5, estimate is similar in magnitude to the being malnourished, and doing poorly estimated reduction in total fertility. in school. Detailed analysis of these Again, reductions in population growth impacts and their associated economic rates could be even larger if all girls were costs are available in the 11th economic able to complete secondary education, update for Tanzania. since universal secondary education has more impact on total fertility than Although interventions to delay eliminating child marriage. Finally, it is marriage and childbearing, and important to recognize that if all girls thereby reduce fertility, need to be completed secondary education, that country-specific, lessons can be would virtually eliminate child marriage, learned from other countries. Many since girls who are in school rarely marry countries have passed laws to prevent before the age of 18. marriage before the age of 18. For educational attainment, especially at Delaying marriage and childbearing the secondary level, there is a need to and improving educational attainment have schools closer to where both boys for girls would have numerous benefits and girls live. As an alternative, adequate beyond simply reducing fertility rates and safe transportation to schools could and population growth. Girls marrying be provided, but this is not always or dropping out of school early are feasible. When schools are not too more likely to have poor health and far away, if there are safety concerns, earn less in adulthood, which makes it communities may identify responsible more likely that their households will be members to accompany girls to school poor. They are also at risk of intimate and back. Beyond access to schools, partner violence and lack decision- providing separate water, sanitation, making ability within the household. and hygiene facilities for girls is also Fundamentally, girls who marry, have important, as is the need to reduce the children, or drop out of school early risk of violence and sexual harassment 17 Estimates for Tanzania are based on an extrapolation of results for 22 countries where simulations were conducted using demographic projection tools. Comparison with impacts on fertility rates suggest that estimates of the reduction in population growth are reasonable, given the measured impacts on fertility through regression analysis. PAGE 45 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION in school. Lessons from other countries Like programs to delay marriage and also suggest that programs to provide childbearing, interventions to achieve life skills and reproductive health gender equality in earnings must be knowledge, to expand economic country-specific, but again there are opportunities, and to provide incentives lessons in the literature in addition to for girls to remain in school or delay achieving gender parity in educational marriage, are effective.18 attainment. Interventions should focus on three main areas: (1) reducing time Also limiting the ability of Tanzania spent by women in unpaid work and to increase wealth per capita and redistributing care responsibilities to raise standards of living is gender increase the time they spend in the labor inequality in earnings. Increasing the market; (2) giving women more access earnings of both men and women would to and control of productive assets; and help increase HCW per capita, but given (3) addressing market and institutional the prevailing gender inequality in failures.19 earnings, policies and programs should place more emphasis on increasing the Beyond its impact on human capital earnings of women. In 2014, women wealth, gender inequality affects accounted for 35.5 percent of HCW other development outcomes that in Tanzania and men 64.5 percent. have implications for women and Women’s human capital could have their children. Gender inequality has risen from US$123 billion to US$234 implications not only for women’s billion in a simple gender equality earnings but also for a wide range of scenario whereby women would earn as other areas that for simplicity can be much as men, without losses for men. considered as pertaining to women’s In other words, gender inequality may roles at home as wives and mothers have caused a loss in HCW of US$111 rather than their role at work. Gender billion. With gender equality, in 2014 inequality heightens the risks of child HCW would have been larger by an marriage, early childbearing, and less estimated 31.9 percent. For total wealth use of modern contraceptives. Children (including natural and produced capital of young and poorly educated mothers and net foreign assets), the increase are often at greater risk of dying by would have been an estimated 12.3 age 5, being malnourished, and doing percent. Per capita, gender inequality poorly in school. Gender inequality at may be costing the country of the order home also raises the risk to women of of two thousand dollars per person—a intimate partner violence. And because severe loss for a low-income country their voice and agency are limited, like Tanzania. Gender equality would women have less ability to contribute to certainly have significant benefits. household decision-making. 18 Botea et al. 2017. 19 Wodon and de la Briere 2018. PAGE 46 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 2.4 Conclusion The analysis in this report remains intentionally limited. Many other Countries that invest in their people dimensions could have been considered, are better positioned to benefit from such as the distinction between urban the changing global economy. They and rural areas, or between various also reduce poverty much faster. parts of the country, so that policies can Tanzania would be well-advised to be adapted to differences in needs at reposition the policy and strategic the local level. The report also provides dialogue and the development narrative only general directions for programs with human capital at the center. Both and policies, as opposed to specific should recognize the importance of recommendations. The World Bank empowering women’s (through child team is in the process of preparing a spacing and family planning as well set of thematic notes that will provide as lessening child marriage and early analysis for various sectors that could childbearing); investing in young inform government decision-making. children (to reduce under-5 mortality The government has already made and stunting); and both expanding major strides in investing in its people. access to secondary education and But more can be done. Tanzania should raising the quality education throughout now move much more deliberately the system. This report suggests a need to direct investments to high-impact for stronger investments in people in programs for both the demand and Tanzania. supply sides; increase investments; and target resources to priority regions in order to greatly improve the standards of living of all Tanzanians. PAGE 47 TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION PAGE 48 Macroeconomics, and The World Bank Group Macroeconomics Trade and Management Fiscal Investment Global GlobalPractice, Africa Practice, Region Africa Region 3 Statistical Annexes PAGE 49 50 PAGE STATISTICAL ANNEXES Annex 1, Key Macroeconomic Indicators 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 National Acciounts and Prices GDP at constant market price (% change) 5.3 6.3 7.7 4.5 6.8 6.7 6.2 6.9 6.8 Agriculture 4.2 3.2 2.5 3.4 2.8 6.9 5.4 4.8 6.0 Industry 3.4 9.2 11.8 4.2 10.5 6.0 9.7 11.7 10.7 Service 5.5 7.8 8.2 6.4 5.1 9.3 6.4 6.3 5.3 Inflation (e.o.p) 12.1 5.1 12.7 16.0 7.9 6.1 5.6 5.2 5.3 3.5 TA N Z A N I A E C O N O M I C U P D AT E Per capita (in US$) 681.4 726 765 870 969 1000 912 934 1005 1056.0 Fiscal (% of GDP, fiscal year) Revenue and grants 16.0 15.2 15.3 15.9 15.4 15.6 14.0 14.8 16.3 16.1 Tax and nontax revenue 12.2 11.8 11.9 12.6 12.8 13.5 12.8 14.3 15.3 15.3 Grants 3.8 3.4 3.4 3.2 2.6 2.1 1.2 0.5 1.0 0.8 Expenditure and net lending 19.6 20.4 19.5 18.9 20.5 18.5 17.1 18.3 17.4 20.0 Overall balance (excluining grants) -7.4 -8.6 -7.7 -6.2 -7.7 -5.0 -4.3 -4.0 -2.1 -4.8 Overall balance (including grants) -3.6 -5.2 -4.3 -3.0 -5.1 -2.9 -3.1 -3.5 -1.1 -3.9 Financing 3.4 4.8 4.8 3.6 5.0 3.3 3.3 3.5 1.5 3.9 Foreign financing (net) 2.7 3.4 2.2 3.0 3.9 3.0 3.1 1.4 1.6 2.5 Domestic financing (net) 0.6 1.4 2.6 0.6 1.1 0.3 0.2 2.1 -0.1 1.5 Money and Credit M3 (% change) 17.7 25.4 18.2 12.5 10.0 15.6 18.8 3.4 8.0 4.5 Credit to private sector (% change) 9.6 20.0 27.2 18.2 15.3 19.4 24.8 7.2 1.7 4.9 External sector (US$ million unless otherwise) JULY 2019, 12TH EDITION Exports (goods and services) 5,086 5,743 7,051 7,987 8,335 8,886 8,877 9,341 8,813 9,447 Imports (goods and services) 7,876 8,365 9,996 12,946 12,871 13,966 13,348 11,597 9,596 11,519 Gross official reserves 2,930 3,482 3,610 3,797 4,357 4,638 4,285 3,870 5,022 4,944 (months of imports) 4.5 5.0 4.3 3.5 4.1 4.0 3.9 4.0 6.3 5.2 Current Account Balance (% of GDP) -7.8 -7.1 -7.9 -13.1 -10.5 -10.7 -9.8 -6.5 -3.0 -3.8 Exchange rate(Tsh/US$; e.o.p) 1,314 1,379 1,572 1,569 1,603 1,655 1,974 2,179 2,230 2,274 Debt Stock and Service Total public debt (% of GDP) 22.9 22.9 25.7 26.8 29.1 30.0 32.4 38.6 38.1 37.8 External debt (public sector, % of GDP) 16.2 17.6 20.2 21.1 22.6 23.2 24.7 30.8 22.3 23.9 Domestic public debt (% of GDP) 6.7 5.3 5.5 5.7 6.5 6.9 7.7 7.8 15.8 13.9 Source: Tanzania authorities, IMF, and World Bank. Annex 2. Annual Real GDP Growth Rates (Percent Change) Economic Activity 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Agriculture and Fishing 7.5 5.1 2.7 3.5 3.2 3.2 3.4 2.3 2.1 3.6 Crops 7.8 5.5 3.7 4.8 4.2 3.5 4.0 2.2 1.4 3.7 Livestock 8.1 5.3 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 Forestry and Hunting 3.8 5.1 3.4 3.3 3.5 4.7 5.1 2.6 3.4 6.3 Fishing 7.2 0.5 0.9 2.6 2.9 5.5 2.0 2.5 4.2 2.7 Source: National Bureau of Statistics. Industry and construction 6.6 3.3 9.1 12.0 4.0 9.5 10.3 11.3 10.7 12.1 Mining and quarrying -9.5 18.7 7.3 6.3 6.7 3.9 9.4 9.1 11.5 17.5 Manufacturing 11.4 4.7 8.9 6.9 4.1 6.5 6.8 6.5 7.8 7.1 Electricity 8.1 4.3 13.4 -4.3 3.3 13.0 9.3 5.8 8.3 2.2 Water 2.3 4.6 2.2 -1.2 2.8 2.7 3.7 0.1 4.3 16.7 Construction 9.7 -3.8 10.3 22.9 3.2 14.6 14.1 16.8 13.0 14.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Services 4.2 5.8 7.8 8.4 7.2 7.1 7.2 6.9 7.6 6.6 Wholesale and Retail Trade,Repairs 6.8 2.7 10.0 11.3 3.8 4.5 10.0 7.8 6.7 6.0 Transport and storage 3.3 6.9 10.7 4.4 4.2 12.2 12.5 7.9 11.8 16.6 Accomodation and Food Services 1.8 1.0 3.7 4.1 6.7 2.8 2.2 2.3 3.7 3.2 Information and communication 11.9 26.6 24.4 8.6 22.2 13.3 8.0 12.1 13.0 14.7 Financial and insurance activities 18.1 18.4 12.6 14.8 5.1 6.2 10.8 11.8 10.7 1.9 Real estate 1.7 1.8 1.8 1.9 2.0 2.1 2.2 2.2 2.3 2.4 Professional,scientific and technical activities 30.6 15.8 29.9 4.8 -5.8 5.4 0.5 6.8 6.3 6.0 Administrative and support service activities -1.8 0.4 8.6 5.1 23.8 12.2 6.0 4.7 2.1 3.7 Public administration and Defence -6.3 -0.7 -5.0 15.9 9.1 7.8 3.9 4.6 6.7 -1.3 Education 9.5 9.2 6.4 5.6 7.4 4.3 4.8 6.3 8.1 8.5 Human Health and social work activities 5.5 7.4 3.3 5.3 11.4 8.8 8.1 4.7 5.2 5.9 Arts, entertainment and recreation 6.4 3.0 7.3 7.7 11.0 5.7 5.7 6.2 8.8 7.6 Other social and personal services 5.1 5.9 6.0 6.2 6.4 6.5 6.7 6.9 7.2 7.3 Activities of households as employers 2.6 2.7 2.7 2.7 2.7 2.7 2.7 2.7 3.0 2.7 0.0 FISIM 6.8 20.0 7.9 22.6 1.2 0.1 9.7 11.7 16.3 18.5 Net taxes 5.0 12.8 3.8 12.1 0.4 14.2 7.7 9.6 7.8 0.5 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 0.0 Total GDP 5.6 5.4 6.4 7.9 5.1 7.3 7.0 7.0 7.0 7.1 Source: National Bureau of Statistics. 51 PAGE Annex 3. Share of Economic Activities in GDP (current market prices) 52 PAGE Economic Activity 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Agr icultur e and Fishing 28.8 30.2 29.9 29.4 31.1 31.2 28.8 29.0 29.2 30.1 Crops 15.3 16.0 16.6 16.5 18.0 17.5 16.1 15.6 15.6 17.0 Livestock 9.3 9.7 9.1 8.7 8.5 8.2 7.3 7.9 7.7 6.9 Forestry and Hunting 2.3 2.3 2.2 2.2 2.5 3.1 3.1 3.5 3.9 4.0 Fishing 1.8 2.2 2.1 2.1 2.2 2.4 2.2 2.1 2.0 2.2 -1.00 0.00 0.00 0.00 0.00 0.00 0.00 I ndustr y and constr uction 20.4 18.6 20.3 22.8 21.8 22.7 23.2 24.3 24.9 26.4 Mining and quarrying 3.0 2.8 4.1 5.1 4.9 4.2 3.7 4.0 4.8 4.8 Manufacturing 7.0 6.9 6.9 7.6 7.5 6.4 5.6 5.2 4.9 5.5 TA N Z A N I A E C O N O M I C U P D AT E Electricity and water 1.7 1.6 1.5 1.0 1.3 1.2 1.6 1.4 1.2 1.0 Electricity 0.9 0.9 0.9 0.6 0.9 0.8 1.1 1.0 0.8 0.5 Water 0.8 0.7 0.6 0.5 0.4 0.5 0.5 0.4 0.4 0.5 Construction 8.8 7.2 7.8 9.0 8.1 10.8 12.4 13.6 14.0 15.0 0.00 0.00 0.00 0.00 0.00 0.00 Ser vices 45.1 45.5 44.2 42.7 41.9 41.0 40.9 40.0 39.1 37.5 Wholesale and Retail Trade,Repairs 9.7 9.9 10.1 10.6 10.4 10.2 10.5 10.7 10.8 11.0 Transport and storage 6.0 6.2 5.8 5.2 4.4 4.2 4.3 4.3 4.3 4.3 Accomodation and Food Services 1.7 1.8 1.6 1.4 1.4 1.3 1.1 1.1 0.9 0.9 Information and communication 2.2 2.4 2.6 2.4 2.4 2.3 2.1 2.0 2.0 2.0 Financial and insurance activities 2.9 3.1 3.2 3.4 3.4 3.3 3.4 3.6 3.6 3.3 Real estate 5.2 5.1 4.6 4.3 4.3 3.8 3.7 3.2 3.0 2.7 Professional,scientific and technical activities 1.4 1.5 1.7 1.5 1.3 1.3 1.3 1.2 1.2 1.1 Administrative and support service activities 2.6 2.4 2.2 2.1 2.3 2.4 2.5 2.4 2.2 2.1 Public administration and Defence 7.0 6.7 6.1 6.3 6.5 7.0 6.6 6.4 6.3 5.4 Education 3.1 3.2 3.1 2.8 2.6 2.7 2.7 2.5 2.4 2.2 JULY 2019, 12TH EDITION Human Health and social work activities 1.6 1.8 1.7 1.6 1.5 1.4 1.4 1.4 1.4 1.4 Arts, entertainment and recreation 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Other social and personal services 0.9 0.9 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.7 Activities of households as employers 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 -1.00 0.00 0.00 0.00 0.00 0.00 0.00 FISIM -0.9 -0.9 -0.9 -1.1 -1.0 -1.2 -1.0 -1.1 -1.0 -0.9 Net taxes 6.6 6.6 6.4 6.2 6.3 6.3 8.1 7.8 7.7 6.9 T otal GDP 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: National Bureau of Statistics. Annex 4. Quarterly Real GDP Growth Rates (Percent Change) Year Quarter Agricultu Mining Manufa Electrici Water Constru Trade Accom Transpo Informa Financia Year Public Professi Adminis Real Educati Health Other All Taxes GDP at re and c-turing ty c-tion and modati rt and tion l& admi- onal, trative estate on services indust. on market quarryi Repair on & storage and insuran nistrati Scientifi & at basic product prices ng restaur commu ce on c& Support prices s ant nication Technic services al act. 2013 2.8 4.5 3.7 8.2 2.7 19.1 4.2 0.9 6.0 11.6 -1.1 2012 9.7 19.5 17.2 4.2 0.3 -3.1 8.9 5.7 17.7 6.8 2014 6.9 6.4 10.0 12.7 3.8 2.5 9.9 3.1 8.7 10.3 10.5 2013 6.7 16.3 19.0 4.2 13.4 8.4 9.8 7.7 -2.2 6.7 2015 5.4 10.0 7.1 -2.0 2.4 12.9 3.6 1.7 5.4 7.8 11.3 2014 7.2 15.7 10.5 4.3 10.4 5.1 5.1 6.9 -1.6 6.2 2016 4.8 7.4 10.8 8.8 6.9 14.5 5.9 4.1 5.7 2.2 1.1 2015 5.4 17.0 19.6 4.3 10.4 5.6 11.7 7.3 1.9 6.9 2017 6.0 5.3 8.2 1.0 8.5 15.1 6.1 3.2 6.7 6.2 -2.8 2016 2.4 14.5 10.8 4.4 7.3 7.6 10.3 7.0 4.5 6.8 1 0.4 -11.5 -4.5 10.6 1.0 18.2 -2.6 3.6 25.7 10.7 -4.5 11.7 20.8 13.6 4.1 -1.4 -3.2 10.0 3.7 12.6 4.5 2 3.7 3.0 0.2 7.6 0.8 16.8 1.6 1.3 3.1 13.0 -1.0 15.7 20.0 16.2 4.1 3.5 -1.9 8.7 5.2 24.0 6.8 2013 3 2.6 5.0 11.9 4.9 -7.1 18.8 9.7 -1.2 1.6 9.4 -0.5 8.8 19.2 18.4 4.2 -0.7 -4.6 7.9 6.7 20.4 8.0 4 4.2 22.2 7.6 9.7 16.1 22.4 8.6 0.2 -2.5 13.2 1.5 4.2 18.2 20.2 4.2 -0.1 -2.6 9.0 7.2 14.5 7.9 1 5.7 25.3 11.1 20.5 0.7 1.7 12.4 4.3 7.0 9.8 12.4 12.3 17.2 21.4 4.2 12.1 7.7 11.2 8.6 8.0 8.5 2 9.3 2.5 10.3 3.3 5.2 18.7 10.1 4.5 7.7 10.9 10.9 8.2 16.5 20.9 4.2 13.6 8.8 11.5 10.2 -5.6 8.7 2014 3 6.0 6.2 6.6 17.9 13.0 -6.7 7.5 2.1 11.4 15.5 9.0 4.1 16.0 18.8 4.2 14.0 6.9 9.2 5.8 -4.8 4.7 4 6.6 -4.2 12.1 9.6 -2.4 -1.7 9.8 1.6 8.7 5.6 9.9 3.4 15.6 15.3 4.2 13.9 10.3 7.3 6.3 -5.8 5.1 1 4.3 -1.5 6.9 4.9 10.2 11.7 1.9 0.0 1.8 12.7 9.2 2.6 15.5 10.7 4.2 9.3 2.7 4.4 5.1 -18.1 2.9 2 8.0 10.7 6.6 9.0 -1.9 7.3 5.8 1.7 3.7 8.6 9.0 4.4 15.5 9.0 4.3 9.2 0.8 4.2 6.9 4.7 6.7 2015 3 4.6 3.3 8.5 -10.2 2.6 16.7 6.3 2.9 4.6 6.6 12.0 11.0 15.7 9.7 4.3 12.0 9.0 5.1 7.6 7.6 7.6 4 4.6 27.2 6.4 -9.8 -0.6 16.4 0.7 2.2 11.3 4.1 14.7 10.2 16.0 12.6 4.3 10.8 7.9 6.8 8.1 0.6 7.4 1 2.8 10.2 13.4 1.4 -1.1 17.3 9.6 3.3 9.9 3.8 11.5 19.6 16.5 17.8 4.3 20.6 15.7 9.2 9.4 13.0 9.7 2 8.0 14.9 9.7 5.4 8.6 11.4 5.6 0.6 8.6 2.1 4.1 15.5 16.9 20.5 4.3 17.9 11.2 10.8 9.2 -2.5 8.2 2016 3 6.0 14.4 7.3 11.7 4.0 23.4 6.4 3.6 5.1 2.2 -2.1 -6.2 17.2 20.9 4.3 1.7 -4.2 12.3 7.7 -3.8 6.6 4 3.1 -6.3 13.2 17.5 16.0 6.6 2.2 8.8 -0.2 1.0 -7.9 -3.9 17.4 19.1 4.3 3.7 1.1 14.3 3.5 2.9 3.4 1 6.5 9.9 5.2 4.4 1.6 12.0 1.9 4.7 5.3 12.6 -5.8 -5.9 17.6 15.5 4.4 1.3 0.1 12.6 5.5 -3.0 4.9 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 2 14.7 -4.6 9.6 -1.0 4.2 21.2 5.1 3.5 5.0 6.4 -2.5 0.1 16.4 12.3 4.4 5.6 6.8 11.4 7.1 0.3 6.6 2017 3 4.1 4.2 13.7 3.9 10.0 -0.3 5.8 2.5 6.9 1.9 -5.3 7.5 14.0 9.3 4.4 11.3 11.1 9.8 5.1 4.0 5.0 4 6.4 12.1 4.5 -3.1 16.4 28.8 11.3 2.3 9.6 4.5 2.6 8.3 10.5 6.5 4.4 11.0 12.8 7.7 9.8 15.6 10.3 1 5.5 -5.7 5.4 -0.5 3.7 13.2 4.2 3.8 8.8 14.3 -2.7 12.2 8.4 4.5 4.4 12.4 18.3 5.0 6.5 15.1 7.1 2018 2 6.4 6.8 3.7 5.0 6.1 2.8 4.1 9.3 13.6 14.7 -1.7 3.4 7.9 4.8 4.4 5.5 6.9 5.2 5.5 16.3 6.3 3 4.0 1.9 7.3 3.7 10.7 7.4 7.1 5.7 12.4 7.3 4.7 7.2 8.4 5.7 4.4 7.6 13.2 2.7 6.5 10.6 6.8 Source: National Bureau of Statistics. 53 PAGE Annex 5. Inflation Rates (Percent Change) 54 PAGE Month Headline Food & Non Transport Housing, Furnishing, Clothing & Restaurants Miscel. Goods Alcoholic and Communi- Education Recreation & Health Overall Index Alcoholic Water,Electrici Housing Footwear and Hotels and Services Tobacco cation & Culture Beverages ty,Gas & Other Equipment & Entertainment (Exclude Food Fuel Routine consumed at Maintenance Restaurants) of House Weight (%) 100.0 47.8 9.5 9.2 6.7 6.72 6.4 4.5 3.3 2.1 1.7 1.3 0.9 Jan 2017 5.2 7.6 0.6 9.5 3.3 3.4 3.9 2.3 5.0 -0.9 1.8 0.7 4.8 Feb 2017 5.5 8.7 0.6 8.7 3.8 3.2 3.9 1.9 5.2 -1.5 0.8 1.4 3.3 Mar 2017 6.4 11.0 1.6 6.8 3.9 3.4 3.6 3.6 5.2 -0.1 0.8 1.2 3.0 Apr 2017 6.4 11.8 1.9 5.8 3.1 3.9 0.8 4.3 3.5 -0.5 0.8 1.3 2.5 TA N Z A N I A E C O N O M I C U P D AT E May 2017 6.1 11.6 1.3 4.6 3.2 3.7 0.9 4.0 3.0 -0.8 0.7 1.2 2.9 Jun 2017 5.4 9.6 0.4 7.1 3.2 3.8 0.7 3.7 3.0 -1.0 0.8 0.8 2.2 Jul 2017 5.2 8.9 0.1 7.1 3.3 3.8 0.8 4.0 2.4 -1.0 0.9 1.0 2.4 Aug 2017 5.0 8.6 -0.6 8.9 2.7 3.4 -0.3 3.7 2.5 -1.1 0.8 1.3 2.0 Sep 2017 5.3 9.3 -0.3 8.8 2.6 3.4 -0.3 3.4 2.5 -1.0 0.8 1.9 1.9 Oct 2017 5.1 8.8 0.2 7.6 2.8 3.4 0.6 3.0 2.6 -0.9 0.8 1.9 2.1 Nov 2017 4.4 7.4 0.1 7.8 1.8 3.1 0.3 2.6 2.5 -1.0 0.8 1.6 2.0 Dec 2017 4.0 6.2 0.0 8.3 1.3 2.9 0.3 2.5 2.6 -1.0 0.8 0.9 2.0 Jan 2018 4.0 6.3 0.3 7.1 1.8 2.7 0.8 2.6 2.6 -1.0 2.5 2.0 1.6 Feb 2018 4.1 5.4 1.6 8.6 1.6 3.3 0.9 2.7 2.3 -0.2 2.5 1.5 1.6 Mar 2018 4.0 4.7 1.4 10.4 1.9 3.2 0.8 1.2 2.0 -0.2 2.4 1.1 1.6 Apr 2018 3.8 3.6 1.8 13.1 2.0 2.6 0.8 0.9 1.6 0.1 2.4 1.2 1.6 May 2018 3.6 2.6 1.9 15.0 2.3 2.4 1.0 1.2 1.3 0.1 2.3 0.7 1.2 Jun 2018 3.4 3.4 1.7 12.0 2.4 2.2 0.7 1.4 0.3 -2.6 2.6 0.5 1.4 Jul 2018 3.3 2.8 2.5 12.3 2.6 2.4 0.8 1.2 0.8 -2.7 2.5 0.4 0.7 JULY 2019, 12TH EDITION Aug 2018 3.3 2.2 3.4 12.3 3.1 2.7 1.1 1.2 1.2 -2.6 2.5 -0.2 1.7 Sep 2018 3.4 2.0 2.8 13.1 3.0 3.2 1.9 1.3 1.9 -2.6 2.5 -0.2 1.3 Oct 2018 3.2 1.2 3.0 14.1 2.8 3.4 1.9 1.6 1.9 -2.7 2.4 -1.0 0.8 Nov 2018 3.0 0.4 5.1 13.4 2.9 3.3 1.9 1.7 1.6 -2.7 2.4 -0.7 0.8 Dec 2018 3.3 1.0 5.1 12.1 4.0 3.6 2.7 2.6 2.2 -2.6 2.4 0.1 1.0 Jan 2019 3.0 0.7 4.0 11.7 3.9 3.7 2.6 2.5 2.2 -2.4 2.0 0.2 1.0 Feb 2019 3.0 2.0 4.1 15.4 4.3 3.9 3.8 2.7 2.6 -1.9 2.0 0.2 1.5 Mar 2019 3.1 3.7 5.1 18.9 5.1 4.1 5.2 3.2 3.3 -1.0 2.1 0.3 1.9 Source: National Bureau of Statistics. Annex 6. Food Crop Prices (Regional Averages, TZS per 100Kg) Maize Rice Wheat Beans Sorghum Month Year Arusha Dar es Mbeya Arusha Dar es Mbeya Arusha Dar es Mbeya Arusha Dar es Mbeya Arusha Dar es Mbeya Salaam Salaam Salaam Salaam Salaam Jan 2016 70,515 64,942 68,000 158,859 193,322 162,500 83,364 129,195 116,818 168,208 201,097 143,182 83,542 88,276 - Feb 2016 66,269 66,122 64,455 183,942 194,093 162,500 78,917 134,880 122,273 145,756 194,802 145,000 71,109 106,756 - Mar 2016 59,908 64,428 60,400 185,250 191,493 171,000 75,967 124,484 125,000 131,617 183,556 157,000 74,733 109,673 - Apr 2016 54,612 63,417 53,875 168,846 187,139 163,333 73,000 120,833 131,875 124,833 177,618 152,500 68,038 117,167 - May 2016 47,955 58,881 53,400 161,515 173,144 154,250 88,894 109,630 119,500 131,970 176,486 137,500 63,773 111,074 - Jun 2016 50,972 59,974 50,923 158,194 162,884 136,346 77,806 115,019 110,385 122,472 177,866 135,192 68,042 99,103 80,000 Jul 2016 52,188 60,000 48,708 163,146 164,730 135,375 77,667 119,286 113,750 133,035 178,585 135,000 62,542 99,405 - Aug 2016 49,625 58,840 49,038 164,167 163,770 138,846 75,104 117,708 110,000 137,660 185,470 135,000 55,389 95,833 - Sep 2016 51,514 59,702 49,833 160,451 161,635 136,250 74,986 116,667 114,792 151,354 179,110 135,000 71,264 96,167 - Oct 2016 59,674 65,310 53,364 159,410 163,929 140,000 77,625 119,643 116,818 153,299 188,095 135,000 69,208 102,500 - Nov 2016 67,389 74,566 59,583 162,708 162,866 140,000 77,764 114,848 117,500 152,882 188,923 135,000 65,215 101,852 - Dec 2016 77,381 92,193 62,800 156,845 163,115 140,000 77,500 115,167 118,500 155,952 188,079 136,400 65,262 99,071 - Jan 2017 97,833 98,298 79,031 165,000 172,443 146,500 76,667 117,413 116,241 176,875 194,732 140,583 73,500 106,424 - Feb 2017 118,286 104,402 95,263 173,155 181,770 153,000 75,834 119,660 113,981 197,798 201,385 144,767 81,738 113,777 - Mar 2017 99,136 107,325 90,769 162,955 188,293 174,885 80,200 124,741 118,800 186,250 207,774 162,692 81,750 125,833 - Apr 2017 117,500 124,854 84,542 195,000 185,868 179,375 77,500 136,111 117,188 213,333 209,826 156,800 87,500 142,458 - May 2017 93,833 103,190 81,556 182,000 191,025 178,889 78,500 138,182 118,958 165,500 203,121 155,000 78,083 137,587 - Jun 2017 89,125 82,530 75,583 178,269 183,198 170,000 76,458 126,573 107,179 168,056 200,042 154,042 78,250 139,042 - Jul 2017 62,500 73,429 72,214 188,333 183,750 174,286 72,167 118,643 105,833 158,333 205,357 155,286 74,167 122,500 - Aug 2017 52,286 52,880 66,313 183,571 177,220 157,100 64,500 124,065 98,611 162,500 197,494 154,444 66,333 98,042 - Sep 2017 54,100 53,491 64,000 180,111 182,180 181,375 68,450 129,583 133,333 161,071 200,835 181,464 57,389 98,393 - Oct 2017 53,714 54,207 200,313 191,389 66,214 121,404 166,875 194,681 62,357 95,148 - Nov 2017 51,417 52,288 50,333 177,000 188,054 181,667 69,000 118,167 134,167 197,500 201,736 210,833 59,500 89,885 - Dec 2017 52,625 52,083 53,000 201,563 189,306 188,750 67,071 113,722 192,000 175,000 200,000 200,000 66,222 83,000 - Jan 2018 51,750 47,828 49,000 210,000 189,643 185,833 73,900 110,889 125,000 160,000 207,917 207,500 62,833 86,917 - Feb 2018 48,417 49,427 203,000 196,563 72,778 114,115 160,313 197,135 58,429 79,690 - Mar 2018 48,091 54,958 179,708 194,750 69,850 126,538 145,000 193,281 55,278 79,091 - Apr 2018 46,333 46,375 216,667 210,000 70,625 128,750 199,375 56,500 101,250 May 2018 46,500 49,333 35,000 190,000 170,000 195,000 72,500 130,000 141,000 155,000 206,667 147,000 61,000 85,000 Jun 2018 44,300 49,286 35,000 185,000 171,071 186,667 65,600 126,429 136,833 149,500 185,000 151,583 48,100 92,857 Jul 2018 43,833 42,167 35,000 185,000 145,000 190,000 63,167 125,833 136,000 137,500 186,667 152,500 46,333 85,000 Aug 2018 37,250 45,483 181,875 164,188 63,188 127,500 118,750 191,875 44,688 88,083 Sep 2018 35,182 40,855 360,000 328,788 63,591 119,377 118,409 190,269 47,727 80,758 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Oct 2018 34,071 36,524 31,000 180,000 167,024 180,000 63,857 127,381 100,000 120,000 186,429 170,000 44,000 76,190 90,000 Dec 2018 42,667 52,528 36,000 168,750 158,889 140,417 66,958 117,917 118,750 121,667 185,333 180,833 59,375 75,375 101,208 Jan 2019 43,275 58,200 36,000 177,000 171,333 140,000 66,500 126,667 120,000 123,500 192,567 180,000 39,100 77,667 101,500 Feb 2019 43,111 65,241 39,000 180,000 184,630 180,000 78,000 133,889 120,000 127,778 197,963 170,000 36,556 76,019 101,500 Source: Ministry of Industry, Trade, and Marketing. 55 PAGE TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Annex 7, Food Crops Prices (National Average, TZS per 100Kg.) Month-Year Beans Maize Rice Round Sorghum Potatoes Jan-16 173,501.3 67,044.9 178,803.4 78,980.5 85,906.5 Feb-16 171,919.0 67,316.0 184,137.0 77,635.0 92,338.0 Mar-16 158,487.4 64,206.9 178,886.3 77,352.7 91,720.6 Apr-16 151,563.0 57,944.7 174,746.3 86,147.2 90,966.1 May-16 150,429.7 54,992.3 158,951.0 91,921.1 93,853.6 Jun-16 149,124.8 53,987.4 148,128.8 89,686.5 97,810.8 Jul-16 149,624.0 55,803.0 144,652.1 84,006.7 89,777.2 Aug-16 149,699.1 55,855.5 139,595.8 82,074.3 89,885.7 Sep-16 151,356.5 56,984.0 138,550.5 77,548.2 84,896.4 Oct-16 164,655.8 64,054.5 145,466.1 81,764.0 96,777.5 Nov-16 169,725.8 72,620.2 147,787.4 81,385.9 102,690.8 Dec-16 171,742.9 85,159.8 152,274.2 79,426.4 104,545.1 Jan-17 175,602.4 93,356.3 162,745.3 83,467.5 94,899.7 Feb-17 179,461.8 101,552.9 173,216.4 87,508.7 85,254.4 Mar-17 180,705.0 103,143.0 171,760.0 78,960.0 117,288.0 Apr-17 182,930.0 106,077.0 177,932.0 81,556.0 133,440.0 May-17 176,695.0 94,915.0 177,830.0 84,572.0 123,913.0 Jun-17 171,701.0 81,938.0 175,283.0 82,145.0 117,939.0 Jul-17 165,057.0 69,693.0 170,895.0 77,478.0 101,856.0 Aug-17 168,027.0 57,629.0 170,855.0 70,653.0 95,879.0 Sep-17 172,795.0 56,401.0 179,845.0 68,494.0 88,864.0 Oct-17 164,917.2 54,389.2 187,153.5 67,159.4 88,897.5 Nov-17 178,768.9 50,818.8 184,648.0 67,465.8 74,250.8 Dec-17 175,312.5 61,402.9 192,401.4 70,613.5 74,915.7 Jan-18 177,044.3 49,880.4 194,293.5 76,225.9 76,809.1 Feb-18 178,078.5 48,530.1 199,294.9 70,096.2 72,134.7 Mar-18 166,248.2 45,876.4 180,224.3 69,900.9 78,401.5 Apr-18 170,814.2 42,662.3 195,545.6 69,903.5 76,636.7 May-18 174,586.7 41,850.4 170,952.5 70,983.6 91,327.2 Jun-18 165,420.6 42,721.9 160,080.8 74,153.3 87,824.4 Jul-18 161,234.1 41,282.9 153,053.2 77,358.1 68,168.0 Aug-18 153,880.6 40,520.1 146,181.4 79,721.3 80,448.4 Sep-18 154,304.0 39,908.0 247,492.0 81,736.0 76,052.0 Oct-18 158,809.5 33,865.1 175,674.6 81,558.0 70,063.5 Nov-18 Dec-18 162,611.1 43,731.5 156,018.5 86,598.0 78,652.8 Jan-19 165,355.6 45,825.0 162,777.8 82,434.0 72,755.6 Feb-19 165,246.9 49,117.3 181,543.2 75,069.0 71,358.0 Source: Ministry of Industry, Trade, and Marketing. PAGE 56 Annex 8. Balance of Payments (Percent of GDP, except where noted otherwise) 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 1. CA balance (including transfers) -7.8 -7.1 -7.9 -13.1 -10.5 -10.7 -9.8 -6.5 -3.0 -3.8 -3.9 Exports of Goods 11.7 12.4 15.0 15.5 12.9 12.0 11.1 12.4 9.9 9.0 8.5 o/w Gold Import of Goods -21.6 -20.2 -20.1 -22.4 -25.3 -22.5 -23.5 -23.7 -20.6 -20.9 -21.7 Services ( net) 0.6 0.5 0.5 0.2 1.3 1.4 1.7 2.0 3.6 3.2 3.1 Trade balance -10.6 -9.1 -9.5 -14.1 -12.1 -12.3 -10.9 -7.4 -5.6 -5.9 -5.9 Income ( net) -1.1 -1.5 -1.9 -1.8 -1.5 -1.4 -1.8 -1.9 -1.9 -1.9 -1.9 Current transfers ( net) 3.4 2.9 3.0 2.6 1.9 1.6 1.2 0.7 0.9 0.8 0.8 2. Capital and financial account 8.3 8.9 10.3 11.5 12.2 10.1 7.9 6.1 5.3 4.5 4.3 Capital account 1.4 1.7 1.7 2.2 1.8 1.6 0.9 0.7 0.9 0.9 0.8 Financial account 6.9 7.2 8.5 9.4 10.4 8.5 7.0 5.3 4.5 3.6 3.5 o/w Direct investment 3.9 3.2 4.6 4.2 4.6 4.4 3.4 3.3 1.8 1.9 1.8 3. Net errors and omission -0.4 -0.2 -2.1 2.4 -0.6 1.1 1.4 -0.3 0.1 0.6 0.0 4. Overall balance 0.1 1.6 0.3 0.8 1.1 0.5 -0.6 -0.8 2.4 1.2 0.4 5. Reserves and related items -0.1 -1.6 -0.3 -0.8 -1.1 -0.5 0.6 0.8 -2.4 -1.2 -0.4 Reserves assets -0.9 -1.9 -0.4 -0.8 -1.4 -0.5 0.7 0.9 -2.3 -1.0 -0.2 Use of Fund credit and loans 0.9 0.3 0.1 -0.1 0.3 0.0 -0.1 -0.1 -0.2 -0.2 -0.2 Source: Bank of Tanzania, IMF, and World Bank. The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 57 PAGE Annex 9. Fiscal Framework (Percent of GDP) 58 PAGE 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Estimated Revenue and grants 16.0 15.2 15.3 15.9 15.4 15.6 14.0 14.8 16.3 16.1 16.5 Domestic revenue 12.2 11.8 11.9 12.6 12.8 13.5 12.8 14.3 15.3 15.3 15.5 Tax Revenues 11.5 10.9 11.0 11.3 11.7 12.3 11.6 12.8 12.9 13.0 13.2 Non-Tax Revenues 0.7 0.9 0.9 1.3 1.1 1.2 1.3 1.5 2.4 2.2 2.2 Grants 3.8 3.4 3.4 3.2 2.6 2.1 1.2 0.5 1.0 0.8 1.1 Program grants 2.3 2.3 2.2 1.8 1.2 0.9 0.6 0.1 0.3 0.3 0.3 o/w Basket funds 0.6 0.6 0.7 0.5 0.4 0.3 0.1 0.1 0.2 0.2 0.2 Project grants 1.3 1.1 0.8 1.1 1.0 0.9 0.6 0.4 0.7 0.5 0.8 TA N Z A N I A E C O N O M I C U P D AT E 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Expenditure and net lending 19.6 20.4 19.5 18.9 20.5 18.5 17.1 18.3 17.4 20.0 21.1 Recurrent Expenditure 13.3 14.0 13.9 12.2 14.3 13.7 12.8 13.8 10.7 11.2 11.7 Wages and compensation 4.6 4.2 4.9 4.8 5.1 5.3 5.4 5.8 5.2 5.1 5.2 Interest Payments 0.7 0.6 0.7 0.8 1.2 1.3 1.5 1.5 1.6 1.5 1.9 Domestic 0.6 0.5 0.6 0.6 0.9 1.0 1.1 1.0 1.1 0.9 1.3 Foreign 0.1 0.1 0.1 0.2 0.3 0.3 0.4 0.5 0.5 0.6 0.6 Goods, services, and transfers 8.0 9.1 8.3 6.7 8.0 7.1 5.9 6.5 4.0 4.6 4.6 Development Expenditure 6.3 6.4 5.7 6.6 6.2 4.9 4.4 4.5 6.7 8.8 9.4 Domestically financed 2.6 2.5 2.0 3.3 2.9 2.5 2.7 3.0 4.7 6.7 6.2 Foreign financed 3.7 3.9 3.7 3.3 3.3 2.4 1.7 1.5 2.0 2.1 3.3 Overall balance (including grants) -3.4 -4.8 -4.8 -3.6 -5.0 -3.3 -3.3 -3.5 -1.5 -3.9 -4.6 Financing 3.4 4.8 4.8 3.6 5.0 3.3 3.3 3.5 1.5 3.9 4.6 Foreign financing (net) 2.7 3.4 2.2 3.0 3.9 3.0 3.1 1.4 1.6 2.5 3.8 JULY 2019, 12TH EDITION Gross foreign borrowing 2.8 3.6 2.3 3.2 4.1 3.3 3.4 2.0 2.6 3.4 4.6 Program loans 1.4 1.8 0.8 0.7 0.8 1.0 0.6 0.5 0.2 0.9 0.6 Project loans 1.4 1.7 1.3 1.0 1.1 0.7 0.8 0.8 1.2 1.1 2.1 Nonconcessional loans 0.0 0.0 0.2 1.4 2.2 1.6 2.0 0.7 1.2 1.3 1.9 Amortization -0.1 -0.2 -0.1 -0.1 -0.2 -0.2 -0.3 -0.6 -0.8 -1.0 -0.8 Domestic borrowing (net) 0.6 1.4 2.6 0.6 1.1 0.3 0.2 2.1 -0.1 1.5 0.8 Source: Tanzania authorities, IMF, and World Bank. Annex 10. Monetary Aggregates (Percent of GDP, except where noted otherwise) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Monetary aggregates M3 as % of GDP 22.9 24.6 24.1 23.5 22.1 22.5 23.4 21.1 20.8 20.3 M2 as % of GDP 17.2 18.0 17.1 17.2 16.3 16.8 16.7 15.3 15.4 15.0 M3 growth rate (%) 17.7 25.4 18.2 12.5 10.0 15.6 18.8 3.4 8.0 4.5 M2 growth rate (%) 20.8 21.8 15.0 16.0 10.9 17.0 13.4 5.3 10.4 3.8 Domestic credit Total Domestic credit (% of GDP) 13.3 15.2 16.8 17.7 17.7 19.4 21.6 19.3 17.0 17.5 Total domestic credit growth ( %) 21.3 32.8 33.8 21.3 17.4 24.1 26.8 2.5 -3.4 10.1 Private Sector credit ( % of GDP) 13.0 13.4 14.1 14.5 14.2 15.0 16.4 15.3 14.2 14.0 Private Sector credit growth ( %) 9.6 20.0 27.2 18.2 15.3 19.4 24.8 7.2 1.7 4.9 Interest rates structure Overall Tbills rate ( period average, %) 8.3 4.8 8.3 13.6 13.6 13.6 12.9 16.2 11.1 6.4 Average lending rate (%) 15.0 14.6 15.0 15.6 15.6 16.2 16.1 16.0 17.6 17.3 Average deposit rate( %) 6.8 5.9 6.3 8.4 8.3 8.4 8.9 9.2 10.0 8.2 Source: Bank of Tanzania. The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region 59 PAGE TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Annex 11. Interest Rates Structure (Percent) Source: Bank of Tanzania. PAGE 60 Annex 12. National Debt Developments (Million US$) The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region Source: Ministry of Finance and Bank of Tanzania. 61 PAGE Note: 1During the period. 2Position at the end of the period. TA N Z A N I A E C O N O M I C U P D AT E JULY 2019, 12TH EDITION Annex 13. Poverty by Geographical Region Poverty Distribution of Distribution of the Headcount the Poor Population HBS 2011/12 HBS 2011/12 HBS 2011/12 1 Basic Needs Poverty Line = TSh 36,482 Urban 15.5 15.9 28.8 Rural 33.3 84.1 71.2 Regions Urban 21.7 14.4 18.7 Rural 33.3 84.1 71.2 Dar es Salaam 4.1 1.5 10.1 Total 28.2 100.0 100.0 1 Food Poverty Line = TSh 26,085 Urban 6.0 17.7 28.8 Rural 11.3 82.3 71.2 Regions Urban 8.7 16.7 18.7 Rural 11.3 82.3 71.2 Dar es Salaam 1.0 1.0 10.1 Total 9.7 100.0 100.0 Source: National Bureau of Statistics. Note: 1 Monthly expenditure per adult. PAGE 62 The World Bank Group Macroeconomics, Trade and Investment Global Practice, Africa Region REFERENCES • Alcott, B., P. Rose and R. Sabates. 2017. Targeted, Multidimensional Approaches to Overcome Inequalities in Secondary Education: Case Study of Camfed in Tanzania. Background paper for the Learning Commission. 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