The World Bank (WB) is optimistic about Tanzania's economic growth prospects despite deteriorating global economic conditions.
The 19th Tanzania Economic Update, released in Dar es Salaam on Tuesday, said growth reached 4.6% in 2022 and is expected to rise to 5.1% this year, supported by an improving business environment and the implementation of structural reforms.
However, Tanzania's prospects are premised on a good global outlook and the government's timely completion of structural reforms to enhance economic competitiveness, improve the business and investment environment, and reduce regulatory compliance costs.
Growth forecasts have been revised downwards to reflect the impact of worsening global economic conditions caused by the war in Ukraine and Russia, which has disrupted global supply chains and a lack of rainfall in agricultural regions, the update said.
Compared with the government's forecast of economic growth of about 5.2% in 2023, the World Bank's data is slightly lower, mainly due to the continued recovery of tourism and the gradual stabilization of supply and value chains.
The report titled "Improving the Efficiency and Effectiveness of Tanzania's Fiscal Policy" shows that Tanzania has made some progress in expanding taxation, with the tax-to-GDP ratio increasing from 10% in 2004/2005 to 11.8% in 2022. twenty three.
At the same time, public expenditure as a share of GDP increased from 12.6% to 18.2%, still below the average for sub-Saharan Africa, low-income countries, and lower-middle-income countries.
Improving the efficiency and effectiveness of fiscal policy can help Tanzania increase revenue and increase public spending, paving the way for enhanced human capital outcomes, inclusive economic growth and citizen prosperity, the report said.
“Tanzania’s economy has been growing steadily and fiscal policies have been successful in reducing income inequality, but there is still room to strengthen these policies to improve public spending on priority projects,” said World Bank Country Director Nathan Bellette
“While additional resources are needed to close service delivery gaps in the social sector, there is room for improvements in spending efficiency within the existing system. If the healthcare system operates at peak efficiency, Tanzania could improve key health outcomes by 11%, while No additional resources are required.”
Finance Minister Dr Mwigulu Nchemba said the government values the World Bank’s Tanzania economic update and that the report is very useful in formulating various policy reforms to address the many economic challenges.
He commended President Samia Suluhu Hassan for his visionary leadership and commitment to promoting economic growth and providing clear direction for leveraging the private sector as an engine of growth.
Dr Nchemba said Tanzania’s economy was not immune to the adverse global situation caused by the war between Ukraine and Russia, which disrupted global trade and tightening of monetary policies by developed countries
“Tanzania’s economy has not escaped the impact of major global challenges such as Covod-19, the Russia-Ukraine conflict and climate change, and we are grateful for the cooperation of development partners, including the World Bank,” the minister said.
“Tanzania has experienced difficulties arising from disruptions to global supply chains. The lingering impact of the war in Ukraine, while we also face the impact of dollar scarcity...but despite the impact of the Covid-19 pandemic and the war in Ukraine, the economy is Strong growth.
"Economic growth is expected to be 4.7% in 2022, down from 4.9% in 2021, due to government policies to address the challenges posed by deteriorating global economic conditions," he said.
He said the strong growth was driven by government policies and programs to deal with the impact of the wars in Ukraine and Russia, a rebound in tourism and strategic investments in transport, energy and water infrastructure development.
"Our economy's positive growth is attributed to policies and programs that address the effects of the Ukraine-Russia war; strategic investments in energy, water, education, health and transportation infrastructure; and increased tourism activity," he said.
The minister said the government is taking various measures, including strengthening domestic revenue collection and controlling unnecessary expenditure.
"We continue to have friendly fiscal policies to attract investment and business to the country. By implementing the regulatory reform blueprint, we have eliminated some nuisance taxes and revenue has improved," the minister said.
