How Tanzania can translate growth into poverty reduction

Dar es Salaam. Tanzania is facing the dual challenge of economic growth failing to translate into poverty reduction while grappling with rapid population growth, according to the World Bank.

While the economy is projected to grow by 5.6 percent in 2024, with the long-run potential of around six percent, Tanzanians are still falling into poverty.

This was revealed during the launch of the 20th edition of the Tanzania Economic Update in Dar es Salaam on Tuesday.

New data shows that nearly 3 million Tanzanians fell into poverty during and after the Covid-19 pandemic.

In 2018, around 14 million Tanzanians were living in poverty, but by 2022, the number had risen to 17 million.

An additional 300,000 individuals had fallen below the poverty line by December 2023, bringing the total to 17.3 million individuals.

The World Bank projects that Tanzania’s population will double every 23 years, potentially reaching around 140 million by 2050.

World Bank country director Nathan Belete said this surge will intensify demand for education and healthcare services beyond the economy’s capacity, leading to challenges in job creation.

“For example, in the education sector, projections show that by 2061, the cost of public education would rise from the current 3.3 percent of GDP to 4.1 percent under the high fertility scenario, but could drop to 2.9 percent under the low fertility scenario,” he said.

Mr Belete added that Tanzania can nevertheless attain a demographic dividend, which is the potential economic growth that can take place when a country undergoes a rapid improvement in health outcomes accompanied by a decline in fertility.

This includes intensifying efforts to expand access and strengthen completion of secondary education for girls and scaling up family planning services.

“The government needs to continue to improve child survival interventions, as well as lowering stunting rates, to give parents the confidence to have fewer children,” Mr Belete said, adding that there is a need to continue to focus on adolescent girls and promote the economic empowerment of women and girls.

World Bank human development leader Aneesa Arur said Tanzania is one of eight countries that are expected to account for half of global population growth.

“For Tanzania to benefit from demographic dividend, three pre-conditions need to be in place. The first is a rapid decline in mortality followed by a rapid decline in fertility. The second pre-condition is investment in human capital to create a healthy, well-educated and skilled labour force and lastly is the creation of good jobs and economic opportunities for this skilled labour force,” she said.

Gracing the event, Planning and Investment minister Kitila Mkumbo said in response to these challenges, the government has prioritised youth-focused and rural-oriented policies, with human investment being at the centre of President Samia Suluhu Hassan’s agenda.

“Education remains key in terms of going forward as it correlates with low fertility rates. This goes hand in hand with family planning and reproductive health education,” he said.

Prof Mkumbo added that the government has also made education and rural economic transformation a top priority through revision and repositioning of the education policy and curriculum.

This includes the Building a Better Tomorrow (BBT) programme, a youth initiative for agribusiness.

Other risks to economic growth

According to the World Bank, supported by a promising macroeconomic outlook and an increased budget to unlock sectoral productivity in the agriculture sector, which employs three-quarters of people experiencing poverty, it is expected that there will be a relief to the poverty rate in the medium term.

“Despite this positive outlook, there are some external and domestic risks. The possibility of a global recession is the main external risk, while partial implementation of structural reforms, particularly those related to boosting the private sector, is the main domestic risk,” Mr Belete said.

The World Bank report says other key risks to Tanzania’s economic growth potential include the damaging effects of climate change on the agriculture and tourism sectors.

“To mitigate these risks, policymakers must accelerate structural reforms as part of a sustained effort to attract greater private investment and spur resilient and inclusive private-sector-led growth.”

The report highlights that over the longer term, one of the country’s key challenges will be to complete its structural economic transformation, which will require creating a more favourable business climate to support the growth of the industrial and services sectors while boosting agricultural productivity.