World Bank report urges reforms for inclusive growth
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- The bank pointed out that there is a chance of currency mismatch and declining fiscal revenues due to public investments, which also involve fiscal exposure and dwindling exports.
Dar es Salaam. The World Bank has said in a report that although public investments have filled in significant infrastructure gaps in Tanzania, a comprehensive strategy for private sector-driven growth is essential for the nation's long-term development.
The newly launched WB’s Country Economic Memorandum for Tanzania, titled ‘Privatising Growth', highlights the need for Tanzania to shift its growth strategy to tap into its full potential.
The icon bank indicated that regardless of the strides made by the current growth model, it had left many Tanzanians trapped in a poverty cycle "exposed to frequent income shocks, and they have little protection either in the form of private assets or of a well-functioning social protection system.”
The bank pointed out that there is a chance of currency mismatch and declining fiscal revenues due to public investments, which also involve fiscal exposure and dwindling exports.
Commenting on the report, the World Bank Country Director for Tanzania, Nathan Belete, said that structural transformation has not happened in Tanzania over the last two decades.
Structural transformation usually refers to the transfer or shift of production factors—especially labour, capital, and ther—from activities and sectors with low productivity to those with higher productivity, which are typically different in location, organisation, and technology.
"That is a cause for poverty reduction not to happen as fast as we would like. In the early 2000s, poverty reduction was happening at a greater pace than it is today. Today, the correlation to job creation impacting the livelihoods of the poor is less because most of the investments, while fueling the economy, are not necessarily touching a wider part of the population," he said.
Mr Belete added that if Tanzania put more effort into transforming the agricultural sector, then poverty reduction would be achieved much faster.
"This is why the government has also seen this as a challenge and seen the need to place greater attention on looking at how to invest more in primary sectors to make them more pro-poor and conducive to growing and improving the livelihoods of Tanzanians," the World Bank Country chief, who also oversees Malawi, Zambia, and Zimbabwe, added.
To ensure Tanzania's sustainable growth and development, the World Bank emphasises five pivotal policy reforms, including reforms that improve the business-enabling environment, foster investments, and create social policies that nurture inclusion and resilience.
The third policy recommendation, according to the WB, is to enhance productivity and resilience in agriculture with proper financing channels, technology, and climate adaptation.
The report showed that the sector is still lagging; as of 2019/2020, only 30 percent of agricultural households used improved seeds, 23 percent applied inorganic fertiliser, 12 percent used herbicides, and 9 percent used irrigation.
“The average use of fertiliser stood at 16 kg per hectare (kg/ha) in 2020, well below the 50 kg/ha target set by African governments in the 2006 Abuja Declaration on Fertiliser,” the report reads in part.
The WB also suggested the realisation of the tourism potential through addressing long-standing regulatory and infrastructure bottlenecks, investing in infrastructure such as roads and an international airport, and identifying new areas for tourism growth.
The bank also advised the country to reduce trading costs, including logistical and procedural challenges.
“Tanzania ranked 180th out of 189 countries on ease of trade across borders, with its performance level sitting about 80 percentage points away from the frontier (constructed from the best performances across all economies),” the report reads.
WB’s senior economist, Mr Harun Onder, said: “Considering the slow structural transformation and persistent poverty, in the absence of a stronger domestic market, one that facilitates the more qualified participation (for example, with better skills and jobs) of a greater number of Tanzanians, a shrinking export orientation will likely constrain Tanzania’s development trajectory."
