World Bank tips Tanzania on inclusive economic growth

It says that despite the strides made through the current growth model, many Tanzanians remain trapped in poverty, “…exposed to frequent income shocks with little protection either in the form of private assets or a well-functioning social protection system”.

Public investments also entail fiscal exposure accompanied by decreasing exports, with a potential risk of currency mismatch and dwindling fiscal revenues, the World Bank further notes.

Commenting on the report, World Bank country director for Tanzania Nathan Belete said structural transformation has not happened in Tanzania in the last two decades or so.

Structural transformation refers to the transfer or shift of production factors — especially labour, capital and land — away from activities and sectors with low productivity to those with higher productivity, which are typically different in location, organisation and technology.

“That is why poverty reduction is not happening 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 fuelling the economy, are not necessarily touching a wider part of the population,” Mr Belete said.

He 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,” said Mr Belete, who also represents the World Bank in Malawi, Zambia and Zimbabwe.

To ensure Tanzania’s sustainable growth and development, the World Bank emphasises five pivotal policy reforms, including changes that improve the business-enabling environment, foster investments and create social policies that nurture inclusion and resilience.

The third policy recommendation is to enhance productivity and resilience in agriculture with proper financing channels, technology and climate adaptation.

The report shows that agriculture is still lagging and 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 fertilizer 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 Fertilizer,” the report says.

The World Bank also suggests the realisation of the tourism potential through addressing long-standing regulatory and infrastructural bottlenecks, investing in infrastructure such as roads and international airports and identifying new areas for tourism growth.

The institution further advises the country to reduce trading costs by addressing  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).”

World Bank senior economist Harun Onder said, “Considering the slow structural transformation and persistent poverty, in the absence of a stronger domestic market, one that facilitates a 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.”