Tanzania On Stairways to Economic Heaven – World Bank Report

Dar Es Salaam Tanzania's capital

Tanzania can achieve her vision of accelerated and shared growth through the combination of fiscal prudence, cost-effective reforms in the education sector, and smart policies aimed at promoting the transformation of firms, says the latest World Bank analysis.

The first Tanzania Economic Update titled Stairways to Heaven: Fiscal Prudence, Value for Money in Education, and Economic Transformation of Firms, to be launched tomorrow, February 22, shows that the country has been performing well over the past few years due to effective demand policies but warns against complacency.

“Tanzania relative isolation from global markets has helped it to survive recent external and regional shocks. However, this resilience of the economy in the past does not necessarily guarantee immunity in the future,” cautioned Mercy Tembon, World Bank Acting Country Director for Tanzania, Uganda and Burundi. “But if Tanzania continues to commit to fiscal prudence and stability and make further investments in human capital and in facilitating business development, it could reach its ambitious target of rapid and shared growth in the current decade.”

The report forecasts that Tanzania could grow at around 6 percent in 2011/12 but quickly adds that this good performance would nevertheless represent the lowest rate achieved since the early 2000s and a slowdown compared to 7.3 and 6.5 percent observed in 2009/10 and 2010/11. The report notes that this deceleration is partly the result of the new restrictive fiscal and monetary stance, rightly adopted by the Government of Tanzania after the deterioration of several indicators during the second half of 2011. “Tanzania needs to find new drivers of growth after three years of rapid fiscal expansion” says Jacques Morisset, the Bank’s Lead Economist for Tanzania.

“The challenge is to create new impulse for growth through better education outcomes and skills, which will in turn sustain job creation and transformation of firms.” The first economic update on Tanzania underlines that education has been a national priority where the Government has invested as much as 20 percent of its budget every year, but the next challenge will be to produce more graduates with limited fiscal resources and fast growing school populations.

“Getting better value for money will require some reallocation of fiscal and human resources across districts, improvements in teachers’ capabilities and in financial management, and synergies with the private sector and parents”, says Stevan Lee, co-author of the report. The Bank also considers that signs of economic transformation have emerged from the private sector with technological and educational improvements as main drivers. Small and medium firms are now the fastest source of employment growth and manufacturing exports have been booming since 2005.

The good signs can be further encouraged by smart supportive policies. The Tanzania Economic Update will be published biannually and constitutes an important aspect of the World Bank’s analytical program that aims at fostering a constructive policy dialogue between stakeholders and policymakers and to stimulate debate on critical economic issues.