Dar es Salaam, Tanzania - Tanzania's commitment to public spending on social services has led to a reduction in income inequality and poverty levels, albeit with modest progress, as highlighted in the 19th Tanzania Economic Update released by the World Bank. The report was launched in Dar es Salaam on Tuesday, shedding light on the positive impact of increased public expenditure on social services in the country.
The data presented in the report indicates that public spending on social services has been on the rise, effectively preventing a surge in poverty levels. The government's commitment to enhancing social services is evident in the substantial increase in public expenditure, which grew from 12.6 percent of the Gross Domestic Product (GDP) during the 2000/2001 financial year to approximately 19 percent in the 2005/2006 financial year. This expansion in spending was driven by a concerted effort to meet the Millennium Development Goals, underpinned by robust revenue generation and generous donor support.
The report underscores the distributive impact of Tanzania's fiscal policies, highlighting that the country's fiscal system has significantly reduced income inequality. Public spending on social services has more than offset a modest rise in poverty rates, effectively sustaining economic growth.
From the 2012/2013 financial year onwards, expenditures have remained relatively stable as a share of GDP. This stability reflects a strategic shift towards development expenditures, aligning with the government's second Five-Year Development Plan. The plan aims to accelerate structural transformation in the economy by addressing infrastructure gaps and fostering human capital development.
During the period spanning from the 2016/2017 to the 2020/2021 financial years, recurrent spending accounted for an average of around 10 percent of GDP, while development expenditures increased to an average of 6.5 percent of GDP. This marks a significant rise from the 4.8 percent recorded during the 2011/2012 and 2015/2016 financial years.
The report further reveals that over 60 percent of development expenditures between the 2016/2017 and 2020/2021 financial years were channeled towards the real sector. These expenditures primarily consisted of investments in critical infrastructure projects such as the Standard Gauge Railway, the Mwalimu Nyerere hydroelectric power plant, and various transportation and electrification initiatives.
Tanzania's strategic focus on investing in social services and development projects reflects its commitment to addressing income inequality, reducing poverty, and fostering sustainable economic growth. The World Bank's report acknowledges the positive impact of these efforts on the country's economic and social landscape.