The World Bank (WB) has expressed optimism regarding the growth prospects of Tanzania's economy, despite the challenging global economic conditions. In its 19th Tanzania Economic Update, launched in Dar es Salaam on Tuesday, the WB reported that the country's economy achieved a growth rate of 4.6 percent in 2022 and is projected to increase to 5.1 percent this year. This positive outlook is attributed to improvements in the business climate and the implementation of crucial structural reforms.
However, the World Bank's outlook for Tanzania's economy is contingent on a favorable global environment and the timely completion of government-led structural reforms aimed at enhancing the competitiveness of the nation's economy, improving the business and investment climate, and reducing regulatory compliance costs. The report highlights that the growth projection has been slightly adjusted downward due to the adverse impact of deteriorating global economic conditions caused by the conflict between Ukraine and Russia, which disrupted global supply chains, as well as insufficient rainfall in key agricultural areas.
While the World Bank's figures indicate a slightly lower growth projection compared to government estimates of around 5.2 percent growth in 2023, driven by the ongoing recovery in the tourism sector and the gradual stabilization of supply and value chains, the overall economic outlook remains promising. Titled "Enhancing the Efficiency and Effectiveness of Fiscal Policy in Tanzania," the report underscores Tanzania's progress in expanding tax collection, with the tax-to-GDP ratio rising from 10 percent in 2004/05 to 11.8 percent in 2022/23. Nevertheless, public spending, which has increased from 12.6 percent of GDP to 18.2 percent, still falls below the averages for Sub-Saharan Africa, low-income countries, and lower-middle-income countries.
The report emphasizes that improving the efficiency and effectiveness of fiscal policies can significantly contribute to boosting revenue collection and increasing public expenditure. This, in turn, can pave the way for enhanced human capital development, inclusive economic growth, and overall prosperity for the citizens of Tanzania. Nathan Belete, World Bank Country Director, stated, "Tanzania's economy has been steadily expanding, and fiscal policies have been successful in reducing income inequality, but there is still room for enhancing these policies to improve public spending in priority programs." Dr. Mwigulu Nchemba, Minister for Finance, expressed the government's appreciation for the World Bank Tanzania Economic Update, which has played a vital role in shaping policy reforms to address various economic challenges. He commended President Samia Suluhu Hassan for her visionary leadership and commitment to boosting economic growth while involving the private sector as a driving force.
Acknowledging the adverse impact of global challenges such as COVID-19, the conflict between Russia and Ukraine, and climate change, Dr. Nchemba emphasized that Tanzania's economy has faced difficulties but continues to exhibit robust growth. This growth is attributed to government policies and strategic investments in key sectors, including energy, water, education, health, and transportation infrastructure development.
The Minister highlighted the government's measures to strengthen domestic revenue collection and control unnecessary expenditure. Friendly fiscal policies and the implementation of regulatory reforms have attracted investment and business to the country. The government's projections include domestic revenue reaching 14.9 percent of GDP in the 2023/24 fiscal year, up from 14.4 percent in 2022/2023. This growth in domestic revenue is expected to be driven by a 13.0 percent increase in tax revenue, reaching 26.7 trillion Tanzanian shillings in the 2023-2024 fiscal year.
The Tanzania Revenue Authority (TRA) is anticipated to collect 26.73 trillion Tanzanian shillings in tax revenues, while non-tax revenue is projected to reach 4.66 trillion Tanzanian shillings, according to the government's 2023/2024 budget. Despite global challenges, Tanzania remains committed to economic growth, and the collaboration with development partners, including the World Bank, continues to play a vital role in mitigating the impacts of these challenges while fostering sustainable development.