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Economy


Tanzania is one of the developing countries whose economy depends heavily on agriculture. The sector accounts for almost half of GDP, provides 85% of the country’s exports and employs 80% of the total workforce. On the other side, the industrial sector traditionally features the processing of agricultural products and light consumer goods. Today Tanzania has a GDP of USD 11.6 billion (2005) and Per Capital income of US $ 330 (2005).

Economic Reforms

Since early 1986, The Government of Tanzania has, with determination, launched a comprehensive economic reform and stabilization programme. In pursuit of this, agricultural marketing has been liberalised, foreign exchange controls have been lifted, prices have been deregulated, private sector involvement in the economy through a privatisation programme has been enhanced and a new investment code offering competitive incentives has been put in place. In addition, with assistance from multilateral and bilateral donors Tanzania has keenly embarked on rehabilitation of its economic infrastructures and alleviation of poverty.

These comprehensive economic reforms have resulted into improved competitiveness, lower tariffs, increasing levels of foreign investment and trade, improved key economic indictors and rapid integration into world markets. Furthermore, the long-term growth through 2005 featured a pickup in industrial production and a substantial increase in output of minerals, led by gold.

Macroeconomic Stability

Tanzania has continued to maintain prudential monetary and fiscal policies that have led to a sustainable low level of inflation and stable exchange rates. Macroeconomic stability is further sustained by a more efficient budget management and a by far stronger balance of payments.

Generally, Tanzania has been experiencing a sound macroeconomic performance as substantiated by decreasing inflation, from 30% in the mid 90’s down to 4.3% by the end of 2005 and a growing economy from 2.8% in 1991 to 6.8% in 2005. These developments have made the local currency the (Tanzanian shilling) stable and predictable, providing certainty to the investment climate in the country.

 

Key Performance Indicators

 

1999

2000

2001

2002

2003

2004

2005

2006

Population (millions)

30.9

31.9

32.9

33.6

34.2

35.3

36.2

38.7

GDP (factor cost ) T.Shs billion

5,978

6,706

7,625

8,700

9,816

11,332

13,063

14,995

Real GDP Growth, % change

4.7

4.9

5.7

6.2

5.7

6.7

6.8

6.2

GDP per Capita 
(at constant prices-T.Shs 000’)

193

210

232

256

300

320

361

400

Exchange rate 
(Tshs/US$) ann. Avg.

745

800

876

967

1039

1089

1129

1,252

Inflation annual average (%)

7.8

6.0

5.2

4.5

4.4

4.2

4.3

6.2

Investment/GDP ratio (%)

15.4

17.6

17.0

18.9

18.5

18.8

18.7*

19.4

FDI (US$ million)

516.7

463.4

467.2

430

526.8

470

473

490

For updated figures visit: Selected Macroeconomic Indicators.

 

 

Investments

Since the country started to implement economic and institutional reforms, there has been a steady increase of investment inflows in the economy as substantiated below.

Number of Projects Approved by TIC

(1996 – 2006)

 

 

 

Further, With regard to Foreign Direct Investments (FDI), according to the survey of Private Capital Flows undertaken in 2004 by the Bank of Tanzania in collaboration with the National Bureau of Statistics and the Tanzania Investment Centre, it was revealed that over 72.5 percent of investors were satisfied with the investment environment in the country. Under the same coverage of the study (2001 – 2004), Tanzania experienced increasing FDI inflows with an annual average of USD 424 million.

 

Growth of FDIs in Tanzania
(1995 – 2005)

Year

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Value in (US $ million)

150.9

148.6

157.8

172

516.7

463.4

467.2

430

526.8

469.9

325

Overall, the increase in investment is attributed to macroeconomic stability and government’s efforts in creating a business-friendly environment backed by enabling legislation, facilitative framework and a well balanced and competitive investment package.

Also, in a bid to promoting investments, the Government passed two Acts namely: Export Processing Zone Act, 2002 and Special Economic Zone Act of 2006.

 

Export Processing Zones (EPZ)

In this case, the Government has adopted the concept as a policy option for export oriented industrialization and economic development. This move is expected to increase employment opportunities, ease the process of technology transfer and improve Tanzania’s economic growth through export-oriented investments.

The Act was amended in 2006 to give the Economic Processing Zones Authority (EPZA) the mandate to facilitate and oversee the implementation of the programme throughout the country. Areas earmarked for establishment of EPZs in the country include the following centers: Dar es Salaam , Tanga, Moshi, Arusha, Bukoba, Mwanza, Kigoma, Isaka and Mtwara on the mainland and Amani, Fumba and Micheweni in Zanzibar.

Notably, these locations have been established under the Gateway Concept by linking them to international trade routes such as airports, inland dry-ports, main roads, and harbors and inland marine ports.

Special Economic Zones (SEZ)

In this initiative Special Economic Zones are established in selected geographical areas and provided with special business environment to promote priority economic activities for faster economic growth. Objectively, SEZs are established to enhance: productivity, competitiveness, economic growth, export promotion; and employment generation for poverty eradication. In that effect, areas such as: industrial parks; export processing zones, free trade areas; free ports, tourist parks; and science and technology have been targeted.

These two initiatives, among others, have significantly contributed to the investment inflows in the country. The Government therefore, is consistently determined to improve the business environment in order to attract both foreign and local investors.

Trade

Accelerated reforms undertaken since 1995 in Tanzania have resulted in a significantly liberalized trade regime in which among others, export restrictions and foreign exchange controls have been eliminated and export and import procedures more simplified. Generally, the government has made a concerted effort to create an environment conducive to both domestic and foreign investment.

The principal export commodities include: Coffee, cotton, manufactures, cashew nuts, minerals, tea, sisal, tobacco, pyrethrum and cloves. The main imports are machinery and transport equipment, textiles and clothing, petroleum products and food & drinks. While main export partners include: Germany, Japan, India, Belgium-Luxembourg and Britain, the main import partners are Britain, Kenya, Japan, Saudi Arabia, India and China. Although production of export commodities is increasing, many of Tanzania’s main exports such as tea, tobacco and gold are suffering from weather susceptibility and fluctuating world prices.

Regional and International affiliations:

Tanzania is committed to the promotion of development, peace and security in the world. In the pursuit of these objectives, Tanzania works with other countries, through various regional and international organizations. In the regional sphere, Tanzania is a member of the Southern African Development Community (SADC), East African Community (EAC) and the African Union (AU).

In the international arena, Tanzania is an active member of the United Nations (UN) and its specialized agencies, World Bank, International Monetary Fund, and the World Trade Organization (WTO), just to mention a few.

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