WB: 12m Tanzanians still live in abject poverty
Despite the tremendous strong economic growth over 12 million people are still living in extreme poverty according the World Bank’s latest economic update for Tanzania.
According to eighth Tanzania Economic Update entitled The Road Less Traveled: Unleashing Public Private Partnerships in Tanzania released last week shows that the economic growth was around seven percent in 2015, and inflation was contained within single digit levels.
The economy growth still put Tanzania the fourth largest population living under poverty in Africa the report says.
The report notes that a significant portion of the non-poor population lives just slightly above the poverty line, and risks falling back into poverty with the slightest level of disruption, unless proper measures are in place.
World Bank Country Director for Tanzania Bella Bird said approximately, 12 million people still live on less than Tsh1.300 per day and a large proportion of Tanzania’s rapidly growing population still does not have adequate access to infrastructure and social services.
“Tanzania needs to increase investments in infrastructure and human capital to further unlock its growth potential while enabling the private sector to create more jobs”, says Bird.
“This will not only have a stronger impact on poverty reduction but it is also consistent with the new government’s priorities and its commitment to the achievement of the country’s Vision 2025 goals.
“The needs are many but the resources are limited and a focused approach in which key development priorities are fully financed will be needed to achieve the desired results.
The economic update has indicated tt the same time that about 800,000 young Tanzanians enter the job market every year where productive opportunities remain scarce,” she said.
The Tanzanian economy has grown at an average annual rate of around 6-7 percent for more than a decade and the rate of inflation has declined since January 2016 although it trended upwards in the preceding few months due to increased domestic food prices and the lagged impacts of the sharp depreciation of the Tanzanian Shilling during the first half of 2015.
As of June 2015, the government had accumulated arrears to a value of approximately Tsh5 trillion (6 percent of GDP) with suppliers and pension funds including arrears with suppliers. The fiscal deficit in 2014/15 increased to 4.5-5.0 percent of GDP.
In addition, TANESCO has accumulated a level of arrears, the value of which Is estimated to reach approximately TZS trillion5 (1.2 percent of GDP) while the situation of other parastatal entities, such as REA and DAWASCO, remains unclear according to the report.
However the sky rocketing cost of debt service creates additional fiscal challenges, with debt service currently consuming approximately 25 percent of domestic revenues.
Mean while economic performance has remained strong in the recent past, the new government administration comes into power in the context of increasingly significant external risks.
China’s economic slowdown the decline in commodity prices significant negatives impact on Tanzanian’s economy as a result of a deceleration in exports.
World Bank Senior Economist, Emmanuel Mungunasi explained that one percent point decline in China’s domestic investment growth is associated with a decline of approximately of 0.6 percent points in the rate of the growth of Tanzania’s export.
“Slower, more balanced rate of growth in China has led to depressed global demand for commodities and hence to decrease demand for Tanzania.
One percent decline in investment in China is estimated to have the impact of reducing Tanzania’s export price by nearly one percent, so Tanzania may need to diversify its export destinations,” Mungunasi noted.
The report makes the following key recommendations towards a new direction that could ensure PPPs deliver for Tanzania as they have with other countries.
World Bank Senior Public Private Partnership Specialist, Jeffrey Delmon noted the private sector, which employs more than 95 percent of the work force, should take the driver’s seat to foster private sector growth and the government needs to create a more conducive business environment.
“The economic update shows that Public Private Partnership (PPP) could play a useful role in financing economic development can be achieved if PPPs are well-designed and appropriately implemented,” he said.
Delmon noted the country has significant experiences with PPPs, although these have so far produced mixed results. PPPs are not a panacea and do not necessarily work well in all sectors and their projects should be carefully selected on the basis of their financial viability and attractiveness to the private sector.
“What is needed now is to embrace these important past lessons and combine them with best practices from the largest emerging economies such as Brazil, Chile, Mexico and India and develop a strong PPP program that addresses the country’s infrastructure development challenges and generates jobs.”
According to the World Bank, the government must address funding and financing issues related to PPPs by developing and implementing clear and transparent approaches, including working with domestic financial institutions to gradually develop local currency financing for PPPs.
The Tanzania Economic Update is a biannual report published by the World Bank with the aim of fostering constructive policy dialogue between stakeholders and policymakers and stimulating debate on essential economic issues in the country.