Tanzania

Despite the persistence of structural shortfalls, Tanzania’s annual growth averaged 7% of gross domestic product (GDP) between 2001 and 2008. In 2008, GDP rose by 7.5% making Tanzania one of the fastest growing economies in sub-Saharan Africa. The onset of a series of globally-induced crises including fuel price hikes, and the second and third round effects of the global financial crisis have curtailed this record however. Economic growth in 2009 is estimated at 5.5%. Inflationary pressure has also intensified since 2008 pushing the inflation rate to a double-digit annual average of 10.3% in 2008 and 12.2% in 2009.

The 2007 household budget survey reported that agriculture remains the mainstay of more than two thirds of the country’s population although it accounted for only slightly over a quarter of GDP and a little shy of 20% of exports in 2007 and 2008. Economic diversification efforts have brought other sectors to the fore, with particularly strong growth in the services sub-sectors of finance, real estate, business services, communication (in particular mobile telephony) and tourism. Industrial sectors including manufacturing, construction and mining have also grown in importance. Lifting growth to match economic potential is nonetheless hampered by an unacceptably high cost of doing business.

The aim of government policy in 2009/10 is to achieve economic recovery supported by the implementation of a counter-cyclical economic stimulus plan that was endorsed by Parliament in July 2009. The government requested a one-year extension of the IMF’s Policy Support Instrument and has received financial support from its Exogenous Shocks Facility (ESF). Similar to 2008/09 one third of the 2009/10 government budget will be financed by foreign aid. Consolidation of domestic fiscal resources is being pursued as part of an exit strategy from aid dependence. Given the expected slow global recovery, however, medium term prospects for closing the growing budget gap using domestic sources alone remain slim.

Progress in reducing poverty continues to be slow despite high GDP growth. Estimates from the national survey show that over one third of Tanzania’s population still lives below the poverty line and income is inequitably distributed. Access to social services is improving but at a slow pace and it is mostly skewed in favour of urban settings. Meanwhile, the government is developing its second National Strategy for Growth and Reduction of Poverty (NSGRP), which will begin to be implemented in 2010/11.

Tanzania continues to be politically stable. Local elections were conducted in September 2009 and national elections are scheduled for October 2010. The incumbent President Kikwete is expected to vie for another five-year term, and with a weak opposition, the ruling party has high prospects of winning. In the meantime, efforts to fight corruption continue albeit with limited achievements. A breakthrough has been achieved in resolving the long-standing political impasse in Zanzibar Island involving the ruling Chama Cha Mapinduzi (CCM) and the stronghold opposition Civic United Front (CUF). Consultations regarding the most appropriate form of government in Zanzibar and how to achieve it are also ongoing.

The Tanzanian economy performed buoyantly in 2008 but slowed in 2009 due to a decline in external and domestic demand attributed to the global financial crisis. Both exports in emerging sectors and private capital inflows that have been instrumental in driving Tanzania’s strong recent performances were lower than in 2008.

The services sector, which makes the largest contribution to GDP, grew by 8.5% in 2008 compared to 8.1% in 2007, with financial services and communications recording the highest growth rates of 11.9% and 20.5%, respectively. Under the Second Generation Financial Sector Reform Programme, the government facilitated the creation of an investment bank and a women’s bank, both of which became operational during 2009. More private banking and microfinance institutions have also entered the sector. Underlying the good performance of the communications sub-sector has been an expansion of providers and subscribers as well as greater diversity of services. An exercise to register mobile phone users will be ongoing in 2010, targeting about 15 million SIM cards. Meanwhile a major construction project to establish a national ICT backbone connecting Tanzania to the rest of the world via a submarine fibre-optic cable was completed in 2009. Due to delayed effects of the economic crisis however, growth of the services sector was estimated at just 6% in 2009 with considerable slowing of growth in both communications and financial services. A modest recovery is expected in 2010.

Agriculture’s contribution to GDP is slightly over a quarter, second in importance to services. It expanded by a strong 4.6% in 2008 supported by good weather, up from 4% in 2007. Due to a combination of poor weather and unfavourable world prices, agriculture’s growth is projected to decline to 3% in 2009. Cumulative irrigated land developed by government in 2007 was 273 945 hectares. After an increase of 15 300 hectares it accumulated to 289 000 hectares in 2008. A further development of 21 500 hectares has now made a cumulated total of 310 745 hectares in 2009. The government’s intention is to increase irrigated surfaces to 800 000 hectares. In order to counteract the declining contribution of agriculture to national output, the government has conceived a medium term ‘Kilimo Kwanza’—‘Agriculture First’ initiative, which encompasses enhancing agricultural mechanisation and irrigation farming, rehabilitating infrastructure, removing regulatory constraints to efficient marketing, and promoting agro processing. Implementation of the initiative began in 2009/10.

Tanzania has recurrent pockets of food insecurity despite producing an agricultural surplus. This is due to both infrastructure constraints and a limited agro-processing capability that results in post-harvest losses estimated at nearly 40%. In 2009, drought and food insecurity in neighbouring Kenya caused a sharp increase in cross border smuggling of food, exacerbating the situation in Tanzania and leading the government to draw on stocks from the National Food Reserve Agency (NFRA). A ban on export of cereals imposed in May 2008 was maintained throughout 2009 and will remain in place in 2010. Meanwhile efforts are being made to replenish the national food reserves, which stood at 110 278 metric tonnes in September 2009 compared to 88 841 tons in June 2009. Investment in transport and storage infrastructure is urgently needed to reduce the cost of transporting food from surplus production zones to deficit areas and to address the high level of post-harvest losses.

While growth in the industrial sector (mining and quarrying, manufacturing, electricity and gas, water, and construction) remained strong at 8.6% in 2008, it marked a decline from the 9.5% recorded in 2007. Growth of mining and quarrying slumped to 2.5% compared to 10.7% in 2007 due to upheavals during the transition period following changes in the ownership of the Williamson diamond mine (the country’s largest) in 2008, and from the partial closure of Geita gold mine following safety concerns. With major investment projects either postponed or cancelled due to funding problems, growth of the mining sector is estimated at just 2% in 2009. Prospects of recovery in the medium term are high however, following confirmation of new mineral deposits and the identification of potential oil reserves.

Manufacturing expanded by 9.9% in 2008 up from 8.7% in 2007 notwithstanding supply shortages in the electricity and gas sub-sector. This strong performance is due in part to investment in thermal generators to compensate for unreliable hydroelectric power supplies. Chemical and printed goods for export continued to grow thanks to sustained investment in export processing zones. With the global economic downturn and domestic energy constraints, manufacturing output is expected to fall to 6.6% in 2009. 

Growth in the electricity and gas sub-sector contracted steeply in 2008 to 5.4%, almost half its 2007 rate, chiefly because industrial disputes interrupted production. It is anticipated that the sector will slow further in 2009 to just 3% in the absence of government investment to boost hydroelectric power generation. 

The water sub-sector recorded a 6.6% growth rate in 2008, marginally up from 6.5% in 2007 and it is expected to decline to 5% in 2009. Construction has been the fastest growing sector in recent years, posting growth of 9.7% in 2007 and 10.5% in 2008 but financing difficulties are expected to have impacted growth in 2009, resulting in an estimated expansion of just 6.3%. Overall the industrial sector is expected to grow by 4.5% in 2009 and around 4.7% in 2010.

Though higher than most African countries, Tanzania’s GDP growth is estimated to slow to 5.5% in 2009 with a modest recovery to 5.7% forecast for 2010. The rate of capital formation is also expected to slow slightly in 2009 compared to 2008. Since 2003, growth of private capital formation has exceeded public capital formation, as access to bank credit improved and foreign capital inflows strengthened. Supported by major infrastructure projects in the transport and energy sectors aimed at easing supply side constraints, public investment is expected to pick up over the medium term. During 2009, consumption as a proportion of GDP is estimated to have fallen. Imports, which fell in 2009, are expected to rebound in 2010 as demand for intermediate and capital goods increases. In the wake of the global financial crisis, Tanzania’s financial sector is relatively stable and it is expected to safeguard growth of domestic private investment.

 

Tanzania is implementing a counter-cyclical expansionary fiscal policy in 2009/10 as part of its economic recovery strategy. The policy involves a modest reduction in tax rates during 2009/10, and an economic stimulus plan worth TZS 1 693 billion to help companies adversely hit by the global economic down turn.

The 2009/10 budget allows for public expenditure to rise to 30.6% of GDP, with recurrent expenditure accounting for 21.5% of GDP while development projects will be allocated a 9.1% GDP share. The total budget stands at TZS 9.5 trillion, and in absolute terms represents an almost 31% increase over the 2008/09 budget. Domestic tax revenues are expected to cover some 56% of spending, while foreign aid (including about 10% allocated to general budget support) will cover 33% of the budget. The 11% budgetary gap is to be filled through domestic borrowing.

The Tanzania government has identified six priority sectors in its Medium Term Expenditure Framework (MTEF) for 2009/10-2011/12, which include education, health, agriculture, and infrastructure including transport, water and energy. In the 2009/10 budget these sectors will receive an estimated TZS 5.1 trillion, equivalent to 64% of the total budget. About 4% of the budget will cater to debt service payments, and another 18% for the public wage bill.

The cash budgeting system being implemented in Tanzania has helped keep growth of discretionary expenditure in check. However, the country still suffers from poor absorption of development aid caused by delays in disbursing capital expenditure, shortfalls in the capacity of implementing agencies and cumbersome procurement procedures. These constraints in 2008/09, for instance, resulted in development expenditure falling short of the approved budget by some 14%.

In 2008/09 domestic income missed its target by 10%, necessitating borrowing of 1.2% of GDP against a target of zero borrowing. The resultant primary deficit reached 9.4% of GDP. In order to cope with expected shortfalls in tax revenue collection and reduced inflow of foreign assistance, the government has relaxed the zero net domestic financing condition instituted in 2008/09 and expects to borrow about 1.6% of GDP domestically in 2009/10. Furthermore, efforts are being made to improve tax compliance as well as collection of other revenues from natural resource sectors including mining, hunting, forestry and fishing. These sectors have high revenue potential but have contributed very little to government coffers. A major revision of the mining legislation is underway. The government plans to introduce a clause in the revised act that would enable it to purchase a stake in mining companies at the same time as reducing the number of tax incentives granted to the sector.

It could be difficult for the government to raise revenues to meet the target of 16.4% of GDP. The first 2009/10 quarterly revenue report showed that tax revenues were about 13% lower than projections. If tax collection becomes more difficult, the government will have either to revise spending or increase borrowing. Further public borrowing may, however, cause a crowding out effect on private investment in addition to increasing the debt burden. Tanzania’s public debt was estimated at TZS 11 357.4 billion in June 2009 with domestic debt accounting for roughly 20% (TZS 2 262.4 billion) of this amount.

The monetary policy of the Central Bank of Tanzania will continue to focus in 2009/10, as in the recent past, on managing the growth of broad money and credit, and containing liquidity-induced inflation while making space for increased private sector lending. Food prices remained persistently high in 2009, fuelled by domestic shortages and food insecurity in neighbouring countries. Due to the high weight of food in the consumer price index, it has been extremely difficult to control inflation by tightening monetary policy. The Bank thus missed its inflation objective of 7% in June 2009. Throughout 2009, the inflation rate ranged between 11% and 13%, and averaged 12.2% for the year, compared to a 10.3% annual average in 2008.

Relaxation of the monetary policy stance in 2008/09 considerably eased interest rates on Treasury bills towards the second half of the year. In June 2009 the average 12-month interest rate was 6.97% down from 7.84% in June 2008 and 17.07% in June 2007. With greater public borrowing from the local economy on the horizon for 2009/10, this downward trend in interest rates might reverse. Interest rates on local currency deposits continued to be quite low, at around 2.5% throughout 2009. In contrast, commercial lending rates remained high throughout 2009, at around 15.48% in June 2009 compared to 14.76% in June 2008. Tanzania plans to establish a national credit reference bureau, which might soften lenders’ perceptions of borrower risk leading to lower lending rates. Credit reference bureau regulations and licensing guidelines are due for approval in 2010.

Growth of money supply increased slightly in 2009 with the easing of monetary policy. Extended broad money supply grew by 19% in 2008/09 compared with 18% in 2007/08. Broad money growth also recovered to 19% by end June 2009 after a consistent slide that saw it fall from its peak of 30.8% in June 2008 to just around 14.5% in April 2009. The effect of higher liquidity and reduced yields on Treasury bills has been to boost lending to the private sector, which increased by 32.2% from its position in June 2008.

Although the shilling continued to depreciate against the US dollar (USD), it was less volatile than in 2008 thanks to the central bank’s carefully programmed interventions on the foreign exchange market. The monthly average exchange rate stayed within the range of TZS 1 250-1 360:USD 1 throughout 2009 and was TZS 1 314 per dollar in December 2009 compared to TZS 1 273.6 per dollar in December 2008. The Bank of Tanzania will continue to manage liquidity through the modest sale of foreign reserves in 2009/10 alongside repurchase agreements and sale of treasury bills. Also as part of liquidity management efforts, measures are also being taken to reduce idle government cash balances in commercial banks.

Despite the global financial crisis, the Tanzanian banking system has remained stable primarily due to its low level of integration on international markets. Nonetheless considering the downside risks of the crisis on the economy, the Bank of Tanzania has instituted closer and more regular monitoring and supervision of the financial sector in order to ensure that weaknesses are identified and addressed summarily.

With liberalisation, Tanzania’s export base has widened from the traditional base of cash crops to include services and minerals. Export performance improved in 2008 growing by 22.7% over 19.1% in 2007. In 2008 about 34.2% of Tanzania’s exports were directed to EU countries – the country’s longest standing trade partner – followed by Asia at 21.8%. The recently created East African Customs Union also seems to be yielding the expected boost in exports within the region. In the last two years in particular, there has been considerable growth in Tanzania’s trade with Kenya, Uganda, Rwanda and Burundi. In 2008, merchandise exports to other EAC countries reached USD 315.5 million, nearly four times their 2004 value.

Exports of manufactured goods performed remarkably, growing by 36.4% in 2008 compared to 16.1% in 2007. This strong growth is linked to a strengthening of Tanzania’s trade ties with Asian countries, especially China, India and Japan.

Growth of services however slowed to 6.6%, compared to 22.7% in 2007 due to economic meltdown in European countries, the main source of most tourists to Tanzania. With international demand remaining sluggish, exports are expected to be considerably lower in 2009 than in 2008.

Due to weak growth of exports, caused mainly by supply-side infrastructural constraints, Tanzania’s trade deficit has widened year after year, similarly affecting the current account. The current account deteriorated further in 2008 although strong growth of financial and capital inflows kept the balance of payments position comfortable, enabling the country to maintain its foreign exchange reserves in excess of 4 months of imports throughout 2008. Foreign direct investment (FDI) has risen considerably over the last five years averaging around USD 563 million annually. In 2008 alone FDI amounted to USD 744 million.

Anticipating a further deterioration in the trade account and lower factor income, in early 2009 the government requested IMF support of USD 328 million via the Exogenous Shocks Facility. This amount will be fully disbursed in the 2009/10 fiscal year. A modest easing of the current account deficit is thus expected in 2009. In the meantime, the country has taken the first steps towards full liberalisation of the capital account, including engaging a stakeholder consultative process.

The East African Community (EAC) countries signed a Common Market Protocol in November 2009, effective from January 2010, with a monetary union to follow in 2012. Signing of the Economic Partnership Agreement (EPA) with the EU initially slated for the second half of 2009 was postponed until 2010 to allow for extended negotiations. EAC partner states have expressed concerns about the cost of some of the clauses in the agreement, in particular stand still clauses that require that trade taxes applied to the EU under the Most Favoured Nations clause be kept constant when the EPA comes into force. Meanwhile, technical work on the proposed merger of the east with central and southern Africa’s (COMESA and SADC) trade blocks is underway.

Tanzania’s external debt stock is on the rise again after considerable easing associated with massive debt relief prior to 2007. At the end of June 2009 the external debt stock stood at USD 7 billion, equivalent to 34.4% of GDP, compared to USD 5.8 billion (31% of GDP) at the end of June 2008. Due to debt relief savings, external debt service payments during 2008/09 were equivalent to 1.2% of exports of goods and services against the scheduled 5.8% of exports. In 2007/08 actual debt service stood at 2% of exports of goods and services. Implementation of Tanzania’s Medium Term Public Investment Plan which involves major investments in transport and energy infrastructure is expected to necessitate further external borrowing. With this, it is expected that Tanzania’s debt stock may rise to over USD 8 billion by June 2010.

A decade and a half of critical structural reforms have improved the country’s economic position immensely. Public sector imbalances have also been greatly reduced as productive activities have been relegated to the private sector. In the last three years however, discontent has grown over the poor performance of many of the privatised and/or partially divested public corporations. Many are facing acute financial constraints. In addition, the privatisation process which had been initially deemed highly successful is now marred with allegations of dubious deals that might have involved diverting considerable sums of money away from the government. Authorities are working on measures to address shortfalls in the ownership structures and performance of these companies.

Coverage of transport, electricity and water infrastructure remains inadequate to meet demand despite ongoing government efforts. In large towns traffic congestion is becoming challenging. A major road transport project intended to help decongest the capital, Dar es Salaam, has been delayed and, after several adjustments, there are indications that the first phase will be completed around 2013. Improvements in the inland road network are taking place but a significant boost is needed to ameliorate the underdeveloped network connecting western Tanzania. Prices of utility services, electricity and water remain high as utility companies struggle to finance their operations through tariff increases. Electric power interruptions and outages increased in 2009.

In terms of ease of doing business, Tanzania was ranked the 131^st out of 183 countries in the World Bank’s Doing Business report 2009, falling from 126^th position in 2008. This relative decline was attributed to government reforms that have increased the cost of doing business. As a result of internal and external pressures, a presidential task force was constituted to examine business transaction costs, focusing on the regulatory environment. Concurrently, the government is preparing a Public Private Partnership (PPP) regulatory framework to guide cooperation with the private sector in infrastructure investment.

The government’s efforts to increase agricultural mechanisation and irrigation come under the Agriculture First strategy. A special long-term development investment banking window has been created capitalised by the Tanzania Investment Bank with the aim of encouraging local long-term projects, particularly in the relatively under-financed agricultural sector. Agricultural input subsidies continue to be provided selectively in major crop producing zones.

Meanwhile, the local government reform programme is progressing involving devolution of administrative, political, and fiscal powers to lower levels of government. In 2009/10, the budgetary share administered at the local government level was raised to 25.6% compared with 19.4% in 2008/09 and about 17% in 2005/06. Other major areas targeted for reform include public service, public finance management, and the legal sector. With regards to public finance management, efforts in 2009 were directed towards strengthening the public audit function – particularly internal audits – and streamlining and improving compliance with public procurement regulations. With the public service, the government is reviewing salaries and implementing a reform programme with a special focus on improving service delivery in underserved rural areas. In terms of the legal sector, gradual steps are being taken to improve the performance of the judiciary.

Meanwhile, environmental sustainability has been made key part of Tanzania’s poverty reduction strategy in a bid to contain depletion of natural resources and preserve the quality of the environment for future generations. The country is suffering considerably from the impact of global climate change despite its low contribution to greenhouse carbon emissions. Measures to ensure environmental sustainability through conservation have led to an increase in terrestrial and marine protected areas. Similarly, while progress leaves much to be desired, measures are being taken to improve solid and liquid waste management and to improve the living conditions of slum dwellers.

Tanzania embarked on major reform of the tax administration system in the mid 1990s with the intention of increasing budgetary resources. These efforts built upon existing measures of prudent expenditure management that date back to 1980s. The Tanzania Revenue Authority, the department charged with collecting all major taxes such as income tax, value added tax, import and customs duties and taxes, was thus established in 1996. The resulting improvement in tax administration led to commendable growth of revenue collection over the last decade. In 1998/99 total revenue from taxes and non-tax sources was approximately TZS 689.3 billion (10.2% of GDP). However, this increased more than seven fold in absolute terms by 2008/09 to reach TZS 4 997 billion (15.9% of GDP).

Notwithstanding this improvement in revenue collection, growth of domestic revenue has not matched the pace of growth of the government budget. As a result, Tanzania’s recourse to foreign assistance grew substantially in the last ten years. The OECD DAC estimates total aid inflows to Tanzania between 1996 and 2008 at USD 19 331 million (12.5% of cumulative GDP in that period), of which USD 10 228 million (about 53%) was received in the last five years. In 2009/10, aid inflows will comprise 33% of the government budget (approximately 10% of GDP). 

In 2008/09 the government stated its intention to begin reducing dependence on foreign aid, with a first step being to ensure that sufficient domestic resources are raised to finance recurrent expenditure. The global slowdown in economic activity derailed this objective however, as tax collection targets were not met. There are indications that it might also be difficult for the government to achieve this objective in 2009/10. Despite the fiscal gaps since 2008/09, there are several measures Tanzania could adopt to improve domestic revenues in the medium term. Domestic indirect taxes (value added, and excise duty on products and services), income tax, and trade taxes (import and customs taxes and duties) contribute roughly 90% to domestic revenue. On average over the last five years, indirect taxes have comprised 34.4% of all revenue collected (about 4.8% of GDP), while income tax has contributed 27.9% (3.9% of GDP) and trade taxes about 24.4% (3.5% of GDP). Other taxes and non-tax revenue sources have accounted for about 14% together. With free trade agreements with other regional bodies coming into force and regional trade blocks being formed, Tanzania will have to rely increasingly on local taxes – in particular VAT, corporate and income tax – and less on trade levies. For instance, the EAC Customs Union, of which Tanzania is a member, requires all members to remove import duties on goods from other member countries within the agreed framework. Similar conditions are expected with the conclusion of Economic Partnership Agreements with the European Union.

Currently, a large segment of micro and small enterprises fall outside the tax net. As of 2008, the number of companies or organisations registered for taxes were estimated as follows: corporate tax 370; income tax, 380 800; and VAT, 8 443. The number of VAT payees fell in 2008 due to a change in the threshold for VAT administration, which was raised from TZS 20 million to TZS 40 million to reduce the tax collection burden. Raising the number of registered organisations would thus be a key step forward for increasing revenue. In addition, the compliance rate needs to be improved.

Although procedures for granting tax exemptions have been streamlined, there are indications of widespread abuse due to weak enforcement. Some goods for development projects that have been exempted from taxes for example have found their way onto the open market. Anecdotal evidence also indicates that some commodities intended for institutions that are tax exempt have been used for personal gain. A study conducted by the Eastern and Southern African Universities Research Program (ESAURP) in 2008 estimated that tax exemptions consumed around 4% of GDP in revenue each year since 2004/05. In the 2009/10 budget the Minister for Finance proposed abolishing tax exemptions offered to religious and charitable organisations due to abuse. Although this blanket measure was considered drastic and was rejected by the parliament, it is clear that the government needs to be stricter in enforcing laws governing exemptions.

Tanzania has offered significant tax incentives to large investors in order to attract foreign capital inflows and to stimulate private investment. In the period from 2005/06 to 2008/09, exemptions to investors issued by the customs department under Tanzania Investment Centre’s Certificates of Incentives totalled about TZS 1 027 billion (an average of 1.2% of GDP per year). While incentives have a justifiable base, it is clear that a comprehensive analysis of long-term implications of these for the country may have been neglected. As a result, investors in extractive industries in particular have become the focus of criticism as they have paid very little tax.

Following the recommendations of a mining sector presidential committee, a major review of tax regime in the sector is being drawn up. The government plans to modify legislation to enable the state to acquire a pre-set minimum stake in mining companies. Other attempts to improve governance of the mining sector are also being pursued to increase public revenues. In 2009, Tanzania was accepted as a candidate member of the Extractive Industries Transparency Initiative (EITI), and has since established a local EITI Multi-Stakeholder Working Group.

Non-tax revenues are also a source of great potential. These are mainly collected by government departments other than the TRA. Between 1997/98 and 2008/09, collection of non-tax revenues hovered between 0.7% and 1.2% of GDP, comprising less than 7% of all domestic revenue. Recent studies have indicated the government could boost these non-tax sources if enforcement of existing legislation is improved. In the natural resource sectors, for example, huge revenue leakages take place through illegal logging, poaching and fishing and through smuggling. In 2007/08, the government made an attempt at tapping into this source by raising fees on hunting blocks. Moving forward however, effective enforcement of regulations and chargeable fees would be a crucial step.

The country continued to enhance efforts at fighting corruption. Several court charges were filed in 2009 including one involving two former cabinet ministers accused of causing the government to lose billions of Tanzanian shillings while in office. However, slow progress on existing cases is a matter of serious concern and the investigation of several high profile corruption scandals including one involving irregular procurement of power generators dragged throughout 2009. At the same time, the prosecution of government officials alleged to have been involved in the 2008 Bank of Tanzania’s External Payment Account scandal also remain inconclusive. As a consequence Tanzania’s position in Transparency International’s Corruption Perception Index slipped from 102^nd in 2008 to 126^th in 2009.

Tanzania is traditionally a very stable country and democracy is improving. The civil tensions indicator in Tanzania reverted to 0 in 2009 from 0.1 in 2008. Troubles linked to the movement for Zanzibar independence often occur during election years. By-elections conducted in September 2009 attracted a low turnout of voters, and this was interpreted as a passive expression of discontent with the performance of the government and the ruling party in particular. In the Zanzibar Islands however the pre-election strife intensified and marred the voter registration process, forcing the electoral committee to temporarily suspend voter registration in August 2009 until early 2010.                                                                                                    

A major breakthrough appears to have been reached in 2009 with regard to the longstanding political tension between the ruling party (CCM) and the main opposition party (CUF) in Zanzibar. Dissenting voices over Zanzibar’ sovereignty and place in the Union continue to be a thorny political issue. Some observers have suggested that a federal government system could provide a sustainable solution. By every count, if the 2009 by-elections are taken as a key parameter, the CCM stands a high chance of winning the upcoming elections mainly due to lack of a clear and unified alternative vision offered by the fragmented opposition parties.

In 2009 the hardening indicator rose from 0 in 2008 to 0.38 in 2009 due to the stronger position taken by the government against ritual murders of albinos. For the first time the death penalty was applied against a murderer found guilty for killing several albinos. The press houses remain partially free as cases of suspended or banned newspapers increased in 2009.

The five-year implementation of Tanzania’s National Strategy for Growth and Reduction of Poverty (MKUKUTA in Kiswahili) will come to an end in June 2010 with more than one third of the population still living below the poverty line. Some progress in provision of education and health services as well as other social infrastructure has taken place but formidable challenges remain with respect to quality and accessibility, especially in rural areas. At the same time, possibly due to slow progress in poverty reduction, the UN Human Development Index ranking for Tanzania has stagnated at 151 since 2006.

In education, efforts have been made to construct more classrooms. Supported by the implementation of a capitation grant, enrolment in primary schools slightly decreased. In 2009 net enrolment was 95.9% compared to 97.2% in 2008. Pre-primary school enrolment however remains low. In 2009 net enrolment in pre-primary schools was 24.4% compared to 36.8% in 2008. Due to constraints on effective learning – including a low teacher-pupil ratio – exam pass rates and the number of students transferring from primary to secondary schools have deteriorated over the last two years. In 2009 only 50% of the pupils who sat the primary school leaving examination passed. The transition rate from primary to secondary schools has also declined to just 51.6% in 2009 from 56.7% in 2008. Measures are being taken to raise the number of teachers, particularly in rural areas.

Expansion of both public and private schools has resulted in an appreciable rise in secondary school enrolment to 27.5% in 2009 compared to a low starting base of 10.1% in 2005. The gender parity index also shows a marked improvement, supported by availability of boarding and affordable community schools. Efforts are being made to revisit the cost-sharing policy to make higher education more accessible to students from low income households. Gross enrolment in higher education in 2009 was estimated at 95 525 students, equivalent to a gross enrolment rate of 2.5% compared to 1.43% in 2008. In 2008/09 it was estimated that female students accounted for 34% of all enrolled students in higher education institutions in the country.

In health, the infant mortality rate is estimated to have fallen from 99 per 1 000 live births in 1999 to 58 per 1 000 live births in 2008, while under five mortality has improved to 91 per 1 000 live births from 147 per 1 000 live births over the same period. This performance is attributed to a combination of factors that include improvements in child nutrition, intensification of malaria control interventions, as well as efforts to curb HIV/AIDS mother-to-child transmission. In 2007/08 it was estimated that the HIV prevalence rate among the population aged 15 to 49 years was 6% compared to 7% in 2003/04. The government continues to scale up support for the use of antiretroviral (ARV) drugs and care services for people living with HIV/AIDS.

A marginal improvement is taking place with respect to access to improved water sources. In 2008/09 the government estimated that 58.3% of the rural population had access to improved water sources compared to 57.1% in 2007/08. Access to clean water sources in urban areas is also estimated to have risen marginally to 83% in 2008/09 compared to 79% in 2007/08. Notwithstanding, access to piped water has actually declined to 34% in 2007, from 39% in 2001 due to the fast population growth and a protracted period of slow investment in piped water supply infrastructure. Access to electricity from the national grid line is also one of the lowest at 14% in 2007 and is skewed in favour of urban areas such that the MKUKUTA target of providing at least 20% of the population with access to grid line electricity by 2010 is unlikely.

Overall only a few of the Millennium Development Goal (MDG) targets are likely to be achieved within the appointed time, while the MKUKUTA implementation plan MKUZA I (2005-10) has been assessed to be off-track. Reaching the country’s targets under the revised MKUKUTA/MKUZA, the implementation of which will start in July 2010, as well as the MDG targets, will require the mobilisation of adequate funding, development of human resources especially in rural areas and strengthening of public financial management.