29 June 2014

Tanzania: Agriculture Pulls Tanzania Economy

Photo: UNECA
Dr. Carlos Lopes

Dar es Salaam — Improving productivity in agriculture, industries predominantly located in cities, construction, communication and retail trade have been singled out as the main drivers for this year's economic growth.

Tanzania's economy is set to grow at approximately 7% annually for the next two years, with inflation stabilizing at around 6% largely due to falling food prices and tight monetary policies.

The current account deficit should remain equivalent to a value of 13 -15% of GDP, unless there are significant changes in global commodity prices and in the demand for Tanzanian products, according to the World Bank's latest Tanzania Economic Update released last December 2013: 'Raising the Game: Can Tanzania Eradicate Extreme Poverty,'

The World Bank report says, "Tanzania's economic growth is driven by a number of industries predominantly located in cities, in the communication, transportation, construction, and retail trade sectors."

The report argues for increasing productivity in agriculture and creating more good jobs off the farm. But it also highlights that such strategies are not enough to get everyone out of poverty.

Global experience shows that even when agriculture productivity increases, the poorest families tend to be left behind, it urged.

"This underscores the importance of highly targeted safety net programs to support the most vulnerable," Philippe Dongier, the World Bank's Country Director for Tanzania, Uganda and Burundi said.

The latest Economic Update highlights the success of conditional cash transfer programs around the world, including in a pilot program implemented by the Tanzania Social Action Fund (TASAF) which is showing promising results in addressing the needs of the poorest households.

Parents who receive the small monthly transfers spend the money on extra food and on education and health of their children.

The country's latest Household Budget Survey shows that 12 million Tanzanians are still trapped in poverty today.

At least 4.2 million of these constitute the 'extreme poor' for whom life means constantly choosing between difficult options, such as keeping the eldest child in school or pulling her out of class permanently to help grow more food on the family farm.

"Without access to targeted safety nets, most extreme poor households in Tanzania depend on their relatives or use other social ties to survive in times of hardship," he said.

As the Economic Update puts it, "the families of vulnerable Tanzanians are themselves often very poor and thus cannot always provide support."

The experience with TASAF has shown that people can do a lot with just a little extra money and that they tend to spend their money wisely.

"Some spend it on their children's immediate wellbeing, while others save to invest or to cushion themselves in the face of future hardships," he noted.

Safety nets in Tanzania currently amount to only one percent of total public expenditure, which is equivalent to less than 0.3% of GDP. This is insufficient to urgently address vulnerability among the extreme poor, says Jacques Morisset, the Bank's Lead economist for Tanzania, Uganda and Burundi and author of the latest report.

"While investments in infrastructure, agriculture, education and health are essential for inclusive growth, well-targeted cash transfer programs can improve the living conditions of extremely poor households," adds Morisset.

The Tanzania Economic Update is a biannual publication which reports on the state of the country's economy.

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