Tanzania: Increasing Public Spending Lower Poverty Levels

TANZANIA : PUBLIC spending on social services in Tanzania has been increasing in the recent past, helping to reduce income inequality and poverty levels albeit marginally, according to a World Bank report.

The 19th Tanzania Economic Update launched in Dar es Salaam on Tuesday shows that public expenditure on social services has increased which helped to keep poverty levels from rising.

It shows that government spending increased significantly from 12.6 per cent of GDP in the 2000/2001 financial year to about 19 per cent in 2005/2006 financial year as the authorities ramped up priority expenditures to achieve the Millennium Development Goals.

Buoyant revenues and strong donor assistance facilitated Tanzania's fiscal expansion which continued into the early 2010s.

"The distributional impact of its revenue and expenditure policies indicates that Tanzania's fiscal system substantially reduces income inequality, while public spending on social services more than offsets a moderate increase in poverty and sustains economic growth."

Expenditures broadly stabilised as a share of GDP from 2012/2013 financial year onward.

According to the report, the shift toward development expenditures reflected the priorities outlined in the government's second Five-Year Development Plan, which aims to accelerate the economy's structural transformation by addressing the infrastructure gap and building human capital.

Between 2016/2017 and 2020/2021 financial years, recurrent spending averaged about 10 per cent of GDP.

Meanwhile, development expenditures averaged 6.5 per cent of GDP, up from 4.8 per cent during 2011/2012 and 2015/2016 financial years.

Between 2016/2017 and 2020/2021 financial years, more than 60 per cent of development expenditures were directed to the real sector, the report shows.

These expenditures mainly consisted of infrastructure investments in the Standard Gauge Railway, the Mwalimu Nyerere hydroelectric power plant and other transportation and electrification projects.

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