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World Bank Outlines Strategies Tanzania Can Achieve Private Sector-Led Growth

A new World Bank report recommends privatising growth through five priority policy actions to achieve a more balanced and inclusive growth pattern in the East African nation.

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Dar es Salaam. A new World Bank report has suggested that Tanzania needs to switch gears towards a more private sector-driven growth model, noting that that is the only way through which the East African nation can ensure the viability of its economic growth and realise its development potential.

A newly launched Country Economic Memorandum for Tanzania titled ‘Privatising Growth’ notes that Tanzania’s growth over the past twenty years has been characterised by a noticeable shift towards increased reliance on public infrastructure investments to fuel growth, slowing structural transformation, and a diminishing role of exports.

A statement released Tuesday quoted World Bank Country Director Nathan Belete recognising Tanzania’s “impressive” economic growth while emphasising the need for the country to be “faster, better, and more inclusive.”

“This requires complementing the public investment push with strong reforms that help local businesses compete and grow, along with robust social programmes that help people get ahead and stay resilient and boost export orientation,” he said.

The report shows that Tanzania’s structural transformation has slowed in recent years, and the economy has not been able to create enough jobs in higher-productivity sectors, making it harder for people to escape poverty. 

READ MORE: World Bank Will Investigate Human Rights Violations in the Bank-Funded REGROW Project in Tanzania

In addition, while Tanzanian exports experienced substantial growth until 2012, they have since shrunk as a share of GDP, and their composition has shifted from agricultural products towards extractives, primarily gold. 

This change has made the country more reliant on fewer products, making it more vulnerable to changes in the global market, the World Bank analysed.

Harun Onder, World Bank senior economist and co-author of the Memorandum, warned of slowing Tanzania’s economic growth should the country continue experiencing the slow structural transformation and persistent poverty. 

“In the absence of a stronger domestic market, one that facilitates more qualified participation, for example, with better skills and jobs, of a greater number of Tanzanians, a shrinking export orientation will likely constrain Tanzania’s development trajectory,” said Onder.

“While public investments have played a crucial role in narrowing Tanzania’s infrastructure gap, in the absence of a more private sector-driven and inclusive growth, fiscal exposure emanating from these investments can be costly,” he added.

READ MORE: World Bank Releases 19th Tanzania Economic Update Focused on Efficiency of Fiscal Policy

The report recommends privatising growth through five priority policy actions to achieve a more balanced and inclusive growth pattern in Tanzania.

This involves accelerating the implementation of business climate and investment promotion reforms, which will require removing current obstacles without erecting new ones, which the report says is “critical” for more sustainable and private sector-driven growth in the country.

Boosting inclusion and resilience by aligning social policies with the domestic market orientation of the current ‘growth model’ is another strategy that the report suggests. 

“This calls for scaling up social protection with a more institutionalized approach and promoting adequate access to healthcare,” it says.

The report also recommends improving productivity and resilience in agriculture by addressing the drivers of low productivity—limited access to technology, finance, and skills.

READ MORE: World Bank: Gender-based Violence Remains a Serious Concern in Tanzania

It urges Tanzania to leverage the upside potential of its tourism by addressing several long-standing regulatory and infrastructure bottlenecks to attract and mobilise private investors.

Finally, it calls for harnessing regional integration to unlock Tanzania’s export potential, which is hindered by low productivity and high trade costs, including logistical and procedural challenges.

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  1. Dear Chanzo Team,
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