Economy of Tanzania
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History
Significant measures have been taken to liberalize the Tanzanian economy along market lines and encourage both foreign and domestic private investment. Beginning in 1986, the Government of Tanzania embarked on an adjustment program to dismantle socialist economic controls and encourage more active participation of the private sector in the economy. The program included a comprehensive package of policies which reduced the budget deficit and improved monetary control, substantially depreciated the overvalued exchange rate, liberalized the trade regime, removed most price controls, eased restrictions on the marketing of food crops, freed interest rates, and initiated a restructuring of the financial sector.
As of October 2003, a new, 3-year Poverty Reduction and Growth Facility (PRGF) was in negotiation. In June 2003, the Tanzanian Government successfully completed a previous three-year PRGF arrangement with the International Monetary Fund, the successor program to the ESAF. From 1996-1999, Tanzania had an ESAF agreement. Tanzania also embarked on a major restructuring of state-owned enterprises. The program has so far divested 335 out of some 425 parastatal entities. Overall, real economic growth has averaged about 4% a year, much better than the previous 20 years, but not enough to improve the lives of average Tanzanians. Also, the economy remains overwhelmingly donor-dependent. Moreover, Tanzania has an external debt of $7.9 billion. The servicing of this debt absorbs about 40% of total government expenditures. Tanzania has qualified for debt relief under the enhanced Highly Indebted Poor Countries (HIPC) initiative. Debts worth over $6 billion were canceled following implementation of the Paris Club VII Agreement.
Agriculture
Agriculture dominates the economy, providing more than 60% of GDP and 80% of employment. Cash crops, including coffee, tea, cotton, cashews, sisal, cloves, and pyrethrum, account for the vast majority of export earnings. The volume of all major crops--both cash and goods, which have been marketed through official channels--have increased over the past few years, but large amounts of produce never reach the market. Poor pricing and unreliable cash flow to farmers continue to frustrate the agricultural sector.
Industry
Accounting for only about 10% of GDP, Tanzania's industrial sector is one of the smallest in Africa. It has been hit hard recently by persistent power shortages caused by low rainfall in the hydroelectric dam catchment area, a condition compounded by years of neglect and bad management at the state-controlled electric company. Management of the electric company was contracted to the private sector in 2003.
The main industrial activities include producing raw materials, import substitutes, and processed agricultural products. Foreign exchange shortages and mismanagement continue to deprive factories of much-needed spare parts and have reduced factory capacity to less than 30%.
Despite Tanzania's past record of political stability, an unattractive investment climate has discouraged foreign investment. Government steps to improve that climate include redrawing tax codes, floating the exchange rate, licensing foreign banks, and creating an investment promotion center to cut red tape. In terms of mineral resources and the largely untapped tourism sector, Tanzania could become a viable and attractive market for U.S. goods and services.
Zanzibar
Zanzibar's economy is based primarily on the production of cloves (90% grown on the island of Pemba), the principal foreign exchange earner. Exports have suffered with the downturn in the clove market. Tourism is an increasingly promising sector, and a number of new hotels and resorts have been built in recent years.
The Government of Zanzibar has been more aggressive than its mainland counterpart in instituting economic reforms and has legalized foreign exchange bureaus on the islands. This has loosened up the economy and dramatically increased the availability of consumer commodities. Furthermore, with external funding, the government plans to make the port of Zanzibar a free port. Rehabilitation of current port facilities and plans to extend these facilities will be the precursor to the free port. The island's manufacturing sector is limited mainly to import substitution industries, such as cigarettes, shoes, and process agricultural products. In 1992, the government designated two export-producing zones and encouraged the development of offshore financial services. Zanzibar still imports much of its staple requirements, petroleum products, and manufactured articles.
Statistics
GDP: purchasing power parity - $20.42 billion (2002 est.)
GDP - real growth rate: 6.1% (2002 est.)
GDP - per capita: purchasing power parity - $600 (2002 est.)
GDP - composition by sector:
agriculture: 48.1%
industry: 15.4%
services: 36.5% (2001 est.)
Population below poverty line: 36% (2002 est.)
Household income or consumption by percentage share:
lowest 10%: 2.8%
highest 10%: 30.1% (1993)
Inflation rate (consumer prices): 4.8% (2002 est.)
Labor force: 13.495 million
Labor force - by occupation: agriculture 80%, industry and services 20% (2002 est.)
Unemployment rate: NA%
Budget:
revenues: $1.01 billion
expenditures:$1.38 billion, including capital expenditures of $NA (FY 00/01 est.)
Industries: primarily agricultural processing (sugar, beer, cigarettes, sisal twine), diamond and gold mining, oil refining, shoes, cement, textiles, wood products, fertilizer, salt
Industrial production growth rate: 8.4% (1999 est.)
Electricity - production: 2.906 billion kWh (2001)
Electricity - production by source:
fossil fuel: 18.9%
hydro: 81.1%
nuclear: 0%
other: 0% (2001)
Electricity - consumption: 2.752 billion kWh (2001)
Electricity - exports: 0 kWh (2001)
Electricity - imports: 50 GWh (2001)
Oil - production: 0 barrel/day (2001 est.)
Oil - consumption: 17,000 barrel/day (2,700 m³/d) 2001
Natural gas - proved reserves: 11.33 km³ (37257)
Agriculture - products: coffee, sisal, tea, cotton, pyrethrum (insecticide made from chrysanthemums), cashew nuts, tobacco, cloves (Zanzibar), maize, wheat, cassava (tapioca), bananas, fruits, vegetables; cattle, sheep, goats
Exports: $863 million f.o.b. (2001)
Exports - commodities: coffee, manufactured goods, cotton, cashew nuts, minerals, tobacco, sisal
Exports - partners: India 15.2%, Japan 12.4%, Netherlands 9.2%, UK 6.8%, Belgium 6.5%, Kenya 5.9%, Germany 4.8% (2002)
Imports: $1.67 billion f.o.b. (2001)
Imports - commodities: consumer goods, machinery and transportation equipment, industrial raw materials, crude oil
Imports - partners: South Africa 12.7%, China 7.9%, Kenya 6.6%, India 6.3%, UK 6%, Japan 4.5%, US 4%, Australia 4% (2002)
Debt - external: $6.8 billion (2002 est.)
Economic aid - recipient: $963 million (1997)
Currency: 1 Tanzanian shilling (TSh) = 100 cents
Exchange rates: Tanzanian shillings (TSh) per US$1 - 876.41 (2001), 800.41 (2000), 744.76 (1999), 664.67 (1998), 612.12 (1997), 579.98 (1996), 574.76 (1995)
See also
References
Some information in this article has been taken from the CIA World Factbook, 2003 edition.