Tanzania WT/TPR/S/66
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I. THE ECONOMIC ENVIRONMENT
(1) MAJOR FEATURES OF THE ECONOMY
1. The United Republic of Tanzania is a coastal country in south eastern Africa, bounded to the
north by Kenya and Uganda, to the east by the Indian Ocean, to the south by Mozambique, Malawi,
and Zambia, and to the west by the Democratic Republic of the Congo (DRC, formerly Zaire),
Burundi, and Rwanda.  The country includes the islands of Zanzibar and Pemba, and other offshoreislands in the Indian Ocean.  The total area of Tanzania is 945,087 sq. km.  Dar es Salaam is the
largest city and served as Tanzania’s capital until 1974, when the Tanzanian Government announced a
decision to transfer the national capital from Da r es Salaam to Dodoma by the 1990s.  The National
Assembly, the Tanzanian legislative body, was immediately relocated to Dodoma but, due to
insufficient funds, the construction of other government buildings fell behind schedule.  Currently thebuilding programme and government transfer are scheduled to be completed by 2005.
2. With a per capita GNP of US$210, Tanzania is one of the world's least developed countries.
The economy is essentially dependent on agriculture, which currently provides 50% of GDP.
Topography and climatic conditions, however, limit cultivated crops to only about 4% of the land
area.  The fluctuating nature of agricultural production, due both to climatic conditions and ongoingbut incomplete economic reforms, along with variations in commodity prices have had a major impact
on Tanzania’s economic performance.  Because Tanzania is very dependent on the export of
commodities for its export earnings, its terms of trade have deteriorated as commodity prices have
generally declined.  Tanzania’s prospects depend heavily on the development of its mineral resources,
particularly gold, but prices in this subsector have also been fluctuating, potentially endangering plans
for development in this area.  Tanzania’s manufacturing sector is underdeveloped and suffers from a
variety of inefficiencies that need to be addresse d for the sector to contribute more substantially to
Tanzania’s economic well-being.  The services se ctor, approximately 40% of GDP, is predominantly
characterized by commerce related to tourism.  Tanzania’s GDP has grown over 3% in the past two
years and projections are for faster growth through the year 2001 (Chart I.1).
3. Tanzania’s population is 31.3 million with the islands of Zanzibar constituting approximately
3% of the total.  The average annual growth rate since 1990 has been approximately 3%.  The urbanpopulation increased from 2.7 million (15%) in 1980 to 8.0 million (26%) in 1997 (Table I.1).  The
percentage of public expenditure on health between 1990 and 1997 was 1.1% of GDP.  Tanzania’s
official languages are Kiswahili or Swahili, and English, which is the primary language of commerce,
administration, and higher education.  Arabic is wi dely spoken in Zanzibar.  According to the UNDP,
Tanzania ranked 156
th of 174 countries in its human development index (HDI).
4. The currency unit is the Tanzanian shilling, which replaced the East African shilling in 1966.
Tanzania’s official exchange rate is determined on the basis of the rate established in the interbank
market for foreign exchange.  The middle rate in terms of the U.S. dollar, the intervention currency
was T Sh 737.0 per U.S. dollar as of 30 June 1999.  The Bank of Tanzania allows the exchange rate to
be determined freely, and intervenes in the mark et only to smooth short-term fluctuations in the
exchange rate.  It intends to continue this policy while striving to achieve a reserve target of 24 weeks
of imports by the end of June 2000, while continuing to meet the Government’s external obligations
as they fall due.1
                                                     
1 Bank of Tanzania (1999a).WT/TPR/S/66 Trade Policy Review
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0123456
1994/95 95/96 96/97 97/98 98/99 99/2000 2000/01Source :  International Monetary Fund.Percentage changeChart I.1
Tanzania's real GDP growth , 1994-2001
a             Estimates.a a a
Table I.1
Social and economic indicators
Area 945,087 km2GNP per capita US$210
Population 31.3 million Formal employment ..
Population density 36 per km2Enrolment rate in education ..
Annual average population growth (1990-98) 3% Exchange rate (June 1999) T Sh/US$ 737.0
Urban share of population (1997) 8 million Inflation (June 1998) 12.1%
Life expectancy (1997) 47 years
Adult illiteracy
- male 18%
- female 38%
.. Not available.
Source: World Bank (1999), World Development Report 1999/2000 [Online].  Available at:  http://www.worldbank.org/
wdr/2000/pdfs/engtable2.pdf;  and UNDP (1999), Human Development Report  [Online].  Available at:
http://www.undp.org/hdro/report.html.
5. Tanzania is one of the most heavily indebted countries in the world.  Of its approximately
US$8 billion of debt, 50.6% is multilateral debt and 42.5% is bilateral.  The remaining debt is split
between commercial debt, which constitutes 3.8%, and other private debt, which constitutes the
remaining 3.1%.  The Government accounts for 93.7% of the debt;  public corporations and the
private sector account for the remaining 6.3%.  An enormous obstacle to Tanzania’s economic
development is the requirement that foreign exchange  be allocated to servicing the debt rather thanTanzania WT/TPR/S/66
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towards increased imports, which could serve to improve economic capacity and competitiveness, and
increase investment.
6. On 27 July 1999, the International Monetary Fund (IMF) completed the mid-term review of
the third annual arrangement under the Enhanced Structural Adjustment Facility (ESAF) for
Tanzania, and approved the disbursement of the second annual instalment under the third year of the
arrangement.2  Tanzania is expected to request a new three-year ESAF arrangement at the end of
1999.
7. Tanzania is also in line to receive additional debt relief to cushion the adverse economic
effects of its foreign debt, under the IMF and World Bank's Heavily Indebted Poor Countries (HIPC)
programme.  While the specific level of assistance has yet to be negotiated, Tanzania’s inclusion in
the HIPC programme is, in part, the result of the recognition that it has consistently implementedstringent measures laid down by the World Bank and the International Monetary Fund (IMF).
3
(2) ECONOMIC DEVELOPMENTS
(i) From independence to 1985
8. In May 1961, Tanganyika became an autonomous nation, gaining its independence from the
United Kingdom, which had administered the region since the end of World War I, first under aLeague of Nations mandate, when control passed from German colonial authorities, and then, after
World War II, as a UN trust territory.  On 9 December 1961, Tanganyika became fully independent
and a year later, Julius Nyerere was elected its first President.
9. Zanzibar was an Arab/Persian trading centre between Africa, the Middle East, and India until
Portuguese rule commenced in the 16th century.  In the early 18th century, Arabs regained control of
Zanzibar.  Zanzibar was a British Protectorate rule d through the local sultan until it was granted the
right of self-government in 1963 as a constitutional monarchy under the sultan.  In 1964, the sultan
was deposed by a revolt of the African majority and a revolutionary government took power.  In 1964,
after negotiations between Tanganyika and Zanzibar, the United Republic of Tanzania was created.
Each area retained its own legislature and legal system pending an agreement on more completeintegration.  Economic and political integration has proven to be a slow and difficult process although
harmonization in a variety of areas has been progressing
.
10. From independence until 1985, Tanzania was a one-party state, ruled by President
Julius Nyerere, which followed a socialist model of economic development.  The Government
pursued the principles of socialism and self-reliance, and implemented policies that called for the
collectivization of agriculture through the creation of agricultural cooperatives.  Businesses andindustries were nationalized, as were financial institutions.  Income and price controls were
implemented as were fiscal measures that emphasized the development of the rural sector.  This
socialist experiment suffered a setback with the increases in the price of petroleum in the 1970s,
which wiped out Tanzania's reserves.  Nyerere's ujamaa  ("familyhood") programme, designed to
revitalize village agriculture by combining modern technology with African ideas of cooperation, was
ultimately proven ineffectual by world economic developments, government inefficiency, and
resistance from Tanzania’s citizens.
                                                     
2 The ESAF is a concessional IMF facility for assisting eligible IMF members that are undertaking
economic reform programmes to strengthen their balance of payments and to improve their growth prospects.
3 To obtain assistance, a country must be eligible for concessional assistance from the IMF and World
Bank, face an unsustainable debt even after the application of traditional debt-relief mechanisms, and establish atrack record of reform and sound policies.WT/TPR/S/66 Trade Policy Review
Page 4
(ii) 1985 to the present
11. President Nyerere stepped down from the presidency in 1985.  During the latter years of his
leadership, some economic reforms were initiated:  in 1983, initial reform steps were taken with the
formulation of a National Agricultural Policy and the National Livestock Policy.  This started the
process of reviving agricultural production, which had been performing poorly.
12. The new administration of President Ali Hassan Mwinyi more earnestly continued the process
of political and economic reforms.  In 1986, further efforts were undertaken to reduce government
control over the economy, and to encourage private sector activity.  As a part of this effort, Tanzania
implemented its first comprehensive Economic Recovery Program (ERP) under the tutelage of the
International Monetary Fund and the World Bank.  The programme focused on improving fiscal
management and reforming the public sector, privatizing parastatal entities, and reforming the civilservice.  Despite initial successes with these efforts,  progress with structural reform in Tanzania was
halting as inflation, which remained at approximat ely 30%, contributed to strengthened resistance to
further reforms.  After a series of political reforms, the first multiparty elections were held in 1995
when Benjamin Mkapa took over the leadership of Tanzania.
13. Significant further progress has been achieved since 1995.  With continued support from
international financial institutions, Tanzania has focused on macroeconomic stabilization and fiscal
reform.  Tax administration improvements along with tightened controls on expenditures have
improved the country’s fiscal heath.  Along with monetary constraints, Tanzania’s rate of inflation has
declined to 8.7%, the lowest in 23 years.  Exports of both traditional and non-traditional goods
strengthened between 1995 and 1997 as the market signalled the impact of ongoing economic
reforms.  Despite this progress, the severe climatic conditions of 1996-98 dealt a setback to
agriculture-led export activity.  Tanzania’s track record of reform and its stated commitment tocomplete the process suggests that progress will continue.
(3) T
RADE PERFORMANCE
14. Tanzania’s balance of trade has been consistently in deficit despite the continuing process of
economic reform (Table I.2).  The liberalization of trade restrictions since the 1980s has seen the
revitalization of the export sector, particularly agriculture.  A similar liberalization of the importsector took place, but without the corresponding improvements in tax administration.  In order to
maintain revenues, tariff levels have been kept high, which has dampened imports and restrained
economic development, and has led to resource misallocations.
(i) Trade in goods
15. In 1991, the top ten sources for Tanzania’s imports were the United Kingdom, Japan, Italy,
Germany, the Netherlands, India, the United States, Kenya, Belgium, and Sweden.  By 1998, import
share had increased for Japan, Kenya, India, and the United States (Chart I.2).
16. The nature of Tanzania’s imports changed somewhat between 1990 and 1998.  Imports, in
1998, were characterized by machinery, transportation equipment and consumer goods (Chart I.3).  A
large increase in the import of food and foodstuffs in 1998 was attributable to the substantial decreaseof agricultural production brought about by climat ic conditions during this period (Table I.3).
17. The destination of Tanzania’s exports has shifted slightly during the 1990s.  In 1991, the main
export markets were the EU countries, India, Japan, the United States, Singapore, and Chinese Taipei.
In 1998, markets had diversified to include Kenya, Ireland, and Switzerland (Chart I.4).Tanzania WT/TPR/S/66
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Table I.2
Tanzania's balance of payments, 1990-98
(T Sh million)
Items 1990 1991 1992 1993 1994 1995 1996 1997 1998a
Trade account -164,722.0 -195,396.7 -268,699.1 -350,594.2 -401,081.5 -380,400.7 -247,021.5 -274,932.3 -391,920.0
Exports (f.o.b) 66,560.5 75,981.3 123,966.0 181,147.6 265,176.8 390,378.0 455,419.0 437,852.0 449,482.0
Imports (f.o.b) 231,282.5 271,378.0 392,665.1 531,741.8 666,258.3 770,778.7 702,440.5 712,784.3 841,402.0
Services (net) 5,923.4 5,278.8 2,149.4 -161,637.6 -43,354.6 -124,584.6 -161,793.7 -191,203.5 -105,577.8
Receipts 26,312.0 31,364.2 43,769.1 128,839.0 213,151.2 334,859.4 311,621.8 296,528.8 597,170.5
Payments 20,388.5 26,085.4 41,619.7 290,476.6 256,505.8 459,444.0 473,415.5 21,783.6 702,748.3
Investment income -37,669.4 -40,608.3 -67,079.9 -61,184.7 -62,430.1 -63,378.5 -36,921.0 -75,613.9 -104,668.9
Receipts 1,211.0 1,571.9 2,434.9 8,871.0 15,747.7 18,258.3 24,090.0 27,442.8 30,495.5
Payments 38,880.5 42,180.2 69,514.8 70,055.7 78,177.8 81,636.8 61,011.0 103,056.7 135,164.4
Transfers (net) 135,274.1 180,929.0 269,426.0 145,554.2 146,020.3 194,389.5 196,341.6 208,452.4 275,690.0
Inflows 141,125.9 187,955.4 279,846.0 157,990.1 158,761.1 212,947.1 215,085.5 249,926.1 307,127.1
Of which:  Govt. 105,195.9 122,873.7 179,348.8 153,757.7 109,591.6 135,572.9 136,934.3 158,347.3 184,813.2
Private 35,930.1 65,081.7 100,497.2 4,232.4 49,169.5 77,374.2 78,151.2 91,578.8 122,313.9
Outflows 5,851.8 7,026.4 10,420.0 12,435.9 12,740.8 18,557.6 18,743.9 41,473.7 31,437.1
CURRENT ACCOUNT -61,193.9 -49,797.2 -64,203.6 -427,862.3 -360,845.9 -373,974.3 -249,394.6 -333,297.3 -326,476.7
Capital account 26,762.2 28,069.9 21,939.0 83,163.1 133,845.1 109,693.4 110,794.9 212,343.0 239,448.2
Inflows 60,673.4 67,623.0 52,851.7 83,163.1 133,845.1 109,693.4 110,794.9 212,343.0 239,448.2
O u t f l o w s 3 3 , 9 1 1 . 2 3 9 , 5 5 3 . 1 3 0 , 9 1 2 . 7000000
Financial account 0 0 3,622.9 23,606.7 -54,466.0 61,302.7 11,900.6 -136,092.4 -136,044.2
Direct investment 0 0 3,622.9 8,290.6 25,481.7 68,935.4 87,034.5 96,645.4 114,359.6
A b r o a d 000000000
In Tanzania 0 0 3,622.9 8,290.6 25,481.7 68,935.4 87,034.5 96,645.4 114,359.6
P o r t f o l i o  i n v e s t m e n t 000000000
Other investment 0 0 0 15,316.1 -79,947.7 -7,632.7 -75,133.9 -232,737.8 -250,403.8
Inflow of financial resources 0 0 0 255,094.4 221,408.0 249,668.1 192,950.8 254,622.1 203,930.9
Outflow of financial
resources0 0 0 239,778.3 301,355.7 257,300.8 268,084.7 487,359.9 454,334.7
Errors and omissions -19,553.1 -36,909.8 -28,164.7 58,347.7 53,814.4 -11,671.0 -3,218.6 -59,287.9 -15,113.4
OVERALL BALANCE -53,984.8 -58,637.1 -66,806.4 -262,744.8 -227,652.4 -214,649.2 -129,917.7 -316,334.6 -238,186.1
Financing 53,984.8 58,637.1 66,806.4 262,744.8 227,652.4 214,649.2 129,917.7 316,334.6 238,186.1
Reserve assets 19,689.9 2,437.3 -2,679.4 22,532.5 -63,870.0 24,339.1 -113,670.4 -126,415.4 -7,585.0
LCFARb0 0 0 57.2 9,485.1 5,345.1 13,523.8 15,029.4 -32,375.8
Exceptional financing 34,294.9 56,199.8 69,485.8 240,155.1 282,037.3 184,965.0 230,064.3 427,720.6 278,146.9
Arrears -9,426.2 55,972.3 61,539.4 82,471.7 151,050.1 154,752.2 181,146.5 79,861.2 -54,834.0
Rescheduling 46,881.1 227.5 7,946.4 56,624.9 73,637.0 0 0 119,241.6 129,479.7
Debt forgiveness 0 0 0 9,749.8 12,124.2 0 0 75,722.7 82,227.6
Use of fund credit -3,160.0 0 0 29,203.7 7,742.4 -2,267.3 -7,991.2 53,205.9 19,531.6
Grants/borrowing for BOP
Support0 0 0 62,105.0 37,483.6 32,480.1 56,909.0 99,689.2 101,742.0
a Provisional.
b Liabilities constituting foreign authority reserves.
Source: Bank of Tanzania.WT/TPR/S/66 Trade Policy Review
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Estimates.
1991 import figures are not available for Argentina, Brazil, Finland, Malaysia, Pakistan, Portugal, Thailand, South Africa and the United Arab Emirates.  
Bank of Tanzania.Chart I.2
Imports by origin, 1991 and 1998
1991 Per cent
China   2.0EU
31.3United States
2.41998a
Japan
6.9 India
3.4Other
51.6United States
5.2
Kenya
6.7Other
24.4
South Africa
8.3EU
30.8
a
Note:
Source :United Arab Emirates
3.8 Thailand  1.5
China
3.0Japan
8.3India
5.7 Malaysia
2.2Kenya  2.4
T Sh 311.9 billion T Sh 1,043.1 billion
1990(Per cent )
a             Estimates.
Source :  Bank of Tanzania.Chart I.3
Imports by major commodity group, 1990 and 1998
Fertilizers
0.6
Food and 
foodstuffs
4.6
Building and 
construction
14.7Machinery
15.7
Industrial raw
materials
25.21998
Transport 
equipment
13.5Oil
14.3a
Building and 
construction
8.4Food and 
foodstuffs
14.5Other consumer 
goods
11.2Other consumer 
goods
19.8Fertilizers
0.7Oil
6.5
Transport 
equipment
15.4Industrial 
raw materials
9.8Machinery
24.8Tanzania WT/TPR/S/66
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Table I.3
Tanzania's imports by major commodity group, 1990-98
(T Sh million)
1990 1991 1992 1993 1994 1995 1996 1997 1998
Machinery 41,840.6 59,906.8 71,866.2 113,816.9 155,399.5 168,267.3 148,200.7 137,889.9 258,992.3
Industrial raw
materials67,011.3 26,770.2 40,536.5 49,305.1 65,411.3 232,142.4 202,157.3 114,272.4 102,563.6
Transport
equipment35,913.5 67,688.1 101,287.7 101,920.5 122,589.3 120,594.9 117,232.9 155,587.0 160,192.2
Building and
construction38,994.1 22,724.8 34,140.6 45,155.3 54,619.6 28,079.3 24,473.2 52,520.9 87,741.1
Food and
foodstuffs12,302.6 199.0 14,767.5 38,375.6 64,756.2 26,017.7 30,276.9 59,707.4 150,949.5
Other consumer
goods29,752.6 70,340.8 102,478.2 88,142.8 118,057.8 191,786.7 178,800.6 168,649.1 206,801.7
Fertilizers 1,657.2 8,223.4 5,095.7 8,141.1 5,971.8 7,123.4 13,720.4 13,868.7 7,776.2
Oil 38,019.2 35,303.0 56,189.8 69,024.1 75,824.0 111,940.9 92,441.0 105,672.5 68,080.3
Miscellaneous
goods3 5 0 . 9 2 0 , 7 7 2 . 8 2 4 , 9 7 7 . 1 1 0 0 , 7 1 6 . 2 1 0 3 , 1 8 4 . 7000 0
Total 265,842.0 311,928.7 451,339.2 614,597.5 765,814.2 885,952.6 807,302.9 808,168.0 1,043,096.9
Source: Bank of Tanzania (1999b), Quarterly Economic Statistics  [Online].  Available at:  http://www.bot-tz.org/
Stats/table4_4.htm.
Chart I.4
Exports by destination, 1991 and 1998
1991Per cent
Estimates.
In 1991, exports to Malaysia, Pakistan and the United Arab Emirates are not available.
Bank of Tanzania.Other 
23EU
52.9
Chinese Taipei
4.0United States
4.51998a
Japan
6.6
Kenya
2.0United States
2.2EU
36.9
a
Note:
Source :Other 
29.0India
19.5 Kenya
4.4Japan
7.7
India
8.7
T Sh 75.9 billion T Sh 391.8 billion
18. Tanzania’s commodity exports have always relied heavily on agricultural products;  heavy
reliance in 1990 on cotton and coffee shifted to coffee and cashew nuts in 1998 (Chart I.5).
Manufactured exports constituted a minimal portion of Tanzania’s exports throughout this period
(Table I.4).WT/TPR/S/66 Trade Policy Review
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1990(Per cent)
a             Estimates.
Source :  Bank of Tanzania.Chart I.5
Exports by major commodity group, 1990 and 1998
Petroleum prod.  
1.5Tea 6.3Sisal
4.7Cotton
22.2
Cashew nuts   1.5Coffee
18.4
Sisal
1.2
Tea
5.11998
Coffee
24.1
Minerals
   5.4a
Tobacco
9.4
Cashew nuts
18.3Tobacco  3.1Other
29.0Cotton
8.1
Manuf. 
products
4.7Other
26.4
Minerals   
4.5Manufactured products
6.1
Table I.4
Tanzania's exports by major commodity group, 1990-98(T Sh million)
1990 1991 1992 1993 1994 1995 1996 1997 1998
Coffee 16,023.9 16,553.9 17,300.6 39,427.9 58,764.7 81,168.4 85,603.5 72,743.7 72,280.2
Cashew nuts 1,028.7 3,522.0 6,486.5 9,132.8 26,507.3 36,077.4 47,446.9 55,513.3 71,806.1
Tobacco 2,066.7 3,691.7 8,186.7 7,096.8 10,495.4 15,371.6 28,008.7 33,060.1 36,671.5
Cotton 14,790.0 13,631.5 28,366.8 31.697.2 53,425.20 69,237.6 79,571.2 79,623.4 31,647.3
Tea 4,191.9 4,797.0 7,164.5 15,175.8 20,153.6 13,215.8 15,004.8 19,498.4 20,091.1
Sisal 3,114.4 479.0 391.1 1,440.7 2,643.1 3,535.3 3,054.1 5,591.0 4,507.5
Petroleum
products1,004.1 1,370.1 2,487.2 5,631.8 2,791.2 6,214.8 7,713.0 4,336.5 65.5
Minerals 3,620.1 8,478.8 12,920.20 28,074.3 15,389.8 25,545.1 31,450.0 31,302.9 17,509.2
Manufactured
products3,176.1 12,419.9 18,439.40 21,625.3 39,161.7 63,042.5 64,892.2 67,716.50 23,782.30
Others 17,544.7 11,037.5 22,223.0 21,844.9 35,844.9 76,969.6 92,674.9 90,163.2 113,444.0
R e - e x p o r t s 000000000
Total 66,560.5 75,981.3 123,966.0 181,147.6 265,176.8 390,378.1 455,419.2 459,549.0 391,804.7
Source: Bank of Tanzania.
(ii) Trade in services
19. Tanzania has been a net importer of services since 1993.  Services receipts have come
primarily from the tourism sector, which has grown markedly since 1990.  Tanzania’s paymentsreflect the substantial debt burden that Tanzania ha s been servicing along with a large deficit in the
travel sector (Table I.5).Tanzania WT/TPR/S/66
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Table I.5
Tanzania services account 1990-97
(US$ million)
1990 1991 1992 1993 1994 1995 1996 1997
Services receipts 140.1 127.1 155.6 290.2 494.0 589.3 495.8 522.3
Freight and insurance 11.8 7.1 10.8 6.8 4.1 3.5 5.5 14.3
Transportation 23.2 28.6 30.2 5.9 0.4 23.3 46.5 47.3
Travel 45.4 32.6 48.3 232.9 330.9 439.6 328.0 337.3
Communication .. .. .. .. .. 8.9 20.8 15.1
Education 0.0 0.0 1.9 0.9 .. .. .. ..
Investment income 4.3 6.4 8.2 19.3 14.0 15.5 36.1 43.3
Other services 55.4 52.4 56.2 24.4 144.6 98.5 58.9 65.0
Services payments 303.8 318.0 373.3 386.2 793.4 884.6 801.5 855.7
Transportation 7.9 7.2 1.2 13.6 17.8 31.3 41.7 42.5
Travel 16.1 18.2 72.6 214.2 273.8 337.9 358.5 415.6
Education 3.2 3.4 9.6 12.9 .. .. .. ..
Investment income 235.5 222.4 233.5 42.5 135.3 142.1 143.1 176.6
Other payments 41.1 66.8 56.4 103.0 366.5 165.8 170.9 129.9
Government services .. .. .. .. .. 207.5 87.3 91.1
Services (net) -163.7 -190.9 -217.7 -95.9 -299.4 -295.3 -305.7 -333.4
.. Not available.
Source: Tanzania authorities;  and IMF staff estimates.
(4) INVESTMENT
20. Gross domestic savings in Tanzania, both by the Government and the private sector are
insufficient to meet the needs of Tanzania’s growing economy.  In the early 1990s, Tanzania was
experiencing negative savings.  Since 1994/95, the savings rate has been increasing and is now
approximately 5% of GDP.  Inve stment in Tanzania as a percentage of GDP was around 20-25% in
the early 1990s, with government investment constituting a small portion of overall investment
activity.  More recently, investment levels have fallen to the range of 16-18% (Table I.6) and the
extent of government investment has increased.  Fo reign investment flows have traditionally been the
source of most investment funds .  In 1998/99, investment in Tanzania was 16.8% of GDP, with 12.4%
coming from abroad.
Table I.6
Tanzania’s savings and investment
(Per cent of GDP)
1994/95 1995/96 1996/97 1997/98 1998/99a1999/2000a2000/01a
Gross domestic savings 0.0 3.5 5.6 5.0 4.4 4.8 6.0
Government -2.0 -0.6 0.7 0.9 0.5 0.4 0.8
Non-government 1.9 4.1 4.9 4.1 3.9 4.3 5.2
Investment 21.9 18.2 16.0 15.9 16.8 17.5 18.5
Government 1.6 0.6 0.9 2.9 4.5 4.5 4.5
Non-government 20.3 17.6 15.1 13.0 12.3 13.0 14.1
Resource balance -21.9 -14.7 -10.4 -10.9 -12.4 -12.8 -12.5
a Projections.
Source: International Monetary Fund.WT/TPR/S/66 Trade Policy Review
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(5) OUTLOOK
21. The objective of the Tanzanian Government’s economic programme is to increase real growth
of the economy from 3.1% in 1997/98 to 4.3% in 199 8/1999 to 6.1% for 2000/01.  Inflation, which
has been declining steadily, is targeted to fall even further.  In June 1998, the rate of inflation was
12.1%.  The rate dropped further to 9.1% in January 1999, the first time in 23 years that Tanzania’s
inflation rate has been in single digits.  After a further decrease, inflation rebounded later in 1999.Nonetheless, the Government's long-term objective is  for an inflation rate at about 4-5% through
2001.
22. Tanzania has made significant strides in reforming its economy and liberalizing the various
components of its trade policy.  However, the costs associated with the restructuring of its fiscal
policies have been borne, in large measure, by trade policy.  Although improvements have been
achieved in customs administration and tax collection, tariff policy has been under pressure to assure
sufficient levels of government revenue.  As a result, recently implemented changes in the tariff
structure have resulted in an escalatory tariff structure with rates higher than might otherwise have
been necessary.  This has been done to accommodate the numerous import duty exemptions while, at
the same time, assuring that the government’s fiscal objectives can be met.
23. The continuing deterioration of Tanzania's terms of trade, with decreasing commodity prices
and a continued depreciation in the nominal value of the Tanzanian shilling, has further worsened its
trade outlook.  It is likely to increase Tanzania’s external trade and current account deficits and further
endanger its debt repayment capability.
24. The recent introduction of the VAT, and improved domestic tax collection by the Tanzania
Revenue Authority, may reduce the heavy dependence on trade taxes, allowing for lower duties.  In
turn, lower tariffs will address the misallocation of resources that is a consequence of higher duties.Lower tariffs will also encourage increased imports that can be directed to advance the development
process.
25. Tanzania has made significant progress in implementing a comprehensive reform of its fiscal
and monetary policies.  In spite of its high potential and progress in recent years, Tanzania continues
to be constrained by a number of key factors such as inadequate infrastructure, insufficient managerialand administrative expertise, fiscal mismanagement, corruption, lack of accountability, and poor
governance.  Moreover, it is quite susceptible to economic setbacks brought about by climatic
variations that have a detrimental impact on Tanzania’s crucial agricultural sector.  Even with
increased agricultural production, the vagaries of the commodities markets can jeopardize Tanzania’s
economic progress.  For these reasons, continued trade liberalization and parastatal reform, coupledwith progress in attracting foreign investment and promoting mining and other non-traditional
exports, will be important for Tanzania’s development prospects.