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- GDP (PPP):
- $127.1 billion
- 7.2% growth
- 6.8% 5-year compound annual growth
- $2,667 per capita
- Inflation (CPI):
- FDI Inflow:
Tanzania’s economy has grown substantially in recent years, but much of the population still remains below the extreme poverty line. The services sector has developed somewhat, but tourism remains underdeveloped due to a lack of proper infrastructure.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 58.5 (up 1 point)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 110th
- Regional Ranking: 17th in Sub-Saharan Africa
- Notable Successes: Fiscal Freedom and Investment Freedom
- Concerns: Rule of Law and Regulatory Efficiency
- Overall Score Change Since 2012: +1.5
Government corruption hinders foreign investment in Tanzania. In March 2015, the parliament passed a law instituting tougher regulations for businesses that are looking to hire foreign workers, showing preference for hiring locals. The 2014 Value Added Tax Act also took effect in 2015, reducing the number of VAT exemptions.
John Magufuli of the Chama Cha Mapinduzi party was elected president in October 2015, succeeding Jakaya Kikwete, also of the Chama Cha Mapinduzi party. Their party and its earlier iterations have been in power since independence in 1961. Adoption of a limited number of market-based policies has stimulated growth, but property rights remain uncertain, and corruption is endemic. Tanzania has a high HIV/AIDS rate and poor infrastructure. In 2012, the Millennium Challenge Corporation selected Tanzania for a second compact. It successfully completed its first compact, the world’s largest, in September 2013. A 50-year border dispute with Malawi resurfaced in 2012 when Malawi gave a British firm exploration rights for oil in Lake Malawi. In 2014, Tanzania began the naturalization process for approximately 200,000 Burundian refugees. Tanzania is a transit point for human and drug trafficking.
Corruption remains pervasive in all aspects of political and commercial life, especially in the energy and natural resources sectors. Almost $500 million in foreign aid was withheld in late 2014 after the fraudulent withdrawal of $122 million from the central bank. The underresourced and corrupt judiciary remains politically influenced. Complex land laws have been accompanied by a high incidence of land disputes.
The top personal income and corporate tax rates are 30 percent. Other taxes include a value-added tax and an interest tax. The overall tax burden equals 16.8 percent of total domestic income. Government spending has declined to 19.7 percent of GDP. The budget deficit has declined to below 5 percent of GDP, and public debt has reached a level equal to 33 percent of total domestic output.
Despite some progress, business formation and operation remain difficult. Requirements for launching a business are not time-consuming, but the licensing process costs over five times the average annual income. Labor regulations are not efficient enough to support a vibrant labor market. Subsidies to the telecommunications sector increased in 2015, and the government repeatedly interfered in the state-owned electricity firm’s pricing decisions.
Tanzania’s average tariff rate is 8.4 percent. All land is owned by the government. The government may not expropriate property without providing compensation. State-owned enterprises operate in the energy and telecommunications sectors. The small financial sector has been evolving. Credit is allocated largely at market rates, and various commercial credit instruments are available to the private sector.