2013 Index of Economic Freedom

Tanzania

overall score57.9
world rank98
Rule of Law

Property Rights30.0

Freedom From Corruption30.0

Limited Government

Government Spending77.9

Fiscal Freedom79.9

Regulatory Efficiency

Business Freedom48.6

Labor Freedom61.9

Monetary Freedom71.8

Open Markets

Trade Freedom73.5

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 42.2 million
  • GDP (PPP):
    • $63.9 billion
    • 6.7% growth
    • 6.8% 5-year compound annual growth
    • $1,515 per capita
  • Unemployment:
  • Inflation (CPI):
    • 7.0%
  • FDI Inflow:
    • $1.1 billion
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Tanzania’s economic freedom score is 57.9, making its economy the 98th freest in the 2013 Index. Its score is 0.9 point higher than last year, with improvements in half of the 10 economic freedoms, including business freedom and freedom from corruption, outweighing a decline in the control of government spending. Tanzania is ranked 13th out of 46 countries in the Sub-Saharan Africa region, and its overall score is slightly lower than the world average.

The Tanzanian economy has weathered the impact of the global economic turmoil relatively well, achieving an average growth rate above 6 percent over the past five years. Continued economic expansion has been facilitated by open-market policies related to global commerce. The financial sector and the investment framework are relatively well developed for the region.

However, institutional shortcomings continue to undermine prospects for dynamic long-term economic expansion. Tanzania has attempted to update its commercial laws to reduce administrative delays and the cost of conducting business, but the overall regulatory framework remains poor. An inefficient judicial system and pervasive corruption erode the effectiveness of government and undermine the rule of law. Price controls continue to hamper growth in the agricultural sector.

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Background

Former Foreign Minister Jakaya Kikwete has served as president since winning election in December 2005. Elections for president and all parliamentary seats were last held in October 2010. The next presidential and parliamentary elections are scheduled for 2015. Tanzania’s historically state-led economy is becoming more market-based but remains hindered by weak property rights, poor infrastructure, and the country’s high HIV/AIDS rate. Thirty percent of the budget is dependent on donor assistance. In 2008, Tanzania received the world’s largest Millennium Challenge Corporation grant from the United States, worth $698 million. Agriculture is the most important sector of the economy, providing about 27 percent of GDP and 80 percent of employment.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 30.0 Create a Graph using this measurement

The judicial system is subject to political interference and severely inefficient. Recent reforms have been aimed at establishing a reliable system of transferable property rights, but there is no single comprehensive law covering transactions. Complex land laws have been accompanied by a high incidence of land disputes. Corruption is extensive, and penalties are ineffective.

Limited GovernmentView Methodology

The top income tax and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and an interest tax. The overall tax burden equals 14.6 percent of total domestic income. Government spending has risen to 27.1 percent of GDP. The budget deficit has been over 5 percent of GDP in recent years, and public debt has reached 44 percent of total domestic output. High gold prices and strong gold exports have boosted fiscal health.

Regulatory EfficiencyView Methodology

Despite some progress, business formation and operation remain cumbersome. Although requirements for launching a business are not time-consuming, the licensing process costs over five times the level of average annual income and takes more than 200 days to complete. Labor regulations are not efficient enough to support a vibrant labor market. The lack of competition in the market has inflated price levels, hurting monetary stability.

Open MarketsView Methodology

The trade-weighted average tariff rate is high at 8.2 percent, with costly non-tariff barriers, including customs delays, further limiting trade freedom. Investment regulations are outmoded, and burdensome bureaucracy and inadequate infrastructure deter investment growth. The small financial sector has been evolving. Credit is allocated largely at market rates, and a range of commercial credit instruments are available to the private sector.

Country's Score Over Time

Bar Graph of Tanzania Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Tanzania to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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