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Quick Facts
- Population:
- GDP (PPP):
- $149.8 billion
- 7.0% growth
- 6.6% 5-year compound annual growth
- $3,080 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Tanzania’s economic freedom score is 59.9, making its economy the 97th freest in the 2018 Index. Its overall score has increased by 1.3 points, with increases for judicial effectiveness and property rights outpacing lower scores for the tax burden and labor freedom indicators. Tanzania is ranked 10th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.
The government has an ambitious development agenda to attract investment by creating a better business environment through improved infrastructure and access to financing, but achievement of those goals is hindered by long-standing structural problems including poor management of public finance, widespread corruption, and an underdeveloped legal framework that interferes with regulatory efficiency and weakens the rule of law. Although the financial sector and credit market have been updated, additional institutional reforms and greater market openness are essential to long-term economic development.
Background
Shortly after gaining independence from Britain, Tanganyika and the island of Zanzibar merged to form the United Republic of Tanzania in 1964. John Magufuli of the Chama Cha Mapinduzi party was elected to a five-year term as president in 2015, succeeding the CCM’s Jakaya Kikwete. The CCM and its earlier incarnations have been in power continuously since independence. Tanzania has one of the world’s lowest levels of income per capita, and agriculture accounts for most exports and two-thirds of jobs. Its high growth rates are the result of vast natural resource wealth and tourism. A large helium gas field was discovered in 2016. Efforts are also underway to build an oil pipeline from western Uganda to Tanzania’s Tanga port.
Property rights are not well protected. Complex laws have led to a high incidence of land disputes. The inadequately resourced and corrupt judiciary remains under political influence. Although pervasive corruption has affected all aspects of political and commercial life, an antigraft campaign and the establishment of an anticorruption court have reduced the incidence of low-level corruption.
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 15.0 percent of total domestic income. Over the past three years, government spending has amounted to 18.5 percent of total output (GDP), and budget deficits have averaged 3.4 percent of GDP. Public debt is equivalent to 39.0 percent of GDP.
The arbitrary and inconsistent enforcement of regulations is a hindrance to entrepreneurial activity, and starting a business can be expensive. Tanzania faces persistent shortages of skilled labor, and graduates from universities often lack marketable skills. Subsidies continue to flow to TANESCO, the financially unsustainable public electricity utility, but fuel subsidies have been reduced.
Trade is moderately important to Tanzania’s economy; the combined value of exports and imports equals 37 percent of GDP. The average applied tariff rate is 6.5 percent. Nontariff barriers impede some trade. Government openness to foreign investment is below average. 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.