by Ben Taylor
Strong growth recorded, and projected
Tanzania recorded economic growth of 5.1% in 2023, according to the latest government figures. This was stated by the Minister of Planning and Investment, Prof Kitila Mkumbo, in his National Economic Status Report for 2023, presented to Parliament in Dodoma in June.
This represents a small improvement in growth rates compared to recent years. Tanzania was among a small number of countries to maintain economic growth throughout the Coronavirus pandemic, though growth slowed from 6.9% in 2019 to 4.5% in 2020, 4.8% in 2021 and 4.7% in 2022.
According to Mkumbo, the growth in 2023 was driven by the arts and entertainment sector, which expanded by 17.7%, followed by the finance and insurance sector at 12.2%, and mining at 11.3%. The accommodation and food services sector grew by 8.3% and the information and communications sector by 7.6%. Prof Mkumbo noted that sectors that had traditionally provided substantial employment saw slower growth rates. He noted particularly that agriculture, which is vital for the majority of Tanzanians, grew by only 4.2% while manufacturing and trade expanded by 4.3% and 4.2% respectively. The result, he said, was that the benefits of growth have not been evenly distributed, particularly among the nation’s poorest citizens
Nevertheless, the Minister also explained that the agriculture sector continued to make the largest contribution to GDP, accounting for 26.5%. This is followed by construction (13.2%) and mining (9%).
Prof Mkumbo told Parliament that the types of goods that Tanzania exports have changed over the past two decades. “In the 2000s,” he explained, “57% of Tanzania’s export goods involved agricultural products sold to markets in Europe, the United States, and Africa. However, twenty years later, Tanzania’s exports are now dominated by minerals, with many products being sold to markets in Asia and African countries.”
In 2023, 49% of exported goods were minerals, followed by manufactured goods (17%), with agricultural products (12%) coming in third, said the Minister.
Moreover, the country still continues to face a significant trade imbalance. The value of the country’s exports was $8.2 billion in 2023, while imports amounted to $13.7 billion. “This indicates that we are still spending a considerable amount of foreign currency on importing goods that could be produced domestically,” the minister told Parliament.
Going forward, Prof Mkumbo said the government’s target was to achieve 5.4% GDP growth in 2024.
Later in the same month, the IMF suggested that this target was in line with their projections. In a report, they predicted growth in Tanzania would pick up to 5.4% in 2024 and 6.0% in 2025, respectively, supported by improvements in the business environment and subsiding global commodity prices.
Njombe, Simiyu, Dodoma, Coast and Kagera regions experience growth spurt
Njombe, Simiyu, Dodoma, Coast and Kagera regions recorded the fastest economic growth at the regional level from 2018 to 2022, according to data from the Bank of Tanzania’s 2023 Consolidated Zonal Economic Performance Report. Despite having lower GDP figures than Dar es Salaam and other major urban centres, these regions posted notable growth during the five-year period.
Njombe’s GDP surged 48%from TSh2.1 trillion to TSh3.1 trillion, Simiyu’s jumped 45%, Dodoma and Coast regions both grew by 43% and Kagera by 39%.
In contrast, Dar es Salaam’s GDP grew by 34% during the same period, the second slowest rate in the country. It should be noted, however, that Dar es Salaam has continuously retained its status as Tanzania’s biggest and most important economic hub, with a regional GDP worth TSh29 trillion in 2023. “It’s the norm that the larger the economy, the slower the growth,” said Dr Daudi Ndaki of Mzumbe University. “That’s why you will see that Tanzania’s economy, for instance, is growing much faster than the GDPs of many developed countries,” Dr Ndaki said.
University of Dar es Salaam Business School assistant lecturer Godsaviour Christopher said the five regions’ economies are growing fast due to increased investment and untapped potential for growth.
“These regions still have many investment opportunities, while big cities such as Dar es Salaam have already used up a great deal of available resources and are approaching full capacity,” he said.
There is plenty of arable land available for investment in Njombe for the cultivation of maize, tomatoes, potatoes, beans, pineapples, avocados, tea production, flowers and timber. And Coast Region has in recent years emerged as a key destination of strategic projects such as the Julius Nyerere Hydro Power Project (JNHPP).
Common East African currency postponed
Secretary General of the East African Community (EAC), Ms Veronica Mueni Nduva, said in August that the process for monetary union and a single East African currency has been pushed back to 2031. Previously, EAC member states had committed to launching the currency in 2024.
“The Monetary Union was expected to be established in 2024 as per the Monetary Union Roadmap” she explained. “However, it has not been realised and the timeline was therefore revised to 2031.”
She said that so far, some aspects of the roadmap have been implemented even as members remain divided on several other aspects. She noted that central banks within the EAC have established the East African Payments System (EAPS), a multicurrency platform that enables settlements in the local currencies of the partner states, facilitating currency convertibility across the region, and said that partner states have signed and are implementing an MOU on currency convertibility and repatriation.
There have, however, been delays in obtaining a consensus on which country should host the East African Monetary Institute (EAMI), a precursor to an East African Central Bank, and member states have not yet managed to agree on the criteria to effectively converge the four macroeconomic fundamentals.
These include a headline inflation rate of 8%, a foreign exchange reserve cover equivalent to 4.5 months of imports, a ceiling on the overall fiscal deficit set at 3% of gross domestic product (GDP), and a limit on gross public debt capped at 50% of GDP for all partner states.
For context, Tanzania currently meets or is very close to meeting all four of these targets, with headline inflation at 3.1%, foreign exchange cover at 4.4 months of imports, an overall fiscal deficit at 3% of GDP and gross public debt at an estimated 38% of GDP.