Strong Tanzania economy still blighted by poverty: World Bank

Reuters News

11/1/2012 7:12:19 AM - Reuters News

By Fumbuka Ng'wanakilala

DAR ES SALAAM (Reuters) - Tanzania's economy is well placed to extend a run of strong growth, but the government should do more to ensure the extra wealth reaches its people, most of whom are mired in poverty, the World Bank said.

Given careful budgeting, gross domestic product should rise 6.5-7.0 percent this year as well as in 2013 and 2014, supported by the country's mining, telecommunications and banking sectors, the World Bank said on Thursday in a report.

The benefits of a rapidly developing natural gas industry should also kick in over the next seven to 10 years.

The growth rate matches a forecast from the International Monetary Fund, which said in March it expects east Africa's second-biggest economy to expand by 6.5 to 7 percent in 2012-13. It grew 6.4 percent in 2011 and 7 percent in 2010.

The World Bank said Tanzania would hit the target if it avoided major economic shocks and found the right balance between borrowing to finance infrastructure projects and ensuring it can manage its debts.

Tanzania's public deficit fell in 2011/12 for the first time in four years to 5.0 percent of GDP, Philippe Dongier, the bank's director for Tanzania, Burundi and Uganda, said at the launch of the report.

But mass poverty remained a major issue despite the improving economic picture.

"Growth in Tanzania has been concentrated in a few capital-intensive sectors such as mining and telecoms, and soon natural gas - failing to produce widespread job creation, failing to raise incomes of the masses, and failing to reduce poverty," he said.

"In macroeconomic terms, Tanzania is a success story. However, its success has not translated into improved conditions for a large proportion of rural households, who constitute ...about 75 percent of the total population."

The lack of inclusive growth threatened to undermine Tanzania's goal of becoming a middle-income country by 2025.

"Rather than minor adjustments, fighting rural poverty requires a major policy shift that involves agricultural commercialization, diversification and urbanization," it said.

The report added that income from agriculture, traditionally one of the biggest sectors, had stagnated, and agricultural production was barely growing faster than the population.

Tanzania last month raised its estimate of recoverable natural gas reserves to 33 trillion cubic feet (tcf) from 28.74 tcf following recent big discoveries offshore.

"With the recent discoveries of significant gas reserves in addition to its mineral resources, Tanzania's long-term economic prospects appear promising as these assets are already attracting potential foreign investors," the report said.

Tanzania attracted $3 billion foreign direct investment in the mining sector in 2011/12, up from $2.1 billion in 2010/11.

(Editing by Yara Bayoumy; Editing by John Stonestreet)