Overview of macro-economic context

The United Republic of Tanzania was formed out of the union of Tanganyika (Mainland) and Zanzibar in 1964. With a total area of 887,000 square kilometers of land and approximately 59,000 square kilometers of water, Tanzania is the largest country in Eastern Africa.

According to the World Bank, the total population is 44. 8 million. The National Census of 2002 has further estimated population to reach 70 million by 2025. About 26 percent of the population lives in urban areas, growing at over 6 percent per annum, around twice the national rate of population growth. Over 70 percent of the urban population lives in informal settlements with little access to basic services like water, sanitation and transportation. Poverty is widespread in the rural areas where close to 80 percent of the population reside.

Generally, Tanzania has maintained relative peace and political stability, which must be capitalized on to effectively address rural and urban poverty and maximize the contributions of efforts towards poverty reduction.

General macroeconomic context and the role of UNIDO

The Tanzanian economy still depends heavily on agriculture, which accounts for about half of Gross Domestic Product (GDP) and employs 85% of the workforce. Services (38% of GDP) and industry (18%) are still lagging behind. [Year 2005. Source: World Bank: World Development Indicators, 2007]. 

The growth of the economy as measured by GDP growth has remained steadily over 6% per annum since 2001 and last year recorded an encouraging 7.3%.

Year	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007
Growth rate (%)	3.6	4.6	3.5	3.7	3.5	5.1	6.2	7.2	7.1	6.7	6.8	6.2	7.3

[Sources: UN Statistics Division, National Account Aggregate Database; URT: Speech by the minister for planning, economy and empowerment, Hon. Alhaj Dr. Juma Ngasongwa (MP) presenting to the national assembly the economic survey for 2006 and medium term outlook for 2007/08-2009/10.]

In the mid-1980s, Tanzania began introducing macroeconomic reform programmes favouring a greater role for market forces and closer integration into the global economy. The reforms, which entailed rationalization of government spending and more conservative fiscal policies, intensified in the mid-1990s. Progressive implementation of economic stabilization and structural reform programmes resulted in the privatization of many public institutions and the liberalization of the banking sector, which brought about substantial (and continuing) influx of Foreign Direct Investment (FDI) in all sectors. These developments helped sustain macroeconomic stability that is the basis of the impressive growth performance over recent years.

But despite the macroeconomic progress, political stability, and impressive growth records, higher growth has yet to translate into significantly improved living standards and reductions in poverty, which remains prevalent especially among rural families that depend largely on agriculture for their livelihoods. In this context, industrialization has a critical role to play in helping Tanzania to raise growth rates and UNIDO plays a strategic role in this process.

To read more about industrial development challenges in Tanzania, please click here.

To read more about the national development strategy of Tanzanian government and the alignment of UNIDO development strategy, please click here.

To see this within the UNDAF (UN Development Assistance Framework), please click here.