Prospects for private sector-led growth in Tanzania

While economic growth in Tanzania has increased in recent years, it is still much too low to have a visible impact on poverty. In fact, recent evidence suggests that aggregate levels of poverty have not changed much in the past decade. The main reason for this is that the ongoing and far-reaching economic reforms have so far failed to create conditions conducive for a growing and competitive private sector. The major obstacles to private sector growth identified in the paper include high costs of production, a piecemeal tax system and remaining legacies from the socialist past. While some of these are currently being addressed by the reform-oriented and determined current government, the political obstacles are still significant. In addition, since Tanzania is still an aid-dependent economy, donor strategies are likely to have a major influence on growth.