Introduction

The Country Program Evaluation (CPE) assesses the relevance and effectiveness of the World Bank Group’s support to Tanzania between FY 2012 and FY22. It assesses the extent to which the Bank Group’s support and its evolution over the evaluation period were relevant and effective in addressing the country’s main development challenges using several evaluation methods, including a literature review, a portfolio analysis, semistructured interviews, and a content analysis (see appendix A). The evaluation distills lessons from the Bank Group’s experience in Tanzania to inform future Bank Group operations.

This evaluation seeks to answer the following questions:

1. How relevant to the development needs of Tanzania was the Bank Group–supported strategy, and did it evolve appropriately over time to reflect changing priorities and changes in country context?
2. To what extent has the Bank Group contributed to improving the business environment, especially through access to finance and energy, and by enhancing human capital through education and skills, especially in vulnerable groups, including women and girls?
3. To what extent has the Bank Group helped Tanzania achieve pro-poor development through efficient and resilient spatial transformation and land use?

The evaluation includes thematic chapters on (i) private sector–led growth, including the role of access to finance, skills development, and access to electricity in fostering private sector job creation, and (ii) spatial transformation. These topics were identified in the 2017 Systematic Country Diagnostic as major development challenges for Tanzania (World Bank 2017b).

The CPE is organized in five chapters. Chapter 1 provides the country context in which the Bank Group provided its support. Chapter 2 describes the evolution of the Bank Group’s strategies and portfolio. Chapter 3 assesses the Bank Group’s contribution to improving the business environment for the private sector by supporting access to finance, access to electricity, and skills development. Chapter 4 evaluates World Bank support toward achieving pro-poor development through efficient and resilient spatial transformation and land use. Chapter 5 presents main findings and lessons to inform future Bank Group support to Tanzania.

Country Context

Tanzania recorded resilient growth over the past decade, but poverty declined only slowly and remains widespread. Tanzania’s annual growth in GDP was 5.5 percent during the evaluation period. Annual per capita GDP growth averaged 2.2 percent from 2012 to 2022, compared with 3.6 percent from 2000 to 2011, with an annual population growth of 3 percent (figure 1.1, panel a). The COVID-19 pandemic caused per capita incomes to contract for the first time since 1994. The country’s poverty head count ratio declined from 36 percent in 2000 to 28 percent in 2011 and to 26 percent in 2018, with growth over time becoming less pro-poor (World Bank 2021b; figure 1.1, panel b).

During the evaluation period, fiscal risks increased from low to moderate, highlighting the need for a close monitoring of the country’s debt portfolio and the need to rely on the private sector as a source of jobs and growth. In 2012, Tanzania’s risk of debt distress, taking into account government borrowing from domestic and external sources, was low (World Bank and IMF 2012), reflecting previous debt relief and sound macroeconomic policies. Yet during the evaluation period, public debt grew by more than 10 percent of GDP, increasing from 31 percent in 2012 to 43 percent of GDP in 2022 (figure 1.2), because of higher infrastructure spending and the dominant role of state-owned enterprises, which represented not only a burden on the government’s budget but also a constraint to the growth of the private sector (World Bank 2017b). The limited fiscal space for public investments was expected to provide a small contribution to growth and emphasized the need to rely on other drivers of growth—namely, improvements in the business environment—as a means to increase private activities, jobs, and economic growth.

Figure 1.1. GDP Growth and Poverty Head Count Ratio

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Figure 1.1. GDP Growth and Poverty Head Count Ratio

Source: World Development Indicators.

Figure 1.2. Public Debt, 2011–22

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Figure 1.2. Public Debt, 2011–22

Sources: Tanzania Ministry of Finance 2023; World Bank 2024a.

Tanzania made significant progress on several health and education outcomes. Life expectancy at birth rose, and infant mortality fell. In education, primary and secondary school enrollment rates increased (table 1.1). Although access to education has improved, it remains low for secondary school enrollment, and outcomes have improved little. Tanzania’s Human Capital Index ranks slightly below the average for Sub-Saharan Africa and well below that of lower-middle-income countries at 152 (out of 174 countries) in 2020.

At the start of the evaluation period, Tanzania’s economic priorities were the provision of social services and the strengthening of human capital, supporting the private sector for job creation and poverty reduction and promoting accountability in the public sector. However, the implementation of a program of important structural reforms had lost momentum after the mid-2000s (World Bank 2016a, 2017b). After the election of a new administration in 2015, the objective was to transform Tanzania into a semi-industrialized economy. Government priorities were scaling up investments in infrastructure and human development while ensuring public sector accountability (World Bank 2017b), with a strong preference for achieving these objectives through promoting domestic firms rather than foreign direct investment.

Main Development Challenges

Tanzania’s rapid population growth is placing pressure on the country’s education system and underscores the need for more job creation. Tanzania’s population growth of close to 3 percent per year is the 12th highest in the world and well above the average for lower-middle-income countries (1.5 percent). Low levels of education and inadequate labor skills have constrained poor households in accessing productive employment opportunities. With 800,000 Tanzanians expected to enter the labor market each year, there is growing pressure to generate more jobs (World Bank 2017b).

The private sector can play a crucial role in improving growth and creating jobs, yet the economy remains dominated by the state. Several studies have associated the development of the private sector with economic growth in developing countries (Gala 2008; Jones and Olken 2008; Rodrik 2013, 2014). However, in Tanzania, the role of the state in the economy remains large: the government’s total portfolio investment (equity holding) in both majority- and minority-owned companies amounted to about 44 percent of GDP in 2020 (IMF 2023). State-owned enterprises also place a burden on the government’s budget (and increase fiscal risks, including through potentially large contingent liabilities), negatively affect service delivery, and constrain private sector growth. In addition to a level playing field, the 2017 Systematic Country Diagnostic reported that supporting private sector growth would require reforms of the business climate by reducing regulatory burdens, facilitating access to finance, and removing critical infrastructure bottlenecks in transport and energy, which constrained competitiveness (World Bank 2017b). In addition, addressing substantial skills shortages and gaps was critical for faster growth and creation of high-productivity jobs.1

Growth needs to become more inclusive and resilient, including to the increasing risks from climate change. Despite continued growth over the past decades, the pace of poverty reduction in Tanzania slowed down during 2011–18 compared with 2007–11 (World Bank 2021b), pointing to the need for more inclusive growth. Tanzania also needs to build economic resilience against future shocks driven by climate change. Tanzania is increasingly facing climate change–driven challenges, which are more likely to affect poor and vulnerable households. For example, Tanzania’s traditional sectors of agriculture and tourism employ a large share of the country’s labor force and are highly sensitive to climate change.

Source: World Bank Group 2020.

Note: Comparator countries were identified using the dynamic benchmarking tool. DPT = diphtheria, pertussis, and tetanus; LMIC = lower-middle-income country; SSA = Sub-Saharan Africa; UMIC = upper-middle-income country; — = not available a. Based on available data (as of June 2024).