THE ECONOMIC SURVEY 2010

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1 THE UNITED REPUBLIC OF TANZANIA THE ECONOMIC SURVEY 2010 Produced by: The Ministry of Finance DAR ES SALAAM TANZANIA August, 2011 Printed by KIUTA Dar es Salaam - Tanzania

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3 Table of Contents LIST OF TABLES... i ABBREVIATIONS AND ACRONYMS... vii IMPORTANT ECONOMIC EVENTS IN x CHAPTER THE DOMESTIC ECONOMY... 1 Economic Growth... 1 Rebasing of the National Consumer Price Index (NCPI)... 5 New weights and a new reference period... 5 Classification of Goods and Social Services... 6 NCPI Methodology... 7 The Link between the new and old NCPI... 8 Price Trend... 8 Inflation Rate excluding Food and Energy... 8 Capital Formation CHAPTER THE STATE OF THE WORLD ECONOMY AND INTERNATIONAL ECONOMIC CO-OPERATION THE STATE OF THE WORLD ECONOMY World Economic Growth Trend in World Trade Economic Development in Sub-Saharan Africa East African Community (EAC) Africa Union and Economic Commission for Africa Joint Permanent Commission (JPC) Southern Africa Development Community (SADC) African Peer Review Mechanism (APRM) World Economic Forum (WEF) CHAPTER EXTERNAL SECTOR INTRODUCTION MERCHANDISE EXPORTS Coffee Cotton Tea Tobacco Cashewnuts Cloves Minerals Manufactured Goods Fish and Fish Products... 52

4 Horticultural Products Other goods exports Service Receipts MERCHANDISE IMPORTS Capital goods Intermediate Goods Consumer Goods SERVICES PAYMENTS TRENDS IN SELECTED REGIONAL AND BILATERAL TRADE.. 55 BALANCE OF PAYMENTS Balance of Merchandise Trade Balance on Services Balance on Investments Receipts and Payments Balance on Current Transfers Balance on Current Accounts Balance on Capital Transfers Balance on Investment Payments Overall Balance of Payments Foreign Currency Reserves EXCHANGE RATE CHAPTER GOVERNMENT FINANCE Domestic Revenue Expenditure Sectoral Allocation of Government Budget National Debt External Debt External Debt Stock by Creditor Category Domestic Debt Stock Public Debt Service CHAPTER MONEY AND FINANCIAL INSTITUTIONS Money Supply and Domestic Credit Deposits in Commercial Banks Parastatal Pension Fund (PPF) Public Service Pension Fund (PSPF) National Social Security Fund (NSSF) Government Employees Provident Fund (GEPF) National Health Insurance Fund (NHIF) Local Authorities Pensions Fund (LAPF) Tanzania Insurance Regulatory Authority (TIRA) Dar es Salaam Stock Exchange (DSE) Tanzania Postal Bank ii

5 CHAPTER HUMAN RESOURCES Population and Development Labour Force and Employment CHAPTER PRIVATE SECTOR DEVELOPMENT Investment in the Country The Regional Distribution of Projects The Improvement of Business Environment ECONOMIC EMPOWERMENT Mwananchi Empowerment Fund Access to Credit CHAPTER CROSS CUTTING ISSUES HIV/AIDS Environment Good Governance Gender Public Safety CHAPTER REVIEW OF THE IMPLEMENTATION OF NATIONAL STRATEGY FOR GROWTH AND REDUCTION OF POVERTY (NSGRP) Introduction Growth and Reduction of Income Poverty Improving Quality of Life and Social Well-being Good Governance and Accountability CHAPTER EXPANDING FINANCIAL SERVICES TO THE UNBANKED COMMUNITY Introduction Financial Sector in Tanzania Mobile Phone Payment Development of Microfinance Institutions Challenges Conclusion CHAPTER AGRICULTURE AND COOPERATIVES Growth Food Crops Cash crops Production Production of Oil seeds Investment in Agriculture Irrigation Farming iii

6 Extension Services and Trainings Research Activities Agriculture Input Trust Fund Provision of Subsidies for Farming Inputs LIVESTOCK Livestock Production and its Products Trading of Livestock and Its Products COOPERATIVES AND MARKETING Cooperative Development Trend of Cash Crops Prices CHAPTER NATURAL RESOURCES AND TOURISM Growth Rate Forestry and Beekeeping Wildlife FISHERIES Tourism Archives and Antiquities CHAPTER MINING Growth Rate Mineral Prospecting Mining and Mineral Sales Diamond Gold Gemstones Coal The value of Mineral Exports CHAPTER MANUFACTURING AND INTERNAL TRADE Growth Rate Small Enterprises Production Cost Production in Selected Industries Internal Trade Dar es Salaam International Trade Fair CHAPTER CONSTRUCTION AND LAND DEVELOPMENT CONSTRUCTION Growth Rates Road Network Roads and Bridges Maintenance Road Board Fund iv

7 Contractors Registration Board Engineers Registration Board Architects and Quantity Surveyors Registration Board National Building Council Tanzania Building Agency LAND DEVELOPMENTS Human Settlements and Rural Development Housing Development CHAPTER TRANSPORT AND COMMUNICATION Introduction TRANSPORT Road Transport Urban Commuter Services Usafiri Dar es Salaam (UDA) RAILWAY TRANSPORT Tanzania Railways Limited (TRL) Tanzania and Zambia Railway Authority (TAZARA) AIR TRANSPORT Tanzania Airport Authority (TAA) METEOROLOGICAL SERVICES WATER TRANSPORT Marine Transport The Marine Service Company Limited (MSCL) SINOTASHIP COMMUNICATION SERVICES Tanzania Posts Corporation (TPC) Tanzania Communication Regulatory Authority (TCRA) INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) National ICT Infrastructure Backbone Tele-centers National Physical Address and Postal Codes SCIENCE, TECHNOLOGY AND INNOVATION The Development of Scientific Research in Tanzania National Research Registry Human Resource Development Radiation Control CHAPTER ENERGY Growth Rate Electricity Exploration of Petroleum and Gas v

8 Fuel Prices ALTERNATIVE SOURCES OF ENERGY Minor Waterfalls Solar Power Geothermal and Biofuel CHAPTER WATER Introduction Rural Water Supply Urban Water Supply CHAPTER EDUCATION AND TRAINING Pre primary Education Primary Education Secondary Education Teachers Education Adult Education Schools and Colleges Inspection Vocational Training Technical Education Higher Education CHAPTER HEALTH Introduction Health Facilities Health Facilities Inspection Community Health Education Maternal and Child Health Life expectancy National Malaria Control Programme (NMCP) Food and Nutrition Social Welfare CHAPTER COMMUNITY DEVELOPMENT Folk Development Colleges Gender and Women Development Children Development Coordination of Non-Government Organisations (NGOs) vi

9 LIST OF TABLES Table A: Table B: Table 1: Table 1A: Table 2: Table 2A: Table 2B: Table 3: Table 3A: Table 4: Table 4A: Basic Economic Statistics Statistics Tanzania Mainland... xi Trends in Selected Macroeconomic Indicators, xii Gross Domestic Product by Kind of Economic Activity, at current prices Gross Domestic Product (Monetary & non-monetary GDP mp) by Kind of Economic Activity, at current prices Sectoral Contribution to Overall GDP at Market Price (at current prices) Sectoral Contribution to Overall GDP Monetary & Non-Monetary, at current prices Gross Domestic Product and Expenditure, at current Market prices Gross Domestic Product (GDP mp) by Kind of Economic Activity, at constant 2001 prices Gross Domestic Product (Monetary & non-monetary) by Kind of Economic Activity, at constant 2001 prices Gross Domestic Product (GDP mp) by Kind of Economic Activity - Percentage Growth Rates, at constant 2001 prices Gross Domestic Product (Monetary & non-monetary GDP mp) by Kind of Economic Activity - Percentage Growth Rates, at constant 2001 prices Table 4B: Sectoral Contribution to Overall GDP (%) at constant 2001 prices i

10 Table 4C: Sectoral Contribution to Overall GDP (%) - Monetary & non-monetary at constant 2001 prices Table 4D: Gross Domestic Product and Expenditure, at constant 2001 market prices Table 5: Capital Formation by Type of Assets, at current prices Table 6: Capital Formation by Type of Assets, at constant 2001 prices Table 7: Capital Formation by Public and Private Sectors, at current price 29 Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Index of Retail Prices of goods consumed by minimum wage earners in Dar es Salaam (2001=100) Index of Retail Prices of goods consumed by minimum wage earners in Dar es Salaam (2001 = 100) Cost of Living Index of goods and services consumed by middle grade wage earners in Dar es Salaam (2001=100) Cost of Living Index of goods and services consumed by middle grade wage earners in Dar es Salaam (2001=100) Cost of Living Index for the high income group in Dar es Salaam (2001=100) Cost of Living Index for high income group in Dar es Salaam (2001=100) Cost of Living Index of goods and services consumed by urban dwellers in Tanzania Mainland (2001=100) Cost of Living Index of goods and services consumed by urban dwellers Tanzania Mainland (2001=100) Different Indices of goods and services consumed by urban residents in Tanzania Mainland (2001 =100) ii

11 Table 17: Value of Tanzania's Foreign Trade Table 18: Volume and Value of Domestic Exports Table 19: Table 20: Volume and Value of Traditional and Non-traditional Exports Export Prices of Principal Commodities (Tshs/Ton)...70 Table 21: Export Prices of Principal Commodities (US$/Ton)...71 Table 23: Composition of Imports Table 24: Balance of Payments Table 25: Trends in Government Finance Table 26: Classification of Central Government Expenditure by Purpose Table 27: Monetary Survey: Tanzania Mainland Table 28: Table 29: Growth of Money Supply and Domestic Credit: Tanzania Mainland Trend of Exchange Rates of the Tanzania Shs. against the US$ Table 30: Commercial Banks Lending by Sectors Table 31: Trend of Commercial Banks Deposits Table 32: Average Nominal Interest Rates Table 33: Regional Distribution of Tanzania Population ( ) Table 34: Tanzania Investment Centre (TIC): Approved Projects iii

12 Table 35: Domestic Production and Consumption of Sugar Table 36: Cotton procurement and local sales Table 37: Tea crop area, production and local sales Table 38: Coffee procurement and local sales Table 39: Sisal plantations, production and local sales Table 40: Tobacco procurement and local sales Table 41: Pyrethrum procurement and local sales Table 42: Cashewnuts procurement and local sales Table 43: Summary of Marketed Quantities and Value of Principal Cash Crops Table 45: Tree Planting - Seedlings planted Table 47: Exports of Forestry Products Table 48: Export of Government Trophies Table 48A: Earnings from Tourist Hunting and Export of Live Animals Table 48B: Number of Tourist Hunters Table 50: Production in the Fisheries Sector ( ) Table 51: Export of Fish Products Table 51A: Summary of Fish Export Products ( ) Table 51B Trends of Nile Perch Exports ( ) iv

13 Table 52: Number of visitors, hotel bed-nights and foreign exchange earnings Table 53: Number of Tourists and Foreign Exchange Earnings ( ) Table 55: Tourist Accommodation in Tanzania ( ) Table 55A: Number of Tourists visited Tourist Attractions Table 56: Minerals Production Table 57: Minerals Exports ( ) Table 58: Production and Consumption of Cement Table 59: Production in selected industries Table 60: Industries - Estimated number of employees Table 61: Industries - Estimated labour costs Table 62: Industries - Summary Statistics Table 63: Industries - Regional Summaries Table 65: Performance Indicators in the Industrial sector Table 67: Tanzania Railways Corporation (TRC) Table 68: The UHURU Railway (TAZARA) Table 69: Shipping Statistics: Dar es salaam, Tanga & Mtwara Table 70: Postal Services Statistics Table 73: Air Tanzania Corporation (ATC) Table 74: Electricity: Installed Capacity and Total Units Generated by Station v

14 Table 75: Electricity sales by Type of Use Table 76: Quantity of Electricity Sold by Region Table 78: Total Number of Boreholes Drilled during the year Table 79: Water Supply in Urban City Centre Table 80: Government Secondary Schools: Number of Students by Form. 249 Table 81: Private Secondary Schools: Number of Students by Form Table 84: Health Facilities in the Country Table 85: Health Services: Training Output in Table 87: Number of Medical Personnel Table 87A: Number of Hospital Beds in the Country vi

15 ABBREVIATIONS AND ACRONYMS APRM ASDP ARVs TAA AU ATMS BEST BRELA BoT Cif COSTECH CARMATEC CPI CRDB COICOP COMESA DAWASCO D by D DSM DSE DADPs DITF DIT ECA EAC EPZ EWURA f.o.b FDI GEPF GBS GDP HESLB HBS - African Peer Review Mechanism - Agricultural Sector Development Programme - Anti-retroviral - Tanzania Airports Authority - African Union - Automatic Teller Machine - Business Environment Strengthening for Tanzania - Business Registration and Licensing Authority - Bank of Tanzania - Cost insurance and freight - Tanzania Commission for Science and Technology - Centre for Agricultural Mechanisation and Rural Technology - Consumer Price Index - CRDB Bank - Classification of Individual Consumption by Purpose - Common Market for Eastern and Southern Africa - Dar es Salaam Water and Sewerage Corporation - Decentralization by Devolution - Dar es Salaam - Dar es salaam Stock Exchange - District Agricultural Development Plan - Dar es Salaam International Trade Fair - Dar es Salaam Institute of Technology - Economic Commission for Africa - East African Community - Economic Processing Zone - Energy and Water Utilities Regulatory Authority - free on board - Foreign Direct Investment - Government Employees Provident Fund - General Budget Support - Gross Domestic Product - Higher Education Students Loan Board - Household Budget Survey vii

16 ISO ILFS JPC IFMS LUKU LSRP LAPF LGRP LGA M 2 M 3 IMF MDGs MKUKUTA MACEP MAIR MMS MSCL MRCC MSMEs MW NAIC NSSF NASCAP NEMC NEPAD NGO s NHIF NIC NMB PHDR PSRP PSPF PPF PFMRP PCCB PEDP RAHCO RITES - International Organization for Standardization Intergrated Labour Fource Survey - Joint Program Commissions - Integrated Financial Management System - Lipa Umeme Kadri Unavyotumia - Legal Sector Reform Programme - Local Authorities Pensions Fund - Local Government Reform Program - Local Government Authority - Broad Money Supply - Extended Broad Money Supply - International Monetary Fund - Millennium Development Goals - Mkakati wa Kukuza Uchumi na Kupunguza Umasikini Tanzania - Marine and Coastal Environmental Management Project - MKUKUTA Annual Implementation Report - MKUKUTA Monitoring System - Marine Service Company Ltd - Maritime Rescue Coordination Centre - Medium, Small and Micro Enterprises - Mega Watts - The National Artificial Insemination Centre - National Social Security Funds - Anti-Corruption Strategy and Action Plan - National Environmental Management Council - New Partnership for Africa s Development - Non-Governmental Organisations - National Health Insurance Fund - National Insurance Corporation - National Microfinance Bank Poverty and Human Development Report - Public Service Reform Program - Public Service Pensions Fund - Parastatal Pensions Fund - Public Financial Management Reform Program - Prevention Combating of Corruption Bureau - Primary Education Development Program - Railway Holding Company - RITES Company of India viii

17 RITA SACCOS SADC SCULT SMEs SUMATRA TaESA TANESCO TANROADS TAZARA TEUS TDHS TIRA TCAA TMA TCRA TICTS TRA TRC TRL TTCL Tshs UAE UFI VAT WEF WDL WMO WSDP - Registration, Insolvency and Trusteeship Agency - Savings and Credit Cooperative Societies - Southern Africa Development Community - Savings and Co-operatives Union League of Tanzania - Small and Medium Enterprises - Surface and Marine Transport Regulatory Authority - Tanzania Employment Service Agency - Tanzania Electricity Supply Company - Tanzania Roads Agency - Tanzania Zambia Railway Authority - Twenty Equivalent Units - Tanzania Demographic and Health Survey - Tanzania Insurance Regulatory Authority - Tanzania Civil Aviation Authority - Tanzania Meteorology Agency - Tanzania Communications Regulatory Authority - Tanzania International Container Terminal Services - Tanzania Revenue Authority - Tanzania Railways Corporation - Tanzania Railways Company Limited - Tanzania Telecommunications Company Limited - Tanzanian Shilling - United Arab Emirate - Global Association of the Exhibition Industry Formerly known, Union Des Foires Internationales - Value Added Tax - World Economic Forum - Williamson Diamonds Limited - World Meteorological Organization - Water Sector Development Program ix

18 IMPORTANT ECONOMIC EVENTS IN 2010 Date Month Events 5 7 May World Economic Forum WEF May The Southern Agricultural Growth Corridor (SAGCOT) was Launched 08 July Tanzania signed Comprehensive Africa Agriculture Development Program CAADP Compact 1-7 July The Dar es Salaam International Trade Fair took August September place in Dar es Salaam, Tanzania The Public Private Partnership PPP Act Na. 19 of 2010 was enacted Tanzania awarded a certificate for good performance in primary schools enrolment, that indicates the way of reaching MDGs targets in 2015, during MDGs Summit 31 October Tanzania National Election 17 December Central Bank of Tanzania printed new currency whereby its circulation started on 01 st January 2011 x

19 Table A BASIC ECONOMIC STATISTICS - TANZANIA MAINLAND % Change 2009/10 Population (millions) Gross Domestic Product, at current prices (Shs. million) Gross Domestic Product, at constant 2001 prices (Shs. million) GDP per capita, at current prices (Shs.) GDP per capita, at constant 2001 prices (Shs.) Consumer Price Index (%) Balance of merchandise trade (US$ million) Current Account balance (US$ million) Consumption of cement ('000 Tons) Electricity sold (KWH million) Tourist earnings (US$ million) Railways: Cargo transportation ('000 Tons) Education: Students in Primary Schools ('000)* Education: Students in Secondary Schools ('000)* Education: Students in Higher Learning Institutions (number) Hospitals: Number of beds Doctors (number) Exports of Cash Crops (Mill.US$) Traditional Commodities Coffee Cotton Sisal Tea Tobacco Cashewnuts Cloves Non-Traditional Commodities Minerals Manufactured goods Other exports Monetary Aggregates 2004/ / / / / / /11p Money supply (Shs. billion) Net domestic credit (Shs. billion) Government Finance Government Recurrent Revenue (Shs. billion) Government Recurrent Expenditure (Shs. billion) Government Development Expenditure (Shs. billion) Source: Ministry of Finance * For Government and Private Schools ** From 1998, Base year is Academic year ending in the respective years 2 Extended Broad Money (M3) - Not available xi

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21 Table No. B: TRENDS IN SELECTED MACROECONOMIC INDICATORS, NATIONAL ACCOUNTS Real GDP growth at market price 7.2% 6.9% 7.8% 7.4% 6.7% 7.1% 7.4% 6.0% 7.0% Agriculture, Hunting and Forestry 4.9% 3.1% 5.9% 4.3% 3.8% 4.0% 4.6% 3.2% 4.2% Fishing 6.8% 6.0% 6.7% 6.0% 5.0% 4.5% 5.0% 2.7% 1.5% Industry and Construction 9.4% 10.9% 10.9% 10.4% 8.5% 9.5% 8.6% 7.0% 8.2% Manufacturing 7.5% 9.0% 9.4% 9.6% 8.5% 8.7% 9.9% 8.0% 7.9% Construction 11.9% 13.8% 13.0% 10.1% 9.5% 9.7% 10.5% 7.5% 10.2% Services 7.7% 7.8% 7.8% 8.0% 7.8% 8.1% 8.5% 7.2% 8.2% Trade and Repair 8.3% 9.7% 5.8% 6.7% 9.5% 9.8% 10.0% 7.5% 8.2% Communications 10.4% 15.6% 17.4% 18.8% 19.2% 20.1% 20.5% 21.9% 22.1% Money 10.1% 10.7% 8.3% 10.8% 11.4% 10.2% 11.9% 9.0% 10.1% GDP growth at current prices 14.8% 15.9% 15.4% 14.3% 12.4% 16.8% 18.3% 13.8% 14.5% PRICES AND INTEREST RATES CPI Inflation (annual Average) 4.5% 5.3% 4.7% 5.0% 7.3% 7.0% 10.3% 12.1% 5.5% GDP deflator inflation (market price) 7.1% 8.4% 7.0% 6.4% 5.3% 9.0% 10.1% 7.4% 4.9% Short term lending rate 15.9% 15.6% 14.2% 15.7% 15.7% 15.0% 13.6% 14.0% 14.4% Long term lending rate 13.2% 12.5% 12.6% 14.1% 14.9% 16.7% 16.5% 14.5% 14.6% 12 months deposit rate 5.7% 5.0% 5.8% 7.7% 8.8% 10.1% 8.3% 9.0% 7.1% Deposit rates 2.7% 2.5% 2.6% 2.6% 2.6% 2.7% 2.7% 2.8% 2.4% MONEY M3 growth rate 25.6% 18.0% 13.5% 34.8% 21.5% 20.5% 19.8% 17.7% 25.4% M2 Growth rate 21.6% 17.8% 19.8% 33.9% 16.7% 27.2% 24.4% 20.8% 21.8% Growth rate of credit to private sector 41.5% 42.8% 32.8% 29.3% 40.1% 43.1% 44.6% 9.6% 20.0% BALANCE OF PAYMENTS (RATIO TO GDP) Exports of Goods 9.1% 10.5% 11.5% 11.9% 12.2% 12.0% 15.0% 15.7% 18.4% Exports of goods and Services 17.6% 18.6% 20.3% 20.9% 22.9% 23.1% 24.7% 24.4% 27.6% Imports of Goods 14.0% 16.6% 19.3% 21.2% 27.1% 28.8% 33.8% 27.3% 30.4% Imports of goods and Services 19.8% 22.8% 26.9% 29.8% 35.8% 37.1% 41.8% 35.3% 38.2% Reserves (Months of Imports) GOVERNMENT BUDGETARY OPERATIONS (Ratio to GDP) 2001/2 2002/ / / / / / / /10 Revenue 10.7% 10.8% 11.2% 11.9% 12.4% 14.1% 15.9% 16.2% 15.2% Expenditure 21.9% 21.8% 26.6% 29.4% 31.9% 31.7% 22.8% 25.7% 26.9% Recurrent Expenditure 18.4% 18.9% 20.9% 22.2% 24.2% 24.8% 14.9% 17.7% 18.3% Development Expenditure 3.5% 2.9% 5.7% 7.2% 7.7% 6.9% 7.9% 8.0% 8.6% Deficit (exl. Grants) -4.3% -5.3% -8.3% -9.7% -11.4% -9.9% -8.6% -9.3% -11.0% Deficit (inl. grants ) -0.4% -1.0% -2.9% -4.9% -5.5% -4.9% -1.7% -4.5% -6.4% Foreign Borrowing 1.2% 1.4% 3.3% 3.9% 3.3% 3.7% 3.2% 3.6% 4.5% Source: Ministry of Finance and Bank of Tanzania xiii

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23 CHAPTER 1 THE DOMESTIC ECONOMY Economic Growth 1. In 2010, the real GDP grew by 7.0 percent compared to 6.0 percent in This growth resulted from increased growth rates in economic activities that have substantial contribution to GDP including agricultural; trade and repair; and construction. Economic activities that recorded the highest growth were: communication (22.1 percent); construction (10.2 percent); electricity and gas (10.2 percent); financial intermediation (10.1 percent) and manufacturing (7.9 percent). However, manufacturing and fishing were the only economic activities that recorded lower rates of growth in 2010 compared to The share of services; and industry and construction economic activities to overall GDP continued to increase in 2010 whereas that of agricultural activities declined, implying diversification of economic activities to other sectors. 2. The GDP in 2010 amounted to shs. 32,293,479 million at current market prices or shs. 16,828,563 million at 2001 constant prices. Meanwhile, according to the population growth rate of 2.9, the total population of Tanzania Mainland was estimated at 41,914,311 in Thus, the per capita income was shs. 770,464.3 in 2010 at current market prices compared to shs. 693,185 in 2009, equivalent to an increase of 11.1 percent. 3. The growth rate of agriculture economic activities increased to 4.2 percent in 2010 compared to 3.2 percent in This growth was mainly attributed to increased crop production due to good weather in the 2009/10 agricultural season; improved irrigation infrastructure; Government initiative on input subsidies; and the implementation of ASDP. The growth rate of crop sub activity increased from 3.4 percent in 2009 to 4.4 percent in This was a result of improved crop production particularly maize, millet, sorghum and cassava. The growth rate of livestock sub activity increased from 2.3 percent in 2009 to 3.4 percent in The increase in the growth rate of livestock 1

24 includes availability of adequate pasture and increase in livestock extension services. Forest and hunting sub activities grew by 4.1 percent in 2010 compared to 3.5 percent in This was due to increase in the production of forest products and tourist hunting. 4. The growth rate of monetary agriculture increased to 5.3 percent in 2010 compared with 2.2 percent in With regard to non-monetary agriculture, the growth rate decreased to 2.0 percent in 2010 compared with 5.0 percent in The decrease reflects an increase in monetary agricultural activities visà-vis subsistence agriculture. The contribution of agricultural activities to GDP was 24.1 percent in 2010 compared to 24.6 percent in Fishing activities grew by 1.5 percent in 2010 compared with 2.7 percent in The slowdown in growth rate was caused by decreased demand for fish and fish products in the foreign markets; decrease in fish harvest particularly in lakes as a result of destruction of marine ecosystems in fish hatcheries; overfishing; illegal fishing practices; and use of poor fishing gears. The share of fishing activities to overall GDP remained the same at 1.4 percent in 2010 as it was in Industry and construction economic activities grew by 8.2 percent in 2010 compared to 7.0 percent in This growth was attributed to improved performance in: construction; water supply; and electricity and gas economic activities. However, the rate of growth of manufacturing sub activity declined marginally in The share of industry and construction economic activities to GDP increased marginally to 22.4 percent in 2010 from 22.0 percent in The growth rate for manufacturing sub activity was 7.9 percent in 2010 compared with 8.0 percent in The slowdown in growth was a result of increased cost of production. Nonetheless, the contribution of manufacturing sub activity to GDP increased to 9.0 percent in 2010 from 8.6 percent in

25 8. The growth rate of the mining and quarrying sub activity increased from 1.2 percent in 2009 to 2.7 percent in This growth was attributed to increase in gold production, exacerbated by the rise in prices of gold in the world market after being destabilized by the Global Financial Crisis. The contribution of mining and quarrying sub activity to GDP remained at 3.3 percent in 2010 as it was in Construction sub activities grew by 10.2 percent in 2010 compared to 7.5 percent in This growth was attributed to an increase in the construction and rehabilitation of roads and bridges; residential and non residential buildings; airports; and water infrastructure. The share of construction sub activity to GDP was 8.0 percent in 2010 compared with 7.9 percent in The growth rate of electricity and gas sub activities was 10.2 percent in 2010 compared to 8.4 percent in This was attributed to an increase in hydro-electric power generation; and the government initiatives to install gasfired machines. Electricity and gas sub activity accounted for 1.8 percent of the total GDP in 2010 compared to 1.7 percent in The water supply sub-activity grew by 6.3 percent in 2010 compared to 5.6 percent in The increase was attributed to the continued efforts by the Government to improve water infrastructure in the rural and urban areas and increase in the number of people supplied with water. The contribution of water supply sub activity to GDP continued to be 0.4 percent since The growth rate of service economic activities was 8.2 percent in 2010 compared to 7.2 percent in The growth rate of all services sub economic activities increased in 2010 owing to the recovery of activities that were affected by the GFC such as financial intermediation; hotels and restaurants; trade and repair; and transport. The share of services activities to GDP was 43.9 percent in 2010 compared with 43.6 percent in

26 13. The trade and repairs sub activity grew by 8.2 percent in 2010, compared to 7.5 percent in The growth was mainly attributed to increased demand on the account of recovery in the GFC. The contribution of the trade and repairs sub activity to GDP was 12.1 percent in 2010, compared to 11.8 percent in The hotel and restaurants sub activity (including tourism), grew by 6.1 percent in 2010, compared to 4.4 percent in The growth was mainly attributed to recovery of the global economy and initiatives to promote tourist attractions both locally and in the foreign countries. The contribution of the hotel and restaurants sub activity to GDP was 2.3 percent in 2010, as it was in The transport sub activity grew by 7.0 percent in 2010 compared to 6.0 percent in This growth was due to increase in cargo freight on road and marine; and increase in passengers in domestic and international flights. The contribution of transport sub activity to GDP was 5.1 percent in 2010, compared to 5.0 percent in In 2010, communication sub activity recorded highest growth compared to other economic activities. The growth rate for this sub economic activity was 22.1 percent in 2010 compared to 21.9 percent in The growth was attributed to increase in customers of mobile phone services. The contribution of communication sub-activity to GDP continued to be 2.1 percent in 2009 as it was in The financial intermediation services sub activity grew by 10.1 percent in 2010 compared to 9.0 percent in The growth emanated from successful implementation of the Second Generation Financial Sector Reform Program; increase in credit to private sector; increase in the demand for money for investment purposes; insurance; and business services. The contribution of financial intermediation sub activity to GDP was 1.8 percent in 2010 compared to 1.7 percent in

27 18. The growth rate of real estate and business services sub activity was 7.0 percent in 2010 compared to 6.8 percent in The growth rate of non monetary real estate and business services decreased to 6.1 percent in 2010 compared to 9.0 percent in However, the growth rate of monetary real estate and business service activities increased to 7.5 percent in 2010 from 5.7 percent in This was attributed to the successful implementation of the Business and Property Formalization Program as well as increase in growth of business services related to non residential and residential buildings. The contribution of real estate and business services to GDP was 8.8 percent in 2010 compared to 9.0 percent in In 2010, public administration sub-activity grew by 6.5 percent compared to 4.4 percent in The growth of this sub-activity was due to continued implementation of the Public Sector Reform Program Phase II and increase of new employment in defence, security and judiciary. The share of public administration sub-activity to GDP in 2010 decreased marginally to 8.0 percent compared to 8.1 percent in The rates of growth in education and health sub-activities were 7.3 and 6.9 percent in 2010 compared to 7.1 and 6.7 percent in 2009 respectively. The growth in education sub-activity was due to implementation of education development programs in Primary and Secondary Education Phase II and increase in recruitment of teachers. Likewise, the growth in health sub-activity was attributed to improvement in immunization programmes; control of malaria; Tuberculosis (TB) and HIV/AIDS. The contribution of education and health sub-activities to GDP continued to be 1.4 and 1.6 percent respectively in 2010 as it was in Rebasing of the National Consumer Price Index (NCPI) New weights and a new reference period 21. The National Bureau of Statistics has updated the NCPI market basket weights from 2001 to 2007 using results of the 2007 Household Budget 5

28 Survey. The new NCPI weights are based on monetary expenditures relating to consumption for all survey types of households in the 21 geographic regions of Tanzania mainland. The new index weights are based on expenditures of all types of private household from both urban and rural areas, while the old index covered only private urban households. The reference period for the NCPI has been changed from December, 2001=100 to September 2010=100. Classification of Goods and Social Services 22. The rebased NCPI follows the internationally recommended Classification of Individual Consumption by Purpose (COICOP). The use of COICOP results in a change in the publication format for the NCPI. The composition of the 12 major groups of COICOP is different from the composition of the major groups of the old NCPI. As seen in the table below, these major groups have been analysed further and form four additional index aggregations, which are: 1) Food and Non -alcoholic Beverages - combining food consumed at home and food consumed in restaurants; 2) Energy and Fuels combining electricity and other fuels for use at home with petrol and diesel; 3) All Items Less Food and Non -alcoholic Beverages and 4) All Items Less Food, Energy and Fuels. 6

29 Table No. 1.1: NCPI Linked Index Series NEW NCPI OLD NCPI SNO. MAIN GROUP WEIGHT MAIN GROUP WEIGHT Food and Non Alcoholic Beverages Food 55.9 Alcoholic Beverages and Tobacco Beverages and Cigarettes Clothing and Foot wear 6.7 Clothing and Foot wear 6.4 Housing, Water, Electricity, Gas and Other Fuel Rent 1.4 Furnishing, Housing Equipment and Routine 6.7 Electricity, Kerosene and Maintenance of the House Water 6 Health 0.9 Health Services Transport 9.5 Transport 9.7 Furniture and Household Communication Utensils 9 Recreation and Culture 1.3 Recreation and Entertainment Education 1.7 Education 2.6 Services and other Household Restaurants and hotels Requirements 2.1 Miscellaneous goods and services Others 1.5 TOTAL ALL ITEMS TOTAL ALL ITEMS 100 INDEX INDEX Food and Non-alcoholic Beverages - combining food consumed at home and food consumed in restaurants 51.0 Energy and Fuels - combining electricity and other fuels for use at home with petrol and diesel 5.7 All Items Less Food 49.0 All Items Less Food and Energy 43.3 NCPI Methodology 23. Apart from being based on new classification system, the new NCPI incorporates a number of methodological improvements including the use of geometric means as opposed to arithmetic average for compiling elementary index aggregates and improved procedures for collecting and processing prices. The modified Laspeyres index formula continues to be used for computing higher level aggregates for the NCPI. The sample of goods and services has been updated to include many new items and eliminate those items that have become less representative of current consumption patterns. 7

30 The Link between the new and old NCPI 24. The new NCPI has been compiled with a 12 month overlap in order to facilitate the calculation of 12 month index changes based on the same index market basket and weights. However, the new NCPI with a reference base of September 2010=100, only became the official Index starting in October The NCPI for the previous period will be maintained up to September Although the old NCPI has been linked to the new NCPI at the all items level, it is not feasible to construct linked index series for the new major groups of the new NCPI due to significant differences in the composition of these major groups relative to those of the old NCPI. Price Trend 25. Inflation during the period ended October 2010 was 4.2 percent using the geometric mean compared to 4.5 percent recorded in September 2010 using the old methodology of arithmetic mean. If the arithmetic mean was used, inflation would have been 4.1 percent in October 2010 compared with 4.2 percent for the same month using the geometric means. In general terms, when comparing the inflation results using the two methodologies, the difference is insignificant. The annual headline inflation increased from 5.6 percent for the year ended December 2010 to 6.4 percent in January 2011 and continued upwards to 8.6 percent in April This rate of increase in inflation was largely attributed to increased price indices of electricity, water and food. Inflation Rate excluding Food and Energy 26. This type of NCPI excludes food consumed at home and restaurants, non alcoholic beverages, petrol, diesel, gas, kerosene, charcoal and electricity. Excluding food and energy which are the most volatile components in the total NCPI provides a more stable Inflation figure for policy makers. The Annual Inflation rate which excludes food and energy for the year ended March 2011 using the rebased NCPI increased to 6.3 percent from 5.2 percent in February The annual Inflation rate for energy increased to 17.2 percent while food inflation decreased to 8.3 percent in March 2011 compared to 13.0 percent and 8.6 percent registered in February 2011 respectively. Tables 8 16 show the 8

31 97.82 Percent Price Index price indices for various goods and services. Since the new NCPI is used for the first time, the new classification has been shown for 2010 only. Figure No. 1.1: The trend of price index January December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Price Index Inflation 9

32 Figure No. 1.2: Monthly NCPI Movements and Inflation Rate (2010) C o n s u m e r P r i c e 100 I95 n d e 90 x I n f l a t i o n ( % ) 80 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Food and Non-alcoholic Beverages Energy and Fuels All Items Less Food All Items Less Food and Energy Inflation Rates 0 Capital Formation 27. Capital formation at current prices increased to shs. 10,342,536 million in 2010 from shs 8,173,221 million in 2009, equivalent to an increase of 26.5 percent. Further, capital formation in 2001 prices increased from shs. 3,982,283 million in 2009 to shs. 4,385,837 million in 2010, equivalent to an increase of 10.1 percent. The ratio of capital formation to Gross Domestic Product at current prices was 32.0 percent in 2010 compared to 29.0 percent in Capital formation which includes buildings, other construction works and equipment increased from sh. 3,928,805 million in 2009 to sh. 4,332,960 million in 2010 at 2001 constant prices, equivalent to 10.0 percent increase. Capital formation in building activities at 2001 constant prices increased from sh. 1,211,008 million in 2009 to sh. 1,284,866 million in 2010, equivalent to 6.1 percent increase. The growth rates of residential building, rural own account and non residential buildings were 6.6, 5.4 and 6.3 percent in 2010 respectively as it was in

33 29. Other construction works including land improvement, roads and bridges, and water supply increased from sh. 952,312 million in 2009 to sh. 1,004,548 million in 2010, at 2001 constant prices, equivalent to an increase of 5.5 percent. The growth rate of land improvement and water supply were 5.3 and 6.3 percent in 2010 as it was in 2009 respectively. However, capital formation in roads and bridges activities grew by negative 10.2 percent in 2010 compared to negative 6.5 percent in Importation of capital equipment increased from sh. 1,765,485 million in 2009 to sh. 2,043,546 million in 2010 at 2001 constant prices, equivalent to an increase of 15.7 percent. The import value of transport equipment increased by 27.5 percent compared to 38.5 percent in In addition, imports of machinery and other equipment increased by 8.5 percent in 2010 compared to 4.9 percent in On the other hand, importation of capital equipment at current prices increased by 41.5 percent from sh. 2,561,532 million in 2009 to sh. 3,624,582 million in The value of change in stock decreased by 1.1 percent to sh. 52,877 million in 2010 compared to sh. 53,478 million in 2009 at 2001 constant prices. In addition, the value of change in stock at current prices increased by 8.3 percent from sh. 152, 252 million in 2009 to sh. 164,843 million in Capital formation in the public sector (including central government, institutions and parastatals) increased from sh. 2,241,507 million in 2009 to sh. 2,607,525 million in 2010 at current prices, equivalent to an increase of 16.3 percent. The public sector s contribution to capital formation decreased to 25.2 percent in 2010 compared to 27.4 percent in Capital formation in private sector increased from sh. 5,779,463 million in 2009 to sh. 7,570,168 million in 2010, at current prices, equivalent to an increase of 31.0 percent. Contribution of private sector to capital formation increased to 73.2 percent in 2010 compared to 70.7 percent in

34 Table No.1 ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY At current prices Shs.million %change 2009/10 Agriculture, Hunting and Forestry % Crops % Livestock % Hunting and Forestry % Fishing % Industry and construction % Mining and quarrying % Manufacturing % Electricity, gas % Water supply % Construction % Services % Trade and repairs % Hotels and restaurants % Transport % Communications % Financial intermediation % Real estate and business services % Public administration % Education % Health % Other social and personal services % Gross value added before adjustments % less FISIM % Gross value added at current basic prices % add Taxes on products % GDP (At current market prices) % Source : National Bureau of Statistic 12

35 Table No.1A GROSS DOMESTIC PRODUCT (Monetary & Non-monetary GDPmp) BY KIND OF ECONOMIC ACTIVITY At current prices ECONOMIC ACTIVITY Shs.million %change 2009/10 A. MONETARY Gross Domestic Product at market prices % Agriculture, Hunting and Forestry % Crops % Livestock % Forestry and hunting % Fishing % Industry and construction % Mining and quarrying % Manufacturing % Electricity, gas % Water supply % Construction % Services % Trade and repairs % Hotels and restaurants % Transport % Communications % Financial intermediation % Real estate and business services % Public administration % Education % Health % Other social & personal services % Gross value added before adjustments % less FISIM % Gross value added at current basic prices % Add Taxes on products % Non-monetary Gross domestic product at market prices % Agriculture, Hunting and Forestry % Crops % Livestock % Forestry & hunting % Fishing % Industry and construction % Water supply % Construction % Services % Real estate & business services % Total GDP (at market prices) % Source: National Bureau of Statistic

36 SHARES OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY Table No. 2 At market current prices Percentages ECONOMIC ACTIVITY Agriculture, Hunting and Forestry Crops Livestock Hunting and Forestry Fishing Industry and construction Mining and quarrying Manufacturing Electricity, gas Water supply Construction Services Trade and repairs Hotels and restaurants Transport Communications Financial intermediation Real estate and business services Public administration Education Health Other social and personal services Gross value added before adjustments less FISIM Gross value added at current basic prices add Taxes on products GDP (At current market prices) Source: National Bureau of Statistic 14

37 SHARES OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY - Monetary & Non-monetary Table No. 2A At current prices Percentages ECONOMIC ACTIVITY A. MONETARY Gross domestic product at market prices Agriculture, Hunting and Forestry Crops Livestock Forestry and hunting Fishing Industry and construction Mining and quarrying Manufacturing Electricity, gas Water supply Construction Services Trade and repairs Hotels and restaurants Transport Communications Financial intermediation Real estate and business services Public administration Education Health Other social & personal services Gross value added before adjustments less FISIM Gross value added at current basic prices Add Taxes on products B. NON MONETARY Gross domestic product at market prices Agriculture, Hunting and Forestry Crops Livestock Forestry & hunting Fishing Industry and construction Water supply Construction Services Real estate & business services Total GDP at market prices Source: National Bureau of Statistic 15

38 Table No. 2B GROSS DOMESTIC PRODUCT AND EXPENDITURE At current market prices Sh. Million Gross Domestic Product (GDPmp) Final Consumption Households Government Investment Gross Fixed Capital Formation Changes in Inventory Exports Goods Services Imports Goods Services Source: National Bureau of Statistic 16

39 GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY Table No.3 At constant 2001 prices Shs. million Change ECONOMIC ACTIVITY 2009/2010 Agriculture, Hunting and Forestry % Crops % Livestock % Hunting and Forestry % Fishing % Industry and construction % Mining and quarrying % Manufacturing % Electricity, gas % Water supply % Construction % Services % Trade and repairs % Hotels and restaurants % Transport % Communications % Financial intermediation % Real estate and business services % Public administration % Education % Health % Other social and personal services % Gross value added before adjustments % less FISIM % Gross value added at current basic prices % add Taxes on products % GDP (market prices) % Source : National Bureau of Statistic 17

40 GROSS DOMESTIC PRODUCT (Monetary & Non-monetary GDPmp) BY KIND OF ECONOMIC ACTIVITY Table No.3A At constant 2001 prices Shs. million Change ECONOMIC ACTIVITY 2009/2010 A. MONETARY Gross Domestic Product at market prices % Agriculture, Hunting and Forestry % Crops % Livestock % Forestry and hunting % Fishing % Industry and construction % Mining and quarrying % Manufacturing % Electricity, gas % Water supply % Construction % Services % Trade and repairs % Hotels and restaurants % Transport % Communications % Financial intermediation % Real estate and business services % Public administration % Education % Health % Other social & personal services % Gross value added before adjustments % less FISIM % Gross value added at current basic prices % Add Taxes on products % B. NON MONETARY Gross domestic product at market prices % Agriculture, Hunting and Forestry % Crops % Livestock % Forestry & hunting % Fishing % Industry and construction % Water supply % Construction % Services % Real estate & business services % Total GDP (At constant 2001 prices) % Source : National Bureau of Statistic 18

41 Table No.4 GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY - ANNUAL GROWTH RATES At constant 2001 prices Percentages ECONOMIC ACTIVITY Agriculture, Hunting and Forestry Crops Livestock Hunting and Forestry Fishing Industry and construction Mining and quarrying Manufacturing Electricity, gas Water supply Construction Services Trade and repairs Hotels and restaurants Transport Communications Financial intermediation Real estate and business services Public administration Education Health Other social and personal services Gross value added before adjustments less FISIM Gross value added at current basic prices add Taxes on products GDP (Constant prices) Source : National Bureau of Statistic 19

42 Table No. 4A GROSS DOMESTIC PRODUCT (Monetary & Non-monetary GDPmp) BY KIND OF ECONOMIC ACTIVITY - ANNUAL GROWTH RATES At constant 2001 prices percentages ECONOMIC ACTIVITY A. MONETARY Gross domestic product at market prices Agriculture, Hunting and Forestry Crops Livestock Forestry and hunting Fishing Industry and construction Mining and quarrying Manufacturing Electricity, gas Water supply Construction Services Trade and repairs Hotels and restaurants Transport Communications Financial intermediation Real estate and business services Public administration Education Health Other social & personal services Gross value added before adjustments less FISIM Gross value added at current basic prices Add Taxes on products B. NON MONETARY Gross domestic product at market prices Agriculture, Hunting and Forestry Crops Livestock Forestry & hunting Fishing Industry and construction Water supply Construction Services Real estate & business services Total GDP at market prices Source : National Bureau of Statistic 20

43 percent GDP Growth Rate at constant 2001 prices year 21

44 SHARES OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY Table No. 4B At constant 2001 prices ECONOMIC ACTIVITY Agriculture, Hunting and Forestry 29.3% 29.0% 28.4% 27.4% 26.9% 26.1% 25.4% 24.6% 24.0% 23.3% 22.7% Crops 21.5% 21.4% 21.1% 20.4% 20.1% 19.6% 19.1% 18.6% 18.2% 17.8% 17.3% Livestock 5.1% 5.0% 4.8% 4.6% 4.5% 4.4% 4.2% 4.0% 3.8% 3.7% 3.6% Hunting and Forestry 2.6% 2.5% 2.4% 2.4% 2.2% 2.2% 2.1% 2.0% 2.0% 1.9% 1.9% Fishing 1.7% 1.7% 1.7% 1.7% 1.7% 1.6% 1.6% 1.6% 1.5% 1.5% 1.4% Industry and construction 17.9% 18.0% 18.4% 19.1% 19.6% 20.2% 20.5% 20.9% 21.2% 21.4% 21.6% Mining and quarrying 1.6% 1.8% 1.9% 2.1% 2.3% 2.4% 2.6% 2.7% 2.6% 2.5% 2.4% Manufacturing 8.5% 8.4% 8.4% 8.6% 8.7% 8.9% 9.0% 9.2% 9.4% 9.5% 9.6% Electricity, gas 2.2% 2.2% 2.1% 2.1% 2.1% 2.2% 2.0% 2.1% 2.0% 2.1% 2.1% Water supply 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Construction 5.1% 5.2% 5.5% 5.8% 6.1% 6.2% 6.4% 6.5% 6.7% 6.8% 7.0% Services 45.3% 45.5% 45.7% 46.1% 46.1% 46.4% 46.9% 47.3% 47.8% 48.3% 48.8% Trade and repairs 12.9% 13.0% 13.1% 13.5% 13.2% 13.1% 13.5% 13.8% 14.1% 14.3% 14.5% Hotels and restaurants 2.8% 2.8% 2.7% 2.6% 2.5% 2.5% 2.4% 2.4% 2.3% 2.3% 2.3% Transport 5.4% 5.4% 5.3% 5.2% 5.2% 5.2% 5.1% 5.1% 5.1% 5.1% 5.1% Communications 1.2% 1.2% 1.3% 1.4% 1.5% 1.7% 1.9% 2.1% 2.3% 2.7% 3.1% Financial intermediation 1.5% 1.5% 1.6% 1.6% 1.6% 1.7% 1.8% 1.8% 1.9% 1.9% 2.0% Real estate and business services 10.5% 10.3% 10.3% 10.3% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% 10.2% Public administration 6.8% 7.0% 7.2% 7.4% 7.8% 8.0% 8.0% 8.0% 8.0% 7.8% 7.8% Education 2.0% 2.1% 2.1% 2.0% 1.9% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% Health 1.3% 1.3% 1.3% 1.3% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% Other social and personal services 0.9% 0.9% 0.9% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0.6% 0.6% Gross value added before adjustments 94.2% 94.2% 94.2% 94.2% 94.2% 94.3% 94.3% 94.4% 94.4% 94.5% 94.5% less FISIM -0.9% -0.9% -0.9% -0.9% -1.0% -1.0% -1.1% -1.1% -1.2% -1.2% -1.2% Gross value added at current basic prices 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% 93.3% add Taxes on products 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% Total GDP (at constant 2001 market price 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source : National Bureau of Statistic 22

45 SHARE OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITIES At 2001 Constant Prices Agriculture, Hunting and Forestry 24.0% Fishing 1.5% Services 51.6% Industry and construction 22.8% * Excluding Bank services Charges 23

46 SHARE OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITIES At 2001 Constant Prices Agriculture, Hunting and Forestry 24.7% Fishing 1.6% Services 51.1% Industry and construction 22.6% * Excluding Bank Services Charges 24

47 SHARES OF GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY - Monetary and non-monetary Table No.4C At constant 2001 prices ECONOMIC ACTIVITY A. MONETARY Gross domestic product at market prices 83.5% 83.9% 84.3% 84.7% 84.7% 85.4% 85.6% 85.9% 86.1% 86.1% 86.6% Agriculture, Hunting and Forestry 19.3% 19.3% 19.1% 18.4% 17.7% 17.5% 17.0% 16.5% 16.0% 15.5% 15.2% Crops 12.5% 12.7% 12.6% 12.1% 11.7% 11.6% 11.2% 10.9% 10.7% 10.3% 10.2% Livestock 3.4% 3.4% 3.2% 3.1% 3.0% 2.9% 2.8% 2.7% 2.6% 2.5% 2.4% Forestry and hunting 1.7% 1.7% 1.6% 1.6% 1.5% 1.4% 1.4% 1.3% 1.3% 1.3% 1.2% Fishing 1.7% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.5% 1.5% 1.4% 1.4% Industry and construction 16.9% 17.0% 17.4% 18.2% 18.7% 19.3% 19.6% 20.0% 20.2% 20.4% 20.6% Mining and quarrying 1.6% 1.8% 1.9% 2.1% 2.3% 2.4% 2.6% 2.7% 2.6% 2.5% 2.4% Manufacturing 8.5% 8.4% 8.4% 8.6% 8.7% 8.9% 9.0% 9.2% 9.4% 9.5% 9.6% Electricity, gas 2.2% 2.2% 2.1% 2.1% 2.1% 2.2% 2.0% 2.1% 2.0% 2.1% 2.1% Water supply 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% Construction 4.3% 4.4% 4.7% 5.0% 5.3% 5.5% 5.6% 5.7% 5.9% 6.0% 6.2% Services 41.5% 41.7% 42.0% 42.4% 42.5% 42.8% 43.3% 43.8% 44.3% 44.7% 45.3% Trade and repairs 12.9% 13.0% 13.1% 13.5% 13.2% 13.1% 13.5% 13.8% 14.1% 14.3% 14.5% Hotels and restaurants 2.8% 2.8% 2.7% 2.6% 2.5% 2.5% 2.4% 2.4% 2.3% 2.3% 2.3% Transport 5.4% 5.4% 5.3% 5.2% 5.2% 5.2% 5.1% 5.1% 5.1% 5.1% 5.1% Communications 1.2% 1.2% 1.3% 1.4% 1.5% 1.7% 1.9% 2.1% 2.3% 2.7% 3.1% Financial intermediation 1.5% 1.5% 1.6% 1.6% 1.6% 1.7% 1.8% 1.8% 1.9% 1.9% 2.0% Real estate and business services 6.7% 6.5% 6.6% 6.6% 6.5% 6.6% 6.7% 6.7% 6.7% 6.7% 6.7% Public administration 6.8% 7.0% 7.2% 7.4% 7.8% 8.0% 8.0% 8.0% 8.0% 7.8% 7.8% Education 2.0% 2.1% 2.1% 2.0% 1.9% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% Health 1.3% 1.3% 1.3% 1.3% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% Other social & personal services 0.9% 0.9% 0.9% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0.6% 0.6% Gross value added before adjustments 77.7% 78.1% 78.5% 78.9% 79.0% 79.6% 79.9% 80.3% 80.5% 80.6% 81.1% less FISIM -0.9% -0.9% -0.9% -0.9% -1.0% -1.0% -1.1% -1.1% -1.2% -1.2% -1.2% Gross value added at current basic prices 76.8% 77.2% 77.6% 78.0% 78.0% 78.6% 78.8% 79.2% 79.4% 79.4% 79.9% Add Taxes on products 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% B. NON MONETARY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Gross domestic product at market prices 16.5% 16.1% 15.7% 15.3% 15.3% 14.6% 14.4% 14.1% 13.9% 13.9% 13.4% Agriculture, Hunting and Forestry 11.7% 11.3% 11.0% 10.7% 10.8% 10.2% 10.0% 9.7% 9.5% 9.4% 8.9% Crops 9.1% 8.7% 8.5% 8.3% 8.5% 8.0% 7.8% 7.7% 7.5% 7.5% 7.1% Livestock 1.7% 1.7% 1.6% 1.5% 1.5% 1.4% 1.4% 1.3% 1.2% 1.2% 1.2% Forestry & hunting 0.9% 0.9% 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 0.7% 0.7% 0.6% Fishing 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Industry and construction 1.0% 1.0% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% 1.0% 0.9% 1.0% Water supply 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Construction 0.8% 0.8% 0.8% 0.8% 0.7% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% Services 3.8% 3.8% 3.7% 3.7% 3.6% 3.6% 3.5% 3.5% 3.5% 3.6% 3.6% Real estate & business services 3.8% 3.8% 3.7% 3.7% 3.6% 3.6% 3.5% 3.5% 3.5% 3.6% 3.6% Total GDP at market prices 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source : National Bureau of Statistic 25

48 Table No. 4D GROSS DOMESTIC PRODUCT AND EXPENDITURE At constant 2001 prices Shs. Million ECONOMIC ACTIVITY Gross Domestic Product (GDPbp) Net taxes on product Gross Domestic Product (GDPmp) EXPENDITURE ON GROSS DOMESTIC PRODUCT Gross Domestic Product (GDPmp) Final Consumption Households Government Investment Gross Fixed Capital Formation Changes in Inventory Exports Goods Services Imports Goods Services Source : National Bureau of Statistic 26

49 Table No. 5 CAPITAL FORMATION BY TYPE OF ASSETS (At Current Prices) (Shs. million) Type Buildings: Residential Rural Own Account Non-Residential Total Other Works: Land Improvement Roads & Bridges Water Supply Others Total Equipment: Transport Equipment Other Equipment Total Fixed Capital Formation Increase in Stocks Total Capital Formation Source: National Bureau of Statistics 27

50 CAPITAL FORMATION BY TYPE OF ASSETS At Constant 2001 Prices Table No. 6: Shs. Million %change Type Buildings: Residential % Rural Own Account % Non-Residential % Total % Other Works: Land Improvement % Roads & Bridges % Water Supply % Others % Total % Equipment: Transport Equipment % Other Equipment % Total % Fixed Capital Formation % Increase in Stocks % Total Capital Formation % Source: National Bureau of Statistics 28

51 Table No. 7 Shs. million Sector Public Sector: Central Gov't Parastatals Institutions Total Public Sector: Private Sector Total Fixed Capital Increase in Stocks Total Capital Formation Source: National Bureau of Statistics ++ Includes non-profit making organisations CAPITAL FORMATION BY PUBLIC AND PRIVATE SECTORS At Current Prices 29

52 INDEX OF RETAIL PRICES OF GOODS CONSUMED BY MINIMUM WAGE EARNERS IN DAR ES SALAAM (2001=100) Table No. 8 ALL ITEMS FOOD YEAR INDEX % CHANGE INDEX % CHANGE YEAR ALL ITEMS FOOD INDEX % CHANGE INDEX % CHANGE * Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationally recommended Classification of Individual 30

53 MINIMUM WAGE EARNERS IN DAR ES SALAAM (2001=100) Table No. 9 Beverages Electricity, Clothing Furniture Services Recreation OVERALL Year Food and Rent Kerosene and and and other Health and Transport Education Others PRICE Cigarettes and Water Footwear Household Household Services Entertain. INDEX Utensils Requirements 2004 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Foo d Alcoholic Clothing Electricity, Furniture Health Transport Communication Recreation Education Hotel and Others OVERALL Year and Drinks and and Household and Services and Restaurants PRICE Beverages Cigarettes Footwear and Water Household Entertain. INDEX Utensils 2010* Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationalil recommended Classification of individual Consumption by Purpose (COICOP). 31

54 COST OF LIVING INDEX OF GOODS AND SERVICES CONSUMED BY MIDDLE GRADE WAGE EARNERS IN DAR ES SALAAM (2001=100) Table No. 10 Months Year March June September December Average Change % First Quarter Second Third Fourth Quarter Quarter Quarter Second Third Fourth First Quarter Year Quarter Quarter Quarter Average %change * Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationally recommended Classification of Individual Consumption by Purpose (COICOP). 32

55 COST OF LIVING INDEX OF GOODS AND SERVICES CONSUMED BY MIDDLE GRADE WAGE EARNERS IN DAR ES SALAAM (2001=100) Table No. 11 Beverages Electricity Clothing Furniture Services Health Recreation OVERALL Year Food and Rent Kerosene and and and other Services and Transport Education Others PRICE Cigarettes and Water Footwear Household Household Entertain. INDEX Utensils Requirements 2004* First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Foo d Alcoholic Clothing Electricity, Furniture Health Transport ommunicati Recreation Education Hotel and Others OVERALL Year and Drinks and and Household and Services and Restaurants PRICE Beverages Cigarettes Footwear and Water Household Entertain. INDEX Utensils 2010* First Quarter Second Quarter Third Quarter Fourth Quarter Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationalil recommended Classification of individual Consumption by Purpose (COICOP). 33

56 COST OF LIVING INDEX OF GOODS AND SERVICES CONSUMED BY HIGH INCOME GROUP IN DAR ES SALAAM (2001=100) Table No. 12 Beverages Electricity Clothing Furniture Services Health Recreation OVERALL Year Food and Rent Kerosene and and and other Services and Transport Education Others PRICE Cigarettes and Water Footwear Household Household Entertain. INDEX Utensils Requirements 2004 March June September December March June September December March June September December March June September December March June September December March June September December Foo d Alcoholic Clothing Electricity, Furniture Health Transport ommunicatiorecreation Education Hotel and Others OVERALL Year and Drinks and and Household and Services and Restaurants PRICE Beverages Cigarettes Footwear and Water Household Entertain. INDEX Utensils 2010* March June September December Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationalil recommended Classification of individual Consumption by Purpose (COICOP). 34

57 COST OF LIVING INDEX FOR HIGH INCOME GROUP IN DAR ES SALAAM (2001=100) Table No. 13 Year Months Change Average March June Sept. December % Year First Second Third Fourth Quarter Quarter Quarter Quarter Average %Change * % Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationally recommended Classification of Individual Consumption by Purpose (COICOP). 35

58 COST OF LIVING INDEX OF GOODS AND SERVICES CONSUMED BY URBAN DWELLERS IN TANZANIA MAINLAND (2001=100) Table No. 14 Beverages Electricity Clothing Furniture Household Health Recreation OVERALL Year Food and Rent Kerosene and and Operations Services and Transport Education Others PRICE Cigarettes Water Footwear Household Household Entertainment INDEX Utensils Operations 2004 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Foo d Alcoholic Clothing Electricity, Furniture Health Transport Communication Recreation Education Hotel and Others OVERALL and Drinks and and Household and Services and Restaurants PRICE Year Beverages Cigarettes Footwear and Water Household Entertain. INDEX Utensils 2010* First Quarter Second Quarter Third Quarter Fourth Quarter Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationalil recommended Classification of individual Consumption by Purpose (COICOP). 36

59 COST OF LIVING INDEX OF GOODS AND SERVICES CONSUMED BY URBAN DWELLERS IN TANZANIA MAINLAND (2001=100) Table No. 15 Period Year First Second Third Forth Average Change Quarter Quarter Quarter Quarter % Year First Second Third Fourth Quarter Quarter Quarter Quarter Average %Change * Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationally recommended Classification of Individual Consumption by Purpose (COICOP). 37

60 Percent TREND OF INFLATION - Tanzania Mainland At 2001 base year Years 38

61 DIFFERENT INDICES OF GOODS AND SERVICES CONSUMED BY URBAN RESIDENTS IN TANZANIA MAINLAND (2001=100) Table No. 16 Index Index (%) Urban Urban Dwellers Dwellers Income Income Year Tanzania Tanzania Mainland Mainland Minimum Middle High Minimum Middle High Index Index (%) Urban Urban Dwellers Dwellers Income Income Year Tanzania Tanzania Mainland Mainland Minimum Middle High Minimum Middle High Source: National Bureau of Statistics *Starting 2010, the reference period for the NCPI has been changed from December, 2001 to September 2007, following the internationally recommended Classification of Individual Consumption by Purpose (COICOP). 39

62 CHAPTER 2 THE STATE OF THE WORLD ECONOMY AND INTERNATIONAL ECONOMIC CO-OPERATION THE STATE OF THE WORLD ECONOMY World Economic Growth 33. In 2010, the world economy started to recover from the aftermath of the global financial and economic crisis following the collapse of financial markets in the United States and the European countries. The pace of global economic growth increased to 5.0 percent compared to a contraction of 0.5 percent in The global economic recovery was a result of economic rescue strategies in which fiscal and monetary policies were pursued by the affected countries. The growth in the global economy went in tandem with economic growth of the Developed Countries whose growth recovered to 3.0 percent in 2010, compared to a contraction of 3.4 percent in The output growth rate in Developing Countries increased by 7.3 percent in 2010 compared to 2.7 percent in This was attributed to increased investment and exports, rising commodity prices and influx of capital inflows. 35. The pace of economic growth for Developing Asian Countries notably China and India increased to 9.5 percent in 2010 from 7.2 percent in The increase was spurred by the robust export of goods which is the main base of these economies. Table 2.1: World Output (Annual percentage change) Region World Output Developed Countries Developing Countries Developing Asia Sub-Saharan Africa Source: International Monetary Fund (IMF), April 2011 Trend in World Trade 36. In 2010, the growth rate of the world trade increased to 14.5 percent from a contraction of 12.3 percent in 2009, this was the largest increase since This was a result of rising commodity demand in Developed and Developing countries which 40

63 led to the expansion of world trade. Moreover, the strengthening of capital and money markets contributed to the growth of world trade. 37. The value of world merchandise exports amounted to USD 14.9 trillion in 2010 compared to USD 12.2 trillion in 2009, equivalent to 22.0 percent increase. The increase in the value of merchandise exports was attributed to rising commodity prices in the world market as well as the weakening of US dollar against other major currencies in the world. 38. Similarly, in African countries, the growth of merchandise exports increased from a contraction of 30.0 percent in 2009 to 28.0 percent in On the other hand, merchandise imports increased by 14.0 percent in 2010 compared to a contraction of 15.0 percent in As a result of favourable trade, African countries managed to record surplus trade balance valued at USD 37.0 billion in 2010 compared to a deficit trade balance of USD 15.5 billion in

64 Table 2.2: World Merchandise Trade by Region and Selected Economies 2010 (Billion USD and percentage) Value Exports Annual percentage change Value Imports Annual percentage change World 14, , North America 1, , United States 1, , Canada Mexico South and Central America Brazil Other South and Central America Europe 5, , European Union 5, , Germany 1, , France Netherlands United Kingdom Italy Commonwealth of Independent States (CIS) Russian Federation Africa South Africa Africa less South Africa Oil exporters Non oil exporters Middle East Asia 4, , China 1, , Japan India Newly industrialized economies 1, , Memorandum Items Least Developed Countries (LDCs) Source: World Trade Organisation (WTO) Report April

65 Economic Development in Sub-Saharan Africa 39. In 2010, economic growth of Sub-Saharan Africa increased to 5.0 percent from 2.8 percent in The increase in growth was a result of both rising price and demand for agricultural commodities in Developed Countries. Further, this growth of Sub-Saharan Africa was attributed to high growth in oil exporting countries whose growth was 6.5 percent in 2010 compared to 4.8 percent in The economic growth of middle-income countries in Sub-Saharan Africa recovered from a contraction of 1.7 percent in 2009 to 3.1 percent in Similarly, the economic growth of low-income countries in Sub-Saharan Africa increased from 4.7 percent in 2009 to 5.3 percent in On average, the economic growth of Sub- Saharan Africa shows signs of recovering to its normal growth path which were there before the onset of the global financial and economic crisis that weakened economic activities in Further, in 2010, the pace of increasing consumer price in Sub-Saharan Africa slowed down to 7.5 percent from 10.5 percent in 2009, where the slowdown in the overall inflation was also reflected in the middle and low income countries. The oil exporting countries in Sub-Saharan Africa revealed different trend, whereas inflation increased to 12.4 percent in 2010 from 11.0 percent in

66 Table 2.3: Trend of Selected Macroeconomic indicators in some African Countries ( ) Real GDP Consumer Prices Current Account Balance Annual growth Annual growth Percentage of GDP Sub-Saharan Africa Oil Exporters Nigeria Angola Equatorial Guinea Gabon Republic of Congo Chad Middle-Income South Africa Botswana Mauritius Namibia Swaziland Cape Verde Low-Income Ethiopia Kenya Ghana Tanzania Cameroon Uganda Cote d'ivoire Source:-International Monetary Fund (IMF). 44

67 INTERNATIONAL ECONOMIC CO-OPERATION East African Community (EAC) 42. In December 2010, the Summit of Heads of State from East African Community met in Arusha and elected Burundi to be the Chair of the community for a period of one year. The Heads of State directed the Council of Ministers to carefully identify implementable priorities as per the existing budgetary constraints when preparing the East African Development Strategy. Further, the Summit directed all Ministers of Finance from member states to attend the pre-budget meeting for East African Community. 43. In line with the protocol for establishing the East African Community Common Market, the heads of State directed the Council of Ministers to finalize negotiations for the establishment of the Common Market so as to have in place institutional arrangement for facilitating its operation by With regard to the preparations of the East African Community Monetary Union, the Summit directed member states to fast track the process of attaining macroeconomic convergence, which is an important criterion for establishing common currency. 44. Further, the EAC Council of Ministers was directed to find better way of fasttracking implementation of regional projects, particularly those of energy generation. The Summit called for a long term energy master plan to the year 2050, which will indicate type and quantity of energy that should be produced by each member in the given timeframe. 45. Moreover, there has been incidence of piracy in the Indian Ocean that has extended further to the territorial waters of some EAC member states. This situation threatens peace and economic wellbeing of member states. Thus, the Heads of State called for coordinated measures to address the threat at national, regional and international levels. Africa Union and Economic Commission for Africa 46. Despite impressive economic performance shown by African countries in the past decade, unemployment remains high and rising. Thus, the Africa Union (AU) and the Economic Commission for Africa (ECA) at their 3rd Annual Joint Meeting held in March 2010 discussed means to achieve sustainable economic growth with the aim of reducing unemployment in Africa. This is because, unemployment not only weaken the efforts to reduce poverty, but also a basis for suppressing human resources, widening income inequality and fuels social unrest in the African countries. 45

68 47. As a means to address the challenge, African countries were urged to create employment opportunity, specifically for youth and other groups. Moreover, countries were advised to have appropriate policy interventions to generate highemployment economic growth that can fulfil the goal of reducing poverty. 48. Further, the meeting adopted Resolution No. 11 of ensuring food security in Africa within five years. The Resolution calls for African countries to have a set of concrete measures in agricultural investment and ensure sufficient resources are allocated in the budget in order to promote agricultural sector. Joint Permanent Commission (JPC) 49. The Joint Permanent Commissions between Tanzania and friendly countries sustained good relationship in Following the amicable relationship, the 4th Meeting of JPC between Tanzania and Algeria was held in Dar es Salaam in June The meeting was beneficial to Tanzania because an agreement to cancel USD million Tanzanian debts was signed, a debt that Tanzania owed Algeria since 1970s and 1980s. Also, negotiations on the agreement on the avoidance of double taxation between the two countries are on-going. 50. Likewise, technical meetings between Tanzania and Brazil were held in June 2010, whereby a number of issues were discussed, including the provision of concessional terms in settling USD million of debt Tanzania owed Brazil. 51. Furthermore, continued cooperation between Tanzania and Mozambique enabled the construction of Umoja Bridge that links the two countries and its inauguration was done in May The Umoja Bridge is located about 300 kilometres from Mtwara town. It is expected that, this bridge will enhance unity and cooperation between Tanzania and Mozambique, it will also provide great support in reducing poverty by improving investment, businesses, tourism, communication and other economic activities in the border areas. Southern Africa Development Community (SADC) 52. In 2010, the Southern Africa Development Community (SADC) participated in a tripartite conference to discuss infrastructure investment in the three regional communities, namely EAC, SADC and Common Market for Eastern and Southern Africa (COMESA) in Nairobi, Kenya. The conference was a special opportunity for 46

69 SADC to showcase regional infrastructure projects to international donor community, development partners, development finance institutions and private investors from around the world. This conference was largely set in the context of SADC 2010 Investment Promotion Programme in which priorities were identified in the infrastructure projects of transport corridors, water supply and sanitation, energy and communication. 53. SADC continues to implement its programs with a view to enhance cooperation and to fast track development. Some of those programs deal with the simplification of immigration procedures to easy movement of citizens from one country to another. Other programs relate to pharmaceuticals and control of communicable diseases; establishment of HIV/AIDS Fund; and the establishment of Development Fund. Also, SADC continues to implement joint programs in anti-money laundering, road transport and ports, promotion of tourism, agriculture and food security and gender development. African Peer Review Mechanism (APRM) 54. In 2010, the country team of African Peer Review Mechanism continued with its scheduled activities particularly in the areas of good governance, rule of law, promotion of participatory democracy and protection of human rights especially to vulnerable groups. The good governance report that was prepared in 2009 covering areas mentioned above continued to be rationalized in line with the current political, economic and social context, the work that will end in the financial year of 2010/ Moreover, a series of sensitization seminars on APRM process continued to be undertaken through a wide participation of stakeholders. About 320 face to face seminars were conducted in Similarly, about 6,600 fliers were distributed and other means of communication were used for sensitization including radio, TV and news papers. World Economic Forum (WEF) 56. In 2010, the World Economic Forum was held in Dar es Salaam for three days starting from 5th May 2010, to discuss challenges facing Africa Continent. The forum involved more than 1,000 participants from over 85 countries including heads of state, ministers, intellectuals, business people, among other delegates. The main theme of the forum was Rethinking Africa s Growth Strategy and the challenges brought about by the recent economic crisis. Also, the forum looked on recent global 47

70 changes and identified opportunities that could unlock the continent s growth potentials. 57. Moreover, the conference discussed challenges that higher education sector experiences and its importance in economic development, whereby issues such as low level of student registration and shortage of lecturers were noted. 48

71 CHAPTER 3 EXTERNAL SECTOR INTRODUCTION 58. In 2010, the trend of goods and services exported was satisfactory compared to The value of goods and services exported increased by 24.1 percent compared to a decrease of 7.7 percent in This was mainly attributed to increase in non-traditional goods particularly gold. On the other hand, the value of goods and services imported increased by 19.0 percent due to the increase in commodity prices in the world market. MERCHANDISE EXPORTS 59. The value of merchandise exports increased from USD 3,294.7 million in 2009 to USD 4,296.8 million in 2010, equivalent to an increase of 30.4 percent. Likewise, the value of traditional goods exports increased to USD million in 2010 from USD million in 2009, equivalent to an increase of The value of non-traditional goods exports increase to USD 3,177.3 million from USD 2,376.1 million in 2009, equivalent to an increase of 33.7 percent. Traditional exports accounted for 13.1 percent of the overall merchandise exports, non-traditional goods was 73.9 percent and unrecorded trade was 13.0 percent. Gold continued to account for a large share of the overall non-traditional goods exports. Traditional exports 60. In 2010, the value of traditional exports increased to USD million from USD million in 2009, equivalent to an increase of 16.5 percent. This was attributed to increase in the volume and price of tobacco and cashewnuts exported. Those crops accounted for 41.6 and 17.3 percent of all traditional goods exported respectively. Likewise, in 2010 the average price of coffee, cotton, tea, tobacco, cashewnuts and cloves increased compared to However, the value of exports of coffee, cotton, tea and cloves decreased. 49

72 Coffee 61. The value of coffee exports decreased from USD million in 2009 to USD million in 2010, equivalent to the decrease of 8.6 percent. This was due to decrease in the volume of coffee exports. The volume of coffee exports was 35,600 tons compared to 56,000 tons in 2009, equivalent to a decrease of 36.4 percent. However, the average price of coffee in the world market in 2010 increased to USD 2,852.4 per ton from USD 1,984.6 per ton in Cotton 62. The value of cotton exports was decreased to USD 84.0 million in 2010 from million in 2009, equivalent to a decrease of 24.3 percent. This was due to decrease in the volume of cotton exports resulting from a decrease in cotton production in the country. However, the average unit price of cotton in the world market increased by 11.2 percent from an average of USD 1,116.7 per ton in 2009 to USD 1,241.8 per ton in Tea 63. In 2010, the value of tea exports decreased to USD 36.4 million from USD 47.2 million in 2009, equivalent to a decrease of 22.8 percent. This was due to decrease in the volume of tea exports resulting from a decrease in tea production in the country. The volume of tea exports decreased to 18,700 tons from 30,600 tons in 2009, equivalent to a decrease of 39.0 percent. Likewise, the average unit price of tea in the world market increased from an average of USD 1,538.7 per ton in 2009 to USD 1,948.9 per ton in Tobacco 64. In 2010, the value of tobacco exports was USD million compared to USD million in 2009, equivalent to an increase of 82.4 percent. This was attributed to an increase in volume of tobacco exports from 33,800 tons in 2009 to 53,500 tons in In addition, the average unit price of tobacco in the world market was USD 4,339.3 per ton in 2010 compared to USD 3,764.0 per ton in 2009, equivalent to an increase of 15.3 percent. 50

73 Cashewnuts 65. The value of cashewnuts exports increased to USD 96.9 million in 2010 from USD 68.6 million in 2009, equivalent to an increase of 41.3 percent. This was due to increase in the volume of cashewnuts exports from 95,500 tons in 2009 to 125,000 tons in In addition, the average unit price of cashewnuts in the world market increased by 7.9 percent from USD per ton in 2009 to USD per ton in Cloves 66. In 2010, the value of cloves exports decreased to USD 7.6 million from USD 14.4 million in 2009, equivalent to a decrease of 47.0 percent. This was caused by the decrease in the volume of cloves exports from 4,800 tons in 2009 to 2,200 tons in However, the average unit price of cloves in the world market increased from USD 2,977.9 million per ton in 2009 to USD 3,449.6 million per ton in 2010, equivalent to an increase of 15.8 percent. Non-Traditional Exports 67. The value of non-traditional exports increased to USD 3,177.8 million in 2010 from USD 2,376.2 million in 2009, equivalent to an increase of 33.7 percent. This was due to the increase in mineral exports, particularly gold. Non-traditional exports accounted for 73.9 percent of the total merchandise exports compared to 72.1 percent in The increase in value of nontraditional exports was due to the increase in exports of manufactured goods (90.3 percent), minerals (22.7 percent) and other goods (20.5 percent). Minerals 68. In 2010, the value of mineral exports increased to USD 1,560.2 million from USD 1,271.4 million in 2009, equivalent to an increase of 22.7 percent. Gold accounted for 97.2 percent of all mineral exports. The value of gold exports increased from USD 1,229.5 million in 2009 to USD 1,516.6 million in 2010, equivalent to an increase of 23.4 percent. This was due to an increase in the volume of gold exports and unit price of gold in the world market. 51

74 However, diamond exports decreased to USD 10.1 million in 2010 from USD 15.5 million in 2009, equivalent to a decrease of 34.8 percent. In addition, the gold exports contributed 47.7 percent of all non-traditional goods. Manufactured Goods 69. In 2010, the value of exports of manufactured goods increased to USD million from USD million in 2009, equivalent to an increase of 90.3 percent. This was mainly attributed to the increase in exports from cotton and tobacco products. However, exports of sisal products decreased due to the decrease in demand of that product in the world. Exports of manufactured goods accounted for 30.3 percent of non-traditional goods in 2010, compared to 21.3 percent in Fish and Fish Products 70. In 2010, exports value of fish and fish products decreased to USD million from USD million in 2009, equivalent to a decrease of 9.0 percent. This was due to a decrease in demand of fish and fish products in the world market. Horticultural Products 71. The export value of horticultural products decreased by 6.6 percent from USD 33.3 million in 2009 to USD 31.1 million in Other goods exports 72. The export value of other goods was increased to USD million in 2010 from USD million in 2009, equivalent to an increase of 20.5 percent. In addition, the value of re-exports goods was USD million in 2010 compared to USD million in Likewise, the value of unrecorded goods exports was USD million in

75 Table 3.1: Value (fob), Volume and Prices of Goods Exports ( ) Goods exports r 2010p (% change) Traditional goods (US$ million) Coffee Value (US$ million) Volume ( 000 ton) Price (US$ per ton) 1, , , , , Cotton Value (US$ million) Volume ( 000 ton) Price (US$ per ton) 1, , , , , Sisal Value (US$ million) Volume ( 000 ton) Price (US$ per ton) , Tea Value (US$ million) Volume ( 000 ton) Price (US$ per ton) 1, , , , , Tobacco Value (US$ million) Volume ( 000 ton) Price (US$ per ton) 2, , , , , Cashewnuts Value (US$ million) Volume ( 000 ton) Price (US$ per ton) Cloves Value (US$ million) Volume ( 000 ton) Price (US$ per ton) 3, , , , , Subtotal (Traditional exports) Non -Traditional Exports (US$ million) Minerals , , , Gold , , , Diamond Other minerals Manufactured goods Fish and fish products Horticultural products Re-exports Other exports Sub Total (Non Traditional exports) 1, , , , Unrecorded Trade GRAND TOTAL 1, , , , , Source: Bank of Tanzania, and Ministry of Finance - Data not available 53

76 Service Receipts 73. In 2010, receipts from services increased to USD 2,091.5 million from USD 1,854.6 million in 2009, equivalent to an increase of 12.8 percent. This was due to the increase in receipts from transportation and tourism. Receipts from transportation services increased by 33.2 percent from USD million in 2009 to USD million in Likewise, receipts from tourism increased by 8.2 percent from USD 1,159.8 million in 2009 to USD 1,254.5 million in In addition, receipts from other services which include fees in legal, accountancy, consultancy and research increased by 8.6 percent, from USD million in 2009 to USD in However, receipts from communication services decreased by 19.6 percent in MERCHANDISE IMPORTS 74. In 2010, the value of goods imported (f.o.b) increased to USD 7,125.1 million from USD 5,834.1 million in 2009, equivalent to an increase of 22.1 percent, compared to a decrease of 16.8 percent in This was due to an increase in importation of intermediate goods particularly oil products and raw materials. Capital goods 75. In 2010, the import value of capital goods increased to USD 2,715.2 million from USD 2,539.2 million in 2009, equivalent to an increase of 6.9 percent. This was due to the increase in imports of transport and construction equipment. The importation of transport equipments increased by 20.4 percent from USD million in 2009 to USD million in Importation of building and construction equipment increased by 9.4 percent from USD million in 2009 to USD million in However, the imports value of plant and machinery decreased to USD 1,203.4 million in 2010 from USD 1,232.5 million in 2009, equivalent to a decrease of 2.4 percent. Intermediate Goods 76. The import value of intermediate goods increased from USD 1,890.3 million in 2009 to USD 2,700.8 million in 2010, equivalent to an increase of 54

77 42.9 percent. This was due to the increase in the value of oil and industrial raw material imports. The imports value of oil products was USD 1,983.8 million in 2010 compared to USD 1,323.0 million in 2009, equivalent to an increase of 49.9 percent. This increase was due to the rise in oil prices in the world market as well as volume imported. Further, the imports value of industrial raw materials increased to USD million in 2010, compared to USD million in 2009, equivalent to an increase of 27.5 percent. Furthermore, fertilizer imports increased by 20.8 percent compared to a decrease of 36.7 percent in Consumer Goods 77. In 2010, imports of consumer goods increased to USD 1,709.2 million from USD 1,404.6 million in 2009, equivalent to an increase of 21.7 percent. This was due to increase of imports of food and food stuffs, and other consumer goods. The value of imports of food and food stuffs was reached to USD million in 2010 from USD million in 2009, equivalent to an increase of 34.5 percent. The increase in import value of food and food stuffs was due to an increase in importation of cereal products particularly wheat. Likewise, the imports of other consumer goods including pharmaceuticals, plastic products and paper products increased by 17.5 percent from USD 1,061.3 million in 2009 to USD 1,247.5 million in SERVICES PAYMENTS 78. In 2010, services payment increased to USD 1,849.6 million from USD 1,709.1 million in 2009, equivalent to an increase of 8.2 percent. This was due to a rise in the costs of transportation services. Transport costs increased from USD million in 2009 to USD million in 2010, equivalent to an increase of 18.4 percent. TRENDS IN SELECTED REGIONAL AND BILATERAL TRADE 79. Tanzania continued to maintain good trade relationship with different countries in the world including countries from European, American, Asian, and African continents. In 2010, the value of goods exported to countries from 55

78 European continent increased to USD 1,151.1 million from USD million in 2009, equivalent to an increase of 26.6 percent. This was due to the increase in exports to Switzerland and European Union (EU) countries. The value of goods exported to Switzerland increased by 46.7 percent to USD million in 2010 while exports to EU countries increased by 5.5 percent to USD million in The value of goods imported from European countries increased from USD 1,222.1 million in 2009 to USD 1,669.8 million in 2010, equivalent to 36.6 percent increase. In addition, balance on merchandise trade between Tanzania and European countries registered a deficit of USD million in 2010 compared to a deficit of USD million registered in The value of goods exported to other East African Community (EAC) countries increased by 70.6 percent from USD million in 2009 to USD million in This was mainly attributed to increased exports to Kenya. The value of goods exported to Kenya increased by 67.6 percent to USD million in In addition, goods exports to Kenya accounted for 66.1 percent, Rwanda 12.2 percent, Burundi 11.3 percent and Uganda contributed 10.4 percent of all goods exported to the Community. The value of goods imported from the EAC countries decreased to USD million in 2010 from USD million in 2009, equivalent to a decrease of 8.2 percent. Balance on merchandise trade between Tanzania and other EAC countries registered a surplus of USD million in 2010 compared to a deficit of USD 46.7 million in In 2010, the value of goods exported to Southern African Development Community (SADC) member countries increased by 67.0 percent to USD million from USD million in This was mainly attributed to increased exports to South Africa and Democratic Republic of Congo (DRC). Out of the total exports, 66.7 percent went to South Africa and 21.9 percent to DRC. The value of goods imported from SADC member countries increased by 12.9 percent to USD million in 2010 from USD million in This was due to the increase in imports from South Africa, Swaziland, Zambia and Mozambique. Balance on merchandise trade between Tanzania 56

79 and other SADC member countries registered a deficit of USD million in 2010 compared to a deficit of million in In 2010, the value of goods exported to all African countries increased to USD 1,080.9 million from USD million in 2009, equivalent to an increase of 69.3 percent. This was due to the increase in exports to South Africa, Kenya and DRC. In addition, the value of goods imported from Africa increased by 6.6 percent from USD 1,044.0 million in 2009 to USD 1,112.9 million in This was due to the increased value of goods imported from South Africa and Kenya. Balance on merchandise trade between Tanzania and all African Countries registered a deficit of USD 32.0 million in 2010 compared to a deficit of USD million in In 2010, the value of goods exported to Asian Continent including China, Japan, India, Hong Kong and United Arab Emirates increased by 29.0 percent to USD 1,200.2 million from USD million in This was attributed to the increase in exports to China, India and Japan. Likewise, the value of goods imported from Asian continent increased to USD 4,158.1 million in 2010 from USD 3,282.5 million in 2009, equivalent to an increase of 26.7 percent. Balance on merchandise trade between Tanzania and Asian countries registered a deficit of USD 2,957.9 million in 2010 compared to a deficit of USD 2,352.2 million in In 2010, the value of goods exported to American Continent increased to USD 51.0 million from USD 45.6 million in 2009, equivalent to an increase of 12.0 percent. This was due to the increase in exports to America. The value of goods imported from America decreased by 1.4 percent to USD million in 2010 from USD million in Moreover, the balance on merchandise trade between Tanzania and American continent registered a deficit of USD million in 2010 compared to a deficit of USD million registered in

80 Table 3.2: Balance of Trade between Tanzania and Regional Economic Grouping (USD million) Region/ Year r 2010p European Continent (210.5) (77.8) (515.2) (567.0) (313.1) (518.7) SADC (233.7) (103.2) (284.8) (355.4) (510.2) (417.8) (202.6) EAC (35.6) (42.3) (64.0) (56.7) (46.7) Asian Continent (1,582.0) (2,212.8) (2,352.2) (2,957.9) American Continent (174) (291.5) (313.7) (217.1) (208.0) Source: Bank of Tanzania and Ministry of Finance r = revised p = provisional 58

81 Table 3.3: Tanzania Export by Country/Region of Destination (USD million) COUNTRY/ REGION (% r 2009r 2010p change) European Union (EU) Other European Countries TOTAL-European Continent , SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) South Africa Zambia Swaziland Zimbabwe Mozambique (12.8) Democratic Republic of Congo Other SADC countries TOTAL- SADC EAST AFRICAN COMMUNITY (EAC) Burundi Kenya Rwanda Uganda (1.9) TOTAL EAC Other African Countries TOTAL AFRICA , AMERICAN CONTINENT America Canada (254.6) Other American countries TOTAL- AMERICA ASIA China India Japan United Arab Emirates (17.2) Hong Kong (85.2) Singapore Other Asian Countries (4.6) TOTAL- ASIA , OTHER COUNTRIES GRAND TOTAL 1, , , , , , Source: Bank of Tanzania and Ministry of Finance r = revised p = provisional 59

82 Table No.3.4: Tanzania Import by Country/Region of Origin (Value in Million USD) COUNTRY/ REGION r 2009r 2010p (% Change) European Union (EU) , , , , Other European Country TOTAL-European Continent , , , , SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) South Africa Zimbabwe Zambia Mozambique Democratic Republic of Congo (8.3) Swaziland Other SADC Countries TOTAL SADC EAST AFRICAN COMMUNITY (EAC) Burundi Kenya (10.9) Rwanda Uganda TOTAL EAC (8.2) Other African Countries (90.0) TOTAL-AFRICA , , , AMERICAN CONTINENT America Canada Other American Countries (21.2) TOTAL-AMERICA (1.4) ASIA Japan United Arab Emirates China India Hong Kong (24.1) Singapore Other Asian Countries TOTAL - ASIA 1, , OTHER COUNTRIES GRAND TOTAL 3, , , , Source: Bank of Tanzania and Ministry of Finance r = revised p = provisional BALANCE OF PAYMENTS Balance of Merchandise Trade 85. In 2010, the balance of merchandise trade registered a deficit of USD 2,828.3 million compared to a deficit of USD 2,539.3 million in 2009, 60

83 equivalent to an increase of 13.4 percent. The deficit was a result of high rate of imports relative to exports. Balance on Services 86. In 2010, balance on services registered a surplus of USD million compared to the surplus of USD million in 2009, equivalent to an increase of 66.2 percent. This was due to the increase in receipts from transit trade and tourism, following the recovery of global economy. Balance on Investments Receipts and Payments 87. In 2010, balance on investments receipts and payments which comprise of compensation to employees, investment income and interest payments increased by 27.6 percent to a deficit of USD 90.9 million from a deficit of USD 71.2 million in This was due to the increase in the compensation of non citizen employees. Balance on Current Transfers 88. The balance on current transfers which comprise money transfers, grants and debt relief recorded a surplus of USD million in 2010 compared to the surplus of USD million in This was due to increase in Development Partners support to the Government from USD million in 2009 to USD million in Balance on Current Accounts 89. In 2010, the balance on current account, which comprises balances on merchandize trade, service, investments receipts and payments as well as current transfers, registered a deficit of USD 2,677.2 million compared to a deficit of USD 2,465.2 million in 2009, equivalent to an increase of 8.6 percent. The deficit was a result of increase in the rate of imports. Balance on Capital Transfers 90. In 2010, the balance on capital transfers, that comprising investments grants and debt cancellation from international financial institutions and Development Partners increased by 25.1 percent to a surplus of million 61

84 compared to the surplus of USD million in The increase was mainly attributed to the increase in investments grants to the Government. Balance on Investment Payments 91. The balance on investment payments that comprise of Foreign Direct Investments and foreign loans registered a surplus of USD 1,587.8 million in 2010 compared to a surplus of USD 1,328.2 million in The increase was due to decrease in foreign resources owned by domestic commercial Banks from USD million in 2009 to USD 75.2 million in Overall Balance of Payments 92. In 2010, the overall balance of payments had a surplus of USD million, compared to a surplus of USD million in Foreign Currency Reserves 93. In 2010, foreign reserves increased to USD 3,948.0 million from USD 3,552.5 million in 2009, equivalent to an increase of 11.1 percent. The foreign reserves for 2010 were equivalent to 5.3 months of imports of goods and nonfactor services compared to 5.7 months in EXCHANGE RATE 94. In 2010, the average value of the Tanzanian Shilling was shilling 1,432.3 per USD, compared to an average of shilling 1, per USD in 2009, equivalent to a depreciation of 8.5 percent. However, this was lower when compared to the depreciation of 10.4 percent in Depreciation of the value of Tanzanian Shilling was due to the increase in demand for USD in the country as well as appreciation of USD against other international currencies. In addition, the value of USD as at end of December 2010 was, 1,453.5 shillings compared to 1,313.3 shillings as of end December

85 Table No. 17 VALUE OF TANZANIA'S FOREIGN TRADE Shs. million Type of Goods Exports Domestic Exports Re-exports Imports Total Value of Foreign Trade Balance of Merchandise Trad Exchange Rate (Shs/US$) , , , , , , , ,409.3 Source: National Bureu of Statical, Bank of Tanzania and Tanzania Revenue Authority 63

86 Table No. 18 Commodity VOLUME AND VALUE OF DOMESTIC EXPORTS Quantity (Ton) Value (Shs. milion) Change(%) Change (%) / /10 Coffee % Cotton % Sisal % Tea % Tobacco % Cashewnuts % Cloves % Diamonds (Carats) % Gold (Gms.) % Source: National Bureau of Statistics and Tanzania Revenue Authority 64

87 VOLUME AND VALUE OF TRADITIONAL AND NON-TRADITIONAL EXPORTS Table No. 19 Quantity (Ton) Value (mill.us$) Change (%) Change (%) Commodity / /10 Traditional Commodities: Coffee (37) Cotton (25) Sisal Tea Tobacco Cashewnuts Cloves (47) Sub-Total Non-Traditional Commodities: Petroleum Products Minerals Manufactured Goods Fish and Fish Products Horticultural products Re-exports Other Exports Sub-Total Unrecorded Goods GRAND TOTAL Source: National Bureau of Statistics and Bank of Tanzania 65

88 3500 I: TRADITIONAL AND NON-TRADITIONAL EXPORTS (US$ Milion) Traditional exports Non-traditional exports 66

89 IIB: COFFEE AND COTTON EXPORTS (Quantity - Tons '000) Coffee Cotton 67

90 IIIA: PERCENTAGE CONTRIBUTION OF EXPORTS 2010 Coffee 3.0% Cotton 2.4% Sisal 0.0% Tea 1.1% Tobacco 6.8% Cashewnuts 2.8% Others 10.2% Cloves 0.2% Manufactured goods 28.1% Minerals 45.5% 68

91 IIIB: PERCENTAGE CONTRIBUTION OF EXPORTS 2009 Others 11.4% Coffee 4.4% Cotton 4.4% Sisal 0.0% Tea 1.9% Tobacco 5.0% Cloves 0.6% Cashewnuts 2.7% Manufactured goods 19.9% Minerals 49.9% 69

92 EXPORT PRICES OF PRINCIPAL COMMODITIES Table No. 20 Shs/Ton* Change(%) Commodity /10 Coffee 926, ,107, ,380, ,812, ,390, ,668, ,642, ,628, ,069, Cotton 811, ,051, ,147, ,126, ,221, ,222, ,767, ,462, ,775, Sisal 491, , , , , ,047, , ,475, ,302, Tea 1,166, ,233, ,495, ,322, ,680, ,581, ,861, ,373, ,501, Tobacco 1,993, ,101, ,109, ,938, ,440, ,869, ,593, ,966, ,586, Cashewnuts 596, , , , ,058, ,278, ,356, , ,284, Cloves 3,117, ,901, ,524, ,210, ,285, ,321, ,202, ,008, ,390, Diamonds (Carats) 114, , , , , , , , , Gold (Gms.) 7, , , , , , , , , Source: Custom Department, Tanzania Revenue Authority * Except for diamonds and gold, whose prices are quoted per carat and gram respectively 70

93 EXPORT PRICES OF PRINCIPAL COMMODITIES Table No. 21 US$/Ton* Change(%) Commodity /10 Coffee , , , , , , , , Cotton , , , , , Sisal , , Tea 1, , , , , , , , , Tobacco 2, , , , , , , , , Cashewnuts , Cloves 3, , , , , , , , , Diamonds (Carats) , , Gold (Gms.) Source: National Bureau of Statistics and Tanzania Revenue Authority * Except for diamonds and gold, whose prices are quoted per carat and gram respectively - Figures not available 71

94 US Dollars IIA: TREND OF COFFEE AND COTTON EXPORT PRICES (US$/Ton) Coffee Cotton 72

95 COMPOSITION OF IMPORTS Table No. 23 Consumer Intermediate Capital Year Goods Goods Goods Shs. Million Total * Source: Bank of Tanzania * Commencing 1990, the value of imports is quoted at F.O.B. prices (previously quoted at C.I.F. prices) 73

96 BALANCE OF PAYMENTS Table No. 24 US $ milion Actual Actual Actual Actual Actual Actual Actual Actual Likely Outturn Goods Balance Exports (fob) Imports (fob) Service balance Receipts Payments Income Receipts Payments Current transfers Inflows Government Other Sectors Outflows CURRENT ACCOUNT Capital Transfers Inflows Outflows Financial Account Direct Investment Portfolio Investment Other Investment Errors and Omissions OVERALL BALANCE Financing Source: Bank of Tanzania Starting 2006, exports includes unrecorded goods 74

97 TREND OF BALANCE OF PAYMENTS GOODS BALANCE CURRENT ACCOUNT OVERALL BALANCE 75

98 CHAPTER 4 GOVERNMENT FINANCE 95. The budget implementation for 2010/11 was in line with the National Development Vision 2025; National Strategy for Growth and Reduction of Poverty (NSGRP); Millennium Development Goals (MDGs); National Debt Strategy; public investment priorities as outlined in Plan and Budget Guidelines for 2010/ /13; and Joint Assistant Strategy for Tanzania (JAST). Based on macroeconomic policy as well as the basis and objectives of the budget for 2010/11, the Government estimated the resource envelope of shilling 11,609,557 million consisting of domestic revenue, foreign grants and loans and spend the amount for recurrent and development expenditure. Out of this amount, shilling 6,003,590 million was estimated as domestic revenue; shilling 172,582 million from Local Government Authorities (LGAs) own sources; shilling 821,645 million from General Budget Support grants and loans; shilling 2,452,908 million from project grants and loans, including basket funds; shilling 1,331,212 million loans from domestic and foreign sources; shilling 797,620 million for rollover; and shilling 30,000 million from privatisation proceeds. Domestic Revenue 96. During July 2010 March 2011, domestic revenue including LGAs own resources amounted to shilling 4,256.3 billion, equivalent to 92 percent, compared to estimates of shilling 4,629.9 billion. Out of this amount, shilling 3,910.6 billion, equivalent to 91.9 percent of total revenue was from taxes, shilling billion equivalent to 5.3 percent of total revenue was from nontaxes and shilling equivalent to 2.8 percent was from LGAs own sources. In addition, during that period, tax revenue was 93 percent of the estimated shilling 4,216.1 billion while non tax revenue was 80 percent compared to estimates of shilling billion. This was caused by power shortages, which has adverse effect on economic activities; hike in world oil prices; piracy threats in the Indian Ocean; decrease in fish in the lakes and 76

99 oceans and illegal fishing. Despite the decline in revenue against targets, there was an increase in domestic revenue collection by 21 percent compared to the corresponding period in 2009/10, and average monthly collections increased from shilling 390 billion in 2009/10 to shilling 473 billion in 2010/11. Reforms in Tax Systems 97. In 2010, the Government continued to expand tax base and strengthen the system of revenue collections so as to finance a larger share of the budget. In addition, the Government continued to review legal and regulatory framework governing tax exemptions with the view to reduce and control its administration. Further, Tanzania Revenue Authority continued to implement its Third Five Year Corporate Plan (2008/ /13), which has been the basis for increased domestic revenue collection. Furthermore, the Government strengthened the collection and administration of non tax revenue with the aim of increasing its contribution to GDP. Grants and Loans 98. During the period of July 2010 March 2011, the Government continued to coordinate the implementation of Joint Assistant Strategy for Tanzania, strengthening relationship with Development Partners and international financial institutions in securing grants and concessional loans to complement Government efforts in implementation of MKUKUTA, in line with the Millennium Development Goals and the National Development Vision A total of shilling. 845,748 million was realised from General Budget Support (GBS) during July 2010 March 2011, which is equivalent to 103 percent of shilling 821,645 million budgeted. This was mainly due to the fluctuation of Tanzanian shilling against currencies of other countries contributing to GBS compared to initial projections. 99. Project grants and loans, including basket funds, amounted to shilling 1,427,604 million, which is 77 percent of estimates during July 2010 March The shortfall was primarily due to delays in reporting of D-Funds as well as untimely disbursements by some Development Partners. 77

100 100. The Government planned to borrow from domestic sources for financing development expenditure, whereby up to March 2011 a total of shilling 1,107,471 million was realised. Out of this amount, shilling 607,621 million was for rollover of maturing debts while shilling 499,850 million was utilised in financing various infrastructure projects. Non-Concessional Borrowing 101. In 2010/11, the Government planned to borrow USD 525 million from non-concessional sources. As of March 2011, the Government had concluded negotiations with HSBC Bank for a loan amounting to USD million. This loan will be used in procurement of two power generators for Dar es Salaam and Mwanza. Out of that amount, USD 103 million is for power project at Ubungo Dar es Salaam. In addition, the Government had discussions with the Standard Bank for loan amounting USD 250 and the process of contracting that loan is ongoing. Likewise, discussions with other financial institutions are in progress to secure the loan balance amounting to USD 84 million consistent with the plan to raise USD 525 million from that source. Expenditure 102. During the period of July 2010 March 2011, the Government continued to align expenditure with resources. During that period, actual expenditure amounted to shilling 7,169,336 million, equivalent to 90 percent of the estimated shilling 8,009,917 million. Out of that amount, shilling 5,226,893 million was recurrent expenditure and shilling 1,942,443 million was development expenditure Payment for salary and wages for Government employees during July 2010 March 2011 amounted to shilling 1,749,096 million, equivalent to 79 percent of shilling 2,205,430 million budgeted in 2010/11. Out of this amount, shilling 569,962 million was for Ministries, Independent Departments and Agencies, shilling 52,928 million was for Regional Secretariats and shilling 78

101 1,126,206 million was for Local Government Authorities. In addition, shilling 443,987 million was paid as salaries for Government institutions During the period of July 2010 March 2011, expenditure on other charges for Ministries, Independent Departments and Agencies, Regional Secretariats and LGAs reached shilling 1,955,278 million, equivalent to 89 percent of the estimate during that period. In addition, development expenditure amounted to shilling 1,942,443 million consisting of locally financed of shilling 514,839 million, equivalent to 52 percent of the estimated shilling 1,000,537 million. Foreign financed development expenditure was shilling 1,427,604 million, equivalent to 77 percent compared to the estimates of shilling 1,839,681 million. Sectoral Allocation of Government Budget 105. During 2010/11, the Government continued to allocate resources to various sectors. For the 2010/11 budget, the Government allocated 6.0 percent of total resources to finance expenditure in education sector compared to 5.7 percent in 2009/10. The budget for secondary education as well as higher education continued to be the main contributors in the observed increase. The health sector budget increased to 5.5 percent of budgeted resources for 2010/11 from 5.2 percent in 2009/10. This reflects Government s continued efforts in financing health services Agriculture, forestry, fishing and hunting sector received 3.0 percent of budgeted resources for 2010/11. The budget for agriculture increased by 4 percent compared to the allocation in 2009/10, whereby large increases was contributed by allocation in agricultural activities. Likewise, the budget for mining, industries and construction continued to receive 0.4 percent of total resources in 2010/11 as it was in 2009/10. Notwithstanding the observed trend, the budget for mining sector increased by 24 percent compared to that of 2009/10. The budget for transport and communications sector indicated a large increase, whereby 10.1 percent of total resources was allocated to the sector compared to 8.9 percent allocated in 2009/10. Another sector which 79

102 indicated a large increase in allocation was other economic services, which received 7.7 percent of total budget compared to 7.2 percent in 2009/10. National Debt 107. As at December 2010, the national debt which comprises public debt and private debt had reached USD 11,380.2 million, equivalent to an increase of 6.1 percent compared to the corresponding period of year 2009/10. Out of which, USD 9,516.8 million was public debt and USD 1,863.4 was private debt. The increase in debt stock was attributed to accumulation of arrears particularly from non Paris club countries which have not yet provided the relief in accordance to Paris Club terms. In addition, the new contracted loans which attributed to the increase in the Government needs to finance infrastructure development projects resulted to the growth of National Debt. Likewise, out of USD 9,516 million which was public debt stock, USD 6,529.6 million was external debt and USD 2,986.9 million was domestic debt In implementing National Debt Strategy, the Government continued to closely monitor its debt by contracting loans mainly through concessional terms and analysing risks of contracting new loans. In addition, during the period of July-December 2010, the Government carried out Debt Sustainability Analysis which indicated that the national debt is sustainable in accordance to international debt indicators benchmarks. Table No. 4.1: Indicators for National Debt (Percentage) Ratio Present Value (PV) of Debt to GDP Present Value (PV) of Debt to Exports Present Value (PV) of Debt to Revenue Debt Service to Exports Debt Service to Revenue Source: Ministry of Finance Threshold 80

103 External Debt 109. In December 2010, external debt stock was USD 8,363 million compared to USD 7,641.9 million at the end of December 2009, which is equivalent to an increase of 9 percent. Out of USD 8,363 million, USD 7,699.6 million was disbursed outstanding debt and USD million was Interest arrears. The increase in debt stock was attributed to accumulation of arrears particularly from non Paris club countries which have not yet provided the relief in accordance to Paris Club terms. In addition, out of external debt stock, USD 6,529.6 million was public debt and USD 1,863.4 was private debt. Analysis of external debt by currency indicated that, large portion of debt was dominated by US Dollar, Euro and Yen which account for 37, 28 and 11 percent respectively. Figure No. 4.1: Disbursed Outstanding Debt by Currency at December 2010 Others 13% Yuan 3% GBP 8% Yen 11% USD 37% Euro 28% External Debt Stock by Creditor Category 110. The analysis of external debt stock by creditor category showed that, major creditors are multilateral organisations which accounted for 72 percent of total external debt. Bilateral creditors accounted for 25 percent and other creditors accounted for 3 percent of total external debt stock. The Government has been borrowing from major multilateral organisations which do not have stringent conditionalities. 81

104 Figure No. 4.2: External debt by Creditor Category as at December 2010 Bilaterals 25% Commercial/ other 3% Multilaterals 72% Domestic Debt Stock 111. As at December 2010, domestic debt stock was shilling 4,385.4 billion (or USD 2,986.9 million) compared to shilling 3,837.7 billion in December 2009, which is equivalent to an increase of 14.3 percent. This was due to the increase in the Government needs to finance infrastructure development projects and use of Treasury bills to mop up excess liquidity in the economy. Large share of domestic debt emanated from Treasury bond which is equivalent to 61.1 percent, treasury bills 38.7 percent and other debts 0.2 percent The analysis of domestic debt by holder category indicated that Commercial Banks were leading creditors holding larger proportional of the total domestic debt. As at December 2010, commercial banks were holding 48.8 percent of the domestic debt. This was contributed by the expansion of the banking sector and relatively low investment risk in Government securities compared to the private sector. Bank of Tanzania ranked second holding 30.0 percent of domestic debt, the social security funds 20.7 percent, and individuals and other entities holding 0.5 percent. 82

105 Public Debt Service 113. During the period of July March 2011, the Government spent shilling 801,443 million in debt service payments. Out of which, shilling 71,193 million was for external debt service payments and shilling 730,250 was for domestic service payments. The principal payment of the external debt was shilling 26,610 million, where as interest payment was shilling 44,583 million. In addition, out of shillings 730,250 million paid to service the domestic debts, shilling 556,695 million was for matured government securities on rollover terms and shilling 173,555 million was for interest payment. 83

106 TRENDS IN GOVERNMENT FINANCE Table No. 25 Sh. milioni 2006/ / / / / / /11 Actual Actual Actual Actual Budgeted Actual to March Likely Outturn June A. DOMESTIC REVENUE (incl. Revenues from LGAs) A. DOMESTIC REVENUE Tax Revenue Import Duty and Excise Duty Value Added Tax (VAT) Imports Domestic Income Tax Other Taxes Refunds Accounts Non-Tax Revenue Revenues from LGAs B. TOTAL EXPENDITURE Recurrent Expenditure Development Expenditure Local Funds Foreign Funds C. DEFICIT/SURPLUS (A-B) D. FINANCING External Sources Grants Basket support Import Support/OGL Loans Project Loans Concensional loans Amortization (foregn) Internal Sources Non-Bank Borrowing Bank Borrowing Payment of arrears Proceeds from privatisation Adjustment to Cash Amortization (local) Expenditure float Source: Ministry of Finance 84

107 TRENDS IN GOVERNMENT FINANCE A. DOMESTIC REVENUE (incl. Revenues from LGAs) B. TOTAL EXPENDITURE C. DEFICIT/SURPLUS (A-B) 85

108 Table No. 26 CLASSIFICATION OF CENTRAL GOVERNMENT EXPENDITURE BY PURPOSE Shs. mill 2008/ / /11* Recurrent Development Total Exp. Recurrent Development Total Exp. Recurrent Development Total Exp. 1.0 GENERAL PUBLIC SERVICES Executive and legislative organs, financial and fiscal affairs external affairs other than foreign aid 1,811, , ,695, , ,153, , Foreign economic aid 10, , , Fundamental research affairs and services 19,727 5, ,751 14, ,934 42, General services 141,296 70, ,031 79, ,509 84, General public services n.e.c. 3,448 7, ,098 10, ,071 15, DEFENCE AFFAIRS AND SERVICES Military and civil defence administration and operation 287,446 8,959 3,743, ,082 33, , ,900 31, , Foreign military aid Defence-related applied research and experimental 2.3 development ,920 47, , , Defence affairs n.e.c. 43, ,787 21, , , , PUBLIC ORDER AND SAFETY Police and fire protection 140,819 14,878 1,346, ,538 25, , ,770 17, , Law courts 49,298 8, ,046 52,882 18,433 71,315 57,114 7,661 64, Prison administration and operation 10, ,064 8, ,402 6, , Public order and safety n.e.c. 25,927 11, ,065 44,289 19,353 63,642 54,988 28,809 83, EDUCATION AFFAIRS AND SERVICES Pre-primary & primary education affairs & services 6,027 7, ,271 6,977 3,889 10,866 2,839 3,115 5, Secondary education affairs and services 145,276 26,879 1,138,879 2, ,856 1,732 14,680 16, Tertiary education affairs and services 302,705 45,570 2,968, , , , , , , Education services not definable by level 0 17,213 66, ,300 5,246 3,315 6,796 10, Subsidiary services to education Education affairs and services n.e.c. 46,908 8, ,245 57,779 13,450 71,230 60,731 10,512 71, HEALTH AFFAIRS AND SERVICES Hospitals affairs and services 34, ,037 1,291,535 36, , ,667 31, , , Clinics, and medical, dental and paramedical practitioners 179,284 40,939 2,079, ,027 64, , ,287 84, ,167 Public health affairs and services , Medicaments, protheses, medical equipment and appliances or other prescribed health-related products 3, ,978 5, ,398 8, , Applied research and experimental development related to health and medical delivery system health affairs and services n.e.c. 3, ,995 3, ,610 4, , SOCIAL SECURITY AND WELFARE AFFAIRS AND SERVICES Social security affairs and services Welfare affairs and services Social security and welfare affairs n.e.c. 1, ,616 1, ,390 1, ,231 64,940 7, ,473 95,620 12, ,285 92,114 5,804 97,918 3, ,727 1, ,325 1,460 2,855 4,315 HOUSING AND COMMUNITY AMENITY AFFAIRS AND 7.0 SERVICES Housing and community development 5, ,945 8, ,750 7, , Water supply affairs and services 7, ,988 1,875,636 8, , ,652 8, , , Sanitary affairs and services including pollution abatement and control 6,367 2, ,600 7,345 9,365 16,711 4,446 18,872 23, Street lightning affairs and services Housing and community amenity affairs and services n.e.c. 1, ,234 1, ,928 11, , RECREATIONAL, CULTURAL & RELIGIOUS AFFAIRS & SERVICES Recreational, cultural and religious affairs and services 9,715 7,926 17,641 13,434 8,939 22,373 19,996 9,218 29,214 This table continues on the next page 86

109 ...Table No. 26 (continues) 2008/09* 2009/10* 2009/10* Recurrent Development Total Exp. Recurrent Development Total Exp. Recurrent Development Total Exp. 9.0 FUEL AND ENERGY AFFAIRS AND SERVICES Fuel affairs and services 33, , ,948 32, , ,348 36, , , Electricity and other energy sources Fuel and energy affairs and services n.e.c AGRICULTURE, FORESTRY, FISHING AND HUNTING AFFAIRS AND SERVICES Agriculture affairs and services 127,232 55, , , , , , , , Forestry affairs and services 11,681 6,481 18,163 14,754 12,399 27,153 16,420 5,473 21, Fishing and Hunting affairs and services 17,116 8,648 25,764 19,888 17,999 37,887 20,764 13,309 34, Agricultural research and experimental development n.e.c. 14,700 9,751 24,450 14,621 13,133 27,754 12,926 11,351 24,277 Agriculture, forestry, fishing and hunting affairs and services n.e.c. 6, ,535 6, , , MINING, MINERAL,MANUFACTURING AND CONSTRUCTION AFFAIRS AND SERVICES Mining and mineral resources affairs and services, other than fuel 5,544 1,537 7,081 13,590 16,095 29,685 21,121 15,580 36, Manufacturing affairs and services ,200 1, , Construction affairs and services 1,715 1,800 3,514 4,540 3,000 7,540 5,653 3,000 8, Mining, mineral,manufacturing & construction affairs & services n.e.c TRANSPORTATION AND COMMUNICATION AFFAIRS AND SERVICES Road transport affairs and services 166, , , , , Water transport affairs and services Railway affairs and services Air transport affairs and services Pipeline transport and other transport affairs and services Transportation system affairs and services n.e.c. 40,914 3,850 44, , , , , ,967 1,135, Communication affairs and services 11,561 3,580 15,141 14,234 2,100 16,334 11,729 5,582 17, Transportation and communication affairs and services n.e.c. 1, ,295 8,051 25,968 34,019 8,086 10,413 18, OTHER ECONOMIC AFFAIRS AND SERVICES Distribution trade affairs and services including storage and warehouse; hotel and restaurant affairs and services 6,211 3,077 9,288 9,520 4,867 14,387 9,795 7,470 17, Tourism affairs and services 6,074 1,753 7,827 6,127 4,444 10,571 11, , Multipurpose development project affairs and services 194, , , , , , , , , General economic & commercial affairs other than general labour affairs 9,338 13,337 22,675 10,837 2,275 13,112 12,052 2,388 14, General labour affairs and services 3,048 2,934 5,981 4,693 5,010 9,704 4, , Other economic affairs and services n.e.c. 5,461 52,484 57,945 9, , ,067 8, , , OTHERS Public Debt 693, ,748 1,528, ,528,094 1,757, ,757, Financial and Capital Subscription 94,218 4,211 98,429 84,483 12,051 96,534 71,922 10,265 82, Pension and Gratuities GRAND TOTAL 4,817,137 1,704,934 45,508,092 2,368,047 1,357,396 3,725,443 7,790,507 3,819,051 11,609,558 Source: National Bureau of Statistics * Estimates 87

110 CHAPTER 5 MONEY AND FINANCIAL INSTITUTIONS Money Supply and Domestic Credit 114. In 2009/10, narrow money supply (M1) increased to shs. 4,134.7 billion from shs. 3,149.1 billion in 2008/09, equivalent to an increase of 31.3 percent. The broad money (M2) increased by 26.3 percent from shs. 5,772.5 billion in 2008/09 to shs. 7,288.1 billion in 2009/10. Likewise, extended broad money supply (M3) increased to shs. 9,801.8 billion in 2009/10 from shs. 7,834.1 billion in 2008/09, equivalent to an increase of 25.1 percent. The growth of money supply was attributed to an increase in net foreign assets of commercial banks and the increase in Government borrowing during the period under review By the end of December 2010, broad money supply (M2) grew by 21.8 percent, slightly higher than the target of 20.7 percent during the period. Similarly, extended broad money supply (M3) grew by 25.3 percent compared to the target of 23.5 percent. This trend was due to the increase in foreign currency deposits and appreciation of the US Dollar against Tanzanian shilling Domestic credit increased from shs. 4,771.7 billion in 2008/09 to shs. 6,124.1 billion in 2009/10, equivalent to an increase of 28.3 percent. By the end of December 2010, domestic credit increased to shs. 6,798.5 billion, equivalent to a growth of 32.8 percent as compared to shs. 5,120.2 billion recorded in December This was a result of an increase in credit to the private sector. Commercial Banks Credit to Various Economic Activities 117. By December 2010, commercial banks credit extended to private sector was shs. 6,029.4 billion compared to shs. 4,805.8 billion as of end December 2009, equivalent to an increase of 25.5 percent. The increase was above the target of 19.2 percent during that period owing to enhanced confidence by 88

111 commercial banks lending to the private sector following the global economic recovery. Credits were directed to various economic activities such as: personal loans (23.1 percent); business activities (17.6 percent); manufacturing (13.6 percent); agriculture (12.3 percent); and transportation and communication (9.0 percent) In 2010, the value of Government securities issued was shs. 3,124.3 billion compared to shs. 2,746.5 billion in 2009, equivalent to an increase of 13.8 percent. Likewise, the value of treasury bonds issued in 2010 was shs billion compared to shs billion in 2009, equivalent to an increase of 82.1 percent. The large increase in treasury bonds issued in 2010 was due to increased credit demand by the Government for financing infrastructures projects. Deposits in Commercial Banks 119. In 2010, deposits in commercial banks increased to shs. 9,748.7 billion from shs. 7,852.7 billion in 2009, equivalent to an increase of 24.1 percent. Out of these, private sector contributed shs. 9,049.5 billion, equivalent to 92.8 percent of the total deposits; while the remaining percent was the contribution from the Central Government. The increase was due to improvement of bank services and introduction of new bank products. In addition, the ratio of foreign currency deposits to total deposits increased to 30.0 percent from 27.5 percent in The increase was due to appreciation of US Dollar against other major currencies. Trends in Interest Rates 120. The overall lending rate of commercial banks declined to percent in December 2010 from percent December The average lending rate on short-term loans (up to one year) decreased from percent in December 2009 to percent December Likewise, the overall time deposit rate declined from 6.36 percent in December 2009 to 5.11 percent December Similarly, the average time deposit rate (12 months) decreased to 7.09 percent in December 2010 from 8.99 December Due 89

112 to this trend, the interest rates spread (up to one year) broadened from 4.97 December 2009 to 5.31 percent in December Parastatal Pension Fund (PPF) 121. In 2010, members of Parastatal Pension Fund increased to 160,068 from 132,878 members in 2009, equivalent to an increase of 20.5 percent. The increase was attributed to continued efforts by the Fund to register new members from the private sector. Collections from members increased to shs. 146,943.6 million in 2010 from shs. 126,963.5 million in 2009, equivalent to an increase of 15.7 percent. In addition, the Fund paid members benefits worth shs. 63,527.8 million compared to shs. 47, million in 2009, equivalent to an increase of 34.6 percent. Benefits to members increased due to: an increase in minimum pensionable rate from shs. 21,000 to shs. 50,000 per month; pension increment to retired workers and increase in retired members by age and others by terminating their jobs The assets value of the Fund in 2010 increased by 17.1 percent to shs. 731,421.7 million from shs. 624,850 million in Likewise, the Fund s investments in Government securities increased from shs. 86,875.4 million in 2009 to shs. 117, million in 2010, equivalent to an increase of 34.8 percent. However, income from investment decreased by 10.5 percent from shs. 67,079.3 million in 2009 to shs. 60,047.8 million in This was a result of global financial crisis which affected interest rates structure of commercial banks, Government securities and new investments. Public Service Pension Fund (PSPF) 123. In 2009/10, members of Public Service Pension Fund were 298,046 compared to 285,329 in 2008/09, equivalent to an increase of 4.6 percent. The Fund s collection from investments decreased to shs. 400,164.4 million in 2009/10 from shs. 408,836.5 million in 2008/09, equivalent to a decrease of 2.1 percent. However, during that period, returns from investment income increased to shs billion from shs billion in 2008/09, equivalent to an increase of 13.2 percent. Up to June 2010, the value of the Fund was shs. 90

113 732,111 million compared to shs. 715, million in June 2009, equivalent to an increase of 2.3 percent In 2009/10, benefits paid to members increased to shs billion from shs billion in 2008/09, equivalent to an increase of 92.6 percent. This was attributed to the enhancement of civil servants salaries, leading to increased benefits paid to members and increase in number of retired workers In 2009/10, investment in Government securities decreased to shs. 7,584 million from shs. 141,516 million in 2008/09, equivalent to a decrease of 94.6 percent. This was due to a decrease in returns from interest rate paid in Government securities. National Social Security Fund (NSSF) 126. In 2009/10, National Social Security Fund registered 506,218 members compared to 475,993 members registered in 2008/09, equivalent to an increase of 6.35 percent. Contribution from members amounted to shs. 295, million in 2009/10 compared to shs. 253, million collected in 2008/09, equivalent to an increase of 16.8 percent. This increase was due to the registration of 89,255 new members and timely submission of member s contribution by 1,755 new employers In 2009/10, benefits paid to members amounted to shs. 111, million compared to shs. 84, million in 2008/09, equivalent to an increase of 31.9 percent. However, members who benefited from the Fund decreased to 138,999 in 2009/10 from 207,860 members in 2008/ Total value of investment increased from shs. 847,486.6 million in 2008/09 to shs. 1,029,206.2 million in 2009/10, equivalent to an increase of 21.4 percent. Likewise, the value of investment in Government securities increased from shs. 158,838.5 million in 2008/09 to shs. 185,316.8 million in 2009/10, equivalent to an increase of 16.7 percent. Further, the total investment income increased to shs. 73,920.0 million in 2009/10 from shs. 45,606.0 million in 2008/09, equivalent to an increase of 62.1 percent. The increase was attributed to the increase in various activities in capital 91

114 investments such as real estate, long term loan, fixed deposits and Government securities The value of net assets of the Fund increased to shs. 1,129,179.9 million in 2009/10 compared to shs. 921,192.8 million in 2008/09. In addition, the value of the total asset amounted to shs. 1,198,201.0 million in 2009/10 compared to shs. 969,835.0 million in 2008/09, equivalent to an increase of 23.6 percent. Government Employees Provident Fund (GEPF) 130. In 2009/10, members of Government Employees Provident Fund increased to 35,279 from 30,227 members in 2008/09, equivalent to an increase of 16.7 percent. In addition, the benefits offered to the members increased from shs. 1,575.7 million in 2008/09 to shs. 3,323.7 million in 2009/10, equivalent to an increase of percent The total value of Funds investments increased from shs. 64,935.8 million in 2008/09 to shs. 81,673.5 million in 2009/10, equivalent to an increase of 25.8 percent. In addition, income earned from those investments increased to shs. 7,693.6 million in 2009/10 from shs. 5,475.1 million in 2008/09, equivalent to an increase of 40.0 percent. Table No. 5.1: GEPF Investments Portfolio Structure (Shs. Millions) Type of Investment 2005/ / / / /10 % Change Treasury Bills 9, , , , , % Treasury Bonds 7, , , , , % Government Stocks % Fixed Deposits Equity/shares Corporate Bonds 4, , , , , % , , , , % 1, , , , % Loans - 2, , , % UTT 1, % Real Estate % 24, , , , , % Total Source: Government Employees Provident Fund 92

115 Table No. 5.2: Income from Investments 2005/ /2010 (Shs. Millions) % Portfolio 2005/ / / / /10 Change Treasury Bills , , % Treasury Bonds , , , % Government Stocks Fixed deposits , , , % Dividends/C. Gain % Corporate Bond % UTT Loan Interest % Rent Total 2, , , , , % Source: Government Employees Provident Fund National Health Insurance Fund (NHIF) 132. The number of members of the National Health Insurance Fund increased to 373,326 in 2009/10 compared to 332,650 members in 2008/09, equivalent to an increase of 12.2 percent. This was due to an increase in new Government employees and amendment of the NHIF Act which incorporated other groups like students, religious and councils. Similarly, contribution from members increased from shs. 79,388.5 million in 2008/09 to shs. 96,618.8 million in 2009/10, equivalent to an increase of 21.7 percent. These contributions were due to increase in salaries of Government employees as well as members of the Fund By June 2010, the Fund registered 5,576 health facilities, compared to 4,493 in June Out of those, 4,652 facilities equivalent to 83.4 percent are Government owned; 658 facilities equivalent to 11.8 percent are faith based owned; and 266 facilities equivalent to 4.8 percent are privately owned In 2010, the Fund continued to offer several benefits such as: consultation and registration fees; out-patient care services; in-patient care services; surgical services and diagnostic tests. The Fund also provided dental 93

116 services; and optical services including eye reflection test and provision of reading glasses In 2009/10, the Fund paid benefits worth shs. 25,154.1 million out of the claimed amount of shs. 27,825.3 million, compared to shs. 16,359.0 million paid in 2008/09 out of the claimed amount of shs. 17,781.6 million, equivalent to an increase of 53.8 percent of the paid amount. This was a result of increase in number of members who use NHIF identity cards In 2009/10, investment income increased to shs. 17,115.7 million from shs. 16,359.0 million in 2008/09, equivalent to an increase of 4.6 percent. Income from other sources decreased from shs million in 2008/09 to shs million in 2009/10, equivalent to a decrease of 25.1 percent. Local Authorities Pensions Fund (LAPF) 137. In 2009/10, members of Local Authorities Pension Fund increased to 73,833 from 66,394 in 2008/09, equivalent to an increase of 11.2 percent. The Fund collection from members was shs. 54,235.9 million in 2009/10 compared to shs. 47,048.5 million collected in 2008/09, equivalent to an increase of 16.8 percent. This was attributed to increase in the registration of new members. Similarly, benefits paid to members in 2009/10 amounted shs. 22,507.9 million compared to shs. 14,892.4 million in 2008/09, equivalent to an increase of 51.1 percent. Further, in 2010, the Fund introduced two new benefits namely maternity benefits and funeral grants, hence making a total of six benefits offered by the Fund Total value of investment increased from shs. 209,698.4 million in 2008/09 to shs. 265,567.2 million in 2009/10, equivalent to an increase of 26.6 percent. The value of investments in Government securities increased from shs. 104,767.6 million in 2008/09 to shs. 133,487.0 million in 2009/10, equivalent to an increase of 27.4 percent In 2009/10, total investment income increased to shs. 26,648.9 million from shs. 20,911.7 million in 2008/09, equivalent to an increase of

117 percent. This was a result of increase in investments in equity, corporate bonds, real estate, long term loans and Government securities. Similarly, the value of net assets of the Fund was shs. 361,959.4 million in 2009/10 compared to shs. 271,478.8 million in 2008/09, equivalent to an increase of 33.3 percent. Tanzania Insurance Regulatory Authority (TIRA) 140. In 2010, total registered insurance companies were 25 compared to 24 companies in Out of those, 19 companies were registered to provide general insurance services only, 2 companies provides life insurance services only and 4 companies provides general insurance and life insurance services. In addition, the overall insurance market earnings in 2010 grew by 18.4 percent to shs billion compared to shs billion in General insurance services accounted for 89.3 percent of those market earnings while life insurance services contributed 10.7 percent. Table No. 5.3: Insurance Market Performance General Insurance (Shs. Millions) , , , , ,947 Growth% 16% 22.5% 17.4% 21.5% 17.2% Overall Contribution (%) Life Insurance (Shs. Millions) 91.3% 88.2% 86.2% 90.6% 89.3% 10,014 18,149 26,338 21,678 30,273 Growth % 9.0% 44.8% 31.1% -21.5% 28.4% Overall Contribution (%) Total Earnings (Shs. Millions) 8.7% 11.8% 13.8% 9.4% 10.7% 115, , , , ,220 Growth % 15.1% 25.2% 19.3% 17.5% 18.4% Source: Tanzania Insurance Regulatory Authority 141. Total assets value of insurance companies in 2010 increased to shs billion from shs billion in 2009, equivalent to an increase of 13.2 percent. On the other hand, total liabilities of insurance companies increased to shs billion in 2010 compared to shs billion in

118 Table No. 5.4: Assets Value and Liabilities of Insurance Companies Assets and Liabilities Total Assets (Shs. Millions) 183, , , , ,187 Growth (%) Total Liabilities (Shs. Millions) 111, , , , ,223 Growth (%) Balance (Shs. Millions) 72,350 79,377 87, , ,960 Growth (%) Source: Tanzania Insurance Regulatory Authority Dar es Salaam Stock Exchange (DSE) 142. In 2010, market capitalization at Dar es Salaam Stock Exchange decreased to shs. 4,895.5 billion from shs. 5,013.2 billion in 2009, equivalent to a decrease of 2.4 percent. The decrease was due to falling price of NMB, CRDB and Kenya Airways securities. However, during the period ending December 2010, a total of million shares worth shs billion were traded in DSE compared to million shares worth shs billion in December 2009, equivalent to a decrease of 26.1 percent in value of traded shares and 57.3 percent of total traded shares. Nevertheless, in the similar period, the stock market price index decreased from 1, in 2009 to 1, in 2010, equivalent to a decrease of 6.1 percent The value of listed Government bonds in 2010 at the DSE was shs. 1, billion compared to shs billion in 2009, equivalent to an increase of 67.2 percent. Nevertheless, the value of traded treasury bonds in Dar es Salaam Stock Exchange increased to shs billion in 2010 from shs billion in 2009, equivalent to an increase of 47.6 percent. This was a result of an increased awareness as well as motivation to the public regarding stock exchange markets, securities and investments. Likewise, in 2009/10, profits from trading activities of DSE increased to shs million from shs million in 2008/09, equivalent to an increase of 47.5 percent. 96

119 Table No. 5.5: Stock Exchange Market Performance in 2010 Market Criteria Total shares offered in the Market % Change 6,981,012,160 6,981,012, % Value of traded shares (Shs. Billion) 48, , % Value of all listed shares (Shs. Billion) 5, , % Number of traded shares 121,065, ,387, % Number of deals 21,149 11, % All share Index 1, , % Tanzania Postal Bank 144. In 2010, the number of new customers who joined the Bank were 57,505 which made the total of 582,774 customers compared to 525,269 customers in 2009, equivalent to an increase of 10.9 percent. Similarly, customers deposits held by Tanzania Postal Bank increased to shs. 107,797 million from shs. 88,331 million in 2009, equivalent to an increase of 22.0 percent. This was due to deposits increase strategy of the bank including market expansion campaigns as well as improved services provision by using ATMs In 2010, the Bank continued to invest its assets in other commercial banks; Stocks and Government stocks; and private bonds. Up to December 2010, value of investments increased to shs. 112,464 million compared to shs. 86,572 million in December 2009, equivalent to an increase of 29.9 percent. Investments in treasury bonds increased to shs. 25,229 million in 2010 from shs. 21,229 million in 2009, equivalent to an increase of 19.8 percent. Total value of loans issued was shs. 64,790 million in 2010 compared to shs. 37,069 million in 2009, equivalent to an increase of 74.8 percent. However, the number of credit borrowers increased from 27,899 to 30,564 borrowers during 97

120 that period. The distribution of loans shows that large share were consumer loans (90.7 percent) as depicted in the table below. Table No Tanzania Postal Bank Loans Distribution (Shilling Million) Contributions Type of Loans (%) Business loans 2, , Consumer loans 33, , Micro loans 1, , Government Empowerment loans Total 37, , Source: Tanzania Postal Bank 146. In 2010, the gross income of the Bank from interests and other sources were shs. 20,122 million compared to shs. 17,887 million in 2009, equivalent to an increase of 12.5 percent. The increase was a result of credits growth created by the Bank. Similarly, Bank s profit before tax increased to shs. 955 million from shs. 897 million in 2009, equivalent to an increase of 6.5 percent. 98

121 Table No. 27 MONETARY SURVEY - TANZANIA MAINLAND Shs. million For the period ended June Change Amount % Base Money (M0)* % Narrow Money (M1) % Time and Saving Deposits % Broad Money (M2) % Foreign Currency Deposits % Extended Broad Money (M3) % Net Foreign Assets % Net Domestic Assets % Net Domestic Credit % Net Claims on Government % Net Claims on non-government sector % Net other items % Source: Bank of Tanzania * Currency in circultion outside banks 99

122 Table No. 28 GROWTH OF MONEY SUPPLY AND DOMESTIC CREDIT - TANZANIA MAINLAND For the period ended June Base Money (M0)* 14.5% 10.3% 24.6% 24.5% 16.2% 22.6% 98.6% 28.8% 25.8% Narrow Money (M1) 18.0% 20.3% 20.9% 28.9% 18.4% 19.9% 67.7% 21.0% 31.3% Time and Saving Deposits 27.0% 11.5% 16.0% 25.0% 46.5% 20.6% 35.2% 31.1% 20.2% Broad Money (M2) 21.3% 16.9% 19.1% 27.5% 28.4% 20.2% 52.9% 24.7% 26.3% Foreign Currency Deposits 24.2% 39.4% 15.4% 20.5% 52.1% 21.8% 6.9% 17.5% 21.9% Extended Broad Money (M3) 22.1% 22.7% 18.0% 25.5% 34.9% 20.7% 38.5% 22.9% 25.1% Net Foreign Assets 29.2% 44.7% 14.0% 6.8% 27.9% 16.1% 7.2% 15.7% 25.5% Net Domestic Assets 59.1% -55.4% 40.1% 110.6% 51.1% 29.8% 54.1% 23.0% 23.6% Net Domestic Credit 5.8% 25.3% 30.9% 33.9% 62.2% 14.2% 21.5% 41.0% 28.3% Net Claims on Government -24.6% -1.6% -21.1% 80.6% 156.3% -38.3% % % % Net Claims on non-government sector 27.4% 36.6% 46.7% 26.2% 40.2% 36.6% 51.4% 33.2% 14.7% Other items net % % 25.1% -21.1% 83.3% -10.4% -52.7% 174.6% 44.0% Source: Bank of Tanzania * Currency in circulation outside banks TRENDS OF EXCHANGE RATES OF THE TANZANIA SHILLING AGAINST THE US DOLLAR Table No / / / / / / / / / /10 Shs/US Dollar, end of period Shs/US Dollar, average for the year Nominal change, end of year (%) 4.1% 12.1% 7.8% 8.6% 3.1% 5.4% 7.1% -6.6% 11.0% 1.4% Source: Bank of Tanzania 100

123 COMMERCIAL BANKS LENDING BY ECONOMIC ACTIVITIES Table No. 30 Type of Activity For the period endend December (Shs. Million) Contribution Growth (%) (%) Public Sector Agricultural production 298, , , , Fishing 18, , , , Forest 6, , , , Hunting 4, Financial intermediaries 92, , , , Mining and Quarrying 41, , , , Manufacturing 559, , , , Building and Construction 104, , , , Real estate 49, , , , Leasing , , , Transport and Communication 208, , , , Trade 511, , , ,060, Tourism 15, , , , Hotels and Restaurants 112, , , , Warehouses and Preservation 16, , , Electricity 117, , , , Gas 12, , , , Water 1, , , , Education 33, , , , Health 10, , , , Other Services 253, , , , Personal 508, , ,063, ,393, Total 2,976, ,376, ,805, ,029, Government Securities 1,211, ,049, ,127, ,429, Source: Bank of Tanzania 101

124 Table No. 31 TREND OF COMMERCIAL BANKS DEPOSITS For the period ended June Shs. million Change 2009/10 Type of Deposit Amount % Demand Deposits Time and Saving Deposits Foreign Currency Deposits Total Table No. 32 Type AVERAGE NOMINAL INTEREST RATE For the period ended June End Dec Discount rate Deposit Rates Savings Deposits Fixed Deposits Lending Rates Short-term Long and Medium term Treasury Bills Rate 91 days days days Source: Bank of Tazania 102

125 CHAPTER 6 HUMAN RESOURCES Population and Development 147. The population of Tanzania in 2010 was estimated at 43,187,823. Out of those, 21,935,400 were females, equivalent to 50.8 percent, while 21,252,423, equivalent to 49.2 percent were males. Tanzania mainland had an estimated population of 41,914,311, equivalent to 97.1 percent of the total population, while Tanzania Zanzibar had an estimated population of 1,273,512, equivalent to 2.9 percent of the total population. The population distribution showed that 31,809,808 people, equivalent to 73.7 percent of the total population live in rural areas, while 11,378,015 people equivalent to 26.3 percent live in urban areas. These estimates based on the population growth rate of 2.9 percent per annum of the Population and Housing Census of The analysis of population of Tanzania in 2010 indicates that 44.4 percent of the total population compose of young people aged below 15 years. The population aged below five years were 7,798,254, equivalent to 18.1 percent of the total population. Out of them, 3,932,089 were males and females were 3,866,165. The population aged 5-14 years was 11,366,854, equivalent to 26.3 percent of the total population. Out of them, 5,700,541 were males and females were 5,666,403. Population aged years was estimated at 8,580,351, equivalent to 19.9 percent of the total population. Out of them, 4,279,696 were females and 4,300,655 were males. Population aged years was estimated at 14,080,929, equivalent to 32.6 percent of the total population. The population aged between years, which constitute the active labour force population, was estimated at 22,661,280, equivalent to 52.5 percent of the total population. Out of them, 11,684,533 were females and 10,976,747 were males. Population aged 65 years and above was 1,361,435, equivalent to 3.2 percent of the total population, in which 718,299 were females and 643,136 were males. 103

126 Table No. 6.1: Population Distribution by Age Group Age Males Females Total Percent < 5 3,932,089 3,866,165 7,798, % ,700,451 5,666,403 11,366, % ,300,655 4,279,696 8,580, % ,676,092 7,404,837 14,080, % , ,299 1,361, % Grand Total 21,252,423 21,935,400 43,187, ,976,747 11,684,533 22,661, % Source: National Bureau of Statistics 149. According to 2010 population estimates, Tanzania population density was 49 people per square kilometre. Population density in Tanzania Mainland and Tanzania Zanzibar was 47 people and 518 people per square kilometre, respectively. The population distribution shows that the region with the highest population density was Dar es Salaam with 2,238 people per square kilometre, followed by Mwanza with 181, Kilimanjaro with 123, and Mara with 84 people per square kilometre. The region with the lowest population density was Lindi, with 14 people per square kilometre followed by Ruvuma and Rukwa regions with 22 people per square kilometre each. In Tanzania Zanzibar, all regions had a higher population density, ranging from 132 to 2,101 people per square kilometre In 2010, the regional population distribution shows that Shinyanga continued to have higher population of 3,841,788 equivalent to 8.9 percent of the total population, followed by Mwanza 3,566,263 (8.3 percent) and Dar es Salaam 3,118,132 (7.2 percent). The higher population in Shinyanga was mainly due to high fertility rate of 7.3 children per woman. In 2010, Lindi region had a population of 923,607 people which was the lowest population in Tanzania Mainland. In Tanzania Zanzibar, the region with highest population was Mjini Magharibi (483,205), while the lowest population was Kusini Unguja (112,612). The lowest population in Lindi and Kusini Unguja regions was caused by emigration to other regions. 104

127 151. In 2010, live births estimated at 1,678,325, while deaths were estimated at 573,213. The crude birth rate was estimated at 38.1 children per 1,000 people, while the mortality rate was estimated at 13.5 per 1,000 people. The total fertility rate in Tanzania was estimated at 5.4 children per woman. The infant mortality rate was estimated at 51.0 per 1,000 live births, while under-five mortality rate was estimated at 81.0 per 1,000 live births. Labour Force and Employment 152. According to the Integrated Labour Force Survey (ILFS) of 2006, active labour force was estimated at 18.8 million people, whereby 9.7 million were females and 9.0 million were males. The Survey also revealed that 16.6 million people were employed and 2.2 million were unemployed, equivalent to 11.7 percent of the total labour force in the country. Out of the employed, 8.5 million were females and 8.0 million were males. The unemployed males were 967,847 and females were 1,226,545. Nevertheless, according to the Population and Housing Census of 2002, active labour force population (15 64 years) was projected at 22,661,280 people in Agriculture sector remained the leading employer, whereby more than 70 percent of the people employed were engaged in agriculture In 2010, Tanzania Employment Services Agency (TaESA) provided employment services to 6,645 customers. Out of them, males were 4,398, equivalent to 66.2 percent and females were 2,247, equivalent to 33.8 percent. Moreover, the Agency provided services to job seekers by improving their curriculum vitae and enhances their entrepreneur skills. TaESA also conducted trainings on job search and interviews techniques, labour market information and advice on issues relating to employment services. Likewise, in ensuring the standards and quality of employment services provision in Tanzania, TaESA managed to register 14 private agencies and recognized other 20 agencies. 105

128 REGIONAL DISTRIBUTION OF TANZANIA POPULATION ( ) Table No. 33 Region * 2010** Dodoma 1,786,073 1,896,786 1,951,071 2,004,544 2,058,630 2,111,764 Arusha 1,427,904 1,475,489 1,522,975 1,570,394 1,617,728 1,664,780 Kilimanjaro 1,435,847 1,503,014 1,535,975 1,569,212 1,602,530 1,635,870 Tanga 1,716,271 1,753,284 1,837,661 1,880,389 1,923,468 1,966,908 Morogoro 1,881,113 1,929,087 1,975,160 2,021,713 2,068,426 2,115,275 Pwani 944, , ,586 1,014,968 1,038,654 1,062,574 Dar es Salaam 2,799,241 2,801,675 2,881,548 2,961,150 3,040,118 3,118,132 Lindi 816, , , , , ,607 Mtwara 1,176,112 1,220,248 1,246,089 1,271,912 1,297,751 1,323,568 Ruvuma 1,192,680 1,235,161 1,268,738 1,303,330 1,338,800 1,375,017 Iringa 1,553,392 1,617,696 1,649,200 1,679,828 1,709,225 1,737,382 Mbeya 2,201,206 2,346,388 2,423,635 2,502,258 2,581,792 2,662,156 Singida 1,150,367 1,222,810 1,258,545 1,294,584 1,330,931 1,367,481 Tabora 1,887,507 2,004,115 2,086,048 2,170,926 2,258,664 2,349,374 Rukwa 1,251,697 1,302,278 1,349,579 1,398,866 1,450,118 1,503,184 Kigoma 1,910,592 1,970,750 1,601,020 1,669,078 1,740,111 1,814,158 Shinyanga 3,060,176 3,277,784 3,411,023 3,549,342 3,692,941 3,841,787 Kagera 2,206,814 2,210,217 2,293,093 2,379,637 2,469,904 2,563,870 Mwanza 3,196,714 3,168,904 3,265,729 3,364,378 3,464,566 3,566,263 Mara 1,461,270 1,572,068 1,631,031 1,692,449 1,756,442 1,822,866 Manyara 1,141,376 1,198,051 1,241,994 1,288,280 1,337,015 1,388,295 Tanzania Mainland 36,197,312 37,526,206 38,291,222 39,474,672 40,683,294 41,914,311 Kaskazini Unguja 146, , , , , ,095 Kusini Unguja 99, , , , , ,612 Mjini Magharibi 441, , , , , ,205 Kaskazini Pemba 196, , , , , ,999 Kusini Pemba 186, , , , , ,601 Zanzibar 1,070,217 1,143,538 1,154,777 1,193,054 1,232,505 1,273,512 Tanzania 37,267,529 38,669,744 39,445,999 40,667,726 41,915,799 43,187,823 Source: Ministry Finance and Economic Affairs * Data from the Population Census 2002 ** Projections based on the Population Census

129 107

130 CHAPTER 7 PRIVATE SECTOR DEVELOPMENT Investment in the Country 154. In 2010, a total of 509 projects worth shilling 7,092, million with employment potential of 43,640 were registered compared to 572 projects worth shilling 2,970,730.1 million with 56,615 employment opportunities in Out of the total registered projects, 438 were new while 71 projects were for rehabilitation and expansion. By ownership category, 242 projects were owned by domestic investors, 160 projects by foreign investors while the remaining 139 projects were joint ventures In 2010, the manufacturing sector attracted the largest number of investors with 183 projects worth shilling 705, million with employment potentials of 14,327 people was registered. Investment distribution in other sectors was as follows: Tourism sector 103 projects, worth shilling 417, million with employment potential of 5,452; Commercial buildings 92 projects, worth shilling 1,925, million with employment potential of 5,078; Transport sector 62 projects, worth shilling 436, million with employment potential of 7,197; Agriculture 23 projects, worth shilling 663, million with employment potential of 5,169; Human resources 8 projects, worth shilling 6,076.6 million with 412 employment potential; Services 19 projects, worth shilling 213, million with 4,717 employment potentials; Financial institutions 4 projects, worth 2,294.6 million with employment potential of 86; Economic infrastructure 1 project, worth shilling 6, million with 22 employment potential; Communication 5 projects, worth shilling 260, million with employment potential of 529; Broadcasting 4 projects, worth shilling 158, million with 463 employment potentials ; Computer 1 project, worth shilling 1, million with 43 employment potential and the Natural resources sector 1 project, worth shilling 4, with 100 employment potential. 108

131 The Regional Distribution of Projects 156. In 2010, Dar es Salaam was the largest recipient of investments projects with 321 registered projects followed by Arusha with 55 registered projects. In other regions the investment level was as follows: Coast 28; Mwanza 20; Tanga 12; Morogoro 11; Iringa 9; Kilimanjaro, Mbeya and Dodoma 6 projects each; Mara 5 projects, Shinyanga, Mtwara, Ruvuma and Lindi 4 projects each; Kigoma, Kagera and Manyara 3 projects each; Tabora and Singida 2 projects each and Rukwa which registered one project In 2010, a total of 11,098 applications were handled by Tanzania Investment Centres (TIC) compared to 12,703 applications in The description of various applications at TIC has been shown in table No Table No. 7.1: Services Provided by Tanzania Investment Centre. Service Immigration: Grade A Grade B 2,578 2,386 Employment 3,473 3,284 Company Registration Business Licences Land 2,191 1,677 Tax 3,968 3,351 Total 12,703 11,098 Source: Tanzania Investment Centre 158. In 2010, the value of Foreign Direct Investment was estimated to be USD million, compared to USD million in 2009, equivalent to an increase of 2.7 percent. 109

132 Table No. 7.2: Foreign Direct Investment Year Value of FDI (In USD million) * Source: Bank of Tanzania *Estimates The Improvement of Business Environment 159. In 2010, the government approved Public Private Partnership Act and the National Public Private Partnership Policy. The objective of the new Act and Policy is to put in place the excellent legal framework to evaluate the involvement of private sector in project investments, and in partnership with the Public sector. Similarly, the Government through a number of reform programs such as Legal Sector Reform Program (LSRP), Public Sector Reform (PSRP), Public Finance Management Reform Program (PFMRP), Local Government Sector Reform (LGRP), and Business Environment Strengthening for Tanzania (BEST) maintained her efforts to lessen bureaucratic inconveniences as a way of economizing the time for doing business. On the other hand, Tanzania was ranked 131 st on ease of doing business out of 183 countries according to the World Bank report compared to the 127 th position in In 2010, the Government officially approved the implementation of a program for Improvement of Enabling Environment for Investment and Business. The program has identified key responsibilities to be implemented in consonance with 10 indicators. These indicators are: Starting a Business, 110

133 Closing a Business, Dealing with Construction Permits, Registering Property, Employing workers, Paying Taxes, Trading across Borders, Getting Credit, Enforcing Contracts and Protecting Investors. Through this initiative, a number of successes have been identified such as: simplifying the verification of the business name via the BRELA website ( without writing a letter as it used to be; the availability of a sample of Memorandum and Article of Association online to help minimize business registration costs; and the commencement of business registration in consonance with One Stop Centre dictum In improving the transport business environment, in 2010 the Government ratified an agreement to improve the transport system project in trunk roads. The objective of this agreement is to identify and trim down the permanent road blocks. Currently, an initiative to remove the temporary road blocks while preserving permanent blocks in weigh bridge stations has been done from Dar es Salaam to Rusumo where a total of 15 road blocks will remain unchanged. ECONOMIC EMPOWERMENT Mwananchi Empowerment Fund 162. As of end-december 2010, the government through Mwananchi Empowerment Fund extended soft loans amounting to shillings 4.6 billion to entrepreneurs compared to shillings 3.4 billion in 2009, equivalent to an increase of 35.3 percent. The loans were extended to 30 Savings and Credit Cooperatives (SACCOS) in Mtwara, Lindi, Manyara, Singida and Rukwa regions. Such loans enabled the entrepreneurs to acquire farm implements such as power tillers and thus expand their production units as well as improving their income. As of end - December 2010, a total of shillings 4.3 billion had been repaid, equivalent to 94 percent of the borrowed amount. 111

134 Access to Credit 163. Implementation of the Economic Empowerment and Employment Creation Program continued in 2010 through CRDB and NMB banks and 12 other accredited financial institutions. In 2010, loans amounting to shillings billion were extended to 72,197 entrepreneurs. Out of these, 45,858 were men, equivalent to 64 percent while 26,339 were women equivalent to 36 percent. As of end December 2010, a total of shillings 36.1 billion equivalent to 76.6 percent of the borrowed amount had been repaid In 2010, the government through Small Entrepreneurs Loan Facility (SELF) project extended loans worth shillings 8.7 billion. Loan repayment during the same period totalled shillings 6.1 billion, equivalent to 70.1 percent of the borrowed amount. Beneficiaries of this Facility were 8,631 low income earners in urban and rural areas, out of which 5,092 were women, equivalent to 59 percent while 3,539 were men equivalent to 41 percent. 112

135 SECTOR D'SALAAM MWANZA MOROGORO ARUSHA K/NJARO TANGA MBEYA DODOMA S'NYANGA TABORA KIGOMA KAGERA RUKWA MTWARA LINDI RUVUMA COAST MARA SINGIDA Manyara TOTAL Table Na. 7.1 TANZANIA INVESTMENT CENTRE (TIC) THE REGIONAL DISTRIBUTION OF PROJECT IN 2010 Agriculture and Livestock Natural Resources Tourism Manufacturing Petroleum Products and Mining Construction Transport Services Computer Financial Communication Human Resource Energy Economic Infrastructure Broadcasting TOTAL Source: Tanzania Investment Centre (TIC) 113

136 Table No. 34: Sector TANZANIA INVESTMENT CENTRE (TIC): APPROVED PROJECTS IN 2010 Total number of approved projects New projects Old projects (expansion and rehabilitati on) Local projects Foreign projects Joint projects Total employm ent Total investment (Shs. million) Agriculture and Livestock ,710.6 Natural Resources ,494.0 Tourism ,083.9 Manufacturing ,299.1 Petroleum Products and Mining Construction ,925,186.1 Transport ,513.1 Services ,127.6 Computer ,218.0 Financial ,294.6 Communication ,008.0 Energy ,277,800.0 Human Resource ,921.6 Economic Infrastructure ,076.0 Broadcasting ,886.0 TOTAL ,092,618.7 Source: Tanzania Investment Centre (TIC) 114

137 CHAPTER 8 CROSS CUTTING ISSUES HIV/AIDS 165. In 2010, the Government continued with the implementation of National Aids Control Program by providing trainings on treatment and care to people living with HIV and AIDS as well as counselling and HIV testing services. The Government continued to improve those services by ensuring that antiretroviral drugs are available in health care centers. In addition, during the period services were expanded from 110 councils in 2009 to 133 councils in The number of people living with HIV and AIDS and accessing antiretroviral drugs increased by 10.3 percent from 284,227 in 2009 to 313,384 in Out of those, children under 15 years were 28,309 and adults above 15 years were 285, In 2010, the HIV counselling and testing centers increased by 24.5 percent from 1,743 in 2009 to 2,170 centers. Training was provided to 300 additional HIV/AIDS counsellors and thus making a total of 5,365 counsellors nationwide. As of end December 2010, a total of 8,890,207 people were counselled, tested for HIV/AIDS and availed the results. Environment 167. In 2010, the Government continued to implement policies, strategies, laws and environment management regulations (Cap. 191). In 2010, three regulations for the implementation of the Environment Management Act were formulated, making the Act to have a total of 15 regulations, compared to 12 formulated in 2009 out of the 29 required regulations. Furthermore, three environmental management guidelines were prepared. These include: Guideline for the Preparation of Environmental Management for Ministries, Government Agencies and Local Governments; Communications Towers Guideline; and Guidelines to deal with Climatic Change challenges. 115

138 168. In 2010, the Government continued to enforce investors in the country to undertake Environmental Impact Assessment (EIA) before executing their projects. In addition there was an increase of projects evaluated and certified from 160 projects in 2008/09 to 220 projects in 2009/10, equivalent to an increase of 37.5 percent. This was due to increased investors awareness on the need to fulfil the requirement of the Environment Management Act (Cap.191), which among other things requires the investors to adhere to EIA before and after investment. Up to December 2010, a total of 49 experts of EIA and 22 environmental inspectors were registered and gazetted. In addition, 12 EIA consulting companies EIA and 10 environmental inspectors companies were registered In 2010, the Government finalized the National Strategy for Waste Product Management. The strategy identifies the management of eight types of wastes emanating from different activities in urban areas; minerals; agriculture and livestock; health services; plastics; electrical appliances and electronics; petroleum products including crude oil; and industries. Furthermore, the Government finalized the agreement with the Government of the Republic of South Korea on the implementation of waste management project in Dar es Salaam, Mwanza and Arusha cities. Feasibility study on the implementation of the project has been done. The Government continued to enhance the awareness of the public on the importance of separating solid waste to manage environmental pollution. A total of 60 programs on the stakeholders responsibilities on managing waste products were aired through TBC, ITV and STAR TV In 2010, the Government continued to implement various projects and programmes to conserve biodiversity. The programmes include: Lake Tanganyika Conservation Progamme; through this programme the government directed the establishment of Beach Management Units in 10 villages in Kigoma and Rukwa regions aimed at promoting sustainable fishing and Lake Tanganyika valley conservation; The Kihansi Environment Conservation 116

139 Project, whereby the Government continued with the frog breeding project in Bronx and Toledo zoo in America, and by May 2010 there were more than 5,500 frogs in those zoo; Marine and Coastal Environment Management Project (MACEMP), whereby the Government facilitated the preparation and implementation of the action plans for effective management of the coastal environment in 14 councils; and Regional Program for the Sustainable Management of the Coastal zone of the Countries of Indian Ocean (ReCoMap), whereby a total of 16 projects managed by CSOs and NGOs have been sponsored In 2010, the Government continued to address the impact of climatic change by coordinating the implementation of the Kyoto Protocol which aims at reducing the production of carbon dioxide. Further, the Government approved three projects to reduce the green house gases. Those projects were: Hydropower generation projects at River Mwega (Mufindi) and Ruhudgi (Njombe); as well as electricity generation through the use of tree residues and rice husk at Mbeya cement factory. Those projects aimed at generating renewable energy and connecting to the national grid. Good Governance 172. In 2010, the Government continued with its desire to provide rights to the citizens by translating 14 laws from English language to Swahili. Likewise, the Commission for Human Rights and Good Governance continued with its efforts to promote, protect and maintaining human rights and good governance in the society In 2010, the Commission continued to handle people s complaints, whereby a total of 7,858 old and new complaints were handled. Out of those, 1,003 complaints were investigated and completed while 6,855 continued to be investigated compared to 1,746 complaints received in 2009, whereby 657 complains were investigated and completed. 117

140 174. In 2010, the Court of Appeal received 2,624 cases, out of which 627 cases were completed and 1,997 cases continued to be handled, compared to 18,805 cases in 2009 whereby 9,590 cases were completed. In addition, 62,154 cases were filed in the District and Resident Magistrate Courts. Out of those, 46,977 cases were heard and 15,177 cases were still in the process of being heard compared to 61,237 cases filed in 2009, whereby 42,725 cases were finalized. Likewise, in Primary Courts, a total of 218,767 cases were reported, whereby 167,228 were filed and 51,939 continued to be handled In 2010, the Government continued to implement the Second Phase of the National Anti-Corruption Strategy and Action Plan (NACSAP II). Towards the implementation of the strategy, the Prevention and Combating of Corruption Bureau (PCCB) received and investigated 870 cases, out of those 587 cases were filed to the court and 64 cases finalized compared to 884 cases investigated in 2009 whereby 463 were filed to court and 46 cases completed In 2010, the Government continued to conduct training on Good Governance, whereby 21 ethics committees and 32 public institutions were trained on good governance and management of National Anti-Corruption Strategy compared to 15 ministerial ethics committees and 25 public institutions. Gender 177. In 2010, a total of 40 participants from different sectors participated in the training on mainstreaming gender to plans, programs and budgets. Those participants included 11 members from Gender Committee of the Ministry of Community Development, Gender and Children, and 29 officers from different Ministries. This number of participants decreased from 175 in 2009 to 40 in 2010 due to budget constraint In 2010, the training on eradication of violence against women, children and albino was conducted. The training involved 40 heads of police posts, and 43 village leaders from Kigoma, Arusha, Dodoma, Tabora and 118

141 Manyara regions. In addition, the same training was conducted to 106 law enforcers in Rorya, Tarime, Bukombe and Kahama districts. Public Safety 179. In 2010, the public safety was generally peaceful despite the existence of sporadic crime and traffic offences. A total of 62,133 criminal offences were reported in all police stations in 2010 compared to 69,134 offences reported in The number of reported offences decreased by 7,001, equivalent to 10.1 percent decrease The road accidents reported in police stations in 2010 were 24,926 compared to 22,019 accidents in 2009, equivalent to an increase of 2,907 accidents or 13.2 percent increase. In addition, a total of 3,687 people died on road accidents while 22,064 people were injured in 2010 compared to 3,851 people died and 18,830 people injured in The number of people who died on road accidents decreased by 4.3 percent while the number of injured people increased by 17.2 percent. High rate of road accidents was due to: reckless driving; high speed by some drivers; poor infrastructure in some parts of the country; defective vehicles; negligence on road safety rules by some road users (pedestrians, motorcyclist and bicycles riders); and drunkenness As of end-december, 2010, the total number of refugees in the country was 109,286 compared to 273,782 refugees in Those refugees came from Burundi (47,350 refugees), Democratic Republic of Congo (60,186), Somalia (1,488) and other countries such as Rwanda, Uganda, Sudan, Ethiopia and Zimbabwe all with a total of 262 refugees. Further, in 2010, a total of 162,256 refugees were granted Tanzania citizenship and 1,092 returned to Burundi In 2010, a total of 628,795 foreigners entered Tanzania compared to 756,363 foreigners in 2009, equivalent to a decrease of 16.9 percent. In addition, 775,310 foreigners returned to their respective countries 119

142 compared to 755,004 foreigners in 2009, equivalent to an increase of 2.7 percent. In 2010, a total of 19,550 residence permits (visas) were granted to foreigners to undertake different economic activities in the country compared to 17, 650 visas granted in 2009, equivalent to an increase of 10.8 percent. 120

143 CHAPTER 9 REVIEW OF THE IMPLEMENTATION OF NATIONAL STRATEGY FOR GROWTH AND REDUCTION OF POVERTY (NSGRP) Introduction 183. The first phase of the implementation of National Strategy for Growth and Reduction of Poverty (NSGRP) ended in The Strategy was implemented for a period of five years from 2005/06 to 2009/10. During its implementation, various stakeholders including MDAs, Non-state actors, private sector and Development Partners participated effectively in the three identified clusters, which are: Growth and Reduction of Income Poverty, Improving Quality of Life and Social Well-being and Good Governance and Accountability. Achievements recorded during the period, challenges and lessons learned were critically analysed in the MKUKUTA Annual Implementation Report (MAIR 2009/10). In addition, following completion of MKUKUTA-I, the Government prepared MKUKUTA-II which was launched in October The design of MKUKUTA- II was based on the challenges and lessons learned during the implementation of MKUKUTA-I in order to improve its implementation. The process of preparing MKUKUTA-II involved a wide range of stakeholders and will be implemented for a period of five years (2010/ /15). Some of the ongoing MKUKUTA-II activities includes: preparations of MKUKUTA Implementation Guide and identifying sectoral Priority Programmes, preparations of MKUKUTA Monitoring Master Plan and the Communication Strategy As 2010 was the ending year for the implementation of MKUKUTA-I, the analysis of various MKUKUTA-I indicators were identified in the three clusters of MKUKUTA for the entire implementation period, as follows: Growth and Reduction of Income Poverty 185. Over the last four years ( ) of MKUKUTA-I implementation, the Tanzanian economy recorded impressive performance despite the adverse impact emanating from soaring of oil prices in the world market, drought 121

144 experienced in many parts of the Country during 2005/06 and 2008/09, and unreliable power supply. The real GDP growth averaged 6.9 percent between 2005 and 2010 and thus was in line with MKUKUTA target of 6-8 percent by Report of the Integrated Labour Force Survey (ILFS) of 2005/06 revealed that employment has been expanding by absorbing 40,000 workforces per annum, whereby about 760,000 people enters the labour market annually. The MKUKUTA target was to reduce unemployment rate from 12.9 percent in 2000/01 to 6.9 percent in The survey undertaken in 2006 revealed that 11 percent of the active labour force was unemployed. Unemployment was high in Dar es Salaam city whereby statistics shows that 31.4 percent of the active labour force in the city was unemployed. In other urban areas, unemployment rate was Likewise, statistics shows that, unemployment rate was higher for women than men in urban areas The Household Budget Surveys (HBS) of 2000/01 and 2007 for Tanzania Mainland showed that Tanzanians who cannot meet basic needs decreased from 35.6 percent in 2000/01 to 33.4 percent in The incidence of poverty in rural areas decreased from 38.7 percent in 2000/01 to 37.4 in In Dar es Salaam city, the incidence of poverty decreased from 17.6 percent in 2000/01 to 16.2 percent in 2007and in other urban areas, the incidence of poverty decreased from 25.8 percent to 24.1 percent during the same period. Generally, the rate of poverty decreased by 2.2 percentage point between 2000/01 and The Poverty and Human Development Report (PHDR) of 2009 showed that there is a close relationship between poverty, economic growth and income inequality. The analysis of the report also revealed that the good performance of the economy since 2000/01 has not been translated significantly into the reduction of income poverty. Increasing income inequality could have been one of the reasons, but income inequalities among Tanzanians have not changed. The analysis of HBS 2000/01 and

145 indicated that income inequality measured by Gini coefficient remained at 35 percent. In Dar es Salaam city, income inequality decreased from 36 percent to 34 percent during the same period. Table 9.1: Trend in Poverty Indicators (Percentage) Indicators Survey Year Country Level DSM Other urban Rural Poverty 2000/ Income Difference Poverty Income Difference Change (2000/ ) Source: PHDR Improving Quality of Life and Social Well-being 189. In the course of improving quality of life and social well-being, the most common applicable indicators are those related to education, health, and water. Information generated by the MKUKUTA Monitoring System indicates that there have been impressive performances in 2009/10 at all level of education including increased gross enrolment rate at pre-primary, primary, Secondary, Vocational and Higher education levels. Achievements were also recorded in maternal and child health as portrayed by the decline in maternal mortality rate as per the Demographic and Health Survey (DHS 2009/10) report. The Malaria Control Strategic Plan has also been successful since the percentage of households owning at least one bed net has increased from 56.3 percent in 2007/08 to 74.7 percent in 2009/10. The number of HIV positive women receiving ARVs and preventing mother to child transmission and the number of people with advanced HIV Infection receiving ARV increased. The proportion of population with access to clean and safe water in both rural and urban areas also increased. The trend of some social indicators is as indicated in table below. 123

146 Table 9.2 Status of quality of life and social well-being indicators Indicators 2005/ Baseline Actual Target Under 5 mortality 1000 live births Infant mortality per 1000 live births Maternal mortality HIV prevalence amongst years old 7.4% 5.7% 5% Net Primary school enrolment 96.1% 95.4% 99% Primary school dropout rate 2.6% Primary pupil/teacher ratio 56:1 51:1 45:1 Proportion of under fives wasted 21.9% 21% Proportion of under fives moderately stunted (height 21.9% 35% 20 for age) Source: MAIR 2009/10 Good Governance and Accountability 190. During the period of MKUKUTA-I implementation, there have been improvement in the management of Government revenues and expenditure.. The Government in collaboration with other stakeholders continued to enhance accountability in its institutions with specific focus on the LGAs. The Decentralization by Devolution policy has enabled the availability of financial resources in LGAs and therefore improved accountability in expenditures. Currently, LGAs are required to post budget reports which include revenues and actual expenditures on easily accessible public notice boards In 2009/10, the Government initiated the National Identity processing system by establishing the National Identity Authority. The Authority is vested with the task of coordinating the system that will eventually issue national ID to all residents. Public education campaigns are going on to create awareness to the citizens about the importance of the National Identity In order to create gender balance in administrative and leadership posts, women in decision making posts increased from 26 percent in 2005 to 31percent in The number of women in decision making posts between 124

147 2005 and 2010 increased as follows: Judges-13 to 34; Ministers - 4 to 7; Permanent Secretaries- 7 to 9; Regional Administrative Secretaries- 4 to 10; District Commissioners- 20 to 25; Council Directors- 14 to 35; and Directors in Ministries and Agencies- 19 to In 2009/10, the Government continued to improve land use management in many aspects. A total of 21,160 plots were surveyed under Business and Property Formalization Programme. Out of the surveyed plots, 17,526 plots were registered in computerized systems in order to issue land title deeds of which, 8,109 title deeds were prepared. Land titling is crucial for dispute resolution, accessing various resources such as credit and enhancing government revenue collection The number of LGAs with unqualified reports increased from 53 councils in 2005/06 to 77 in 2008/09. The observed improvement is attributed to enhanced human resources capacity, particularly accountant professionals, as well as increased use of IFMS and Plan-Rep tools In an effort to strengthen the fight against corruption, a total of 755 new corruption cases were filed in the court of laws between 2005 and Out of those, the Government won 155 cases and recovered shillings 28,827,667,374. Further, the government has filed 19 grand corruption cases since As a way to speed up court case hearing, various initiatives have been undertaken by the Government, including: appointment of more judges, resident magistrates, primary court magistrates, state attorneys, and law secretaries. For instance, the number of judges in the court of appeal increased from 8 judges in 2005 to 21 judges in 2010, and the number of judges in the high court increased from 24 judges in 2005to 68 judges in

148 126

149 CHAPTER 10 EXPANDING FINANCIAL SERVICES TO THE UNBANKED COMMUNITY Introduction 196. The objective of financial inclusion is to ensure timely delivery of financial services to disadvantaged sections of the community at affordable cost. This encompasses the two dimensions of financial inclusion as per United Nations definition of Firstly, financial inclusion refers to a customer having access to a range of formal financial services, from simple ones like credit and savings to more complex ones like insurance and pensions. Secondly, financial inclusion implies that customers have access to more than one provider of financial services so that clients have access to a variety of competitive options. We are taking this aspect of financial inclusion an issue for discussion because; various studies lead us to believe that a well functioning financial system is linked to faster and equitable socio-economic growth. Background 197. Poverty in Africa is a predominantly rural phenomenon, although the urban poor are now perhaps the fastest growing segment of the poor as urbanization has picked up speed without matching growth in job opportunities. Agriculture, informal sector activities and small and medium scale enterprise together present the largest source of livelihood to the majority of our citizens and indeed to the majority of the poor. The growth of these sectors in turn, as widely documented in various studies, and has been constrained by poor access to credit and other financial services. For example, the 2010 Study done by the Overseas Development Initiative (ODI) stated that financial services enables households to invest in activities that are likely to contribute to higher future income and, therefore, to growth. The Study which was conducted in Kenya and Tanzania showed that there is link between access to financial services and household investment in education or a 127

150 business, which can contribute to economic growth. For example, the reason given for borrowing was to invest in education and business in Kenya and Tanzania respectively. In addition, while semi-formal and informal financial services are important and accessible, households in Kenya are more likely to use formal financial services for investment than in Tanzania Alliance for Financial Inclusion Report of 2009 stated that over half of the world's adult population, which is about 2.5 billion people lacks access to formal financial services. About 90 per cent of the 'unbanked' community live in developing countries. The report further states that Greater financial inclusion mechanisms can bring these people into the financial system so that they have the opportunity to access financial services ranging from savings, payments and transfer to credit and insurance. This initiative will have positive effects on economic growth, financial stability and social cohesion Further, the World Bank estimates that across Sub Saharan Africa, only 20 percent of households have accounts with financial institutions compared to about 90 percent in advanced countries. Furthermore, in small firms, only 15 percent of new investments are financed through loans from the bank compared to 30 percent in large firms, limiting their capacity to expand. Many enterprises in Africa complain more about lack of bank loan and limited insurance services than other regions of the world. In Sub Saharan Africa, one branch is catering for the banking needs of more than 50,000 people compared to less than 4,000 people in advanced countries However, these averages mask great disparities across countries in Africa. According to FinScope Africa Brief of 2010, the proportion of the unbanked population in East Africa is highest in Uganda (62 percent), Rwanda 56 percent, Tanzania 52 percent and Kenya only 32 percent. The proportions not served by any financial institution formal or informal is more than 40 percent in most Sub Saharan Africa. The proportion of the population served 128

151 by the informal financial sector in a large number of those countries exceeds that served by the banking sector Over the last two decades, the financial landscape in Sub Saharan Africa has changed rapidly, with the banking system now offering a wider range of services at a greater scale and across a wider area. A number of factors have been responsible to these developments, out of those, three key reasons include: i) Financial sector reforms, which have reduced barriers to entry, improved the capacity of financial institutions to mobilize savings, and promoted greater competition; ii) Technological innovations, which have extended affordable and convenient financial services, particularly to rural populations; and iii) The growth of specialized microfinance institutions, which have used innovative techniques such as group lending to deliver financial services to the poor Though the financial system in Sub Saharan Africa has shown tremendous growth in volume and complexity during the last few decades, there are challenges that sizeable segment of the population, particularly the vulnerable groups, such as low income groups, continue to remain excluded from even the most basic opportunities and services provided by the financial sector. The reasons may vary from country to country and hence the strategy to address this situation could also vary. However, financial inclusion to the low income earners can improve their standards of life and ultimately contribute to economic growth. Financial Sector in Tanzania 203. The financial sector in Tanzania has undergone substantial structural change since the liberalization of the sector in The financial landscape is comprised of mainly banks, pension funds, insurance companies, and other financial intermediaries. However, the sector is dominated by banking 129

152 institutions which account for 75 percent of the total assets of the financial system, followed by pension funds whose assets account for 21 percent and the insurance sector with 2.0 percent of the total assets, while the remaining financial intermediaries hold 2 percent. The figure below indicates composition of the financial system in terms of asset ownership. Figure No. 10.1: Financial Sector Asset-Based Composition June Financial sector assets have expanded rapidly in the past decade from a total of shilling 1,637 billion at end of December 2001 to shilling 10,040 billion in December The growth was attributed to increase in private sector deposits in the banking system Despite the rapid growth in financial assets, the financial system depth remains small and access to finance is limited for both urban and rural population. According to Fin-Scope Survey which was conducted in 2009, the proportion of adult population who use banks and other formal financial institutions was 12.4 percent only representing about two million adults (mostly urban) out of the estimated twenty million adults. Efforts to improve financial literacy in order to enhance financial inclusion and consumer protection are part of the Second Generation of Financial Sector Reforms. The financial literacy programme aims at empowering more individuals to make 130

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