Macroeconomic Policy Development in Tanzania

The document examines Tanzania's transition from socialist policies to a market-determined economy, noting a sustained GDP growth rate of 7% between 2010 and 2019. It analyzes how the COVID-19 pandemic disrupted this growth, causing a decline in tourism and traditional exports, while highlighting that a 'business as usual' approach helped the country avoid a recession in 2020. The paper details fiscal and monetary interventions, such as increasing health spending and lowering discount rates, and recommends further macroprudential policies and social protection to support vulnerable populations and ensure a climate-resilient recovery.

• Tanzania experienced a period of strong economic performance from 2010 to 2019, with a sustained average real gross domestic product growth rate of 7% per annum.
• Tanzania avoided a recession in 2020, which is attributed to sound macroeconomic measures and a government policy of 'business as usual' that avoided lockdowns, except for schools and social activities from March to May 2020.
• The COVID-19 pandemic caused a significant drop in tourism, with international arrivals falling by 59.6% to 616,491 in 2020, leading to a 59.2% decrease in tourism earnings to $1.06 billion.
• Gold export earnings increased by 34% in 2020, reaching $2.95 billion compared to $2.21 billion in 2019, which helped mitigate the balance of payments tension caused by the pandemic.
• The pandemic created an economy-wide liquidity crunch, causing a sharp drop in cash flow for businesses and pushing some solvent but illiquid firms into bankruptcy, particularly micro, small and medium enterprises (MSMEs).
• World Bank simulations based on the 2018 Household Budget Survey suggest that approximately 500,000 Tanzanians, especially vulnerable urban residents relying on informal enterprises, could fall below the poverty line due to the pandemic.
• Tanzania's public debt remains sustainable with low risk of distress, although debt service costs are high, with payments expected to be about 40% of domestic revenue in 2020/21.
• To combat the pandemic's impact, the government increased health spending by at least $8.4 million (TZS 19.3 billion) using Bank of Tanzania contingency reserves.
• The Bank of Tanzania implemented accommodative monetary policies, including reducing the discount rate from 7% to 5% in May 2020 and lowering statutory minimum reserve requirements for banks from 7% to 6%.
• The government introduced climate resilience measures by exempting value added tax (VAT) on agricultural crop insurance to help farmers cope with droughts and floods.

APA

Mashindano, O. J., & Kazi, V. (n.d.). Macroeconomic Policy Development in Tanzania. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2021/10/CoMPRA-07-mashindano-kazi.pdf

Chicago

Mashindano, Oswald Joseph, and Vivian Kazi. Macroeconomic Policy Development in Tanzania. South African Institute of International Affairs, n.d. https://saiia.org.za/wp-content/uploads/2021/10/CoMPRA-07-mashindano-kazi.pdf.

Wikipedia

{{cite report |last1=Mashindano |first1=Oswald Joseph |last2=Kazi |first2=Vivian |title=Macroeconomic Policy Development in Tanzania |publisher=South African Institute of International Affairs |url=https://saiia.org.za/wp-content/uploads/2021/10/CoMPRA-07-mashindano-kazi.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mashindanondmacroeconomic, author = {Mashindano, Oswald Joseph and Kazi, Vivian}, title = {{Macroeconomic Policy Development in Tanzania}}, institution = {South African Institute of International Affairs}, url = {https://saiia.org.za/wp-content/uploads/2021/10/CoMPRA-07-mashindano-kazi.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }