New World Bank report upbeat on growth prospects

Dar es Salaam. Tanzania’s economy is growing faster than the average growth rate of the Sub-Saharan Africa (SSA) region, a new World Bank update shows.

In its 18th Tanzania Economic Update, the World Bank says that strong macro fundamentals allowed Tanzania to emerge from the Covid-19 pandemic in good shape, outpacing the average SSA rate of 3.3 percent.

“After a mild slowdown during the pandemic, Tanzania’s economic recovery has outpaced the SSA average,” the World Bank says.

Titled Clean Water, Bright Future: The Transformative Impact of Investing in WASH, the update, however, notes that economic recovery has been relatively modest due to strong headwinds caused by the ongoing war in Ukraine, tightening global financial conditions, and global economic slowdown.

The economy, the World Bank says, continues to recover from the shock of the pandemic, noting, however, that significant slack remains.

The GDP growth rate is expected to accelerate marginally from 4.6 percent in 2022 to 5.3 percent in 2023.

“For 2022, GDP growth was 4.6 percent, marginally higher than 4.3 percent growth in 2021. The economic recovery in 2022 nevertheless remains broad based with most sectors rebounding to pre-Covid activity levels,” the report says.

The growth, the World Bank adds, is fuelled by an increase in investments and improvement in the terms of trade.

The World Bank urges the government to continue with its consumption and investment in its mega infrastructure projects and its tempo of improving the business environment to propel economic growth.

“If government consumption and investment in flagship capital projects deepen and if the authorities successfully implement policies to strengthen the business environment, Tanzania’s GDP should reach its potential over the medium term….Faster growth should attract greater private investment, spurring a virtuous cycle,” the World Bank says.

Some of the mega projects that the government has been injecting much of its development funds include the ongoing construction of the standard gauge railway (SGR) line, the 2,115MW Julius Nyerere Hydropower Project and construction of bridges, roads as well as air and seaports.

The 2,561-kilometre SGR network will link the port of Dar es Salaam to Mwanza on Lake Victoria, with eventual spurs to Burundi, Democratic Republic of Congo (DRC), Rwanda and Uganda.

Speaking during when she witnessed the signing of a contract for the construction of the SGR section from Tabora to Kigoma (506km) between Tanzania Railways Corporation and joint venture companies CCECC and CRCC in December last year (2022), President Samia Suluhu Hassan said Tanzania’s investment in the SGR had now reached $10.04 billion or Sh24 trillion, including the latest contract.

According to the World Bank, Tanzania’s headline inflation continued to edge up during 2022 as a result of rising international commodity prices and severe drought. It has since reached 4.9 percent. However, it is still one of the lowest in the region.

“While Tanzania’s headline inflation rate has increased in recent years, it remains the lowest among EAC member states. Going forward, inflation is expected to taper gradually as global commodity prices moderate,” the World Bank says.

The report highlights that strengthening the country’s’ capacity to build resilience, supporting productivity-enhancing private sector-led inclusive growth, attracting new foreign and domestic investment, and expanding fiscal space while maintaining debt sustainability remain key priority reforms over the short- and medium-term.

It also discusses the enormous opportunities the country stands to gain with more investments in universal access to Water Supply, Sanitation and Hygiene for all citizens.

It says by providing universal access to water supply, sanitation, and hygiene (WASH) could reduce Tanzania’s economic losses by $1.9 billion per year by 2030.

The country, the World Bank says, could potentially generate more than $2.4 billion each year in savings on excess medical costs and lost productivity due to inadequate access.

“For Tanzania to ensure universal WASH access, considerable upfront investment is required to avoid the devastating consequences of inadequate services,” said Nathan Belete, World Bank Country Director. “Achieving WASH goals can support the jobs agenda while mitigating the adverse effects on workforce productivity and advance Tanzania’s objectives for inclusive growth and poverty reduction.”

Death and disease are the most immediate consequences of inadequate WASH services-- being responsible for 31,000 deaths (10 percent of preventable deaths) -- and cost the economy more than $2.4 billion each year in excess medical costs and lost productivity. The heaviest toll is being borne by women, children, and the poor and vulnerable. For example, WASH-related illnesses lessen the educational attainment of students and impair the cognitive development of children.

To achieve and sustain universal WASH access, the report recommends a combination of policy measures, institutional capacity building, and new financial arrangements at the national, subnational, and community levels. It calls for prioritizing the cross-cutting impact of WASH on the government’s larger policy agenda and urges policymakers across sectors to advocate for WASH investments and develop collaborative solutions to address their shared challenges.

“The implementation of Tanzania’s third Water Sector Development Program (WSDP) requires an estimated $6.5 billion in total,” said Ruth Kennedy-Walker, World Bank Senior Water Supply and Sanitation Specialist and report co-author.

“On the other hand, providing near universal WASH access would cost the government just $16 per capita per year, which is less than half the $38 per capita that inadequate WASH services cost Tanzania each year. The WSDP-3 implementation therefore would generate benefits equal to its initial investment of $4.1 billion, for WASH related activities under the program, within five years.”