Born out of a union between Zanzibar and Tanganyika in 1964, Tanzania’s economic performance was expected to remain strong in 2008. GDP growth for 2008 was estimated at 7.5 per cent, up from 7.2 per cent in 2007 and an improvement over the 2002-2006 period when the economy grew by an average of 6.0 per cent. Recent growth has mainly been attributed to construction, tourism and mining. Economic reforms have been key growth drivers and have transformed the economy from a relatively controlled one to one that is liberalized and market-driven.

Inflation has remained in single digits and averaged 5.0 per cent per annum from 2000-2006 but shot up in 2008 and is expected to edge over 9 per cent in 2008, as a result of the globally high food and fuel prices. The current account deficit was forecast to stay at about 13 percent of GDP due to higher imports as a result of strong economic activities and a construction boom.

Development Policy

The country is making progress towards achieving the MDG targets (consistent with targets articulated in Tanzania’s own poverty reduction strategy; MKUKUTA, and MKUZA for Zanzibar). These include Goal 2 (universal primary education), Goal 3 (gender equality in primary schools, although not in secondary schools), Goal 7 (proportion of urban population with access to safe water and basic sanitation), and Goal 8 (Global partnership for development). Where goals have not yet been achieved, ongoing trends make it likely that most could be attained by 2010. With an increased focus on (rural) growth, and the implementation of improved policies, strengthened institutions, and additional funding, Goal 1 (eradicate extreme poverty and hunger) is likely to be achieved. There is, however, slow progress in attaining the health-related Goals 4, 5 and 6 (reduction of child and maternal mortality, combating HIV/AIDS, malaria and other diseases) despite notable improvements in policies, institutions, and funding and even the significant progress that has been made to date, in combating child mortality.  The country has already achieved some selected targets.

In spite of the country's sound macro-economic achievements, the donors’ Joint Program Document recognises that Tanzania faces some important development challenges. While the country's portfolio performance has been satisfactory, the implementation of Bank-financed projects in Tanzania has been slow due to delays in project completion and weak capacity to administer Bank- funded projects. The Bank and the Tanzanian government have agreed on measures to improve portfolio management, including greater focus on capacity building in key areas.

Bank Group Programme

In the medium term, the Bank Group’s programme is guided by the Joint Assistance Strategy for Tanzania (JAST) launched in December 2006.  Through the JAST, the Bank Group has been able to align and harmonise its strategy with the other donors and government’s objective of promoting broad-based economic growth and poverty reduction in Tanzania. The focus is on two mutually reinforcing pillars, namely; Tanzania’s Poverty Reduction Strategy (MKUKUTA) and the improvement of quality of life and social well-being. Although support for the governance pillar is not envisaged over the medium term, the Bank Group will remain engaged in this area through the ongoing Institutional Support Project for Good Governance. The Bank Group is also providing capacity building support to the Prevention and Combating Corruption Bureau.

The Bank Group also provides support to infrastructure - transport, agriculture, energy, education, health, water and sanitation. The interventions are delivered through a mix of budget support and project financing.  In the first quarter of 2008, the AfDB had 15 ongoing operations estimated at UA 441.43 million. Tanzania's allocation under the African Development Fund 2008-2010 (ADF XI) was UA 404.2 million.