1. PRBS Development Partners Presentation at the 2008 Annual Review of Budget Support Progress in poverty reduction in Tanzania 2000/01-2007 Assessment and way forward

2. OUTLINE  Are the Government’s latest poverty data reliable?  What do they say?  What may have happened to explain what the data show?  The way forward.

3. Are the Government’s latest poverty data reliable?  Some questions have been raised recently with DPs on the reliability of the 2007 Household Budget Survey poverty data  Comparability: Between 2000/01 and 2007 Between Tanzania and other countries  Consistency: Internal to HBS data External, with CPI or GDP

4. Comparability  The poverty line from 2000/01 was used and costed in Tshs. (not in PPP US$).  The basket on which the poverty line is based costed 7,253 Tshs. in 2000/01  The inflation rate associated with this basket is 93% (equivalent to 10.6% annual inflation over 6.5 years: 7253*1.106 exp(6.5)=13,998.)  So poverty line for 2007 is 13,998 Tshs.

5. Comparability  International comparators Other countries measure poverty in very similar ways  Poverty line is determined according to international best practice  Some use diary, some recall to measure consumption  Diary is thought to be more precise Customary not to price the user value of consumer durables and housing Treatment of health and education expenses varies between countries

6. Consistency  How can the modest increase in private consumption of the basic goods basket be consistent with higher ownership of consumer durables? 1. Because of the drop in price of consumer durables, the value of assets has remained about constant although the quantity has increased. 2. Durables can reflect purchases since 2001, while consumer goods basket is just for 2007.

7. Consistency  The inflation rate calculated in the HBS is much higher than CPI or GDP inflation indexes.  Some discrepancies are normal, as these are different indexes. The CPI is based on a limited number of major urban centers, HBS covers entire nation. GDP deflator is at factor cost; HBS deflator at market prices There are some well documented shortcomings with CPI.

8. Are the Government latest poverty data reliable?  Overall answer is YES  Well done NBS !  Tanzania Statistical Master Plan will strengthen production and quality of statistics

9. What do the data say?  Improvement in basic-needs income poverty has been disappointing  Significant improvement in consumer durables ownership  Ownership of productive assets in agriculture has gone down  Access to social service has been mixed  Nutrition has improved.

10. Little progress towards income poverty MDG The nation is even more off-track to achieving the income poverty MDG in 2007 than it was in 2000/01

11. Little progress towards income poverty MDG: Other countries have done much better Between 2000/01 and 2007 the number of poor in Tanzania increased by 1.3 million.

12. Still, income poverty MDG can be achieved! … if consumption growth is 3.2 percent per capita per year.

13. Other measures of welfare... nutrition is on track with risk The nation is on-track to achieving the nutrition MDG. But concerns about the worsening composition of diet

14. Other measures of welfare...  Ownership of consumer durables  Ownership of non-agricultural productive assets  Housing conditions  Net enrollment in primary education (59% to 84%)  Health care (less costly)  Food share  Ownership of productive agricultural assets  Access to clean water  Inflation (10.6% instead of 5.9%)  Nutrition: composition of diet of he poor  Access to health services stable  Value of assets

15. No change in inequality!

16. What may explain what the data show? GDP up by 32% between 2000/1 and 2007  Not increased inequality  Not household consumption (up 5%)  Government consumption (up 102%)  Investments in capital intensive sectors (up 88%)  Maybe there was less growth Did agriculture really grow with 12% per capita?

17. Consumption growth of rural households Broad-based agricultural growth, based on deregulated food and crops markets has been shown to be key to boost the incomes of rural households

18. What may explain what the data show?  Limited increases in household income are behind the modest growth in private consumption.  Changes in relative prices are behind changes in asset ownership (and change in food share?).  Increase in aggregate demand seems behind changes in overall price level.  Together it suggest rigid supply, indicating the seriousness of well known infrastructure and regulatory constraints for the private sector Progress was recorded where supply was flexible (imports).

19. The way forward: A multidimensional growth challenge  In rural areas, income growth is needed to reduce poverty. Enhance profitability of agriculture  make it attractive to invest in productive assets instead of consumer durables.  make it attractive to work rather than to go to school Investigate importance of regulatory and institutional constraints.  Need to re-energize policies for a good investment climate Government is focused on infrastructure, but major other bottlenecks remain (e.g. port) The continued presence of heavy regulation, unpredictable policy moves (e.g. maize export ban), weak progress on land issues continues to weight heavily on the investment climate.  Investigate welfare gains made through imports of cheap consumer goods  Macro-economic stability needs to be re-emphasized 10.6% inflation per year is too high for comfort. High levels of public spending are possible without causing inflation provided there is a supply response.

20. Business environment  Private sector environment is highly challenging and reforms have been slow.  BEST program is unsatisfactory  All Tanzania’s business environment ratings are low and are not improving  How can policies and their implementation better address these challenges?

21. Looking ahead …  Recent results on income poverty are disappointing and speed of income poverty reduction needs to improve.  Without a change of direction and increased pace, MKUKUTA objectives and MDGs will be at risk.  More analysis is required to inform and address more effectively the challenges highlighted by the recent data.  Opportunities for dialogue on results are critical to DPs.  Looking forward to discussing how to take joint actions to improve the outcomes for Tanzanians.  With improved capacity in data analysis and performance measurement, how will this be used effectively in decision-making?