Tanzania remains one of the world’s poorest countries, with a per capita GNI of US$400 and one third of the population (over 12 million people) living below the poverty line. Inequality is high and urban/rural income disparities are evident. Lack of access to health and education services, lack of agricultural inputs, lack of opportunities to diversify in to non-farm activities, dependency and powerlessness are the defining characteristics of the poor. Tanzania’s economy relies heavily on agriculture, employing 80 percent of the work force and accounting for half of GDP. Close to 40 percent of the current state budget is financed by outside donors and this reflects a dangerous aid dependency relationship. Due to economic reform and continued political stability, the economy has achieved annual growth rates above 5 percent since 2000. However, Tanzania, especially rural Tanzania, has not seen a reduction in poverty even though the economy has stabilised and investment has grown. In this thesis, I argue that the Tanzanian government and the donors share responsibility for the failure of past policies to set in motion an initiative of pro-poor growth and poverty reduction, particularly in the rural economy. I review some of the constraints on growth and poverty reduction under the National Strategy for Growth and Reduction (Mkukuta), including the major role of foreign aid from especially the World Bank and the United Nations Development Programme. I argue that the programme of the World Bank should be reconsidered, as support is not focused around on pro-poor growth. Corruption issues, rising inequality between the elite and the poor and the lack of pro-poor growth are identified as main constraint on poverty reduction in Tanzania.
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