Infrastructure contributed 1.3 percentage points to Tanzania’s annual per capital GDP growth during the 2000s. If the country’s infrastructure endowment were improved to the level of the African leader, Mauritius, annual per capita growth rates could increase by 3.4 percent.
Tanzania has made great progress in reforming its road sector improving the quality of the road network. Its domestic air transport market is also a success. The country has also seen significant gains in ICT networks.
The power sector poses Tanzania’s most serious infrastructure challenge. An estimated 2,046 megawatts of new generation capacity are needed to keep pace with demand, calling for major reforms. The port of Dar es Salaam suffers constraints caused by high traffic and poor backward linkages with transport networks. Poor access to safe water is another challenge, exacerbated by poor budget execution in the sector.
Tanzania would need to invest $2.9 billion annually for 10 years to meet its infrastructure targets. Spending at that level would absorb just over 20 percent of the country’s GDP. Existing spending stands at $1.2 billion a year.
Tanzania loses $0.5 billion each year to inefficiencies such as underpricing, undercollection of revenue, overstaffing, and lack of budget prioritization. But even if inefficiencies could be fully captured, an annual funding gap of $1.1 billion would remain. That gap could be shrunk to $0.8 billion if lower-cost technologies were adopted and if cross-border finance were made available to permit greater regional trade in power.