PRBS Development PartnersPresentation at the 2008 Annual Review of Budget Support

Progress in poverty reduction in Tanzania2000/01-2007

Assessment and way forward

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.

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

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.

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

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.

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.

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

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.

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

0

5

1015

20

25

3035

40

45

1991/92 2000/01 2007 2015

Year

Pov

erty

inci

denc

eActual poverty MDG 1 targetTrendline required to reach MDG

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.

40

50

60

70

80

90

100

1991-1992 2004-2007

Tanzania

Uganda

Ghana

Vietnam

Still, income poverty MDG can be achieved!

Poverty line0.0

000

1.0

000

2.0

000

3.0

000

4.0

000

5D

ensi

ty

0 20000 40000 60000 80000Consumption per adult equivalent

… if consumption growth is 3.2 percent per capita per year.

Other measures of welfare... nutrition is on track with risk

0

5

10

15

20

25

30

35

1991 1996 1999 2004 2015

Year

Und

erw

eigh

tActual nutritionMDG 1 targetTrendline required to achieve MDG

The nation is on-track to achieving the nutrition MDG.

But concerns about the worsening composition of diet

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

No change in inequality!-5

05

10

15

Con

sum

ptio

n g

row

th (

%)

0 10 20 30 40 50 60 70 80 90 100

Consumption percentiles

Growth incidence, Tanzania Mainland, 2001 - 2007

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?

Consumption growth of rural households

-10

01

02

0

Con

sum

ptio

n g

row

th (

%)

0 10 20 30 40 50 60 70 80 90 100

Consumption percentiles

Growth incidence, rural areas, 2001 - 2007

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

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).

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.

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?

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?