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.