Although Tanzania experienced relatively rapid growth in per capita GDP in the 1995-
2001 period, household budget survey (HBS) data shows only a modest and statistically insignificant
decline in poverty between 1992 and 2001. To assess the likely trajectory of poverty rates over the
course of the period, changes in poverty are simulated using unit-record HBS data and national
accounts growth rates under varying assumptions for growth rates and inequality changes. To this
end the projection approach of Datt and Walker (2002) is used along with an extension that is better
suited to taking into account distributional changes observed between the two household surveys.
The simulations suggest that following increases in poverty during the economic slowdown of the
early 1990s, recent growth in Tanzania has brought a decline in poverty, particularly in urban areas.
Unless recent growth is sustained, the country will not meet its 2015 Millennium Development Goal
(MDG). Poverty reduction is on track in urban areas, but reaching the MDG target for bringing
down poverty in rural areas, where most Tanzanians live, requires sustaining high growth in rural
output per capita.