Foreign aid and economic growth in Tanzania: 1970-1999

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University of Dar es Salaam
Since independence, Tanzania has relied heavily on foreign aid as a source of capital to speed up the economic growth. Tanzania has and is still receiving significant amounts of foreign aid in forms of technical assistance, loans, food and grants. Nevertheless, the level of development as reflected by the economic and social indicators is still low by any standard. This study attempts to examine empirically the relationship between various components of foreign aid and the gross domestic product growth (GDP), domestic savings and investment for the period 1970 - 1999. This study used secondary time series data. The regression analysis has employed. Two Stage Least Squares technique to examine the impact of each component on the mentioned variables. The regression results have shown that grants is positively related to GDP and investment but negatively related to domestic savings. Food aid is positively related with investment though negatively related with GDP. The loan is negatively related with GDP and investment but positively related with domestic savings. Based on these results, a number of policy lessons can be drawn. First the government has to ensure effective utilisation of foreign resources by channelling them to viable projects. Second, the government should increase revenue collection and educate the public on the importance of savings through the financial institutions. Third, the government should refrain from contracting new loans to finance unproductive activities.
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Foreign aid, Economic aspect, Tanzania
Eliud, N. T. (2001) Foreign aid and economic growth in Tanzania: 1970-1999, Masters' dissertation, University of Dar es Salaam. Available at (