Government expenditure and poverty reduction in Tanzania: the case of Bagamoyo district

The objective of this study was to investigate the extent to which government expenditure has reduced poverty in Tanzania. More specifically, the study investigated how important are education and health sectors in poverty reduction. The study also identified the existing relationship between total expenditure in relation to the aforementioned sectorial expenditures. The results from this study suggest that an increase in government expenditure allocated to health and education has positive impact on poverty eradication. The correlation shows the negative and strong relationship between expenditure on both health and education on poverty reduction as proxy by proportion of population below the poverty line. Although an increase in expenditure on health significantly reduces infant mortality rate, it has no impact on life expectancy. The trend of expenditure on education, health and development were in line with an increase in total government expenditure. The study recommends that, in setting targets for government expenditures, the government must adopt policies that encourage expenditure on education and health sectors. The government should also allocate more of its resources to public investment in the development issues to supplement other sectors that have impact on poverty reduction. Despite the limitations and shortcomings encountered, in general, the findings indicate that in Tanzania, government expenditure has an impact on poverty reduction, with the implication that policies adopted may draw from the empirical evidence presented to enhance this role. This will thus be a useful guideline to policy makers when deciding on expenditure allocation and rationalization.