The assessment of the effect of saving on economic growth in Tanzania

This study assess the effect of saving on economic growth in Tanzania for the period of 1981 to 2011. It employs a time series regression analysis in which economic growth is assumed to be affected by gross national saving, inflation, import and export of goods. The study finds that gross saving and import of goods have a positive effect on Tanzania economic growth. However, the increase in import in the long run is likely to cause a negative effect on Tanzania economic growth as stipulated by vector error correction (VEC) model results. Therefore the government ought to reduce importation of goods by developing a good industrial base to satisfy the demands of the local market. Although saving has shown to have positive effect on growth, still the decreasing rate of the Tanzania national saving is still a hindrance toward achieving high economic growth in Tanzania like what happened in the Asian countries. Therefore the government should sharply reduce its expenditure to increase more availability of finance that might be used in different development projects. Also the central bank should devote its resources to fight inflation to ensure price stability which later on will increase saving an capital accumulation in the economy.