The impact of growth and public spending on poverty in Tanzania: a household budget surveys’ analysis

This study assesses the mismatch impact of economic growth and public spending on poverty reduction in Tanzania. It covers indepth analysis of poverty status; the impact of growth on poverty and public spending on poverty. The findings on poverty status show that poverty in Tanzania is not only a rural phenomenon but is also sensitive to the choice of the poverty line and the indicator of wellbeing. Three decomposition approaches namely the Datt-Ravallion; the Huppi-Ravallion and the Shapley were adopted to assess the impact of economic growth on poverty. The findings show that if inequality remained constant as official statistics indicate, poverty change would have been much greater than what is currently stipulated. The Benefit Incidence Approach was adopted to analyse the impact of public spending on poverty. The findings show that there is a marked difference in accessibility between the location, gender and income. The poorest share a significant percent of the public spending on primary education while the richest have the largest share in the tertiary education. This shows spending on education and health sectors are not pro-poor in absolute sense. The marginal Benefit Incidence Analysis shows that the poorest quintiles can benefit more from extra spending on primary education which currently is highly accessible to them. The main policy implications of this study are threefold: First, policies on poverty reduction should consider the fact that poverty in Tanzania is not only a rural phenomenon, but also sensitive to the choice of the poverty line. Second, though decomposition analysis reveals that inequality plays a key role in poverty reduction; the observed poverty changes are not reflected by the constant inequality estimates. Finally, the public spending on poverty reduction should give priority to the sectors in which the poor people benefit most.