Tanzania 's world ranking is low in most economic and social indicators , with over 48% population below the poverty line, life expectancy 43.5 years, HIV/AIDS incidence at about 10%, limited electricity access, and a ranking of 162 among 177 countries rated by the UN for 2002. The economy, largely agrarian, has done well in recent years, with promising potential in particular in agriculture, mining and tourism.

After the experience of the socialist economic policies – with mixed results, talks with IMF/World Bank were started in 1984, followed by the launch of economic reforms. Liberalisation of the economy, privatisation and other moves toward integration into the global economy, and substantial infusion of resources from the Fund/Bank and other donors, gradually produced higher growth rates. Under Mkapa's leadership in particular Tanzania is pursuing the goals of economic development and poverty alleviation - and the Economic and Social Development Vision-2025, aiming at 8-9% annual growth, raising PPP per capita GDP to $3,000 by 2025 - more determinedly.

Privatisation of the parastatals has been pursued vigorously, with most such - 617 such organisations (289 core assets companies, and 328 non-core) already privatised by 2003, and the process for most others well advanced. The donor community has evidently reposed confidence in Mkapa Government's sincerity to carry out economic reforms. A Tanzanianrevenue authority has been set up, structured to be more transparent and less complicated to tax-payers, with wide-ranging powers, resulting in the revenue collection virtually doubling within two years. The process got a further boost with the introduction of VAT from July 1998, at a flat rate of 20% for most items. Tariff rates have been progressively reduced, with peak tariffs currently in the 20-25% range.

In the financial sector, banking and insurance have been deregulated, already attracting new private and foreign companies to enter the market, such as StanChart, Barclays and Citibank. Bank of Baroda too is set to join the ranks soon. The acceptance of IMF Article-VIII obligations introduced current account convertibility, and consequent growth in the number of foreign exchange dealers.

In November 2001, Tanzania reached the completion point of the Enhanced HIPC (Highly Indebted Poor Country) Initiative, earning the country a total debt repayment waiver of about $ 3 billion, which amount is to be utilised for Tanzania's internationally approved poverty alleviation strategy, focussing on the sectors of education, health, water supply, transport, agriculture, good governance, and judiciary. The Tanzanian economy is clearly on the mend. The extensive structural reforms carried out over the last couple of years have positioned the economy to attain a higher growth trajectory in the coming years. The macro-economic gains are, however, yet to percolate or spread widely enough to be palpable at micro-economic levels.

Recognised now as one of the star economic performers of sub-Saharan Africa , Tanzania had its economic growth rate reaching 6.2 % in 2002 , and 5.6% in 2003 (was expected to be 6.3 % but for a nation-wide drought). Inflation rate in 2001 dipped for the first time below 5.0%, and going still lower, before rising to 6.5% in April'04. Tanzania 's GDP in 2002 was US $8,927.1 million ( PPP $22.1 b in 2000), translating into per capita income of $265.4, or TZS256,490 (or, $580 in PPP terms). The FE reserves had grown to $2,037.8 m by Dec.'03-end , that is, worth 8.5 month's imports of goods and invisibles, and in 2003 Tanzanian economy recorded its first surplus balance of payments - of $243.9 m. The FDI inflow grew further - led by the mining sector - to $300 million in 2003. Tanzania 's external debt in Apr.'04-end stood at $7,908.8 million. Tanzania 's budget for the year 2004-05 (beginning 1 July) envisages an expenditure of TZS 3,347.538 b, including TZS 1,091.590 b for development. Of this, only TZS 1,739.288 b were expected to be raised domestically, whereas external aid was expected to contribute TZS 1,367.025 b (509,140 m budget support, and 857,885 m for development budget), or 41.08% of the total budget, thus underscoring the economy's continued vulnerability and overdependence on the donors .

The Tanzanian Shilling (TZS) has been generally stable but gradually declining in value. The current exchange rate is hovering about TZS 1,099 to US$1, and about TZS 23.8 to a Rupee .

Tanzania is rich in natural resources . However, despite abundant arable land (40 million hectare, but only 6 million under cultivation), and plentiful water (several large and smaller lakes all across the country, besides rivers aplenty, endowing Tanzania with one of the highest per capita water availability), agriculture - including irrigation, as well as the hydel sector (only 559 MW tapped of the total potential of 2,000 MW), remain far from optimum development. Gold, diamonds, precious & semi-precious stones , coal, nickel, cobalt, tin, phosphates, iron ore and other minerals are the other major natural resources. Natural gas has been found (by ONGC of India, in 1975), but in limited quantities. Hopes however abound of considerable discoveries - though with little tangible evidence so far. Tanzania 's total installed power generation capacity is 892 MW.

Agriculture, including forestry and fishery, the mainstay of the country's economy, sustains 80% of the population (normal food production is about 8.1 million tonne annually), accounting for 44% of GDP in 2002. It also contributes about half of the country's foreign exchange earnings, and well over 90% of domestic food supply. Agricultural production has improved, but the sector still remains direct rain-fed, and, therefore, subject to the vagaries of nature. The main foodgrain crop is maize (annual production about 2.5 million tonne); other main crops including cloves, cashew nuts, cassava, coffee, cotton, tea, sisal, pyrethrum, paddy (< 1m tonne), fruits (bananas, mangoes, oranges, and many others), and vegetables. Agriculture's pivotal role for both economic growth and poverty reduction in Tanzania is well and widely recognised. Tanzania's vast agriculture potential, for both foodgrains and cash crops, for its full development, remains awaiting further relevant investment policies, and induction of technologies and other necessary inputs.

Industry: The legacies of socialism, inadequate infrastructure, high input costs, excessive lending rates, low productivity, a limited market and ancillary sector, and corruption and its bureaucratic ramifications, are major factors behind a limited industrial sector – constituting just about 8.4% of GDP . Tanzania 's main industries are sugar, cigarettes, sisal twine, cement, textiles, wood products, pharmaceuticals, soap, flour, edible oils, steel, beverages, tea, packaging, foam mattresses, and leather incl. shoes. Many of these have much surplus capacity, besides some parastatal units lying closed.

Mining: Tanzania 's large deposits of gold, diamonds and precious stones remained long underground for the lack of investment and technologies. The sector, hitherto run mainly as a cottage industry, has now with the liberalisation started attracting some major global players – bringing in considerable investments, already over to $1.4 billion in recent years. Forecasts for production of gold and diamonds in particular tend to be fairly optimistic; Tanzania has already witnessed an upsurge in last 2-3 years in production and export of these items. Tanzania 's production of gold in 2003 was about 50 tonne (up from merely 389 kg in 1998), and of diamonds 354,400 carats (in 2000). Tanzanite, a blue-violet stone unique to Tanzania, discovered in 60s and found only in a 5 sq mile area near Arusha in the northern highlands, adds 50 million carats annually (annual sale of $380 m in the US, the main market). A number of companies, including from South Africa, Australia, Canada and Ghana, are engaged in this sector, besides a large number of small Tanzanian miners.

Tourism: Owing to Tanzania 's unparalleled wildlife attractions, and Zanzibar 's unique old-world, mixed-culture charms, besides sunny beaches, and Kilimanjaro, the tourism sector has been a fast growth area, especially in recent years. The country is in an ongoing boom phase in hotels construction, and other ancillaries. The number of tourist arrivals in 2003 was 576,198 (incl. over 15,000 from India), and revenue earnings US$731 m, the sector as a whole contributing about 16% of GDP, nearly 25% of the export earnings, and providing direct or indirect employment to 157,200.

Foreign Trade: Tanzania 's exports, $1,174.7 m (year till Apr.'04), traditionally comprise mainly primary products: raw cashew nuts, coffee, sisal, tobacco, cloves, raw cotton, oilseeds, fish, timber, and horticulture products. The major export markets were UK, France, Japan, India, Netherlands, Kenya, and Germany. The rapidly changing mix of the exports is evident from gold exports jumping to over $565.8 m, or 48.2% of all exports, and 59.2% of the ‘non-traditional' exports (itself 81.3% of all exports) in the year ending Apr.'04. Total minerals export during the period was $611.6, up from $411.2 in the preceding 1 year period, with gold exports alone growing by 55.2%. Manufactured goods too grew by 52.4% to $107.9 m.

Tanzania's imports span a wide range, adding up to $2,085.7 m for year till Mar.'04; the major import sources were South Africa, Japan, India, UAE, Kenya, UK, USA, and China.