Tanzania achieves very low overall compliance with international standards and codes, with a score of 19.2 out of 100 in our Standards Compliance Index. Tanzania is taking notable steps to converge with international best practices in many areas. It has achieved an "intent declared" rating on seven of the twelve standards. It is moving towards reforms under the aegis of the World Bank, where major financial sector reforms projects are underway to strengthen financial sector supervision, corporate governance practices, and accounting and auditing standards. In the sub-regional context, Tanzania is a participant of the Eastern and Southern Africa Anti-Money Laundering Group, which is working to implement best practices. Tanzania is also moving towards greater compliance in the areas of fiscal and monetary transparency. However, it still remains non-complaint in the areas of data dissemination, and anti-money laundering and has an "insufficient information" rating for its insolvency and corporate governance framework as well as in insurance supervision.

Macroeconomic Policy and Data Transparency

Tanzania does not yet subscribe to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS), but has participated in the less stringent General Data Dissemination System (GDDS) since July 6, 2001. The IMF's 2004 Report on the Observance of Standards and Codes (ROSC) data module reported that Tanzania has made significant improvements in the quality of its macroeconomic statistics as it has liberalized its economy, but identified numerous areas in which Tanzania fell short of SDDS specifications. The ROSC suggested that it would be possible, with technical and financial assistance and much effort, for Tanzania to subscribe to the SDDS within as little as five years. The 2007 IMF Article IV Consultation report noted that Tanzania continues to make progress in improving data quality and dissemination standards, but makes no mention as to whether that five year goal would be met. More »

The 1995 Bank of Tanzania (BoT) Act and its 2006 supplement clearly define the relationship between the central government and the BoT. The Act accords to the BoT both administrative and policy-making independence from the government, and establishes the BoT's primary responsibility to be the formulation and implementation of monetary policy aimed at establishing and maintaining price stability in the context of sustainable economic growth. The World Bank's 2006 Financial Sector Reform Project will support the implementation of the Government of Tanzania's Action Plan for Second Generation Financial Sector Reforms. The monetary policy component of the reform will be supported by International Monetary Fund's (IMF) Monetary and Financial Systems Department and the IMF's East Africa Regional Technical Assistance Centre. The aim is to deliver a transparent monetary policy that brings about financial deepening. With respect to current challenges in monetary policy, the Tanzanian authorities and the IMF both recognize the need to manage liquidity in an environment characterized by high levels of donor aid. The IMF's 2007 Article IV Consultations report characterized Tanzania's overall economic policy as prudent, including its monetary policy. The report found that Tanzanian authorities remained committed to sustainable economic growth and macroeconomic stability. More »

The International Monetary Fund (IMF) reported in its 2002 Report on the Observance of Standards and Codes (ROSC) that Tanzania's reform efforts had yielded some enhancements to fiscal transparency. Chief among these were the newly introduced Integrated Financial Management System (IFMS) and the Public Expenditure Review, as well as several legal reforms. However, the 2002 ROSC found that more legislative reforms were needed to accompany the ongoing decentralization of political, administrative, and financial responsibilities. The government's 2005 Letter of Intent to the IMF acknowledged the need to improve its internal and external audits of public spending, and called for greater parliamentary oversight and a further strengthening of the National Audit Office. The 2007 IMF Article IV Consultations report notes that Tanzania has expanded participation in the IFMS to 87 out of the 122 local government agencies and has staff training programs on the use of the system in place. Tanzania does not subscribe to the IMF's Special Data Dissemination Standard but participates in the less rigorous General Data Dissemination System. More »

Institutional and market infrastructure

Prior to March 1, 2006, when the Companies Act of 2002 came into effect, the procedures for winding up an insolvent company were covered under the Company Law of 1929, which dated back to the colonial era and was in effect through the period when Tanzania had a planned economy. Although the primary objective of the reform legislation, which replaced the earlier law, was to clarify company-related legislation, and to enhance the speed and efficiency of business-related legal proceedings, it has also introduced the prospect of rescue-oriented alternatives to liquidation of debtor firms. To this end, the Tanzanian government also created the Commercial Court in September 1999, which is a specialized venue within the High Court. However, although there have been some improvements in the speed of proceedings, the U.S. Department of Commerce reported in 2004 that problems of inefficiency and corruption remained. Nevertheless, there is insufficient information publicly available as to Tanzania's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

According to the 2005 World Bank assessment of accounting and auditing in Tanzania, the National Board of Accounting and Auditing (NBAA), the national accounting standard-setter, adopted International Financial Reporting Standards (IFRSs) "wholesale" as Tanzanian standards, effective July 2004. However, it is unclear as to which entities are required to follow IFRSs. The World Bank observed that legislation governing listed companies, insurance companies, parastatals, and executive agencies did not provide clear legal backing for the use of the NBAA prescribed standards. The World Bank also observed that, in general, accounting requirements specified in Tanzanian laws are largely incompatible with IFRSs requirements. A few of the major recommendations included but were not limited to, adopting IFRSs without any modifications and making these legally mandatory for all public interest entities; setting up an oversight body to ensure compliance with accounting and auditing standards; and strengthening the capacity of the regulatory bodies and the NBAA. Following the assessment, a stakeholder workshop was held in March 2006 and a World Bank-funded project on updating accounting and auditing legislation in Tanzania was initiated the same year. In a November 2006 speech delivered at a stakeholders' conference, A. Khatibu, the Tanzanian deputy Minister of Finance confirmed that World Bank-approved consultants were working on updating accounting and auditing legislation in Tanzania. According to the website of the Emerging Market Group (EMG), the consultant for the project, the first stage of the project entails an overview of the accounting profession in Tanzania. The EMG will also make a proposal for restructuring the NBAA, including its framework, and draft new laws for ensuring compliance with accounting and auditing standards along with effective monitoring and enforcement arrangements. The second stage of the project focuses on preparing manuals and providing on-the-job training for the NBAA staff. More »

In 2002, according to an article by Mkono & Co. written in 2005, Tanzania adopted the Capital Markets and Securities Act Guidelines on Corporate Governance Practices to bring its corporate governance framework in line with international standards. The guidelines include recommendations regarding the responsibilities and qualifications of the board of directors, equitable treatment of shareholders, and minority shareholders' rights. Furthermore, as noted in a 2006 article by Van Winkelhof, minority shareholders' rights are protected under the 2002 Companies Act, which came into force on March 1, 2006. In 2006, the World Bank conducted a Project Appraisal Document on a Proposed Credit of $US15 Mil to Tanzania, of which $2.6 Mil were allocated to developing the financial markets, and promoting good corporate governance. Despite the information above, there is insufficient publicly available information regarding Tanzania's compliance with the Principles on Corporate Governance developed by the Organization for Co-operation and Development. The Dar es Salaam Stock Exchange is the only regulated securities market in Tanzania, and was formed following the enactment of the 1994 Capital Markets and Securities Act, and the establishment of the Capital Markets and Securities Authority. More »

According to the 2005 World Bank assessment of accounting and auditing in Tanzania, the National Board of Accounting and Auditing (NBAA), the national accounting and auditing standard-setter, adopted International Standards on Auditing (ISAs) "wholesale" as Tanzanian standards effective July 2004. The World Bank observed, however, that although there is sufficient legal backing for adherence to the NBAA standards for auditors in Tanzania, compliance was not enforced effectively. Lack of implementation guidelines further hindered the application of auditing standards. Also, since the 2005 assessment, the International Auditing and Assurance Standards Board has issued new or revised some of the existing ISAs, and there is insufficient publicly available information whether Tanzania has incorporated the latest pronouncements. Following the assessment, a stakeholder workshop was held in March 2006, and a World Bank-funded project on updating accounting and auditing legislation in Tanzania was initiated the same year. In a November 2006 speech delivered at the stakeholders' conference, A. Khatibu, the Tanzanian Deputy Minister of Finance, confirmed that World Bank approved consultants were working on updating accounting and auditing legislation in Tanzania. According to the website of the Emerging Market Group (EMG), consultants for the project, the first stage of the project entails the overview of the accounting profession in Tanzania. The EMG will also make a proposal for restructuring the NBAA, including its framework, and draft new laws for ensuring compliance with accounting and auditing standards along with effective monitoring and enforcement arrangements. The second stage of the project focuses on preparing manuals and providing on-the-job training for the NBAA staff. More »

According to a 2007 U.S. Department of State (DoS) International Narcotics Control Strategy Report, Tanzania is characterized by a weak anti-money laundering (AML) and combating the financing of terrorism (CFT) regulatory and supervisory framework, in particular with regards to financial institutions and law enforcement capabilities. The DoS report adds that there is no functioning financial intelligence unit in Tanzania, legislation does not address due diligence, and reporting is conducted on a voluntary basis. Legal requirements to file suspicious transaction reports have been issued by the Bank of Tanzania but are not enforced. In 2006, Tanzania proposed AML legislation that would provide for the creation of a financial intelligence unit. The AML law was expected to be implemented by February 2007. As of November 2007, however, there is little information available regarding the implementation of this law. Tanzania is a member of the Eastern and Southern Africa Anti-Money Laundering Group, which seeks to intensify efforts to implement the 2003 Forty Recommendations and the 2001 Nine Special Recommendations on Terrorist Financing of the Financial Action Task Force (FATF). More »

A 2006 self-evaluation report by the Southern African Development Community (SADC) mentions self-assessments conducted between October 2005 and March 2006 on the compliance of each SADC country's systemically important payment system (SIPS) with the Core Principles for Systemically Important Payment Systems (CPSIPS). The Tanzania Interbank Settlement System (TISS), which is Tanzania's SIPS, observes eight of the ten Core Principles (CP) and all four Central Bank responsibilities. The Bank of Tanzania (BoT) has explicit powers for regulating, supervising, and conducting the oversight functions of the National Payment System (NPS), which includes all major payment systems users, owners, providers, and managers. According to the same report Tanzania only partly observes CP I, which deals with the crucial aspect of a well founded legal basis and CP V is not applicable to Tanzania. Tanzania passed a new Bank of Tanzania Act in 2006. A 2005 BoT report titled "Tanzania Payment System - Vision and Strategic Framework" points to Tanzania's clear intention to design a new regulatory framework to international best practice. However, there is no subsequent information publicly available as to the effectiveness of the 2006 Bank of Tanzania Act or the compliance of the new regulatory framework with international standards. More »

Financial Regulation and Supervision

A 2003 Financial System Stability Assessment (FSSA) report by the International Monetary Fund (IMF), finds that Tanzania's banking supervisory framework is generally adequate when assessed against the Basel Core Principles (BCPs). Furthermore, according to the report, regulations are in line with international standards. However, the 2003 IMF assessment also points to several major shortcomings, the most important of which is the lack of transparency in banking supervision and the lack of independence of the supervisor - the Bank of Tanzania (BoT). The 2003 IMF report recommended further improvements, specifically changes in certain laws and regulations governing banking supervision in the country, developing a banking supervision policy, and implementing risk based supervisory practices. In 2006, a new BoT Act and Banking and Financial Institutions Act were implemented, incorporating IMF recommendations regarding compliance with the BCPs. During the same period, the World Bank, as noted on its website, launched a "Financial Sector Support Program" for Tanzania, with the aim of increasing the soundness, competitiveness, and access to the financial sector. In a subsequent 2006 Project Appraisal Document, the World Bank found that the supervisory framework was adequate when assessed against the BCPs. Despite the information provided in the aforementioned reports, there is little information addressing the actual overall compliance of Tanzania with the BCPs for Effective Banking Supervision. More »

According to the International Monetary Fund's 2003 Financial System Stability Assessment, the Tanzanian capital market is very small, in part due to a lack of a financial sector infrastructure with a functioning legal, judicial and information disclosure framework. While the Capital Markets and Securities Authority is responsible for the implementation of the regulatory framework governing the capital market, due to the early stage of market development, its principle role is to motivate investment and educate about investor rights, as opposed to making policy and setting standards. The World Bank's 2003 Financial Sector Assessment recommends that the Tanzanian government amend the Companies Law, improve cooperation between financial institutions, increase transparency in the debt market, address the risks and oversight of securities and settlement systems, and establish a financial crisis management program. A 2006 World Bank project appraisal document indicates that the Tanzanian government has designed an Action Plan for Second Generation Financial Sector Reforms (SGFSR) using the recommendations of the joint 2003 World Bank/IMF Financial Sector Assessment Program. More »

There is insufficient information publicly available regarding Tanzania's compliance with the revised Insurance Core Principles issued by the International Association of Insurance Supervisors in October 2003. According to a 2003 Financial System Stability Assessment by the International Monetary Fund (IMF), although the insurance sector in Tanzania was liberalized under the 1996 Insurance Act, its effectiveness is undermined by the very poor condition of the former monopoly - the National Insurance Corporation (NIC). Following the privatization of the insurance industry in 1996, the Insurance Supervision Department (ISD) within the Ministry of Finance was given powers to act as the regulatory and supervisory authority in Tanzania. As noted in its 2007 Completion Report, the World Bank conducted a Second Financial Institutions Development Project (FIDP II), which became effective in September 2000 as a follow-up to the first FIDP, with the aim of strengthening the ISD's supervisory and regulatory powers, and supporting the privatization process of the NIC. According to the same report, the recommendations on insurance regulation and supervision, including the liberalization of investment requirements for insurance companies, were effectively addressed by the ISD. Subsequent to FIDP II, the World Bank implemented a Financial Sector Support Project (FSP) to address issues that were not completed under FIDP II, notably through increased market-based investment policies and competitiveness. In a 2006 Project Appraisal Document on the FSP, the World Bank found that, although a risk-based supervision methodology had been developed under FIDP II, improvements were still needed in the areas of corporate governance and investment policies. More »

Legend:

Credit Ratings

Moody's Not rated

Fitch Not rated

Standard & Poor's Not rated

Macroeconomic Data

2007 GDP (Current Prices): 16.2 billion USD (IMF)

2007 GDP (Per Capita): 415 USD (IMF)

2008 GDP (Growth Forecast): 7.7% (IMF)

2008 Inflation (CPI): 7.1% (IMF)

2007 Unemployment: N/A% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 0.4 billion USD (UNCTAD)

FDI (Outward): N/A billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 1825 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)