Tanzania's Economic Freedom: Steady Growth Amid Structural Challenges

In the latest Economic Freedom of the World 2025 Annual Report published by the Fraser Institute, Tanzania ranks 120th out of 165 jurisdictions with an overall economic freedom score of 6.01 on a scale of 0 to 10. This places the East African nation in the third quartile, moderately free, highlighting a mixed performance: strengths in monetary stability and business regulations, but notable weaknesses in international trade and property rights protection. As Tanzania navigates a post-pandemic recovery and global uncertainties, its economic trajectory underscores the interplay between policy reforms and institutional freedoms. With real GDP growth projected at 6% for 2025, the country stands at a crossroads, poised for acceleration if it addresses barriers to freer markets.

A Resilient Economy in 2025: Key Indicators

Tanzania's economy has demonstrated remarkable resilience, expanding at an average annual rate of 6-7% over the past two decades, even amid the COVID-19 disruptions. In fiscal year 2024/25, real GDP growth reached 5.6%, slightly above the 5.5% forecast, driven by robust performance in agriculture, mining, and services. The World Bank's latest projections align closely, estimating 5.6% growth for 2024, with momentum carrying into 2025 at around 6%, fueled by increased exports and infrastructure investments. Nominal GDP stood at approximately USD 73 billion in 2024, reflecting a population of over 67 million and per capita income hovering around USD 1,100.

Inflation remains manageable, confined to single digits at about 3.8% in early 2025, supported by prudent monetary policy from the Bank of Tanzania. Unemployment, while officially low at around 2.6%, masks underemployment issues, particularly in rural areas where agriculture employs over 65% of the workforce. Fiscal balances are stable, with public debt at 40% of GDP, allowing room for targeted spending on education and health.

These macroeconomic fundamentals paint a picture of stability, but the Economic Freedom of the World index reveals underlying constraints that could cap long-term potential. Tanzania's score in "Sound Money", a measure of inflation control and currency stability, stands at a respectable 7.92 (80th globally), aligning with its low inflation environment. Similarly, "Regulation" scores 6.60 (67th), indicating relatively efficient labor and credit markets that support business entry and operations.

Pillars of the Economy: Agriculture, Mining, and Emerging Sectors

Tanzania's economic backbone remains agriculture, contributing about 25% to GDP and employing the majority of its labor force. Crops like coffee, cotton, cashews, and tobacco dominate exports, with recent gains from improved irrigation and climate-resilient farming. The mining sector, particularly gold production (over 50 tons annually), has surged, positioning Tanzania as Africa's fourth-largest gold producer and boosting foreign exchange earnings to USD 16.1 billion in exports through September 2024.

Tourism, leveraging the Serengeti and Zanzibar's beaches, accounts for 17% of GDP and is rebounding strongly, while manufacturing and construction are nascent but growing at 8-10% annually, aided by special economic zones. Natural gas discoveries off the southern coast promise future energy self-sufficiency, with projects like the USD 30 billion LNG plant potentially transforming the landscape by 2030.

Yet, these sectors' potential is tempered by Tanzania's middling economic freedom. A score of 5.76 in "Freedom to Trade Internationally" (137th globally) reflects high tariffs (average 12%) and non-tariff barriers, limiting market access for exporters. This hampers diversification away from raw commodities, exacerbating vulnerability to global price swings.

Challenges: From Property Rights to Inclusive Growth

Despite steady expansion, Tanzania grapples with structural hurdles that echo its lower rankings in "Legal System and Property Rights" (5.22, 82nd) and "Size of Government" (5.87, 125th). Weak judicial independence and inconsistent enforcement of contracts deter foreign direct investment (FDI), which, while rising to USD 1.5 billion in 2024, remains below regional peers like Kenya. Government consumption and transfers, at 18% of GDP, crowd out private sector dynamism, while corruption perceptions linger as a drag.

Poverty affects 26% of the population, with growth unevenly distributed, urban areas thrive, but rural households see limited gains from sectoral booms. Climate change poses existential risks to agriculture, with droughts and floods eroding yields by up to 20% in vulnerable regions. Infrastructure gaps, including power shortages and poor transport links, inflate business costs by 15-20%.

The report's broader insights amplify these concerns: Countries in the freest quartile enjoy incomes 6.2 times higher than the least free, with poverty rates 25 times lower. Tanzania's third-quartile status correlates with middling outcomes, life expectancy at 66 years and infant mortality at 43 per 1,000 births, far from the top performers.

Reforms on the Horizon: Toward a USD 1 Trillion Vision

Under President Samia Suluhu Hassan, Tanzania has accelerated reforms since 2021, easing business registration to under 48 hours and digitizing tax systems via the Tanzania Revenue Authority's portal. The 2025 National Five-Year Development Plan emphasizes private sector-led growth, targeting manufacturing's GDP share to rise from 9% to 15% by 2030. Initiatives like the USD 10 billion Standard Gauge Railway and port upgrades in Dar es Salaam aim to slash trade costs.

Enhancing economic freedom could amplify these efforts. Bolstering property rights through land tenure reforms would unlock agricultural productivity, while tariff reductions could double exports in five years. The Economic Freedom Network's local partner, Liberty Sparks, advocates for such changes, linking freer markets to peace and education quality, as explored in the report's chapters on conflict mitigation and PISA score correlations.

Outlook: Unlocking Potential Through Freer Markets

Tanzania's 2025 economy is a tale of promise and perseverance: 6% growth amid global headwinds, but shadowed by institutional frictions. By climbing the economic freedom ladder, perhaps targeting a top-100 ranking, the country could realize its ambition of a USD 1 trillion economy by 2050. Sustained reforms in trade and legal protections, coupled with investments in human capital, offer a pathway to inclusive prosperity. As the Fraser Institute notes, economic freedom isn't just a metric—it's a multiplier for human flourishing. For Tanzania, embracing it could turn steady gains into transformative leaps.