Tanzania vs. Burundi

Tanzania has achieved high growth rates based on its vast natural resource wealth and tourism with GDP growth in 2009-17 averaging 6%-7% per year. Dar es Salaam used fiscal stimulus measures and easier monetary policies to lessen the impact of the global recession and in general, benefited from low oil prices. Tanzania has largely completed its transition to a market economy, though the government retains a presence in sectors such as telecommunications, banking, energy, and mining.

The economy depends on agriculture, which accounts for slightly less than one-quarter of GDP and employs about 65% of the work force, although gold production in recent years has increased to about 35% of exports. All land in Tanzania is owned by the government, which can lease land for up to 99 years. Proposed reforms to allow for land ownership, particularly foreign land ownership, remain unpopular.

The financial sector in Tanzania has expanded in recent years and foreign-owned banks account for about 48% of the banking industry's total assets. Competition among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services, though interest rates are still relatively high, reflecting high fraud risk. Banking reforms have helped increase private-sector growth and investment.

The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania's aging infrastructure, including rail and port, which provide important trade links for inland countries. In 2013, Tanzania completed the world's largest Millennium Challenge Compact (MCC) grant, worth $698 million, but in late 2015, the MCC Board of Directors deferred a decision to renew Tanzania's eligibility because of irregularities in voting in Zanzibar and concerns over the government's use of a controversial cybercrime bill.

The new government elected in 2015 has developed an ambitious development agenda focused on creating a better business environment through improved infrastructure, access to financing, and education progress, but implementing budgets remains challenging for the government. Recent policy moves by President MAGUFULI are aimed at protecting domestic industry and have caused concern among foreign investors.

Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. Agriculture accounts for over 40% of GDP and employs more than 90% of the population. Burundi's primary exports are coffee and tea, which account for more than half of foreign exchange earnings, but these earnings are subject to fluctuations in weather and international coffee and tea prices, Burundi is heavily dependent on aid from bilateral and multilateral donors, as well as foreign exchange earnings from participation in the African Union Mission to Somalia (AMISOM). Foreign aid represented 48% of Burundi's national income in 2015, one of the highest percentages in Sub-Saharan Africa, but this figure decreased to 33.5% in 2016 due to political turmoil surrounding President NKURUNZIZA's bid for a third term. Burundi joined the East African Community (EAC) in 2009.

Burundi faces several underlying weaknesses - low governmental capacity, corruption, a high poverty rate, poor educational levels, a weak legal system, a poor transportation network, and overburdened utilities - that have prevented the implementation of planned economic reforms. The purchasing power of most Burundians has decreased as wage increases have not kept pace with inflation, which reached approximately 18% in 2017.

Real GDP growth dropped precipitously following political events in 2015 and has yet to recover to pre-conflict levels. Continued resistance by donors and the international community will restrict Burundi's economic growth as the country deals with a large current account deficit.

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