The bank cited Tanzania among a group of nations that have successfully reduced inequality significantly in recent years, but warned that if unequal distribution of the gains of economic growth continues, the goal of ending extreme poverty by 2030 may not be achieved.
Tanzania, one of the ten fastest-growing economies in Africa, has made some modest gains in reducing inequality over the past two decades, but
more action is needed to share prosperity and tackle poverty, the World Bank said in a new report.
"The economic expansion (in Tanzania) has been driven since the early 2000s primarily by rapidly growing sectors, particularly communication, financial services and construction," said the bank in the inaugural edition of the Poverty and Shared Prosperity study.
"However, growth in these sectors did not translate into substantive improvements in the living conditions of the poor, the less well educated, or rural residents relative to the more highly skilled residing in urban areas, notably, Dar es Salaam."
Tanzania's gross domestic product (GDP) or economic output grew by 7.0 per cent in 2015 and is expected to expand by 7.2 per cent this year, according to Bank of Tanzania (BoT) projections.
From a fiscal point of view, Tanzania, which has a population of around 47 million people, tends to redistribute more than anticipated based on its relatively low income level, said the World Bank.
"Nonetheless, the fiscal system (in Tanzania) contributes little to reducing inequality," it said.
"This explains, in part, a more limited ability of economic growth to reduce poverty during the early years of the first decade of the 2000s."
The bank attributed rapid GDP growth over the past two decades to a transition from a socialist to a market-based economy, which gave a further, significant boost to domestic production.
"However, this transition to a market-based economy is not fully completed -- the private sector is still characterized by high levels of market concentration and informality and low levels of productivity, mainly because of weak market institutions and a weak business environment," it said.
"The country is still facing persistent state control over the market, particularly in agriculture."
The bank said the world has generally made impressive progress in lifting people out of extreme poverty considering the lethargic state of the global economy since the financial crisis.
“The message is clear: to end poverty, we must make growth work for the poorest, and one of the surest ways to do that is to reduce high inequality, especially in those countries where many poor people live,” said World Bank president Jim Yong Kim.
The report, the first of an annual series looking at the latest and most accurate trends in global poverty and shared prosperity, found that nearly 800 million people around the world lived on less than $1.90 a day in 2013 – the indicator for extreme poverty.
That is 100 million fewer people than in 2012, with most of the progress driven by nations in East Asia, specifically China, and Indonesia and India.
But progress has come at the expense of sub-Saharan Africa, which now houses half of the global total of poor people and more than all other regions combined. Another third live in South Asia.
Contrary to the widely accepted narrative that global inequality is on the rise, the World Bank claims that inequality between and within countries has been falling consistently since 1990.
In 60 out of the 83 countries covered by the report – representing 67 per cent of the world’s population – average incomes went up for those living in the bottom 40 per cent of their nation’s income distribution, despite the financial crisis.
Inequality has been falling in many places since 2008 too, the bank said, noting that for every country that saw a substantial increase in inequality during this time period, two others saw a similar decrease.
But historically, the wealth gap is worryingly wide. Earlier this year, Oxfam highlighted that sixty two people now own as much wealth as the poorest half of the planet’s population combined.
The bank also stressed yesterday that inequality is “still far too high”. In 34 of the 83 countries monitored, income gaps widened as incomes grew faster among the wealthiest 60% of the population than they did among the bottom 40 per cent.
In 23 countries, the bottom 40 per cent saw their incomes decline in absolute terms. In many advanced economies, such as the United Kingdom and the United States, incomes for the lower earners have yet to recover to pre-crisis levels.
The bank highlighted a number of policies that countries should pursue, based on the success of a group of nations that have reduced inequality significantly in recent years, including Tanzania, Brazil, Cambodia, Mali and Peru.
The policies, such as universal health and education, cash transfers to poor families, progressive taxation and rural infrastructure, have a proven ability to build poor peoples’ earnings, improve their access to services, and improve their long-term development prospects without damaging growth, the bank said.
Kim said that none of the measures represent a “miracle cure”, with some able to affect income inequality rapidly, and others bringing change more gradually.
He continued: “But all are supported by strong evidence, and many are within the financial and technical reach of countries. Adopting the same policies doesn’t mean that all countries will get the same results, but the policies we’ve identified have worked repeatedly in different settings around the world.”
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