Average per capita income in Tanzania is US$280 a year. 20% of the population live on less than US$1 a day; 60% on less than US$2 a day. Poverty is not decreasing, despite relatively stable economic growth. Tanzania is IDA-eligible and has LDC status.

Its macroeconomic policy has been approved by the International Financial Institutions. The country enjoys macroeconomic stability with reasonable and stable growth figures averaging 5% over the last five years. Economic growth is increasing. Inflation is decreasing; in late 2002 it was 4%. Last year the country's foreign debt increased to around US$6.5 billion, considerably higher than when the HIPC completion point was reached in late 2001. The liberalisation of the economy and privatisation of public companies is proceeding very slowly. The country's IDA performance is good, and its rating has risen to 1.

Public resources are managed with increasing transparency. The country has risen to 71st place on the Transparency International index. The civil law system is weak; proceedings are slow and opaque. The government apparatus is not very effective; its quality and capacity could be improved.

The country receives a huge amount of development aid: over US$1.2 billion, equivalent to over 13% of GDP or US$34 per head of the population. The Netherlands is Tanzania's fourth largest donor. In 2002 expenditure amounted to €74.5 million; the budget for 2003 is €56.2 million. The main sectors are education, health and governance (decentralisation). Macro support is also provided. The presence of technical experts at the embassies makes the Netherlands a significant player in relations with the authorities and in donor consultations. Dutch NGOs active in Tanzania include NOVIB, ICCO, Cordaid, HIVOS, SNV and the Netherlands Management Cooperation Programme (PUM).

Tanzania plays an important role in East Africa, both politically and economically. The country is active in promoting peace talks in Burundi and is hosting the Rwanda tribunal. It is considerably burdened by an influx of refugees from Burundi and DRC. Tanzania focuses on regional economic cooperation as a member of the East African Community and SADC. The Netherlands sees Tanzania as a partner in initiatives in the field of conflict prevention, the Great Lakes issue, Burundi, the Arusha tribunal and human rights.

In view of the level of poverty, the country's IDA performance rating, the size of the programme in priority sectors and the Netherlands' position within the donor community, as well as of the importance of supporting a stable country in an unstable region, bilateral development cooperation with Tanzania will be continued.