Tanzania Threshold II - Constraints Analysis

MCC’s evidence-based approach to its investments begins with a mutual understanding of a country’s main growth challenges. During the first phase of the compact or threshold program development process, MCC and the selected partner country, jointly conduct a constraints-to-growth analysis (CA). This analysis identifies the constraints to private investment and entrepreneurship that are most binding to economic growth in the country. The results of this analysis enable the country, together with MCC, to select activities most likely to contribute to sustainable, poverty-reducing growth.

The Constraints Analysis Report for the second Tanzania Threshold Program highlights the following binding constraints to economic growth:

1. High costs of conducting international trade. High trade costs due to poor logistics, infrastructure deficiencies, poor trade facilitation, and tariff and non-tariff barriers hamper the country’s export potential. 
2. Unfriendly business environment, particularly burdensome tax burden/policy and licensing regime, that  promote informality. Tanzania’s tax policy and administration contribute to low levels of domestic resource  mobilization and create a significant burden for both  domestic and foreign private sector actors. This burden drives much of the preference for informal economic 
   activity.
3. High costs of access to finance. The exceptionally high costs of borrowing have hampered private investment.