Tanzania came to independence in 1961 with a severely underdeveloped economy and extremely limited infrastructure. In an effort to bring about rapid yet socially equitable development, it became an early proponent of African socialism, launched in 1967 with the nationalisation of banking, finance, industry and marketing boards; and the resettlement of peasants in communal ujamaa villages, created out of large estates.
However, after an initial boom, the formal economic base shrank, production fell and the parallel economy became a way of life. The Uganda–Tanzania War, falls in commodity prices and failures of the policy itself brought the country to the verge of bankruptcy by the mid-1980s.
Since 1986 new policy directions and IMF-backed structural adjustment programmes have, at considerable cost to social programmes, helped integrate the parallel economy and stimulate growth, which for the most part has been ahead of population growth since the policy change. From the mid-1990s the government embarked on a programme of economic liberalisation and diversification.
The Dar es Salaam Stock Exchange was opened in March 1998. The government has encouraged foreign investment in industry, especially mining where investments have been made in gold, nickel and cobalt mining. Hundreds of public enterprises were privatised during the 1990s and the programme continued in the 2000s, with privatisation of Air Tanzania and Tanzania Railways Corporation, though following a dispute with the railway management company over investment levels the government subsequently cancelled its contract with the company and the contractor’s majority shareholding in Tanzania Railways reverted to public ownership. The principal exports are gold, diamonds and other gemstones, coffee, fish and seafood, tobacco, cotton, cashew nuts and tea.
In July 2001, an immense new gold mine was commissioned near Mwanza, with the potential to make the country one of the world’s largest producers of gold. In 2004, natural gas began to flow from the island of Songo Songo, in southern Tanzania, via pipeline to a power station and cement plant at Dar es Salaam. New discoveries of offshore gas since 2010 were reported in 2014 to comprise 700–850 billion cubic metres of recoverable gas. Plans for a liquefied natural gas plant were under discussion in 2014. Good indications of substantive oil deposits have also been found.
After averaging 2.9 per cent p.a. in the 1990s, GDP growth strengthened in the 2000s. It was sustained at six per cent p.a. or more during 2001–15, despite the adverse international economic climate in 2008–09.