The United Republic of Tanzania is one of the few countries in the troublesome region of East Africa that continues to enjoy constant peace, and actually harbors over 700,000 refugees from surrounding nations—but its social and economic development is being threatened by HIV/AIDS.

Experiences from several parts of the country indicate that HIV infected persons, on average, die about 4 to 12 months after falling ill with one or more of the major manifestations of AIDS. Given the fatality of the illness, and with 1.7 million infected adults, HIV/AIDS can no longer be viewed as just a health problem and is recognized as a development problem. The impact of the epidemic is serious given its widespread existence; it is now the major cause of adult mortality in many parts of Tanzania. 

According to a June 2003 report from the World Bank, previous studies have grossly underestimated the economic impact of the AIDS epidemic, failing to factor in the impact of education and parenting on the economy. The authors point out that by killing mostly young adults, AIDS does more than destroy the human capital embodied in them. AIDS also deprives their children of the assets to become economically productive adults, their parents' care, knowledge, and capacity to finance education. This weakening of the mechanism through which human capital is transmitted and accumulated across generations becomes apparent only after a long time lag, and it is progressively cumulative in its effects.¹

HIV/AIDS is robbing sub-Saharan Africa of potential economic gains by decimating whole populations. According to the UNAIDS/WHO AIDS Epidemic Update: December 2005, sub-Saharan Africa has just over 10 percent of the world's population, but is home to more than 60 percent of all HIV/AIDS victims—around 25.8 million people, and growing. However, in three African nations: Kenya, Uganda and Zimbabwe, "declines in adult national HIV prevalence appear to be under way," a U.N. report states.² During 2005, an estimated 2 million people in sub-Saharan Africa died from AIDS, leaving behind a cummulative total of 12 million orphaned African children, since the AIDS epidemic began.³

Crafts and Haacker of the IMF have sought to quantify the welfare losses associated with HIV/AIDS. They used estimates and projections of the impact of the epidemic on mortality and life expectancy, as well as existing studies on the value of statistical life. They estimated welfare loss as the loss in per capita income that would have the same effect on lifetime utility as the increase in mortality, expressed in percentage of GDP (Gross Domestic Product). They do note numerous limitations of their study. For Tanzania , they found that HIV/AIDS has already resulted in welfare losses equivalent to 47.2 percent of GDP.⁴

The HIV/AIDS crisis has had a serious impact on Tanzania’s economy, affecting agricultural and industrial production, as well as life expectancy. Industries experiencing the loss of skilled workers are facing high costs of recruitment and training of the new personnel. As the labor force in agriculture declines, agricultural production will decline. Agriculture takes place on family farms where agricultural production is labor intensive, and seasonal labor constraints are common. Since agriculture is the backbone of the Tanzanian economy, and most agricultural workers are in the age group 15-45 who are mostly affected by the epidemic, the impact of HIV/AIDS is becoming more noticeable as the epidemic spreads to rural communities. Production of food and cash crops suffers as the labor force gets sick and dies from AIDS.

The World Bank estimates that because of the AIDS epidemic, life expectancy by 2010 will revert to 47 years, instead of the projected 56 years in the absence of AIDS. The World Bank also expects that the age of the working population will decline from 31.5 years to 29 years by 2010. The overall younger work force will have less education, less training and less experience.

In 2001, Tanzania's HDI (Human Development Index) value was 0.400, ranking it 160 out of 175 countries for which UNDP calculated an HDI. The country's HDI is below that for the sub-Saharan Africa region (0.468) as well as all low-income countries (0.561 ). More alarming is Tanzania's HDI value, already very low, has been decreasing since 1990, when it stood at 0.408. Although the government's spending on health rose during the 1990s, the enormous impact of AIDS mortality drastically reduced the life expectancy component of the HDI value. Despite notable macroeconomic gains, the country's GNI (Gross National Income) per capita remains very low.

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1 Clive Bell, Shantayanan Devarajan, and Hans Gersbach, The Long-run Economic Costs of AIDS: Theory and an Application to South Africa. 2003, World Bank: Washington, DC. http://www1.worldbank.org/hiv_aids/docs/BeDeGe_BP_total2.pdf
2 U.N. Reports AIDS Rates Decline Among Some African Nations http://usinfo.state.gov/gi/Archive/2005/Nov/25-438271.html
3 Sub Saharan Africa HIV & AIDS Statistics. http://www.avert.org/subaadults.htm
4 Nicholas Crafts and Markus Haacker, Welfare Implications of HIV/AIDS. 2003, IMF: Washington, DC. http://www.imf.org/external/pubs/ft/wp/2003/wp03118.pdf