Prepared by TERI for research purposes only; not investment, legal or financial advice, and not the position of the Revolutionary Government of Zanzibar or the Bank of Tanzania. Figures are from the BoT September 2026 review; derived figures are labelled as TICGL calculations.
01 - OVERVIEWExecutive Summary
Zanzibar's economy is service-led and externally strong, but its price level and budget are more exposed than the mainland's. Services (mostly tourism) generate a US$1.7 billion surplus that more than covers a US$770 million goods deficit.
The external position is strong and diversifying into capital-goods imports (3.1 times last year's level), but it rests on tourism receipts and one volatile crop. On the fiscal side, spending ran 1.8 times monthly resources (a TZS 207.7bn gap, TICGL calc.), with grants and World Bank support filling the space left by tax shortfalls.
02 - PRICESInflation: Easing, but Food-Led
Headline inflation eased to 5.6% in August from 6.0% in July, but was above the 3.9% of August 2025. Prices fell 0.2% month on month (August 2025: +0.1%). The annual rise reflects food prices, especially Mbeya rice, sugar, fish and yellow cooking bananas, plus higher transport costs from fuel. Food (weight 41.9%) contributes roughly 4.0 of the 5.6 percentage points (TICGL calc.).
Annual Inflation by Main Group
| Main group (annual %) | Weight | Aug-25 | Jul-26 | Aug-26 | m/m Aug-26 |
|---|---|---|---|---|---|
| Food & non-alcoholic beverages | 41.9 | 4.8 | 10.9 | 9.6 | -0.4 |
| Housing, water, electricity, gas | 25.8 | 3.0 | 0.5 | 1.0 | -0.5 |
| Transport | 9.1 | 1.9 | 4.7 | 5.2 | 0.3 |
| Clothing & footwear | 6.3 | 5.5 | 1.4 | 1.5 | 0.1 |
| Furnishings & household | 4.8 | 3.7 | 4.0 | 4.3 | 0.0 |
| Information & communication | 4.2 | 2.7 | 0.3 | 0.3 | 0.0 |
| Restaurants & accommodation | 1.4 | 1.6 | 6.2 | 6.2 | 0.0 |
| Education | 1.6 | 3.8 | 0.3 | 1.1 | 0.8 |
| Recreation, sport & culture | 1.1 | 4.3 | 2.7 | 3.0 | 0.4 |
| Personal care & misc. | 1.7 | 5.4 | 1.6 | 1.1 | 0.0 |
| Alcohol, tobacco & narcotics | 0.2 | 2.7 | 3.5 | 4.2 | 0.1 |
| Health | 1.3 | 1.6 | 0.9 | 0.9 | 0.0 |
| Headline (all items) | 100.0 | 3.9 | 6.0 | 5.6 | -0.2 |
Food inflation: 4.2% (Aug-25), 11.1% (Jul-26), 9.8% (Aug-26). Non-food: 3.7%, 1.9%, 2.2%. Table 3.1.1 reports food and non-alcoholic beverages at 9.6% and the "Food" selected group at 9.8%. Base: July 2022 = 100.
03 - PUBLIC FINANCEGovernment Budget: Grants Fill the Gap
Resources (revenue and grants) were TZS 251.3bn in August 2026, 10.4% above target, thanks to World Bank budget support. Domestic revenue of TZS 198.0bn was 78.8% of resources but only 92.7% of target. Tax revenue (TZS 174.5bn, 88.1% of domestic revenue) reached 88.7% of target. Every major tax head missed its target except VAT and excise, which beat theirs; non-tax revenue of TZS 23.6bn exceeded its target by 38.2%.
Domestic Revenue, August: 2025 Actual vs 2026 Estimate vs 2026 Actual
| Revenue (TZS bn) | Aug-25 | 2026 est. | Aug-26 | vs est. |
|---|---|---|---|---|
| Tax on imports | 35.1 | 40.5 | 35.6 | -12.1% |
| Local VAT & excise | 40.0 | 56.8 | 60.5 | +6.5% |
| Income tax | 13.4 | 39.0 | 31.3 | -19.7% |
| Other taxes | 70.2 | 60.3 | 47.1 | -21.9% |
| Non-tax revenue | 15.8 | 17.0 | 23.6 | +38.8% |
| Domestic revenue | 174.5* | 213.6 | 198.0 | -7.3% |
*Sum of 2025 components (TICGL calc.: 174.5). "Other taxes" include hotel and restaurant levies, tour operator levy, stamps, airport and seaport charges, road fund and petroleum levy. Note: the BoT chart labels grants at 105.6bn for August 2026, while the text gives total resources of 251.3bn, which implies grants of about 53.3bn; we use the text figure.
Government expenditure was TZS 459.0bn, 73.3% for development projects. That is 10.3% above the revised estimate and 49.0% above August 2025 (TICGL calc.). Development spending (TZS 336.3bn) was 2.4 times its August 2025 level, while other recurrent spending fell 46.5%.
Expenditure, August
Spending Composition, Aug 2026
| Expenditure (TZS bn) | Aug-25 | 2026 est. | Aug-26 | y/y |
|---|---|---|---|---|
| Wages and salaries | 65.8 | 68.1 | 68.0 | +3.3% |
| Other recurrent | 102.2 | 62.0 | 54.7 | -46.5% |
| Development | 140.1 | 286.1 | 336.3 | +140.0% |
| Total | 308.1 | 416.2 | 459.0 | +49.0% |
Read alongside the mainland fiscal analysis
Compare Zanzibar's budget structure with the mainland's FY2025/26 revenue and spending outturn.
Central Government Revenue & Expenditure →04 - EXTERNAL SECTORA Tourism-Powered Surplus
The current account surplus widened 19.3% to US$953.7m in the year to August 2026, from US$799.3m, on higher service receipts that benefited from more visitors and lower service payments. Exports of goods and services rose 18.8% to US$1,847.0m (services receipts are 96.2% of that, TICGL calc.), while imports rose 40.4% to US$909.5m.
Current Account Components, Year Ending August
| US$ million | Aug-25 | Jul-26 | Aug-26 | 2025 | 2026p | Change |
|---|---|---|---|---|---|---|
| Goods account | -47.7 | -55.9 | -56.1 | -514.2 | -769.8 | 49.7% |
| Services account | 182.8 | 191.0 | 221.4 | 1,420.3 | 1,707.2 | 20.2% |
| Service receipts | 191.8 | 196.0 | 226.3 | 1,521.6 | 1,777.8 | 16.8% |
| Service payments | 9.1 | 5.0 | 5.0 | 101.3 | 70.5 | -30.3% |
| Goods & services (net) | 135.1 | 133.7 | 163.5 | 789.1 | 935.6 | 18.6% |
| Exports of goods & services | 193.6 | 199.4 | 228.2 | 1,554.2 | 1,847.0 | 18.8% |
| Imports of goods & services | 58.6 | 64.2 | 63.0 | 648.0 | 909.5 | 40.4% |
| Primary income (net) | 0.2 | 2.2 | 2.6 | 9.1 | 14.6 | 59.9% |
| Secondary income (net) | 0.0 | 0.7 | 0.9 | 1.0 | 3.5 | >100% |
| Current account balance | 135.3 | 136.6 | 166.9 | 799.3 | 953.7 | 19.3% |
Monthly: exports of goods and services USD 228.2m in August 2026 versus 193.6m a year earlier (+17.9%); monthly current account surplus US$166.9m versus 135.3m (+23.4%), TICGL calc.
05 - EXPORTSGoods Exports: A Clove-Driven Doubling
Goods exports more than doubled to US$69.2m. Cloves alone earned US$42.5m (versus US$3.6m), with volumes up from 0.8 to 7.2 thousand tonnes and unit prices up 27% to US$5,936.7 per tonne. Clove output is known to swing sharply between seasons, so this should be read as a rebound, not a trend. Non-traditional exports fell 7.9%: seaweed dropped 57.4% and manufactured goods 33.2%, offset by fish (+44.1%) and other exports (+62.8%).
Goods Exports, Year to Aug 2026
| Export (US$ '000) | 2025 | 2026p |
|---|---|---|
| Cloves | 3,574.0 | 42,494.6 |
| Seaweed | 3,079.7 | 1,311.4 |
| Manufactured goods | 17,329.0 | 11,574.6 |
| Fish & fish products | 730.5 | 1,052.5 |
| Other exports | 7,834.1 | 12,756.9 |
| Grand total | 32,547.3 | 69,190.0 |
Services dominate: transport and travel receipts are the engine of the economy, supported by increased visitor arrivals through 2026 (BoT).
06 - IMPORTSImports: Investment-Led, Not Consumption-Led
Goods imports (fob) rose 53.4% to US$839.0m, led by capital goods (US$224.2m, 3.1 times last year) and industrial supplies (+84.1%), notably iron and steel (US$76.1m). Capital goods are 26.7% of imports, intermediate 59.7% and consumer goods 13.6% (TICGL calc.). Fuel imports fell 17.7%.
Goods Imports by Category, Year Ending August
| Imports (US$ m) | 2025 | 2026p | Change |
|---|---|---|---|
| Capital goods | 71.8 | 224.2 | >100% |
| Machinery & mechanical appliances | 28.3 | 81.5 | >100% |
| Industrial transport equipment | 23.0 | 76.2 | >100% |
| Electrical machinery | 13.5 | 49.3 | >100% |
| Intermediate goods | 403.3 | 500.5 | 24.1% |
| Industrial supplies | 135.4 | 249.3 | 84.1% |
| Fuel and lubricants | 146.8 | 120.9 | -17.7% |
| Food & beverages (industrial use) | 82.8 | 59.8 | -27.9% |
| Consumer goods | 71.7 | 114.3 | 59.4% |
| Total imports (fob) | 546.8 | 839.0 | 53.4% |
07 - CONTEXTZanzibar vs Mainland
| Indicator (Aug 2026) | Zanzibar | Mainland |
|---|---|---|
| Headline inflation | 5.6% | 4.3% |
| Food inflation | 9.8% | 3.7% |
| Food weight in CPI | 41.9% | 28.2% |
| Current account (12m) | +US$953.7m | -US$2,481.8m |
| Exports of goods & services (12m) | US$1,847.0m | US$20,216.2m |
| Imports of goods & services (12m) | US$909.5m (+40.4%) | US$21,269.2m (+21.4%) |
Zanzibar's exports are about 9.1% of the mainland's (TICGL calc.), yet it runs a surplus where the mainland runs a deficit, reflecting its tourism-based service economy.
08 - OUTLOOKRisks and Recommendations
- Food price exposure: food is 41.9% of the CPI and 9.8% inflation; a strong El Niño into early 2027 and rice imports from the mainland keep risk elevated.
- Fiscal gap: spending was 1.8 times resources in August; tax collection reached only 88.7% of target.
- Single-crop and single-sector concentration: cloves are 61% of goods exports and tourism almost all service receipts.
- Rising goods deficit: up 49.7% to US$769.8m as imports outpace exports.
- Current account surplus of US$953.7m, with services surplus 2.2 times the goods deficit (TICGL calc.).
- Capital-goods imports tripled, signalling investment in capacity; development spending is 73% of the budget.
- Monthly price level fell 0.2% and VAT and non-tax revenue beat targets.
Recommendations
- Strengthen tax collection on income, import and hotel-related levies, where targets were missed.
- Diversify exports beyond cloves: seaweed, fish and processed goods recovery plans.
- Secure food supply chains and buffer stocks to contain rice, sugar and fish price pressures.
- Anchor development spending in projects with measurable returns, since donor support cannot fill the gap indefinitely.
"Zanzibar earns its dollars from visitors and spends its shillings on building. The question is whether tomorrow's tax base grows fast enough to carry what today's grants are paying for."
- TICGL / Tanzania Economic Research Institute (TERI)09 - FAQFrequently Asked Questions
What was Zanzibar's inflation in August 2026?
5.6% (July: 6.0%; August 2025: 3.9%), with food at 9.8% and non-food at 2.2%.
How big is Zanzibar's current account surplus?
US$953.7 million in the year to August 2026, up 19.3%, driven by tourism-related service receipts.
Why did goods exports more than double?
Cloves rose to US$42.5 million (about 61% of goods exports) on higher volumes and prices.
How did government finances look in August 2026?
Resources TZS 251.3bn (+10.4% vs target) against spending of TZS 459.0bn, 73.3% on development.
Built from BoT Monthly Economic Review, September 2026: Sections 3.1-3.3, Charts 3.2.1-3.2.2 and Tables 3.1.1, 3.3.1-3.3.3 (Office of the Chief Government Statistician, Ministry of Finance and Planning Zanzibar, TRA, and BoT computations). The grants figure for August 2026 is derived from reported total resources because chart and text differ.
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✉️ economist@ticgl.com →Muhtasari kwa Kiswahili
Utendaji wa Uchumi wa Zanzibar, Agosti 2026 - Mfumuko wa bei ulipungua hadi asilimia 5.6 kutoka 6.0 Julai, lakini bado uko juu ya asilimia 3.9 ya Agosti 2025, ukichochewa na bei za chakula (asilimia 9.8). Ziada ya akaunti ya sasa iliongezeka kwa asilimia 19.3 hadi Dola milioni 953.7.
Bajeti: Rasilimali za serikali zilikuwa TZS bilioni 251.3 (asilimia 10.4 juu ya lengo, kutokana na msaada wa Benki ya Dunia). Matumizi yalikuwa TZS bilioni 459.0, asilimia 73.3 kwa miradi ya maendeleo. Mapato ya kodi yalifikia asilimia 88.7 tu ya lengo.
Sekta ya nje: Mauzo ya bidhaa yalifikia Dola milioni 69.2, na karafuu pekee zikichangia Dola milioni 42.5 (asilimia 61). Mapato ya huduma, hasa utalii, yalikuwa Dola milioni 1,777.8. Uagizaji wa bidhaa za mtaji uliongezeka mara 3.1.
Hatari: Bei za chakula, pengo la bajeti, utegemezi wa karafuu na utalii, na nakisi ya akaunti ya bidhaa (Dola milioni 769.8).
Mapendekezo: Kuimarisha ukusanyaji wa kodi, kuongeza aina za mauzo ya nje, kulinda usambazaji wa chakula, na kuelekeza matumizi kwenye miradi yenye tija.
Chanzo: Benki Kuu ya Tanzania, Monthly Economic Review, Septemba 2026. Mawasiliano: economist@ticgl.com.