2024/25 Budget: A Pathway to Economic Growth and Improved Incomes for Ordinary Tanzanians

The 2024/25 Budget, with a total allocation of TZS 49.35 trillion, aims to foster economic growth and improve incomes for ordinary Tanzanians. Projected GDP growth is set to rise from 5.1% in 2023 to 5.4% in 2024, driven by increased investments in agriculture (26.5% of GDP), construction (13.2%), and mining (9.0%). Key measures include a 10% increase in tax revenue to TZS 29.41 trillion, a 30% allocation for development expenditure on energy and transportation, and targeted support for local industries and agriculture. However, managing a national debt of TZS 91.7 trillion and inflation will be crucial to ensure sustainable benefits for citizens.

GDP Growth:

• Tanzania's real GDP grew by 5.1% in 2023, up from 4.7% in 2022.
• Projected GDP growth for 2024 is 5.4%, driven by public and private investment.
• The Economic Intelligence Unit (EIU) forecasts an average annual GDP growth of 6.3% from 2024, peaking at 6.8% in 2028 due to strong private consumption, growth in the energy sector, and buoyant tourism and mining sectors​​.

Sector Contributions to GDP:

• Agriculture: 26.5%
• Construction: 13.2%
• Mining: 9.0%​​.

Budget Overview:

• The 2024/25 budget is TZS 49.35 trillion, an 11.2% increase from the 2023/24 budget.
• Domestic revenue is expected to account for 70.1% of the total budget, driven by a 10% increase in tax revenue from TZS 26.7 trillion in 2023/24 to TZS 29.41 trillion in 2024/25​.

Recurrent and Development Expenditure:

• Recurrent expenditure will increase by TZS 4.4 trillion (14.6%) in 2024/25, mainly due to higher debt servicing costs and borrowing for infrastructure projects.
• Development expenditure is expected to be 30% of the total budget, focusing on energy and transportation infrastructure projects​​.

National Debt:

• As of April 2024, the total national debt is TZS 91.7 trillion, with TZS 60.95 trillion in external debt and TZS 30.75 trillion in domestic debt.
• The debt-to-GDP ratio for 2024 is projected to be 52.4%​​.

Inflation and Exchange Rates:

• The exchange rate of TZS to USD is expected to be 2,569 in 2024​​.

A comprehensive overview of Tanzania's economic status and projections for the near future.

The 2024/25 budget has several provisions that could positively impact the income and economic situation of ordinary Tanzanian citizens, especially those with low to moderate incomes. The focus on agricultural growth, infrastructure development, and support for local industries are promising signs. However, managing debt and inflation will be crucial to ensure that the benefits are not offset by higher living costs. If implemented effectively, this budget has the potential to improve the economic well-being of Mwananchi mwenye kipato cha kawaida (the average citizen with a regular income).

Budget Size and Allocation

Total Budget:

• 2023/24: TZS 44.4 trillion
• 2024/25: TZS 49.35 trillion
• Change: Increase of 11.2%

Economic Growth

GDP Growth:

• 2023: 5.1%
• 2024 (Projected): 5.4%
• Future Projections: Average of 6.3% annually, peaking at 6.8% in 2028

The GDP growth is steadily increasing, indicating a positive economic trajectory, supported by strong private consumption, growth in energy, tourism, and mining sectors.

Revenue and Taxation

Tax Revenue:

• 2023/24: TZS 26.7 trillion
• 2024/25: TZS 29.41 trillion
• Change: Increase of 10%

Domestic Revenue Contribution:

• 2024/25: 70.1% of total budget

The significant increase in tax revenue reflects improvements in tax collection efficiency and economic activities, suggesting better fiscal health and capacity to fund public services and infrastructure.

Expenditure

Recurrent Expenditure:

• 2023/24: TZS 30.1 trillion
• 2024/25: TZS 34.5 trillion
• Change: Increase of 14.6%

Development Expenditure:

• 2024/25: 30% of total budget

The increase in recurrent expenditure, largely due to higher debt servicing costs and further borrowing for infrastructure, underscores the need for careful debt management. The emphasis on development expenditure, especially in energy and transportation, aligns with the country's growth objectives.

Sectoral Contributions to GDP

• Agriculture: Remains a significant contributor at 26.5%
• Construction: Accounts for 13.2% of GDP
• Mining: Accounts for 9.0% of GDP

The sectoral contributions highlight the diversified nature of the economy, with agriculture, construction, and mining playing pivotal roles. Continued investments in these sectors are essential for sustained growth.

National Debt

Total National Debt:

• April 2024: TZS 91.7 trillion
• External Debt: TZS 60.95 trillion
• Domestic Debt: TZS 30.75 trillion

Debt to GDP Ratio:

• 2023: 52.4%
• 2024: 52.7%

The debt levels have increased, and the debt-to-GDP ratio remains high. This trend necessitates strategies to enhance debt sustainability, such as boosting revenue generation and managing expenditure.

Exchange Rates and Inflation

Exchange Rate (TZS/USD):

• 2023: 2,383
• 2024: 2,569

The Tanzanian Shilling has depreciated, which could affect import costs and inflation. Efforts to stabilize the currency and manage inflation are critical for economic stability.

Foreign Currency Reserves

Foreign Currency Reserves:

• March 2024: USD 5.3 billion (4.4 months of import cover)

Adequate foreign currency reserves provide a buffer against external shocks and help maintain economic stability.

Summary of Performance

• Growth: The economy shows positive growth trends with increasing GDP growth rates.
• Revenue and Expenditure: There is a notable increase in both revenue and expenditure, reflecting expanding economic activities and government investments.
• Debt: Rising debt levels and a high debt-to-GDP ratio call for prudent fiscal management.
• Currency Stability: The depreciation of the Tanzania Shilling needs to be addressed to control inflation and maintain economic stability.

Positive Indicators for Economic Improvement

1. GDP Growth:
   • The projected GDP growth from 5.1% in 2023 to 5.4% in 2024, and an average annual growth of 6.3% beyond 2024, suggests overall economic expansion. Economic growth typically leads to job creation and higher incomes for the population, including those with lower incomes.
2. Sectoral Growth:
   • Agriculture: Continues to be a significant contributor to GDP (26.5%). Since a large portion of the Tanzanian population relies on agriculture for their livelihood, growth in this sector can directly benefit low-income citizens.
   • Construction and Mining: Growth in these sectors (13.2% and 9.0% of GDP, respectively) can create job opportunities, potentially increasing incomes for workers in these industries.
3. Development Expenditure:
   • With 30% of the total budget allocated to development expenditure focusing on energy and transportation infrastructure, there will likely be more job opportunities in these projects. Improved infrastructure can also lead to better access to markets, education, and healthcare, indirectly benefiting low-income citizens.
4. Tax Revenue Increase:
   • The increase in tax revenue (10% increase from TZS 26.7 trillion in 2023/24 to TZS 29.41 trillion in 2024/25) indicates better fiscal health and capacity for the government to fund public services and social programs that can benefit low-income households.
5. Recurrent Expenditure:
   • Increased recurrent expenditure (14.6% rise) might be directed towards public sector salaries and social services, which could benefit lower-income individuals through better public services and potential increases in public sector wages.

Direct Measures Benefiting Low-Income Citizens

1. Agriculture and Fishing:
   • Introduction of a 2% final withholding tax (WHT) on payments for agricultural produce, fishing, animal, and poultry keeping, and exemptions for certain agricultural activities suggest targeted support for farmers and fishers, who are typically among the lower-income segments.
2. VAT Measures:
   • VAT exemptions for essential items like locally manufactured fertilizer and supply of textile products using locally grown cotton can reduce costs for farmers and local manufacturers, benefiting their income levels.
3. Support for Local Industries:
   • Duty remission and stay of application of import duty rates on various items aim to promote local manufacturing and employment, which could lead to more job opportunities and higher incomes for workers in these industries.

Challenges and Considerations

1. Debt Servicing Costs:
   • The increase in debt servicing costs due to a depreciating shilling and further borrowing for infrastructure projects might strain the budget, potentially limiting the government’s ability to fund additional social programs.
2. Inflation and Currency Depreciation:
   • The depreciation of the Tanzanian Shilling (from TZS 2,303/USD in 2022 to TZS 2,569/USD in 2024) and inflation pressures could erode purchasing power, particularly affecting low-income households. Effective measures to stabilize the currency and control inflation are essential to protect the real income of citizens.