Can the 2025/2026 Budget Promote and Uplift Tanzania’s Economy, Especially for Low-Income Citizens?
June 14, 2025
Tanzania’s 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) achieved a commendable 5.5% real GDP growth, surpassing the 5.4% target, by collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target) and investing TZS 15.75 trillion in development projects, including TZS 1.68 trillion for the Standard Gauge Railway (SGR) and TZS 574.8 billion for […]
Tanzania’s 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) achieved a commendable 5.5% real GDP growth, surpassing the 5.4% target, by collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target) and investing TZS 15.75 trillion in development projects, including TZS 1.68 trillion for the Standard Gauge Railway (SGR) and TZS 574.8 billion for rural electrification. Social programs, such as TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, and TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24), supported low-income Tanzanians, enhancing affordability and livelihoods while reducing extreme poverty (8.0% in 2018).
The 2025/2026 budget, increased by 11.6% to TZS 56.49 trillion (USD 22.07 billion), targets 6.0% GDP growth with TZS 38.9 trillion in domestic revenue (16.7% of GDP) and TZS 16.4 trillion for development, prioritizing agriculture, industry, and services. By sustaining social spending and allocating TZS 2.2 trillion for energy and TZS 359.9 billion for tourism, this budget aims to further uplift low-income citizens through job creation and poverty reduction, building on the 2024/2025 foundation.
The 2024/2025 budget provides a benchmark for evaluating the 2025/2026 budget’s potential. Key achievements by May 2025:
Economic Growth: Achieved 5.5% real GDP growth, surpassing the 5.4% target, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9.0%).
Revenue: Collected TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP, up from 13.7% in 2020/2021) due to TRA reforms and mining contributions.
Expenditure: Disbursed TZS 42.90 trillion (85.3% of target), including TZS 30.63 trillion for recurrent expenditure (90.8%) and TZS 15.75 trillion for development (95.1%), with TZS 1.68 trillion for Standard Gauge Railway (SGR), TZS 1.58 trillion for roads/bridges, and TZS 574.8 billion for rural electrification.
Inflation: Maintained at 3.1% (within 3.0–5.0% target), supporting affordability for low-income households.
Trade Balance: Deficit narrowed to USD 5,157.2 million from USD 6,032.3 million in 2023, with exports at 20.3% of GDP (tourism, gold).
Social Spending: Allocated TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, TZS 414.7 billion for healthcare supplies, and TZS 378.7 billion for water projects, benefiting low-income citizens.
Subsidies: TZS 708.6 billion for fertilizers (2021/22–2023/24) reduced farming costs by 50%, and TZS 100 billion monthly for fuel in 2022 stabilized prices.
Impact on Low-Income Citizens:
Fertilizer subsidies increased agricultural incomes for ~65% of the workforce, reducing rural poverty (8.0% in 2018).
Fee-free education and student loans expanded access, enhancing skills for low-income youth.
Rural electrification (TZS 574.8 billion) and water projects improved livelihoods and supported small businesses.
Infrastructure projects (SGR, roads) created jobs, boosting incomes for low-income workers.
Challenges:
Revenue shortfall (89.6% of target) limited spending capacity.
The 2025/2026 budget, themed “Inclusive Economic Transformation through Domestic Resource Mobilization and Resilient Strategic Investment for Job Creation and Improved Livelihoods,” is 11.6% larger than the 2024/2025 budget (TZS 49.35 trillion) and targets 6.0% real GDP growth with a 3.0% GDP deficit. It prioritizes agriculture, industry, services, and social inclusion to uplift low-income Tanzanians.
Financial Structure:
Total Budget: TZS 56.49 trillion (USD 22.07 billion at TZS 2,560/USD, inferred).
Revenue:
Domestic: TZS 38.9 trillion (16.7% of GDP, up from 15.0% in 2024/2025), with TRA targeting TZS 29.17 trillion (13.3% of GDP).
Recurrent: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
Development: TZS 16.4 trillion (29.0% of budget) for SGR, Julius Nyerere Hydropower Project (JNHPP), and social projects.
Key Allocations:
Tourism: TZS 359.9 billion for promotion and conservation.
Energy: TZS 2.2 trillion for power generation and rural electrification.
Agriculture: Continued fertilizer subsidies.
Education and Health: Sustained or increased from TZS 444.7 billion (education) and TZS 414.7 billion (health) in 2024/2025.
Macroeconomic Targets:
Real GDP growth: 6.0% (up from 5.5%).
Inflation: 3.0–5.0% to protect affordability.
Domestic revenue: 16.7% of GDP to reduce borrowing.
Reserves: ≥4 months of imports (4.4 months in 2024).
3. Can the Budget Promote Economic Growth?
The 2025/2026 budget’s potential to achieve 6.0% GDP growth hinges on sectoral investments and fiscal stability, building on the 2024/2025 success (5.5% growth).
a. Agriculture
2024/2025 Contribution:
Contributed 26.5% to GDP, employing ~65% of Tanzanians.
TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) boosted yields.
Tanzania Agricultural Development Bank (TADB) loans supported cash crops.
2025/2026 Strategy:
Continued subsidies and irrigation projects to enhance productivity.
Construction (13.2%) and mining (9.0%) grew via TZS 1.68 trillion for SGR, TZS 1.58 trillion for roads, and TZS 574.8 billion for JNHPP/rural electrification.
Mining revenue rose due to gold exports.
2025/2026 Strategy:
Completion of SGR and JNHPP (2,115 MW) to cut logistics/energy costs.
TZS 2.2 trillion for energy projects, including rural electrification.
Support for Small Industries Development Organization (SIDO) to expand manufacturing.
Potential Impact:
Could contribute 1.5–2.0 percentage points to GDP growth (assuming 7–8% sectoral growth).
Lower energy costs (JNHPP) and import substitution reduce consumer prices.
c. Services (Tourism, Transport, ICT)
2024/2025 Contribution:
Services (~40–50% of GDP) grew via tourism (USD 7.2 billion, 1.4 million visitors) and ICT (12.5% growth).
Exports at 20.3% of GDP narrowed the trade deficit to USD 5,157.2 million.
2025/2026 Strategy:
TZS 359.9 billion for tourism promotion and infrastructure.
Investments in SGR, Air Tanzania (ATCL), and ports to reduce transport costs.
ICT expansion (13.5% growth projected by 2026) via digital services.
Potential Impact:
Could contribute 2.5–3.0 percentage points to GDP growth (assuming 6–7% sectoral growth).
Reduced transport costs (SGR) lower commodity prices.
Overall Growth Potential:
With TZS 16.4 trillion for development (up from TZS 15.75 trillion), the budget could achieve 6.0% growth if revenue targets (TZS 38.9 trillion) are met and projects are executed efficiently.
Risks include revenue shortfalls (89.6% in 2024/2025), currency depreciation (TZS 2,585/USD), and global shocks.
4. Can the Budget Uplift Low-Income Tanzanians?
The budget prioritizes inclusive growth to reduce poverty (26.4% abject, 8.0% extreme in 2018) through targeted measures:
Agriculture Support:
Likely continuation of TZS 708.6 billion fertilizer subsidies to lower farming costs.
TADB loans and irrigation projects increase incomes for ~65% of the workforce.
Impact: Higher yields and exports could reduce extreme poverty below 8.0%, as seen in 2018.
Education:
Sustained or increased funding for fee-free education (TZS 444.7 billion in 2024/2025) and student loans (TZS 636.0 billion).
Impact: Improves skills and employability for low-income youth, supporting long-term poverty reduction.
Healthcare:
Investments in universal health insurance, medicines (TZS 414.7 billion in 2024/2025), and facilities (TZS 47.2 billion).
Impact: Reduces out-of-pocket costs, improving health and productivity for low-income households.
Energy and Water:
TZS 2.2 trillion for energy, including rural electrification, up from TZS 574.8 billion.
Water projects (TZS 378.7 billion in 2024/2025) to expand access.
Impact: Cheaper energy and water support small businesses and improve living standards.
Job Creation:
Infrastructure projects (SGR, JNHPP) and SIDO programs create jobs for low-income workers.
Tourism (TZS 359.9 billion) generates hospitality jobs accessible to low-skill workers.
Impact: Aligns with FYDP III’s goal of 8 million jobs by 2026.
Social Safety Nets:
Expansion of Productive Social Safety Nets (PSSN) cash transfers to reduce malnutrition and poverty.
2025/2026: Larger budget (TZS 56.49 trillion vs. TZS 49.35 trillion) and increased allocations (e.g., TZS 2.2 trillion for energy) enhance inclusivity, with potential to further lower poverty if implemented effectively.
5. Fiscal and Macroeconomic Stability
Revenue: TZS 38.9 trillion (16.7% of GDP) reduces reliance on external loans (TZS 16.02 trillion, 28.4% of budget).
Debt: Public debt at 46.5% of GDP (2024, sustainable) and external debt at USD 34.1 billion (March 2025) support fiscal stability.
Trade: Exports projected to grow by 6.0% (tourism, minerals), narrowing the trade deficit (USD 5,157.2 million in 2024) and stabilizing reserves (USD 5.7 billion).
6. Is the Budget a Solution for Economic Growth and Low-Income Tanzanians?
Strengths:
Economic Growth: The TZS 56.49 trillion budget, with TZS 16.4 trillion for development, can achieve 6.0% growth by leveraging agriculture (subsidies), industry (SGR, JNHPP), and services (TZS 359.9 billion for tourism). This builds on the 2024/2025 success (5.5% growth with TZS 15.75 trillion development spending).
Fiscal Strategy: Higher domestic revenue (16.7% of GDP vs. 15.0%) and sustainable debt (46.5% of GDP) enable inclusive spending.
Challenges:
Revenue Collection: 2024/2025’s 89.6% shortfall (TZS 45.07 trillion of TZS 50.29 trillion) and TRA inefficiencies risk undermining TZS 38.9 trillion target.
External Risks: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs, affecting low-income consumers.
Implementation: Delays in SGR or JNHPP could limit job creation and cost reductions.
Conclusion: The 2025/2026 budget has strong potential to be a solution for Tanzania’s economic growth and uplifting low-income citizens if it overcomes revenue and implementation challenges. Its increased size (TZS 56.49 trillion), focus on inclusive sectors, and social programs position it to surpass the 2024/2025 budget’s impact, fostering 6.0% growth and reducing poverty through jobs and affordability.
Tanzania’s Budget and Economic Performance: Key Figures (2024–2026)
