The July 2025 government budgetary operations from the Bank of Tanzania's Monthly Economic Review (September 2025) reveal a robust fiscal start to the fiscal year, with revenues surpassing targets by 3% amid controlled expenditures. This performance—revenues at TZS 2,911.6 billion (103% of target) and expenditures at TZS 4,006.2 billion—results in a monthly deficit of approximately TZS 1,094.6 billion (about 38% of revenues), but aligns with the annual budget's emphasis on growth-oriented spending. In the broader context of the attached document, this supports Q3 2025 GDP growth estimates above 6%, low inflation (3.4%), and export-driven stability (e.g., gold and tourism inflows). As of October 2025, Tanzania's FY 2024/25 closed with 5.6% GDP growth and a narrowing current account deficit to 2.5% of GDP, per IMF assessments, positioning the country for 6% growth in FY 2025/26 through enhanced domestic revenue mobilization and public investments. These trends imply fiscal resilience, enabling infrastructure and social spending to drive inclusive development, though high recurrent costs (59% of outlays) highlight needs for efficiency to sustain debt sustainability (domestic debt at ~35% of GDP).

Drawing from recent analyses, such as the World Bank's emphasis on Vision 2050 for upper-middle-income status by 2050 and the African Development Bank's projection of 6% growth fueled by agriculture and tourism, the data signals a pro-growth fiscal stance. However, global risks like elevated fertilizer prices (Chart 1.5) could pressure import taxes if unmitigated.

1. Central Government Revenue

• Total revenue (including LGAs): TZS 2,911.6 billion (103% of target).
• Central government revenue:TZS 2,592.7 billion
  • Tax revenue:TZS 2,345.8 billion
    • Taxes on imports: TZS 958.8 billion
    • Income taxes: TZS 795.9 billion
    • VAT & excise on local goods/services: TZS 446.1 billion
    • Other taxes: TZS 347.3 billion
  • Non-tax revenue: TZS 246.8 billion
• Local Government Authorities (LGA) own sources: TZS 133.9 billion

2. Central Government Expenditure

• Total expenditure:TZS 4,006.2 billion
  • Recurrent expenditure:TZS 2,371.8 billion
    • Wages & salaries: TZS 900.8 billion
    • Interest payments: TZS 378.4 billion (Domestic: 277.7; Foreign: 100.8)
    • Other goods, services & transfers: TZS 607.7 billion
  • Development expenditure:TZS 1,634.4 billion
    • Domestically financed: TZS 1,261.2 billion
    • Foreign financed: TZS 373.2 billion.

Table: Central Government Revenue and Expenditure – July 2025 (TZS Billion)

Implications for Tanzania's Economic Development

1. Central Government Revenue: Strong Collections Signal Economic Momentum and Tax Efficiency

• Key Observations Recap: Total revenues (including LGAs) reached TZS 2,911.6 billion (103% target), driven by tax revenue (TZS 2,345.8 billion, or 90% of central total), with imports (TZS 958.8 billion) and income taxes (TZS 795.9 billion) leading. Non-tax added TZS 246.8 billion, and LGA own sources TZS 133.9 billion.
• Implications for Economic Development:
  • Boost to Fiscal Capacity and Growth Financing: Exceeding targets reflects vibrant trade activity, amplified by TZS appreciation (6.6% in August) and export surges (e.g., gold up 35.5% y-o-y to USD 4.32 billion). This provides buffers for the FY 2025/26 budget's TZS 51.1 trillion target, focusing on agriculture (30% of GDP) and industry to achieve 6% growth. The KPMG Budget Brief notes increased domestic revenue (aiming for 16.5% of GDP) will fund inclusive measures like low-income support, potentially lifting 1-2 million from poverty.
  • Enhanced Tax Base and Private Sector Vitality: High import and income taxes indicate formalization gains from 16.2% private credit growth (document), supporting MSMEs (36% of credit). IMF's 2025 Article IV praises this for narrowing deficits, fostering FDI in mining and services.
  • Risks: Reliance on imports (41% of tax revenue) exposes to global shocks; diversification via non-tax (e.g., tourism) is key, as per Deloitte's East Africa Outlook.

2. Central Government Expenditure: Balanced Allocation Prioritizes Development Amid Recurrent Pressures

• Key Observations Recap: Total outlays TZS 4,006.2 billion, with recurrent at TZS 2,371.8 billion (59%, including TZS 900.8 billion wages and TZS 378.4 billion interest) and development at TZS 1,634.4 billion (41%, 77% domestically financed).
• Implications for Economic Development:
  • Investment-Led Growth Acceleration: Significant development spending (TZS 1,634.4 billion) aligns with the document's construction credit rise (14.8%), funding projects like hydropower and ports to sustain 6%+ expansion. Domestic financing dominance (TZS 1,261.2 billion) reduces external vulnerability, as highlighted in SECO's 2025 Economic Report, which credits public investments for 5.6% FY 2024/25 growth.
  • Social Stability and Debt Management: Recurrent focus on wages (23% of total) supports public sector employment (amid 5.5% unemployment), while interest payments (9.4%, 73% domestic) remain sustainable at ~20% of revenues. The Taylor & Francis study on fiscal policy notes this mix drives structural transformation, with transfers (TZS 607.7 billion) aiding vulnerable groups.
  • Risks: Recurrent dominance risks crowding out (e.g., vs. private credit), per World Bank; foreign financing (TZS 373.2 billion) ties to aid flows, vulnerable to global tightening.

Overall Summary and Forward Outlook

July's budgetary outcomes imply a fiscally prudent yet expansionary path for Tanzania's development: over-target revenues fund balanced spending, reinforcing 6% growth projections while anchoring inflation. This builds on FY 2024/25's 5.6% performance and supports Vision 2050 goals, with domestic focus mitigating external risks. Compared to EAC peers (e.g., Kenya's wider deficits), Tanzania's metrics highlight strength. Into Q4 2025, sustained export inflows could trim the annual deficit to 4% of GDP (IMF estimate), but reforms for recurrent efficiency—e.g., digital tax systems—will be crucial to unlock 7% medium-term potential.