Fiscal Deficit Reaches TZS 618.5 Billion (Sept 2025)

In September 2025, Tanzania’s fiscal landscape showed a mix of resilient revenue mobilization and slower-than-planned expenditure execution, shaping an overall moderate fiscal deficit of TZS 618.5 billion. Total revenue reached TZS 2,728.1 billion—equivalent to 87.2% of the target—supported largely by tax collections amounting to TZS 2,571.4 billion. However, performance fell short due to weaker import duties, lower corporate taxes from mining companies, and delayed recruitment reducing PAYE inflows. On the expenditure side, total spending stood at TZS 3,346.6 billion, representing 71.9% of the target, with recurrent spending dominating but development spending constrained by slow disbursements and reduced donor flows. This revenue–expenditure pattern reflects a government attempting to maintain fiscal discipline amid external uncertainties and domestic structural inefficiencies, while financing the shortfall through domestic borrowing and concessional foreign loans to support ongoing economic expansion.

1. Central Government Revenues

Key Figures (September 2025)

• Total domestic revenue collected:
  TZS 2,728.1 billion

Breakdown:

• Tax revenue: TZS 2,571.4 billion
• Non-tax revenue: TZS 156.7 billion

Performance Against Target:

• Actual: TZS 2,728.1 billion
• Target: TZS 3,126.3 billion
• Performance: 87.2% of target

Reasons for Underperformance

• Lower-than-expected import duty collection
• Decline in corporate tax from mining firms
• Lower PAYE due to delays in recruitment
• Reduced revenue from oil marketing firms due to stabilized fuel prices

2. Central Government Expenditures

Key Figures (September 2025)

• Total government expenditure:
  TZS 3,346.6 billion

Breakdown:

• Recurrent expenditure: TZS 2,073.7 billion
• Development expenditure: TZS 1,272.9 billion

Development Expenditure Breakdown:

• Locally financed development spending: TZS 590.9 billion
• Foreign financed development spending: TZS 682.0 billion

Expenditure Performance

• Total expenditure target: TZS 4,656.3 billion
• Actual: TZS 3,346.6 billion
• Performance: 71.9% of target

Drivers of Lower Actual Spending

• Slow disbursement of development funds
• Delays in project execution
• Reduced donor disbursements

3. Fiscal Balance (Revenue vs Expenditure)

• Overall fiscal deficit (September 2025):
  TZS 618.5 billion

This deficit was financed through:

• Domestic borrowing via government securities
• External concessional loans

Summary Table — Central Government Revenue & Expenditure (September 2025)

Implications of Central Government Budgetary Operations in September 2025

The data on Tanzania's central government budgetary operations for September 2025, drawn from the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), reveals a fiscal environment characterized by resilient revenue mobilization amid execution challenges on the spending side. This occurs within a context of robust economic growth (6.3% real GDP in Q2 2025), low inflation (3.4%, within 3–5% target), and accommodative monetary policy (CBR at 5.75%, with M3 growth at 20.8% y/y driven by private credit; Section 2.3). The resulting TZS 618.5 billion fiscal deficit (financed via domestic securities and external concessional loans) underscores prudent management but highlights vulnerabilities tied to external factors like commodity prices (mixed trends, e.g., declining oil offsetting rising coffee). Below, I break down the implications across key areas, integrating broader economic ties.

1. Revenue Performance: Resilience with Structural Vulnerabilities

• 87.2% Achievement (TZS 2,728.1 bn vs. TZS 3,126.3 bn Target): This below-target collection still marks improvement over prior months (as noted in the Review's narrative), buoyed by strong domestic tax streams like VAT on local goods, excise duties, and direct taxes (e.g., income and corporate). Tax revenue dominated at TZS 2,571.4 bn (94% of total), reflecting effective administration and economic activity in growth drivers like agriculture and mining (contributing 1.8% and 1.5% to Q2 GDP, respectively).
• Underperformance Drivers: Shortfalls in import duties (linked to stabilized global oil prices, reducing fuel import values; Chart 2.2.5 shows domestic petrol/diesel declines), mining corporate taxes (despite sector growth, possibly due to profit repatriation or lower global metal prices), PAYE (recruitment delays amid labor market tightness), and oil marketing revenues (tied to subdued demand) signal over-reliance on volatile external and commodity-linked sources. Non-tax revenue (TZS 156.7 bn) remained marginal and stable, underscoring the need for diversification (e.g., via fees from services or assets).
• Broader Implications:
  • Positive: Bolsters fiscal sustainability, aligning with EAC/SADC criteria (deficits below thresholds). Supports exchange rate stability (shilling +9.4% y/y appreciation, aiding import competitiveness) and low inflation by avoiding excessive money printing.
  • Risks: Exposure to global shocks (e.g., renewed trade protectionism) could widen shortfalls, pressuring future collections. Encourages policy focus on broadening the tax base (e.g., digital economy or informal sector) to sustain 6% full-year GDP projection.

2. Expenditure Performance: Prioritization Amid Execution Hurdles

• 71.9% Achievement (TZS 3,346.6 bn vs. TZS 4,656.3 bn Target): Recurrent spending (TZS 2,073.7 bn) held steady, covering essentials like wages, subsidies, and operations—critical for social stability and public service delivery in a low-inflation environment (core inflation at 2.2%). Development outlays (TZS 1,272.9 bn) were robust despite shortfalls, split between local (TZS 590.9 bn) and foreign-financed (TZS 682.0 bn) projects, emphasizing infrastructure in construction (1.1% GDP contribution) and energy (reliable supply as a growth enabler).
• Underperformance Drivers: Delays in project execution (procurement bottlenecks), slow fund disbursements, and reduced donor inflows (possibly due to global fiscal tightening; IMF notes widening deficits as risks) hampered full rollout. This echoes broader challenges in capital spending absorption, common in emerging economies.
• Broader Implications:
  • Positive: Balanced composition (recurrent ~62% of total) prevents overheating while directing ~38% to growth-enhancing investments, supporting sectors like mining/quarrying (up due to exports; Section 2.8 preview). Foreign financing (51% of dev spend) leverages concessional terms, keeping debt sustainable.
  • Risks: Lagged infrastructure could bottleneck long-term growth (e.g., slowing construction momentum) and exacerbate regional disparities (e.g., Zanzibar's external performance). Calls for streamlined procurement and donor coordination to hit annual targets.

3. Fiscal Balance and Financing: Manageable Deficit with Borrowing Pressures

• Deficit of TZS 618.5 bn (Commitment Basis): The revenue-expenditure gap reflects fiscal expansion to underpin 6% growth, but at 87.2% revenue vs. 71.9% spending utilization, it highlights absorption inefficiencies rather than profligacy.
• Financing Mix: Domestic borrowing (via Treasury bonds/bills) and external concessional loans provide flexibility, avoiding high-cost commercial debt. This aligns with monetary policy's liquidity management (reverse repos absorbing surpluses), preventing spillover to inflation.
• Broader Implications:
  • Positive: Deficit remains "manageable" (as per Review), financed sustainably to complement private credit growth (16.1% y/y). Supports external sector strength (e.g., export-led current account surplus).
  • Risks: Rising domestic borrowing could elevate yields, feeding into higher lending rates (overall at 15.18% in September, up 0.11 pp; prior analysis). External loans expose to currency risks, though shilling stability mitigates this. Cumulative deficits may strain debt metrics if revenues falter (e.g., from oil price volatility).

4. Macroeconomic and Policy Context from the Review

• Synergies with Growth and Stability: These operations reinforce fiscal prudence alongside monetary easing, enabling 6.3% Q2 GDP (agriculture/mining-led) and food stock buildup (570,519 tonnes by NFRA), which curbs food inflation (down to 7.0%). In Zanzibar (Section 3), similar patterns likely aid tourism recovery.
• External Ties: Mixed commodity prices (oil down, gold/coffee up; Table A8) explain revenue dips but buoy mining taxes long-term. Global risks (protectionism, tighter conditions; Section 1.0) amplify vulnerabilities, yet EAC/SADC inflation convergence provides regional buffers.
• Outlook: Projections for stable inflation (3–5%) and 6% growth assume improved execution. Policy recommendations: Enhance revenue forecasting (e.g., via digital tools), accelerate dev spending, and diversify exports to insulate against shocks.

In conclusion, September 2025's budgetary dynamics imply a fiscally disciplined stance that underpins Tanzania's growth trajectory while navigating execution and external headwinds. Revenue robustness signals economic vitality, but addressing spending delays and revenue volatility is crucial for sustaining momentum into 2026. This balanced approach—echoing the Review's emphasis on prudent policies—positions the economy resiliently against global uncertainties.