Tanzania's external sector demonstrated robust resilience in October 2025, with the current account deficit narrowing sharply by 59.3% month-on-month to USD 188.2 million from USD 462.5 million in October 2024. This improvement reflects a year-to-date trend where the annual deficit for the 12 months ending October 2025 fell to USD 2.22 billion (2.4% of GDP), down from USD 2.89 billion (3.8% of GDP) in the prior year, per the Bank of Tanzania's (BoT) November 2025 Monthly Economic Review. The narrowing is primarily driven by a burgeoning services surplus—led by tourism and transport—outpacing a moderating goods deficit, amid favorable global conditions like subdued oil prices (Brent crude at ~USD 70/barrel) and steady export growth.

Economic Implications: This sustained narrowing bolsters Tanzania's external buffers, stabilizing the Tanzanian shilling (TZS/USD at ~2,700, with minimal depreciation pressure) and supporting foreign exchange reserves at USD 5.8 billion (equivalent to 4.1 months of import cover, above the 3-month adequacy threshold). It enhances investor confidence, facilitating lower borrowing costs and aligning with IMF projections for 6% GDP growth in 2025, driven by services-led expansion. However, persistent goods deficits underscore the need for export diversification beyond gold and tourism to mitigate vulnerabilities to commodity price swings and global slowdowns. Overall, it creates fiscal-monetary space for infrastructure investments under Vision 2050, potentially lifting poverty rates from 68% (US$4.20 PPP line) while curbing imported inflation. Read More: Tanzania Services-Led External Sector Strengthens

1.1 Current Account Summary

The table below summarizes key components, highlighting the shift toward a services-dominated balance that offsets goods imbalances.

Source: BoT computations. Economic Implications: The services-led turnaround reduces reliance on volatile primary income outflows (e.g., mining dividends), fostering a more balanced external position. This cushions against external shocks, such as U.S. rate hikes, and supports BoT's monetary policy in maintaining 3-5% inflation. For the broader economy, it implies enhanced import affordability for capital goods, accelerating industrialization (e.g., Julius Nyerere Hydropower contributing 1.2% to GDP growth), though secondary income volatility from diaspora flows (~USD 700M annually) highlights remittance diversification needs.

1.2 What is Driving the Improvement?

The deficit's contraction stems from structural and cyclical factors, amplifying Tanzania's role as an East African trade hub.

• Tourism receipts surged, supported by increased arrivals: International arrivals hit 1.6 million YTD (up 28% YoY), generating USD 2.8 billion in earnings, fueled by European/Domestic recovery and marketing under the Tanzania Tourism Board.
• Transport services receipts increased from cargo and port activity: Dar es Salaam Port handled 22 million tons (up 12%), serving landlocked neighbors (Zambia/DRC transit up 18%).
• Imports of goods declined, especially machinery and oil: Capital goods imports fell 15% amid project completions; oil imports down 20% on lower global prices, easing the energy bill (15% of total imports).

Economic Implications: These drivers signal a pivot to high-value services, contributing ~45% of export earnings and creating 1.2 million jobs in tourism/transport (10% of employment). Port efficiency boosts regional integration (EAC/AfCFTA), potentially adding USD 500 million in intra-trade by 2026, per World Bank estimates. Reduced import pressures lower production costs, supporting manufacturing growth (3.5% in 2025) and consumer spending, but over-reliance on tourism (vulnerable to geopolitical risks) necessitates policy buffers like export insurance.

2. Services Exports (Services Receipts by Category)

Services receipts hit a record USD 1.92 billion in October 2025, up 34.1% YoY, comprising 55% of total exports and underscoring Tanzania's services-led external strength.

2.1 Total Services Receipts

Economic Implications: This surge elevates services to a FX stabilizer, covering 80% of goods imports and funding reserves buildup (up 14% YoY). It aligns with 6% GDP growth, as services contribute 52% of output, but calls for skills investment to sustain competitiveness amid digital shifts.

2.2 Services Receipts by Category

Source: BoT. Interpretation – Services Exports: Tourism now contributes nearly half of all services receipts, with average spend up 15% to USD 1,200/visitor. Transport is second-largest, boosted by Dar es Salaam Port (Africa's 2nd busiest) and transit cargo for Zambia, DRC, Rwanda, Burundi, Uganda (up 25% volume). “Other business services” grew 36.9%, reflecting ICT (e.g., Arusha tech parks) and professional services.

Economic Implications: The diversified services mix (tourism/transport 83% share) drives inclusive growth, with tourism alone adding 7% to GDP and employing 25% of youth. Transport enhancements position Tanzania as a logistics gateway, potentially increasing EAC trade by 20% (USD 1B gain), per Afreximbank. Declines in construction signal maturing FDI (down 5% YoY), freeing resources for local firms, but underscore needs for SME financing to capture value chains.

3. Services Imports (Services Payments by Category)

Services payments rose modestly to USD 743.4 million, up 20.6% YoY, reflecting outbound demand but contained by domestic capacity buildup.

3.1 Total Services Payments

3.2 Services Payments by Category

Economic Implications: Moderate payment growth (net services surplus at USD 1.175B) preserves FX, but rising travel/tech outflows (up 25%) signal middle-class expansion (household income +8% YoY), boosting consumption-led growth (3.5% private demand). Financial savings imply deepening domestic markets, reducing remittance leakages, yet construction imports highlight skills gaps—addressable via TVET investments for 500K jobs by 2030.

4. Key Insights from External Sector Performance

1. Current account deficit narrowed significantly: Driven by higher service exports (+34%), increased travel & transport receipts, and lower goods imports (machinery -15%, oil -20%). Implication: Enhances debt sustainability (public debt at 49.6% GDP), freeing 2% of budget for social spending and supporting 4-month reserve adequacy amid global tightening.
2. Tourism is the largest and fastest-growing export service: +51.7% growth in receipts; arrivals +28% to 1.6M YTD. Implication: Catalyzes hospitality multiplier effects (USD 1 earner generates USD 2.5 in linkages), lifting rural economies (e.g., Zanzibar 30% GDP share) and poverty reduction, but climate risks demand resilient infra (e.g., USD 500M coastal adaptation).
3. Transport receipts are rising due to regional demand: Port services to Zambia/DRC/Rwanda/Burundi +25%; transit cargo growth. Implication: Reinforces Tanzania's hub status, adding 1.5% to GDP via logistics and AfCFTA (projected USD 1B trade uplift), fostering job creation (200K in ports/rail) and reducing neighbor deficits.
4. Services payments rising moderately: More Tanzanians traveling abroad (+15% outflows); higher demand for foreign professional services; digital imports growing. Implication: Reflects rising incomes (GDP/capita USD 1,200), spurring services trade balance, but erodes 10% of surplus—mitigable by digital literacy to localize tech spends.
5. Net services surplus is strengthening: Receipts USD 1.918B vs. payments USD 0.743B; net USD 1.175B. Implication: Critical for FX stability, offsetting 53% of goods deficit and enabling import substitution (e.g., local oil refining), with spillover to 5.5% non-oil growth.

5. Summary Tables

5.1 Current Account Summary

5.2 Services Receipts (Exports)

5.3 Services Payments (Imports)

Overall Economic Implications: October 2025's performance cements Tanzania's trajectory toward external resilience, underpinning 6% growth and reserve adequacy per World Bank/IMF outlooks. Services dominance (55% exports) diversifies from commodities, enhancing shock absorption (e.g., post-2025 election stability), but sustained narrowing requires export processing zones and skills upgrades to fully realize USD 10B AfCFTA potential by 2030.