Strong revenue performance above targets, driven by improved tax administration
Tax Revenue Share
83.8%
Tax revenue dominated total collections, confirming fiscal sustainability
Total Expenditure
TZS 3.13T
Aligned with priority sectors including wages, social services, and infrastructure
Fiscal Deficit
-TZS 594.8B
Manageable deficit financed through external borrowing and domestic securities
Tanzania Economic Development: Focus on Government Budgetary Operations
Tanzania's economy in 2025 continued its resilient performance, supporting fiscal operations amid structural reforms and economic diversification efforts. The central government's budgetary operations in December 2025 demonstrate robust revenue mobilization, strategic expenditure allocation, and prudent deficit management. This comprehensive analysis provides detailed insights into revenue performance, expenditure patterns, fiscal balance dynamics, and policy implications for Tanzania's economic trajectory.
1. Central Government Revenue Performance (December 2025)
Central government revenue performance remained exceptionally strong, exceeding budgetary targets due to improved tax administration, economic activity expansion, and enhanced compliance mechanisms. Total revenue collection reached TZS 2,534.6 billion, with tax revenue contributing the dominant share at 83.8%, while non-tax revenue accounted for 16.2% of total collections.
Central Government Revenue Collection Overview
Revenue Category
Amount (TZS Billion)
Share (%)
Tax Revenue
2,123.8
83.8
Non-Tax Revenue
410.8
16.2
Total Revenue
2,534.6
100.0
Revenue Composition: Tax vs Non-Tax Revenue
Interpretation
Tax revenue continued to dominate total government revenue collections, confirming that government financing relies primarily on domestic tax mobilization rather than volatile non-tax sources. The 83.8% tax revenue share indicates a stable and predictable revenue base, which is critical for fiscal planning and budget execution. This performance reflects improved tax administration efficiency, broadened tax base coverage, and enhanced compliance enforcement by the Tanzania Revenue Authority (TRA).
Detailed Breakdown of Tax Revenue Sources
Tax Type
Amount (TZS Billion)
Share of Tax Revenue (%)
Income Tax
833.2
39.2
Value Added Tax (VAT)
702.5
33.1
Import Duties
296.7
14.0
Excise Duties
210.6
9.9
Other Taxes
80.8
3.8
Total Tax Revenue
2,123.8
100.0
Tax Revenue Distribution by Type
💡Key Insight
Income tax and VAT together accounted for over 70% of tax revenue, indicating broad-based domestic economic activity and formalization of the economy. The significant contribution from income tax (39.2%) reflects growing employment in the formal sector and improved corporate tax compliance. VAT's 33.1% share demonstrates robust consumption patterns and domestic trade activity. Import duties contributing 14.0% highlight Tanzania's continued reliance on international trade, while excise duties (9.9%) target specific consumption goods for both revenue and regulatory purposes.
Section 2: Government Expenditure & Fiscal Balance - Tanzania December 2025
2. Central Government Expenditure Performance (December 2025)
Government spending during December 2025 totaled TZS 3,129.4 billion, demonstrating strategic alignment with priority sectors including wages, social services, and infrastructure development. The expenditure structure reveals a dominant focus on recurrent obligations while maintaining significant investment in development projects critical for economic growth and social advancement.
Overall Expenditure Structure
Expenditure Category
Amount (TZS Billion)
Share (%)
Recurrent Expenditure
2,048.7
65.5
Development Expenditure
1,080.7
34.5
Total Expenditure
3,129.4
100.0
Expenditure Allocation: Recurrent vs Development
Interpretation
Recurrent spending remained dominant at 65.5% of total expenditure, reflecting the substantial cost of running government operations, servicing debt, and maintaining public services. This recurrent-heavy expenditure structure is characteristic of developing economies where wage bills, interest payments, and essential service delivery consume the majority of government budgets. However, the 34.5% allocation to development expenditure demonstrates the government's continued commitment to infrastructure development, capital projects, and long-term economic transformation initiatives.
Breakdown of Recurrent Expenditure Components
Component
Amount (TZS Billion)
Share of Recurrent (%)
Wages and Salaries
826.3
40.3
Interest Payments
603.4
29.5
Goods and Services
618.9
30.2
Total Recurrent Expenditure
2,048.7
100.0
Recurrent Expenditure Distribution
Recurrent Components Comparison
⚠️Critical Observation: Interest Payment Burden
Interest payments formed a significant recurrent burden at TZS 603.4 billion (29.5%), highlighting the fiscal impact of accumulated public debt. When combined with wages and salaries (40.3%), these two obligatory components consume nearly 70% of recurrent expenditure, leaving limited fiscal space for discretionary spending on goods and services (30.2%). This structural constraint emphasizes the critical need for debt sustainability management and revenue mobilization enhancement to create greater fiscal flexibility.
Development Expenditure Financing Structure
Financing Source
Amount (TZS Billion)
Share (%)
Foreign Financing
654.8
60.6
Domestic Financing
425.9
39.4
Total Development Expenditure
1,080.7
100.0
Development Expenditure Financing Sources
Interpretation
Development spending remained predominantly externally financed at 60.6%, indicating continued reliance on foreign loans, grants, and concessional financing from development partners. This external dependency increases exposure to exchange rate risks, foreign debt accumulation, and potential vulnerability to external financing conditions. The domestic financing component of 39.4% represents local resource mobilization through domestic borrowing and budgetary allocations, which, while lower, demonstrates some capacity for self-financed development initiatives.
Wages & Salaries
TZS 826.3B
40.3% of recurrent expenditure
Interest Burden
TZS 603.4B
29.5% of recurrent spending
Development Projects
TZS 1,080.7B
34.5% of total expenditure
Foreign Financing
60.6%
Of development expenditure
3. Fiscal Balance Position (December 2025)
The fiscal balance for December 2025 reflected higher expenditure relative to revenue collections, resulting in a deficit that requires strategic financing mechanisms. This deficit position is typical for developing economies pursuing aggressive development agendas while building fiscal capacity.
Fiscal Balance Overview
Indicator
Amount (TZS Billion)
Total Revenue
2,534.6
Total Expenditure
3,129.4
Overall Fiscal Deficit
-594.8
Revenue vs Expenditure: Fiscal Balance Analysis
Interpretation
The fiscal deficit of TZS 594.8 billion represents approximately 19.0% of total revenue or 23.5% of expenditure. This deficit was financed primarily through external borrowing (concessional loans and development financing) and domestic securities (treasury bills and bonds). The deficit level, while substantial, remains within manageable bounds for a developing economy with Tanzania's growth trajectory and debt sustainability indicators. However, persistent deficits require careful monitoring to ensure long-term fiscal sustainability and prevent excessive debt accumulation.
Fiscal Deficit Financing Mechanisms
How the Fiscal Deficit is Financed
💡Fiscal Sustainability Perspective
The government's ability to finance the deficit through a combination of external concessional financing and domestic capital markets demonstrates fiscal credibility and access to diverse funding sources. The preference for external financing in development projects helps preserve domestic liquidity for private sector credit growth. However, maintaining fiscal discipline through enhanced revenue mobilization and expenditure efficiency will be crucial for long-term sustainability, particularly as interest payment obligations continue to consume a significant portion of recurrent budgets.
The budgetary operations of December 2025 demonstrate Tanzania's fiscal resilience amid competing pressures. While revenue performance remained robust and tax-driven, persistent expenditure obligations—particularly from wages and debt servicing—continue to constrain fiscal flexibility. This section provides a multi-dimensional assessment of Tanzania's fiscal position, contextualizes performance within broader economic trends, and offers policy-oriented perspectives for sustainable fiscal management.
Multi-Dimensional Fiscal Assessment
Dimension
Assessment
Status Indicator
Revenue Performance
Strong and tax-driven with 83.8% tax revenue share
📊 Macroeconomic Context: Tanzania's Economic Performance in 2025
Tanzania's economy in 2025 continued its resilient performance, supporting robust fiscal operations amid strong domestic resource mobilization. The broader economic fundamentals provided a solid foundation for government budgetary operations:
Real GDP Growth (Q3 2025)
6.4%
Headline Inflation
3.6%
Private Credit Growth
23.5%
M3 Money Supply Growth
25.8%
Import Cover (Months)
4.9
Current Account Deficit
USD 2.0B
Key Economic Drivers:
Agriculture, mining, construction, and financial services led sectoral growth
Inflation remained within the 3-5% target band, supported by stable food supplies and declining global fuel prices
Robust private sector credit expansion (23.5%) fueled business investment and consumption
External sector resilience with reserves covering 4.9 months of imports
Current account deficit narrowed to USD 2,015.5 million, improving external balance
These fundamentals enabled robust revenue performance in late 2025, with the Tanzania Revenue Authority (TRA) achieving a record TZS 4.13 trillion collection in December 2025, exceeding targets by 2.9%. The half-year performance reached TZS 18.77 trillion against a target of TZS 18.10 trillion, supporting the 2025/26 annual revenue goal of TZS 36.06 trillion.
Tanzania's central government budgetary operations in December 2025 showcased strong revenue mobilization but persistent expenditure pressures, particularly from wages and debt servicing. While the fiscal deficit remains manageable, continued reliance on external financing for development spending underscores the critical importance of export growth and debt prudence.
In December 2025, central government operations featured robust revenue (TZS 2,534.6 billion, tax-led) but persistent pressures from recurrent spending, with wages and interest payments at TZS 603.4 billion representing a significant fiscal burden. The TZS 594.8 billion deficit remains manageable, supported by:
TRA's exceptional revenue over-performance
Fiscal consolidation targets aiming for deficit reduction to ~3% of GDP in 2025/26 (from 3.4% in 2024/25)
Strong macroeconomic fundamentals (6.3% projected GDP growth in 2026)
Diversified financing sources (external and domestic)
Strategic Priorities: Continued emphasis on domestic revenue mobilization, export-led growth, and prudent borrowing practices will sustain development financing while reducing external vulnerabilities. Enhancing budget execution efficiency and implementing the Medium-Term Revenue Strategy will further bolster fiscal resilience and support Tanzania's development objectives under the Fifth Five-Year Development Plan (FYDP III).
Strategic Policy Recommendations for Fiscal Sustainability
Based on the comprehensive analysis of December 2025 budgetary operations, the following policy recommendations are proposed to enhance fiscal sustainability, improve budget efficiency, and support Tanzania's long-term development objectives:
1Enhance Domestic Revenue Mobilization
Strengthen tax administration capacity, broaden the tax base through formalization initiatives, and implement digital tax collection systems to sustain revenue growth and reduce dependency on external financing.
2Optimize Recurrent Expenditure Management
Implement cost-efficiency measures in public service delivery, rationalize wage bill growth through productivity improvements, and prioritize high-impact goods and services spending to create fiscal space.
3Manage Debt Service Obligations
Pursue debt restructuring opportunities for expensive commercial loans, prioritize concessional financing sources, and implement robust debt sustainability monitoring frameworks to manage the rising interest burden.
4Diversify Development Financing
Increase domestic resource allocation for development projects, explore innovative financing mechanisms (PPPs, green bonds), and strengthen project implementation capacity to reduce external financing dependency.
5Strengthen Budget Execution
Improve quarterly budget release schedules, enhance procurement efficiency, and implement results-based budgeting to ensure development expenditure translates into tangible economic and social outcomes.
6Boost Export Competitiveness
Support export-oriented sectors through targeted incentives, infrastructure development, and trade facilitation to generate foreign exchange earnings and reduce current account pressures supporting fiscal stability.
Government Securities Market Tanzania December 2025 | Treasury Bills & Bonds Analysis | TICGL
Economic Analysis • December 2025
Government Securities Market Tanzania: December 2025 Comprehensive Report
In-depth analysis of Tanzania's government securities market performance, treasury instruments, interbank cash market dynamics, and monetary policy transmission effectiveness.
Published: December 2025
By: TICGL Research Team
Category: Financial Markets & Economic Development
Executive Summary
Tanzania's financial markets demonstrated exceptional strength and liquidity throughout December 2025, underpinned by robust macroeconomic fundamentals and effective monetary policy transmission. The government securities market remained highly active, with Treasury Bills experiencing declining yields to 5.87% and Treasury Bonds achieving remarkable oversubscription rates of 3.44x for the 20-year instrument.
The interbank cash market (IBCM) witnessed extraordinary growth, with turnover surging to TZS 3,481.9 billion—a 95.5% month-on-month increase and 115.3% year-on-year expansion. This market dynamism reflects strong investor confidence, ample banking sector liquidity, and the Bank of Tanzania's successful monetary policy framework anchored at a 5.75% Central Bank Rate (CBR).
GDP Growth (Q3 2025)
6.4%
Mainland Real GDP
Inflation Rate
3.6%
Within 3-5% Target
Private Sector Credit
+23.5%
Robust Expansion
Foreign Reserves
$6.3B
4.9 Months Cover
Tanzania Economic Development Context
Macroeconomic Foundations (2025)
Tanzania's economy maintained strong momentum into late 2025, driven by diversified sectoral growth and prudent macroeconomic management. The economic landscape was characterized by robust fundamentals that created an optimal environment for financial market development and investor confidence.
🌾
Agriculture
Key growth driver with stable food supplies supporting low inflation
⛏️
Mining
Significant contributor to GDP expansion and export revenues
🏗️
Construction
Infrastructure development under FYDP III driving sector growth
💼
Financial Services
M3 money supply growth of 25.8% reflecting financial deepening
The external position improved substantially, with foreign exchange reserves reaching USD 6,329 million (equivalent to 4.9 months of import cover) and a narrower current account deficit. This external strength, combined with declining global fuel prices, contributed to stable inflation within the Bank of Tanzania's 3-5% target range.
These fundamentals fostered a liquid, confident financial system evident in active government securities markets and robust interbank cash market activity. Strong demand for Treasury instruments reflected investor trust in macroeconomic stability, low inflation, and accommodative monetary policy (CBR at 5.75%), enabling cost-effective domestic financing for development priorities like infrastructure under the Fifth Phase Development Plan (FYDP III).
1. Government Securities Market (December 2025)
The Government securities market remained active and liquid throughout December 2025, supported by ample liquidity in the banking system and strong investor confidence in public debt instruments. The market demonstrated exceptional resilience and depth, with both short-term Treasury Bills and long-term Treasury Bonds experiencing robust demand.
Treasury Bills Auction Performance
Treasury Bills auctions in December 2025 reflected favorable domestic borrowing conditions and declining investor risk perception. The weighted average yield decreased to 5.87% from 6.25% in the previous month, signaling improved macroeconomic confidence and reduced government financing costs.
Indicator
Value
Interpretation
Tender Size
TZS 176.1 billion
Government financing needs and liquidity management
Total Bids Received
TZS 341.2 billion
Strong demand (oversubscription)
Amount Accepted
TZS 291.7 billion
BoT accommodated excess liquidity
Bid-to-Cover Ratio
1.94
Indicates high investor appetite
Weighted Average Yield
5.87%
Declined from 6.25% in previous month
Yield Trend
Downward
Reflects excess liquidity and lower risk perception
Key Insight: Treasury Bills Market
The decline in Treasury Bills yields signals favorable domestic borrowing conditions, reduced cost of government financing, and confidence in macroeconomic stability. The oversubscription (bid-to-cover ratio of 1.94) demonstrates that demand exceeded supply by nearly double, indicating strong investor appetite for risk-free government assets. The Bank of Tanzania's decision to accept TZS 291.7 billion—significantly more than the tender size—reflects effective liquidity management and accommodation of excess banking sector liquidity.
Treasury Bills Auction Analysis (TZS Billions)
176.1
Tender Size
341.2
Total Bids
291.7
Amount Accepted
Treasury Bills Yield Trend
Treasury Bond Auction Performance (20-Year Bond)
The long-term Treasury Bond market demonstrated exceptional investor confidence in December 2025. The 20-year Treasury Bond auction attracted remarkable interest, with a bid-to-cover ratio of 3.44, indicating that total bids received were more than three times the tender size. This exceptional oversubscription reflects investors' preference for stable, long-dated government securities, particularly among institutional investors such as pension funds and commercial banks.
Indicator
Value
Interpretation
Instrument
20-Year Treasury Bond
Long-term financing
Tender Size
TZS 236.3 billion
Infrastructure and long-term fiscal needs
Total Bids Received
TZS 813.5 billion
Very strong demand
Amount Accepted
TZS 232.9 billion
Near full allotment
Bid-to-Cover Ratio
3.44
Exceptional investor confidence
Weighted Average Yield
12.02%
Eased compared to previous auctions
Coupon Rate
13.00%
Attractive long-term return
Key Insight: Treasury Bonds Market
The exceptional oversubscription of long-term bonds (3.44x) reflects investors' preference for stable, long-dated government securities, particularly among pension funds and banks. This strong demand enables the government to secure cost-effective long-term financing for infrastructure and development projects under FYDP III at favorable rates. The weighted average yield of 12.02% represents an easing compared to previous auctions, indicating improved investor sentiment and reduced country risk perception. The near full allotment (TZS 232.9 billion accepted from TZS 236.3 billion tendered) demonstrates the government's ability to meet its financing needs efficiently.
Treasury Bonds Auction Performance (TZS Billions)
236.3
Tender Size
813.5
Total Bids
232.9
Amount Accepted
Bid-to-Cover Ratio Comparison
1.94x
Treasury Bills
3.44x
20-Year Bonds
2. Interbank Cash Market (IBCM)
The interbank cash market continued to play a critical role in short-term liquidity redistribution among banks, closely aligned with the Central Bank Rate (CBR). The IBCM serves as a vital mechanism for banks to manage their daily liquidity positions, facilitating the efficient allocation of surplus funds from cash-rich institutions to those experiencing temporary shortfalls.
In December 2025, the IBCM witnessed extraordinary growth and deepening, reflecting enhanced banking sector confidence, improved liquidity circulation, and the effectiveness of the Bank of Tanzania's monetary policy framework. The market's performance demonstrated the financial system's maturity and the strengthening of interbank relationships.
Interbank Cash Market Activity
Market turnover in the IBCM experienced remarkable expansion during December 2025, surging to unprecedented levels that signaled robust liquidity conditions and active trading among financial institutions.
Indicator
December 2025
November 2025
December 2024
Market Turnover (TZS billion)
3,481.9
1,781.0
1,616.8
Month-on-Month Growth
+95.5%
—
—
Year-on-Year Growth
+115.3%
—
—
Key Insight: Interbank Market Turnover
The sharp increase in turnover indicates improved liquidity circulation and stronger interbank confidence. The near-doubling of month-on-month activity (95.5% increase) and more than doubling year-on-year (115.3% increase) reflects several positive developments: enhanced trust among financial institutions, effective reverse repo operations by the Bank of Tanzania (TZS 1,419.3 billion), robust private sector credit growth (23.5%), and overall banking sector health. This exceptional growth demonstrates the IBCM's increasing importance as a liquidity management tool for Tanzania's financial institutions.
The tenor structure of interbank transactions reveals important insights about liquidity management preferences and monetary policy alignment. The distribution of transaction tenors demonstrates how banks strategically manage their short-term funding needs in alignment with the Bank of Tanzania's policy framework.
Tenor
Share of Total Transactions
Overnight
Significant but secondary
2–6 Days
Moderate
7-Day Transactions
39.9% (dominant)
Other Tenors
Minor
Key Insight: Transaction Tenor Structure
The dominance of 7-day transactions (39.9% of total) shows alignment with the Bank of Tanzania's liquidity management framework and policy signalling horizon. This concentration reflects strategic planning by financial institutions, matching the BoT's typical open market operations cycle and the CBR signaling period. The preference for 7-day tenors over overnight funding indicates confidence in near-term liquidity positions and reduces the operational burden of daily refinancing. This maturity profile supports more stable and predictable liquidity management across the banking sector.
Interbank Transaction Tenor Distribution
Interbank Interest Rates
Interest rates in the interbank cash market remained remarkably stable and closely aligned with the Central Bank Rate (CBR), confirming effective monetary policy transmission and adequate liquidity conditions throughout December 2025.
Indicator
Rate (%)
Policy Signal
Overall IBCM Rate
6.29
Stable
Central Bank Rate (CBR)
5.75
Policy anchor
Rate Movement
Almost unchanged
Liquidity adequate
Policy Corridor
±2 percentage points around CBR
Effective transmission
Key Insight: Monetary Policy Transmission
Interbank rates remained close to the CBR, confirming effective monetary policy transmission and adequate liquidity conditions. The IBCM rate of 6.29% staying within the policy corridor of ±2 percentage points around the 5.75% CBR demonstrates that the Bank of Tanzania's monetary policy signals are effectively transmitted to the interbank market. This close alignment indicates: (1) adequate systemic liquidity without excess or scarcity, (2) successful open market operations by the BoT, (3) market confidence in the policy framework, and (4) efficient price discovery in the interbank market. The stability of rates supports predictable borrowing costs for banks and contributes to overall financial system stability.
The comprehensive analysis of Tanzania's government securities market and interbank cash market in December 2025 reveals a financial system operating at peak efficiency, characterized by exceptional liquidity, strong investor confidence, and effective monetary policy transmission. These market dynamics provide robust support for both fiscal operations and monetary policy effectiveness in Tanzania.
In December 2025, Tanzania's financial markets demonstrated extraordinary strength across all key indicators. The oversubscribed auctions for both Treasury Bills (1.94x) and 20-year Treasury Bonds (3.44x), combined with surging interbank cash market turnover (TZS 3,481.9 billion, representing a 95.5% month-on-month increase), highlighted three critical achievements:
💰
Ample Liquidity
Banking sector liquidity remained abundant, enabling robust market activity and supporting credit expansion to the private sector at 23.5% growth.
📈
Investor Confidence
Exceptional demand for government securities across all tenors reflects strong confidence in macroeconomic stability and fiscal sustainability.
🎯
Policy Effectiveness
Interbank rates staying within the CBR corridor confirm effective monetary policy transmission and central bank credibility.
💼
Reduced Borrowing Costs
Declining yields (T-bills to 5.87%, bonds easing to 12.02%) enable efficient financing for infrastructure and development under FYDP III.
Strategic Implication: This financial market strength bolsters Tanzania's macroeconomic stability, supporting sustained GDP growth projections of 6.3% for 2026. The liquid and efficient government securities market enables the government to finance development priorities at competitive rates, while the deepening interbank market enhances financial sector resilience and supports monetary policy effectiveness. Together, these factors position Tanzania's financial system to effectively support economic transformation objectives under the Fifth Phase Development Plan.
December 2025 Financial Markets Performance Summary
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