Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

Revenue Growth, Expenditure Trends, and Fiscal Deficit Challenges

Tanzania’s budget performance in December 2024 reflected strong revenue collection, controlled expenditure, and a widening fiscal deficit. The government collected TZS 2,737.6 billion, exceeding the target by 2.4%, driven by tax revenue (TZS 2,338.5 billion, up 4.4%). However, total government expenditure reached TZS 3,612.4 billion, with 67% allocated to recurrent costs and 33% to development projects. This resulted in a budget deficit of TZS 874.8 billion, financed through domestic and external borrowing, increasing public debt to USD 46.6 billion. While revenue mobilization improved, fiscal sustainability remains a concern, requiring diversification of income sources and better expenditure management

Government Budgetary Operations – December 2024

Tanzania’s government budgetary operations in December 2024 reflected strong revenue collection and controlled expenditure, but the country still faced a budget deficit, requiring strategic fiscal management.

1. Central Government Revenues

Implication:

Higher revenue collection suggests improved tax compliance and efficient revenue mobilization.
⚠️ Non-tax revenue underperformance could indicate challenges in public sector efficiency and collection mechanisms.

2. Central Government Expenditure

Implication:

Balanced spending on recurrent and development sectors ensures government services continue while maintaining infrastructure growth.
⚠️ High recurrent spending (~67% of total) may limit development financing, affecting long-term economic expansion.

3. Budget Deficit

Implication:

⚠️ A persistent budget deficit means the government relies on borrowing, increasing future debt service obligations.
Managing the deficit through investment in productive sectors (infrastructure, energy, agriculture) could stimulate economic growth and future revenue.

Key Takeaways

The government budgetary operations for December 2024 reveal key insights about Tanzania’s fiscal position, revenue performance, expenditure priorities, and debt sustainability

1. Strong Revenue Performance but Dependence on Tax Revenue

Implication:
✅ The government is collecting more revenue than expected, which is positive for fiscal stability.
⚠️ Heavy reliance on tax revenue means any economic slowdown could impact future revenue collection, requiring more diversification.

2. High Government Spending but Investment in Development

Implication:
✅ The government is maintaining investment in development projects, which can boost economic growth.
⚠️ High recurrent costs may crowd out spending on critical infrastructure and increase reliance on borrowing.

3. Budget Deficit and Rising Debt Levels

Implication:
⚠️ A persistent budget deficit means the government must borrow more, increasing debt obligations.
✅ If borrowing is channeled into productive sectors, it can stimulate long-term growth, making debt more sustainable.

Overall Takeaways

What Needs to be Done?

🔹 Diversify revenue sources beyond tax income.
🔹 Control recurrent spending, especially the public sector wage bill.
🔹 Ensure borrowed funds are invested in growth-driven sectors like infrastructure, agriculture, and energy.
🔹 Strengthen fiscal discipline to reduce reliance on debt financing

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