Tanzania's external sector performance in August 2024 reflects a positive trajectory, with a narrowing current account deficit driven by strong export growth and robust performance in the services sector. While the primary income account deficit remains a concern, the overall stability provided by healthy foreign exchange reserves offers a buffer against potential economic shocks. Continued focus on enhancing export competitiveness and managing import levels will be essential for maintaining this positive trend in the external sector.

1. Current Account Performance:

• The current account deficit narrowed to USD 2,567.2 million for the year ending August 2024, compared to USD 3,846.5 million in the same period the previous year. This reflects a significant reduction of approximately 33.3%​.
• The improved performance can be attributed to stronger export receipts and moderated import growth, contributing positively to the overall trade balance.

2. Goods Account:

• The goods account recorded a deficit of USD 534.0 million in August 2024. The components of this account include:
  • Exports: Totaled USD 934.3 million.
  • Imports: Amounted to USD 1,468.3 million​.
• Export Performance:
  • The total exports of goods increased significantly to USD 15,064.6 million for the year, up from USD 13,290.1 million, driven by higher sales of traditional products such as tobacco and non-traditional products like gold and horticultural goods.

3. Services Account:

• The services account also contributed positively, with a surplus of USD 488.9 million in August 2024. This was an increase from USD 411.34 million in the previous year​.
• Key components of this account included:
  • Services Receipts: Reached USD 670.6 million, up from USD 609.3 million the previous year, primarily driven by the tourism sector, which benefited from increased tourist arrivals.

4. Primary Income Account:

• The primary income account recorded a deficit of USD 1,760.8 million, wider than the previous year’s deficit of USD 1,446.4 million. This deficit is primarily due to higher interest payments on external debt​.

5. Secondary Income Account:

• The secondary income account showed a surplus of USD 556.5 million, compared to USD 637.6 million in the previous year. This component includes remittances and other transfers, which remained steady but slightly declined​.

6. Foreign Exchange Reserves:

• By the end of August 2024, Tanzania's foreign exchange reserves increased to USD 5,379.7 million, providing sufficient coverage for 4.4 months of projected imports. This level of reserves is in line with international benchmarks and demonstrates the country’s ability to manage external shocks​.

The external sector performance of Tanzania in August 2024 with key insights into the country’s economic health and trade dynamics

Overall, the external sector performance in August 2024 indicates a positive trend in Tanzania’s trade dynamics, characterized by improved export performance and a narrowing current account deficit. However, the challenges posed by the primary income deficit highlight the need for careful debt management. Strengthening the export base and diversifying the economy will be crucial for maintaining this positive trajectory while ensuring long-term economic stability.

1. Improved Current Account Balance:

• The narrowing current account deficit from USD 3,846.5 million to USD 2,567.2 million signifies a positive shift in Tanzania’s external financial position. This reduction of approximately 33.3% suggests that the country is managing its foreign transactions more effectively, with increasing exports helping to offset import expenditures.
• A smaller current account deficit is generally a sign of improving economic stability, indicating that Tanzania is becoming less reliant on foreign borrowing to finance its deficits.

2. Strong Export Growth:

• The increase in total exports to USD 15,064.6 million, particularly in traditional (like tobacco) and non-traditional goods (such as gold and horticultural products), shows that Tanzania is capitalizing on its resource base and expanding its market reach.
• This growth in exports can enhance foreign exchange earnings, support local industries, and potentially lead to job creation in the agricultural and mining sectors. It indicates that Tanzania is competitive in the global market.

3. Services Sector Contribution:

• The services account surplus of USD 488.9 million indicates that sectors like tourism are recovering well, benefiting from increased tourist arrivals and related services.
• A robust services sector contributes to economic diversification, reduces dependence on agriculture and commodities, and can enhance overall economic resilience.

4. Primary Income Deficit:

• The widening primary income deficit (to USD 1,760.8 million) suggests that while the country is earning from exports, it is also incurring substantial costs from interest payments on external debt.
• This raises concerns about debt sustainability. If the trend continues, it may limit the government’s ability to invest in public services or development projects, as more revenue will be required to service debt.

5. Solid Foreign Exchange Reserves:

• The increase in foreign exchange reserves to USD 5,379.7 million, sufficient for 4.4 months of imports, provides a buffer against external shocks and currency fluctuations.
• Healthy reserves enhance the country’s ability to manage trade imbalances and stabilize the currency, reflecting prudent monetary policy and fiscal management.

In August 2024, Tanzania's financial market displayed mixed but stable performance, with rising yields on government securities reflecting higher returns for investors, while the interbank cash market showed increased short-term liquidity demand. The Tanzanian Shilling experienced slight depreciation, though foreign exchange reserves grew to USD 5.38 billion, ensuring adequate coverage for imports. These trends suggest a balanced but cautious economic environment, with both opportunities for investors and pressures on liquidity management.

1. Government Securities Market:

• Treasury bills: The government conducted two auctions with a combined tender size of TZS 253.3 billion. Bids totaling TZS 150.8 billion were received, of which TZS 101 billion were successful.
  • The weighted average yield for Treasury bills increased to 10.61%, compared to 8.81% in July 2024, indicating higher returns for investors in these short-term securities​(2024100418271429).
• Treasury bonds: The Bank of Tanzania also auctioned 10- and 20-year Treasury bonds with a combined tender size of TZS 244.8 billion.
  • The auction attracted bids worth TZS 295.9 billion, of which TZS 174.7 billion were successful.
  • The weighted average yield to maturity for the 10-year bond was 13.26%, while the 20-year bond offered 15.40%​(2024100418271429).

2. Interbank Cash Market (IBCM):

• The interbank cash market (where banks lend to each other) saw total transactions of TZS 2,033.8 billion in August 2024, slightly lower than the TZS 2,375.4 billion traded in July 2024.
• Overnight transactions (very short-term borrowing) became more prominent, accounting for 49.1% of total market turnover, while 7-day transactions decreased to 12.7% from 33.3% in the previous month.
• The overall IBCM interest rate increased to 7.79% from 7.24% in July​(2024100418271429).

3. Interbank Foreign Exchange Market (IFEM):

• In August 2024, foreign exchange liquidity improved due to seasonal increases in tourism and export activities.
• The Tanzanian Shilling (TZS) traded at an average of TZS 2,694.25 per US dollar, slightly depreciating from TZS 2,663.76 per US dollar in July.
• The Bank of Tanzania’s participation in the IFEM reduced, with a net sale of USD 2.1 million, down from USD 10.5 million in July​(2024100418271429).

4. Foreign Exchange Reserves:

• By the end of August 2024, Tanzania’s foreign exchange reserves increased to USD 5,379.7 million, sufficient to cover 4.4 months of projected imports​(2024100418271429).

The performance of Tanzania's financial market in August 2024 with insights into the country's economic environment

Tanzania’s financial market is stable, but experiencing some pressure points. The government is offering higher yields to finance its operations, while liquidity tightness in the banking sector is driving up short-term borrowing costs. The Tanzanian Shilling remains stable, supported by strong foreign exchange reserves, though there is some pressure on the currency. These trends highlight the need for ongoing monitoring of liquidity and fiscal dynamics to ensure continued economic stability.

1. Higher Returns on Government Securities:

• The rise in yields on Treasury bills (from 8.81% in July to 10.61%) and on Treasury bonds (up to 13.26% for 10-year bonds and 15.40% for 20-year bonds) indicates that the government is offering higher returns to attract more investors.

This could be a sign that the government is increasing borrowing to finance development projects or cover fiscal needs, or it may suggest tighter liquidity in the market, prompting higher rates to attract funds. Investors benefit from these higher returns, but it may also signal growing fiscal pressures.

2. Shift in Liquidity Conditions in the Interbank Cash Market:

• The interbank cash market saw a slight reduction in transactions (from TZS 2,375.4 billion to TZS 2,033.8 billion). The increased share of overnight transactions (short-term lending between banks) suggests higher demand for liquidity in the short term.

Banks are prioritizing short-term liquidity needs, likely due to seasonal factors like crop purchasing and higher demand for the Tanzanian Shilling. The increase in the IBCM interest rate (from 7.24% to 7.79%) reflects rising costs of short-term borrowing for banks, which may tighten credit availability.

3. Stable but Slightly Depreciating Currency:

• The Tanzanian Shilling (TZS) depreciated slightly against the US dollar, trading at TZS 2,694.25 compared to TZS 2,663.76 in July.

The slight depreciation reflects seasonal factors, such as fluctuations in demand for foreign currency due to import and export activities. However, the improvement in foreign exchange reserves (to USD 5.38 billion) suggests that the central bank has a buffer to stabilize the currency and manage external shocks.

4. Improving Foreign Exchange Reserves:

• Foreign exchange reserves increased to USD 5.38 billion, sufficient to cover 4.4 months of imports, which is in line with the country’s benchmarks.

This increase in reserves provides economic stability and strengthens Tanzania’s ability to withstand external economic shocks, such as rising import costs or fluctuations in global commodity prices. It also reflects the positive impact of rising export revenues, especially from sectors like tourism and gold.

In August 2024, the Tanzania Shilling (TZS) depreciated slightly against the US dollar, continuing a trend of gradual weakening. The average exchange rate for the month was TZS 2,694.25 per US dollar, compared to TZS 2,663.76 per US dollar in July 2024, representing an annual depreciation of 10.3%​.

The Tanzania Shilling's depreciation in August 2024 reflects increased demand for foreign currency driven by imports, combined with reduced central bank intervention in the foreign exchange market. While the currency’s decline was moderate, it indicates ongoing pressure on the shilling due to Tanzania's growing import needs, despite robust export performance and healthy foreign reserves.

Key Factors Behind Depreciation:

1. Demand for Foreign Currency: The depreciation was partly driven by higher demand for US dollars, particularly for imports. Tanzania's growing import bill, which includes fuel, capital goods, and machinery, has increased the demand for foreign exchange. In August 2024, the import of goods rose to USD 1,468.3 million, up from USD 1,163.9 million in the same month of 2023​.
2. Seasonal Export Inflows: Despite seasonal increases in export earnings from sectors like tourism and agriculture, the shilling continued to experience depreciation. The improvement in foreign exchange liquidity due to these inflows wasn’t enough to offset the increased demand for foreign currency.
3. Limited Central Bank Intervention: The Bank of Tanzania's participation in the foreign exchange market (Interbank Foreign Exchange Market - IFEM) decreased significantly. In August 2024, the Bank sold a net amount of USD 2.1 million, a sharp decline from USD 10.5 million in July. This limited intervention allowed the market to adjust naturally, contributing to the slight depreciation​.

Foreign Exchange Reserves:

Tanzania’s foreign exchange reserves increased to USD 5,379.7 million, which covers 4.4 months of projected imports. This buffer is above the country’s benchmark for external reserves, allowing the Bank of Tanzania to stabilize the currency if necessary. However, the limited intervention in August indicates a decision to let market forces dictate the exchange rate, at least temporarily​.

Mnamo Agosti 2024, Shilingi ya Tanzania (TZS) ilishuka kidogo dhidi ya dola ya Marekani, ikiendeleza mwelekeo wa kudhoofika kwa polepole. Kiwango cha wastani cha kubadilisha fedha kwa mwezi huo kilikuwa TZS 2,694.25 kwa dola moja ya Marekani, ikilinganishwa na TZS 2,663.76 kwa dola moja ya Marekani mnamo Julai 2024, ikiwa ni kushuka kwa thamani kwa asilimia 10.3 kwa mwaka.

Kushuka kwa thamani ya Shilingi ya Tanzania mnamo Agosti 2024 kunaakisi ongezeko la mahitaji ya fedha za kigeni kutokana na uagizaji wa bidhaa kutoka nje, pamoja na kupungua kwa ushiriki wa benki kuu katika soko la fedha za kigeni. Ingawa kushuka kwa thamani ya sarafu kulikuwa kidogo, hali hii inaashiria shinikizo linaloendelea kwa shilingi kutokana na mahitaji yanayokua ya bidhaa zinazoagizwa kutoka nje, licha ya utendaji mzuri wa mauzo nje na akiba ya fedha za kigeni iliyokuwa imara.

Sababu Muhimu za Kushuka kwa Thamani:

1. Mahitaji ya Fedha za Kigeni: Kushuka kwa thamani kuliendeshwa kwa kiasi fulani na ongezeko la mahitaji ya dola za Marekani, hususan kwa uagizaji wa bidhaa. Gharama ya kuagiza bidhaa nchini Tanzania, ikiwa ni pamoja na mafuta, bidhaa za mitaji, na mashine, imeongeza mahitaji ya fedha za kigeni. Mnamo Agosti 2024, uagizaji wa bidhaa ulifikia dola milioni 1,468.3, ikilinganishwa na dola milioni 1,163.9 katika mwezi huo huo wa mwaka 2023.
2. Mapato ya Msimu ya Mauzo Nje: Licha ya ongezeko la msimu la mapato ya mauzo nje kutoka sekta kama utalii na kilimo, shilingi iliendelea kushuka thamani. Uboreshaji wa ukwasi wa fedha za kigeni kutokana na mapato haya haukuweza kumaliza mahitaji makubwa ya fedha za kigeni.
3. Ushiriki Mdogo wa Benki Kuu: Ushiriki wa Benki Kuu ya Tanzania katika soko la fedha za kigeni (Interbank Foreign Exchange Market - IFEM) ulipungua kwa kiasi kikubwa. Mnamo Agosti 2024, Benki iliuza kiasi cha dola milioni 2.1 pekee, ikilinganishwa na dola milioni 10.5 mnamo Julai. Ushiriki huu mdogo uliiruhusu soko kujirekebisha kwa kawaida, hali iliyochangia kushuka kwa thamani kidogo.

Akiba ya Fedha za Kigeni:

Akiba ya fedha za kigeni ya Tanzania iliongezeka hadi dola milioni 5,379.7, ambayo inatosha kugharamia miezi 4.4 ya uagizaji wa bidhaa unaotarajiwa. Akiba hii inazidi kigezo cha nchi kwa akiba ya nje, ikiiruhusu Benki Kuu ya Tanzania kutuliza sarafu endapo kutahitajika. Hata hivyo, ushiriki mdogo wa benki kuu mnamo Agosti unaonyesha uamuzi wa kuruhusu nguvu za soko kuamua kiwango cha kubadilisha fedha, angalau kwa muda.

Tanzania's debt development in August 2024 reflects a careful approach to financing government operations and development initiatives. The increase in total debt stock, primarily driven by external loans, suggests a reliance on borrowing to support key infrastructure projects and social services. However, the significant proportion of external debt and the ongoing requirement for debt service payments emphasize the importance of sustainable debt management strategies to maintain fiscal health and ensure economic stability.

1. National Debt Stock:

• As of the end of August 2024, Tanzania’s total national debt stock reached USD 44,891.5 million, marking a 1.7% increase from the previous month​.
• The composition of the debt was predominantly external, with 72.8% of the total being external debt.

2. External Debt:

• The external debt stock increased to USD 32,675.1 million, which represents a 2.1% monthly rise.
• During August, the government disbursed USD 433 million in external loans, primarily directed to central government projects.
• Debt service payments on external debt totaled USD 30.6 million, which included:
  • Principal Repayment: USD 20.6 million
  • Interest Payments: USD 10 million​.

3. Composition of External Debt:

• The breakdown of external debt shows that 76.9% is owed to the central government, with multilateral institutions being the largest creditors at 53.7% of the total external debt stock​.
• The sectors holding the most significant portion of disbursed outstanding external debt included:
  • Transport and Telecommunications: 21.3%
  • Social Welfare and Education: 19.9%

4. Domestic Debt:

• Domestic debt stock was reported at TZS 32,760.2 billion at the end of August 2024, reflecting an increase of TZS 295 billion from the previous month.
• The government raised TZS 755.6 billion from the primary domestic market for budget financing in August. This amount included:
  • TZS 650.9 billion through Treasury bonds
  • TZS 104.7 billion through Treasury bills​.

5. Debt Service Payments:

• Total debt service payments for domestic debt in August amounted to TZS 731.2 billion, which included:
  • Principal Repayments: TZS 454.6 billion
  • Interest Payments: TZS 276.7 billion

The debt development data for Tanzania in August 2024 with critical insights about the country's fiscal health and economic management

The overall picture of Tanzania’s debt development underscores a critical balancing act. While borrowing is essential for financing development and growth, the rising debt levels—especially external debt—demand careful monitoring and management to ensure sustainability. The government’s ability to service this debt without compromising other areas of public expenditure will be crucial for maintaining economic stability and fostering long-term growth. Proper fiscal policies and economic management strategies will be essential to mitigate risks associated with high debt levels.

1. Rising National Debt:

• The total national debt stock of USD 44,891.5 million, with a 1.7% monthly increase, indicates that the government is actively borrowing to finance its budget and development projects. While some debt accumulation is necessary for growth, continued increases can raise concerns about sustainability if not managed properly.

2. Predominance of External Debt:

• With 72.8% of the national debt being external, Tanzania is significantly reliant on foreign loans. The increase to USD 32,675.1 million in external debt suggests ongoing engagement with international lenders, primarily multilateral institutions.
• This reliance exposes the country to exchange rate risks and potential vulnerabilities in global financial markets. If the Tanzanian Shilling depreciates further, the cost of servicing foreign-denominated debt could rise, putting additional strain on government finances.

3. Strategic Borrowing for Development:

• The disbursement of USD 433 million in external loans primarily for government projects indicates a focus on financing critical infrastructure and social programs. This strategic borrowing can drive economic growth and improve living standards if the funds are effectively utilized.

4. Debt Servicing Pressure:

• The USD 30.6 million in debt service payments (including both principal and interest) reflects the government's obligation to manage its debt responsibly. As debt increases, so too do these obligations, which can limit the government's flexibility to allocate funds for other important areas, such as health, education, and development.

5. Domestic Debt Dynamics:

• The increase in domestic debt stock to TZS 32,760.2 billion and the substantial debt service payments (TZS 731.2 billion) suggest that the government is balancing its financing needs between domestic and external sources. The ability to raise TZS 755.6 billion from domestic markets indicates confidence from local investors.

In August 2024, Tanzania’s financial sector displayed a stable interest rate environment, with lending rates remaining steady while deposit rates saw a slight increase. The overall lending rate stood at 15.26%, reflecting stable borrowing conditions, while savings deposit rates rose to 3.02%, encouraging more savings. A narrowing interest rate spread indicates reduced credit risk and increased market confidence. These developments signal a healthy and efficient financial sector, supporting both savers and borrowers in Tanzania's growing economy.

1. Overall Lending Rates:

• The overall lending rate stood at 15.26%, only slightly lower than 15.29% in July 2024.
• The short-term lending rate (loans with a maturity of up to 1 year) averaged 15.50%, a small decline from 15.67% in the previous month.

2. Negotiated Lending Rates:

• Negotiated lending rates, which are rates agreed upon between banks and clients, averaged 12.79% in August 2024, which remained almost unchanged from 12.78% in July 2024.

3. Deposit Rates:

• The overall deposit rate slightly decreased to 7.98% in August, compared to 8.15% in July 2024.
• Savings deposit rates rose to 3.02%, up from 2.87% in July, reflecting banks offering better returns on savings deposits.
• The negotiated deposit rate reached 10.12%, up from 9.96% in July.

4. Interest Rate Spread:

• The spread between the short-term lending rate and deposit rate averaged 6.68 percentage points in August, a slight increase from 6.66 percentage points in July 2024.
• This was a notable improvement compared to 8.08 percentage points recorded in August 2023, indicating a reduction in credit risk in the market.

The interest rate figures for Tanzania in August 2024 reveals several important insights about the country’s economic and financial conditions

The stability in interest rates, combined with better deposit returns and a narrowing spread, reflects growing confidence in Tanzania’s economic environment. While lending rates are still relatively high, the overall conditions suggest that the financial sector is healthy, credit risk is reducing, and banks are positioned to support both savings and borrowing activities. This is a positive indicator for both consumers and businesses looking to engage in financial transactions.

1. Stable Lending Environment:

• The overall lending rate of 15.26% suggests that banks are maintaining stable interest rates for borrowers. While high compared to international standards, the rate’s stability indicates that Tanzania's banking sector is cautious but not tightening credit conditions further.
• The short-term lending rate (15.50%) is slightly lower than previous months, suggesting a slight easing of conditions for businesses and consumers seeking short-term loans.

Stability in lending rates reflects banks’ confidence in economic stability, and it offers predictability for businesses planning to borrow for investment or expansion.

2. Increased Savings Returns:

• The increase in savings deposit rates (from 2.87% to 3.02%) indicates that banks are offering better returns to attract deposits. This rise may encourage households and businesses to save more.
• Negotiated deposit rates, which rose to 10.12%, show that some clients can secure even higher returns for large or long-term deposits, making it more attractive to keep money in the bank.

Higher savings rates can promote more savings, increasing liquidity in banks, which can then be used to extend more credit to businesses.

3. Narrowing Interest Rate Spread:

• The spread between lending and deposit rates narrowed to 6.68 percentage points from 8.08 percentage points a year earlier. This narrowing suggests reduced credit risk and increased competition among banks.

A lower spread means that banks are charging less of a premium on loans, making borrowing slightly cheaper while offering better returns for depositors. This is a positive sign for the economy, indicating improved efficiency in the financial sector.

4. Slightly Lower Risk Perception:

• The narrowing of the interest rate spread also indicates that banks perceive less risk in lending, likely due to better economic performance and improved borrower confidence.

Tanzania's export and import performance in August 2024 demonstrates robust growth in exports, particularly in traditional and non-traditional goods, driven by increased global demand. While imports also rose, reflecting strong economic activity and ongoing demand for capital and intermediate goods, the trade balance shows a deficit, underscoring the challenges of managing external trade flows. Overall, these trends highlight the need for continued focus on enhancing export competitiveness while managing the import bill to ensure sustainable economic growth.

1. Export Performance:

• Total Exports: Tanzania's exports of goods and services surged to USD 15,064.6 million in the year ending August 2024, up from USD 13,290.1 million in the same period of the previous year, representing an increase of approximately 13.4%​.
• Breakdown of Exports:
  • Traditional Exports: These increased to USD 1,099.9 million, up from USD 807.9 million in the previous year. The increase was largely attributed to higher exports of:
    • Tobacco and cashew nuts, driven by both volume and price improvements.
  • Non-Traditional Exports: Amounted to USD 6,568.3 million, compared to USD 6,349.8 million previously, largely driven by:
    • Gold exports: Increased by 8.2% to USD 3,189.4 million, reflecting strong global demand and favorable prices.
    • Horticultural products: Saw a significant rise of 35.3%, reaching USD 454.4 million, driven by increased shipments of edible vegetables​.
• Monthly Export Figures: In August 2024, exports of goods totaled USD 934.3 million, compared to USD 785.3 million in August 2023, showing growth year-on-year​.

2. Import Performance:

• Total Imports: Imports increased to USD 16,427.5 million for the year ending August 2024, up from USD 16,327.7 million the previous year, indicating a slight increase of about 0.6%​.
• Breakdown of Imports:
  • Capital Goods: Imports of capital goods rose to USD 2,912.4 million, a marginal increase from the previous year, with significant purchases of machinery and transport equipment.
  • Intermediate Goods: These accounted for USD 9,860.0 million, with notable increases in:
    • Fuel and lubricants: Totaled USD 3,090.1 million, highlighting the ongoing demand for energy imports.
    • Iron and steel: Imports of these materials surged, reflecting ongoing infrastructure projects and construction activities​.
• Monthly Import Figures: In August 2024, goods imports amounted to USD 1,468.3 million, compared to USD 1,163.9 million in August 2023, indicating robust import activity​.

3. Trade Balance:

• The trade balance (the difference between exports and imports) indicates a current account deficit:
  • Goods Account: Reported a deficit of USD 534.0 million in August 2024, with exports of USD 934.3 million and imports of USD 1,468.3 million​.

Growth and Potential

Tanzania, nestled within the vibrant East African region, has emerged as one of Africa's most promising economic success stories. Over the past decade, the country has consistently achieved impressive GDP growth rates, averaging 6-7% annually before the COVID-19 pandemic. Despite global challenges, Tanzania's economy has shown remarkable resilience, with the World Bank projecting a robust recovery and growth rate of 5.4% in 2023, expected to rise to 6.1% by 2025.

This growth is not isolated to Tanzania alone. The East African Community (EAC), comprising Tanzania, Kenya, Uganda, Rwanda, Burundi, and South Sudan, has been one of the fastest-growing regions in Africa. The EAC's combined GDP has more than doubled over the last decade, with an average annual growth rate of around 5-6%. This regional dynamism creates a substantial market of over 177 million people, with Tanzania strategically positioned to serve as a gateway to this burgeoning economic bloc.

Demographic Dividend

One of the key drivers of East Africa's economic potential is its favorable demographics. Tanzania, like its regional counterparts, boasts a young and rapidly growing population. As of 2023, Tanzania's population is estimated at 65 million, with a median age of just 18 years. This youthful population presents a significant demographic dividend, offering a large workforce and a growing consumer base.

The region's high birth rates further underscore its demographic vitality:

• Tanzania: 4.6 births per woman
• Uganda: 4.8 births per woman
• Kenya: 3.4 births per woman
• Rwanda: 3.8 births per woman

These birth rates, while gradually declining, ensure a continued expansion of the population and, by extension, the consumer market. The United Nations projects that Tanzania's population could reach 100 million by 2050, potentially making it one of the largest countries in Africa.

Urbanization and Middle-Class Growth

Accompanying this population growth is a rapid urbanization trend. Tanzania's urban population is increasing by about 5% annually, one of the highest rates globally. This urbanization is driving demand for housing, infrastructure, and consumer goods – including furniture and home furnishings.

Moreover, East Africa is experiencing a notable expansion of its middle class. In Tanzania, the middle class is projected to grow from about 3.7 million in 2020 to over 15 million by 2030. This emerging middle class, with its increased purchasing power and aspirational lifestyles, is driving demand for quality products and modern living spaces.

Investment Climate and Opportunities

Tanzania has been actively improving its business environment to attract foreign investment. The government has implemented various reforms to streamline business processes, enhance infrastructure, and promote key sectors such as manufacturing, agriculture, and services.

The country's strategic location, with access to eight landlocked neighboring countries and a coastline on the Indian Ocean, positions it as a potential logistics and manufacturing hub for the region. This geographic advantage, combined with Tanzania's membership in the EAC and the African Continental Free Trade Area (AfCFTA), opens up vast opportunities for investors to tap into a market far beyond Tanzania's borders.

In light of these economic and demographic trends, sectors such as furniture manufacturing stand to benefit significantly. The growing population, increasing urbanization, and rising middle class all point to a surge in demand for home furnishings, office furniture, and related products. Investors entering this market now have the opportunity to establish themselves in a rapidly expanding ecosystem, potentially capturing substantial market share as the region's economy continues to flourish.

As we delve into specific investment opportunities in the furniture sector and beyond, it's crucial to keep this broader context of growth, youth, and regional integration in mind. Tanzania, as part of the dynamic East African landscape, offers not just a market of 65 million, but a gateway to hundreds of millions of consumers in one of the world's most promising economic regions.

The bank lending rate is the interest rate charged by commercial banks for loans to private individuals or businesses.

The cost of borrowing has fluctuated based on economic conditions, policies, and other market dynamics in Tanzania. A lower lending rate typically encourages more borrowing and investment, while higher rates tend to restrain borrowing and reduce inflation.

Tanzania’s bank lending rates from 2003 to July 2024:

1. Recent Trend (June to July 2024):

• In July 2024, the bank lending rate in Tanzania decreased to 12.78% from 12.82% in June 2024.
• This is a 0.04% decline within a month.

2. Historical Average (2003 to 2024):

• The average lending rate from 2003 to 2024 was 13.09%.
• This suggests that, over this 21-year period, the cost of borrowing for businesses and individuals in Tanzania has typically been around 13.09%.

3. All-Time High:

• The highest lending rate was 17.91% in September 2017.
• This period represented the peak in borrowing costs, which could have been influenced by economic factors such as inflation, monetary policy changes, or liquidity issues in the banking sector.

4. All-Time Low:

• The lowest lending rate was 7.53% in March 2004.
• This would have been a favorable time for borrowers as the cost of accessing credit was at its lowest in recent history.
  

Summary of Key Data:

• July 2024: Lending rate = 12.78%
• June 2024: Lending rate = 12.82%
• 2003-2024 average: Lending rate = 13.09%
• All-time high: Lending rate = 17.91% (September 2017)
• All-time low: Lending rate = 7.53% (March 2004)
  

The fluctuations in the bank lending rate tell us several things about Tanzania’s economic and financial environment

the trends in Tanzania’s lending rates reflect the country's monetary policy decisions and its response to inflation, economic growth, and financial stability concerns. A gradual reduction in rates could suggest a focus on boosting economic activity, while higher rates historically reflect efforts to control inflation or mitigate risk.

1. Recent Decline (July 2024):

The slight decrease from 12.82% in June to 12.78% in July 2024 indicates a marginal easing of borrowing costs.

• This could signal that the central bank is trying to stimulate economic activity by making credit more affordable. It may also reflect improved liquidity conditions in the banking sector or a response to inflation trends.

2. Historical High in September 2017 (17.91%):

• The sharp increase in the lending rate in September 2017 to 17.91% suggests that there was either an effort to control inflation or to protect the currency from depreciation.
• Higher rates tend to reduce borrowing and spending, which can help stabilize an overheating economy or high inflationary pressures.

3. Historical Low in March 2004 (7.53%):

• The record low rate of 7.53% in March 2004 points to a period of relatively low inflation and/or expansionary monetary policy.
• This lower rate made borrowing cheaper and could have stimulated investments, which supports economic growth.

4. Long-Term Average (13.09%):

• The long-term average of 13.09% suggests that lending rates in Tanzania are generally high compared to other emerging markets. This may reflect the risk premium that banks assign to loans due to factors such as:
  
  • Credit risk (likelihood of default),
  • Inflation volatility,
  • Regulatory environment, or
  • Other economic uncertainties.

High lending rates can limit access to finance for businesses and individuals, particularly for small businesses, and can stifle growth in sectors that rely on loans for expansion.

5. Impact on Borrowers and Economic Growth:

• Lower lending rates generally encourage businesses to take out loans for investment, leading to potential growth in sectors like manufacturing, agriculture, and services.
• Higher rates, on the other hand, discourage borrowing, which can slow down economic growth as businesses and consumers have less access to affordable credit.

Tanzania's economic performance in Q4 2024 exhibited remarkable growth across several indicators. The number of registered investment projects rose by 53.49%, reaching 198, while job creation skyrocketed by 558.04%, with 96,278 new jobs compared to just 14,631 in Q4 2023. Capital investment surged by 60.72%, amounting to US$ 1.62 billion, with manufacturing leading the way at US$ 636.84 million. Foreign-owned projects and joint ventures also increased, along with a 76.19% rise in locally-owned ventures. Dar es Salaam attracted the most projects, cementing its role as the economic hub. Overall, these positive trends signal growing investor confidence and strong economic development in Tanzania.

Number of Projects:

• 198 investment projects were registered in Q4 2024
• This represents a 53.49% increase compared to Q4 2023, when 129 projects were registered

Number of Jobs Created:

• The 198 projects are expected to generate 96,278 new job opportunities
• This is a massive 558.04% increase compared to Q4 2023, which created 14,631 jobs

Capital Invested:

• Total investment value of US$ 1,619.45 million in Q4 2024
• This is a 60.72% increase from US$ 1,007.63 million invested in Q4 2023

Key sectors:

• Manufacturing was the top performing sector, with an estimated capital investment of US$ 636.84 million
• Other top sectors included Commercial Building, Human Resources, Transportation and Tourism

Ownership:

• Foreign-owned projects increased to 89 (from 55 in Q4 2023)
• Joint venture projects increased to 35 (from 32 in Q4 2023)
• Local ownership increased by 76.19%

Regional distribution:

• Dar es Salaam attracted the most projects with 75
• Followed by Pwani (30 projects), Arusha (19 projects) and Dodoma (13 projects)

Tanzania's economic development in Q4 2024 shows strong signs of growth and progress compared to Q4 2023

The improvements in project numbers, job creation, and capital investment reflect growing investor confidence in Tanzania and an improving business environment, contributing positively to Tanzania's economic development.

1. Significant Growth in Investments:
   • The number of investment projects increased by 53.49% from 129 to 198. This shows a notable rise in business activities and interest in the Tanzanian market.
2. Substantial Job Creation:
   • The investments are expected to create 96,278 jobs, a staggering 558.04% increase compared to the 14,631 jobs in Q4 2023. This reflects a major boost to employment opportunities, which can reduce poverty and improve livelihoods.
3. Increase in Capital Investment:
   • The total capital invested grew by 60.72%, reaching US$ 1,619.45 million compared to US$ 1,007.63 million in Q4 2023. This indicates that larger investments are flowing into Tanzania, showing an enhanced investor confidence.
4. Key Sectors Driving Growth:
   • Manufacturing led with US$ 636.84 million in investments, followed by sectors such as Commercial Building, Human Resources, Transportation, and Tourism. Growth in diverse sectors suggests a broad-based development trajectory.
5. Ownership Shifts:
   • Foreign-owned projects increased by 61.82%, and joint ventures rose by 9.38%, showing that international and collaborative investments are rising. More notably, locally-owned projects surged by 76.19%, highlighting stronger domestic participation in the economy.
6. Regional Distribution:
   • Dar es Salaam attracted the most projects, followed by Pwani, Arusha, and Dodoma, showing regional growth distribution. Dar es Salaam's dominance suggests its position as the business hub.