Tanzania has maintained stable inflation rates, averaging around 3% from December 2023 to December 2024, with minor increases to 3.1% during mid-2024. This consistency, compared to higher rates in neighboring countries like Kenya (8%) and Uganda (7.5%), underscores Tanzania's strong economic management. The 2025 forecast predicts continued stability, with inflation rates ranging between 3.05% and 3.97%, creating a favorable environment for investment and economic growth.

Tanzania's Inflation Rate: A Detailed Analysis

1. Current Trends (2023-2024):

The inflation rate in Tanzania has remained relatively stable. Below are the key observations and figures:

• 2023 (December): The inflation rate was 3%, reflecting stable prices.
• 2024:
  • From January to March 2024, the rate held steady at 3%.
  • Slight increases occurred from April to June 2024, where the rate rose to 3.1% due to seasonal and market factors.
  • The latter half of 2024 saw fluctuations between 3% and 3.1%, closing the year at 3.1% in December.

The minor changes suggest a well-managed inflation environment with limited external shocks.

2. Factors Influencing Inflation in Tanzania:

• Food Prices: As food has a significant weight in Tanzania's Consumer Price Index (CPI), fluctuations in harvest seasons directly impact inflation.
• Fuel Costs: Changes in global oil prices affect transportation and energy costs, which can trickle into overall inflation.
• Exchange Rates: The Tanzanian Shilling's stability has contributed to controlled imported inflation.
• Monetary Policy: The Bank of Tanzania's efforts to maintain inflation within its medium-term target of 3-5% have been successful.

3. Historical Comparison:

Tanzania has maintained a low and stable inflation rate compared to other Sub-Saharan African countries, where double-digit inflation is common in some economies. For example:

• Kenya's Inflation (2024): Averaged 8%.
• Uganda's Inflation (2024): Averaged 7.5%.

4. Forecast for 2025 (January-December):

Using historical data and current trends, the projected inflation rates for 2025 are:

5. Key Observations for 2025:

• Seasonal Fluctuations: Minor variations occur due to predictable economic cycles, like agricultural harvests and fiscal policy adjustments.
• Controlled Environment: Inflation is expected to remain within the central bank's target range of 3-5%.

6. Long-Term Outlook:

Tanzania's consistent inflation management strengthens investor confidence and supports economic growth. Continued focus on:

• Enhancing agricultural productivity.
• Stabilizing fuel and food imports.
• Maintaining prudent monetary policy.

The analysis of Tanzania's inflation rates tells us the following key issues

1. Stability in Inflation

• Low and Stable Rates: Tanzania has maintained a stable inflation rate around 3%, indicating effective monetary and fiscal policies. This stability benefits:
  • Consumers: Stable prices mean predictable costs for essential goods like food and fuel.
  • Businesses: Low inflation reduces uncertainty, encouraging investments.
  • Investors: A controlled inflation rate is attractive for both domestic and foreign investments.

2. Factors Driving Stability

• Effective Policy Measures:
  • The Bank of Tanzania keeps inflation within its target range of 3-5%, ensuring economic predictability.
• Controlled Costs of Essentials:
  • Food prices are a major driver of inflation, and stable agricultural production helps prevent sharp price increases.
  • Fuel and energy prices, though influenced by global markets, are managed to reduce local volatility.
• Stable Exchange Rates: This reduces imported inflation for goods and services sourced from outside Tanzania.

3. Regional Context

• Compared to neighbors like Kenya (8% inflation) and Uganda (7.5%), Tanzania's inflation rate is among the lowest in the region. This highlights:
  • Resilience to external shocks, such as rising global commodity prices.
  • Effective management of domestic supply chains to prevent price spikes.

4. Implications for 2025

• Slight Seasonal Variations: Forecasted rates for 2025 (3.05%-3.95%) suggest minor fluctuations influenced by agricultural harvests, demand cycles, and market adjustments.
• Inflation Stability Supports Growth:
  • Promotes economic confidence for businesses and investors.
  • Reduces the cost of living, aiding poverty reduction and consumer spending.

5. Long-Term Economic Significance

• Predictability: Low inflation signals strong governance and macroeconomic stability, which are critical for attracting long-term investments.
• Economic Growth Potential: With stable prices, Tanzania can focus on accelerating growth in sectors like manufacturing, services, and agriculture without major inflationary pressures.

Tanzania’s inflation rates tell a story of economic discipline, resilience, and opportunity for sustained growth, with careful policy adjustments ensuring continued stability.

Balancing Growth and Sustainability

Tanzania’s government budgetary operations in October 2024 highlight steady progress in revenue collection, achieving 94.9% of the target, driven by robust tax revenues from imports and domestic goods. Expenditures prioritized recurrent needs and development projects, reflecting the government’s commitment to balancing economic growth and fiscal sustainability. Despite minor shortfalls in revenue and a high share of recurrent expenditure, fiscal policies remain focused on strengthening infrastructure and long-term development.

Central Government Revenues:

1. Total Revenue Collection (October 2024):
   • Amounted to TZS 2,773.4 billion, achieving 94.9% of the monthly target.
   • Central government revenues accounted for 96% of total collections, amounting to TZS 2,662.1 billion.
   • Tax revenue contributed TZS 2,238.4 billion, marginally missing the target by 0.7%.
   • Taxes on imports and local goods and services performed above their targets, laying a strong foundation for revenue growth.
2. Breakdown of Revenue Categories (October 2024 Actuals):
   • Taxes on imports: TZS 992.9 billion.
   • Income tax: TZS 581.7 billion.
   • Taxes on local goods and services: TZS 550.3 billion.
   • Other taxes: TZS 179.2 billion.
   • Non-tax revenue: TZS 358.0 billion.

Central Government Expenditures:

1. Total Expenditure (October 2024):
   • Reached TZS 3,402.8 billion.
   • Recurrent expenditure: TZS 2,176 billion focused on wages, salaries, and operational costs.
   • Development expenditure: TZS 1,226.8 billion allocated to infrastructure, social programs, and other key development initiatives.
2. Breakdown of Expenditure Categories (October 2024 Actuals):
   • Wages and salaries: TZS 825.4 billion.
   • Interest costs: TZS 445.1 billion.
   • Other recurrent expenditures: TZS 494.4 billion.
   • Development expenditure: TZS 1,226.8 billion, with priority on infrastructure projects.

Observations:

• The government maintained fiscal consolidation efforts by aligning expenditures with available resources.
• Tax revenue performance highlights the government's efforts to improve efficiency in revenue collection.
• Development expenditure emphasizes a strong focus on economic growth and infrastructure investment.

The information on Government Budgetary Operations reflects several key aspects of Tanzania's fiscal management and economic priorities

1. Revenue Performance:

• The central government achieved 94.9% of its revenue target, indicating effective revenue collection strategies but highlighting room for improvement in achieving full targets.
• Taxes on imports and local goods/services performing above target suggests robust trade activity and economic activity within the domestic market.
• The reliance on tax revenue (over 80% of total revenue) demonstrates the importance of a growing tax base and enhanced compliance.

Takeaway: The government is making progress in revenue mobilization, but minor shortfalls indicate challenges in achieving ambitious targets or unpredictable economic factors.

2. Expenditure Trends:

• Recurrent Expenditure: The high share of recurrent costs (64% of total spending) underscores significant commitments to salaries, interest payments, and operational costs.
• Development Expenditure: Allocating 36% to development projects reflects a deliberate focus on infrastructure and long-term economic growth.

Takeaway: While development spending shows a commitment to future growth, the dominance of recurrent spending limits flexibility for additional investments in key areas.

3. Fiscal Balance:

• The data implies that the government may be operating with a fiscal deficit, given that expenditures exceed revenue. This suggests reliance on borrowing or other financing mechanisms.

Takeaway: Fiscal consolidation efforts must continue to strike a balance between stimulating growth through spending and maintaining sustainable debt levels.

4. Policy and Economic Insights:

• The strong performance in taxes on imports and domestic goods indicates improving economic activity and consumption.
• The focus on development expenditure aligns with the government’s goal of infrastructure-led growth and poverty reduction.

Broader Implication: The government’s fiscal policies aim to balance short-term obligations with long-term development, but consistent revenue growth and effective expenditure management are critical to avoid over-reliance on borrowing.

Overall, the data illustrates a government striving to grow its economy and invest in the future while managing the constraints of its budget and obligations. This underlines the importance of continued reforms in tax administration, spending efficiency, and fostering private-sector-driven growth.

Stability and Growth in Focus

Zanzibar's economy demonstrated resilience in November 2024, with headline inflation dropping to 4.5%, reflecting stable food prices and currency strength. Government revenues reached TZS 180 billion, with tax collections surpassing targets by 8.2%, while development spending accounted for 52% of total expenditures. A current account surplus of USD 500.7 million, driven by strong tourism and export performance, highlights the region’s economic potential. Despite a fiscal deficit of TZS 3.3 billion, Zanzibar continues to prioritize growth through strategic investments and fiscal discipline.

Economic Performance in Zanzibar (November 2024)

1. Inflation Trends

• Headline Inflation: Decreased to 4.5% in November 2024, from 5.8% in October 2024 and 6.3% in November 2023.
  • The decline was driven by slower increases in food prices and an appreciating Tanzanian shilling, which reduced import costs.
• Food Inflation: Dropped to 6.6% in November 2024, down from 8.2% in October 2024 and 10.9% in November 2023.
• Non-Food Inflation: Stood at 3%, a reduction from 4.1% in October 2024 and stable compared to November 2023.

2. Government Budgetary Operations

Revenues and Grants:

• Total government revenue and grants reached TZS 180 billion, with:
  • Domestic Revenue: TZS 138.2 billion (94.6% of target).
  • Grants: TZS 41.7 billion.
  • Tax Revenue: TZS 124.2 billion, exceeding the target by 8.2%, due to improved tax enforcement and compliance.
  • Non-Tax Revenue: TZS 14 billion (44.7% of the target).

Expenditure:

• Total expenditure amounted to TZS 155.4 billion:
  • Recurrent Expenditure: TZS 74.8 billion, allocated to wages, salaries, and operational costs.
  • Development Expenditure: TZS 80.6 billion, primarily funded by domestic sources (TZS 62.7 billion) and supplemented by foreign financing.

Fiscal Deficit:

• Zanzibar recorded a fiscal deficit of TZS 3.3 billion, which was financed through external borrowing.

3. External Sector Performance

• Current Account Balance: Surplus of USD 500.7 million for the year ending November 2024, up from USD 360.3 million in November 2023.
• Exports of Goods and Services:
  • Improved performance, especially in tourism, contributed significantly to the surplus.
• Imports of Goods and Services:
  • Decreased, further supporting the positive current account position.

Key Insights:

1. Declining Inflation: Reflects stability in food prices and effective currency management, benefiting households and businesses alike.
2. Revenue Mobilization Success: Tax revenue exceeded targets, showcasing improved enforcement and taxpayer compliance.
3. Development Priorities: Significant allocation to development spending underlines a commitment to infrastructure and socio-economic growth.
4. Trade and Tourism Boost: Strong performance in the external sector, particularly in tourism, highlights Zanzibar’s growing economic potential.

The analysis of Zanzibar's economic performance with several important insights into the region's fiscal and economic health

1. Declining Inflation Reflects Economic Stability

• The drop in headline inflation to 4.5% indicates stable prices for essential goods, benefiting consumers.
• The reduction in food inflation to 6.6% reflects improved food supply and a stronger currency, reducing import costs.

Implication: Zanzibar’s inflation trends signal effective price control mechanisms, stable economic conditions, and reduced pressure on household purchasing power.

2. Strong Revenue Mobilization

• Tax revenue exceeding targets by 8.2% highlights the government’s improved enforcement and taxpayer compliance.
• However, the shortfall in non-tax revenue (44.7% of the target) suggests areas for improvement in diversifying revenue sources.

Implication: Zanzibar’s fiscal system demonstrates strengths in tax mobilization but needs to enhance efficiency in collecting non-tax revenues to reduce reliance on external financing.

3. Prioritization of Development Spending

• Development expenditure accounted for more than half (52%) of total spending, with domestic financing (TZS 62.7 billion) playing a significant role.
• Investments in infrastructure and social programs align with long-term growth objectives.

Implication: The focus on development spending reflects a commitment to building infrastructure and improving public services, but the reliance on domestic and foreign funding underscores the need for effective project management to ensure returns.

4. Improved External Sector Performance

• The current account surplus of USD 500.7 million reflects strong export performance, especially in tourism and reduced imports.
• Growth in tourism receipts underscores the sector’s vital role in Zanzibar’s economy, driven by increased tourist arrivals.

Implication: The external sector performance highlights Zanzibar’s success in leveraging its comparative advantages, particularly in tourism, while maintaining control over imports.

5. Fiscal Deficit and Financing

• The fiscal deficit of TZS 3.3 billion demonstrates the challenges of balancing revenues and expenditures.
• Financing through external borrowing requires careful management to avoid over-reliance and maintain debt sustainability.

Implication: Zanzibar’s fiscal health is stable but demands continued efforts in expanding domestic revenue and prudent debt management.

Conclusion:

Zanzibar’s economic performance reflects positive trends in inflation control, revenue mobilization, and trade, driven by tourism and development spending. However, the reliance on external borrowing and the underperformance of non-tax revenue highlight the need for diversified revenue sources, enhanced fiscal discipline, and productive investments to sustain long-term economic growth.

Tanzania's financial markets in November 2024 demonstrated resilience and stability, reflecting sound macroeconomic management. Government securities attracted strong interest in long-term bonds, with yields rising to 15.93% for 25-year bonds, signaling investor confidence in the economy. The interbank cash market maintained balanced liquidity, with a modest overall rate of 8.06%. Meanwhile, the foreign exchange market saw a significant increase in activity, with turnover reaching USD 186.7 million and the Tanzanian shilling appreciating by 2.3% against the US dollar. These trends underscore a stable financial environment conducive to sustained growth and investment.

Details on Financial Markets in November 2024

1. Government Securities Market

The government securities market showed mixed performance in November 2024, with strong interest in long-term maturities. Key details include:

• Treasury Bills:
  • Two auctions were conducted, with a combined tender size of TZS 253.3 billion.
  • Total bids received: TZS 211.7 billion (undersubscribed).
  • Successful bids: TZS 154.8 billion.
  • Weighted average yield (WAY): 12.68%, up from 11.55% in October 2024.
• Treasury Bonds:
  • Two auctions for 20-year and 25-year Treasury bonds were conducted.
  • Combined tender size: TZS 391 billion.
  • Total bids received: TZS 560.7 billion (oversubscribed).
  • Successful bids: TZS 487.5 billion.
  • Weighted average yields:
    • 20-year bond: 15.64%.
    • 25-year bond: 15.93%.

2. Interbank Cash Market (IBCM)

The Interbank Cash Market facilitated shilling liquidity distribution among banks. Highlights include:

• Total Transactions:
  • November 2024: TZS 1,651 billion.
  • October 2024: TZS 2,093.7 billion (indicating reduced market activity).
• Transaction Composition:
  • Overnight transactions accounted for 19.2% of total turnover.
  • 7-day transactions contributed 35.2% of total turnover.
• Interest Rates:
  • The overall IBCM rate: 8.06%, slightly up from 8.04% in October 2024.

3. Interbank Foreign Exchange Market (IFEM)

The foreign exchange market experienced significant activity, reflecting improved liquidity and favorable economic conditions. Key figures:

• Market Turnover:
  • November 2024: USD 186.7 million, a sharp increase from USD 50.7 million in October 2024 and USD 13.1 million in November 2023.
• Bank of Tanzania Participation:
  • Purchases: USD 23 million, compared to USD 4.5 million in October 2024.
• Exchange Rate Performance:
  • Average exchange rate: TZS 2,659.03 per USD, reflecting a 2.3% appreciation from TZS 2,719.91 per USD in October 2024.
  • Annual depreciation slowed to 6.3%, down from 9% in October 2024.

Summary of Figures

Key Insights

1. Government Securities Market: Increased investor appetite for long-term bonds due to stable macroeconomic conditions. Treasury bill auctions faced undersubscription, likely due to lower yields.
2. Interbank Cash Market: A slight decline in activity and marginal rate increase reflects balanced liquidity management among banks.
3. Foreign Exchange Market: Strong activity, with a notable improvement in foreign exchange liquidity and a steady appreciation of the Tanzanian shilling.

The financial market report provides important insights into Tanzania's economic and financial conditions in November 2024

1. Government Securities Market

• Investor Confidence in Long-Term Stability:
  • The oversubscription of 20-year and 25-year Treasury bonds, coupled with increased yields (15.64% and 15.93%, respectively), indicates strong investor confidence in Tanzania's long-term economic stability and macroeconomic policies.
  • The undersubscription of Treasury bills suggests reduced demand for shorter-term investments, possibly due to the relatively lower yields or a preference for more stable, long-term returns.

2. Interbank Cash Market (IBCM)

• Efficient Liquidity Management Among Banks:
  • The decrease in transactions to TZS 1,651 billion (from TZS 2,093.7 billion) reflects reduced borrowing needs in the banking system, potentially due to improved liquidity conditions.
  • The slight increase in the overall IBCM interest rate (8.06% from 8.04%) suggests that liquidity is well-regulated without excessive pressure on interbank lending costs.

3. Interbank Foreign Exchange Market (IFEM)

• Improved Foreign Exchange Liquidity:
  • A sharp increase in market turnover to USD 186.7 million (compared to USD 50.7 million in October 2024 and USD 13.1 million in November 2023) signals robust foreign currency inflows, likely driven by strong tourism performance, cash crop exports, and other international activities.
  • The appreciation of the Tanzanian shilling (2.3% against the USD) reflects improved economic fundamentals, reduced foreign exchange pressures, and confidence in monetary policy management.

What It Tells Us About the Economy

1. Stable Financial Environment:
   • The strong demand for long-term bonds and stable interbank rates indicate a well-functioning financial system with investor confidence and efficient liquidity distribution.
2. Economic Resilience and Foreign Inflows:
   • The surge in foreign exchange market activity and shilling appreciation highlight Tanzania's growing strength in foreign exchange-generating sectors such as tourism and exports.
3. Policy Effectiveness:
   • The financial market trends demonstrate that monetary policy is effectively maintaining balance and fostering stability without excessive inflation or liquidity stress.
4. Opportunities and Risks:
   • The preference for long-term securities over short-term ones and improved foreign exchange conditions present opportunities for investment and growth. However, any global economic shocks or local fiscal pressures could disrupt these favorable trends.

Overall Interpretation

The financial market data shows that Tanzania's economy is on a stable and sustainable path, with growing investor confidence, improved foreign exchange conditions, and efficient liquidity management. These trends are supportive of continued economic recovery and growth.

Tanzania’s external sector showcased remarkable strength in November 2024, with the current account deficit narrowing by 35% to USD 2,025.8 million. Exports surged by 14.2% to USD 15,872.9 million, driven by gold and tourism, while imports grew modestly by 2.7%. Foreign exchange reserves increased to USD 5,056.8 million, covering 4.1 months of imports, exceeding benchmarks. This performance highlights Tanzania’s growing global competitiveness and economic resilience, ensuring a stable foundation for sustainable growth.

The external sector demonstrated notable improvements in November 2024, driven by robust export growth, a reduced current account deficit, and strong foreign exchange reserves. These factors underline the resilience and recovery of Tanzania's economy.

1. Current Account Balance

• The current account deficit narrowed significantly by 35% to USD 2,025.8 million in the year ending November 2024, compared to USD 3,115.8 million in the corresponding period in 2023.
• This improvement was attributed to strong export performance and controlled import growth.

2. Exports

• Total Exports: Increased by 14.2% to USD 15,872.9 million in the year ending November 2024, up from USD 13,901.2 million in the same period in 2023.
• Goods Exports:
  • Rose to USD 8,887.1 million, compared to USD 7,771.7 million in 2023.
  • Mineral exports dominated, with gold alone contributing USD 3,320.9 million, accounting for 83.1% of mineral exports and 37.4% of total goods exports.
• Services Exports:
  • Increased to USD 6,985.9 million, up by 14% year-on-year, driven by growth in tourism receipts and transportation earnings.
  • Tourism receipts: Grew by 11.1% to USD 3,681.5 million, supported by increased tourist arrivals (2,106,870 tourists, compared to 1,781,214 in 2023).

3. Imports

• Total Imports: Grew modestly by 2.7% to USD 16,582.7 million, compared to USD 16,142.1 million in 2023.
• Goods Imports: Accounted for 85% of the total import bill, driven by industrial supplies and refined petroleum products.
  • Petroleum imports: Declined by 7% to USD 2,578.5 million, primarily due to favorable price effects.

4. Foreign Exchange Reserves

• Reserves rose to USD 5,056.8 million, up from USD 4,850.8 million in November 2023.
• The reserves were sufficient to cover 4.1 months of projected imports, meeting and exceeding the national benchmark of 4 months.

Key Figures in Summary

Implications:

1. Export-Led Recovery:
   • The substantial growth in exports, particularly from gold and tourism, highlights the resilience of Tanzania's external sector and its role in economic recovery.
2. Sustainable Import Growth:
   • Modest growth in imports, with a decline in petroleum imports, reflects effective management of import bills despite global challenges.
3. Strengthened External Resilience:
   • The increase in foreign exchange reserves and a narrowing current account deficit underscore Tanzania's improved ability to weather external shocks and maintain macroeconomic stability.

The external sector's performance in November 2024 illustrates Tanzania's growing strength in exports, particularly in minerals and tourism, coupled with controlled imports and robust reserve levels. This positions the economy well for sustainable growth and resilience against global uncertainties.

Tanzania's external sector performance in November 2024 highlight several important trends and insights about the country's economic standing and resilience

1. Positive Export Performance Drives Recovery

• The 14.2% growth in total exports (to USD 15,872.9 million) signals Tanzania's increasing competitiveness in global markets, especially in key sectors like gold mining and tourism.
• Tourism receipts grew by 11.1%, supported by higher tourist arrivals, emphasizing the sector's role as a major foreign exchange earner.

2. Controlled Import Growth Reflects Stability

• The 2.7% rise in imports demonstrates Tanzania's ability to manage its import bills effectively, ensuring that the trade deficit does not widen excessively.
• The 7% decline in petroleum imports reflects price advantages and efficient consumption, contributing to reduced external pressure.

3. Narrowed Current Account Deficit Signals Economic Improvement

• The 35% reduction in the current account deficit to USD 2,025.8 million shows improved external balances, supported by strong export earnings and controlled import bills.
• This reduction boosts the country's ability to withstand external shocks and enhances investor confidence.

4. Strengthened Foreign Exchange Reserves Indicate Resilience

• Reserves reached USD 5,056.8 million, covering 4.1 months of imports, exceeding the national benchmark. This signals robust external sector health and the ability to manage future trade or financial shocks.

5. Implications for Economic Stability

• Improved External Balances: Growth in exports coupled with a narrowing deficit reflects Tanzania's strengthening position in international trade.
• Reduced Vulnerability: Higher foreign exchange reserves and a slower pace of depreciation indicate greater resilience to global uncertainties.
• Sectoral Contribution: Gold and tourism emerge as pivotal drivers of the economy, underscoring the importance of further developing these sectors.

Key Takeaways

1. Economic Resilience: The narrowing current account deficit and growing reserves underline Tanzania's improving external stability.
2. Export Diversification Potential: While gold and tourism dominate, there is potential to expand other export sectors for sustained growth.
3. Global Competitiveness: The performance of key exports reflects Tanzania's ability to leverage favorable global conditions and enhance its economic footprint.

Conclusion

The external sector performance in November 2024 tells a story of recovery, resilience, and growth. Tanzania is strengthening its global economic position through robust exports, effective import management, and growing foreign exchange reserves, laying a strong foundation for sustainable economic progress.

Supporting Economic Stability and Growth

Tanzania's lending and deposit interest rates in November 2024 reflected a stable financial environment conducive to economic growth. The overall lending rate remained unchanged at 15.67%, ensuring consistent borrowing costs, while the negotiated lending rate slightly eased to 12.77%, benefiting prime borrowers. On the other hand, deposit rates experienced a modest decline, with the overall deposit rate at 8.18% and the negotiated deposit rate at 10.14%, signaling sufficient liquidity in the banking system. The narrowing short-term interest spread to 5.93 percentage points highlights improved efficiency and competition in the banking sector, fostering a more supportive financial landscape.

Interest Rates Overview: Lending and Deposit Rates

The report highlights stable trends in both lending and deposit interest rates for November 2024, with slight variations compared to previous months. These rates indicate the cost of borrowing and the return on savings within the Tanzanian financial system.

1. Lending Interest Rates

• Overall Lending Rate: Remained unchanged at 15.67%, reflecting stability in the cost of credit for borrowers.
• Negotiated Lending Rate: Marginally decreased to 12.77% from 12.93% in October 2024.
  • Negotiated rates are typically offered to large borrowers or prime customers, highlighting some relaxation in credit terms for preferred clients.

2. Deposit Interest Rates

• Overall Deposit Rate: Declined slightly to 8.18%, down from 8.25% in October 2024.
• Negotiated Deposit Rate: Dropped to 10.14%, compared to 10.27% in October.
  • This reflects a slight reduction in returns offered by banks to attract savings.

3. Interest Rate Spread

• The spread between lending and deposit rates provides insight into banking profitability and efficiency.
  • The short-term interest spread narrowed to 5.93 percentage points in November 2024, compared to 6.47 percentage points in the same period of 2023.
  • This narrowing suggests increased competition among banks or improved cost efficiencies in financial intermediation.

Key Figures in Summary

Interpretation

The stable lending rates suggest consistent credit availability for businesses and individuals, crucial for economic activity. The slight decline in deposit rates may reflect ample liquidity in the banking system, reducing the need for banks to aggressively attract deposits. The narrowing interest rate spread is a positive development, indicating potential benefits for borrowers through lower borrowing costs and increased banking competition.

The information on lending and deposit interest rates reveals several insights into Tanzania's financial and economic environment

1. Stable Lending Rates Indicate Credit Availability

• The unchanged overall lending rate of 15.67% reflects a consistent cost of borrowing, ensuring businesses and individuals have access to credit for economic activities.
• The slight drop in the negotiated lending rate to 12.77% highlights increased flexibility for prime borrowers, likely supporting key sectors and large-scale investments.

2. Declining Deposit Rates Reflect Ample Liquidity

• The reduction in the overall deposit rate to 8.18% suggests that banks are less aggressive in attracting deposits. This is likely due to sufficient liquidity in the banking system.
• The decrease in the negotiated deposit rate to 10.14% aligns with this trend, further indicating that banks have access to alternative funding sources or are managing their liquidity efficiently.

3. Narrowing Interest Rate Spread Points to Efficiency

• The narrowing of the short-term interest spread to 5.93 percentage points from 6.47% in 2023 indicates:
  • Improved competition among banks, potentially lowering borrowing costs for consumers.
  • Greater efficiency in financial intermediation, which benefits the broader economy.

4. Economic Implications

• For Borrowers: Stable and slightly reduced borrowing rates make credit accessible and affordable, encouraging investment and consumption, particularly in key sectors like agriculture and SMEs.
• For Savers: Lower deposit rates might discourage savings, but they reflect a stable banking environment where liquidity pressures are minimal.
• For the Banking Sector: A narrowing spread suggests competitive pressures or operational improvements that can foster a healthier financial system.

Overall Insight

The interest rate trends reveal a balanced approach to monetary and financial stability in Tanzania. By keeping borrowing costs stable and deposit rates manageable, the Bank of Tanzania supports sustained economic growth while maintaining a well-functioning banking system. This is particularly important in an economy experiencing strong credit demand and seasonal cash flow pressures.

In November 2024, the Bank of Tanzania maintained a cautious yet supportive monetary policy to ensure economic stability. With a 7-day Interbank Cash Market (IBCM) rate averaging 8.29%, slightly above the Central Bank Rate (CBR) of 6%, the policy aimed to balance liquidity amid high seasonal cash demands for crop purchases. The extended broad money supply (M3) grew by 13.6%, driven by foreign asset growth, while private sector credit expanded by 15.3%, highlighting strong economic activity, particularly in agriculture and SME financing. This measured approach reflects the Bank’s commitment to fostering sustainable growth and financial stability.

Policy Implementation

• The Bank of Tanzania maintained a 7-day Interbank Cash Market (IBCM) rate within a corridor of ±200 basis points around the Central Bank Rate (CBR), set at 6%.
• The 7-day IBCM rate averaged 8.29%, slightly above the CBR corridor, due to low liquidity in the banking sector influenced by seasonal cash demands for crop purchases.

Liquidity Management

• Reverse repurchase agreements (reverse repos) decreased to TZS 2,578.5 billion, from TZS 2,887.9 billion in October 2024.
• Lombard facility usage also declined to TZS 3,870.4 billion from TZS 5,601.1 billion in October.

Money Supply

• Extended broad money supply (M3) grew by 13.6%, driven by foreign asset increases in the banking sector.
• Private sector credit expanded by 15.3%, a slight deceleration from 17% in October and 18.3% in November 2023.

Figures

1. Interest Rates:
   • IBCM 7-day rate: Averaged 8.29% in November 2024.
   • Central Bank Rate (CBR): Set at 6%.
2. Monetary Transactions:
   • Reverse repos: TZS 2,578.5 billion.
   • Lombard facility: TZS 3,870.4 billion.
3. Money Supply Components:
   • M3: TZS 49,510.7 billion, growing at 13.6% annually.
   • Private Sector Credit: Grew at 15.3%.
4. Credit Allocation:
   • Significant growth in agriculture (41.9%), personal loans (19.2%), and building & construction (16.6%).

The monetary policy report highlights the Bank of Tanzania's actions and the state of monetary indicators in November 2024, offering insights into the economic environment

Policy Stance

1. Monetary Tightening:
   • The slightly elevated 7-day Interbank Cash Market (IBCM) rate (8.29%) compared to the Central Bank Rate (CBR) (6%) suggests tightened liquidity conditions. This reflects the seasonal cash demand for crop purchases, especially after a bumper harvest.
2. Controlled Liquidity Management:
   • The use of reverse repos and the Lombard facility to manage liquidity declined, indicating an improvement in banking sector liquidity.

Economic Activity Reflected Through Money Supply

1. Money Supply Growth (M3):
   • The 13.6% growth in M3 is healthy and suggests adequate liquidity in the economy to support economic activities.
   • The growth was driven primarily by foreign currency deposits, reflecting the importance of foreign inflows.
2. Private Sector Credit Growth:
   • A 15.3% expansion in private-sector credit shows strong credit demand and confidence in economic activities. However, the slight decline from previous months (17% in October) hints at moderating credit expansion.
3. Sectoral Focus:
   • The highest credit growth in agriculture (41.9%) signals robust demand for financing in the sector, likely tied to crop purchases and investment in production.
   • Personal loans dominate total credit (38.7%), reflecting their importance in consumption and SME financing.

Key Implications

1. Economic Resilience:
   • Despite seasonal liquidity pressures, the monetary system is effectively balanced, ensuring adequate support for economic activities without overheating.
2. Agriculture as a Driver:
   • The strong focus on agriculture financing suggests the sector's critical role in the economy, especially during harvest periods.
3. Sustainable Credit Growth:
   • Moderate private sector credit growth ensures economic expansion without excessive risks of inflation or non-performing loans.
4. Foreign Influence:
   • The prominence of foreign currency deposits highlights Tanzania's reliance on international trade, tourism, and remittances for liquidity.

Policy Outlook

The report suggests the Bank of Tanzania is maintaining a cautious yet supportive monetary stance, balancing liquidity to promote growth while containing inflationary pressures. The focus on agriculture and personal loans supports essential sectors of the economy.

Challenges and Opportunities

Tanzania, as a key player among East African low-income countries, faces significant hurdles in achieving middle-income status. While progress in areas like agriculture and infrastructure development has been modest, the nation’s untapped potential in industrialization, tourism, and regional trade offers avenues for growth. By addressing challenges such as low productivity, poverty reduction, and governance reforms, Tanzania can emulate the successes of regional peers like Ethiopia and Rwanda to accelerate its economic transformation.

Tanzania’s Position Relative to East Africa and LICs

1. Economic Growth:
   • Per capita GDP growth in LICs, including Tanzania, has been slow. Median growth for LICs was just 1.5% (2000-09), dropping further to 1.3% (2010-19), and 0.1% (2020-24)​.
   • Among East African countries, Ethiopia and Rwanda outpaced others, with annual per capita growth rates of 6.5% and 4.6%, respectively, over the same periods​.
2. Poverty Reduction:
   • LICs, including many in East Africa, saw a decline in extreme poverty by 17 percentage points since 2000, slower compared to middle-income transitions​.
   • In Tanzania, agriculture and services remain key sectors but lag in productivity compared to industrialized sectors​.
3. Structural Transformation:
   • The share of agriculture in employment remains high across LICs, averaging 28% of GDP, higher than in transitioning middle-income nations, which show more balanced outputs between agriculture, industry, and services​.
4. Productivity and Employment:
   • Agricultural productivity in LICs grew slower than in other sectors, while service and industrial sectors showed more dynamism in countries like Kenya and Uganda, highlighting Tanzania's potential for improvement​.

Key Regional Comparisons

• Ethiopia and Rwanda have experienced robust structural changes driven by policy reforms and investment in industrialization, making them standout performers in East Africa.
• Kenya's growth is supported by better trade openness and service sector expansions​.
• Tanzania's economic prospects are tied closely to its agricultural productivity and untapped potential in industrialization and tourism.

Recommendations for Tanzania

• Sectoral Reforms:
  • Accelerate industrial development to reduce the over-reliance on agriculture.
  • Improve governance to attract more investments and integrate regional trade opportunities.
• Poverty and Productivity:
  • Invest in agricultural modernization to boost productivity and reduce poverty more effectively.
  • Leverage youthful demographics for labor-intensive sectors.

The challenges and opportunities facing low-income countries (LICs), including Tanzania, and provides a context for understanding its position within East Africa and globally.

1. Economic Position of LICs:

• LICs are struggling to achieve middle-income status, with slow economic growth and high levels of poverty.
• Tanzania, as an LIC, shares similar challenges with other East African nations, such as reliance on agriculture, limited industrialization, and weak institutional frameworks.

2. East Africa’s Economic Standouts:

• Ethiopia and Rwanda demonstrate strong growth due to structural reforms, investment in infrastructure, and industrial policies.
• Kenya benefits from a more diversified economy, trade openness, and vibrant services sector.
• Tanzania, while progressing, lags behind these countries in structural transformation and industrial growth.

3. Challenges for Tanzania:

• Low Productivity in Agriculture: Agriculture accounts for a large share of GDP but remains low in productivity, limiting income growth.
• Limited Industrialization: Tanzania has not transitioned enough labor and output into higher productivity sectors like manufacturing.
• Poverty Stagnation: Extreme poverty reduction has slowed, with a significant portion of the population still living on less than $2.15 a day.

4. Opportunities for Tanzania:

• Demographics: A youthful population can drive economic growth if educated and employed productively.
• Natural Resources: Abundant resources, such as minerals and tourism potential, can fuel growth if managed effectively.
• Regional Integration: Leveraging East African Community (EAC) trade and infrastructure projects can enhance competitiveness and market access.

5. Lessons from East Africa:

• Ethiopia and Rwanda: Investments in industrial parks, export-oriented policies, and agricultural modernization have spurred growth.
• Kenya: A strong private sector and focus on trade services have boosted economic resilience.
• Tanzania’s Potential: By learning from these successes, Tanzania can prioritize:
  • Infrastructure development.
  • Agricultural productivity reforms.
  • Policies to attract foreign investment and foster industrialization.

6. Policy Recommendations:

• Investment in Human Capital: Enhance education and healthcare to build a productive workforce.
• Structural Reforms: Simplify business regulations, improve governance, and foster public-private partnerships (PPPs).
• Climate Adaptation: Address vulnerabilities to climate shocks by investing in resilient infrastructure and sustainable practices.

7. Global Context:

• LICs like Tanzania face external pressures such as declining global trade growth, high debt burdens, and geopolitical tensions.
• International assistance (e.g., concessional financing and debt relief) is critical for Tanzania to sustain investments in growth and poverty reduction.

Implications for Tanzania:

Tanzania has significant growth potential but must address critical bottlenecks in governance, productivity, and industrialization. Learning from regional peers and leveraging its demographic and resource advantages could fast-track its transition to middle-income status. This requires strategic investments, effective policies, and stronger regional and global integration.

The Tanzania Revenue Authority (TRA) demonstrated exceptional performance in the first half of the 2024/2025 fiscal year, consistently exceeding revenue targets with efficiency rates above 100% and achieving year-on-year growth ranging from 15% to 23.6%. With total collections peaking at TZS 3.587 trillion in December 2024, driven by strengthened economic activities and improved tax compliance, TRA's strategic initiatives have set a solid foundation for continued growth. Forecasts for January–June 2025 project sustained revenue momentum, reinforcing TRA's pivotal role in enhancing Tanzania’s fiscal stability and economic development.

1. Overview of Monthly Performance

The table shows the revenue collections compared to targets and highlights both efficiency (how much was collected compared to the target) and growth (how much collections increased compared to the previous year).

2. Key Observations

A. Efficiency (Target Achievement)

• July 2024: Revenue collection was 104.45% of the target (TZS 2.347 trillion collected against a target of TZS 2.247 trillion).
• October 2024: The highest efficiency was recorded at 107.45%, showing TRA’s strong performance in meeting and exceeding targets.
• December 2024: Efficiency was 103.52%, indicating slight overperformance relative to the target of TZS 3.465 trillion.

B. Growth (Year-on-Year Increase)

• July 2024: Revenue grew by 21.04% from TZS 1.939 trillion in July 2023/2024 to TZS 2.347 trillion in 2024/2025.
• October 2024: This month recorded the highest growth at 23.60%, a sign of increased economic activity or improved tax compliance mechanisms.
• December 2024: Growth was 17.61%, an improvement of TZS 0.537 trillion compared to December 2023/2024.

3. Breakdown of Key Drivers

1. Revenue Growth Factors
   • Improved economic activity during the year, particularly in key sectors like trade and services.
   • Strengthened tax administration and enforcement measures by TRA.
2. Efficiency in Exceeding Targets
   • Enhanced compliance through digital tax systems (e.g., EFDs).
   • Improved taxpayer education and monitoring contributed to high revenue performance.
3. Month-on-Month Trends
   • The largest revenue collection occurred in December 2024 (TZS 3.587 trillion), likely due to increased economic activity during the holiday season.
   • July 2024 saw a strong start with significant growth and efficiency, setting the pace for subsequent months.

4. Highlights and Takeaways

• Consistent Growth: Revenue growth ranged from 15% to 23.6%, demonstrating resilience in collections despite possible economic challenges.
• Exceeding Targets: TRA consistently achieved over 100% efficiency, showing effective planning and execution.
• Peak Collection: December was the strongest month in absolute collections, reflecting seasonal economic patterns.

Forecast for revenue collections by the Tanzania Revenue Authority (TRA) for the next six months (January–June 2025), based on the average growth rate observed between July and December 2024/2025:

Key Observations:

1. January 2025: Forecasted collections are TZS 3.97 trillion, an increase from December 2024 due to consistent growth momentum.
2. June 2025: Collections are projected to reach TZS 6.60 trillion, reflecting significant month-on-month growth.
3. Trend: Revenue is expected to grow steadily due to sustained improvements in tax compliance and economic activities.

Tanzania Revenue Authority (TRA) for July–December 2024/2025 and the forecast for January–June 2025 offers key insights into the efficiency, growth, and trends of revenue collections:

1. Efficiency (Target Achievement)

• TRA consistently exceeded revenue targets, achieving efficiency rates above 100% across all months, with a peak of 107.45% in October 2024.
• This indicates robust tax collection strategies, improved taxpayer compliance, and effective administrative measures.
• Even in December, where targets are typically ambitious, TRA managed to collect 3.587 trillion TZS, surpassing the target by 3.52%.

2. Growth (Year-on-Year Comparison)

• Revenue collections showed steady growth compared to the previous fiscal year, ranging from 15.01% in September to a high of 23.60% in October.
• The high growth rates suggest:
  • Strengthened economic activity, particularly in trade and services.
  • Enhanced enforcement of tax compliance and digital systems like EFDs.

3. Seasonal Trends and Peaks

• July 2024: Marked a strong start with 21.04% growth, setting a positive trajectory for subsequent months.
• December 2024: Registered the highest collections in absolute terms (3.587 trillion TZS), attributed to increased holiday-related economic activity.

4. Key Drivers Behind Performance

• Economic Growth: Expansion in key sectors such as trade and services contributed to rising tax revenues.
• Technological Integration: Use of digital tax systems and improved enforcement mechanisms enhanced compliance.
• Taxpayer Education: Increased awareness among taxpayers likely reduced evasion and improved voluntary compliance.

5. Forecast for January–June 2025

• Forecasted collections project sustained growth, with revenues rising from 3.97 trillion TZS in January to 6.60 trillion TZS in June 2025.
• The steady increase indicates momentum in tax collection strategies and economic performance.
• By June 2025, collections are expected to reflect nearly 66% growth compared to January 2025, showcasing robust monthly expansion.

6. Overall Insights

1. Consistency in Exceeding Targets: TRA’s ability to consistently exceed revenue targets demonstrates strong institutional efficiency.
2. Sustained Growth: Growth rates of 15–23.6% suggest resilience in economic activities despite potential challenges.
3. Strategic Focus: December’s peak collections and the upward forecast highlight the importance of seasonal and economic patterns in TRA’s strategies.
4. Future Prospects: The optimistic forecast for January–June 2025 underscores TRA's capability to leverage momentum and maintain revenue collection growth.

Remittance flows play a pivotal role in Tanzania's economic landscape, contributing $757 million in inward remittances in 2024, equivalent to 1.0% of GDP. While the country lags behind regional peers such as Kenya and Uganda, these private transfers offer a stable source of foreign exchange and household income. With modest outward remittances of $161 million, Tanzania remains a net recipient, highlighting opportunities to strengthen diaspora engagement and leverage remittances for sustainable development. This comparative regional analysis underscores the untapped potential to enhance financial inclusion, promote labor mobility, and foster economic resilience.

Inward Remittance Flows:

• 2024 Estimated Inflows: Tanzania received approximately $757 million, contributing to 1.0% of GDP.
• Comparative Position in East Africa:
  • Kenya received $4,800 million (4.6% of GDP).
  • Uganda received $1,492 million (2.6% of GDP).
  • Rwanda received $537 million (3.9% of GDP).
  • Burundi received $49 million (1.6% of GDP).

Tanzania ranks lower in absolute remittance inflows compared to Kenya and Uganda but surpasses Rwanda and Burundi. The proportion of remittances relative to GDP (1.0%) suggests moderate reliance compared to Kenya (4.6%) or Uganda (2.6%)​.

Outward Remittance Flows:

• 2023 Outflows: Tanzania recorded remittance outflows of $161 million, equating to 0.2% of GDP.
• Comparative Position in East Africa:
  • Kenya had outflows of $40 million (minimal, 0.0% of GDP).
  • Uganda had outflows of $218 million (0.4% of GDP).
  • Rwanda had outflows of $94 million (0.7% of GDP).
  • Burundi had outflows of $16 million (0.4% of GDP).

Tanzania's outward remittances are moderate among East African peers, with higher outflows than Kenya but lower than Uganda​.

Insights and Context:

1. Inward Remittances:
   • Key Source of Foreign Exchange: Moderate contribution to Tanzania's economy, reflecting a growing diaspora engagement but trailing behind Kenya and Uganda.
   • Potential for Growth: With improved diaspora engagement strategies and reduced transaction costs, Tanzania can enhance remittance inflows.
2. Outward Remittances:
   • Reflecting Increased Labor Movements: Outflows signify Tanzanian expatriates and foreign nationals sending funds abroad.
   • Balance with Inflows: The country maintains a favorable net remittance position, with inflows significantly higher than outflows.

Tanzania’s strategic focus could involve:

• Strengthening financial inclusivity to capture more remittances.
• Enhancing bilateral agreements to facilitate smoother remittance channels.
• Promoting investment opportunities for the diaspora to convert remittances into economic growth.

Key Implications of Remittance Flows

1. Diaspora Contributions

• Inward Remittances: At $757 million (1.0% of GDP) in 2024, remittances highlight the economic contributions of Tanzanians abroad. Although the volume is lower than peers like Kenya and Uganda, it still represents a stable source of foreign exchange and household income for recipients.
• Opportunity: With better diaspora engagement and reduced costs of money transfers, Tanzania can harness this resource to boost economic resilience and poverty reduction.

2. Limited Reliance Compared to Neighbors

• Kenya (4.6% of GDP) and Uganda (2.6% of GDP) are far more dependent on remittances relative to GDP. Tanzania's lower percentage suggests:
  • A less mature remittance market, with scope for growth.
  • Economic diversification, reducing dependence on external flows compared to peers.

3. Outward Remittances: Evidence of Regional Integration

• Tanzania's $161 million outflows (0.2% of GDP) reflect:
  • Cross-border labor movements, with Tanzanian expatriates working in other countries.
  • Presence of foreign nationals in Tanzania who remit earnings home.

This indicates regional and global labor market integration, although the scale of outflows remains modest compared to inflows.

4. Economic Development Indicator

• Inward Focus: A growing remittance inflow indicates increasing engagement with the diaspora and improvements in financial systems to capture these flows.
• Outward Focus: Moderate outward flows suggest that Tanzania is a net recipient of remittances, which is typical for developing economies. However, outflows may grow with increased labor migration and regional trade integration.

Regional Position

• Kenya dominates East Africa in remittance inflows due to a well-established and globally dispersed diaspora, along with efficient remittance channels.
• Tanzania's Moderate Rank: It holds a middle position in the region, above smaller economies like Burundi and Rwanda but behind Kenya and Uganda. This reflects the potential for Tanzania to grow its influence in regional labor markets and attract more remittances.

Policy and Strategy Implications

1. Financial Inclusion & Infrastructure:
   • Encourage the use of formal remittance channels by improving accessibility to banking and mobile money services.
   • Negotiate lower transaction costs with international financial institutions.
2. Diaspora Engagement:
   • Launch programs to strengthen connections with Tanzanians abroad, encouraging investments and remittances.
3. Domestic Investment Opportunities:
   • Offer attractive incentives for the diaspora to invest in productive sectors such as real estate, agriculture, and technology.
4. Labor Export Programs:
   • Promote skilled labor migration through agreements with countries seeking workers, particularly in sectors like healthcare, education, and construction.

What It Tells About Tanzania's Future

The remittance data suggests Tanzania has untapped potential to:

• Leverage its diaspora for economic development.
• Enhance its role in regional labor markets.
• Develop policies that reduce reliance on external aid by maximizing stable, private flows like remittances.