Debt Structure and Figures

As of May 2025, Tanzania’s national debt stood at TZS 107.70 trillion, comprising TZS 72.94 trillion in external debt and TZS 34.76 trillion in domestic debt. The external debt stock, equivalent to approximately USD 34.1 billion (using an exchange rate of TZS 2,884.42 per USD from April 2025), was primarily held by multilateral institutions and directed toward key sectors such as transportation (21.5%) and telecommunications. The central government accounted for 78.3% of external debt (USD 26.7 billion), with 67.7% of this debt denominated in US dollars (USD 23.1 billion). Domestic debt, at TZS 34.26 trillion in March 2025, was largely financed by commercial banks (29%) and pension funds (26.5%), with Treasury bonds dominating at 78.2%.

In May 2025, principal repayments on external debt amounted to USD 267 million. Debt servicing costs are significant, with historical data indicating that external debt servicing consumed up to 40% of government expenditures in earlier years. For 2023, total debt service was 2.89% of Gross National Income (GNI), and in 2025, servicing the external debt (at concessional rates) and domestic debt (at 15.5% lending rates) could cost approximately USD 1–2 billion and TZS 5.31 trillion annually, respectively. These costs divert resources from productive investments, potentially straining fiscal space.

Impact on the Tanzania Shilling

The Tanzania Shilling’s stability in May 2025 is supported by several factors related to debt management and economic performance:

• Foreign Exchange Reserves: The Bank of Tanzania (BoT) reported foreign exchange reserves of USD 5,360 million in May 2025, covering 4.2 months of imports, which exceeds the national benchmark of 4 months. By March 2025, reserves had increased to USD 5,700 million, covering 3.8 months of imports, indicating sustained adequacy. These reserves provide a buffer against external shocks, reducing pressure on the Shilling and enabling the BoT to meet external debt obligations without significant currency devaluation.
• Export Performance: Robust export growth, particularly in gold (24.5% increase) and cashew nuts (141% increase), contributed to a 16.8% rise in exports to USD 16.7 billion in the year ending April 2025. Gold prices, at USD 2,983.25 per ounce in March 2025, further bolstered foreign exchange inflows, supporting the Shilling’s stability.
• Fiscal and Monetary Policy: The BoT maintained the Central Bank Rate (CBR) at 6% in April 2025 to safeguard economic stability amid global uncertainties. Prudent fiscal policy, with a fiscal deficit trending toward 3% of GDP, and stringent monetary policy have kept inflation low at 3.2% in May 2025, below the BoT’s 5% target. Low inflation reduces pressure on the Shilling by maintaining purchasing power and stabilizing import costs.

Despite these stabilizing factors, the Shilling experienced a 3.86% annual depreciation against the USD, trading at TZS 2,884.42 per USD in April 2025. This depreciation, though improved from the previous month, reflects pressures from external debt servicing and import demands. The high USD denomination of external debt (67.7%) exacerbates these pressures, as a depreciating Shilling increases the local currency cost of debt servicing by approximately TZS 2.37 trillion for the USD 34.1 billion external debt, based on a 2.6% depreciation rate.

Foreign Exchange Interventions and Their Role

The BoT’s interventions in the Interbank Foreign Exchange Market (IFEM) have been critical to maintaining the Shilling’s stability. In January 2025, the BoT sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation amid a 1.37% month-on-month weakening of the Shilling (from TZS 2,420.84 to TZS 2,454.04 per USD). Similar interventions likely occurred in April and May 2025, as the document notes that seasonal inflows from cash crops and gold exports, combined with BoT actions, mitigated depreciation pressures. However, IFEM transactions declined significantly from USD 95.7 million in December 2024 to USD 16.3 million in January 2025, suggesting reduced market activity, possibly due to lower trade or investor participation.

These interventions, supported by adequate reserves, have ensured short-term stability, with the Shilling appreciating by 2.6% year-on-year from January 2024 to January 2025. The BoT’s ability to intervene is bolstered by improved current account performance, with the deficit narrowing by 31.1% to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings and moderate import growth.

Potential Risks to Long-Term Shilling Stability

The composition of Tanzania’s external debt and reliance on commodity-driven inflows pose several risks to the Shilling’s long-term stability:

1. High USD Denomination of External Debt: With 67.7% of the USD 34.1 billion external debt denominated in US dollars (USD 23.1 billion), the Shilling is highly exposed to exchange rate fluctuations. A further depreciation, such as the 2.6% observed in 2024, increases debt servicing costs in local currency, potentially requiring the BoT to draw down reserves or increase borrowing, both of which could weaken the Shilling.
2. Commodity Price Volatility: Tanzania’s foreign exchange inflows heavily depend on gold and agricultural exports (e.g., cashew nuts, coffee). While gold prices were strong at USD 2,983.25 per ounce in March 2025, declines in coffee (-2%) and sugar (-1.5%) prices highlight vulnerability to global commodity market fluctuations. A downturn in gold prices or reduced export demand could strain reserves and pressure the Shilling.
3. Global Economic Uncertainties: The document highlights risks from global trade tariffs and geopolitical tensions, with the IMF projecting global growth at 2.8% in 2025. Rising global interest rates could increase external borrowing costs, particularly for non-concessional loans, further straining fiscal resources and reserves needed to stabilize the Shilling.
4. Fiscal Constraints and Crowding-Out Effects: High domestic borrowing (TZS 34.26 trillion) and lending rates (15.5%) crowd out private sector investment, weakening credit growth and economic diversification. This limits the economy’s ability to generate sustainable foreign exchange inflows, increasing reliance on volatile commodity exports and BoT interventions.
5. Climate and Structural Risks: Climate change could reduce agricultural output, a key export sector, with the World Bank estimating a potential 4% GDP growth reduction by 2050 due to climate impacts. Slow structural transformation and shallow financial markets further constrain Tanzania’s ability to diversify revenue sources, heightening Shilling vulnerability.

Mitigating Factors and Policy Measures

Tanzania’s authorities are implementing measures to mitigate these risks:

• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) classifies Tanzania’s risk of external debt distress as moderate, with public debt at 35% of GDP in 2024, well below the 55% benchmark. Access to concessional financing from multilateral institutions reduces servicing costs compared to commercial loans.
• Revenue Mobilization: The government collected TZS 2,441 billion in April 2025, with tax revenue exceeding targets by 1.5% due to improved administration. The proposed TZS 56.49 trillion 2025/26 budget aims to enhance revenue through new taxes and levies, reducing reliance on borrowing.
• Export Diversification: Investments in infrastructure (48% of World Bank financing) and sectors like manufacturing and tourism (projected to drive 6% GDP growth in 2025) aim to reduce reliance on commodity exports.
• Monetary Policy: The BoT’s 6% CBR and interventions in the IFEM demonstrate proactive management of liquidity and exchange rate stability. Food reserves (587,062 tonnes, with 32,598 tonnes released) help stabilize food prices, supporting low inflation and Shilling stability.

Conclusion

In May 2025, Tanzania’s national debt developments and foreign exchange interventions have supported the Tanzania Shilling’s short-term stability, with reserves of USD 5,360 million (4.2 months of import cover) and export-driven inflows mitigating a 3.86% annual depreciation. BoT interventions in the IFEM, backed by strong gold and cashew nut exports, have prevented sharp fluctuations, maintaining the Shilling at TZS 2,884.42 per USD in April 2025. However, the high USD denomination of external debt (67.7% of USD 34.1 billion), reliance on volatile commodity exports, and global uncertainties pose risks to long-term stability. A potential further depreciation could increase debt servicing costs by TZS 2.37 trillion, straining reserves and fiscal space. Continued prudent fiscal and monetary policies, alongside diversification efforts, are critical to sustaining Shilling stability and supporting Tanzania’s projected 6% GDP growth in 2025.

Table: Key Economic Figures Impacting Tanzania Shilling Stability (May 2025)

Notes and Explanations

1. Debt Figures: The total national debt (TZS 107.70 trillion) and its breakdown into external (USD 34.1 billion) and domestic (TZS 34.26 trillion) components reflect Tanzania’s borrowing profile. The high USD denomination (67.7%) of external debt increases vulnerability to exchange rate fluctuations, as a 2.6% depreciation could raise servicing costs by approximately TZS 2.37 trillion (calculated as 2.6% of TZS 72.94 trillion).
2. Foreign Exchange Reserves: Reserves of USD 5,360 million in May 2025 and USD 5,700 million in March 2025 provide a buffer for debt servicing and exchange rate stabilization. The 4.2-month import cover exceeds the national benchmark, supporting short-term Shilling stability.
3. Exchange Rate: The Shilling’s depreciation to TZS 2,884.42 per USD reflects pressures from debt servicing and imports, mitigated by BoT interventions (e.g., USD 7 million sale in January 2025). The 2.6% appreciation from January 2024 to January 2025 indicates effective short-term management.
4. Export Performance: Strong export growth (USD 16.7 billion, up 16.8%) driven by gold and cashew nuts bolsters foreign exchange inflows, critical for reserve accumulation and Shilling stability. Gold’s high price (USD 2,983.25 per ounce) is a key factor but introduces volatility risk.
5. Current Account and Inflation: The narrowed current account deficit (USD 2,175 million) and low inflation (3.2%) reduce pressure on the Shilling, supporting its purchasing power and import affordability.
6. Debt Servicing Costs: Estimated based on historical data (2.89% of GNI in 2023) and domestic lending rates (15.5%). These costs strain fiscal resources, potentially requiring reserve drawdowns or further borrowing, which could weaken the Shilling.

This table provides a concise overview of the key figures driving the Tanzania Shilling’s stability in May 2025, highlighting the interplay between debt developments, foreign exchange interventions, and external sector performance, as well as underlying risks from debt composition and commodity reliance.

As of May 2025, Tanzania’s national debt reached TZS 107.70 trillion (approx. USD 39.88 billion), with external debt accounting for TZS 72.94 trillion (67.7%) and domestic debt at TZS 34.76 trillion (32.3%). The debt-to-GDP ratio stands at an estimated 47.8%, up from 46.9% in 2023, though projections suggest a decline to 40.84% by 2029 due to robust GDP growth. External debt is heavily exposed to currency risk, with 67.4% denominated in USD (approx. TZS 49.18 trillion), amplifying the cost of servicing amid a 3.82% depreciation of the shilling. Despite rising debt levels, the 2024 Debt Sustainability Analysis (DSA) by the IMF and government confirms that Tanzania’s debt remains sustainable, backed by USD 5.14 billion in reserves (covering 4.2 months of imports) and a narrowing fiscal deficit projected at 3.0% of GDP in 2025/26.

1. Overview of National Debt

• Tanzania’s national debt comprises external debt (owed to non-residents, repayable in foreign currency, goods, or services) and domestic debt (owed to residents, primarily in TZS). It includes public and publicly guaranteed (PPG) debt, covering central government, public corporations, and contingent liabilities, but excludes private sector debt unless specified.
• Total Debt Stock: As of May 2025, Tanzania’s total national debt stood at TZS 107.70 trillion (USD 39.88 billion at TZS 2,698.42/USD), with external debt at TZS 72.94 trillion (67.7%) and domestic debt at TZS 34.76 trillion (32.3%).
• Debt-to-GDP Ratio: The debt-to-GDP ratio was 46.9% in 2023 (), rising to an estimated 47.8% in 2024 (based on GDP of TZS 156.6 trillion in 2024, and projected debt growth). Forecasts suggest a decline to 40.84% by 2029 due to GDP growth outpacing debt accumulation.
• Sustainability: The 2024 Debt Sustainability Analysis (DSA) by the Tanzanian government and IMF indicates that the debt remains sustainable, with a low risk of external debt distress, supported by a fiscal deficit narrowing to 3.0% of GDP in 2025/26 and foreign exchange reserves covering 4.2 months of imports.

2. External Debt

• Overview: External debt includes loans from multilateral institutions, bilateral creditors, commercial lenders, and IMF credit, denominated primarily in USD (67.4%), Euro (16.6%), and Chinese Yuan (6.3%). It finances infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant), social services, and energy projects.
• May 2025 Figures:
  • Total External Debt: TZS 72.94 trillion (USD 27.04 billion), up from TZS 64 trillion in October 2022 () and TZS 53.32 trillion in June 2023 (), reflecting a 14% year-on-year increase from April 2024’s estimated TZS 64.1 trillion (based on USD 23.75 billion at TZS 2,698.42/USD).
  • Composition by Creditor:
    • Multilateral Institutions: ~45.7% (~TZS 33.33 trillion), led by World Bank-IDA (TZS 19.1 trillion in 2020/21,) and African Development Bank-ADF (TZS 5.5 trillion in 2020/21).
    • Commercial Creditors: ~30.5% (~TZS 22.25 trillion), including Credit Suisse AG (TZS 3.1 trillion in 2020/21,) and Standard Chartered Bank (TZS 1.6 trillion).
    • Bilateral Creditors: ~11.2% (~TZS 8.17 trillion), with Exim China at TZS 3.9 trillion in 2020/21.
    • Other: ~12.6% (~TZS 9.19 trillion), including IMF credit and other multilateral lenders.
  • Currency Composition:
    • USD: 67.4% (~TZS 49.18 trillion), increasing repayment costs due to TZS depreciation (3.82% in May 2025).
    • Euro: 16.6% (~TZS 12.11 trillion).
    • Chinese Yuan: 6.3% (~TZS 4.59 trillion).
    • Other Currencies: 9.7% (~TZS 7.08 trillion).
  • Sector Allocation (based on September 2024,):
    • Transport and Telecommunications: 21.5% (~TZS 15.68 trillion), e.g., SGR, port upgrades.
    • Social Welfare and Education: 20.8% (~TZS 15.17 trillion).
    • Energy and Mining: ~15% (~TZS 10.94 trillion), e.g., Julius Nyerere Hydropower Plant.
    • Agriculture: 5.1% (~TZS 3.72 trillion), low given its 25% GDP contribution.
    • Tourism: 1.6% (~TZS 1.17 trillion), underfunded despite 19.5% GDP contribution.
• Trends and Drivers:
  • Growth: External debt rose from TZS 47.07 trillion (USD 20.8 billion) in April 2022 () to TZS 72.94 trillion in May 2025, driven by non-concessional borrowing for infrastructure (e.g., SGR,) and increased disbursements (USD 31.43 billion disbursed, USD 5.04 billion undisbursed in September 2024,).
  • Key Projects: The 2025/26 budget allocates TZS 7.72 trillion for capital projects (), with external loans (TZS 8.68 trillion) funding energy (e.g., hydropower) and transport (e.g., SGR, Dar es Salaam port).
  • Currency Risk: The 67.4% USD-denominated debt exposes Tanzania to exchange rate fluctuations, with the TZS depreciating 3.82% annually in May 2025 (Document, Page 12). A 10% TZS depreciation could increase debt servicing by ~TZS 4.92 trillion.
• Economic Implications:
  • Positive: External borrowing supports growth (5.5% GDP in 2024, 6% projected in 2025,), with investments in infrastructure boosting trade (24% intra-African trade rise,) and competitiveness (e.g., AfCFTA,).
  • Risks: High USD exposure (67.4%) and rising commercial borrowing (30.5% of disbursements,) increase servicing costs, with external debt service at TZS 6.49 trillion in 2025/26 (). Global interest rate hikes and TZS depreciation (web:19) exacerbate costs.
  • Sustainability: The IMF’s 2024 DSA confirms low distress risk, with reserves (USD 5,136.6 million, 4.2 months import cover) and concessional loans (72.5% of external debt,) mitigating risks.elibrary.imf.orgelibrary.imf.org

3. Domestic Debt

• Overview: Domestic debt includes Treasury bonds (78.9%), Treasury bills (8.8%), and domestic arrears (1.1% of GDP in 2022/23,), held by commercial banks, pension funds, and the BoT. It finances recurrent spending (e.g., wages) and development projects.
• May 2025 Figures:
  • Total Domestic Debt: TZS 34.76 trillion (USD 12.88 billion), up from TZS 32.62 trillion in September 2024 and TZS 28.92 trillion in June 2023 (), a 6.5% increase from September 2024.
  • Composition by Creditor:
    • Commercial Banks: 28.8% (TZS 10.14 trillion, down from 29.7% in September 2024).
    • Pension Funds: 26.1% (TZS 9.20 trillion, down from 26.7%).
    • Bank of Tanzania: 20.3% (TZS 7.16 trillion, down from 20.5%).
    • Others (public institutions, private companies, individuals): 17.7% (TZS 6.24 trillion, up from 15.2%).
    • Insurance Companies: 5.2% (TZS 1.84 trillion, down from 9%).
    • BoT Special Funds: 1.8% (TZS 0.62 trillion, down from 2%).
  • Instrument Breakdown:
    • Treasury Bonds: 78.9% (TZS 27.43 trillion), preferred for long maturities.
    • Treasury Bills: 8.8% (TZS 3.06 trillion), used for short-term financing.
    • Domestic Arrears: ~1.1% of GDP (~TZS 1.72 trillion, based on 2024 GDP of TZS 156.6 trillion).
• Trends and Drivers:
  • Growth: Domestic debt rose from TZS 22.37 trillion in April 2022 () to TZS 34.76 trillion in May 2025, driven by borrowing for development projects (TZS 1.90 trillion in 2024/25,) and rollover of maturing securities (TZS 3.54 trillion).
  • Interest Rates: Treasury bill rates rose to 11.7% by March 2024 from 5.8% in March 2023, while Treasury bond yields (e.g., 20-year) increased by 2–2.9% (). Domestic debt servicing cost TZS 5.31 trillion in 2024/25.
  • Creditor Dynamics: Commercial banks (28.8%) and pension funds (26.1%) dominate, reflecting a robust domestic bond market. The BoT’s 20.3% share aligns with monetary policy (6% CBR).
• Economic Implications:
  • Positive: Domestic borrowing reduces reliance on volatile external funds, with Treasury bonds (78.9%) offering stable long-term financing (). The 2025/26 budget’s TZS 6.27 trillion domestic borrowing plan supports infrastructure.
  • Risks: Rising interest rates (11.7% for T-bills,) and arrears (TZS 1.72 trillion) strain fiscal space. High domestic debt (32.3% of total) crowds out private sector credit, with lending rates at 15.5%.
  • Sustainability: The domestic debt-to-GDP ratio (~22.2%, based on TZS 156.6 trillion GDP) is manageable, but increasing yields and arrears require fiscal discipline.

4. Economic Implications and Outlook

• Debt Sustainability: The 2024 DSA confirms sustainable debt, with a debt-to-GDP ratio of 47.8% in 2024, projected to decline to 40.84% by 2029 (). Reserves (USD 5,136.6 million, Document, Page 12) and concessional loans (72.5% of external debt,) mitigate risks. The fiscal deficit is projected at 3.0% of GDP in 2025/26.
• Economic Growth: Debt-funded projects (e.g., SGR, hydropower) drive 6% GDP growth in 2025 (), with exports (USD 16,994.7 million, Document, Page 14) and FDI (USD 3.7 billion in January–May 2025,) supporting stability.
• Risks: USD-denominated debt (67.4%) and TZS depreciation (3.82%, Document, Page 12) increase servicing costs. Low agriculture (5.1%) and tourism (1.6%) allocations () limit growth in key sectors. Geopolitical tensions and climate shocks (e.g., La Niña) pose risks.
• Outlook: The 2025/26 budget (TZS 56.49 trillion,) prioritizes revenue mobilization (16.7% of GDP) and infrastructure, with TZS 14.95 trillion in loans (TZS 8.68 trillion external, TZS 6.27 trillion domestic). Diversifying exports (e.g., manufacturing,) and reducing arrears will enhance sustainability

Tanzania National Debt - May 2025: Key Figures

Note: USD conversion based on exchange rate of TZS 2,698.42/USD (May 2025).

In May 2025, the Tanzanian Shilling (TZS) demonstrated relative stability amid ongoing external and domestic pressures, with an annual depreciation rate of 3.82%, easing slightly from 3.86% in April. The exchange rate reached TZS 2,698.42/USD, up from TZS 2,684.41/USD in April and TZS 2,598.94/USD a year earlier. This moderate depreciation reflects a balancing act between strong foreign exchange inflows—such as USD 3.91 billion from tourism and USD 3.84 billion from gold exports—and heightened demand for imports, which grew to USD 17.69 billion. The Bank of Tanzania (BoT) intervened with USD 53 million in the Interbank Foreign Exchange Market (IFEM), which saw a liquidity surge to USD 110.8 million in May, up from just USD 12.9 million in April. Backed by USD 5.1 billion in reserves and supported by gold purchases and de-dollarization reforms, the TZS remains more resilient than many regional currencies, with depreciation kept below 5%—a testament to BoT’s measured interventions and policy coordination.

1. Exchange Rate Trends

• Overview: The Tanzania Shilling (TZS) exchange rate against the US Dollar (USD) is a critical indicator of Tanzania’s external competitiveness and macroeconomic stability. Managed under a flexible exchange rate regime, the TZS is influenced by supply and demand dynamics in the Interbank Foreign Exchange Market (IFEM), with periodic Bank of Tanzania (BoT) interventions to mitigate volatility. The BoT’s medium-term goal is to maintain stability while ensuring adequate foreign exchange reserves.
• May 2025 Performance:
  • Exchange Rate:
    • May 2024: TZS 2,598.94/USD
    • April 2025: TZS 2,684.41/USD (depreciation from May 2024)
    • May 2025: TZS 2,698.42/USD (further depreciation from April 2025)
  • Annual Depreciation Rate:
    • May 2025: 3.82% (calculated as [(2,698.42 - 2,598.94) / 2,598.94] × 100)
    • April 2025: 3.86%, indicating a slight improvement in the depreciation pace.
  • Monthly Depreciation: From April to May 2025, the TZS depreciated by 0.52% ((2,698.42 - 2,684.41) / 2,684.41 × 100), reflecting moderate pressure.
• Context and Analysis:
  • Historical Trends: The TZS has faced steady depreciation pressures, with an average rate of 2,680.62/USD in April 2025, up 3.9% from 2,579.88/USD in April 2024. By September 2024, the TZS hit a peak of 2,724.57/USD, a 12.6% annual depreciation (web:23). The May 2025 rate of 2,698.42/USD shows a stabilization compared to September 2024, aligning with earlier reports of a 2% appreciation by late 2024.
  • Seasonal Patterns: The slight depreciation in May 2025 (0.52% month-on-month) contrasts with a stronger TZS in late 2024, when it rallied 10% due to tourism and agricultural inflows. May’s depreciation reflects reduced seasonal inflows post-tourism peak (August–October) and increased import demand.
  • Regional Comparison: The TZS has been more stable than regional peers like the Kenyan Shilling (24% weaker against TZS over 2022–2023) and Burundian Franc, reflecting Tanzania’s robust reserves and export growth. However, the TZS remains sensitive to USD strength, as seen in its 3.47% appreciation from 2022 to 2023.
  • Economic Drivers:
    • Export Inflows: Gold exports (USD 3,835.5 million, +23.1% year ending April 2025) and tourism receipts (USD 3,910 million estimated, web:4) bolstered the TZS, with 2,662,219 tourist arrivals in 2024 (+20%). Cash crops like cashew nuts (+141%) and coffee (+66.3%) also supported inflows.
    • Import Pressures: Imports of goods and services rose 9.6% to USD 17,686 million (year ending May 2025), driven by capital goods and industrial inputs, increasing USD demand.
    • Global USD Strength: The USD’s global rally in 2025, driven by US Federal Reserve policies, pressured emerging market currencies, including the TZS.
  • Implications:
    • Stability: The 3.82% annual depreciation is moderate compared to 12.6% in September 2024, reflecting effective BoT interventions and reserve adequacy (USD 5,136.6 million, 4.2 months of import cover).
    • Economic Impact: Depreciation makes exports (e.g., gold, tourism) more competitive but raises import costs (e.g., fuel, USD 2,578.5 million), potentially fueling inflation (3.0% in May 2025). The shilling’s stability supports investor confidence, with USD 3.7 billion in project registrations in January–May 2025.
    • Outlook: The TZS is expected to stabilize around 2,700–2,800/USD in 2025, supported by gold purchases (976.51 kg by November 2024) and tourism growth (+20% projected). However, shilling depreciation risks persist due to import demand and global USD strength.

2. Interventions by Bank of Tanzania

• Overview: The BoT employs a flexible exchange rate policy, intervening in the IFEM to smooth excessive volatility while maintaining market-driven rates. Interventions involve buying or selling USD to balance supply and demand, supported by monetary tools like the 6% Central Bank Rate (CBR) and liquidity management. The BoT’s gold purchases and de-dollarization policies further bolster reserves and TZS stability.
• May 2025 Performance:
  • BoT Intervention: USD 53 million sold in May 2025 via the IFEM to meet import needs for critical goods (e.g., fuel, industrial inputs).
  • IFEM Market Activity:
    • May 2025: USD 110.8 million in transactions, up from USD 12.9 million in April 2025 and USD 10.8 million in May 2024.
    • Growth: The 759% month-on-month increase (April to May 2025) and 925% year-on-year increase (May 2024 to May 2025) reflect improved liquidity.
  • Key Measures:
    • USD Sales: The USD 53 million sale addressed import-driven USD demand, particularly for fuel (USD 2,578.5 million imports) and industrial equipment.
    • Gold Purchases: The BoT acquired 976.51 kg of gold by November 2024 toward a 6-tonne target by June 2025, reducing USD reliance. In 2024/25, 418 kg was purchased.
    • De-dollarization: Since March 2025, domestic transactions must use TZS, increasing USD supply (daily retail FX turnover rose from USD 40 million to USD 70 million). This aligns with May 2025’s ban on foreign currency pricing.
    • FX Regulations: BoT circulars (e.g., daily FX transaction reporting by banks) tightened oversight, reducing speculative trading and stabilizing IFEM activity.
• Context and Analysis:
  • Intervention Scale: The USD 53 million sale in May 2025 is significant compared to a net USD 2.5 million sale in July 2024 but lower than 2023’s USD 506 million annual interventions. This reflects targeted action to address seasonal import peaks.
  • IFEM Liquidity: The surge to USD 110.8 million in May 2025 transactions (from USD 12.9 million in April) align with January 2025’s USD 16.3 million, down from December 2024’s USD 95.7 million (web:4). The increase reflects gold (USD 3.1 billion in July 2024, web:23) and cash crop inflows (e.g., cashew, TZS 743 billion in October 2024).
  • Policy Effectiveness: The BoT’s interventions, combined with a 5.75% CBR cut in July 2025, stabilized the TZS at 2,698.42/USD. Reserves rose to USD 5,323.6 million in January 2025 (4.3 months of import cover), supporting intervention capacity.
  • De-dollarization Impact: The March 2025 regulations increased USD liquidity, with retail FX turnover doubling to USD 70 million daily. However, some businesses face higher costs due to mandatory TZS use.
  • Economic Drivers:
    • Gold and Tourism: Gold prices rose from USD 2,310/oz to USD 3,326/oz, boosting inflows by USD 2 billion. Tourism (2,662,219 arrivals) and agriculture (cashew, coffee) drove USD supply.
    • Monetary Policy: The CBR at 5.75% (post:1) and interbank rates at 7.98% encouraged TZS liquidity, with Interbank Cash Market (IBCM) transactions at TZS 2,245.8 billion in January 2025.
• Implications:
  • Stabilization: The USD 53 million sale and USD 110.8 million IFEM activity cushioned the TZS against import pressures, maintaining a 3.82% depreciation rate (web:24).
  • Reserve Sustainability: Reserves (USD 5,136.6 million) exceed the 4-month benchmark, but sustained interventions risk depletion if imports grow (USD 17,686 million).
  • Business Impact: De-dollarization boosts TZS demand but raises costs for import-reliant firms (e.g., double conversion losses for Yuan trades). The IMF urges market-clearing rates to avoid re-emerging FX pressures.
  • Outlook: Continued gold purchases (5,022.85 kg by July 2025) and tourism inflows (+20% projected) will support TZS stability. The BoT’s prudent interventions and FX regulations are expected to keep depreciation below 5% in 2025.

3. Key Causes of Depreciation

• Overview: The TZS’s 3.82% annual depreciation in May 2025 reflects a mix of domestic and global factors. The BoT’s flexible exchange rate policy allows market-driven adjustments, but structural trade imbalances and external pressures drive depreciation.
• Key Causes:
  1. High Demand for Imports:
     • Details: Imports of capital goods (e.g., industrial equipment) and industrial inputs rose 9.554% to USD 17,686 million (year ending May 2025, Document, 16). Imports of industrial supplies and transport equipment increased in January 2025, supporting manufacturing (9% GDP) and construction (7%).
     • Impact: High USD demand for infrastructure (e.g., SGR, Julius Nyerere Hydropower Plant, web:10) and fuel (USD 2,578.5 million) outpaced export inflows, pressuring the TZS.
  2. Global Strengthening of the USD:
     • Details: The USD strengthened globally in 2023, driven by US Federal Reserve rate hikes and safe-haven demand. Despite 2025 rate cuts, the USD remained robust, affecting emerging market currencies like the TZS.
     • Impact: The TZS’s 3.82% depreciation aligns with regional trends (e.g., Kenyan Shilling, web:4), exacerbated by Tanzania’s 67.4% USD-denominated external debt (USD 35.6 billion, provided data).
  3. Moderate Foreign Exchange Inflows:
     • Details: Gold exports (USD 3,835.5 million) and tourism receipts (USD 3,910 million estimated, web:5) mitigated depreciation, with 2,662,219 arrivals in 2024 (+20%). Cash crops (cashew, coffee, added inflows, but these were insufficient against import growth.
     • Impact: Seasonal inflows peaked in August–October 2024, declining by May 2025, reducing USD supply and contributing to the TZS’s 0.52% monthly depreciation.

• Import Dependency: Tanzania’s trade deficit (USD 1,009 million in Q3 2024, web:16) and reliance on capital goods imports (23.5% of total, web:5) drive USD demand. Manufacturing and construction growth amplify this, despite reduced petroleum imports (-7%).
• Global USD Dynamics: The USD’s strength in 2025, despite US rate cuts, reflects global economic uncertainty, impacting TZS alongside other African currencies. The TZS’s 3.82% depreciation is moderate compared to 12.6% in September 2024.
• Inflow Moderation: Gold prices rose to USD 3,326/oz, boosting inflows by USD 2 billion, but production limits (1.9 million oz) constrain gains. Tourism’s USD 4 billion contribution and agricultural exports (e.g., cashew, TZS 743 billion) are seasonal, with May 2025 inflows lower than Q3 2024 peaks.
• Economic Drivers:
  • Trade Imbalance: Exports grew 19.2% to USD 16,994.7 million (year ending May 2025, Document, Page 16), but imports (USD 17,686 million) outpaced them, widening the current account deficit to USD 2,117.5 million.
  • Policy Response: BoT’s de-dollarization (web:18) and gold purchases increased USD supply, but import demand and USD strength offset gains.
• Implications:

• Economic Costs: Depreciation raises import costs, potentially increasing inflation (projected 5% in 2025) and debt servicing (TZS 5.31 trillion for domestic debt). External debt (67.4% USD-denominated) faces higher TZS costs.
• Competitiveness: A weaker TZS boosts export competitiveness (e.g., gold, tourism), supporting 6% GDP growth in 2025. However, import reliance risks trade imbalances.
• Outlook: Enhanced export diversification (e.g., manufacturing) and import substitution can reduce USD demand. BoT’s reserve management and FX regulations will mitigate depreciation, targeting a 3–5% range.

Tanzania Shilling Stability - May 2025: Key Figures

Tanzania’s inflation trends in May 2025 reflect a stable but nuanced economic environment. Headline inflation at 3.2% is well within regional and national targets, supported by declining non-food and core inflation (2.1%). However, rising food inflation (5.6%), driven by supply-demand imbalances and higher staple food prices, is a growing concern. The decline in energy inflation (6.1%) due to falling charcoal and petroleum prices has helped balance overall inflation. Government interventions, particularly the NFRA’s release of 47,238 tonnes of food and increased stocks to 509,990 tonnes, demonstrate effective supply-side management. In Zanzibar, lower headline inflation (4.2%) reflects improved food supply dynamics. Continued monetary policy vigilance, agricultural investment, and infrastructure improvements will be critical to sustaining inflation stability amidst global and domestic risks.

1. Headline Inflation

• Stability at 3.2%: The annual headline inflation rate in Tanzania remained steady at 3.2% in May 2025, consistent with April 2025. This stability reflects a balance between rising food prices and declining non-food inflation, keeping overall inflation within the national target range.
• Regional Benchmark Compliance: The 3.2% rate aligns with the Southern African Development Community (SADC) target of 3–7% and the East African Community (EAC) benchmark of ≤8%. This positions Tanzania as a stable performer in the region, avoiding the hyperinflationary pressures seen in some neighboring economies.
• Implications: The consistency in headline inflation suggests effective monetary policy management by the Bank of Tanzania (BoT), particularly in maintaining the Central Bank Rate (CBR) at 6% to shield the economy from external shocks like trade tariffs and geopolitical tensions. Stable inflation supports consumer purchasing power and investor confidence, critical for sustaining economic growth amidst global uncertainties.

2. Food Inflation

• Increase to 5.6%: Food inflation rose to 5.6% in May 2025, up from 5.3% in April 2025 and significantly higher than 1.6% in May 2024. This increase is a key driver of inflationary pressure in Tanzania, given the high weight of food in the Consumer Price Index (CPI) basket.
• Drivers of Food Inflation:
  • Supply-Demand Imbalances: Heavy rains disrupted transportation networks, hindering the distribution of agricultural goods. These likely caused temporary shortages, pushing up prices for staple foods.
  • Higher Staple Food Prices: Maize and rice, critical components of the Tanzanian diet, saw notable price increases. These staples are highly sensitive to supply chain disruptions and weather-related challenges, which are common in Tanzania’s rain-dependent agricultural sector.
• Context and Implications: Food inflation’s rise reflects Tanzania’s vulnerability to climatic shocks, as agriculture remains a cornerstone of the economy. The significant jump from 1.6% in May 2024 to 5.6% in May 2025 underscores the impact of seasonal and logistical challenges. This trend could strain low-income households, for whom food constitutes a large share of expenditure, potentially increasing poverty risks if unchecked.

3. Non-Food Inflation

• Decline in Non-Food Inflation: Non-food inflation decelerated in May 2025, helping to offset the rise in food inflation and stabilize headline inflation. The document does not specify the exact rate, but the decline indicates softer price pressures in categories like housing, transport, and services.
• Implications: The reduction in non-food inflation suggests stable or declining costs in imported goods, manufactured products, or services, possibly due to favorable global commodity price trends (e.g., declining petroleum prices) or effective domestic policy measures. This balance is crucial for maintaining overall inflation within target ranges, as non-food items often have a lower weight in the CPI but are sensitive to external price shocks.

4. Core Inflation

• Easing to 2.1%: Core inflation, which excludes volatile items like energy, utilities, and unprocessed food, dropped to 2.1% in May 2025 from 2.2% in April 2025. This measure reflects underlying inflationary pressures and is a key indicator for monetary policy.
• Shifting Influence: The document notes that core inflation’s share in overall inflation is shrinking, while food inflation’s influence is rising. This shift highlights the growing dominance of food prices in driving Tanzania’s inflation dynamics.
• Implications: The easing of core inflation suggests that non-volatile price pressures are well-contained, likely due to stable monetary conditions and the BoT’s efforts to keep the 7-day interbank rate within the 4–8% target band. However, the increasing influence of food inflation indicates that supply-side factors (e.g., agricultural productivity, weather) are becoming more critical to inflation management.

5. Energy, Fuel, and Utilities

• Decline to 6.1%: Inflation in the energy, fuel, and utilities category fell to 6.1% in May 2025 from 7.3% in April 2025. This decline contributed significantly to moderating overall inflation.
• Key Drivers:
  • Falling Wood Charcoal Prices: As a widely used energy source in Tanzania, particularly in rural areas, the decline in charcoal prices likely reflects improved supply or reduced demand pressures.
  • Global Petroleum Price Easing: The global commodity market saw softer crude oil prices due to weaker demand and increased OPEC+ output. This translated into lower prices for petrol, diesel, and kerosene in Tanzania, easing transport and household energy costs.
• Context and Implications: The decline in energy inflation is a positive development for Tanzania, where fuel and energy costs directly impact transport and production expenses. Lower petroleum prices reduce input costs for businesses, potentially supporting economic activity. However, reliance on wood charcoal highlights the need for sustainable energy transitions to reduce environmental impacts and price volatility.

6. Monthly Inflation Movements

• Month-on-Month Inflation at 0.1%: On a month-to-month basis, overall inflation was minimal at 0.1% in May 2025. This low rate indicates stable price movements in the short term, despite annual food inflation pressures.
• Implications: The subdued month-on-month inflation suggests that price spikes are not accelerating rapidly, giving policymakers room to monitor trends without immediate intervention. However, the annual food inflation increases warrants vigilance to prevent broader price pressures.

7. Inflation by Key Categories (Annual, May 2025)

• Analysis:
  • Food & Non-Alcoholic Beverages (5.6%): The highest inflation rate among categories, driven by supply chain disruptions and higher staple food prices. This category’s weight in the CPI basket makes it a dominant factor in headline inflation.
  • Housing, Water, Electricity, Gas (3.4%): Moderate inflation reflects stable utility costs, supported by declining energy prices. This category benefits from global petroleum trends and domestic infrastructure investments.
  • Transport (1.7%): Low inflation is likely due to falling fuel prices, which reduce transport costs. This is significant for Tanzania’s economy, where transport costs influence goods distribution.
  • Education (3.2%): Stable inflation suggests controlled fee increases, possibly due to government subsidies or regulated private sector pricing.
  • Services (1.0%): The lowest inflation rate indicates subdued price pressures in service sectors like telecommunications and personal services, possibly due to competition or technological efficiencies.
  • Goods (4.2%): Higher than services, reflecting the impact of food and imported goods prices on overall goods inflation.
• Implications: The divergence between goods (4.2%) and services (1.0%) inflation highlights the supply-side pressures on physical goods, particularly food, compared to more stable service sectors. Policymakers may prioritize addressing food supply constraints to balance inflation across categories.

8. Government Intervention

• National Food Reserve Agency (NFRA) Actions:
  • Release of 47,238 Tonnes: In May 2025, the NFRA released 47,238 tonnes of food to stabilize food prices. This intervention aimed to counter supply shortages caused by heavy rains and transportation challenges.
  • Stock Increase to 509,990 Tonnes: NFRA food stocks grew to 509,990 tonnes in May 2025, up by 170,000 tonnes from May 2024. This increase was driven by:
    • Good Harvest: Favorable agricultural output in the 2024/25 season boosted food supply.
    • Increased Funding: Enhanced government funding for grain procurement strengthened NFRA reserves.
• Implications: The NFRA’s proactive measures demonstrate a robust response to food inflation pressures. The significant stock increase provides a buffer against future supply shocks, potentially mitigating price volatility in 2025/26. However, sustained investment in agricultural infrastructure (e.g., irrigation, storage, and transport) is needed to address structural supply chain issues.

9. Zanzibar-Specific Inflation Trends

• Decline in Headline Inflation: In Zanzibar, annual headline inflation fell to 4.2% in May 2025 from 4.3% in April 2025 and 5.3% in May 2024. This decline was primarily driven by:
  • Easing Food Inflation: Food inflation dropped to 3.9% in May 2025 from 4.1% in April 2025 and 8.9% in May 2024, attributed to improved domestic production and stable imports, particularly for sugar, rice, and yellow cooking bananas.
  • Monthly Increase: Month-on-month inflation rose to 1.0% in May 2025 from 0% in April 2025, indicating short-term price pressures.
• Implications: Zanzibar’s lower inflation rate compared to May 2024 reflects successful supply-side interventions and stable import flows. The region’s reliance on tourism and imports makes it sensitive to global price trends, but improved agricultural output has helped moderate food prices. The month-on-month increase suggests ongoing monitoring is needed to prevent renewed inflationary pressures.

10. Broader Economic Context

• Global Influences: The document highlights global factors impacting Tanzania’s inflation, such as declining crude oil prices due to weaker demand and increased OPEC+ output. These trends have lowered energy costs, supporting the decline in energy and fuel inflation. However, geopolitical tensions and trade protectionism pose risks to global commodity prices, which could indirectly affect Tanzania’s import-dependent sectors.
• Monetary Policy Support: The BoT’s decision to maintain the CBR at 6% and keep the 7-day interbank rate within 4–8% has helped anchor inflation expectations. This stability is critical in a context of global economic uncertainty, as noted in the document’s discussion of the Global Economic Policy Uncertainty Index and Trade Policy Uncertainty Index.
• External Sector Performance: The narrowing of Tanzania’s current account deficit to USD 2,117.5 million in the year ending May 2025, driven by strong export performance (e.g., gold, cashew nuts), supports foreign exchange stability. This stability helps moderate imported inflation, particularly for fuel and manufactured goods.

11. Potential Risks and Outlook

• Risks:
  • Food Supply Volatility: Continued reliance on rain-fed agriculture makes Tanzania vulnerable to weather shocks, which could exacerbate food inflation.
  • Global Commodity Price Fluctuations: While petroleum prices have eased, any reversal due to geopolitical events or OPEC+ policy changes could increase energy inflation.
  • Logistical Challenges: Transportation disruptions, as seen with heavy rains, highlight the need for improved infrastructure to ensure stable food distribution.
• Outlook:
  • The BoT’s proactive monetary policy and NFRA interventions should help keep inflation within target ranges in the near term. The 509,990-tonne food stock provides a strong buffer against short-term supply shocks.
  • Investments in agriculture, as outlined in the proposed 2025/26 budget, could enhance food security and reduce inflation volatility.
  • Continued global easing of petroleum prices and stable export performance (e.g., gold, cashew nuts) will support low non-food and energy inflation, provided global uncertainties do not escalate.

Below is a structured table summarizing the key figures related to Tanzania’s inflation trends as of May 2025, drawn from the provided Bank of Tanzania. The table focuses on data from relevant sections and the narrative. The table is organized to clearly present the inflation metrics and related government interventions.

Tanzania Inflation Trends (May 2025) - Key Figures

Notes

1. Context:
   • Mainland Tanzania: The 3.2% headline inflation is within the SADC (3–7%) and EAC (≤8%) benchmarks, reflecting effective monetary policy (e.g., Central Bank Rate at 6%).
   • Food Inflation Drivers: The rise to 5.6% is due to supply-demand imbalances from heavy rains affecting transportation and higher prices for staples like maize and rice.
   • Zanzibar: The decline in inflation (4.2%) is driven by improved food supply, particularly for sugar, rice, and yellow cooking bananas.
   • NFRA Intervention: The release of 47,238 tonnes and increased stocks to 509,990 tonnes highlight proactive measures to curb food price volatility.

1. Total Domestic Debt Stock

• Overview: Tanzania’s domestic debt stock represents obligations issued in Tanzania Shillings (TZS), primarily through Treasury bills (T-Bills) and Treasury bonds, to finance budget deficits and support monetary policy objectives. The Bank of Tanzania (BoT) issues these securities, with Treasury bonds dominating due to their longer maturities (2–25 years). Domestic debt is a critical component of Tanzania’s public debt, complementing external debt (USD 35.60 billion in May 2025) and supporting fiscal needs under the Third Five-Year National Development Plan (2021/22–2025/26).
• May 2025 Performance:
  • Total Domestic Debt Stock: TZS 35,201.1 billion (approximately USD 13.04 billion at an exchange rate of ~TZS 2,698/USD, consistent with, noting a 2.6%-shilling depreciation).
  • Context: The domestic debt stock increased from TZS 34,759.9 billion in April 2025 (implied by provided creditor data) to TZS 35,201.1 billion in May 2025, a 1.3% rise (TZS 441.2 billion). This aligns with earlier trends, as September 2024 reported TZS 32.62 trillion, and April 2025 reached TZS 34.75 trillion, reflecting an 8.8% increase from June 2024. The growth is driven by increased Treasury bond issuances (78.9% of domestic debt in September 2024), supporting infrastructure and budget deficits (TZS 743.2 billion in April 2025).
• Economic Drivers:
  • Fiscal Needs: The 2024/25 budget of TZS 49.35 trillion, with a 3% GDP deficit target, relies on domestic borrowing (TZS 6.27 trillion planned for 2025/26) to finance recurrent (61%) and development (39%) spending. High demand for Treasury bonds (e.g., TZS 794 billion in subscriptions for a 25-year bond in May 2025) reflects investor confidence.
  • Monetary Policy: The BoT’s Central Bank Rate (CBR) at 6% and interbank rates near 8% (Document, Page 7) drive high T-Bill yields (8.89%) and bond yields (15.29% for 25-year bonds), attracting institutional investors but crowding out private sector credit (15.1% growth in April 2025, slower than 18.4% a year earlier).
  • Market Dynamics: The shift to market-aligned Treasury bond coupon rates in January 2025 enhances liquidity and price discovery, boosting bond market activity (bond turnover up 592.52% by May 16, 2025).
• Implications: The domestic debt stock (TZS 35,201.1 billion, ~22% of GDP based on 2024 GDP of TZS 156.6 trillion) remains sustainable, with a low risk of distress. However, high yields (15.5% average lending rates) and crowding-out effects may limit private sector growth, particularly for SMEs (15% loan access in 2023). The BoT’s liquidity injections (e.g., reverse repos, gold purchases) aim to ease pressures, but fiscal discipline is needed to manage debt servicing costs (TZS 172.0 billion interest in April 2025).

2. Government Domestic Debt by Creditor Category

• Overview: Domestic debt is held by institutional and individual investors, with commercial banks, pension funds, and the BoT as primary creditors. Treasury bonds (78.9% of domestic debt) are favored for their long-term stability, while T-Bills (8.8% in March 2024) support short-term financing. Creditor composition reflects the banking sector’s role in government financing and the growing participation of non-bank investors.
• May 2025 Performance:
  • Creditor Breakdown:
    • Commercial Banks: TZS 10,138.2 billion (28.8%).
    • Pension Funds: TZS 9,203.9 billion (26.1%).
    • Bank of Tanzania (BoT): TZS 7,158.2 billion (20.3%).
    • Others (incl. public institutions, private companies, individuals): TZS 6,244.5 billion (17.7%).
    • Insurance Companies: TZS 1,840.0 billion (5.2%).
    • BOT Special Funds: TZS 616.3 billion (1.8%).
  • Key Insight: Commercial banks and pension funds hold 54.9% of domestic debt, reflecting their dominant role in financing government activities, consistent with September 2024 (28.9% and 26.4%, respectively).
• Context and Analysis:
  • Commercial Banks (28.8%): Banks hold TZS 10,138.2 billion, down slightly from 29.7% (TZS 9,678.8 billion) in September 2024, but up from 28.9% (TZS 10,049.9 billion) in April 2025. With 33 commercial banks among 45 licensed banks in January 2025, their role reflects strong banking sector assets (TZS 54,263 billion in 2023). High bond yields (15.29% for 25-year bonds) attract banks, but this crowds out private sector lending (15.1% growth in April 2025).
  • Pension Funds (26.1%): Pension funds hold TZS 9,203.9 billion, slightly up from 26.4% (TZS 9,171.1 billion) in April 2025 and 27.6% (TZS 8,991.4 billion) in September 2024. Their long-term investment horizon aligns with Treasury bonds, supporting fiscal stability. Combined pension assets (USD 13 billion in East Africa) are underutilized in private equity, indicating potential for further debt market participation.
  • Bank of Tanzania (20.3%): The BoT’s TZS 7,158.2 billion share (up from 20.5% or TZS 7,119.2 billion in April 2025) reflects its role in monetary policy alignment, holding bonds to regulate money supply. The BoT has no outstanding external debt, focusing on domestic instruments.
  • Others (17.7%): The TZS 6,244.5 billion held by others (public institutions, private companies, individuals) marks a significant rise from 15.2% (TZS 4,956.0 billion) in September 2024, driven by retail investor interest in high-yield bonds (e.g., TZS 794 billion subscriptions in May 2025).
  • Insurance Companies (5.2%): The TZS 1,840.0 billion share, down from 5.8% (TZS 1,904.2 billion) in September 2024, reflects limited insurance sector growth (5% of financial assets). Regulatory constraints limit their bond market participation.
  • BOT Special Funds (1.8%): The TZS 616.3 billion share, up from 1.2% (TZS 389.0 billion) in September 2024, indicates increased use of special funds for targeted financing, though their role remains minor.
• Economic Drivers:
  • Bond Market Boom: Treasury bonds (80% of domestic debt in April 2025) drive creditor participation, with a 25-year bond auction in May 2025 attracting TZS 794 billion in bids. The shift to market-aligned coupon rates in January 2025 enhances investor appeal.
  • Banking Sector Strength: Commercial banks’ 28.8% share reflects their TZS 54,263 billion asset base and 17.4% growth in 2023, though high bond holdings reduce private sector credit availability (15.5% lending rates).
  • Pension and Insurance: Pension funds’ 26.1% share aligns with their USD 13 billion regional asset pool, but low insurance participation (5.2%) reflects shallow non-bank financial markets.
• Implications: The concentration of debt in banks and pension funds (54.9%) ensures stability but risks crowding out private credit, as noted in April 2025 (15.1% credit growth vs. 18.4% prior year). The rise in “Others” (17.7%) diversifies the investor base, reducing rollover risk. However, high yields (8.89% T-Bills, 15.29% bonds) increase debt servicing costs (TZS 5.31 trillion annually at 15.5% rates), straining fiscal space.

3. Comparison with April 2025

• Overview: The month-on-month change in domestic debt by creditor reflects shifting investor dynamics, driven by high-yield bond auctions and monetary policy conditions. The total debt stock rose by TZS 441.2 billion (1.3%), with varying changes across creditor categories.
• Comparison:
  • Commercial Banks: Increased from TZS 10,049.9 billion to TZS 10,138.2 billion (+TZS 88.3 billion, +0.9%).
  • Pension Funds: Increased from TZS 9,171.1 billion to TZS 9,203.9 billion (+TZS 32.8 billion, +0.4%).
  • Bank of Tanzania (BoT): Increased from TZS 7,119.2 billion to TZS 7,158.2 billion (+TZS 39.0 billion, +0.5%).
  • Others: Increased from TZS 5,996.8 billion to TZS 6,244.5 billion (+TZS 247.7 billion, +4.1%).
  • Insurance Companies: Decreased from TZS 1,858.4 billion to TZS 1,840.0 billion (-TZS 18.4 billion, -1.0%).
  • BOT Special Funds: Increased from TZS 564.5 billion to TZS 616.3 billion (+TZS 51.8 billion, +9.2%).
• Context and Analysis:
  • Significant Growth in “Others”: The TZS 247.7 billion increase in “Others” (17.7% share) is the largest, reflecting growing retail and non-bank institutional interest, driven by high bond yields (e.g., TZS 794 billion subscriptions for a 25-year bond). This aligns with bond market turnover rising 592.52% by May 16, 2025, indicating broader market participation.
  • Modest Bank and Pension Growth: Commercial banks (+TZS 88.3 billion) and pension funds (+TZS 32.8 billion) saw modest increases, consistent with their dominant roles (54.9% combined). Banks’ growth reflects strong asset bases (TZS 54,263 billion in 2023), while pension funds’ steady rise aligns with long-term investment strategies.
  • BoT and Special Funds: The BoT’s TZS 39.0 billion increase maintains its 20.3% share, supporting monetary policy (7-day interbank rate at 7.98%, Document, Page 7). The TZS 51.8 billion rise in BOT Special Funds (9.2%) suggests targeted financing, possibly for liquidity management.
  • Insurance Decline: The TZS 18.4 billion decrease in insurance holdings (5.2% share) reflects regulatory limits and a focus on shorter-term assets, as insurance assets remain small compared to pensions.
  • Economic Drivers: The 1.3% debt stock increase (TZS 441.2 billion) is driven by a record TZS 794 billion bond auction in May 2025, with institutional investors (banks, pensions) absorbing most issuances. Tight monetary policy (CBR at 6%) and high interbank rates (7.98%) encourage bond investments over private lending, as noted in April 2025 (15.1% credit growth slowdown).
• Implications: The rise in “Others” (+4.1%) diversifies the creditor base, reducing reliance on banks and pensions, which lowers rollover risk. However, the modest growth in bank holdings (+0.9%) and decline in insurance (-1.0%) suggest liquidity constraints, as banks prioritize bonds over private credit. The BoT’s increased share (20.3%) supports fiscal financing but may strain monetary policy if liquidity tightens further (interbank rates near 8% ceiling).

4. Key Takeaways

• Concentration and Stability: Commercial banks (28.8%) and pension funds (26.1%) dominate, ensuring stable financing but crowding out private credit (15.5% lending rates). The 54.9% combined share aligns with September 2024 (56.1%), reflecting institutional reliance.
• Broadening Investor Base: The significant rise in “Others” (17.7%, +TZS 247.7 billion) indicates growing retail and non-bank participation, driven by high-yield bonds (15.29% for 25-year bonds). This diversification enhances market resilience and aligns with the BoT’s market-aligned coupon rate reform.
• Debt Sustainability: Domestic debt (TZS 35,201.1 billion, ~22% of GDP) remains sustainable, with a low risk of distress. However, high servicing costs (TZS 5.31 trillion annually at 15.5% rates) and crowding-out effects challenge private sector growth. The 2025/26 budget’s TZS 6.27 trillion borrowing plan requires careful management to maintain fiscal space.
• Risks and Opportunities: The increase in “Others” reduces rollover risk, but high bond yields and tight liquidity (interbank rates near 8%) may elevate borrowing costs. The BoT’s liquidity tools (reverse repos, gold purchases) and IMF support (USD 441 million in April 2025) mitigate risks, while bond market reforms enhance efficiency.

Summary Table – May 2025

Additional Insights and Outlook

• Fiscal Context: The domestic debt stock (TZS 35,201.1 billion) supports the 2024/25 budget’s 3% GDP deficit target, financed through bonds (80%) and T-Bills (8.8%). The 1.3% increase from April 2025 reflects strong bond demand, but high yields (15.29%) increase servicing costs, straining fiscal space (TZS 172.0 billion interest in April 2025).
• Market Dynamics: The rise in “Others” (17.7%) aligns with bond market growth (592.52% turnover increase by May 16, 2025), driven by market-aligned coupon rates. This diversification reduces dependence on banks (28.8%) and pensions (26.1%), enhancing resilience.
• Risks: High bond holdings by banks crowd out private credit (15.1% growth), impacting SMEs. Shilling depreciation (2.6%) and tight liquidity (7.98% interbank rate) may elevate costs, requiring BoT interventions (reverse repos).
• Outlook: The 2025/26 budget’s TZS 40.47 trillion revenue target and 6% GDP growth projection rely on sustained domestic borrowing. Continued bond market reforms and IMF support (USD 441 million) will bolster sustainability, but balancing public and private sector financing is critical.

Tanzania Domestic Debt by Creditor - May 2025: Key Figures

Note: USD conversion based on exchange rate of ~TZS 2,698/USD.

1. External Debt Stock by Borrower

• Overview: Tanzania’s external debt includes obligations owed to non-residents, repayable in foreign currency, goods, or services. It encompasses public and publicly guaranteed (PPG) debt (central government and public corporations) and private sector debt. The Bank of Tanzania (BoT) defines external debt based on residency, covering long-term debt, short-term debt, and use of IMF credit. The total external debt stock reflects Tanzania’s financing needs for development projects, balance of payments (BoP) support, and private sector investments.
• May 2025 Performance:
  • Total External Debt Stock: USD 35.60 billion.
  • Borrower Breakdown:
    • Central Government: USD 27.12 billion (76.2% of total).
    • Private Sector: USD 8.48 billion (23.8% of total).
    • Public Corporations: USD 0.004 billion (0.01% of total).
• Context and Analysis:
  • Central Government Dominance: The central government’s 76.2% share (USD 27.12 billion) underscores its role as the primary borrower, funding large-scale infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and social programs (e.g., education, health). This aligns with November 2024 data, where the central government held 76.8% (USD 25.43 billion) of a USD 33.14 billion external debt stock. The slight decrease in share (from 76.8% to 76.2%) may reflect increased private sector borrowing or debt repayments.
  • Private Sector Growth: The private sector’s 23.8% share (USD 8.48 billion) indicates growing external borrowing, up from 23.2% (USD 7.70 billion) in November 2024. This reflects private investments in sectors like manufacturing, agriculture, and tourism, supported by foreign direct investment (FDI) inflows (USD 922 million in 2021). The increase suggests improved access to commercial loans, though at higher costs compared to multilateral financing.
  • Negligible Public Corporations: Public corporations’ 0.01% share (USD 4 million) is consistent with their minimal role, as seen in September 2024 (USD 3.8 million). This reflects limited borrowing by state-owned enterprises (SOEs), possibly due to government guarantees (2.8% of GDP for National Insurance Corporation) or reliance on central government funding.
  • Economic Drivers: The external debt stock rose from USD 33.14 billion in November 2024 to USD 35.60 billion in May 2025, a 7.4% increase, driven by new disbursements for infrastructure and BoP support. Multilateral creditors (e.g., World Bank, IMF) account for 72.5% of PPG debt, offering concessional terms, while commercial borrowing (30.5% of new disbursements in FY2022/23) has grown, increasing debt servicing costs. The BoT reports no outstanding external debt (Document, Page 12), aligning with IMF findings.
  • Implications: The central government’s dominance (76.2%) places repayment burdens on public finances, requiring robust revenue mobilization (TZS 2,544.1 billion in April 2025). The private sector’s growing share (23.8%) supports economic diversification but exposes it to commercial loan risks. The negligible public corporation share minimizes SOE-related fiscal risks, but contingent liabilities (3% of GDP) warrant monitoring. Tanzania’s debt sustainability remains moderate, with a low risk of external debt distress, supported by IMF financing (USD 441 million approved in April 2025).

2. Disbursed Outstanding Debt by Use of Funds

• Overview: Disbursed outstanding debt (DOD) reflects funds already utilized from external borrowings, allocated across sectors to drive Tanzania’s development goals under the Third Five-Year National Development Plan (2021/22–2025/26). Key sectors include infrastructure, social services, and BoP support, aligning with Vision 2050’s focus on industrialization and human capital.
• May 2025 Allocation:
  • Sectoral Breakdown (% of DOD):
    • Transport & Telecommunications: 21.5%
    • Budget Support / Balance of Payments: 20.2%
    • Social Welfare & Education: 20.1%
    • Energy & Mining: 13.7%
    • Agriculture: 5.2%
    • Real Estate & Construction: 4.6%
    • Industry: 4.1%
    • Finance & Insurance: 3.8%
    • Tourism: 1.7%
    • Other: 5.2%
• Context and Analysis:
  • Infrastructure Focus: Transport & Telecommunications (21.5%) remains the largest recipient, consistent with September 2024 (21.5%) and December 2019 (27%). Funds support projects like the Standard Gauge Railway (SGR) and Dar es Salaam Maritime Gateway, enhancing connectivity and trade (exports up 16.8% in April 2025, Document, Page 14). This aligns with the 2025/26 budget’s TZS 7.72 trillion for capital payments.
  • Budget Support: BoP support (20.2%) reflects reliance on external financing to stabilize foreign exchange reserves (USD 5.7 billion, 4 months of import cover). This is critical amid shilling depreciation (2.6% in 2025) and global risks (e.g., trade tensions).
  • Social Investments: Social Welfare & Education (20.1%) supports human capital development (e.g., 28,000 health workers trained in 2025/26), aligning with Vision 2050’s goals. The slight drop from 20.8% in September 2024 may indicate reallocation to other sectors.
  • Energy & Mining: 13.7% funds projects like the Julius Nyerere Hydropower Plant (3,680 MW), reducing power shortages. The decline from 14.8% in September 2024 suggests completion of major projects or slower disbursements.
  • Underfunded Sectors: Agriculture (5.2%) and Tourism (1.7%) receive low shares, despite contributing 27% and 17% to GDP, respectively. This may reflect reliance on domestic or private funding, but underinvestment risks growth in these sectors.
  • Economic Drivers: The sectoral allocation aligns with Tanzania’s development priorities, but the low share for agriculture (5.2%) contrasts with its 65% employment share, suggesting under prioritization. The 2025/26 budget’s focus on agricultural reforms (e.g., irrigation, TZS 2.6 trillion) aims to address this. Commercial borrowing’s rise (30.5% of new disbursements) increases costs but supports infrastructure and BoP needs.
  • Implications: The focus on transport (21.5%) and social services (20.1%) supports long-term growth (6% GDP projected for 2025), but low allocations to agriculture and tourism may limit inclusive growth. Efficient project implementation is critical to ensure debt-financed investments (USD 35.60 billion) yield returns, as emphasized by the IMF. The high BoP share (20.2%) underscores vulnerability to external shocks, requiring robust export growth (gold, cashew nuts).

3. Disbursed Outstanding Debt by Currency Composition

• Overview: The currency composition of external debt reflects the denominations in which Tanzania’s obligations are repayable, exposing the country to exchange rate risks. The dominance of major currencies like the USD and Euro is driven by multilateral and commercial creditors.
• May 2025 Composition:
  • Currency Breakdown (% of DOD):
    • US Dollar (USD): 67.4%
    • Euro (EUR): 16.7%
    • Chinese Yuan (CNY): 6.3%
    • Other Currencies: 9.6%
• Context and Analysis:
  • USD Dominance: The 67.4% USD share aligns with February 2023 (68.9%) and November 2024 (67.4%), reflecting reliance on multilateral (e.g., World Bank, IMF) and commercial creditors. The USD’s dominance exposes Tanzania to exchange rate risks, as a 2.6% shilling depreciation in 2025 increases debt servicing costs (e.g., USD 447.9 million in bilateral debt service in 2024).
  • Euro and Yuan: The 16.7% Euro share supports financing from European creditors (e.g., EU, export credits), while the 6.3% Yuan share reflects Chinese loans for infrastructure (e.g., SGR). Both are stable, with Euro usage consistent (17% in 2019) and Yuan growing due to China’s role in energy and transport projects.
  • Other Currencies: The 9.6% share includes currencies like the Japanese Yen and SDRs (IMF credit), aligning with multilateral financing (72.5% of PPG debt). This diversification mitigates some currency risk but remains minor.
  • Economic Drivers: The USD’s dominance is driven by multilateral loans (47.2% of debt stock) and commercial borrowing (30.5% of new disbursements), which favor USD denominations. The shilling’s depreciation (8% in 2023, 2.6% in 2025) increases servicing costs, with external debt service projected at TZS 5.2 trillion in 2025/26. Foreign exchange reserves (USD 5.7 billion, Document, Page 12) provide a buffer, covering 4 months of imports.
  • Implications: The 67.4% USD share heightens vulnerability to shilling depreciation, increasing debt servicing costs (TZS 4,714.8 billion in FY2024/25). Diversifying currency composition or boosting exports (16.8% growth in April 2025) is critical to manage risks. The IMF’s USD 441 million support in April 2025 strengthens reserves, but prudent debt management is needed to maintain sustainability.

Summary Snapshot

Additional Insights and Outlook

• Debt Sustainability: Tanzania’s external debt (USD 35.60 billion, 47.36% of GDP in 2023) remains sustainable, with a moderate risk of distress. The fiscal deficit (2.5% of GDP in 2024/25) and strong revenue performance (TZS 2,544.1 billion in April 2025) support repayment capacity. However, rising commercial borrowing (30.5% of new disbursements) and shilling depreciation (2.6%) increase costs.
• Policy Support: The 2025/26 budget’s TZS 40.47 trillion revenue target and IMF’s USD 441 million financing bolster fiscal space. The BoT’s reserves (USD 5.7 billion, Document, Page 12) and export growth (16.8%) mitigate currency risks.
• Risks: High USD exposure (67.4%) and low agriculture/tourism allocations (5.2%, 1.7%) pose risks to inclusive growth. Upcoming elections (October 2025) may increase fiscal pressures, potentially widening deficits (TZS 743.2 billion in April 2025).
• Outlook: Continued infrastructure and social investments (42.3% of DOD) support 6% GDP growth, but diversifying funding (e.g., domestic bonds, TZS 32.62 trillion stock) and boosting agriculture/tourism allocations are critical. Enhanced debt transparency, as per IMF’s September 2024 assessment, will strengthen sustainability.

Tanzania External Debt Overview - May 2025: Key Figures

1. Overview of Trade Performance

• Tanzania’s external sector is a critical driver of economic growth, with exports contributing to foreign exchange earnings and imports supporting infrastructure and industrial development. The trade balance reflects a persistent deficit due to higher import demand, though export growth, particularly in minerals and tourism, has narrowed the gap. The current account deficit improved by 26% to TZS 5.71 trillion (USD 2,117.5 million) in the year ending May 2025, driven by strong export performance.
• Total Trade (Year Ending May 2025):
  • Exports of Goods and Services: TZS 45.83 trillion (USD 16,994.7 million), up 19.2% from USD 14,258.2 million in May 2024.
  • Imports of Goods and Services: TZS 47.72 trillion (USD 17,686 million), up 9.6% from USD 16,141.9 million in May 2024.
  • Trade Deficit: TZS 1.89 trillion (USD 701.3 million), narrowed from USD 1,009 million in Q3 2024, reflecting export-driven improvements.
• Economic Drivers: Export growth is fueled by gold, agriculture, and tourism, supported by the Third Five-Year Development Plan (FYDP III, 2021/22–2025/26) and AfCFTA participation. Imports are driven by capital-intensive projects (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and consumer demand. The Tanzanian shilling’s 3.82% depreciation (TZS 2,698.42/USD) boosts export competitiveness but raises import costs.

2. Exports of Goods and Services

• Overview: Tanzania’s exports include goods (minerals, agricultural products, manufactured goods) and services (tourism, transport). Gold and tourism dominate, accounting for 36.8% and 23.2% of total exports, respectively, in 2024. Agricultural exports benefit from global demand, while services leverage Tanzania’s natural attractions and logistics improvements.
• Export Composition (Year Ending May 2025):
  • Goods Exports: TZS 26.67 trillion (USD 9,894.9 million), up from USD 7,758.7 million (+27.5%) in May 2024.
    • Gold: TZS 10.34 trillion (USD 3,835.5 million), 36.8% of goods exports, up 23.1% due to high global prices (USD 3,326/oz) and production increases (1.9 million oz, web:18). Beneficiation policies (e.g., local refining) and BoT gold purchases (976.51 kg) enhance earnings.
    • Cashew Nuts: TZS 1.05 trillion (USD 389.9 million, estimated based on 141% growth), driven by global demand and competitive pricing.
    • Coffee: TZS 0.80 trillion (USD 296.8 million, estimated based on 66.3% growth, supported by improved trade policies.
    • Tobacco: TZS 0.86 trillion (USD 318.8 million, 4.7% of goods exports, web:22), up 32% due to higher productivity.
    • Cloves (Mainly Zanzibar): TZS 0.15 trillion (USD 55.5 million, provided data), down 10.2% due to production and price declines.
    • Horticulture (Vegetables, Fruits, Seeds): TZS 0.84 trillion (USD 312 million, 4.3%), supported by the Horticulture Exports Accelerator Program.
    • Other (Gemstones, Textiles, Fish): TZS 2.63 trillion (USD 976.3 million, estimated), with fish and marine products up 4.3% (USD 4.1 million, provided data) and textiles benefiting from cotton exports to South Asia.
  • Services Exports: TZS 19.16 trillion (USD 7,099.8 million), up 9.2% from USD 6,499.4 million.
    • Travel (Tourism): TZS 10.55 trillion (USD 3,910 million, estimated, 55.1% of services), up 10% due to 2,170,360 tourist arrivals (+10.6% from 1,961,870, provided data). Key attractions include Mount Kilimanjaro, Serengeti, and Zanzibar beaches.
    • Transport Services: TZS 3.83 trillion (USD 1,420 million, ~20%, provided data), up due to improved port and railway infrastructure (e.g., Dar es Salaam port, SGR.
    • Other Services (Construction, Insurance, ICT, Royalties): TZS 4.78 trillion (USD 1,769.8 million, ~25%, provided data), driven by ICT (453.7 million TIPS transactions, web:6) and construction projects.
• Key Destinations:
  • India: 21.4% (~TZS 9.81 trillion), mainly gold and cashew nuts.
  • South Africa: 15.4% (~TZS 7.06 trillion), gold and agricultural products.
  • UAE: 9.4% (~TZS 4.31 trillion), minerals and textiles.
  • Switzerland: 6.4% (~TZS 2.93 trillion), gold.
  • China: 5.9% (~TZS 2.70 trillion), agricultural and manufactured goods.
  • DR Congo: 4.3% (~TZS 1.97 trillion), agricultural products.
• Trends and Drivers:
  • Gold Dominance: Gold’s 36.8% share reflects high global prices and mining reforms. The Epanko Graphite Project signals mineral diversification.
  • Tourism Growth: Tourism receipts (TZS 10.55 trillion) are driven by 2,662,219 arrivals in 2024 (+20%, web:6) and infrastructure (e.g., Mikumi SGR gate). The sector contributes 19.5% to GDP in 2025/26.
  • Agricultural Surge: Cashew nuts (+141%), coffee (+66.3%), and tobacco (+32%) benefit from AfCFTA and trade missions (web:15). Zanzibar’s clove exports (TZS 0.15 trillion) face challenges from market downturns.
  • Services Expansion: Transport earnings (TZS 3.83 trillion) reflect regional logistics improvements (24% intra-African trade rise to USD 5.18 billion, web:6), while ICT and construction grow with infrastructure investments.
• Implications:
  • Strengths: Export growth (19.2%) narrows the current account deficit (TZS 5.71 trillion), supported by reserves (TZS 13.86 trillion, USD 5,136.6 million). Tourism and gold ensure robust foreign exchange inflows.
  • Challenges: Overreliance on gold (36.8%) and tourism (23.2%) risks exposure to global price and demand fluctuations (web:17). Clove exports’ decline (TZS 0.15 trillion, -10.2%) highlights agricultural vulnerabilities.
  • Outlook: Continued export growth (projected +15% in 2025, web:18) depends on diversification (e.g., horticulture) and infrastructure (e.g., SGR). AfCFTA and trade agreements (e.g., Tanzania-UAE, web:24) will boost market access.

3. Imports of Goods and Services

• Overview: Tanzania’s imports support its capital-intensive growth model, with capital goods and industrial inputs dominating. The 9.6% import growth reflects infrastructure demand and consumer needs, particularly in tourism and manufacturing.
• Import Composition (Year Ending May 2025):
  • Goods Imports: TZS 26.67 trillion (USD 9,894.8 million, estimated based on national import share), up from USD 9,693.4 million in May 2024.
    • Petroleum Oils: TZS 6.95 trillion (USD 2,578.5 million, 19.9% of goods imports, web:22), down 7% due to global price effects and domestic energy investments (e.g., Julius Nyerere Hydropower Plant).
    • Machinery and Mechanical Appliances: TZS 4.94 trillion (USD 1,830 million, 12.1%), for infrastructure (e.g., SGR, hydropower).
    • Vehicles and Transport Equipment: TZS 4.34 trillion (USD 1,610 million, 10.7%), supporting logistics and construction.
    • Electrical Machinery and Equipment: TZS 2.58 trillion (USD 955 million, 6.32%), for industrial and ICT applications.
    • Wheat and Meslin: TZS 0.84 trillion (USD 310 million, 3.1%), reflecting food import needs.
    • Other (Chemicals, Plastics, Consumer Goods): TZS 6.96 trillion (USD 2,581.3 million, estimated), including fertilizers and manufactured articles.
  • Services Imports: TZS 7.67 trillion (USD 2,841.7 million), up 27.0% from USD 2,324.9 million.
    • Freight (Transport): TZS 3.66 trillion (USD 1,356.5 million, 47.7%, provided data), driven by import volumes of capital goods and fuel.
    • Other Services (Construction, Insurance, ICT, Financial): TZS 4.01 trillion (USD 1,485.2 million, ~52.3%, provided data), linked to infrastructure projects and financial services.
• Key Origins:
  • China: 27.5% (~TZS 13.12 trillion), machinery and electronics.
  • India: 12.9% (~TZS 6.16 trillion), petroleum and chemicals.
  • UAE: 9.4% (~TZS 4.49 trillion), refined petroleum.
  • Saudi Arabia: 6.1% (~TZS 2.91 trillion), petroleum products.
  • Japan: 4.3% (~TZS 2.05 trillion), vehicles and machinery.
• Trends and Drivers:
  • Capital-Intensive Growth: Imports of machinery (TZS 4.94 trillion) and vehicles (TZS 4.34 trillion) support infrastructure projects (e.g., SGR, TZS 7.72 trillion budget allocation) and manufacturing (9% GDP).
  • Petroleum Decline: Petroleum imports (TZS 6.95 trillion, -7%) reflect hydropower advancements (235 MW from Julius Nyerere dam, web:17) and plans for LNG and oil pipelines by 2026.
  • Freight Costs: The 27.0% rise in services imports (TZS 7.67 trillion) is driven by freight (47.7%), linked to port congestion and global shipping costs. The Tanzania Shipping Agency Corporation’s monopoly may elevate costs.
  • Food Imports: Wheat imports (TZS 0.84 trillion) highlight food security gaps, despite domestic production increases (557,228 tonnes maize).
• Implications:
  • Economic Support: Imports fuel 6% GDP growth, with capital goods (TZS 4.94 trillion) and vehicles (TZS 4.34 trillion) enabling infrastructure and trade (24% intra-African trade rise).
  • Trade Deficit: The TZS 1.89 trillion deficit reflects import reliance, exacerbated by TZS depreciation (3.82%), increasing costs by ~TZS 0.73 trillion for USD-denominated imports.
  • Outlook: Reducing petroleum imports (via LNG, hydropower) and boosting local manufacturing can narrow the deficit. AfCFTA’s tariff reductions (90% of products) will lower import costs but require infrastructure upgrades.

4. Policy Recommendations

To enhance Tanzania’s trade performance, the following actions are recommended based on the analysis:

1. Diversify Exports:
   • Action: Invest in horticulture (TZS 0.84 trillion exports) and manufacturing (e.g., textiles, TZS 0.10 trillion, web:17) via the Horticulture Exports Accelerator Program and SEZ incentives. Support clove production in Zanzibar (TZS 0.15 trillion, -10.2%) with irrigation and market access.
   • Impact: Reduces reliance on gold (TZS 10.34 trillion, 36.8%) and tourism (TZS 10.55 trillion, 23.2%), mitigating global price risks.
   • Example: The AfCFTA Guided Trade Initiative can boost agricultural exports to DR Congo (TZS 1.97 trillion).
2. Reduce Import Dependence:
   • Action: Accelerate domestic energy production (e.g., LNG, Julius Nyerere dam) to cut petroleum imports (TZS 6.95 trillion, 19.9%). Promote import substitution in manufacturing (e.g., wheat processing, TZS 0.84 trillion, web:22) via MKUMBI II reforms.
   • Impact: Narrows the trade deficit (TZS 1.89 trillion) and mitigates TZS depreciation effects.
   • Example: The 2025/26 budget’s VAT exemptions for farmers can boost local food production.
3. Enhance Logistics Infrastructure:
   • Action: Upgrade Dar es Salaam port and railways (e.g., SGR, Mikumi gate, web:6) to reduce freight costs (TZS 3.66 trillion, 47.7% of services imports). Address port congestion via private investment.
   • Impact: Lowers import costs and boosts transport earnings (TZS 3.83 trillion, web:6). Supports intra-African trade (TZS 13.98 trillion).
   • Example: The Tanzania Shippers Council’s collaboration to reduce logistics costs aligns with AfCFTA goals.
4. Strengthen Tourism and Services:
   • Action: Expand tourism marketing to Asia and Americas (71.6% of Zanzibar arrivals from Europe) and invest in ICT (TZS 4.78 trillion in other services). The 2025/26 tourism budget (TZS 0.36 trillion) can fund new attractions.
   • Impact: Sustains tourism receipts (TZS 10.55 trillion) and diversifies services exports.
   • Example: World Travel Awards 2025 recognition can attract more visitors.
5. Improve Trade Facilitation:
   • Action: Streamline TANCIS documentation and reduce non-tariff barriers (e.g., port delays). Leverage AfCFTA to eliminate tariffs on 90% of products.
   • Impact: Enhances export competitiveness and reduces import costs, supporting the trade balance.
   • Example: The Dar es Salaam International Trade Fair (June–July 2025) can promote local products.

5. Economic Implications

• Export Strengths: Gold (TZS 10.34 trillion) and tourism (TZS 10.55 trillion) drive foreign exchange inflows, supporting reserves (TZS 13.86 trillion) and GDP growth (6%). Agricultural exports (TZS 3.60 trillion combined for cashew, coffee, tobacco, horticulture) leverage AfCFTA markets.
• Import Challenges: High capital goods (TZS 4.94 trillion) and freight costs (TZS 3.66 trillion) widen the trade deficit (TZS 1.89 trillion), with TZS depreciation (3.82%) adding ~TZS 0.73 trillion to USD-denominated costs.
• Sustainability: The current account deficit (TZS 5.71 trillion) is manageable with reserves covering 4.2 months. However, import reliance risks external vulnerabilities, requiring diversification and domestic production.
• Outlook: Exports are projected to grow 15% in 2025 (web:18), driven by minerals, agriculture, and tourism. Reducing petroleum imports (via LNG, web:17) and enhancing logistics can further narrow the deficit, supporting Vision 2050’s USD 1 trillion GDP goal.

Tanzania Exports and Imports - May 2025: Key Figures

Note: USD conversion based on TZS 2,698.42/USD (May 2025).

1. Inflation

• Overview: Inflation in Zanzibar, measured by the Consumer Price Index (CPI), reflects the cost of living for a basket of goods and services, including food, transport, utilities, and housing. A declining inflation rate supports household purchasing power and aligns with the Bank of Tanzania’s (BoT) medium-term target of 3–5% for the United Republic of Tanzania. Zanzibar’s inflation is influenced by local factors (e.g., food supply) and external pressures (e.g., global fuel prices).
• May 2025 Performance:
  • Headline Inflation: 4.2% in May 2025, down from 4.3% in April 2025 and significantly lower than 5.3% in May 2024, reflecting a 20.8% year-on-year decline.
  • Key Components:
    • Food Inflation: 3.9% in May 2025 (down from 4.1% in April 2025, 8.9% in May 2024). The decline is driven by improved food supply, with the National Food Reserve Agency (NFRA) holding 557,228 tonnes of maize in April 2025, up from 340,102 tonnes in April 2024, and releasing 29,834 tonnes to stabilize prices.
    • Non-Food Inflation: 4.6% in May 2025 (up from 4.4% in April 2025), driven by transport (e.g., +4.8% in January 2025) and utilities, reflecting global fuel price pressures and infrastructure demand.
    • Core Inflation: 3.8% in May 2025 (unchanged from April 2025), driven by clothing, housing, and education services, indicating stable demand for non-volatile items.
• Context and Analysis:
  • Food Inflation Decline: The drop from 8.9% (May 2024) to 3.9% (May 2025) reflects improved agricultural output and NFRA intervention. Favorable rainfall patterns in 2024/25 supported crop production (e.g., maize, rice), reducing food price volatility. However, Zanzibar’s reliance on imported food (e.g., USD 521.6 million total imports in January 2025,) exposes it to global price fluctuations.
  • Non-Food Inflation Rise: The slight increase to 4.6% reflects higher transport and utility costs, linked to global fuel prices and infrastructure projects (e.g., construction up 5.8% in 2024,). Zanzibar’s tourism-driven economy increases demand for transport services, pushing costs.
  • Core Inflation Stability: The stable 3.8% core inflation indicates consistent demand for services like housing and education, supported by tourism recovery (2,662,219 arrivals in 2024,) and construction growth.
  • Economic Drivers: The BoT’s monetary policy (6% Central Bank Rate) and fiscal discipline (e.g., revenue growth,) keep inflation within the 3–5% target. However, the Tanzanian shilling’s 2.6% depreciation in 2025 raises import costs, exerting upward pressure on non-food inflation.
• Implications:
  • Positive Impact: Declining headline inflation (4.2%) enhances purchasing power, supporting consumption in a tourism-driven economy (7.1% growth,). Food inflation’s drop to 3.9% aligns with stable food stocks.
  • Challenges: Rising non-food inflation (4.6%) and shilling depreciation risk eroding gains, particularly for import-dependent Zanzibar (USD 379.8 million imports, provided data). Global fuel price volatility and La Niña-related supply disruptions pose risks.
  • Outlook: Inflation is projected to stabilize around 3.4% in 2025, supported by prudent policies and food supply stability. Continued NFRA interventions and renewable energy investments (e.g., solar,) can mitigate non-food inflation pressures.

2. Government Budgetary Operations

• Overview: Zanzibar’s government budget reflects revenue mobilization (taxes, non-tax sources, grants) and expenditure (recurrent and development). The budget supports the Zanzibar Development Vision 2050, focusing on tourism, infrastructure, and social services, but persistent deficits require external and domestic financing.
• May 2025 Performance:
  • Revenue and Grants: TZS 109.2 billion collected in May 2025, up 11.2% from May 2024.
    • Tax Revenue: TZS 99.8 billion (91.4% share):
      • VAT and Excise Duties: TZS 42.9 billion
      • Income Tax: TZS 24.0 billion
      • Import Duties: TZS 19.8 billion
      • Other Taxes: TZS 13.1 billion
    • Non-Tax Revenue: TZS 9.4 billion (8.6% share), including fees and licenses.
  • Expenditure: TZS 129.4 billion, up 6.8% from May 2024.
    • Recurrent Spending: TZS 98.8 billion, with TZS 57.3 billion for wages and salaries.
    • Development Spending: TZS 30.6 billion, supporting infrastructure and social projects.
  • Budget Deficit: TZS 20.2 billion, financed through external (e.g., Chinese grants,) and domestic borrowing.
• Context and Analysis:
  • Revenue Growth: The 11.2% increase to TZS 109.2 billion aligns with January 2025’s TZS 115.6 billion (+5.2% from December 2024,). Tax revenue (91.4%) benefits from tourism-driven VAT and import duties, with 2,662,219 tourist arrivals in 2024 boosting collections (). Non-tax revenue (8.6%) reflects improved licensing, supported by reforms to ease business regulations.
  • Expenditure Trends: Recurrent spending (TZS 98.8 billion, 76.4% of total) prioritizes wages (TZS 57.3 billion), reflecting public sector employment (e.g., education, health). Development spending (TZS 30.6 billion, 23.6%) supports infrastructure (e.g., port rehabilitation,) and aligns with 5.8% construction growth.
  • Budget Deficit: The TZS 20.2 billion deficit (down from TZS 22.3 billion in January 2025,) reflects improved revenue but persistent spending pressures. Financing includes domestic bonds (15.29% yields) and external grants (e.g., TZS 185 billion from China for health,).
  • Economic Drivers: Tourism growth (7.1%,) and trade (7.1%,) drive revenue, while infrastructure investments (e.g., Zanzibar port,) increase spending. The 2024/25 budget (TZS 1.43 trillion revenue,) targets fiscal discipline but faces a TZS 190 billion annual deficit.
• Implications:
  • Strengths: Strong revenue growth (11.2%) supports fiscal stability, with tax revenue (91.4%) reflecting tourism and trade gains. Development spending (TZS 30.6 billion) aligns with Vision 2050 priorities.
  • Challenges: The TZS 20.2 billion deficit and high recurrent spending (76.4%) limit fiscal space. Reliance on external financing (e.g., Chinese grants,) and domestic borrowing (15.5% lending rates) increases debt servicing costs.
  • Outlook: Revenue is projected to grow with tourism (6%+ growth,) and trade reforms (e.g., AfCFTA,). Fiscal discipline and expenditure controls are needed to reduce the deficit, as recommended by the World Bank.

3. External Sector Performance

• Overview: Zanzibar’s external sector reflects trade in goods (e.g., cloves, seaweed) and services (e.g., tourism), with a persistent trade deficit due to high import dependence. Tourism and clove exports are key foreign exchange earners, but global price fluctuations and production challenges impact performance.
• May 2025 Performance:
  • Exports of Goods and Services: USD 172.7 million, down 3.9% from May 2024.
    • Clove: USD 55.5 million, down 10.2% year-on-year, due to lower production and global prices.
    • Seaweeds: USD 9.8 million, up 2.1%.
    • Manufactured Goods: USD 3.7 million, up 8.6%.
    • Fish & Marine: USD 4.1 million, up 4.3%.
  • Imports: USD 379.8 million, up 10.1% from May 2024.
    • Capital Goods: USD 166.0 million, for infrastructure and manufacturing.
    • Consumer Goods: USD 134.9 million, driven by tourism and household demand.
    • Intermediate Goods: USD 78.9 million, including fuel and raw materials.
  • Trade Deficit: USD 207.1 million (USD 379.8M imports – USD 172.7M exports), widened from January 2025’s USD 387.4 million.
• Context and Analysis:
  • Export Decline: The 3.9% drop to USD 172.7 million reflects clove export challenges (USD 55.5 million, -10.2%), due to production fluctuations (down from USD 46.8 million in January 2025,) and global price declines. Seaweed (+2.1%), manufactured goods (+8.6%), and fish (+4.3%) show resilience, supported by export zones and processing reforms. Tourism receipts, included in services, bolster exports (USD 3,910 million nationally,).
  • Import Growth: The 10.1% rise to USD 379.8 million aligns with January 2025’s USD 521.6 million (+4.5%,). Capital goods (USD 166.0 million) support construction (5.8% growth,) and manufacturing (7% in Zanzibar,). Consumer goods (USD 134.9 million) reflect tourism demand, while intermediate goods (USD 78.9 million) include fuel, impacted by global prices.
  • Trade Deficit: The USD 207.1 million deficit, though narrower than January 2025’s USD 387.4 million, reflects import dependence. Tourism and remittances (USD 589.1 million nationally,) offset some losses, supported by reserves (USD 5,136.6 million).
  • Economic Drivers: Tourism (7.1% growth,) and infrastructure (e.g., port upgrades,) drive imports, while clove production volatility and global demand weaken exports. AfCFTA and trade agreements (e.g., Tanzania-Mozambique,) support export growth.
• Implications:
  • Strengths: Growth in seaweed, manufactured goods, and fish exports diversifies earnings. Tourism receipts (55.1% of national service exports,) and reserves (4.2 months import cover) ensure stability.tanzaniainvest.com
  • Challenges: Clove export decline (-10.2%) and high import growth (10.1%) widen the trade deficit, exacerbated by shilling depreciation (2.6%, Document, Page 12). Import reliance (USD 379.8 million) risks external vulnerabilities.
  • Outlook: Export diversification (e.g., manufacturing,) and tourism growth (6%+ in 2025,) can narrow the deficit. Investments in agriculture (e.g., seaweed,) and renewable energy will reduce import dependence.

Additional Insights and Outlook

• Economic Context: Zanzibar’s economy grew 6.2% in 2024, driven by tourism (7.1%) and construction (5.8%), with 2025 projections over 6%. Inflation (4.2%) and revenue growth (TZS 109.2 billion) support stability, but the trade deficit (USD 207.1 million) and budget deficit (TZS 20.2 billion) pose challenges.
• Policy Support: The BoT’s 6% CBR and fiscal reforms (e.g., VAT efficiency,) stabilize inflation and revenue. Chinese grants (TZS 185 billion,) and World Bank support (CPF 2025-2029,) fund infrastructure, reducing deficit pressures.
• Risks: Shilling depreciation (2.6%, Document, Page 12), global price volatility, and climate shocks (e.g., La Niña,) threaten inflation and trade. Overreliance on tourism and cloves risks external shocks.
• Outlook: Zanzibar’s 2025 growth (6%+) will rely on tourism, manufacturing, and trade reforms (e.g., AfCFTA,). Diversifying exports and reducing import reliance (e.g., via agriculture,) are critical for sustainability.

Zanzibar Economic Performance - May 2025: Key Figures

Note: USD conversion based on exchange rate of ~TZS 2,698/USD.

1. Central Government Revenues

• Overview: Central government revenues in Tanzania include tax revenue (e.g., income tax, VAT, import duties) and non-tax revenue (e.g., dividends, fees, fines). These funds finance recurrent and development expenditures, with a focus on achieving fiscal targets outlined in the 2024/25 budget of TZS 49.35 trillion (USD 18.85 billion). The Tanzania Revenue Authority (TRA) and other agencies collect these revenues, aiming for 15.8% of GDP in 2024/25.
• April 2025 Performance:
  • Total Revenue: TZS 2,544.1 billion, achieving 99.6% of the monthly target (a shortfall of 0.4% or approximately TZS 10.2 billion, based on an inferred target of TZS 2,554.3 billion).
  • Revenue Breakdown:
    • Central Government Revenue: TZS 2,432.0 billion (95.6% of total revenue, implying local government collections of TZS 112.1 billion).
    • Tax Revenue: TZS 2,105.3 billion, exceeding the target by 1.5% (target approximately TZS 2,073.9 billion).
    • Non-Tax Revenue: TZS 326.6 billion, underperforming at 86.5% of the target (target of TZS 377.8 billion).
• Context and Analysis:
  • Strong Tax Performance: The 101.5% achievement in tax revenue reflects robust tax administration, driven by TRA’s digitalization efforts (e.g., e-filing, fiscalized receipts) and economic growth (5.5% GDP growth in 2024, projected 6.0% in 2025,). Key contributors include income tax (TZS 1,573.8 billion in January 2025) and import taxes (TZS 962.2 billion in January 2025), supported by export growth (16.8% in April 2025) and business activity in sectors like agriculture and manufacturing.
  • Non-Tax Revenue Shortfall: The 86.5% performance (TZS 326.6 billion vs. TZS 377.8 billion target) indicates challenges in collecting dividends, fees, and fines, possibly due to lower-than-expected returns from public enterprises or administrative inefficiencies. Non-tax revenue (TZS 602.6 billion in January 2025,) is critical for diversifying revenue but remains volatile compared to tax collections.
  • Economic Drivers: The marginal shortfall (0.4%) in total revenue aligns with earlier trends, as January 2025 collections reached TZS 3,877.4 billion, surpassing targets by 8.6% (). The strong tax performance reflects improved compliance and economic resilience, despite global challenges (e.g., geopolitical tensions). However, weaker domestic demand (noted by lower taxes on local goods,) may have contributed to the non-tax shortfall.
  • Implications: The robust tax revenue (101.5% of target) supports fiscal stability, aligning with the 2024/25 goal of raising TZS 34.61 trillion in domestic revenues (70.1% of the budget,). The non-tax shortfall (13.5% below target) highlights the need for stronger collection mechanisms, such as improving public enterprise efficiency or expanding fee-based services. Sustained revenue growth is critical to finance the TZS 56.49 trillion 2025/26 budget, which aims for 6% GDP growth.

2. Central Government Expenditures

• Overview: Central government expenditures in Tanzania are divided into recurrent (e.g., wages, interest, goods/services) and development (e.g., infrastructure, social projects) spending. The 2024/25 budget allocates TZS 49.35 trillion, with 59.6% for recurrent expenditure and 40.4% for development. Expenditures support flagship projects like the Julius Nyerere Hydropower Plant and Standard Gauge Railway (SGR).
• April 2025 Performance:
  • Total Expenditure: TZS 3,287.3 billion.
  • Expenditure Composition:
    • Recurrent Expenditure: TZS 2,005.6 billion (~61% of total).
      • Wages & Salaries: TZS 958.8 billion.
      • Interest Costs: TZS 172.0 billion.
      • Other Recurrent Expenses: TZS 874.8 billion.
    • Development Expenditure: TZS 1,281.6 billion (~39% of total).
• Context and Analysis:
  • Recurrent Expenditure Dominance: Recurrent spending (TZS 2,005.6 billion, ~61%) reflects high fixed costs, with wages and salaries (TZS 958.8 billion) as the largest component, supporting public sector employment (e.g., 28,000 health workers trained in 2025/26,). Interest costs (TZS 172.0 billion) indicate rising debt obligations, with domestic debt at TZS 34.26 trillion and external debt at USD 34.1 billion in March 2025. Other recurrent expenses (TZS 874.8 billion) cover goods, services, and subsidies, including local government elections and 2025 election preparations.
  • Development Expenditure: Development spending (TZS 1,281.6 billion, ~39%) aligns with January 2025 trends (TZS 1,393.3 billion,), focusing on infrastructure (e.g., SGR, Julius Nyerere Hydropower Plant) and social services (e.g., education, health). The 2024/25 budget prioritizes energy and transport projects, but a slight decline from January 2025 suggests potential reprioritization or funding constraints.
  • Economic Drivers: High recurrent spending (61%) reflects commitments to public sector stability and debt servicing, with interest payments absorbing significant resources (TZS 467.2 billion in January 2025,). Development spending (39%) supports growth targets (6% GDP in 2025,), driven by projects like the John Magufuli Bridge and Bagamoyo Special Economic Zone. However, the 2.6% shilling depreciation and high lending rates (15.18% in May 2025, Document, Page 7) increase debt servicing costs, limiting fiscal space.
  • Implications: The high share of development spending (39%) supports long-term growth through infrastructure and social investments, but recurrent costs (61%) strain fiscal resources. Interest costs (TZS 172.0 billion) highlight the burden of domestic debt (TZS 34.26 trillion, 29% held by banks,), potentially crowding out private sector credit. The 2025/26 budget’s planned 13.4% spending increase to TZS 56.49 trillion will require sustained revenue growth and prudent debt management to avoid widening deficits.

3. Key Observations

• Revenue-Expenditure Gap: The gap between revenue (TZS 2,544.1 billion) and expenditure (TZS 3,287.3 billion) in April 2025 resulted in a fiscal deficit of TZS 743.2 billion. This aligns with January 2025 data showing a low deficit of TZS 30 billion, financed through domestic borrowing (e.g., T-Bills at 8.89% yield, T-Bonds at 15.29%, Document, Page 8). The 2024/25 budget targets a deficit below 3% of GDP, achieved through fiscal discipline.
• Strong Tax Performance: Tax revenue exceeding targets (101.5%) reflects effective tax administration and economic resilience, supported by export growth (16.8% in April 2025, Document, Page 14) and private sector activity. However, the non-tax shortfall (86.5%) underscores the need for diversified revenue sources, as non-tax collections (TZS 6.48 trillion projected for 2025/26,) remain volatile.
• Fiscal Challenges: High spending (TZS 3,287.3 billion) and rising interest costs (TZS 172.0 billion) indicate growing debt obligations, with domestic debt servicing potentially costing TZS 5.31 trillion annually at 15.5% rates. The 2025/26 budget’s focus on revenue mobilization (TZS 40.47 trillion,) and deficit reduction (3.0% of GDP,) aims to address these challenges.
• Economic Context: Tanzania’s fiscal operations align with the Third Five-Year National Development Plan (2021/22–2025/26), emphasizing industrialization and human development (). The April 2025 deficit reflects continued reliance on domestic borrowing (TZS 6.27 trillion projected for 2025/26,), but foreign exchange reserves (USD 5.7 billion, covering 4 months of imports,) and IMF support (USD 441 million,) mitigate external risks.
• Implications: The fiscal deficit (TZS 743.2 billion) underscores the need for enhanced non-tax revenue and expenditure controls to maintain fiscal sustainability. Strong tax performance supports growth targets, but high recurrent spending (61%) and debt servicing costs could limit development investments. The 2025/26 budget’s reforms, including VAT exemptions and mining regulations, aim to boost revenue and investment, but global risks (e.g., sluggish growth,) and domestic demand weakness require vigilant fiscal management.

Summary Table – April 2025

Additional Insights and Outlook

• Fiscal Discipline: The low deficit (TZS 743.2 billion, ~2.5% of monthly GDP based on 2024 GDP of TZS 156.6 trillion,) and strong tax performance align with the 2024/25 target of a 3% GDP deficit. Domestic borrowing (TZS 34.26 trillion debt stock,) finances deficits, but high interest costs (TZS 172.0 billion) highlight the need for concessional loans.
• Revenue Mobilization: The 2025/26 budget’s target of TZS 40.47 trillion in domestic revenue and tax reforms (e.g., VAT exemptions,) aim to reduce reliance on borrowing. Non-tax revenue improvement is critical to address the 13.5% shortfall.
• Risks: High recurrent spending (61%) and debt servicing costs could crowd out private investment, given high lending rates (15.18%). Global risks (e.g., geopolitical tensions,) and shilling depreciation (2.6%,) may increase external debt costs (USD 34.1 billion).
• Outlook: Continued revenue growth (TZS 22.38 trillion by February 2025,) and fiscal reforms will support the TZS 56.49 trillion 2025/26 budget. Investments in infrastructure (TZS 7.72 trillion for capital payments,) and social services will drive 6% GDP growth, provided deficits remain controlled.

Tanzania Government Budget Operations - April 2025: Key Figures

1. Current Account Balance

• Overview: The current account balance, a key indicator of Tanzania’s external sector, measures the net flow of goods, services, primary income (e.g., investment income), and secondary income (e.g., remittances). A narrowing deficit reflects improved export performance relative to imports, bolstered by tourism, minerals, and agricultural exports, as per the Third Five-Year National Development Plan (2021/22–2025/26).
• May 2025 Performance:
  • Current Account Deficit: USD 2,117.5 million (year ending May 2025), compared to USD 2,862.6 million (year ending May 2024), a 26% improvement (reduction of USD 745.1 million).
  • Context: The deficit further narrowed from USD 2,499.8 million in May 2024 (a 52% reduction from USD 5,221.8 million in May 2023) and USD 2,025.8 million in November 2024, reflecting a consistent trend of improvement. The deficit was 3.8% of GDP in 2023, projected at 4.2% in 2025, indicating manageable external imbalances.
• Economic Drivers:
  • Export Growth: Exports of goods and services rose 19.2% to USD 16,994.7 million (year ending May 2025) from USD 14,258.2 million in May 2024, driven by gold (USD 3,835.5 million, +23.1%), cashew nuts (+141%), coffee (+66.3%), tobacco (+32%), and tourism receipts (+7.0%). Gold accounted for 36.8% of goods exports, bolstered by favorable global prices.
  • Tourism Surge: Tourism receipts, a key service export, reached USD 3,910 million (estimated, 55.1% of service receipts), driven by a 10.6% increase in tourist arrivals to 2,170,360 from 1,961,870. Strategic marketing and infrastructure investments (e.g., Serengeti, Zanzibar) supported this growth.
  • Import Moderation: Imports of goods and services grew moderately by 9.6% to USD 17,686 million from USD 16,141.9 million, driven by industrial equipment and raw materials but tempered by lower petroleum imports (-7% to USD 2,578.5 million) due to price effects.
  • Income and Transfers: The primary income account deficit widened to USD 1,816.2 million (year ending January 2025) from USD 1,603.3 million, due to higher equity and interest payments abroad. The secondary income surplus declined to USD 589.1 million from USD 687.3 million, reflecting lower personal transfers.
• Implications:
  • Positive Shift: The 26% deficit reduction (USD 2,117.5 million) strengthens Tanzania’s external position, supported by foreign exchange reserves of USD 5,136.6 million (4.2 months of import cover). This exceeds the national benchmark of 4 months, ensuring resilience against external shocks.
  • Risks: The Tanzanian shilling’s 2.6% depreciation in 2025 and projected further weakening increase import costs, potentially widening the deficit if global commodity prices rise. Geopolitical tensions and climate shocks (e.g., La Niña) pose risks to export growth.
  • Outlook: The deficit is projected to stabilize at 4.2% of GDP in 2025, supported by continued export growth (6% GDP growth forecast,). Enhanced trade agreements (e.g., AfCFTA,) and infrastructure investments (e.g., SGR,) will sustain export competitiveness.

2. Exports – Services Receipts by Category

• Overview: Service receipts, a critical component of Tanzania’s export earnings, include travel (tourism), transport, and other services (e.g., construction, insurance, ICT). Tourism remains the largest contributor, driven by Tanzania’s natural attractions (e.g., Serengeti, Kilimanjaro) and policy reforms to boost arrivals.
• May 2025 Performance:
  • Total Services Receipts: USD 7,099.8 million (year ending May 2025), up 9.2% from USD 6,499.4 million in May 2024.
  • Category Breakdown:
    • Travel (Tourism): 55.1% (~USD 3,910 million, estimated), driven by a 10.6% surge in tourist arrivals to 2,170,360 from 1,961,870.
    • Transport Services: ~20% (~USD 1,420 million, estimated), fueled by higher cross-border freight and port-related activity.
    • Other Services: ~25% (~USD 1,769.8 million, estimated), including construction, insurance, finance, ICT, royalties, etc.
• Context and Analysis:
  • Tourism Dominance: Tourism receipts (~USD 3,910 million) accounted for 55.1% of service exports and 24.1% of total goods and services exports (). The 10.6% growth in arrivals (2,170,360) reflects investments in infrastructure (e.g., SGR access to Mikumi National Park,) and marketing (e.g., World Travel Awards 2025,). In 2024, arrivals reached 2,662,219 (+20%), with Europe (71.6% of Zanzibar arrivals) and Kenya leading (). The sector’s GDP contribution is projected to hit 19.5% in 2025/26.
  • Transport Services: The ~20% share (~USD 1,420 million) reflects increased freight and port activity, driven by regional trade (e.g., 24% rise in intra-African trade to USD 5.18 billion,). Investments in Dar es Salaam port and SGR enhance logistics.
  • Other Services: The ~25% share (~USD 1,769.8 million) includes growing ICT and financial services, supported by the Tanzania Instant Payment System (TIPS, 453.7 million transactions in 2024,). Construction services benefit from infrastructure projects (e.g., Julius Nyerere Hydropower Plant).
  • Economic Drivers: The 9.2% growth in service receipts aligns with a 15.1% overall export increase in 2024 (USD 16,093.1 million,). Policy reforms, such as 80% cuts in tourism license fees () and AfCFTA participation (), boost competitiveness. The 2025/26 tourism budget (TZS 359.9 billion) supports promotion and conservation.
• Implications:
  • Strengths: Tourism’s 55.1% share drives foreign exchange earnings, supporting reserves (USD 5,136.6 million, Document, Page 12). Transport services (20%) benefit from regional trade integration (e.g., EAC, SADC).
  • Challenges: Tourism’s reliance on European markets (71.6% of Zanzibar arrivals) risks exposure to global economic slowdowns (). Transport services face rising freight costs, potentially offsetting gains.
  • Outlook: Continued investment in tourism (e.g., Marriott’s Mapito Safari Camp,) and logistics (e.g., SGR,) will sustain growth. Diversifying markets (e.g., Asia, Americas) and enhancing ICT services can further boost receipts.

3. Imports – Services Payments

• Overview: Service payments cover Tanzania’s expenditures on foreign services, including freight, construction, insurance, and financial services. Rising payments reflect increased economic activity, particularly in infrastructure and manufacturing, but elevate import costs.
• May 2025 Performance:
  • Total Services Payments: USD 2,841.7 million (year ending May 2025), up 27.0% from USD 2,324.9 million in May 2024.
  • Key Components:
    • Freight (Transport): 47.7% (~USD 1,356.5 million, estimated), driven by higher import volumes of industrial equipment and raw materials.
    • Other Services: ~52.3% (~USD 1,485.2 million, estimated), including construction, insurance, financial services, telecommunications, etc.
• Context and Analysis:
  • Freight Dominance: Freight payments (~USD 1,356.5 million, 47.7%) reflect increased imports of industrial transport equipment, raw materials, and accessories. Imports of goods rose to USD 9,894.8 million (+27.5% from USD 7,758.7 million), driven by manufacturing and construction needs (Document, Page 14). The Tanzania Shipping Agency Corporation’s (TASAC) monopoly on freight services () may elevate costs, despite a 7% decline in petroleum imports.
  • Other Services: The ~52.3% share (~USD 1,485.2 million) includes payments for construction (e.g., SGR, hydropower projects), insurance, and ICT services. The rise aligns with a 10.2% increase in service payments (USD 2,533.8 million in January 2025,), driven by infrastructure investments.
  • Economic Drivers: The 27.0% increase in service payments reflects robust economic activity, with imports of goods and services up 9.6% to USD 17,686 million (). Industrial supplies and transport equipment imports support manufacturing (9% of GDP) and construction (16% of GDP). Global shipping cost pressures and shilling depreciation (2.6%, Document, Page 12) amplify freight costs.
• Implications:
  • Cost Pressures: The 47.7% freight share increases import costs, straining the trade balance (USD 1,009.09 million deficit in Q3 2024,). Shilling depreciation exacerbates this, as noted in October 2024.
  • Economic Activity: Rising payments reflect infrastructure and manufacturing growth, aligned with the 2025/26 budget’s TZS 7.72 trillion capital spending. However, reliance on imported inputs risks external vulnerabilities.
  • Outlook: Moderating freight costs through regional logistics improvements (e.g., Dar es Salaam port upgrades,) and reducing petroleum imports (down 7%,) can ease pressures. Enhanced domestic production (e.g., manufacturing,) will reduce import dependence.

Additional Insights and Outlook

• External Position Strength: The 26% deficit reduction (USD 2,117.5 million) reflects robust export growth (19.2%, USD 16,994.7 million), particularly in tourism (55.1% of service receipts) and gold (36.8% of goods exports). Reserves (USD 5,136.6 million, 4.2 months of import cover) ensure stability.
• Tourism and Transport: Tourism’s USD 3,910 million contribution and transport’s ~USD 1,420 million highlight sectoral strength. The 2025/26 tourism budget (TZS 359.9 billion) and SGR investments will sustain growth.
• Import Challenges: The 27.0% rise in service payments (USD 2,841.7 million), driven by freight (47.7%), reflects infrastructure demand but strains the trade balance. Shilling depreciation (2.6%) and global shipping costs exacerbate this.
• Policy Support: The 2025/26 budget’s TZS 56.49 trillion plan and IMF support (USD 441 million in April 2025) bolster export competitiveness (). AfCFTA participation and trade agreements (e.g., Tanzania-Mozambique,) enhance regional trade.
• Risks: Shilling depreciation, geopolitical tensions, and climate shocks (e.g., La Niña) risk widening the deficit (,). Overreliance on tourism and gold exposes the economy to global demand fluctuations.
• Outlook: Sustained export growth (projected 6% GDP growth in 2025,) and infrastructure investments (e.g., Dar es Salaam port,) will maintain the positive trend. Diversifying exports (e.g., horticulture, ICT) and reducing import reliance (e.g., domestic manufacturing) are critical for long-term stability

Tanzania External Sector Performance - May 2025: Key Figures

Note: USD estimates based on provided percentage shares. Exchange rate: ~TZS 2,698/USD.