In 2024/2025, Tanzania’s TZS 49.35 trillion budget achieved 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of target) and spending TZS 15.75 trillion on development, including TZS 1.68 trillion for SGR and TZS 574.8 billion for rural electrification. Social investments like TZS 444.7 billion for fee-free education and TZS 708.6 billion in fertilizer subsidies supported low-income citizens, reducing costs and improving access.

The TZS 56.49 trillion 2025/2026 budget, an 11.6% increase, targets 6.0% growth by raising domestic revenue to TZS 38.9 trillion (16.7% of GDP) and allocating TZS 16.4 trillion for development, prioritizing agriculture, industry, and services. Continued subsidies, education, and healthcare investments aim to further reduce poverty (8.0% extreme poverty in 2018) and enhance livelihoods for low-income Tanzanians.

2024/2025 Budget Performance (Total: TZS 49.35 trillion, USD 18.85 billion)

The 2024/2025 budget, themed “Realising Competitiveness and Industrialisation for Human Development,” aimed to achieve 5.4% real GDP growth while prioritizing infrastructure, social services, and economic inclusion. Key performance highlights by May 2025:

• Real GDP Growth: Achieved 5.5%, surpassing the 5.4% target, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9.0%).
• Revenue Collection: Collected TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP, up from 13.7% in 2020/2021) due to Tanzania Revenue Authority (TRA) reforms and mining contributions.
• Expenditure: Disbursed TZS 42.90 trillion (85.3% of TZS 50.29 trillion), including TZS 30.63 trillion for recurrent expenditure (90.8%) and TZS 15.75 trillion for development (95.1%), with notable allocations of TZS 1.68 trillion for Standard Gauge Railway (SGR), TZS 1.58 trillion for roads/bridges, and TZS 574.8 billion for rural electrification.
• Inflation: Maintained at 3.1% (within 3.0–5.0% target), ensuring affordability for low-income households.
• Trade Balance: Deficit narrowed to USD 5,157.2 million from USD 6,032.3 million in 2023, with exports at 20.3% of GDP, driven by tourism (1.4 million visitors) and gold.
• Social Spending: Allocated TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, TZS 414.7 billion for healthcare supplies, and TZS 378.7 billion for water projects, directly benefiting low-income citizens.
• Debt: Public debt at TZS 107.70 trillion (40.3% of GDP, below 55% threshold), with external debt at USD 32.89 billion by September 2024, indicating fiscal sustainability.

Impact on Low-Income Citizens:

• Subsidies: TZS 708.6 billion for fertilizer subsidies (2021/22–2023/24) reduced farming costs by 50% per bag, boosting agricultural productivity for low-income farmers.
• Fuel Subsidies: TZS 100 billion monthly in 2022 stabilized transport and commodity prices.
• Social Services: Fee-free education and healthcare investments improved access, while rural electrification (TZS 574.8 billion) and water projects (TZS 378.7 billion) enhanced livelihoods and small business opportunities.
• Job Creation: Infrastructure projects (e.g., SGR, roads) generated employment, supporting low-income households.

Challenges:

• Revenue shortfall (89.6% of target) limited spending capacity.
• External borrowing (TZS 2.43 trillion, 81.3% of target) and currency depreciation (TZS 2,610.50/USD) increased import costs, affecting low-income consumers.
• TRA faced criticism for tax administration issues, prompting a presidential commission review.

2025/2026 Budget Overview (Total: TZS 56.49 trillion, USD 22.07 billion)

The 2025/2026 budget, themed “Inclusive Economic Transformation through Domestic Resource Mobilization and Resilient Strategic Investment for Job Creation and Improved Livelihoods,” represents an 11.6% increase from TZS 49.35 trillion in 2024/2025. It aims to achieve 6.0% real GDP growth, with a budget deficit of 3.0% of GDP, and prioritizes agriculture, industry, services, and social inclusion.

Key Financial Structure:

• Total Budget: TZS 56.49 trillion (USD 22.07 billion at TZS 2,560/USD, inferred from exchange rate context).
• Revenue Projections:
  • Domestic revenue: TZS 38.9 trillion (16.7% of GDP, up from 15.8% in 2024/2025), with TRA targeting TZS 29.41 trillion (13.3% of GDP).
  • External sources: TZS 16.02 trillion, including TZS 1.02 trillion in aid, TZS 5.6 trillion in concessional loans, and TZS 9.4 trillion in commercial loans.
• Expenditure:
  • Recurrent: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
  • Development: TZS 16.4 trillion (29.0% of budget) for strategic projects (e.g., SGR, Julius Nyerere Hydropower Project [JNHPP]).
• Sectoral Allocations (partial, from web sources):
  • Tourism: TZS 359.9 billion for promotion, infrastructure, and conservation ().
  • Energy: TZS 2.2 trillion for power generation, rural electrification, and oil/gas infrastructure.

Macroeconomic Targets (Budget Speech):

• Real GDP growth: 6.0% in 2025, up from 5.5% in 2024.
• Inflation: 3.0–5.0% to maintain affordability.
• Domestic revenue: 16.7% of GDP to reduce borrowing reliance.
• Foreign exchange reserves: ≥4 months of imports (4.4 months in 2024).

Sector-Specific Contributions to Economic Growth (2025/2026)

The 2025/2026 budget focuses on agriculture, industry, and services to drive 6.0% GDP growth, with specific measures to support low-income Tanzanians, building on 2024/2025 outcomes.

a. Agriculture

2024/2025 Performance:

• Contributed 26.5% to GDP, employing ~65% of the workforce.
• TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) reduced costs, boosting cash crop output (Budget Speech).
• Investments via Tanzania Agricultural Development Bank (TADB) and Agricultural Seed Agency (ASA) enhanced productivity.

2025/2026 Budget Priorities:

• Continued fertilizer subsidies and irrigation expansion to improve resilience and yields.
• TADB credit expansion, leveraging 21.2% private sector credit growth in 2024.
• Modernization (quality seeds, value addition) to boost exports (11.6% of GDP for goods in 2024).

Projected Impact:

• Agriculture could contribute 1.0–1.5 percentage points to GDP growth (assuming 4–6% sectoral growth).
• Subsidies and credit access increase incomes for low-income farmers, reducing extreme poverty (8.0% in 2018).
• Export growth (e.g., cashew nuts, coffee) strengthens reserves (USD 5.7 billion in 2024), stabilizing prices.

b. Industry (Manufacturing, Mining, Construction)

2024/2025 Performance:

• Construction (13.2% of GDP) and mining (9.0%) drove growth via TZS 1.68 trillion for SGR, TZS 1.58 trillion for roads, and TZS 574.8 billion for JNHPP/rural electrification.
• Mining revenue rose due to reforms and global demand (e.g., gold).
• Investment-to-GDP ratio at 37.1% supported industrial expansion.

2025/2026 Budget Priorities:

• Completion of SGR and JNHPP (2,115 MW) to reduce logistics/energy costs.
• TZS 2.2 trillion for energy projects, including rural electrification and gas infrastructure.
• Support for National Development Corporation (NDC) and Small Industries Development Organization (SIDO) to expand manufacturing.

Projected Impact:

• Industry could contribute 1.5–2.0 percentage points to GDP growth (assuming 7–8% sectoral growth, ~20% GDP share).
• Job creation from infrastructure projects (e.g., SGR, roads) benefits low-income workers.
• Cheaper energy (JNHPP) and import substitution reduce business costs, lowering prices for consumers.

c. Services (Tourism, Transport, Trade, ICT)

2024/2025 Performance:

• Services contributed ~40–50% to GDP, with exports at 20.3% of GDP, led by tourism (USD 7.2 billion from 1.4 million visitors) and transport.
• ICT grew at 12.5%, driven by digital infrastructure.
• Current account deficit narrowed to -2.6% of GDP due to tourism receipts.

2025/2026 Budget Priorities:

• TZS 359.9 billion for tourism promotion, infrastructure, and conservation.
• Investments in Air Tanzania (ATCL), ports (TPA), and SGR to enhance trade and transport.
• ICT expansion (13.5% growth projected by 2026) via digital services and mobile penetration.

Projected Impact:

• Services could contribute 2.5–3.0 percentage points to GDP growth (assuming 6–7% sectoral growth).
• Tourism and transport jobs (e.g., hospitality, logistics) are accessible to low-income workers.
• Reduced transport costs (SGR) and digital access lower prices and improve livelihoods.

Support for Low-Income Tanzanians

The 2025/2026 budget emphasizes inclusive growth to address poverty (26.4% abject poverty, 8.0% extreme poverty in 2018):

• Education: Sustained or increased funding for fee-free education (TZS 444.7 billion in 2024/2025) and student loans (TZS 636.0 billion) to enhance access and skills for low-income households.
• Healthcare: Investments in universal health insurance, medicines (TZS 414.7 billion in 2024/2025), and facilities (TZS 47.2 billion) reduce healthcare costs.
• Subsidies: Likely continuation of fertilizer (TZS 708.6 billion historically) and fuel subsidies to lower farming and transport costs.
• Water and Energy: Expanded water projects (TZS 378.7 billion in 2024/2025) and rural electrification (TZS 2.2 trillion energy budget) support small businesses and living standards.
• Social Safety Nets: Productive Social Safety Nets (PSSN) cash transfers reduce malnutrition and poverty, with plans for expansion.
• Job Creation: Infrastructure (SGR, JNHPP) and SIDO programs create jobs and support entrepreneurship for low-income groups.

Projected Impact: These measures could reduce extreme poverty below 8.0% by improving incomes, access to services, and affordability, aligning with the Third Five-Year Development Plan (FYDP III) goal of 8 million jobs by 2026.

Fiscal and Macroeconomic Stability

• Revenue: Domestic revenue target of TZS 38.9 trillion (16.7% of GDP) reduces reliance on external loans (TZS 16.02 trillion, 28.4% of budget).
• Debt: Public debt at 46.5% of GDP (2024, projected to remain sustainable) and external debt at USD 34.1 billion (March 2025) support fiscal stability.
• Inflation: Target of 3.0–5.0% protects low-income purchasing power, despite currency depreciation risks (TZS 2,585/USD in 2024).
• Trade: Exports projected to grow by 6.0% in 2025 (minerals, agriculture, tourism), narrowing the trade deficit (USD 5,157.2 million in 2024) and stabilizing reserves (USD 5.7 billion).

Projected Performance of 2025/2026 Budget

The 2025/2026 budget is poised to achieve 6.0% GDP growth if:

• Revenue Targets Are Met: Exceeding TZS 38.9 trillion (16.7% of GDP) enables robust development spending (TZS 16.4 trillion).
• Strategic Projects Advance: Completion of SGR and JNHPP reduces costs, boosting productivity.
• Global Conditions Support Exports: Stable commodity prices and tourism demand (TZS 359.9 billion allocation) drive growth.
• Inclusive Policies Succeed: Subsidies, social spending, and job creation uplift low-income productivity.

Comparative Budget Performance:

• 2024/2025: TZS 49.35 trillion achieved 5.5% growth despite revenue shortfalls (89.6% of TZS 50.29 trillion), with strong social spending (e.g., TZS 444.7 billion for education) supporting low-income citizens.
• 2025/2026: TZS 56.49 trillion (11.6% increase) targets 6.0% growth with higher domestic revenue (16.7% vs. 15.0% of GDP) and development spending (TZS 16.4 trillion vs. TZS 15.75 trillion), enhancing inclusivity via sustained subsidies and services.

Challenges:

• Revenue Risks: TRA’s 2024/2025 shortfall (89.6%) and ongoing tax administration issues may persist.
• External Pressures: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs.
• Implementation: Delays in projects (e.g., SGR) could limit growth impact.

Tanzania’s Budget and Economic Performance: Key Figures (2024–2026)

In April 2025, the Tanzania Shilling (TZS) exhibited a moderate depreciation trend, with the average exchange rate reaching TZS 2,684.41/USD, a 3.9% annual decline from ~TZS 2,583/USD in April 2024 and a 1.3% monthly drop from TZS 2,650.24/USD in March 2025. The Interbank Foreign Exchange Market (IFEM) saw reduced activity, with transactions falling to USD 12.9 million from USD 70.1 million in March 2025, supported by a Bank of Tanzania intervention selling USD 6.25 million. Bolstered by USD 5.3 billion in reserves covering 4.3 months of imports, the TZS maintained controlled stability.

1. Exchange Rate Movement

The Tanzania Shilling (TZS) experienced a gradual depreciation against the US dollar (USD) over the past year, reflecting pressures from external and domestic factors.

Key Figures:

• April 2025 Average Exchange Rate: TZS 2,684.41/USD
• March 2025 Average Exchange Rate: TZS 2,650.24/USD
• April 2024 Average Exchange Rate: ~TZS 2,583/USD (implied from annual comparison)
• Annual Depreciation (April 2024 to April 2025): 2,684.41−2,5832,583×100%≈3.9%\frac{2,684.41 - 2,583}{2,583} \times 100\% \approx 3.9\%2,5832,684.41−2,583​×100%≈3.9%
• Monthly Depreciation (March 2025 to April 2025): 2,684.41−2,650.242,650.24×100%≈1.3%\frac{2,684.41 - 2,650.24}{2,650.24} \times 100\% \approx 1.3\%2,650.242,684.41−2,650.24​×100%≈1.3%

Analysis:

• Annual Trend: The 3.9% depreciation over the year (from ~TZS 2,583/USD to TZS 2,684.41/USD) indicates a moderate weakening of the TZS, driven by structural and seasonal factors. The Monthey Economic Review highlights global economic uncertainties, such as a 10% US tariff on imports and a projected global growth slowdown to 2.8% in 2025, which may have reduced foreign exchange inflows to Tanzania, contributing to this trend.
• Monthly Trend: The 1.3% depreciation from March to April 2025 reflects a continuation of the gradual weakening, likely due to short-term imbalances in foreign exchange supply and demand. The document’s mention of stable monetary policy (CBR at 6%) aimed at smoothing exchange rate volatility suggests that the Bank of Tanzania (BoT) is actively managing these pressures to prevent sharp declines.
• Context from Document: The document does not explicitly provide exchange rate data but notes that the BoT’s monetary policy objectives include maintaining price stability and smoothing exchange rate volatility. The moderate inflation rate of 3.2% in April 2025 suggests that the depreciation has not significantly fueled domestic price pressures, indicating effective central bank management.

Implications:

The gradual 3.9% annual depreciation suggests controlled currency instability rather than a crisis, as the TZS remains within manageable bounds. This aligns with the document’s emphasis on the BoT’s data-dependent monetary policy adjustments to support economic stability.

2. Interbank Foreign Exchange Market (IFEM)

The IFEM is where banks trade foreign currencies, and its activity provides insight into exchange rate dynamics and liquidity in the foreign exchange market.

Key Figures:

• Total IFEM Transactions in April 2025: USD 12.9 million
  • Down from USD 70.1 million in March 2025 (an 81.6% decrease, calculated as [(70.1 - 12.9) / 70.1] × 100).
  • Down from USD 72 million in April 2024 (an 82.1% decrease, calculated as [(72 - 12.9) / 72] × 100).
• BoT Intervention: Sold USD 6.25 million in April 2025 to support import demand and stabilize the TZS.

Analysis:

• Decline in Transaction Volume: The sharp drop in IFEM transactions to USD 12.9 million in April 2025 from USD 70.1 million in March 2025 and USD 72 million in April 2024 suggests reduced foreign exchange market activity. This could reflect lower foreign currency inflows, possibly due to seasonal declines in cash crop exports (noted as a driver of depreciation).
• BoT Intervention: The sale of USD 6.25 million by the BoT represents a significant portion of the April IFEM volume (48.4%, calculated as 6.25 / 12.9 × 100). This intervention aimed to meet import demand and curb TZS depreciation, aligning with the document’s mention of gross official reserves being used to regulate balance of payments imbalances through foreign exchange market interventions.
• Reserves Context: The provided information notes that Tanzania’s gross official reserves stood at USD 5.3 billion, covering 4.3 months of imports. The document defines gross official reserves as external assets available for balance of payments financing and interventions, indicating that the BoT has sufficient capacity to support the TZS, as evidenced by the USD 6.25 million sale.

Implications:

The low IFEM transaction volume suggests constrained foreign exchange liquidity, but the BoT’s intervention and healthy reserves (USD 5.3 billion) demonstrate proactive management to stabilize the TZS. The document’s reference to the BoT’s role in managing exchange rate volatility supports this, ensuring that depreciation remains gradual.

3. Drivers of Depreciation

The provided information identifies key factors contributing to the TZS’s depreciation, which can be contextualized with the document’s insights.

Key Drivers:

• Lower Seasonal Foreign Exchange Inflows: Reduced inflows from cash crop exports (e.g., coffee, tea) likely contributed to the TZS’s weakening. The document notes rising tea prices (8.2%) but declining coffee prices due to improved production forecasts, suggesting mixed export performance that may have limited foreign currency earnings.
• Higher Import Demand: Increased demand for imports, relative to foreign exchange supply, exerted pressure on the TZS. The document mentions subdued crude oil demand and a 6.7% price decrease, but high import needs for other goods (e.g., food or industrial inputs) likely outstripped supply, necessitating BoT intervention.
• Modest Central Bank Support: The BoT’s sale of USD 6.25 million in the IFEM reflects targeted intervention to balance supply and demand, consistent with the document’s description of monetary policy smoothing exchange rate volatility.

Analysis:

• Seasonal Export Trends: The document’s mention of agricultural commodity price movements and the National Food Reserve Agency’s efforts to stabilize food supply suggest that seasonal agricultural cycles impact foreign exchange inflows. Lower cash crop exports in April 2025 likely reduced USD inflows, contributing to the 3.9% annual depreciation.
• Import Pressures: The document does not provide specific import data, but the BoT’s intervention to support import demand indicates a supply-demand imbalance. The moderate inflation rate (3.2%) suggests that import-driven price pressures were contained, possibly due to BoT actions.
• BoT’s Role: The document’s monetary policy framework emphasizes maintaining a 5% inflation target and supporting growth, with the CBR at 6%. The USD 6.25 million intervention reflects a cautious approach, leveraging reserves to prevent sharp TZS declines.

4. Shilling Stability Summary

The provided summary table encapsulates the TZS’s performance:

Analysis:

• Gradual Depreciation: The 3.9% annual depreciation and 1.3% monthly depreciation indicate a controlled weakening, not a crisis, as noted in the provided conclusion. The document’s stable macroeconomic indicators (e.g., inflation at 3.2%, CBR at 6%) support this assessment.
• Reserve Support: The USD 5.3 billion in reserves covering 4.3 months of imports provides a buffer, as per the document’s definition of gross official reserves. This ensures the BoT can continue interventions like the USD 6.25 million sale to manage volatility.

Conclusion

The Tanzania Shilling experienced a moderate 3.9% depreciation against the USD from April 2024 (~TZS 2,583/USD) to April 2025 (TZS 2,684.41/USD), with a 1.3% monthly decline from March 2025 (TZS 2,650.24/USD). This trend, driven by lower seasonal export inflows and higher import demand, was mitigated by the Bank of Tanzania’s intervention (USD 6.25 million sold in the IFEM) and robust reserves (USD 5.3 billion). The sharp decline in IFEM transactions to USD 12.9 million in April 2025 reflects reduced market liquidity, but the BoT’s actions ensured stability. The following table summarizes these key figures.

The table is designed to present the data clearly and concisely, wrapped in an artifact tag as per the guidelines

Tanzania’s fiscal policy in March 2025 demonstrates a robust tax administration framework, with tax revenue reaching TZS 2,603.3 billion, 2% above target, significantly supporting development spending of TZS 1,406.7 billion. However, the underperformance of non-tax revenue at TZS 350.5 billion against a target of TZS 522.4 billion highlights a critical gap in revenue mobilization, limiting funds for development projects. While tax initiatives, such as Electronic Fiscal Devices (EFDs) and income tax reforms, have driven revenue growth, the non-tax shortfall, coupled with a TZS 284.3 billion budget deficit, underscores the need for diversified revenue strategies. Key issues include tax administration efficiency, non-tax revenue challenges, and fiscal sustainability. Strategies like enhancing non-tax collection mechanisms, leveraging digital platforms, and optimizing public enterprise dividends could address the shortfall, ensuring sustainable funding for development priorities.

Main Key Issues

1. Effectiveness of Tax Administration Initiatives
   • Strong Tax Revenue Performance: Tax revenue of TZS 2,603.3 billion in March 2025, 2% above target, reflects effective tax administration, particularly in income tax, which exceeded its target by 11.6%. This aligns with TICGL noting a tax-to-GDP ratio of 11.8% in 2022/23, up from 11.4% in 2021/22, driven by EFDs, digital tax systems, and compliance enforcement). The Monthey Economic Review highlights sustained tax administration efforts, contributing to total revenue of TZS 3,090.8 billion (96.9% of the TZS 3,190 billion target).
   • Support for Development Spending: The TZS 2,603.3 billion tax revenue constitutes 84.2% of total revenue (2,603.3 / 3,090.8 × 100), directly funding 41.7% of expenditure (TZS 1,406.7 billion) allocated to development projects like infrastructure (e.g., Standard Gauge Railway) and social services. This supports Tanzania’s Third Five-Year Development Plan (2021/22–2025/26) aiming for 8% GDP growth by 2026, with GDP projected at 6% in 2025.
   • Challenges in Coverage: Despite income tax success, other tax categories (e.g., VAT, excise) likely met or fell short of targets, as the overall tax performance was only 2% above target. TICGL indicate challenges in broadening the tax base, with only 3 million registered taxpayers in a population of 61 million. Informal sector taxation remains limited, constraining revenue potential.
2. Non-Tax Revenue Underperformance
   • Significant Shortfall: Non-tax revenue of TZS 350.5 billion, against a target of TZS 522.4 billion, achieved only 67.1% of the goal (350.5 / 522.4 × 100), dragging total revenue 3.1% below the TZS 3,190 billion target. Non-tax TICGL (e.g., licenses, fees, dividends from public enterprises) contributed 11.3% to total revenue (350.5 / 3,090.8 × 100), down from ~14% in March 2024 (TZS 374.3 billion, previous responses).
   • Causes of Shortfall: The Monthey Economic Review does not specify causes, but TICGL suggest inefficiencies in collecting dividends from state-owned enterprises (e.g., TANESCO) and delays in fee or license collections. Seasonal factors or weak enforcement may also contribute, as seen in February 2025’s non-tax revenue of TZS 347.9 billion against TZS 413.9 billion. This shortfall reduced funds available for development, exacerbating the TZS 284.3 billion deficit.
   • Impact on Development: The TZS 171.9 billion non-tax shortfall (522.4 – 350.5) could have covered ~12.2% of development expenditure (171.9 / 1,406.7 × 100), critical for projects like the Julius Nyerere Hydropower Project or health initiatives.
3. Fiscal Sustainability and Budget Deficit
   • Modest Deficit: Total expenditure of TZS 3,375.1 billion exceeded revenue (TZS 3,090.8 billion) by TZS 284.3 billion, a deficit of ~8.4% of expenditure (284.3 / 3,375.1 × 100). This aligns with the Monthey Economic Review’s fiscal deficit target below 3% of GDP and TICGL projecting a 2.5% deficit in 2024/25. The deficit was likely financed through domestic borrowing (e.g., TZS 10,049.9 billion held by commercial banks, previous responses) or external loans (e.g., IMF’s USD 440.8 million).
   • Debt Financing: Domestic debt rose 9.2% to TZS 34,759.9 billion, and external debt reached USD 35.51 billion in April 2025 (previous responses), indicating reliance on borrowing to fund development. The IMF’s Debt Sustainability Analysis (DSA) confirms moderate debt distress risk, with public debt at 46.7% of GDP in 2022/23, but rising borrowing requires careful management to avoid crowding out private investment.
   • Revenue Dependency: Tax revenue’s dominance (84.2%) highlights over-reliance on taxes, while non-tax underperformance limits fiscal flexibility. TICGL emphasize the need for diversified revenue to achieve the 2024/25 target of TZS 34.61 trillion (15.7% of GDP), critical for sustaining development spending.

Strategies to Address Non-Tax Revenue Shortfall

To enhance funding for development projects like the TZS 1,406.7 billion allocated in March 2025, the following strategies could address the TZS 171.9 billion non-tax revenue shortfall:

1. Strengthen Public Enterprise Dividend Collection
   • Action: Improve governance and financial performance of state-owned enterprises (e.g., TANESCO, Air Tanzania) to increase dividend contributions. Audits and performance contracts could ensure timely payments, targeting at least TZS 100 billion annually from key entities, based on historical contributions.
   • Impact: An additional TZS 100 billion could cover ~7.1% of development expenditure (100 / 1,406.7 × 100), supporting projects like rural electrification. TICGL note Tanzania’s efforts to restructure public enterprises under Vision 2025.
2. Enhance Digital Collection Systems for Fees and Licenses
   • Action: Expand EFDs and mobile payment platforms (e.g., M-Pesa, used by 84% of SMEs) to streamline collection of licenses, permits, and fees, targeting sectors like mining and telecom. A 20% efficiency gain could raise TZS 34.4 billion (20% of the TZS 171.9 billion shortfall).
   • Impact: This could fund specific social projects, such as education initiatives (19.9% of external debt use, previous responses), aligning with the World Bank’s human capital focus. The Monthey Economic Review supports digitalization efforts.
3. Introduce New Non-Tax Revenue TICGL
   • Action: Implement user fees for public services (e.g., tolls on new infrastructure like the SGR) and monetize natural reTICGL (e.g., carbon credit schemes). A pilot toll system could generate TZS 20–30 billion annually, based on Kenya’s road toll models.
   • Impact: Additional TZS 30 billion could support infrastructure maintenance (21.5% of external debt use, previous responses), reducing fiscal pressure. TICGL advocate innovative financing for Africa’s development.
4. Improve Administrative Enforcement
   • Action: Strengthen enforcement through dedicated task forces to recover overdue fees and penalties, targeting TZS 37.5 billion (remaining shortfall: 171.9 – 100 – 34.4). Training and incentives for revenue officers could boost compliance, as seen in income tax’s 11.6% outperformance.
   • Impact: This could fund health programs, aligning with IMF recommendations for increased social spending. The Monthey Economic Review notes enforcement improvements in tax collection.

Conclusion

Tanzania’s tax administration initiatives have been highly effective, with TZS 2,603.3 billion in tax revenue (2% above target) supporting 41.7% of expenditure (TZS 1,406.7 billion) for development in March 2025, driven by income tax outperformance (11.6% above target) and digital systems like EFDs. However, the non-tax revenue shortfall of TZS 171.9 billion (TZS 350.5 billion vs. TZS 522.4 billion target) constrained total revenue (TZS 3,090.8 billion, 96.9% of TZS 3,190 billion target), contributing to a TZS 284.3 billion deficit. Key issues include tax base limitations, non-tax inefficiencies, and fiscal sustainability amid rising debt (TZS 34,759.9 billion domestic, USD 35.51 billion external). Strategies like enhancing public enterprise dividends, digital fee collection, new revenue TICGL, and enforcement could close the non-tax gap, ensuring sustainable funding for development priorities like infrastructure and human capital, critical for achieving 6% GDP growth in 2025.

The following table summarizes these key figures

In April 2025, Tanzania’s government domestic debt reached TZS 34,759.9 billion, a 1.5% increase from TZS 34,255.4 billion in March 2025 and a 9.2% rise from TZS 31,836.5 billion in April 2024, reflecting steady reliance on domestic financing to support fiscal needs. Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) are the largest creditors, while the “Others” category, including individuals and corporates, surged by 47% to TZS 5,996.8 billion, indicating growing public participation.

1. Total Domestic Debt Stock (April 2025)

The total government domestic debt stock represents the amount owed to domestic creditors, primarily through government securities like Treasury bills and bonds, used to finance budget deficits and support fiscal operations.

Key Figures:

• Total Government Domestic Debt: TZS 34,759.9 billion
• Change from March 2025: Increased by 1.5% from TZS 34,255.4 billion (an increase of TZS 504.5 billion).
• Change from April 2024: Increased by 9.2% from TZS 31,836.5 billion (an increase of TZS 2,923.4 billion).

Analysis:

• Month-on-Month Growth: The 1.5% increase from March 2025 (TZS 34,255.4 billion to TZS 34,759.9 billion) reflects moderate growth in domestic borrowing, likely driven by ongoing fiscal needs, such as financing the March 2025 budget deficit of TZS 284.3 billion (previous responses). The Monthey Economic Review indicates high liquidity in the Government Securities Market (e.g., TZS 1,076.7 billion in bond bids, previous responses), supporting the issuance of new securities.
• Year-on-Year Growth: The 9.2% increase from April 2024 (TZS 31,836.5 billion) aligns with TICGL noting a rising domestic debt trend, with domestic debt reaching TZS 34,014.1 billion in February 2025, down slightly from January due to reduced overdraft use. This growth reflects the government’s reliance on domestic financing to support infrastructure and recurrent expenditures, as outlined in the 2024/25 budget of TZS 49.35 trillion.
• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) indicates that Tanzania’s public debt, including domestic debt, remains sustainable at 46.7% of GDP in 2022/23, including domestic arrears. The domestic debt-to-GDP ratio is estimated at approximately 15.9% in 2021/22, suggesting that April 2025’s TZS 34,759.9 billion (roughly USD 12.97 billion at TZS 2,684.41/USD, previous responses) remains manageable given Tanzania’s GDP of USD 79.2 billion in 2024.

Insights:

• The modest 1.5% monthly increase suggests controlled borrowing, consistent with the Monthey Economic Review’s fiscal deficit target below 3% of GDP and TICGL projecting a 2.5% deficit in 2024/25.
• The 9.2% annual increase indicates a strategic use of domestic borrowing to complement external debt (USD 35.51 billion in April 2025, previous responses), reducing reliance on foreign currency risks (USD dominates external debt at 67.4%, previous responses).
• TICGL highlight commercial banks and pension funds as key creditors reflecting a diversified and stable domestic creditor base.

2. Domestic Debt by Creditor Category (April 2025)

This breakdown details the distribution of domestic debt across creditor categories, highlighting the roles of various institutions and investors in financing government operations.

Key Figures:

Analysis:

• Commercial Banks (28.9%, TZS 10,049.9 billion): As the largest creditor group, commercial banks play a pivotal role in financing government debt, primarily through Treasury bills and bonds. Their share is slightly lower than the 33.1% reported in March 2024, reflecting a minor decline in holdings (see comparison below). This aligns with the Monthey Economic Review’s indication of high banking sector liquidity (e.g., TZS 2,611.1 billion in Interbank Cash Market transactions, previous responses), enabling banks to absorb government securities.
• Pension Funds (26.4%, TZS 9,171.1 billion): The second-largest creditor group, pension funds’ significant share reflects their preference for long-term securities like Treasury bonds, consistent with their long-term investment horizons. TICGL note pension funds held 26.7% in March 2024, indicating stable institutional participation.
• Bank of Tanzania (20.5%, TZS 7,119.2 billion): The BoT’s substantial holding likely includes monetary policy instruments (e.g., liquidity management through Treasury bills) and budgetary support via overdraft facilities. The Monthey Economic Review notes the BoT’s role in stabilizing the interbank market rate within 4–8% (previous responses), supporting its debt holdings.
• Others (17.3%, TZS 5,996.8 billion): This category, including public institutions, private companies, and individuals, shows significant growth (see comparison below), indicating deepening financial market participation. TICGL highlight growing investor interest in government securities, likely driven by attractive yields (e.g., T-bill rates at 11.7% in March 2024).
• Insurance Companies (5.3%, TZS 1,858.4 billion) and BoT Special Funds (1.6%, TZS 564.5 billion): These smaller shares reflect niche roles, with insurance companies investing in secure government securities and BoT special funds supporting specific fiscal needs. Their shares are consistent with historical data (9% and 2% in 2019).

Insights:

• The diversified creditor base reduces reliance on any single group, enhancing debt market stability. Commercial banks and pension funds dominate due to their capacity to absorb large volumes of securities, as noted in TICGL.
• The BoT’s 20.5% share reflects its dual role in monetary policy and fiscal support, aligning with the stable Central Bank Rate (CBR) of 6%.
• The significant share of “Others” (17.3%) indicates broadening financial inclusion, as retail and corporate investors increasingly participate in government securities, supported by digital platforms and market reforms.

3. Comparison: April 2024 vs. April 2025

This comparison highlights changes in creditor holdings, providing insights into evolving debt dynamics.

Key Figures:

Analysis:

• Commercial Banks (↓ -1.1%, TZS -107.9 billion): The slight decline from TZS 10,157.8 billion to TZS 10,049.9 billion suggests portfolio rebalancing or increased competition from other creditors. TICGL note a similar trend in February 2025, with domestic debt declining due to reduced overdraft use, possibly reflecting banks’ shift to other investments amid high liquidity (7-day interbank rate within 4–8%).
• Bank of Tanzania (↑ +6.2%, TZS +416.8 billion): The increase from TZS 6,702.4 billion to TZS 7,119.2 billion indicates greater BoT involvement, likely through monetary policy operations or overdraft facilities to support fiscal needs. The Monthey Economic Review’s stable CBR at 6% supports the BoT’s role in liquidity management.
• Pension Funds (↑ +5.0%, TZS +438.1 billion): The rise from TZS 8,733.0 billion to TZS 9,171.1 billion reflects pension funds’ preference for long-term Treasury bonds, driven by yields (e.g., 2–20-year bond yields up 2–2.9% in March 2024). This aligns with their 26.7% share in March 2024.
• Others (↑ +47.0%, TZS +1,908.7 billion): The sharp increase from TZS 4,088.1 billion to TZS 5,996.8 billion signals growing participation from non-traditional investors (e.g., individuals, corporates), likely due to attractive yields and improved access to securities markets.  TICGL note Treasury bonds as the dominant instrument, appealing to retail investors.
• BoT Special Funds (↑ +84.0%, TZS +257.8 billion): The significant rise from TZS 306.7 billion to TZS 564.5 billion suggests increased use of special funds for specific fiscal purposes, though their small share (1.6%) limits their overall impact.
• Insurance Companies (↑ +0.5%, TZS +10.0 billion): The marginal increase from TZS 1,848.4 billion to TZS 1,858.4 billion indicates stable but limited participation, consistent with their 5–9% historical share.

Insights:

• The decline in commercial banks’ holdings (-1.1%) suggests a shift toward other investments or competition from pension funds and “Others,” reflecting a deepening domestic debt market, as noted in TICGL.
• The significant growth in “Others” (+47.0%) indicates financial market development, with retail and corporate investors increasingly absorbing government securities, supported by digital platforms and market reforms.
• The increases in BoT (+6.2%) and pension funds (+5.0%) reflect institutional confidence in government securities, driven by stable macroeconomic conditions (inflation at 3.2%) and attractive yields (T-bill rates at 11.7% in March 2024).

Conclusion

Tanzania’s domestic debt stock in April 2025 reached TZS 34,759.9 billion, up 1.5% from March 2025 and 9.2% from April 2024, reflecting steady reliance on domestic financing to support a TZS 284.3 billion budget deficit (previous responses). Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) remain the largest creditors, followed by the BoT (20.5%, TZS 7,119.2 billion), indicating a diversified creditor base. The sharp 47% increase in “Others” (TZS 5,996.8 billion) highlights growing public participation, driven by attractive yields and financial market reforms. The domestic debt remains sustainable, with a debt-to-GDP ratio below 55%, supported by robust GDP growth (5.6% in 2024, projected 6% in 2025) and fiscal discipline.

The following table summarizes these key figures.

Tanzania’s external sector showed robust improvement in April 2025, with the current account deficit narrowing by 18.6% to USD 2,224.9 million from USD 2,733.4 million in April 2024, driven by a 7.3% increase in services receipts to USD 6,940.8 million, led by tourism (USD 3,842.6 million, 56.0%) due to 2,162,487 arrivals. Services payments rose 22.8% to USD 2,842.6 million, primarily for transport (USD 1,444.2 million, 53.3%), reflecting higher freight costs. Supported by USD 5.3 billion in reserves, this performance underscores Tanzania’s growing role as a tourism and trade hub. The following table summarizes these key figures.

1. Current Account Performance

The current account balance reflects the net flow of goods, services, primary income (e.g., investment income), and secondary income (e.g., remittances). A narrowing deficit indicates improved external sector performance, driven by export growth outpacing imports.

Key Figures:

• Current Account Deficit (Year ending April 2025): USD -2,224.9 million
• Current Account Deficit (Year ending April 2024): USD -2,733.4 million
• Improvement: Deficit narrowed by USD 508.5 million, or 18.6% year-on-year.
• Reason for Improvement: Higher export earnings outpacing growth in imports.

Analysis:

• Deficit Reduction: The 18.6% improvement in the current account deficit (from USD -2,733.4 million to USD -2,224.9 million) reflects robust export performance, particularly in services, and a relatively moderate increase in imports. TICGL confirm this trend, noting a 31.1% deficit reduction to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings from gold, agriculture, and tourism. The Monthey Economic Review highlights stable foreign exchange reserves of USD 5.3 billion (4.3 months of import cover, previous responses), supporting external balance stability.
• Export-Driven Growth: The narrowing deficit aligns with a 15.1% increase in total exports of goods and services to USD 16,093.1 million in the year ending January 2025, with services exports (e.g., tourism) playing a significant role. Gold exports (USD 3,369.7 million, 36.8% of goods exports) and tourism receipts (USD 3,842.6 million, see below) were key drivers.
• Import Dynamics: Imports of goods and services grew moderately to USD 17,511.8 million in the year ending February 2025 from USD 16,040.6 million in 2024, driven by industrial transport equipment and freight payments, but tempered by lower imports of petroleum, machinery, and wheat. The Monthey Economic Review notes a 3.9% annual TZS depreciation to TZS 2,684.41/USD (previous responses), which may have increased import costs but was offset by export growth.
• Macro Context: The deficit reduction supports Tanzania’s macroeconomic stability, with inflation at 3.2% in February 2025 and GDP growth projected at 6% in 2025. The IMF’s Extended Credit Facility (ECF, USD 1,046.4 million) and foreign exchange interventions (USD 6.25 million sold in April 2025, previous responses) further bolster external balances.

Insights:

• The 18.6% deficit reduction reflects a strong recovery in services exports, particularly tourism, which grew due to a 11.5% increase in tourist arrivals (2,162,487 in April 2025 vs. 1,938,875 in April 2024). This aligns with TICGL reporting 2,106,870 arrivals in the year ending November 2024.
• The moderate import growth (see below) suggests effective management of import bills, particularly for petroleum, amid favorable global commodity prices.
• The deficit, at approximately 2.8% of GDP (based on 2024 GDP of USD 79.2 billion), is sustainable, below the 4.2% projected for 2025, supported by reserves and IMF financing.

2. Exports – Services Receipts by Category

Services receipts are a critical component of Tanzania’s export earnings, driven by tourism and transport, reflecting the country’s role as a regional tourism hub and trade gateway.

Key Figures:

• Total Services Receipts (Year ending April 2025): USD 6,940.8 million
• Total Services Receipts (Year ending April 2024): USD 6,466.0 million
• Growth: +7.3% (USD +474.8 million)
• Breakdown by Category:

Analysis:

• Travel (Tourism, 56.0%, USD 3,842.6 million): Tourism is the largest contributor to services receipts, driven by a 11.5% increase in international arrivals (2,162,487 in April 2025 vs. 1,938,875 in April 2024). TICGL confirm this trend, with arrivals reaching 2,106,870 in the year ending November 2024, boosting travel receipts to USD 3,680 million. The Monthey Economic Review notes tourism’s role as a top foreign exchange earner, supported by Tanzania’s rich wildlife and Vision 2025’s focus on tourism. The sector contributes ~10% to GDP and is projected to reach 19.5% by 2025/26.
• Transport Services (35.2%, USD 2,444.6 million): Receipts from freight and passenger movement grew by 6.5% from ~USD 2,296.0 million in 2024, reflecting Tanzania’s role as a trade hub via Dar es Salaam port, serving six landlocked neighbors. TICGL report transport earnings at USD 2,720 million in November 2024, driven by improved infrastructure (e.g., TAZARA Railway upgrades). The Monthey Economic Review highlights increased trade with neighboring countries (previous responses).
• Other Services (8.8%, USD 653.6 million): This category, including construction, insurance, financial, ICT, government, IP rights, and professional services, grew modestly. Web TICGL note steady growth in ICT and financial services, aligning with the Monthey Economic Review’s emphasis on financial sector digitalization (e.g., mobile money transactions up 26.73%).
• Growth Context: The 7.3% increase in services receipts aligns with a 14% rise in services exports to USD 6,980 million in November 2024, driven by global tourism recovery and regional trade. The African Continental Free Trade Agreement (ratified 2022) and agreements with Angola and the UAE bolster export growth.

Insights:

• Tourism’s 56.0% share underscores its critical role in foreign exchange earnings, supported by a record 2,162,487 arrivals, approaching pre-pandemic levels (1,527,230 in 2019). Investments in tourism infrastructure (e.g., World Bank’s REGROW Project) drive this growth.
• Transport services benefit from Tanzania’s strategic port and railway upgrades (e.g., USD 1.4 billion for TAZARA), enhancing regional trade with landlocked neighbors.
• The modest growth in “Other Services” reflects emerging sectors like ICT, supported by digital payment growth (84% of SMEs adopted digital payments).

3. Imports – Services Payments by Category

Services payments represent expenditures on foreign services, primarily driven by transport costs linked to goods imports, reflecting Tanzania’s import-dependent economy.

Key Figures:

• Total Services Payments (Year ending April 2025): USD 2,842.6 million
• Total Services Payments (Year ending April 2024): USD 2,314.6 million
• Growth: +22.8% (USD +528.0 million)
• Breakdown by Category:

Analysis:

• Transport Services (53.3%, USD 1,444.2 million): The largest category, transport payments grew by 13.2% from ~USD 1,276.2 million in 2024, driven by freight costs linked to goods imports (USD 1,377.9 million in February 2025). TICGL note a 15.8% increase in services payments to USD 2,605.7 million in February 2025, with freight accounting for 53.3%. The Monthey Economic Review attributes this to increased imports of industrial transport equipment (previous responses), reflecting manufacturing and construction activity (GDP contributions of 9% and 16%).
• Travel (19.0%, USD 540.6 million): Payments for Tanzanians traveling abroad for tourism, business, or education grew moderately. TICGL indicate stable travel payments, with services payments rising to USD 2,533.8 million in January 2025, driven by business travel and education abroad. The Monthey Economic Review notes foreign exchange pressures from import payments (previous responses), including travel.
• Other Services (27.7%, USD 857.8 million): This category, including telecom, insurance, royalties, business services, and construction, remained stable (~0% growth). TICGL highlight increased payments for telecom and business services, but overall moderation due to lower global commodity prices. The Monthey Economic Review supports this with stable non-tax revenue (TZS 347.8 billion), indicating controlled service imports.
• Growth Context: The 22.8% increase in services payments outpaced services receipts (7.3%), contributing to the current account deficit. TICGL note a moderate rise in total imports to USD 17,511.8 million in February 2025, driven by industrial supplies but offset by lower petroleum imports.

Insights:

• Transport payments’ dominance (53.3%) reflects Tanzania’s reliance on imported goods, with freight costs tied to Dar es Salaam port’s role as a regional hub. The 13.2% growth aligns with increased construction and manufacturing.
• Stable “Other Services” payments suggest cost management in non-essential services, supported by favorable global prices and BoT’s exchange rate interventions.
• Travel payments (19.0%) indicate growing outbound activity, but their smaller share compared to tourism receipts (USD 3,842.6 million) highlights a net positive services balance.

Conclusion

Tanzania’s external sector performance in April 2025 showed significant improvement, with the current account deficit narrowing by 18.6% to USD 2,224.9 million from USD 2,733.4 million, driven by a 7.3% rise in services receipts to USD 6,940.8 million, led by tourism (USD 3,842.6 million, 56.0%) and transport (USD 2,444.6 million, 35.2%). Services payments grew faster at 22.8% to USD 2,842.6 million, primarily due to transport costs (USD 1,444.2 million, 53.3%), reflecting increased goods imports. The tourism sector, bolstered by 2,162,487 arrivals, and regional trade via improved infrastructure (e.g., TAZARA upgrades) were key drivers, supported by reserves of USD 5.3 billion and IMF financing.

The following table summarizes these key figures.

In April 2025, the Tanzania Shilling (TZS) depreciated by 3.9% annually to TZS 2,684.41/USD, reflecting pressures from import demand and global economic conditions. The Bank of Tanzania’s interventions, including selling USD 6.25 million in the IFEM, and robust foreign reserves of USD 5.3 billion (4.3 months of import cover) provide critical tools to stabilize the exchange rate, enhancing trade competitiveness, particularly for agricultural exports, which benefit from 5.1% of external debt use (USD 35,505.9 million). A stable TZS supports price competitiveness for agricultural goods like cashew nuts and tobacco, which drove an 18.8% export growth to USD 16,737.6 million in February 2025. Key issues include exchange rate volatility, limited agricultural export diversification, and external pressures. Strategies such as targeted IFEM interventions, reserve management, export promotion, and agricultural investment can strengthen stability and competitiveness, supporting Tanzania’s 6% GDP growth projection for 2025.

Main Key Issues

1. Exchange Rate Volatility and BoT Interventions
   • TZS Depreciation: The TZS depreciated by 3.9% annually to TZS 2,684.41/USD in April 2025, from ~TZS 2,583.31/USD in April 2024 (calculated as 2,684.41 / 1.039). This follows a trend of short-term volatility, with monthly depreciations of 1.37% in January 2025 (TZS 2,454.04/USD from TZS 2,420.84/USD) and 1.55% in February 2025 (TZS 2,492.05/USD). TICGL note a 29% TZS weakening from 2014–2024, driven by import demand and debt servicing (67.4% of external debt in USD, previous responses).
   • BoT Interventions: The BoT sold USD 6.25 million in the IFEM in April 2025 to stabilize the TZS, aligning with prior actions (e.g., USD 7 million in January, USD 8.75 million in February). IFEM transactions in April were not specified, but February’s USD 24.4 million (up from USD 16.3 million in January) indicates active market management. These interventions reduce volatility by meeting USD demand for imports and debt payments, maintaining TZS stability.
   • Reserves Adequacy: Foreign reserves of USD 5.3 billion in April 2025 cover 4.3 months of imports, exceeding the national benchmark of 4 months. Reserves grew to USD 5,576.3 million by February 2025, from USD 4,971.5 million in February 2024, supporting intervention capacity. However, reserves declined from USD 5.7 billion in March 2025 (3.8 months cover), signaling potential pressure from intervention costs or capital outflows.
   • Impact on Trade: Depreciation makes exports cheaper but raises import costs (e.g., fuel, 21.6% of imports), affecting agricultural input prices. Volatility disrupts trade planning, as seen in corporate hesitancy during TZS appreciation phases (TZS 2,750–2,800 range in Q3 2024).
2. Agricultural Export Competitiveness
   • Export Growth: Agricultural exports, supported by 5.1% of external debt use (~USD 1,810.8 million of USD 35,505.9 million), contributed to an 18.8% rise in goods and services exports to USD 16,737.6 million in February 2025, from USD 14,094.5 million in 2024. Key commodities include cashew nuts, tobacco, coffee, and horticultural products, with goods exports reaching USD 9,144.8 million (18.8% growth). Agriculture accounts for 26% of GDP and 85% of exports.
   • Competitiveness Gains: A 3.9% TZS depreciation enhances price competitiveness, reducing export prices in USD terms. For example, a USD 1,000 cashew nut shipment cost ~TZS 2,583.31 million in April 2024 but ~TZS 2,684.41 million in April 2025, making it cheaper for buyers. TICGL note agricultural export proceeds drove TZS appreciation in Q3 2024, suggesting depreciation could amplify this effect.
   • Constraints: Limited diversification (gold dominates at 36.8% of goods exports) and low productivity (agriculture employs 65.51% of workers but contributes 25% to GDP) hinder competitiveness. External debt for agriculture (5.1%) is dwarfed by transport (21.5%) and social welfare (19.9%), limiting investment in irrigation or technology. The Monthey Economic Review highlights irrigation needs.
   • AfCFTA Potential: The African Continental Free Trade Agreement (AfCFTA, ratified 2022) offers market access, but only 8.8% of imports are food, indicating untapped potential. TZS stability is critical to maintain competitive pricing in AfCFTA markets.
3. External Pressures and Global Context
   • Import Demand: Imports rose moderately (USD 14.5 billion in 2024), driven by capital goods and fuel, increasing USD demand and pressuring the TZS. Services payments grew 22.8% to USD 2,842.6 million in April 2025, with transport (USD 1,444.2 million) reflecting freight costs. This widens the current account deficit (USD 2,224.9 million, though improved 18.6%).
   • Global Risks: Geopolitical tensions, global slowdown, and climate shocks (e.g., droughts affecting agriculture) threaten export earnings. The IMF notes downside risks from reduced foreign aid and DRC conflict, impacting reserve inflows. A stronger USD (1 USD = TZS 2,655.59 in June 2025) exacerbates depreciation pressures.
   • Debt Servicing: External debt of USD 35,505.9 million, with 67.4% in USD, requires ~USD 2.4 billion annually for servicing (assuming 6.7% average interest, estimates), straining reserves and TZS stability. Domestic debt servicing (TZS 890.9 billion in February 2025) competes for fiscal.
   • Policy Constraints: The BoT’s free-floating exchange rate system faces anecdotal claims of artificial propping, potentially undermining market confidence. New regulations criminalizing non-TZS transactions may drive liquidity offshore, complicating stability.

Strategies to Enhance Exchange Rate Stability and Trade Competitiveness

1. Targeted IFEM Interventions
   • Action: Increase IFEM sales strategically during high USD demand (e.g., import seasons), scaling up from USD 6.25 million to USD 10–15 million monthly, funded by USD 5.3 billion reserves. Coordinate with liquidity management (M3 growth 11.9% in 2024/25) to avoid inflation (3.3% in March 2025).
   • Impact: This could cap TZS depreciation at 2–3% annually, maintaining export competitiveness. For a USD 1,000 agricultural export, a stable TZS 2,684.41/USD ensures predictable pricing, boosting orders. TICGL confirm BoT interventions stabilized TZS in January (USD 7 million sold).
2. Reserve Management and Diversification
   • Action: Diversify reserves into gold (USD 3,369.7 million export earnings) or SDRs to hedge USD fluctuations, preserving USD 5.3 billion for critical interventions. Attract FDI (e.g., USD 1.4 billion China railway deal) to boost reserves to USD 6 billion, covering 5 months of imports.
   • Impact: Enhanced reserves support TZS stability, reducing volatility. A 10% reserve increase (USD 530 million) could fund interventions for 6 months at USD 10 million/month, ensuring competitive TZS pricing for agricultural exports in AfCFTA markets.
3. Export Promotion for Agriculture
   • Action: Use 5.1% of external debt (USD 1,810.8 million) to subsidize agricultural exports (e.g., cashew nuts, coffee) via tax incentives or marketing under AfCFTA. Promote value addition (e.g., coffee processing) to increase earnings by 10–15%, targeting USD 1 billion annually (10% of 2024 goods exports).
   • Impact: Higher export earnings reduce current account deficit (USD 2,224.9 million) and USD demand, stabilizing TZS. Processed coffee at USD 5/kg vs. raw at USD 2/kg could double revenue, enhancing competitiveness. The Monthey Economic Review supports export diversification.
4. Invest in Agricultural Productivity
   • Action: Allocate TZS 360 billion (as in 2022/23) from domestic revenue (TZS 2,603.3 billion tax in March 2025) to irrigation and seed innovation, targeting 50% cultivated land by 2030. Partner with UNDP to meet irrigation financing gaps (6% met by government).
   • Impact: A 10% productivity increase could boost agricultural exports by USD 914.5 million (10% of USD 9,144.8 million), reducing TZS pressure. Improved output stabilizes supply chains, supporting TZS and AfCFTA competitiveness.

Conclusion

The TZS’s 3.9% depreciation to TZS 2,684.41/USD in April 2025, managed by BoT’s USD 6.25 million IFEM sales and USD 5.3 billion reserves, offers opportunities to enhance trade competitiveness, particularly for agricultural exports (5.1% of USD 35,505.9 million external debt). Key issues include TZS volatility, limited agricultural diversification, and external pressures like import costs and debt servicing. Strategies such as targeted IFEM interventions, reserve diversification, export promotion, and agricultural investment can stabilize the TZS at ~2–3% depreciation, boosting competitiveness for cashew nuts and coffee in AfCFTA markets. These align with Tanzania’s 6% GDP growth goal and Vision 2050’s export-led growth, supported by a narrowing current account deficit (USD 2,224.9 million).

The following table summarizes these key figures.

Tanzania’s combined external debt of USD 35.51 billion and domestic debt of TZS 34,759.9 billion as of April 2025 supports critical sectors like infrastructure (21.5% of external debt) and social welfare (19.9%), driving economic growth projected at 6% for 2025. The IMF’s assessment of moderate external debt distress risk and a public debt-to-GDP ratio of 46.7% in 2022/23 (well below the 55% benchmark) indicate a sustainable debt profile, but rising borrowing and a TZS 284.3 billion budget deficit in March 2025 necessitate careful management to maintain economic resilience. Key issues include high debt servicing costs, exchange rate risks (TZS depreciated 3.9% to 2,684.41/USD), and limited revenue diversification. Strategies such as enhancing domestic revenue mobilization, prioritizing concessional borrowing, improving debt management, and diversifying exports can balance borrowing with sustainability, ensuring resilience against shocks while supporting Vision 2050’s growth targets.

Main Key Issues

1. Debt Levels and Sectoral Support
   • Debt Composition: As of April 2025, external debt stands at USD 35,505.9 million, with 76.7% (USD 27,224.0 million) held by the central government and 23.3% (USD 8,278.1 million) by the private sector. Domestic debt is TZS 34,759.9 billion (USD ~12.95 billion at TZS 2,684.41/USD), up 9.2% from TZS 31,836.5 billion in April 2024. Combined, this equals ~USD 48.46 billion, or ~61.2% of 2024 GDP (USD 79.2 billion), higher than the 46.7% public debt-to-GDP ratio in 2022/23.
   • Sectoral Allocation: External debt supports transport and telecommunications (21.5%, ~USD 7,633.8 million), balance of payments and budget support (20.2%, ~USD 7,172.2 million), and social welfare and education (19.9%, ~USD 7,065.7 million). Domestic debt finances recurrent costs (e.g., TZS 833.3 billion for wages in March 2025) and development projects (TZS 1,406.7 billion, 41.7% of expenditure). These investments drive infrastructure (e.g., Standard Gauge Railway) and human capital, critical for 6% GDP growth.
   • Sustainability Metrics: The IMF’s moderate external debt distress risk reflects a debt-to-GDP ratio below 55% and reserves of USD 5.3 billion (4.3 months of import cover). However, TICGL note a rise in external debt from USD 32.09 billion in January 2025, signaling increased borrowing pressure. The debt service-to-export ratio (16.2% in 2024/25) remains manageable but requires vigilance.
2. High Debt Servicing Costs
   • External Debt Servicing: With 67.4% of external debt (USD 23,931 million) in USD, servicing costs are estimated at ~USD 2.4 billion annually (assuming 6.7% average interest rate). In 2024/25, external debt service was USD 1,427.1 million, up from USD 1,224.3 million in 2023/24, straining reserves. Interest arrears are low (USD 78.0 million for central government, 0.2%), but private sector arrears (USD 1,637.0 million, 4.6%) indicate repayment challenges.
   • Domestic Debt Servicing: Domestic debt servicing reached TZS 890.9 billion in February 2025, with interest payments in March 2025 at ~TZS 300.0 billion (previous responses). This competes with development spending (TZS 1,406.7 billion), limiting fiscal space. TICGL note domestic debt servicing at TZS 2,364.3 billion in 2022/23, highlighting its fiscal burden.
   • Impact on Resilience: High servicing costs reduce funds for social programs and infrastructure, increasing reliance on borrowing (e.g., TZS 519.6 billion in Treasury bonds, previous responses). The Monthey Economic Review notes a fiscal deficit target below 3% of GDP, but the TZS 284.3 billion deficit in March 2025 suggests ongoing financing needs.
3. Exchange Rate Risks and Currency Exposure
   • TZS Depreciation: The TZS depreciated 3.9% annually to TZS 2,684.41/USD in April 2025, increasing the cost of USD-denominated debt servicing by ~TZS 2,471.6 billion (23,931 million × 2,684.41 × 3.9%). The BoT’s interventions (USD 6.25 million sold in IFEM) and reserves mitigate volatility, but note a 29% TZS weakening from 2014–2024, amplifying debt costs.
   • Currency Composition: External debt’s 67.4% USD share, 16.8% Euro, and 6.3% Yuan expose Tanzania to currency risks, especially with a stronger USD (1 USD = TZS 2,655.59 in June 2025). Domestic debt in TZS avoids currency risk but faces inflation pressures (3.3% in March 2025, previous responses).
   • Trade Implications: Depreciation boosts export competitiveness (e.g., agriculture, 5.1% of external debt use), but higher import costs (USD 17,511.8 million in February 2025) and debt servicing strain reserves, reducing economic resilience. The current account deficit of USD 2,224.9 million, though improved by 18.6%, reflects external pressures (previous responses).
4. Limited Revenue Diversification
   • Revenue Performance: Tax revenue in March 2025 reached TZS 2,603.3 billion (2% above target), but non-tax revenue underperformed at TZS 350.5 billion against TZS 522.4 billion, contributing to a TZS 3,090.8 billion total revenue (96.9% of TZS 3,190 billion target). The tax-to-GDP ratio (11.8% in 2022/23) is below the 15% Sub-Saharan Africa average, limiting debt repayment capacity.
   • Dependence on Taxes: Taxes constitute 84.2% of revenue (2,603.3 / 3,090.8 × 100), with non-tax TICGL (e.g., dividends, fees) contributing only 11.3% TICGL highlight inefficiencies in public enterprise dividends, constraining fiscal space for debt servicing and development spending.
   • Resilience Risks: Limited revenue diversification increases reliance on borrowing to fund the TZS 284.3 billion deficit, with domestic debt held by commercial banks (TZS 10,049.9 billion, 28.9%) and external loans (e.g., IMF’s USD 440.8 million). This heightens vulnerability to shocks, as seen in the private sector’s USD 1,637.0 million arrears.

Strategies to Balance Borrowing with Debt Sustainability

1. Enhance Domestic Revenue Mobilization
   • Action: Increase the tax-to-GDP ratio to 13% by 2026 through broader tax base (e.g., informal sector, ~3 million taxpayers) and digital tax systems (EFDs). Target TZS 500 billion annually from non-tax TICGL by improving public enterprise dividends (e.g., TANESCO) and introducing carbon credits, covering ~17.6% of the March 2025 deficit (500 / 2,843 × 100).
   • Impact: Additional TZS 1,000 billion (tax + non-tax) could reduce borrowing needs, lowering domestic debt growth (9.2% in 2025) and servicing costs (TZS 890.9 billion in February 2025). This aligns with IMF recommendations for revenue reforms and supports social welfare spending (19.9% of external debt).
2. Prioritize Concessional Borrowing
   • Action: Secure concessional loans (e.g., World Bank, IMF’s ECF USD 1,046.4 million) for 80% of new external borrowing, targeting USD 2 billion annually at <2% interest rates. Limit commercial loans (36.3% of external debt) to reduce servicing costs, saving ~USD 200 million annually (8% of USD 2.4 billion).
   • Impact: Concessional loans lower debt distress risk, freeing funds for infrastructure (21.5% of external debt) and maintaining reserves (USD 5.3 billion). This supports the Monthey Economic Review’s fiscal discipline and IMF’s moderate risk assessment.
3. Improve Debt Management and Transparency
   • Action: Strengthen the Debt Management Office to monitor debt-to-GDP (46.7% in 2022/23) and debt service-to-export ratios (16.2%). Publish quarterly debt reports and hedge 20% of USD debt (USD 4.79 billion) against TZS depreciation, saving ~TZS 494.8 billion annually at 3.9% depreciation. Clear private sector arrears (USD 1 billion of USD 1.637 billion) to boost investor confidence.
   • Impact: Reduced arrears and transparency attract FDI (e.g., USD 1.4 billion for rail, supporting reserves and TZS stability (2,684.41/USD). This could fund TZS 1,406.7 billion in development spending, enhancing resilience against shocks like DRC conflict (USD 3).
4. Diversify Exports to Boost Foreign Exchange
   • Action: Invest 5.1% of external debt (USD 1,810.4 million) and tourism receipts (USD 3,842.6 million) in agriculture and manufacturing (3.9% of external debt) to increase exports by 20% to USD 20.1 billion by 2027 (from USD 16,737.6 million in 2025). Promote value-added agriculture (e.g., processed coffee) under AfCFTA and agreements with UAE.
   • Impact: Higher exports reduce the current account deficit (USD 2,224.9 million) and USD demand, stabilizing TZS and reserves. A USD 1 billion export increase lowers the debt-to-export ratio by ~1%, supporting sustainability and resilience, aligning with Vision 2050.

Conclusion

Tanzania’s combined external (USD 38 billion) and domestic (TZS 35,768.5 billion) debt supports critical sectors but requires balanced borrowing to maintain sustainability, given a 46.7% debt-to-GDP ratio in 2025 and moderate IMF risk assessment. Key issues include high servicing costs (~USD 2.4 billion external, TZS 896.9 billion domestic), exchange rate risks (TZS 2,684.57/USD, 3.3% depreciation, limited revenue (TZS 3,060.8 billion in March 2025), and export dependence. Strategies like revenue mobilization (TZS 1,000 billion target), concessional borrowing (USD 2 billion), debt management, and export diversification (USD 20.1 billion by 2027) can reduce borrowing needs, stabilize TZS, and enhance resilience, supporting 6% GDP growth and Vision 2050.

The following table summarizes these key figures.

Tanzania’s public expenditure in March 2025, totaling TZS 3,375.1 billion, allocates 41.7% (TZS 1,406.7 billion) to development projects and 58.3% (TZS 1,968.4 billion) to recurrent spending, reflecting a moderate commitment to inclusive growth but constrained by high recurrent costs. The emphasis on social welfare and education, which receives 19.9% (~USD 7,065.7 million) of the USD 35,505.9 million external debt, supports human capital development, critical for equitable growth. However, the dominance of recurrent spending, including TZS 833.3 billion for wages and TZS 300.0 billion for interest payments, limits reTICGL for transformative investments, contributing to a TZS 284.3 billion deficit. Key issues include the imbalance between recurrent and development spending, underinvestment in human capital, and fiscal constraints. Strategies such as reallocating recurrent funds, prioritizing human capital investments, enhancing public expenditure efficiency, and leveraging external financing can optimize spending, fostering inclusive growth and aligning with Tanzania’s Vision 2050 and 6% GDP growth projection for 2025.

Main Key Issues

1. Imbalance Between Recurrent and Development Spending
   • Expenditure Allocation: In March 2025, total expenditure of TZS 3,375.1 billion was split into 41.7% (TZS 1,406.7 billion) for development projects and 58.3% (TZS 1,968.4 billion) for recurrent spending, including wages (TZS 833.3 billion), interest payments (~TZS 300.0 billion), and other recurrent costs (TZS 835.1 billion). The Monthey Economic Review notes a fiscal deficit target below 3% of GDP, but the TZS 284.3 billion deficit (8.4% of expenditure) indicates fiscal pressure.
   • Development Spending: The TZS 1,406.7 billion for development projects supports infrastructure (e.g., Standard Gauge Railway, 21.5% of external debt use), health, and education, aligning with the Third Five-Year Development Plan (2021/22–2025/26) for 8% GDP growth by 2026. However, its 41.7% share is lower than the 50%+ recommended for developing economies to drive structural transformation, limiting inclusive growth.
   • Recurrent Spending Dominance: Recurrent spending’s 58.3% share, driven by a wage bill covering 1.2 million public servants and domestic debt servicing (TZS 890.9 billion in February 2025), crowds out development investments.  TICGL note recurrent expenditure at 62% of the 2024/25 budget (TZS 49.35 trillion), highlighting a structural bias toward short-term obligations.
   • Impact on Inclusive Growth: The imbalance constrains investments in poverty reduction (26.4% poverty rate in 2022) and job creation (unemployment ~10%), key for inclusive growth. The Monthey Economic Review emphasizes infrastructure and human capital for equitable development, but recurrent costs limit scalability.
2. Underinvestment in Human Capital
   • Current Allocation: Social welfare and education receive 19.9% (~USD 7,065.7 million) of external debt (USD 35,505.9 million), funding initiatives like free secondary education and health infrastructure. However, only a portion of the TZS 1,406.7 billion development expenditure targets human capital, as infrastructure (21.5%) and budget support (20.2%) dominate external debt use (previous responses). Health and education budgets are ~7% and 15% of the 2024/25 budget, below UNESCO’s 20% and WHO’s 15% benchmarks.
   • Human Capital Gaps: Tanzania’s Human Capital Index (HCI) is 0.40, below the Sub-Saharan Africa average of 0.48, with secondary completion rates at 30% and maternal mortality at 556 per 100,000 births. Low skills constrain productivity in agriculture (26% of GDP, 65.51% employment) and manufacturing (9% of GDP). The Monthey Economic Review notes education and health as Vision 2025 priorities.
   • Tourism Link: Tourism receipts (USD 3,842.6 million from 2,162,487 arrivals in April 2025) could fund human capital, but only ~10% (USD 384.3 million) is estimated as tax revenue (previous responses), insufficient to close gaps without reallocation from recurrent spending.
   • Impact on Growth: Underinvestment limits inclusive growth, as unskilled labor reduces competitiveness in AfCFTA markets (ratified 2022). TICGL highlight the need for skilled workers to achieve 6% GDP growth.
3. Fiscal Constraints and Revenue Limitations
   • Revenue Shortfall: Total revenue in March 2025 was TZS 3,090.8 billion (96.9% of TZS 3,190 billion target), with tax revenue at TZS 2,603.3 billion (2% above target) but non-tax revenue at TZS 350.5 billion (67.1% of TZS 522.4 billion), creating a TZS 171.9 billion gap (previous responses). The tax-to-GDP ratio (11.8% in 2022/23) is below the 15% Sub-Saharan average, limiting fiscal space.
   • Deficit Financing: The TZS 284.3 billion deficit was likely financed through domestic borrowing (TZS 34,759.9 billion, up 9.2%) or external loans (USD 35,505.9 million, previous responses), increasing debt servicing costs (USD 1,427.1 million external, TZS 890.9 billion domestic in 2024/25). This reduces funds for human capital development.
   • External Support: IMF’s Extended Credit Facility (USD 1,046.4 million) and World Bank’s human capital projects supplement spending, but reliance on borrowing risks sustainability, with a 46.7% debt-to-GDP ratio in 2022/23.
   • Resilience Risks: Limited revenue and high recurrent costs heighten vulnerability to shocks (e.g., DRC conflict), undermining inclusive growth. The Monthey Economic Review stresses fiscal discipline.

Strategies to Optimize Spending for Human Capital Development

1. Reallocate Recurrent Spending to Human Capital
   • Action: Reduce recurrent spending by 5% (TZS 98.4 billion from TZS 1,968.4 billion) through wage bill reforms (e.g., freezing non-essential hiring) and redirect to education and health. Fund teacher training (10,000 teachers at TZS 10 million/year, TZS 100 billion) and 50 clinics (TZS 8 billion each, TZS 400 billion).
   • Impact: This increases development spending to 44.6% (1,505.1 / 3,375.1 × 100), boosting HCI by ~0.02 points. Improved education and health enhance labor productivity, supporting 6% GDP growth and reducing poverty (26.4%). Aligns with IMF’s call for social spending.
2. Prioritize Human Capital in Development Budget
   • Action: Allocate 30% of development expenditure (TZS 422.0 billion of TZS 1,406.7 billion) to education and health, doubling their share from ~15%. Invest in vocational training (100,000 youth at TZS 5 million each, TZS 500 billion) and maternal health (20 hospitals at TZS 10 billion, TZS 200 billion).
   • Impact: This could raise secondary completion to 40% and lower maternal mortality to 400 per 100,000, aligning with World Bank’s 2025–2029 framework. Skilled workers boost manufacturing (3.9% of external debt use), fostering inclusive growth. Tourism receipts (USD 384.3 million tax) can co-fund (previous responses).
3. Enhance Public Expenditure Efficiency
   • Action: Implement performance-based budgeting to ensure 90% of TZS 1,406.7 billion development funds reach intended projects, saving ~TZS 140.7 billion (10% inefficiency). Use digital tracking (e.g., EFDs) to monitor spending and reduce leakages.
   • Impact: Savings fund 10,000 scholarships (TZS 10 million each, TZS 100 billion), increasing tertiary enrollment (8% in 2023). Efficient spending supports fiscal sustainability (46.7% debt-to-GDP), reducing borrowing needs (TZS 34,759.9 billion domestic debt).
4. Leverage External Financing for Human Capital
   • Action: Secure USD 500 million in concessional loans from World Bank/IMF for education and health, supplementing 19.9% of external debt (USD 7,065.7 million). Co-finance with tourism taxes (USD 384.3 million) to build 100 schools (TZS 5 billion each, TZS 500 billion).
   • Impact: This increases human capital investment by ~7% (500 / 7,065.7 × 100), supporting AfCFTA competitiveness. Concessional loans maintain moderate debt distress risk, ensuring resilience against shocks.

Conclusion

Tanzania’s March 2025 expenditure allocation of 41.7% (TZS 1,406.7 billion) to development projects and 58.3% (TZS 1,968.4 billion) to recurrent spending reflects a partial commitment to inclusive growth, constrained by high wage (TZS 833.3 billion) and debt servicing costs (TZS 890.9 billion in February 2025). The 19.9% external debt use for social welfare (~USD 7,065.7 million) supports human capital, but underinvestment (HCI 0.40) and fiscal constraints (TZS 284.3 billion deficit) limit equity. Key issues include spending imbalance, human capital gaps, and revenue shortfalls (TZS 171.9 billion non-tax). Strategies like reallocating recurrent funds, prioritizing human capital, enhancing efficiency, and leveraging external financing can optimize spending, boosting education, health, and 6% GDP growth, ensuring inclusive growth per Vision 2050.

The following table summarizes these key figures.

In May 2025, the Bank of Tanzania’s medium-term inflation target of 5% remains a cornerstone for fostering sustainable economic development, balancing price stability with robust growth. According to the "Monthey Economic Review," headline inflation stood at a stable 3.2% in April 2025, down from 3.3% in March, aligning well within the 5% target and regional benchmarks of the East African Community (EAC) and Southern African Development Community (SADC). However, challenges persist with food inflation rising to 5.3% due to weather-induced supply volatility, prompting the National Food Reserve Agency (NFRA) to bolster food stocks to 557,228 tonnes, up from 340,102 tonnes in April 2024, and release 29,834 tonnes of maize to stabilize markets. The Central Bank Rate (CBR) held steady at 6%, supporting economic activity while addressing global uncertainties, such as a projected 2.8% global growth rate and a 6.7% decline in crude oil prices. This introduction explores how these figures reflect Tanzania’s efforts to maintain economic stability and the challenges in sustaining the 5% inflation target.

Alignment with Sustainable Economic Development Objectives

The Bank of Tanzania’s monetary policy objectives, are to maintain price stability (defined as a low and stable inflation rate over time) and support economic growth. The 5% medium-term inflation target aligns with these goals in the following ways:

1. Price Stability for Economic Predictability:
   • A stable inflation rate of around 5% fosters predictability in the economy, which is critical for sustainable development. Low and stable inflation ensures that businesses and consumers can plan investments and expenditures without the uncertainty of volatile price changes.
   • Figure: The document notes that headline inflation in April 2025 was 3.2%, well within the 5% target. This indicates that the Bank’s policy has been effective in maintaining inflation below the medium-term goal, creating a stable environment for economic planning.
   • By keeping inflation within the East African Community (EAC) and Southern African Development Community (SADC) benchmarks, Tanzania enhances its regional competitiveness, attracting investment and supporting trade integration, which are vital for long-term growth.
2. Supporting Economic Growth:
   • The 5% target strikes a balance between controlling inflation and allowing room for economic expansion. Excessively low inflation could stifle growth by limiting monetary flexibility, while high inflation erodes purchasing power and deters investment.
   • Figure: The Monetary Policy Committee’s decision to maintain the Central Bank Rate (CBR) at 6% in April 2025 reflects a strategy to support economic activities while keeping inflation in check. The document states this decision aims to maintain inflation within the 3.5% medium-term target (short-term adjustment) and smooth exchange rate volatility, which supports growth by stabilizing the cost of imports and exports.
   • Stable inflation supports consumer purchasing power, as evidenced by the decline in core inflation to 2.2% in April 2025 from 3.9% in April 2024. This reduction in underlying price pressures enhances affordability, boosting consumption and economic activity.
3. Food Security and Cost of Living:
   • Sustainable economic development requires affordable access to basic goods, particularly food. The 5% inflation target helps manage food inflation, which rose to 5.3% in April 2025, driven by high staple food crop prices due to weather-induced supply volatility. By aiming to keep overall inflation at 5%, the Bank mitigates the risk of runaway food prices, which could disproportionately affect low-income households.
   • Figure: The National Food Reserve Agency (NFRA) increased food stocks to 557,228 tonnes by April 2025 from 340,102 tonnes in April 2024, supporting food price stabilization. This aligns with the inflation target by ensuring supply-side interventions complement monetary policy, fostering inclusive growth.
4. Exchange Rate Stability and External Sector:
   • A stable inflation rate supports exchange rate stability, which is crucial for Tanzania’s external sector performance and economic development. The document highlights the Bank’s focus on smoothing exchange rate volatility, which reduces uncertainty for exporters and importers.
   • Figure: The global economic context, including a 6.7% decline in crude oil prices, could ease pressure on Tanzania’s import bill, supporting the external sector. Maintaining inflation at 5% ensures that exchange rate stability translates into predictable costs for trade, fostering export-led growth and foreign exchange reserve accumulation (e.g., leveraging gold exports, with prices at USD 3,000 per troy ounce in April 2025).

Challenges in Maintaining the 5% Inflation Target

Despite the alignment with sustainable development, maintaining the 5% inflation target poses several challenges, as inferred from the document’s data and context:

1. Food Price Volatility:
   • Challenge: Food inflation rose to 5.3% in April 2025, exceeding the 5% target. The document attributes this to weather-induced supply volatility and logistics challenges, which are difficult to control through monetary policy alone.
   • Impact: High food inflation, as a significant component of the Consumer Price Index (CPI), could push headline inflation above the target, undermining purchasing power and economic stability. For example, Non-core inflation (including food) rising to 5.7% in April 2025, indicating persistent pressure from volatile components.
   • Mitigation: The NFRA’s release of 29,834 tonnes of maize helps stabilize supply, but sustained weather disruptions could require structural agricultural investments beyond monetary policy.
2. Global Economic Uncertainties:
   • Challenge: The document notes a projected global growth slowdown to 2.8% in 2025 and trade uncertainties due to U.S. tariffs. These external shocks could affect Tanzania’s export markets and commodity prices (e.g., tea and sugar prices rose by 8.2% and 3.9%, respectively), indirectly influencing domestic inflation.
   • Impact: External price pressures could make it challenging to maintain the 5% target, especially if import costs rise or export revenues decline, affecting the balance of payments and exchange rate stability.
   • Mitigation: Diversifying export markets and strengthening foreign exchange reserves (e.g., through gold exports) could help, but global volatility remains a significant risk.
3. Energy and Fuel Price Fluctuations:
   • Challenge: Although energy, fuel, and utilities inflation eased to 7.3% in April 2025 from 9.3% in April 2024 month-on-month fluctuations (e.g., 2.4% in April 2024, 1.9% in April 2025). These fluctuations could destabilize inflation if global oil prices reverse their 6.7% decline.
   • Impact: Energy price spikes could increase production and transportation costs, pushing inflation above the 5% target and hindering industrial development.
   • Mitigation: The Bank’s data-dependent monetary policy adjustments can respond to such shocks, but reliance on global commodity markets limits control.
4. Balancing Growth and Inflation Control:
   • Challenge: The document emphasizes the Bank’s dual mandate of price stability and supporting economic growth. Tightening monetary policy to curb inflation (e.g., raising the CBR above 6%) could slow economic activity, while loosening it risks inflation exceeding 5%.
   • Impact: For example, core inflation’s decline to 2.2% suggests room for accommodative policy, but rising non-core inflation (5.7% in April 2025, could force tighter measures, potentially constraining investment and growth.
   • Mitigation: The Bank’s use of instruments like repurchase agreements and the Lombard facility allows flexibility, but aligning these tools with growth objectives requires precise calibration.
5. Structural Constraints:
   • Challenge: Logistics challenges and supply-side issues, as noted in the document, contribute to price volatility. These structural factors are not directly addressed by monetary policy, limiting the Bank’s ability to maintain the 5% target.
   • Impact: Persistent supply chain inefficiencies could keep food and non-core inflation elevated, as seen in the 5.3% food inflation rate, challenging the target and affecting living standards.
   • Mitigation: Complementary fiscal policies, such as infrastructure investments, are needed to address these constraints, but coordination between monetary and fiscal authorities can be complex.

Conclusion

The Bank of Tanzania’s 5% medium-term inflation target aligns with sustainable economic development by fostering price stability, supporting economic growth, ensuring food affordability, and stabilizing the external sector. Figures from the document, such as the 3.2% headline inflation, 2.2% core inflation, and 557,228 tonnes of NFRA food stocks in April 2025, demonstrate the Bank’s success in maintaining a stable economic environment conducive to development. However, challenges like food price volatility (5.3% food inflation), global economic uncertainties (2.8% global growth forecast), energy price fluctuations (7.3% energy inflation), and structural constraints could push inflation above the target, risking economic stability. Addressing these challenges requires a combination of monetary policy precision, supply-side interventions, and regional cooperation to ensure sustainable development.

The table includes critical data points on inflation, monetary policy, food security, and external sector performance, as these are central to understanding the alignment and challenges discussed in the previous response.

Table: Key Economic Figures for Tanzania (May 2025 Economic Review)

Notes on the Table

• Inflation Figures: These highlight the stability of headline inflation (3.2% in April 2025) within the 5% medium-term target, but food inflation (5.3%) and non-core inflation (5.7%) exceed the target, posing challenges.
• Monetary Policy: The CBR at 6% and the 5% medium-term target reflect efforts to balance price stability and growth, with the short-term target of 3.5% indicating flexibility in policy adjustments.
• Food Security: The significant increase in NFRA food stocks (from 340,102 to 557,228 tonnes) and maize releases (29,834 tonnes) underscore efforts to stabilize food prices, supporting economic development.
• Global Context: Global growth slowdown (2.8%) and commodity price changes (e.g., crude oil -6.7%, gold USD 3,000) highlight external factors that could influence Tanzania’s inflation and external sector performance.

In April 2025, Tanzania faced a surge in food inflation to 5.3%, up from 1.4% in April 2024, driven by weather-induced supply volatility and logistics challenges, as reported in the "Monthly Economic Review”. To ensure affordability and foster inclusive economic development, Tanzania can leverage policies like expanding the National Food Reserve Agency’s (NFRA) 557,228-tonne food stocks (up from 340,102 tonnes in 2024) and releasing 29,834 tonnes of maize to stabilize prices. With headline inflation at 3.2% and a steady 6% Central Bank Rate, the Bank of Tanzania’s 5% medium-term target supports economic stability amidst global uncertainties, including a 2.8% growth forecast. This introduction explores strategies to manage food prices for equitable growth.

Policies to Manage Food Price Increases and Ensure Affordability

1. Strengthen Food Reserve and Distribution Systems:
   • Policy: Expand the National Food Reserve Agency’s (NFRA) capacity to stockpile and distribute staple foods, particularly maize, to stabilize supply and mitigate price spikes. The document notes that NFRA increased food stocks to 557,228 tonnes by April 2025, up from 340,102 tonnes in April 2024, and released 29,834 tonnes of maize to local traders. Further increasing stock levels and strategic releases during price surges can dampen food inflation.
   • Impact on Affordability: By ensuring a steady supply of staples like maize, which saw a significant price increase contributing to the 5.3% food inflation, the NFRA can prevent sharp price hikes, making food more affordable for low-income households. This supports inclusive development by reducing the cost-of-living burden, as food is a major component of household expenditure.
   • Implementation: Invest in storage infrastructure and improve distribution networks to reduce logistics costs, which the document identifies as a factor in price volatility. For example, expanding NFRA’s capacity to release more than 29,834 tonnes during peak demand periods could further stabilize prices.
2. Invest in Agricultural Productivity and Resilience:
   • Policy: Enhance agricultural productivity through investments in irrigation, climate-resilient seeds, and modern farming techniques to address weather-induced supply volatility, a key driver of the 5.3% food inflation. Subsidizing inputs like fertilizers and providing extension services can boost yields of staple crops.
   • Impact on Affordability: Increased production of staple food crops, as noted in improved forecasts for coffee and wheat, can reduce supply shortages, lowering prices. For instance, if maize production increases, it could counteract the price pressures that drove food inflation above the 5% medium-term target. Affordable food prices ensure broader access, promoting inclusive growth by supporting rural and low-income populations.
   • Implementation: Allocate public funds to irrigation projects and partner with agricultural research institutions to develop drought-resistant crops. The document’s mention of global agricultural commodity price declines (e.g., coffee, wheat) suggests potential for replicating such improvements domestically.
3. Improve Logistics and Supply Chain Infrastructure:
   • Policy: Upgrade transportation and logistics infrastructure to reduce costs associated with food distribution, as logistics challenges contributed to high staple food prices. Investments in rural road networks and market access can streamline supply chains.
   • Impact on Affordability: Efficient logistics can lower the cost of transporting food from rural to urban areas, reducing retail prices. For example, the 5.3% food inflation rate could be mitigated by cutting transportation costs, making staples more affordable and supporting urban poor households, thus fostering inclusive development.
   • Implementation: Prioritize infrastructure projects in the national budget, potentially funded through public debt, as defined in the glossary, which includes domestic and external borrowing for development projects. Public-private partnerships could also accelerate logistics improvements.
4. Implement Targeted Subsidies and Social Safety Nets:
   • Policy: Introduce or expand targeted subsidies for staple foods and social safety nets, such as food vouchers or cash transfers, to shield low-income households from the 5.3% food inflation impact. These measures can complement NFRA’s efforts to stabilize supply.
   • Impact on Affordability: Subsidies reduce the effective cost of food for vulnerable populations, ensuring access despite price increases. For instance, core inflation’s decline to 2.2% in April 2025 indicates easing non-food price pressures, allowing fiscal space to redirect resources to food subsidies. This promotes inclusive development by protecting purchasing power for the poor, who spend a higher share of income on food.
   • Implementation: Use data from the National Bureau of Statistics to identify high-risk groups and design means-tested programs. The government’s budgetary operations could allocate funds for such initiatives, ensuring fiscal sustainability.
5. Strengthen Regional Trade and Market Integration:
   • Policy: Leverage Tanzania’s alignment with EAC and SADC benchmarks to enhance regional trade in food commodities, importing staples from surplus areas to offset domestic shortages. This can stabilize prices affected by local supply volatility.
   • Impact on Affordability: Importing affordable food from regional partners can counteract the 5.3% food inflation, ensuring stable prices for consumers. For example, the global decline in wheat prices suggests potential for importing cheaper grains, enhancing affordability and supporting inclusive growth by reducing food costs across income levels.
   • Implementation: Negotiate trade agreements within EAC/SADC to reduce tariffs on food imports. The document’s note on easing global trade tensions suggests a favorable environment for such negotiations, supported by stable exchange rates managed by the Bank of Tanzania.

Challenges and Considerations

• Fiscal Constraints: Funding subsidies or infrastructure investments may strain government budgetary operations. The glossary defines public debt as including domestic and external borrowing for development projects, but rising debt levels could limit fiscal space.
• Global Volatility: The document’s mention of a 2.8% global growth forecast and U.S. tariffs could disrupt import costs, complicating regional trade strategies. For example, tea and sugar price increases (8.2% and 3.9%) highlight global price risks.
• Supply-Side Limitations: Weather-induced volatility requires long-term investments in agriculture, which may take years to yield results. The NFRA’s 557,228-tonne stock is a short-term fix but may not suffice during prolonged disruptions.
• Coordination: Effective policies require coordination between monetary policy (e.g., maintaining the 6% CBR) and fiscal measures, which can be complex given structural constraints noted in the document.

Conclusion

To manage the 5.3% food inflation in April 2025 and ensure affordability, Tanzania can strengthen NFRA’s food reserves (557,228 tonnes, 29,834 tonnes maize released), invest in agricultural resilience, improve logistics, provide targeted subsidies, and enhance regional trade within EAC/SADC. These policies support inclusive economic development by stabilizing food prices, protecting low-income households, and fostering rural and urban economic growth. Figures like the 3.2% headline inflation and 2.2% core inflation suggest room for complementary fiscal measures, but challenges like global uncertainties (2.8% growth forecast) and fiscal constraints require careful policy calibration.

Table: Key Economic Figures for Managing Food Inflation in Tanzania (May 2025)

Notes on the Table

• Inflation Figures: The 5.3% food inflatio exceeds the 5% medium-term target, highlighting the urgency of policies to stabilize food prices. The 3.2% headline inflation and 2.2% core inflation indicate overall price stability, providing fiscal space for subsidies or investments. Non-core inflation at 5.7% underscores the role of volatile food prices in driving inflation.
• Food Security: The NFRA’s food stocks increased significantly to 557,228 tonnes from 340,102 tonnes and the release of 29,834 tonnes of maize demonstrates proactive supply-side intervention to curb price spikes, supporting affordability.
• Monetary Policy: The 6% CBR supports economic stability, complementing efforts to manage food inflation through supply-side measures, aligning with the 5% inflation target for inclusive growth.
• Global Context: The 2.8% global growth forecast and commodity price changes (e.g., -6.7% for crude oil, 8.2% for tea) affect Tanzania’s import costs and export revenues, influencing food affordability and trade strategies.