Tanzania’s current account deficit narrowed significantly to USD 2,117.6 million in the year ending June 2025, a 24.3% improvement from USD 2,797.7 million in June 2024. This USD 680.1 million reduction reflects robust growth in goods and services exports, especially from tourism and transport, which drove the net goods & services deficit down by 61.7% to USD 676.6 million. Service receipts rose to USD 7,110.4 million (+8.1%), led by travel (USD 3,934.5 million, +6.9%) and transport (USD 2,530.0 million, +9.8%), supported by a 10% increase in tourist arrivals. However, rising primary income outflows (USD 1,949.6 million, +17.9%) due to external debt servicing and a drop in remittances (USD 508.7 million, -18.1%) partially offset these gains. Meanwhile, foreign reserves stood at USD 5,307.7 million, covering 4.3 months of imports, above the national benchmark. Despite a surge in outbound travel spending (+51.4%), Tanzania’s external sector continues to show resilience, highlighting the importance of export diversification, tourism investment, and policy measures to manage foreign exchange outflows.

1. Current Account Performance

The current account balance reflects Tanzania’s trade in goods and services, primary income (e.g., interest and dividends), and secondary income (e.g., personal transfers and remittances) with the rest of the world. A deficit indicates that outflows exceed inflows, often financed by external borrowing or reserves.

Key Figures (Year Ending June 2025)

• Current Account Balance:
  • June 2025: Deficit of USD 2,117.6 million, a 24.3% improvement (USD 680.1 million reduction) from USD 2,797.7 million in June 2024.
  • Context: The narrowing deficit aligns with trends observed in earlier periods, such as a 31.1% reduction to USD 2,021.5 million in January 2025 and a 35% reduction to USD 2,025.8 million in November 2024. This improvement is driven by robust export growth (+17.7%) and better services performance, supported by global economic recovery and favorable commodity prices.
  • Drivers:
    • Goods & Services (Net): Improved by 61.7% to a deficit of USD 676.6 million from USD 1,764.7 million, reflecting strong export performance (e.g., gold, cashew nuts, tourism) and moderated import growth.
    • Primary Income (Net): Deficit widened by 17.9% to USD 1,949.6 million, driven by higher interest and dividend payments abroad, likely linked to external debt servicing (e.g., USD 32,955.5 million external debt, 67.6% USD-denominated) and foreign investments.
    • Secondary Income (Net): Surplus declined by 18.1% to USD 508.7 million, reflecting lower personal transfers (e.g., remittances), possibly due to global economic tightening or migration patterns.
  • Implications: The narrowing deficit signals improved external sector resilience, supported by tourism and commodity exports. However, persistent deficits and rising primary income outflows highlight the need for enhanced export diversification and remittance strategies. The African Development Bank projects a current account deficit of 4.2% of GDP in 2025, indicating sustained but manageable pressures.
• Foreign Exchange Reserves:
  • June 2025: USD 5,307.7 million, covering 4.3 months of projected imports, above the national benchmark of 4 months.
  • Context: Reserves increased from USD 5,056.8 million in November 2024 and USD 5,323.6 million in January 2025, reflecting improved export inflows and IMF disbursements (e.g., USD 148.6 million under the Extended Credit Facility in December 2024).
  • Implications: Adequate reserves mitigate exchange rate volatility (Tanzanian Shilling depreciated 8% in 2023), but sustained export growth is critical to maintain cover above 4 months.

2. Exports – Service Receipts by Category

Service receipts represent earnings from Tanzania’s service exports, including tourism (travel), transport, and other services (e.g., financial, insurance, ICT). These are critical to narrowing the current account deficit.

Total Service Receipts (Year Ending June 2025)

• Amount: USD 7,110.4 million
• Change: +8.1% from USD 6,578.7 million in 2024 (USD 531.7 million increase).
• Context: The growth aligns with earlier trends, such as a 14% increase to USD 6,985.9 million in November 2024 and a 7.3% increase to USD 6,940.8 million in April 2025, driven by tourism and transport earnings.

Category Breakdown

• Travel (Tourism):
  • June 2025: USD 3,934.5 million (55.3% of total service receipts).
  • Change: +6.9% from USD 3,679.7 million in 2024 (USD 254.8 million increase).
  • Tourist Arrivals: Increased by 10% to 2,193,322 in 2025 from 1,994,242 in 2024, consistent with a 20% annual increase to 2,662,219 in 2024 and 2,106,870 in November 2024.
  • Context: Tourism receipts reflect Tanzania’s growing global appeal, with awards like Africa’s Leading Destination 2025 and investments in promotion (e.g., TZS 359.9 billion tourism budget for 2025/26). Key markets include Europe, Kenya, and the U.S., with new initiatives like Marriott’s Mapito Safari Camp in Serengeti.
  • Drivers: Increased arrivals are driven by post-COVID recovery, reduced tourism license fees (up to 80% cuts), and infrastructure improvements (e.g., Dodoma Transport Project),.
  • Implications: Tourism’s 55.3% share of service receipts underscores its role as a foreign exchange earner, supporting Vision 2050’s 19.5% GDP contribution target by 2025/26. Sustained marketing and conservation investments are critical.
• Transport:
  • June 2025: USD 2,530.0 million (35.6% of total service receipts).
  • Change: +9.8% from USD 2,304.3 million in 2024 (USD 225.7 million increase).
  • Context: Growth aligns with earlier periods, such as USD 2,718.7 million in November 2024 (+15.8%) and USD 2,690.0 million in October 2024, driven by freight earnings from improved port efficiency and trade with landlocked neighbors (e.g., Zambia, Rwanda).
  • Drivers: Investments in transport infrastructure (e.g., Standard Gauge Railway, TAZARA Railway revitalization with USD 1.4 billion from China) and intra-African trade growth (24% to USD 5.18 billion in 2024) boost earnings.
  • Implications: Transport’s growth supports Tanzania’s role as a regional trade hub, but reliance on freight requires sustained infrastructure funding.
• Other Services:
  • June 2025: USD 645.9 million (9.1% of total service receipts).
  • Change: +8.6% from USD 594.6 million in 2024 (USD 51.3 million increase).
  • Context: Includes financial, insurance, and ICT services. The growth is consistent with digital payment advancements (e.g., Tanzania Instant Payment System with 453.7 million transactions in 2024) and financial inclusion efforts (87% adult target by 2030).
  • Implications: Growth in “Other Services” reflects financial sector deepening, but its small share limits its impact on the current account.

Tourism Highlight

• Arrivals: The 10% increase to 2,193,322 tourists reflects sustained recovery, with 2024 seeing 2,662,219 arrivals and November 2024 at 2,106,870. Key drivers include global promotion, reduced fees, and awards like Africa’s Leading Destination 2025.
• Implications: Tourism’s resilience supports foreign exchange inflows, but seasonality (e.g., low season pressures in Q1 2025) and global competition require ongoing investment in infrastructure and marketing.

3. Imports – Service Payments

Service payments represent Tanzania’s expenditures on imported services, such as outbound travel, freight, and other services (e.g., financial, consulting).

Total Service Payments (Year Ending June 2025)

• Amount: USD 2,894.0 million
• Change: +22.7% from USD 2,359.5 million in 2024 (USD 534.5 million increase).
• Context: The increase follows a 22.8% rise to USD 2,842.6 million in April 2025 and a 10.2% rise to USD 2,533.8 million in January 2025, driven by freight and outbound travel.

Category Breakdown

• Travel (Outbound):
  • June 2025: USD 867.9 million (30.0% of total service payments).
  • Change: +51.4% from USD 573.2 million in 2024 (USD 294.7 million increase).
  • Context: The surge aligns with increased consumer spending abroad, possibly driven by a growing middle class and business travel. Earlier data (e.g., April 2025) lacks specific outbound travel figures, but service payments rose due to freight.
  • Drivers: Increased outbound travel reflects economic growth (5.6% in 2024) and higher disposable incomes, but it strains foreign exchange reserves.
  • Implications: The sharp increase offsets export gains, requiring policies to promote domestic tourism and manage foreign exchange outflows.
• Transport:
  • June 2025: USD 1,453.2 million (50.2% of total service payments).
  • Change: Near-flat (≈ 0%) from USD 1,453.0 million in 2024.
  • Context: Stable payments reflect consistent freight costs tied to trade volumes. Earlier data shows freight accounted for 53.3% of service payments in April 2025, driven by industrial transport equipment imports.
  • Drivers: Imports of capital goods (e.g., machinery, transport equipment) for infrastructure projects (e.g., SGR, TAZARA) sustain freight costs,.
  • Implications: Stable transport payments align with trade growth but highlight reliance on imported goods, necessitating export diversification.
• Other Services:
  • June 2025: USD 573.2 million (19.8% of total service payments).
  • Change: -17.1% from USD 691.1 million in 2024 (USD 117.9 million decrease).
  • Context: The decline suggests cost efficiencies or reduced outsourcing in financial, insurance, or consulting services, aligning with digital payment growth and financial inclusion.
  • Implications: Reduced payments improve the services balance, but the small share limits its impact on the current account.

Summary Snapshot

Final Insights and Policy Implications

1. Current Account Improvement:
   • The 24.3% deficit reduction (USD 2,117.6 million) reflects strong export growth (+17.7%) and services performance, supported by tourism (2.2 million arrivals) and transport infrastructure. However, rising primary income outflows (USD 1,949.6 million) due to external debt servicing (40% of government expenditures) and declining remittances (USD 508.7 million) temper gains.
   • Policy: Diversify exports (e.g., horticulture, manufactured goods) and boost remittance inflows through diaspora engagement to further narrow the deficit.
2. Tourism’s Critical Role:
   • Tourism receipts (USD 3,934.5 million, +6.9%) are a cornerstone of service exports, driven by a 10% increase in arrivals and global recognition. Investments in infrastructure (e.g., Dodoma Transport Project, TAZARA) and promotion (TZS 359.9 billion budget) are paying off.
   • Policy: Sustain tourism growth through conservation, reduced fees, and targeting high-value markets (e.g., Europe, U.S.) while addressing seasonality risks.
3. Transport Sector Growth:
   • Transport receipts (USD 2,530.0 million, +9.8%) reflect Tanzania’s role as a regional trade hub, supported by port efficiency and intra-African trade growth (USD 5.18 billion in 2024). Projects like SGR and TAZARA enhance freight earnings.
   • Policy: Continue infrastructure investments and regional trade agreements (e.g., AfCFTA) to boost transport earnings, but monitor freight cost stability.
4. Outbound Travel Pressures:
   • The 51.4% surge in outbound travel payments (USD 867.9 million) reflects growing consumer spending abroad, straining foreign exchange reserves. Stable transport payments (USD 1,453.2 million) indicate consistent trade-related costs.
   • Policy: Promote domestic tourism and manage foreign exchange outflows through targeted incentives (e.g., tax breaks for local travel).
5. Economic Context:
   • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6.0% in 2025 support export performance, driven by agriculture, tourism, and manufacturing.
   • Monetary Policy: The BoT’s 6% Central Bank Rate and 3%–5% inflation target ensure liquidity and exchange rate stability, supporting external sector performance.
   • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against global shocks, but USD appreciation risks remain.
6. Risks and Opportunities:
   • Risks: Rising outbound travel costs, USD-denominated debt servicing (67.6% of external debt), and global commodity price volatility could widen the deficit. Climate shocks and geopolitical tensions also pose risks.
   • Opportunities: Investments in tourism, transport, and digital payments (e.g., TIPS), alongside reforms like MKUMBI II, can sustain export growth and financial inclusion

Strong Growth, Low Inflation, but Trade and Budget Deficits Persist

Zanzibar’s economy showed resilience in 2024, with real GDP growth rising to 6.8%, up from 5.1% in 2023, driven primarily by tourism and infrastructure investments like the SGR and port upgrades. Tourist arrivals surged to 2.2 million in 2025, supporting the services sector, while FDI jumped by 28.3% to USD 1.72 billion, fueling construction. Inflation remained stable at 3.4% in June 2025, down from 6.1% a year earlier, well within the BoT's 3–5% target. On the fiscal front, domestic revenue reached TZS 874.9 billion, covering 95.6% of public income, though a TZS 248.5 billion budget deficit persists. In trade, Zanzibar posted a goods trade deficit of USD 309.2 million, as exports fell 11.9% (led by a 27.2% decline in cloves) while imports rose 8.4%. Meanwhile, the financial sector expanded with credit to the private sector growing by 23.5% and bank deposits increasing by 12.1%, signaling deepening financial inclusion despite high lending rates (15.12%).

1. Real Sector Performance (GDP Growth)

The real sector encompasses economic activities producing goods and services, with GDP growth reflecting Zanzibar’s economic vitality.

• Real GDP Growth (2024):
  • Value: 6.8%, up from 5.1% in 2023.
  • Context: This aligns with earlier reports, such as a 7% growth in January–September 2024 and 7.2% in Q4 2024, driven by tourism and trade. The African Development Bank projects Zanzibar’s growth to exceed 6% in 2025, supported by tourism, construction, and real estate.
  • Drivers:
    • Industry Sector: Construction and manufacturing led growth, fueled by infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Construction benefits from public-private partnerships (PPPs) and foreign direct investment (FDI), with Tanzania’s FDI rising 28.3% to USD 1.72 billion in 2024.
    • Services Sector: Accommodation and food services, tied to tourism, were major contributors. Tourist arrivals reached 2,193,322 in 2025, up 10% from 1,994,242 in 2024, boosting hospitality. The Tanzania National Business Council projects tourism’s GDP contribution to reach 19.5% by 2025/26.
  • Implications: The 6.8% growth reflects Zanzibar’s economic resilience, driven by tourism and infrastructure. However, reliance on tourism (10% of GDP) and construction makes the economy vulnerable to external shocks, such as global tourism fluctuations or commodity price volatility. Diversification into manufacturing and agriculture, as outlined in Zanzibar’s USD 2 billion plan, is critical.
• Comparison with Mainland Tanzania:
  • Mainland Tanzania grew at 5.6% in 2024, projected at 6% in 2025, driven by agriculture, finance, and construction. Zanzibar’s higher growth (6.8%) reflects its tourism-led economy, but its smaller economic base (contributing ~3% to Tanzania’s GDP) limits its overall impact.

2. Inflation Trends

Inflation measures the rate of price increases, affecting purchasing power and economic stability.

• Headline Inflation:
  • 12-Month Average (June 2025): 3.5%.
  • June 2025 (Monthly): 3.4%, down from 6.1% in June 2024.
  • Context: Inflation eased from 5.1% in 2024 and 6.9% in 2023, with February 2025 at 4.8%. The National Bureau of Statistics reported 3.3% inflation in June 2025, driven by food price increases (e.g., finger millet at 7.0%). Zanzibar’s inflation remains below the 5% medium-term target set by the Bank of Tanzania (BoT) and aligns with East African Community (EAC) criteria.
  • Drivers:
    • Stabilized Food Prices: Declining food inflation (5.3% in April 2025) reflects improved agricultural output and stable global commodity prices.
    • Controlled Non-Food Prices: Transport costs moderated due to stable fuel prices, with energy inflation at 7.3% in April 2025, down from 9.3% in 2024.
  • Implications: Low inflation (3.4%) supports consumer purchasing power and aligns with the BoT’s 3%–5% target under its 2025–2030 Strategic Plan. However, food price volatility (e.g., finger millet) poses risks, particularly for low-income households, given Zanzibar’s 26.4% poverty rate. Continued monetary policy prudence (6% Central Bank Rate) is essential.
• Comparison with Mainland Tanzania:
  • Mainland Tanzania’s inflation was 3.2% in May 2025 and 3.1% in January 2025, slightly lower than Zanzibar’s 3.4%. Zanzibar’s higher inflation reflects its reliance on imported goods and tourism-driven demand.

3. Government Budgetary Operations (July 2024 – May 2025)

The government budget reflects fiscal policy, balancing revenues, grants, and expenditures to fund public services and development.

• Revenues and Grants:
  • Total: TZS 914.7 billion.
    • Domestic Revenue: TZS 874.9 billion (95.6% of total).
      • Tax Revenue: TZS 796.6 billion (86.9% of total).
      • Non-Tax Revenue: TZS 78.3 billion (8.6% of total).
    • Grants: TZS 39.8 billion (4.4% of total).
  • Context: Strong revenue performance aligns with Mainland Tanzania’s TZS 2,339.7 billion tax collection in May 2025, 4.1% above target. Zanzibar’s tax revenue reflects improved administration and compliance, supported by digital systems like the Tanzania Instant Payment System (TIPS). Grants, including TZS 185 billion from China for health and economic cooperation, bolster fiscal space.
  • Implications: High domestic revenue (95.6%) reduces grant dependency, but low grant inflows (4.4%) limit funding for development projects. Enhanced tax mobilization, as per MKUMBI II reforms, is critical.
• Expenditures:
  • Total: TZS 1,123.4 billion.
    • Recurrent Expenditure: TZS 744.7 billion (66.3% of total).
    • Development Expenditure: TZS 378.7 billion (33.7% of total).
  • Context: Expenditure aligns with revenue, reflecting fiscal prudence, as noted in the BoT’s mid-year review. Development spending supports tourism (TZS 359.9 billion budget for 2025/26) and infrastructure (e.g., Dodoma Transport Project). Recurrent spending covers wages and public services, critical for Zanzibar’s 9.3% unemployment rate.
  • Implications: The high recurrent share (66.3%) limits development funding, necessitating expenditure rationalization to meet Vision 2050 goals (e.g., 90% electricity access).
• Budget Deficit:
  • Deficit (Before Grants): TZS 248.5 billion.
  • Financing: Covered by domestic borrowing (e.g., TZS 625.5 billion mobilized in April 2025, including TZS 421.7 billion in Treasury bonds) and grants.
  • Context: Public debt remains sustainable with a moderate risk of distress, per the IMF’s 2024 Debt Sustainability Analysis. Zanzibar’s deficit aligns with Mainland Tanzania’s TZS 270.2 billion deficit in May 2025.
  • Implications: Domestic borrowing supports fiscal needs but increases debt servicing costs (TZS 640 billion in April 2025). Grants and FDI (USD 1.72 billion in 2024) are vital to reduce borrowing reliance.

4. Trade Performance (Goods Only)

Trade performance reflects Zanzibar’s external sector, focusing on goods exports and imports, with services (e.g., tourism) covered separately.

• Total Exports (Goods):
  • Value: USD 150.3 million, down from USD 170.6 million in 2024 (-11.9%).
  • Composition:
    • Cloves: USD 66.4 million (44.2% of exports), down from USD 91.2 million (-27.2%).
    • Seafood & Other Goods: USD 60.4 million (40.2% of exports).
    • Manufactured Goods: USD 23.5 million (15.6% of exports).
  • Context: The decline in clove exports reflects global market downturns, as noted in earlier reports. Seafood and manufactured goods growth aligns with diversification efforts under Zanzibar’s USD 2 billion plan. Total Tanzania exports (including Mainland) reached USD 16.1 billion in 2024, led by gold and tourism.
  • Implications: The 11.9% export drop, particularly in cloves, strains foreign exchange earnings, given cloves’ 90% production on Pemba. Diversification into seafood and manufacturing is promising but requires market expansion.
• Total Imports (Goods):
  • Value: USD 459.5 million, up from USD 423.7 million in 2024 (+8.4%).
  • Composition:
    • Capital Goods: USD 222.5 million (48.4% of imports).
    • Intermediate Goods: USD 141.4 million (30.8% of imports).
    • Consumer Goods: USD 95.6 million (20.8% of imports).
  • Context: Import growth reflects infrastructure projects (e.g., SGR, port expansions) and consumer demand, consistent with Mainland Tanzania’s capital goods imports. Zanzibar’s reliance on imported staples and petroleum products persists.
  • Implications: Rising imports, driven by capital goods, support industrialization but widen the trade deficit, straining reserves (USD 5,307.7 million, 4.3 months of import cover).
• Trade Deficit:
  • Value: USD 309.2 million, widened from USD 253.1 million in 2024 (imports USD 423.7 million – exports USD 170.6 million).
  • Context: The deficit reflects falling clove exports and rising capital goods imports, consistent with Tanzania’s overall current account deficit of USD 2,117.6 million.
  • Implications: The widened deficit pressures the Tanzanian Shilling (8% depreciation in 2023) and reserves. Export promotion (e.g., seafood, manufactured goods) and tourism (USD 3,934.5 million in receipts) are critical to offset deficits.

5. Financial Sector Performance

The financial sector supports economic activity through credit provision and deposit mobilization, critical for private sector growth.

• Credit to Private Sector (June 2025):
  • Value: TZS 747.7 billion, up 23.5% from June 2024.
  • Sectors:
    • Trade: 27.8% (TZS 207.9 billion).
    • Building & Construction: 20.2% (TZS 151.0 billion).
    • Personal Loans: 13.8% (TZS 103.2 billion).
    • Transport & Communication: 10.7% (TZS 80.0 billion).
  • Context: The 23.5% growth exceeds Mainland Tanzania’s 12.8% private sector credit growth in January 2025, driven by agriculture and SMEs. Zanzibar’s credit growth reflects tourism and construction demand, supported by the BoT’s 6% Central Bank Rate and TIPS (453.7 million transactions in 2024).
  • Implications: Robust credit growth (23.5%) supports SMEs and infrastructure, aligning with financial inclusion goals (87% adult target by 2030). However, the high trade and construction share risks overexposure if tourism slows.
• Deposit Mobilization:
  • Value: TZS 1,185.4 billion, up 12.1% from TZS 1,057.6 billion in June 2024.
  • Context: Growth aligns with Tanzania’s banking sector stability, with a 3.6% non-performing loan ratio in Q1 2025, below the 5% threshold. Mobile money transactions (TZS 198,859 billion in 2024) boost deposits.
  • Implications: Strong deposit growth (12.1%) reflects financial deepening, but high lending rates (15.12% in January 2025) may constrain borrowing. Digital platforms like TIPS enhance inclusion, supporting Vision 2050.

Summary Table: Key Economic Indicators for Zanzibar (Year Ending June 2025)

Key Takeaways and Policy Implications

1. Robust GDP Growth:
   • Zanzibar’s 6.8% growth in 2024, driven by tourism and construction, outpaces Mainland Tanzania (5.6%). Tourism (2.2 million arrivals) and infrastructure (e.g., SGR) are key drivers, but diversification into manufacturing and agriculture is needed to reduce tourism dependency (10% of GDP).
   • Policy: Implement Zanzibar’s USD 2 billion diversification plan to boost seafood and manufactured exports, aligning with Vision 2050.
2. Stable Inflation:
   • Inflation at 3.4% (June 2025) supports purchasing power, driven by stable food and fuel prices. However, food price volatility (e.g., 7.0% for finger millet) risks impacting the 26.4% poverty rate.
   • Policy: Enhance agricultural productivity and supply chain resilience to mitigate food price shocks, as per the Second Agriculture Sector Development Program.
3. Fiscal Prudence:
   • Strong domestic revenue (TZS 874.9 billion) reduces grant reliance, but the TZS 248.5 billion deficit requires sustained borrowing and grants. Development spending (33.7%) supports growth but is constrained by recurrent costs (66.3%).
   • Policy: Rationalize recurrent expenditure and leverage FDI (USD 1.72 billion in 2024) to fund infrastructure and tourism.
4. Trade Challenges:
   • The USD 309.2 million trade deficit, driven by a 27.2% drop in clove exports and 8.4% import rise, pressures reserves. Tourism receipts (USD 3,934.5 million) offset some losses, but goods exports need boosting.
   • Policy: Promote clove market recovery and expand seafood and manufacturing exports through trade agreements (e.g., AfCFTA).
5. Financial Sector Strength:
   • Credit growth (23.5%) and deposit mobilization (12.1%) reflect financial deepening, supported by digital payments (TIPS) and a stable banking sector (3.6% NPL ratio). High lending rates (15.12%) and trade/construction exposure pose risks.
   • Policy: Reduce lending rates and enhance SME financing, as per the BoT’s 2025–2030 plan, to sustain inclusion and growth.
6. Economic Context:
   • Regional Role: Zanzibar’s tourism and trade hub status supports growth, but its small GDP share (~3% of Tanzania’s USD 105.1 billion in 2022) limits impact.
   • Risks: Global commodity price volatility, tourism seasonality, and shilling depreciation (8% in 2023) pose challenges.
   • Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (87% target) offer pathways to a USD 1 trillion economy.

Stability in Lending, Competitive Deposit Market, and a Narrowing Spread Signal Sector Efficiency

In June 2025, Tanzania’s banking sector exhibited notable stability and competitiveness. The overall lending rate held steady at 15.23%, slightly up from May, while short-term lending rates eased from 15.96% to 15.69%, reflecting increased liquidity and competition. Deposit rates rose across the board, with the negotiated deposit rate jumping from 10.64% to 11.21%, driven by end-of-year liquidity needs. Importantly, the short-term interest rate spread narrowed to 5.90%, down from 6.49% in June 2024, indicating improved efficiency and a more competitive banking environment benefiting both borrowers and depositors.

1. Lending Interest Rates

Lending interest rates represent the cost of borrowing from commercial banks and are influenced by factors such as the Bank of Tanzania’s (BoT) monetary policy, liquidity conditions, credit risk, and competition in the banking sector. In June 2025, lending rates remained broadly stable, with minor fluctuations reflecting market dynamics.

Key Lending Rates

The following table summarizes the lending rates for May and June 2025, with changes noted:

• Overall Lending Rate:
  • Increased slightly from 15.18% in May 2025 to 15.23% in June 2025 (+0.05 percentage points).
  • This marginal increase suggests stable credit conditions, with banks maintaining relatively high rates to account for credit risk and operational costs. The stability aligns with the BoT’s monetary policy stance, likely aimed at controlling inflation while supporting economic growth.
  • Compared to June 2024 (15.30%), the June 2025 rate is slightly lower, indicating a modest easing in borrowing costs over the year, possibly due to improved liquidity or competitive pressures.
• Short-Term Lending Rate (loans up to 1 year):
  • Decreased from 15.96% in May 2025 to 15.69% in June 2025 (-0.27 percentage points).
  • The decline suggests increased competition among banks for short-term lending, possibly driven by higher liquidity in the banking system or demand for short-term credit from businesses managing working capital needs.
  • Compared to June 2024 (15.57%), the June 2025 rate is higher, reflecting a temporary tightening in short-term lending conditions earlier in 2025, possibly due to seasonal liquidity demands.
• Negotiated Lending Rate:
  • Decreased from 12.99% in May 2025 to 12.68% in June 2025 (-0.31 percentage points).
  • Negotiated rates are typically offered to prime customers (e.g., large corporations or low-risk borrowers with strong credit profiles). The decline indicates banks are offering better terms to attract or retain high-quality borrowers, possibly due to competitive pressures or improved borrower creditworthiness.
  • Compared to June 2024 (12.82%), the June 2025 rate is lower, suggesting a trend toward more favorable conditions for prime borrowers over the year.

Context and Insights:

• Stability in Lending Rates: The overall lending rate’s stability (15.23% in June 2025) reflects a balanced monetary policy environment, with the BoT likely maintaining the Central Bank Rate (CBR) at a level to ensure price stability while supporting credit growth. The high rates (relative to deposit rates) indicate that banks are cautious about credit risks, particularly for non-prime borrowers.
• Short-Term Lending Dynamics: The decrease in short-term lending rates may be linked to the robust interbank cash market (IBCM) activity, with a turnover of TZS 2,873.9 billion in June 2025 (as noted in the previous query). Higher liquidity in the IBCM, with a slight decline in interest rates (7.93%), likely eased funding costs for banks, enabling them to lower short-term lending rates.
• Negotiated Rates and Competition: The decline in negotiated lending rates suggests increased competition among banks to secure high-value clients. This could be driven by Tanzania’s growing private sector, particularly in sectors like agriculture, manufacturing, and mining, which require significant financing.
• Economic Implications: Stable but high lending rates (15.23% overall) may constrain borrowing for small and medium enterprises (SMEs), which are sensitive to borrowing costs. However, the lower negotiated rates benefit larger firms, potentially boosting investment in key sectors.

2. Deposit Interest Rates

Deposit interest rates reflect the returns banks offer to depositors for savings, time deposits, and other accounts. These rates are influenced by liquidity needs, competition for deposits, and the BoT’s monetary policy. In June 2025, deposit rates generally increased, driven by seasonal liquidity demands at the end of the financial year.

Key Deposit Rates

The following table summarizes the deposit rates for May and June 2025, with changes noted:

• Overall Time Deposit Rate:
  • Increased from 8.58% in May 2025 to 8.74% in June 2025 (+0.16 percentage points).
  • This rise reflects banks’ increased demand for funds, likely driven by end-of-financial-year obligations, such as loan disbursements or reserve requirements.
  • Compared to June 2024 (7.66%), the June 2025 rate is significantly higher, indicating a sustained increase in deposit rates over the year, possibly due to tighter liquidity conditions or higher competition for deposits.
• 12-Month Deposit Rate:
  • Increased slightly from 9.72% in May 2025 to 9.79% in June 2025 (+0.07 percentage points).
  • The modest increase suggests banks are offering slightly better returns to attract longer-term deposits, which provide more stable funding for lending activities.
  • Compared to June 2024 (9.09%), the June 2025 rate is higher, reflecting a trend toward higher returns for depositors, possibly to compete with alternative investment options like Treasury bonds (yields of 14.50%–14.80% in June 2025).
• Negotiated Deposit Rate:
  • Increased noticeably from 10.64% in May 2025 to 11.21% in June 2025 (+0.57 percentage points).
  • Negotiated rates are offered to large or institutional depositors (e.g., pension funds, corporations). The significant rise indicates banks’ willingness to pay a premium to secure large deposits, likely to meet liquidity needs or fund lending activities.
  • Compared to June 2024 (9.86%), the June 2025 rate is much higher, suggesting increased competition for high-value deposits over the year.
• Savings Deposit Rate:
  • Increased from 2.52% in May 2025 to 2.90% in June 2025 (+0.38 percentage points), recovering from a dip in May.
  • Compared to June 2024 (2.86%), the June 2025 rate is slightly higher, indicating a modest improvement in returns for retail depositors.
  • The low savings rate reflects the lower risk and liquidity of savings accounts compared to time deposits, but the increase suggests banks are incentivizing retail savings to bolster their deposit base.

Context and Insights:

• Seasonal Liquidity Needs: The rise in deposit rates, particularly the negotiated rate (+0.57%), is attributed to seasonal liquidity demands at the end of the financial year (June 2025). Businesses and individuals often settle obligations, increasing banks’ need for funds to meet withdrawal demands or loan disbursements.
• Competition for Deposits: The significant increase in negotiated deposit rates suggests banks are competing aggressively for large deposits from institutional clients, who have bargaining power to secure better terms. This could be driven by the high yields on Treasury bonds (14.50%–14.80%), which compete with bank deposits as investment options.
• Retail Depositor Trends: The recovery in savings deposit rates (from 2.52% to 2.90%) indicates banks are also targeting retail depositors to diversify their funding sources. However, the low savings rate compared to time deposits reflects the limited bargaining power of retail clients.
• Economic Implications: Rising deposit rates encourage savings, which can support bank lending capacity and economic growth. However, higher deposit rates increase banks’ funding costs, which could pressure profit margins unless offset by lending income or operational efficiencies.

3. Interest Rate Spread

The interest rate spread is the difference between lending and deposit rates, typically measured for short-term instruments to reflect banking efficiency and profitability. A narrower spread indicates improved financial intermediation and a more competitive banking environment.

• Short-Term Interest Rate Spread:
  • June 2024: 6.49%
  • May 2025: 6.24%
  • June 2025: 5.90%
  • The spread narrowed by 0.34 percentage points from May to June 2025 and by 0.59 percentage points from June 2024 to June 2025.

Context and Insights:

• Calculation: The short-term interest rate spread is derived from the short-term lending rate (15.69% in June 2025) and the 12-month deposit rate (9.79% in June 2025), as these are comparable tenors. The spread is calculated as:
  • 15.69% - 9.79% = 5.90%
• Narrowing Spread: The decline in the spread reflects:
  • Increased Competition: Banks are lowering short-term lending rates (15.69%) and raising deposit rates (9.79%) to attract customers, reducing their profit margins per transaction.
  • Improved Efficiency: A narrower spread suggests banks are improving financial intermediation, passing on liquidity benefits to borrowers and depositors.
  • Liquidity Conditions: The robust IBCM turnover (TZS 2,873.9 billion) and lower IBCM rate (7.93%) in June 2025 indicate ample liquidity, enabling banks to offer better terms to borrowers and depositors.
• Economic Implications: A narrower spread benefits borrowers by reducing borrowing costs and encourages lending, supporting economic activity. However, it may squeeze bank profitability, prompting banks to seek operational efficiencies or alternative revenue sources.

Summary Table

Key Insights and Broader Implications

1. Stable Lending Environment:
   • The overall lending rate’s stability (15.23% in June 2025) and slight year-on-year decline (from 15.30% in June 2024) suggest that credit risk perceptions have not worsened, despite high rates. This stability supports private sector borrowing, particularly for large firms benefiting from lower negotiated rates (12.68%).
   • The decrease in short-term lending rates (15.69%) reflects competitive pressures and ample liquidity, as evidenced by the IBCM’s high turnover and lower rates. These benefits businesses seeking working capital loans, supporting sectors like trade and agriculture.
2. Rising Deposit Rates:
   • The increase in deposit rates, particularly the negotiated rate (11.21%), reflects banks’ efforts to attract funds to meet liquidity needs at the financial year-end. This aligns with the absence of Treasury bill auctions in June 2025, which may have increased banks’ reliance on deposits for liquidity.
   • Higher deposit rates encourage savings, strengthening banks’ funding base. However, the low savings deposit rate (2.90%) indicates limited benefits for retail depositors, potentially constraining household savings growth.
3. Narrowing Interest Rate Spread:
   • The narrowing spread (5.90% in June 2025) is a positive signal for Tanzania’s banking sector, indicating improved efficiency and competition. This benefits borrowers through lower borrowing costs and depositors through higher returns, fostering financial inclusion and economic activity.
   • The spread’s decline from 6.49% in June 2024 suggests structural improvements in the banking sector, possibly driven by technological advancements, regulatory reforms, or increased market participation.
4. Monetary Policy Context:
   • The BoT’s monetary policy likely played a role in stabilizing lending rates and supporting liquidity, as seen in the IBCM’s performance. The CBR, while not specified, is likely set to balance inflation (targeted at 3%–5%) and growth (projected at 5.5%–6% for 2025).
   • The rise in deposit rates and narrowing spread suggest the BoT’s liquidity management tools (e.g., open market operations, reserve requirements) are effective in maintaining a stable financial environment.
5. Economic Implications:
   • The trends in lending and deposit rates support Tanzania’s economic growth by facilitating credit access and encouraging savings. However, high lending rates (15.23% overall) may limit SME borrowing, a critical driver of employment and growth.
   • The competitive banking environment, as evidenced by the narrowing spread, could attract more players to the financial sector, enhancing financial inclusion and supporting Tanzania’s Development Vision 2025 goals.

Between 2021/22 and 2025/26, Tanzania's debt service costs surged by 42–58%, from an estimated TZS 9–10 trillion to a confirmed TZS 14.22 trillion—now accounting for 25.2% of the national budget (TZS 56.49 trillion). Over this period, total public debt rose to approximately 46% of GDP, driven largely by external borrowing, which reached USD 33.9 billion in 2025/26 and remains 67.7% USD-denominated, exposing the country to exchange rate risks, especially following a 2.6% shilling depreciation in 2024/25. Domestic debt also expanded significantly to TZS 34.26 trillion, with the majority held by commercial banks and pension funds. Despite a stabilizing debt-to-GDP ratio and a manageable debt service-to-GNI ratio of 2.89% (2023), the growing reliance on non-concessional and foreign currency debt underscores fiscal vulnerabilities that require prudent debt management strategies to ensure long-term sustainability.

Escalating Service Costs

Tanzania's debt servicing landscape has undergone significant transformation over the past five years, reflecting the country's economic growth trajectory and evolving fiscal priorities. The most striking development is the substantial increase in debt service costs, which have risen from an estimated TZS 9-10 trillion in 2021/22 to TZS 14.22 trillion in 2025/26 – representing a 42-58% increase over the five-year period.

Key Performance Indicators at a Glance:

• Current Debt Service (2025/26): TZS 14.22 trillion (25.2% of national budget)
• Total Public Debt: Approximately 46% of GDP (2025/26)
• External Debt: USD 33.9 billion (67.7% USD-denominated)
• Domestic Debt: TZS 34.26 trillion
• Debt Service-to-GNI Ratio: 2.89% (2023 data)
• Five-Year Growth in Debt Service: 42-58% increase

Detailed Year-by-Year Analysis

2021/22 Financial Year: Foundation Period

The 2021/22 period established the baseline for Tanzania's modern debt management framework. With debt service costs estimated at TZS 9-10 trillion, the government maintained a relatively moderate debt burden at 43.6% of GDP. The debt composition showed a balanced approach with domestic debt at 15.9% of GDP and external debt forming the larger portion. Notably, domestic arrears stood at a manageable 1.8% of GDP, indicating effective short-term debt management.

The present value debt-to-GDP ratio of 31% remained well below the 55% benchmark, positioning Tanzania in the low-to-moderate debt distress risk category. External borrowing was predominantly concessional, reducing the overall cost burden and exchange rate exposure.

2022/23 Financial Year: Strategic Expansion

The government allocated TZS 9.1 trillion for debt servicing within a total budget of TZS 44.4 trillion, with TZS 7.4 trillion successfully disbursed by April 2023. This period marked a strategic shift as public debt increased to 45.7% of GDP (46.7% including domestic arrears), reflecting increased infrastructure investment.

External debt composition rose to 63.3% of total debt, indicating a pivot toward international financing for development projects. The shift toward non-concessional borrowing began during this period, driven by infrastructure financing needs. Despite this increase, the present value debt-to-GDP ratio remained sustainable at 31.8%.

2023/24 Financial Year: Acceleration Phase

Debt servicing allocation reached TZS 10.48 trillion, representing a 15% increase from the previous year. This increase occurred within a Ministry of Finance budget of TZS 15.94 trillion, highlighting debt service as a major fiscal priority. Total public debt climbed to 47.36% of GDP, with external debt reaching USD 30.533 billion by July 2023.

The debt structure showed concerning trends with external debt comprising 73% of total obligations, significantly increasing Tanzania's exposure to exchange rate fluctuations. Total national debt reached approximately TZS 69.44 trillion in 2022, continuing its upward trajectory through 2023.

2024/25 Financial Year: Consolidation Efforts

Debt service costs are estimated at TZS 11-12 trillion within a national budget of TZS 49.35 trillion. External debt peaked at USD 32.89 billion in September 2024, subsequently reaching USD 33.905 billion by January 2025. The central government held 78.1% of external debt, indicating concentrated fiscal responsibility.

Domestic debt stabilized at TZS 32.62 trillion in September 2024, with Treasury bonds dominating at 78.9% of domestic obligations. The debt-to-GDP ratio showed signs of stabilization, with projections indicating a gradual decline to 40.84% by 2029, suggesting improved debt sustainability measures.

2025/26 Financial Year: Current Trajectory

The current budget allocation confirms TZS 14.22 trillion for debt servicing, including TZS 6.49 trillion specifically for interest payments. This represents the highest debt service allocation in the five-year period, occurring within a total budget of TZS 56.49 trillion. External debt stands at USD 33.905 billion, with the government holding 76.4% of these obligations.

Domestic debt has grown to TZS 34.26 trillion as of March 2025, primarily held by commercial banks (29-33%) and pension funds (26.5-27.6%). The USD-dominated debt structure (67.7-68.1%) continues to pose exchange rate risks, particularly given the 2.6% depreciation of the Tanzanian Shilling in 2024/25.

Tanzania National Debt Service Costs (2021/22–2025/26)

Key Observations

1. Trend in Debt Service Costs: Debt service costs have increased steadily, from an estimated TZS 9–10 trillion in 2021/22 to TZS 9.1 trillion in 2022/23, TZS 10.48 trillion in 2023/24, an estimated TZS 11–12 trillion in 2024/25, and a confirmed TZS 14.22 trillion in 2025/26. This reflects growing borrowing, particularly external debt (73% of total debt in 2024), and larger budgets (TZS 44.4 trillion in 2022/23 to TZS 56.49 trillion in 2025/26). The 18–29% jump from 2024/25 to 2025/26 is driven by increased interest payments (TZS 6.49 trillion in 2025/26) and a higher debt stock.
2. Debt Composition: External debt, predominantly USD-denominated (67.7–68.1%), reached USD 33.905 billion in 2025, exposing Tanzania to exchange rate risks, with a 2.6% shilling depreciation in 2024/25 increasing repayment costs. Domestic debt, mainly Treasury bonds (78.9% in 2024), rose from an estimated TZS 22.17 trillion in 2021/22 to TZS 34.26 trillion in 2025/26, held primarily by commercial banks (29–33%) and pension funds (26.5–27.6%).
3. Sustainability: Tanzania’s debt-to-GDP ratio increased from 43.6% in 2021/22 to 47.36% in 2023/24, stabilizing at ~46% in 2024/25–2025/26, with a projected decline to 40.84% by 2029. The debt service-to-GNI ratio was 2.8915% in 2023, indicating moderate debt distress risk per IMF and World Bank analyses. However, reliance on non-concessional borrowing and USD exposure poses challenges, particularly with shilling depreciation.

Tanzania's engagement with the International Monetary Fund (IMF) has grown significantly in 2025, reflecting its strategic reliance on IMF financing. As of July 25, 2025, Tanzania's IMF credit outstanding reached TZS 3.65 trillion (USD 1,335,730,000), a 18.98% increase from TZS 3.07 trillion (USD 1,122,630,000) on June 30, 2025, based on an exchange rate of approximately TZS 2,735 per USD (sourced from recent web data on Tanzania shilling rates). This growth, driven by TZS 0.58 trillion in disbursements with no repayments, positions Tanzania as a key player in East Africa, holding 22.07% of the region's TZS 16.55 trillion in IMF credit. Across Africa, Tanzania ranks 11th out of 54 countries, contributing 1.30% to the continent's TZS 280.87 trillion total IMF credit outstanding. This analysis examines Tanzania’s position relative to East African peers and all African countries, highlighting its financial dynamics and regional significance.

Tanzania's IMF credit outstanding as of June 30, 2025, and July 25, 2025, in Tanzania Shillings (TZS), comparing its position among East African and all African countries. Tanzania’s credit growth reflects active IMF program participation, ranking it 2nd in East Africa and 11th across Africa. Significant disbursements and zero repayments underscore its reliance on IMF support, contributing notably to regional financing dynamics.

East African Countries Analysis

The following East African countries are included in the IMF credit dataset (converted to TZS using TZS 2,735 per USD):

• Tanzania: TZS 3.07 trillion → TZS 3.65 trillion
• Kenya: TZS 8.27 trillion → TZS 8.27 trillion
• Uganda: TZS 2.71 trillion → TZS 2.71 trillion
• Rwanda: TZS 1.66 trillion → TZS 1.65 trillion
• Burundi: TZS 0.27 trillion → TZS 0.27 trillion

East Africa Totals

• Total as of 06/30/2025: TZS 15.98 trillion
• Total Disbursements: TZS 0.58 trillion
• Total Repayments: TZS 0.01 trillion
• Total as of 07/25/2025: TZS 16.55 trillion

Tanzania's East African Position

East African Ranking (by 07/25/2025 Outstanding)

1. Kenya: TZS 8.27 trillion (49.90%)
2. Tanzania: TZS 3.65 trillion (22.07%)
3. Uganda: TZS 2.71 trillion (16.40%)
4. Rwanda: TZS 1.65 trillion (9.96%)
5. Burundi: TZS 0.27 trillion (1.65%)

All African Countries Analysis

African Countries Total

• Total as of 06/30/2025: TZS 278.22 trillion
• Total Disbursements: TZS 3.46 trillion
• Total Repayments: TZS 0.86 trillion
• Total as of 07/25/2025: TZS 280.87 trillion

Tanzania's African Position

Top 10 African Countries by IMF Credit Outstanding

1. Argentina: TZS 110.11 trillion (39.18%)
2. Egypt: TZS 20.30 trillion (7.22%)
3. Ecuador: TZS 18.19 trillion (6.47%)
4. Pakistan: TZS 18.28 trillion (6.51%)
5. Cote d'Ivoire: TZS 8.49 trillion (3.02%)
6. Kenya: TZS 8.27 trillion (2.94%)
7. Bangladesh: TZS 7.99 trillion (2.84%)
8. Angola: TZS 7.44 trillion (2.65%)
9. Ghana: TZS 7.40 trillion (2.63%)
10. Congo, DRC: TZS 5.34 trillion (1.90%)

Tanzania ranks 11th with TZS 3.65 trillion (1.30%).

Implications for Tanzania’s Economic Development

Tanzania’s significant increase in IMF credit outstanding, from TZS 3.07 trillion to TZS 3.65 trillion between June 30 and July 25, 2025, signals a robust commitment to leveraging IMF financing to support economic development. The TZS 0.58 trillion in disbursements, representing 100% of East Africa’s IMF inflows during this period, suggests Tanzania is actively channeling these funds into priority areas. According to recent IMF reviews, Tanzania’s Extended Credit Facility (ECF) arrangements focus on fiscal consolidation, infrastructure development, and social programs to enhance economic resilience and reduce poverty. The absence of repayments indicates a strategy to maximize liquidity for ongoing projects, potentially in sectors like energy, transport, and agriculture, which are critical for Tanzania’s Vision 2025 development goals. However, this reliance on IMF credit, while boosting short-term growth, raises concerns about long-term debt sustainability, especially given Tanzania’s modest 1.30% share of Africa’s total IMF credit. Balancing these funds with domestic revenue mobilization and prudent fiscal management will be crucial to ensure sustainable economic progress.

Key Insights

Tanzania's Position

• East Africa: Tanzania holds the 2nd position among 5 East African nations, trailing Kenya.
• Africa: Tanzania ranks 11th out of 54 African countries, reflecting a modest continental presence.
• Growth: A 18.98% increase in outstanding credit (TZS 0.58 trillion) from June 30 to July 25, 2025, highlights active IMF engagement.

Notable Points

• Disbursements: Tanzania absorbed the entire TZS 0.58 trillion of East Africa’s IMF disbursements, emphasizing its reliance on new funding.
• Repayments: Tanzania made no repayments, unlike Rwanda, which reduced its credit slightly.
• Regional vs. Continental Share: Tanzania’s 16.86% share of African disbursements significantly exceeds its 1.30% share of total African credit.
• Kenya’s Regional Leadership: Kenya dominates East Africa with TZS 8.27 trillion, nearly 50% of the region’s IMF credit.
• Argentina’s Continental Dominance: Argentina’s TZS 110.11 trillion accounts for 39.18% of Africa’s total IMF credit, far surpassing other nations.

Regional Context

• East Africa’s Contribution: The region represents 5.89% of Africa’s total IMF credit outstanding (TZS 280.87 trillion) as of July 25, 2025.
• Tanzania’s Role: Tanzania’s 22.07% share of East African credit (TZS 16.55 trillion) contrasts with its 1.30% share of African credit, reflecting regional significance.
• IMF Program Activity: Tanzania’s credit growth aligns with its Extended Credit Facility (ECF) arrangements, as noted in recent IMF reviews, signaling efforts to address fiscal or developmental challenges.

Conclusion

Tanzania’s IMF credit outstanding grew by 18.98% from TZS 3.07 trillion to TZS 3.65 trillion between June 30 and July 25, 2025, driven by TZS 0.58 trillion in disbursements and no repayments. Ranking 2nd in East Africa and 11th in Africa, Tanzania plays a pivotal regional role while maintaining a modest continental footprint. Its 100% share of East African disbursements underscores active IMF engagement, likely tied to economic stabilization or development goals. Continued monitoring of Tanzania’s IMF activities will be crucial for understanding its fiscal trajectory in East Africa and beyond.

Tanzania’s significant reliance on International Monetary Fund (IMF) financing, evidenced by its 16.86% share of African disbursements (TZS 0.58 trillion out of TZS 3.46 trillion) between June 30 and July 25, 2025, underscores its strategic use of IMF resources to support economic development. With IMF credit outstanding rising by 18.98% from TZS 3.07 trillion to TZS 3.65 trillion during this period (based on an exchange rate of approximately TZS 2,735 per USD, sourced from recent web data), Tanzania leverages programs like the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF) to address fiscal and developmental challenges. This analysis explores how this reliance shapes Tanzania’s fiscal policy and economic resilience, drawing on IMF data and broader economic insights.

Key Figures

The table below summarizes Tanzania’s key IMF financing metrics as of July 25, 2025, highlighting its position and economic indicators:

Fiscal Policy Impacts

Increased Fiscal Space for Priority Spending

Tanzania’s TZS 0.58 trillion in IMF disbursements provides significant fiscal space to fund priority sectors such as health, education, and infrastructure. The ECF program, with total disbursements reaching approximately TZS 3.42 trillion (USD 1.25 billion) by July 2025, supports social spending while pursuing fiscal consolidation. Recent IMF reviews highlight Tanzania’s efforts to increase funding for health workers, teachers, and social programs, aligning with Vision 2025 goals for poverty reduction and human capital development. For example, a supplementary budget in FY24/25 increased public spending by 0.4% of GDP to clear domestic arrears and enhance education and health initiatives. This financing allows Tanzania to address immediate developmental needs without drastic expenditure cuts or immediate tax hikes.

However, this reliance risks delaying structural fiscal reforms. The temporary pause in fiscal consolidation in FY24/25, as noted by the IMF, reflects a trade-off between short-term spending needs and long-term fiscal discipline. Without sustained efforts to boost domestic revenue (currently at 13% of GDP), Tanzania may face challenges sustaining this level of expenditure once IMF support tapers.

Pressure to Enhance Domestic Revenue Mobilization

Tanzania’s heavy reliance on IMF financing underscores the urgency of strengthening domestic revenue collection to reduce external dependency. The IMF and World Bank note that Tanzania’s tax-to-GDP ratio of 13% in 2024 is below the Sub-Saharan African average of 16%, limiting fiscal autonomy. The ECF includes reforms to expand the tax base, streamline tax policies, and improve revenue administration. For instance, Tanzania is implementing digital tax systems and reducing bureaucratic inefficiencies to boost compliance. The TZS 0.58 trillion disbursement, while critical, may reduce short-term pressure to accelerate these reforms, potentially delaying fiscal self-sufficiency. Strengthening domestic revenue is essential to sustain development gains and reduce reliance on external financing.

Debt Sustainability Concerns

The absence of repayments in July 2025 and the increase in IMF credit to TZS 3.65 trillion raise concerns about long-term debt sustainability. Tanzania’s public debt, at approximately 50% of GDP in 2024, is considered sustainable with a moderate risk of distress, per IMF and World Bank assessments. However, continued reliance on external financing, even if concessional, adds to the debt burden. The IMF’s 2025 Article IV consultation emphasizes resuming fiscal consolidation in FY25/26 to maintain debt sustainability. Risks such as global economic slowdown, commodity price volatility, or reduced donor support could strain Tanzania’s repayment capacity, necessitating prudent fiscal management to balance IMF financing with sustainable debt levels.

Economic Resilience Impacts

1. Support for Macroeconomic Stability

Tanzania’s IMF financing enhances economic resilience by supporting macroeconomic stability. The TZS 0.58 trillion disbursement in July 2025 supports balance of payments stability, easing foreign exchange market pressures and maintaining adequate reserves (USD 5.7 billion, or TZS 15.58 trillion, covering 3.8 months of imports in March 2025). Low inflation (3.3% in March 2025, below the Bank of Tanzania’s 5% target) and projected 6% real GDP growth in 2025 reflect the stabilizing role of IMF funds. These conditions foster investor confidence and support private sector growth, critical for economic resilience.

2. Climate Resilience and Structural Reforms

The RSF, part of Tanzania’s IMF financing, bolsters resilience against climate-related risks, which threaten agriculture and tourism—key economic sectors. The RSF’s USD 55.9 million (TZS 0.15 trillion) disbursed in December 2024 supports reforms for disaster risk management, climate-integrated budgeting, and financial sector supervision for climate risks. Given Tanzania’s vulnerability to floods and droughts, these measures are vital for long-term resilience. Additionally, ECF-supported structural reforms, such as improving the business environment and reducing regulatory barriers, aim to diversify the economy and boost private sector-led growth, further enhancing resilience.

3. Risks from External and Domestic Vulnerabilities

Tanzania’s reliance on IMF financing, with a 16.86% share of African disbursements, exposes it to external and domestic risks. The IMF highlights global risks, including economic slowdown and geoeconomic fragmentation, which could disrupt financing flows. Domestically, the 2025 national elections may delay reforms, as noted in a 2024 IMF working paper, potentially impacting industrial production and increasing borrowing costs. Over-reliance on IMF funds could also strain economic resilience if domestic revenue diversification lags, leaving Tanzania vulnerable to external shocks. Balancing IMF support with domestic reforms is critical to mitigate these risks.

Key Considerations for Tanzania

• Strategic Allocation of Funds: The TZS 0.58 trillion disbursement should prioritize high-impact investments in infrastructure, health, and education to maximize economic returns and align with Vision 2025.
• Governance and Transparency: ECF reforms emphasize improving public financial management and anti-corruption measures to ensure efficient use of IMF funds and build investor confidence.
• Economic Diversification: Reducing reliance on agriculture and tourism through private sector development and ECF-supported regulatory reforms is essential for resilience.
• Climate Adaptation: Continued RSF support is crucial to address climate vulnerabilities, protecting key sectors and sustaining economic growth.

Conclusion

Tanzania’s reliance on IMF financing, with a 16.86% share of African disbursements (TZS 0.58 trillion), significantly influences its fiscal policy and economic resilience. The funds provide fiscal space for critical spending, supporting macroeconomic stability and 6% GDP growth in 2025. However, low domestic revenue (13% of GDP) and rising debt (50% of GDP) highlight the need for stronger revenue mobilization and prudent debt management. The ECF and RSF programs enhance resilience through structural and climate-focused reforms, but risks from global uncertainties and domestic policy delays persist. By strategically leveraging IMF financing, advancing governance, and diversifying its economy, Tanzania can strengthen its fiscal policy and build sustainable economic resilience.

Tanzania’s decision to make no repayments to the International Monetary Fund (IMF) during July 2025, while receiving TZS 0.58 trillion (USD 213.1 million) in disbursements, contributed to a 18.98% increase in its IMF credit outstanding, from TZS 3.07 trillion to TZS 3.65 trillion (based on an exchange rate of approximately TZS 2,735 per USD, sourced from recent web data). This strategy, part of Tanzania’s engagement with the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF), reflects a focus on maximizing liquidity to address immediate fiscal and developmental needs. However, the absence of repayments raises questions about the long-term sustainability of Tanzania’s debt, particularly given its public debt level of approximately 50% of GDP in 2024 and a moderate risk of debt distress, as assessed by the IMF and World Bank. This analysis explores the implications of Tanzania’s zero repayments for its long-term debt sustainability, drawing on IMF data and broader economic insights.

Key Figures

The table below summarizes Tanzania’s key IMF financing and debt metrics as of July 25, 2025, highlighting the context of its zero repayments:

Implications for Long-Term Debt Sustainability

Increased Debt Burden and Future Repayment Pressure

Tanzania’s zero repayments in July 2025, coupled with TZS 0.58 trillion in new IMF disbursements, increase its external debt stock, which stood at USD 33.91 billion (TZS 92.74 trillion) in January 2025. The IMF’s concessional financing, with low or zero interest rates and extended repayment periods (e.g., 5½-year grace period for ECF loans), mitigates immediate servicing costs. However, the absence of repayments during this period defers obligations, potentially creating a future repayment bulge. The IMF’s 2025 Article IV consultation projects that fiscal consolidation will resume in FY25/26 to maintain debt sustainability, but accumulating debt without repayments could strain Tanzania’s capacity if economic conditions deteriorate. With 68.1% of external debt denominated in USD, a weaker Tanzania Shilling (depreciated 8% in 2023) could further inflate repayment costs, threatening long-term sustainability.

Fiscal Space for Development vs. Sustainability Trade-Off

The zero-repayment strategy maximizes fiscal space, allowing Tanzania to allocate the TZS 0.58 trillion disbursement to priority sectors like transport (21% of external debt allocation), social welfare, and education (19.9% each). The ECF supports these investments, aligning with Vision 2025 goals for infrastructure and human capital development. For example, the World Bank’s Sustainable Rural Water Supply and Sanitation Program, concluding in 2025, has improved water access for 7.92 million people, demonstrating the developmental impact of such financing. However, this approach risks prioritizing short-term gains over long-term sustainability. The IMF warns that pausing fiscal consolidation in FY24/25, with a 0.4% GDP increase in public spending, could undermine debt sustainability if not paired with revenue reforms. Tanzania’s low tax-to-GDP ratio (13% in 2024) limits its ability to service future debts without continued external support, posing a sustainability challenge.

Dependence on Concessional Financing

Tanzania’s zero repayments reflect its reliance on concessional IMF financing, which constitutes a significant portion of its external debt (71.7% from multilateral and bilateral creditors in FY2021/22). The IMF’s Debt Sustainability Analysis (DSA) indicates that Tanzania’s public debt-to-GDP ratio (45.7% in FY2022/23) remains below the 55% benchmark for its debt-carrying capacity, suggesting moderate risk. However, the DSA emphasizes the importance of maintaining concessional terms to avoid unsustainable borrowing. Without repayments, Tanzania’s debt stock grows, and any shift to non-concessional borrowing (e.g., commercial loans at higher rates) could elevate debt distress risks, especially given rising domestic interest rates (T-Bill rates rose from 5.8% to 11.7% by March 2024). Sustained access to concessional financing is critical, but over-reliance without repayment progress could signal fiscal vulnerabilities to creditors.

Risks from External and Domestic Vulnerabilities

The absence of repayments amplifies Tanzania’s exposure to external and domestic risks. Externally, the IMF highlights risks from global economic slowdown, geoeconomic fragmentation, and reduced donor support, which could limit future financing. Domestically, the 2025 national elections may delay reforms, increasing fiscal pressures. A 2019 study notes that external debt significantly impacts private investment in Tanzania, and failure to monitor debt closely could crowd out private sector growth, undermining economic resilience. The high USD exposure (68.1% of external debt) exacerbates risks from exchange rate fluctuations, potentially increasing future repayment costs. Without repayments, Tanzania’s ability to build fiscal buffers is limited, reducing its capacity to absorb shocks and threatening long-term debt sustainability.

Opportunities for Strategic Debt Management

Tanzania’s zero repayments provide an opportunity to strategically manage its debt portfolio. The IMF and World Bank recommend prioritizing projects with high socioeconomic returns, such as infrastructure and human capital investments, to maximize the benefits of borrowed funds. The ECF’s focus on revenue mobilization, including a medium-term revenue strategy, aims to increase the tax-to-GDP ratio, reducing reliance on external debt. Additionally, diversifying debt currencies (e.g., 16.1% Euro, 6.3% Chinese Yuan) helps mitigate USD exposure risks. By implementing governance reforms, such as transparent debt management and anti-corruption measures, Tanzania can enhance creditor confidence and ensure sustainable debt levels, as emphasized in the IMF’s 2025 consultation.

Key Considerations for Tanzania

• Revenue Mobilization: Increasing the tax-to-GDP ratio from 13% to closer to the Sub-Saharan African average (16%) through digital tax systems and broader tax bases is essential to reduce debt dependency.
• Project Selection: Prioritizing high-return investments in transport, energy, and education, as seen in current debt allocations, can drive sustainable growth.
• Debt Monitoring: Close monitoring of external debt, particularly USD-denominated loans, is critical to manage exchange rate risks.
• Fiscal Consolidation: Resuming fiscal consolidation in FY25/26, as planned, will help rebuild fiscal buffers and ensure debt sustainability.
• Climate Resilience: RSF-supported climate adaptation measures can protect key sectors like agriculture, reducing debt distress risks from climate shocks.

Conclusion

Tanzania’s zero repayments to the IMF in July 2025, alongside TZS 0.58 trillion in disbursements, enhance short-term fiscal space for critical investments in infrastructure and social services, aligning with Vision 2025. However, this strategy increases the debt burden, with external debt at USD 33.91 billion (TZS 92.74 trillion) and public debt at 50% of GDP, raising concerns about long-term sustainability. While concessional IMF financing mitigates immediate risks, deferred repayments could create future repayment pressures, particularly with high USD exposure and low domestic revenue (13% of GDP). External risks, such as global economic slowdown, and domestic challenges, like election-related reform delays, further complicate sustainability. By prioritizing revenue mobilization, high-return projects, and governance reforms, Tanzania can leverage IMF financing to support development while safeguarding long-term debt sustainability.

Tanzania’s National Development Vision 2050 (Dira ya Taifa ya Maendeleo 2050) aims to transform the nation into a prosperous, equitable, and self-reliant middle-income economy by 2050, targeting a GDP of $1 trillion and a per capita income of $7,000 (Vision 2050). A cornerstone of this ambition is a fair, efficient, and predictable tax system to finance critical investments in infrastructure, health, and education. Despite progress, with the tax-to-GDP ratio rising from 10.8% in 2000 to 11.7% in 2020 (World Bank), challenges such as a large informal sector (40–50% of GDP), tax evasion, and over-reliance on indirect taxes persist. This analysis examines Tanzania’s tax system evolution, current state, future aspirations, and fiscal hurdles to achieving Vision 2050’s goals.

The Foundation: Understanding Tanzania's Tax Evolution

Historical Context: Where We Come From

Tanzania’s tax system has evolved significantly since independence in 1961. Key historical milestones include:

• Post-Independence and Arusha Declaration (1967): The adoption of the Arusha Declaration emphasized socialism and self-reliance, leading to a tax system focused on mobilizing resources for public services and combating poverty, ignorance, and disease. The tax regime was heavily centralized, with limited private sector involvement, which constrained revenue generation due to a narrow tax base.
• Economic Reforms (1980s–1990s): Structural adjustment programs introduced market-oriented reforms, including tax policy changes to encourage private investment. The reintroduction of a multi-party system in 1992 and subsequent governance reforms aimed to enhance transparency and accountability in tax administration.
• Tax Revenue Trends (2000–2020): Between 2000 and 2020, Tanzania improved its tax-to-GDP ratio, though it remained below the Sub-Saharan Africa average. For instance, the tax-to-GDP ratio increased from approximately 10.8% in 2000 to 11.7% in 2020 (World Bank data). However, challenges such as tax evasion, a large informal sector, and inefficiencies in tax collection persisted.
• Key Achievements: The establishment of the Tanzania Revenue Authority (TRA) in 1996 improved tax administration, leading to increased domestic revenue mobilization. By 2020, Tanzania achieved lower-middle-income status, partly due to improved fiscal policies, with per capita income rising from $453 in 2000 to $1,277 in 2023 (Vision 2050).

Current Status: Where We Are

As of 2025, Tanzania’s tax system has made notable strides but faces structural and operational challenges:

• Tax-to-GDP Ratio: The tax-to-GDP ratio is approximately 11.7% (World Bank, 2020), significantly lower than the Sub-Saharan Africa average of 16.5% and far below the 15–20% target often recommended for sustainable development. This reflects a narrow tax base, with heavy reliance on indirect taxes like VAT (approximately 40% of total revenue) and limited contributions from personal and corporate income taxes.
• Tax Administration Improvements: The TRA has implemented digital platforms, such as electronic tax filing and payment systems, improving compliance and reducing administrative costs. The Vision 2050 highlights efforts to create a predictable and transparent tax system to encourage compliance and simplify business registration.
• Informal Sector Challenges: The informal sector, which accounts for about 40–50% of GDP (International Labour Organization estimates), remains largely untaxed, limiting revenue potential. Efforts to integrate the informal sector into the tax net, such as simplified tax regimes for small businesses, are ongoing but face resistance due to high compliance costs and low tax literacy.
• Revenue Composition: In 2023/24, domestic revenue was approximately TZS 27.4 trillion ($10.2 billion), with taxes contributing 86% of this amount (Tanzania Budget Speech 2023/24). However, reliance on a few large taxpayers and volatile revenue sources, such as mining royalties, poses risks to fiscal stability.
• Public Debt Management: The Vision 2050 notes that Tanzania’s national debt remains sustainable, as confirmed by international financial institutions. However, efficient debt management and equitable tax policies are critical to maintaining fiscal stability.

Vision 2050 Aspirations: Where We Are Headed

The Vision 2050 outlines ambitious goals for Tanzania’s tax system to support a strong, inclusive, and competitive economy by 2050.

Key objectives and expectations related to taxation include:

• Fair and Efficient Tax System: The vision aims for a tax system that is equitable, efficient, and predictable, promoting voluntary compliance and fostering business growth. The goal is to increase the tax-to-GDP ratio to support a high-income economy with a GDP of $1 trillion and per capita income of $7,000 by 2050.
• Revenue Mobilization: The vision emphasizes increasing the tax-to-GDP ratio through a broader tax base, improved tax administration, and reduced tax evasion. This will finance priority sectors such as infrastructure, energy, and social services.
• Digital Tax Systems: By 2050, over 50% of government services are expected to be delivered digitally, with 70% of citizens possessing ICT skills. This includes digital tax platforms to enhance transparency, reduce compliance costs, and integrate the informal sector.
• Support for Key Sectors: The vision identifies agriculture, tourism, manufacturing, construction, mining, and financial services as key sectors for economic transformation. Tax incentives and simplified regimes are proposed to stimulate investment and job creation in these sectors.
• Sustainable Development Financing: The vision emphasizes mobilizing domestic resources to reduce reliance on external aid, aligning with the goal of a self-reliant nation. This includes leveraging carbon credit markets and climate finance to support environmental sustainability.

Fiscal Challenges in Achieving Vision 2050

Achieving the Vision 2050 goals for taxation will face several fiscal challenges, as outlined below:

a) Narrow Tax Base and Informal Sector

• Challenge: The large informal sector (40–50% of GDP) limits revenue collection due to low tax compliance and high administrative costs. The Vision 2050 document highlights efforts to integrate informal workers into social protection and tax systems, but resistance persists due to low tax literacy and perceived high compliance costs.
• Impact: A narrow tax base restricts revenue growth, with the tax-to-GDP ratio stagnating below 12%. This limits funding for critical investments in infrastructure, health, and education.
• Mitigation: Simplify tax regimes for small and medium enterprises (SMEs), enhance tax education, and leverage digital platforms to register and tax informal businesses. For example, mobile money taxation has shown success in capturing informal transactions.

b) Tax Evasion and Illicit Financial Flows

• Challenge: Tax evasion, particularly in the mining and trade sectors, and illicit financial flows cost Tanzania billions annually. The OECD estimates that illicit financial flows in Africa amount to $50–80 billion yearly, with Tanzania losing significant revenue due to transfer pricing and underreporting.
• Impact: Revenue losses undermine fiscal sustainability and the ability to finance Vision 2050 goals, such as achieving a $1 trillion GDP.
• Mitigation: Strengthen anti-evasion measures through international cooperation (e.g., OECD’s Base Erosion and Profit Shifting framework), improve tax audits, and enhance transparency in extractive industries via the Extractive Industries Transparency Initiative (EITI).

c) Over-Reliance on Indirect Taxes

• Challenge: Heavy reliance on VAT and excise duties (over 60% of tax revenue) disproportionately burdens low-income households, exacerbating inequality. The Vision 2050 document calls for a fair tax system but does not specify reforms to reduce regressive taxation.
• Impact: Regressive taxes hinder the vision’s goal of inclusive growth and poverty eradication.
• Mitigation: Expand progressive taxes, such as personal and corporate income taxes, and introduce wealth or property taxes to ensure equitable revenue distribution.

d) Administrative and Technological Constraints

• Challenge: Despite progress in digital tax systems, rural areas face limited internet access and low ICT literacy, hindering digital tax compliance. Additionally, the TRA faces capacity constraints in auditing and enforcement.
• Impact: Inefficient tax administration reduces revenue collection efficiency and delays the goal of 50% digital government services by 2050.
• Mitigation: Invest in rural digital infrastructure, train tax officials, and adopt emerging technologies like blockchain for transparent tax collection.

e) Economic Volatility and External Shocks

• Challenge: Tanzania’s economy is vulnerable to external shocks, such as commodity price fluctuations (e.g., mining royalties) and climate change impacts, which affect agricultural productivity and tax revenue. The vision’s reliance on sectors like agriculture and tourism increases this vulnerability.
• Impact: Revenue volatility threatens fiscal stability and the ability to fund long-term investments.
• Mitigation: Diversify revenue sources by promoting manufacturing and financial services, and establish a stabilization fund to cushion against economic shocks.

f) Policy and Regulatory Inconsistencies

• Challenge: Frequent policy changes and complex regulatory frameworks create uncertainty for businesses, discouraging investment and tax compliance. The vision aims for predictable policies but acknowledges past inconsistencies.
• Impact: Unpredictable tax policies deter foreign direct investment (FDI), critical for achieving the $1 trillion GDP target.
• Mitigation: Streamline tax regulations, reduce unnecessary levies, and establish a clear policy framework to enhance investor confidence.

g) High Public Debt and Expenditure Pressures

• Challenge: While public debt is sustainable, increasing expenditure demands for infrastructure, health, and education could strain fiscal resources. The debt-to-GDP ratio was 41.7% in 2023 (IMF data), and rising debt servicing costs could limit development spending.
• Impact: High debt servicing reduces fiscal space for Vision 2050 investments, risking delays in achieving goals like poverty eradication.
• Mitigation: Optimize public expenditure, prioritize high-impact projects, and enhance domestic revenue mobilization to reduce borrowing needs.

Conclusion and Recommendations

Tanzania’s Vision 2050 provides a clear framework for transforming the tax system into a fair, efficient, and predictable mechanism to support a high-income, inclusive economy by 2050. While significant progress has been made since independence, challenges such as a narrow tax base, tax evasion, and administrative inefficiencies persist. To overcome these fiscal challenges and achieve the vision’s goals, the following recommendations are proposed:

1. Broaden the Tax Base: Implement simplified tax regimes for the informal sector and leverage digital platforms to enhance compliance, targeting a tax-to-GDP ratio of at least 20% by 2050.
2. Combat Tax Evasion: Strengthen TRA’s capacity through advanced auditing technologies and international cooperation to curb illicit financial flows.
3. Promote Progressive Taxation: Shift from regressive indirect taxes to progressive taxes, such as income and property taxes, to ensure equitable revenue distribution.
4. Enhance Digital Tax Systems: Invest in rural digital infrastructure and ICT training to achieve the 70% digital literacy target and streamline tax administration.
5. Diversify Revenue Sources: Reduce reliance on volatile sectors like mining by promoting manufacturing and financial services through tax incentives.
6. Ensure Policy Stability: Establish a consistent tax policy framework to boost investor confidence and support FDI inflows.
7. Strengthen Debt Management: Prioritize high-impact projects and enhance domestic revenue to reduce reliance on borrowing.

Below is a table summarizing key figures related to Tanzania’s tax system in the context of the National Development Vision 2050, highlighting historical, current, and projected data, as well as fiscal challenges.

Notes:

• The tax-to-GDP ratio target of ~20% is inferred from the need to finance Vision 2050’s ambitious goals, such as infrastructure and social services, though not explicitly stated.
• The informal sector’s contribution to GDP remains significant, posing a challenge to tax base expansion.
• The Vision 2050 document emphasizes digital tax systems and reduced reliance on indirect taxes like VAT to achieve a fairer tax system.
• External data from the World Bank, IMF, and ILO provide context for historical and current figures, while Vision 2050 targets.

The Tanzania National Development Vision 2050 (Dira ya Taifa ya Maendeleo 2050) charts an ambitious path to transform Tanzania into a prosperous, equitable, and self-reliant nation by 2050, building on its robust economic growth of 6.2% annually from 2000 to 2024, which increased per capita income from USD 453 to USD 1,277 and reduced extreme poverty from 36% to 26% (Vision 2050). With a current GDP of approximately USD 85.42 billion in 2024 and a projected growth rate of 5.5% (Bank of Tanzania, 2024), the vision targets a USD 1 trillion economy and USD 7,000 per capita income by 2050, driven by industrialization, digital transformation, and leveraging Tanzania’s vast resources, including 44 million hectares of arable land and a youthful population (median age 18, World Bank, 2024). This analysis examines Tanzania’s economic trajectory, current status, Vision 2050’s goals, and the strategies needed to overcome challenges and seize opportunities for sustainable growth.

1. Historical Economic Context (Pre-2025)

Tanzania’s economic journey over the past few decades provides the foundation for its current position and Vision 2050 aspirations. Key historical milestones include:

• GDP Growth: From 2000 to 2024, Tanzania achieved an average real GDP growth rate of 6.2% per annum (Vision 2050). This positioned Tanzania among Africa’s fastest-growing economies, driven by agriculture, tourism, and mining. For comparison, the global GDP growth rate averaged 2.3% and Sub-Saharan Africa 2.7% over 2012–2021.
• Per Capita Income: Per capita income rose from USD 453 in 2000 to USD 1,277 in 2023 (Vision 2050), a 170% increase. This growth enabled Tanzania to transition to lower-middle-income status in July 2020.
• Poverty Reduction: Extreme poverty declined from 36% in 2000 to 26% in 2022 (Vision 2050). However, due to high population growth (nearly 3% annually), the absolute number of people living below the poverty line remained stable at 11–12 million.
• Sectoral Contributions: Agriculture contributed 25% to GDP, employing 65% of the workforce, while tourism accounted for 25% of export earnings (Vision 2050). Mining, particularly gold, drove 30% of export revenues.
• Challenges: Slow agricultural growth (around 4% annually), infrastructure deficits, and reliance on public sector-driven growth limited structural transformation (Vision 2050). The manufacturing sector stagnated at 8% of GDP since the 1990s.

Critical Note: While Tanzania’s growth was impressive, it started from a low base (GDP of USD 13.38 billion in 2000), and poverty reduction was uneven, with rural areas lagging due to low agricultural productivity. The reliance on public investment and aid (historically significant) raises questions about sustainability, as private sector dynamism was constrained by regulatory uncertainty and infrastructure gaps.

2. Current Economic Situation (2024–2025)

As of 2025, Tanzania’s economy remains robust but faces challenges in achieving inclusive growth. Key indicators include:

• GDP Growth: In 2024, Tanzania’s economy grew by 5.5%, reaching TZS 156.6 trillion (approx. USD 85.42 billion), driven by electricity generation (e.g., Julius Nyerere Hydropower Plant), infrastructure investments, and improved agricultural production. The African Development Bank (2024) reported 2023 growth at 5.3%, up from 4.7% in 2022, with agriculture, construction, and manufacturing as key drivers.
• Inflation: Inflation remained low at 3.1% in 2024, projected to rise to 5% in 2025 due to global pressures but supported by effective monetary policy and a strategic grain reserve of 340,000 tons. The IMF (2024) reported 3.2% inflation in 2023, among the lowest in the region.
• Per Capita Income: Estimated at USD 1,277 in 2023 (Vision 2050), with slight growth expected in 2024–2025 due to continued economic expansion.
• Exports: Exports rose 16.8% in the year ending April 2025, reaching USD 16.7 billion, driven by cashew nuts (141% increase), gold (24.5%), coffee (66.3%), and tourism receipts (7% increase).
• Fiscal and Debt Position: The fiscal deficit was 3.5% of GDP in 2022/23, financed by external and domestic borrowing, with public debt at 45.5% of GDP. Foreign exchange reserves covered 4.5 months of imports in 2023, down from 4.7 months in 2022.
• Investment: The Tanzania Investment Centre recorded USD 3.7 billion in project registrations from January to May 2025, up from USD 2.8 billion in 2024, with manufacturing leading (156 projects, creating 41,117 jobs).
• Sectoral Dynamics:
  • Agriculture: Contributes 26% to GDP but grows slowly at 4% annually, employing 65% of the workforce.
  • Tourism: Generates 25% of foreign exchange and supports 1.5 million jobs (Vision 2050).
  • Manufacturing: Stagnant at 8% of GDP, with limited export contribution (below 25%).
  • ICT: Contributes 7% to GDP, driven by mobile banking and telecommunications, with 46% internet penetration and 89% mobile penetration (, ITU 2024).

Current Challenges:

• Slow Structural Transformation: The economy remains agriculture-dependent, with low industrial productivity.
• Poverty and Inequality: Despite a decline in poverty rates, 26% of the population remains extremely poor, and inequality persists (Gini coefficient 0.35,).
• Population Growth: A 3% annual growth rate projects a population of 85 million by 2050, straining education, health, and job creation.
• Infrastructure Gaps: Limited access to electricity and quality transport hampers businesses.
• Foreign Exchange: The Tanzanian shilling depreciated by 8% in 2023 due to foreign exchange shortages, with a 2% appreciation in late 2024.

Critical Note: The current growth model, while stable, is not inclusive enough to significantly reduce poverty or create sufficient high-productivity jobs. The World Bank (2024) warns that without private sector-driven growth, Tanzania’s Vision 2050 goals may be unattainable. The appreciation of the shilling in 2024 is a positive signal, but reliance on commodity exports (e.g., gold, cashew nuts) makes the economy vulnerable to global price fluctuations.

3. Tanzania National Development Vision 2050: Economic Ambitions

The Vision 2050 aims to transform Tanzania into an upper-middle-income or high-income economy by 2050, with a national GDP of USD 1 trillion and a per capita income of USD 7,000 (Vision 2050). Some sources suggest an even more ambitious target of USD 2.5 trillion GDP, though this appears less realistic given current projections. The vision is built on three pillars, with the first—A Strong, Inclusive, and Competitive Economy—being the most relevant to economic development (Vision 2050).

Key economic targets include:

• GDP Growth: Achieve double-digit growth (10% annually) to quadruple the economy in 15 years (). Alternatively, a phased approach targets 6% growth in 2024–2025, 7.5% from 2026–2030, and 7.5% from 2046–2050.
• Per Capita Income: Increase from USD 1,277 in 2023 to USD 4,700–8,000 () or USD 12,000 for high-income status.
• Industrialization: Transition to an industrialized economy, with industry contributing over 40% to GDP (from 8% currently).
• Agriculture: Position Tanzania as Africa’s leading food producer and among the global top 10, leveraging 44 million hectares of arable land (Vision 2050).
• Energy: Increase per capita electricity consumption from 170 kWh to 600 kWh (sixfold increase) or up to 3,000 kWh (Vision 2050).
• Digital Economy: Achieve 90% internet penetration and a 15% ICT contribution to GDP (from 7% currently).
• Poverty Eradication: Eliminate extreme poverty by 2050 (Vision 2050).
• Investment: Attract USD 200 billion in infrastructure projects by 2050.

Critical Note: The USD 1 trillion GDP target requires an average growth rate of 8–10% annually, significantly higher than the current 5.5%. Achieving USD 2.5 trillion seems overly optimistic unless unprecedented reforms and investments occur. The vision’s focus on industrialization and digitalization is forward-thinking, but its reliance on generic terms like “prosperous” and “inclusive” lacks the specificity of past visions, such as Nyerere’s 1959 speech.

4. Steps to Achieve Vision 2050: Opportunities and Strategies

To achieve Vision 2050’s economic goals, Tanzania must leverage its opportunities and implement strategic reforms. Key steps include:

1. Industrialization and Value Addition:
   • Opportunity: Tanzania’s vast natural resources (e.g., gold, copper, graphite, nickel) and strategic location as a trade hub (Dar es Salaam port handles 90% of trade,) position it to become an industrial powerhouse.ticgl.com
   • Strategy: Invest in agro-processing, mineral beneficiation, and manufacturing to increase industry’s GDP share to 40%. For example, copper exports have doubled in value over the past decade, with potential for in-country refining to serve Asian markets.
   • Action: Simplify regulations, improve the business environment (current Doing Business rank: 141/190,), and promote public-private partnerships (PPPs) to attract USD 200 billion in investments.
2. Agricultural Modernization:
   • Opportunity: With 44 million hectares of arable land and abundant water resources, Tanzania can become a global food producer (Vision 2050). The EU is supporting agri-value chains (e.g., cereals, horticulture) to boost jobs and food security.
   • Strategy: Increase agricultural productivity (currently 4% growth) through mechanization, irrigation, and digital tools (e.g., precision farming). Secure land tenure to encourage investment.
   • Action: Implement the Second Agriculture Sector Development Program (ASDP II) to commercialize agriculture and prioritize high-value crops like cashew nuts and coffee.
3. Infrastructure Development:
   • Opportunity: Projects like the Standard Gauge Railway (SGR) and Julius Nyerere Hydropower Plant (2,115 MW) enhance trade and energy access. Modernized ports could double cargo traffic by 2032.
   • Strategy: Expand transport (roads, railways, ports) and energy infrastructure to achieve 100% electricity access and 50% renewable energy by 2050.
   • Action: Secure USD 200 billion in infrastructure financing through PPPs and international partnerships (e.g., China’s USD 1.4 billion railway concession,).
4. Digital Transformation:
   • Opportunity: The ICT sector’s 7% GDP contribution and 46% internet penetration provide a foundation for a digital economy. Mobile money platforms like M-Pesa drive financial inclusion (70% of adults, GSMA 2024).
   • Strategy: Expand 4G/5G networks, improve rural broadband, and promote e-governance to achieve 90% internet penetration and 15% ICT GDP contribution.
   • Action: Invest in fiber optic networks, support tech startups, and enhance cybersecurity through initiatives like the Digital4Tanzania program.
5. Human Capital Development:
   • Opportunity: A youthful population (median age 18, World Bank 2024) offers a demographic dividend if skilled.
   • Strategy: Raise literacy to 100% and improve technical/vocational training to address the 0.39 Human Capital Index gap (Vision 2050).
   • Action: Increase education spending (currently 3.3% of GDP, projected to rise to 4.1% by 2061 under high-fertility scenarios) and align curricula with industry needs.
6. Tourism and Blue Economy:
   • Opportunity: Tourism generates 25% of foreign exchange and could grow with sustainable practices (Vision 2050). The blue economy (e.g., fisheries, marine trade) is untapped.
   • Strategy: Promote eco-tourism, cultural tourism, and marine trade to create millions of jobs (Vision 2050).
   • Action: Develop coastal infrastructure and partner with the EU on climate-resilient blue economy initiatives.

Critical Note: These strategies align with Vision 2050’s pillars but require sustained political will and governance reforms. The private sector’s role must be central, as public-driven growth has limitations. International partnerships (e.g., EU’s €585 million for 2021–2027,) can provide funding, but overreliance on foreign aid risks dependency.

5. Challenges to Achieving Vision 2050

Tanzania faces significant hurdles that could impede Vision 2050’s economic goals:

1. Population Growth:
   • Challenge: A 3% annual population growth rate projects a population of 85–140 million by 2050, increasing demand for jobs, education, and services (,). Without fertility decline, public education costs could rise to 4.1% of GDP by 2061.
   • Impact: Strains infrastructure and job creation, potentially leaving 6 million more in poverty if growth isn’t inclusive.
   • Solution: Accelerate fertility decline through health and education investments to achieve a demographic dividend.
2. Infrastructure Deficits:
   • Challenge: Limited electricity access and transport bottlenecks hinder industrialization. The Logistics Performance Index ranks Tanzania 95th globally.
   • Impact: High business costs and reduced competitiveness.
   • Solution: Prioritize USD 200 billion in infrastructure investments, leveraging PPPs and international financing.
3. Skills Mismatch:
   • Challenge: The Human Capital Index (0.39) and literacy rate (78%) lag behind regional peers, with gaps in technical skills (Vision 2050).
   • Impact: Limits industrial and digital growth.
   • Solution: Expand vocational training and STEM education to meet industry demands.
4. Climate Change:
   • Challenge: Climate change could reduce GDP by 4% by 2050 and push 2.6 million more into poverty. Agriculture’s vulnerability to climate shocks is a concern.
   • Impact: Threatens food security and rural livelihoods.
   • Solution: Invest in climate-smart agriculture and renewable energy (50% of energy needs by 2050,).
5. Governance and Corruption:
   • Challenge: Regulatory uncertainty and corruption deter foreign investment. The National Anti-Corruption Strategy exists but needs stronger enforcement.
   • Impact: Slows private sector growth and investment inflows.
   • Solution: Enhance transparency, streamline regulations, and strengthen institutions.
6. Financing:
   • Challenge: The fiscal deficit (3.5% of GDP) and public debt (45.5% of GDP) limit fiscal space. Mobilizing USD 200 billion for infrastructure is ambitious.
   • Impact: Constrains investment in key sectors.
   • Solution: Expand the tax base, deepen financial markets, and attract concessional financing.

Critical Note: Governance and financing challenges are critical. The Vision 2050’s success hinges on addressing corruption and regulatory barriers, as seen in past concerns over foreign investor confidence. The climate change risk highlighted by the World Bank may be overstated in some narratives, but agricultural vulnerability is undeniable given its 26% GDP contribution.

6. Opportunities to Leverage

Tanzania’s unique strengths provide a foundation for achieving Vision 2050:

1. Demographic Dividend: A youthful population (median age 18) can drive growth if skilled and employed (World Bank, 2024;). A demographic transition could double per capita GDP growth and lift 6 million out of poverty by 2050.
2. Natural Resources: Abundant arable land (44 million hectares), minerals (gold, copper, graphite), and tourism assets (e.g., Serengeti, Zanzibar) offer economic potential (Vision 2050).
3. Strategic Location: Tanzania’s ports and regional trade agreements (EAC, SADC) position it as a trade hub. The Dar es Salaam port’s expansion could double cargo traffic by 2032.
4. Global Partnerships: Agreements with the EU (€585 million, 2021–2027), China (USD 1.4 billion railway deal), and India (duty-free access) enhance investment and trade.
5. Digital Growth: High mobile penetration (89%) and growing ICT sector (7% of GDP) provide a platform for digital transformation.

Critical Note: The demographic dividend is a double-edged sword; without job creation, it risks becoming a liability. Strategic partnerships must be managed to avoid dependency or unfavorable terms, as seen in some past aid-driven growth models.

7. Conclusion

Tanzania’s economic journey from 2000 to 2025 showcases resilience, with 6.2% average GDP growth, a rise in per capita income to USD 1,277, and poverty reduction from 36% to 26%. In 2024–2025, the economy grew at 5.5%, supported by agriculture, tourism, and infrastructure, but challenges like slow structural transformation and population growth persist. Vision 2050’s ambitious targets—USD 1 trillion GDP, USD 7,000 per capita income, and industrialization—require double-digit growth and transformative reforms.

To achieve this, Tanzania must modernize agriculture, expand infrastructure, foster digitalization, and invest in human capital while addressing challenges like population growth, climate risks, and governance. Opportunities such as a youthful workforce, natural resources, and strategic trade positioning provide a strong foundation. However, success depends on inclusive policies, private sector empowerment, and robust governance to ensure sustainable and equitable growth.

In June 2025, Tanzania’s headline inflation rate stood at 3.3%, a slight increase from 3.2% in May 2025, remaining within the government’s 3–5% target and aligned with SADC/EAC benchmarks. However, the sharp rise in food inflation to 5.6% in May 2025, driven by supply chain disruptions and price spikes in staples like rice (2.5%), maize flour (0.8%), and cassava (4.2%), significantly impacts the cost of living, particularly for low-income households reliant on these goods. While energy and utilities inflation eased to 6.1% from 7.3% a year earlier, housing costs (7.2% annual increase) and non-food items like charcoal (1.5%) continue to strain budgets. With approximately 26% of Tanzanians living below the poverty line and 80% in the informal sector, these price pressures could exacerbate poverty, fuel wage demands, and challenge economic stability, despite a stable core inflation rate of 1.9%.

Key Inflation Metrics (June 2025)

• Headline Inflation: The annual headline inflation rate for June 2025 is 3.3%, slightly up from 3.2% in May 2025, but within the Tanzanian government's target range of 3–5% and aligned with Southern African Development Community (SADC) and East African Community (EAC) benchmarks. This indicates relative macroeconomic stability.
• Core Inflation: Excluding volatile items like unprocessed food and energy, core inflation decreased to 1.9% in June 2025 from 2.1% in May 2025, reflecting stable prices for non-volatile goods and services.
• Food Inflation: Food and non-alcoholic beverages, which constitute 28.2% of the NCPI basket, saw a 3.5% annual price increase in June 2025, up from a 0.7% monthly rise. Specific food items driving this include rice (2.5%), sorghum grains (1.2%), finger millet grains (7.0%), maize flour (0.8%), cooking bananas (3.9%), and dry cassava (4.2%). Food inflation has risen sharply from 1.6% in May 2024 to 5.6% in May 2025, primarily due to transportation disruptions and supply chain challenges.
• Energy, Fuel, and Utilities: Inflation in this sector decreased from 7.3% in May 2024 to 6.1% in May 2025, reflecting a decline in global oil prices. However, items like charcoal (1.5%) and diesel (0.7%) still saw monthly price increases in June 2025.
• Non-Food Items: Price increases in non-food items, such as garments for men and children (0.2–0.3%), footwear for children (0.3%), household furniture (0.4%), and laptop computers (0.6%), contributed to the overall NCPI rise from 119.85 in May 2025 to 120.18 in June 2025 (a 0.3% monthly increase).

Impact on Cost of Living

1. Food Price Pressures:
   • Food and non-alcoholic beverages, with a significant weight of 28.2% in the NCPI, are a major driver of the cost of living, especially for low-income households who allocate a large share of their budgets to food. The 5.6% food inflation rate in May 2025, coupled with specific increases in staples like rice, maize, and cassava, directly raises household expenses.
   • For example, a 7.0% rise in finger millet grains and 4.2% in dry cassava disproportionately affects rural and low-income households reliant on these staples. This could lead to reduced purchasing power and potential shifts to lower-quality or less nutritious food options, exacerbating food insecurity.
2. Non-Food and Energy Costs:
   • While energy inflation has moderated to 6.1%, the rise in charcoal and diesel prices still impacts household budgets, particularly for cooking and transportation. Urban households, reliant on purchased fuels, feel this pinch more acutely.
   • Non-food items like clothing, footwear, and household goods saw modest increases (e.g., 0.2–0.4%), which cumulatively add to living costs, especially for families with children or those maintaining homes.
3. Housing and Utilities:
   • The housing, water, electricity, gas, and other fuels category, with an 18% weight in the NCPI, recorded a 0.4% monthly decrease but a 7.2% annual increase. Rising rental costs (0.3%) and maintenance materials (0.2%) contribute to higher living expenses, particularly in urban areas like Dar es Salaam.

Impact on Poverty Levels

• Increased Poverty Risk: The sharp rise in food inflation (5.6%) outpaces headline inflation (3.3%), disproportionately affecting low-income households. According to the World Bank, approximately 26% of Tanzanians lived below the international poverty line ($2.15/day, 2017 PPP) in recent estimates. Higher food prices could push more households into poverty, particularly in rural areas where agriculture is a primary livelihood but supply disruptions increase costs.
• Nutritional Impact: Price spikes in staples like maize and rice may force households to reduce consumption or switch to less nutritious alternatives, potentially worsening malnutrition rates, especially among children. Tanzania’s 2022 Demographic and Health Survey reported 30% of children under five are stunted, and rising food costs could aggravate this.

Influence on Wage Demands

• Pressure for Higher Wages: The rising cost of living, driven by food and non-food price increases, is likely to spur demands for wage adjustments, particularly in urban areas and formal sectors. Public sector workers and trade unions may push for salary hikes to match the 3.3% headline inflation rate or the higher 5.6% food inflation rate.
• Informal Sector Challenges: Over 80% of Tanzania’s workforce is in the informal sector, where income adjustments are less structured. These workers may struggle to cope with rising costs, potentially leading to social unrest or increased reliance on government subsidies.

Economic Stability

• Stable Macroeconomic Environment: The headline inflation rate of 3.3% remains within the government’s 3–5% target and aligns with SADC/EAC benchmarks, signaling relative economic stability. The decline in core inflation to 1.9% further supports this, as it indicates controlled price growth in non-volatile sectors.
• External Factors: Easing global oil prices have reduced energy inflation, providing some relief to transport and production costs. However, transportation disruptions (e.g., weather-related issues or infrastructure bottlenecks) have driven food inflation, highlighting vulnerabilities in domestic supply chains.
• Policy Implications: The Bank of Tanzania is likely to maintain a cautious monetary policy to keep inflation within the target range. However, persistent food price increases may necessitate targeted interventions, such as subsidies for staples or investments in agricultural logistics, to stabilize prices.

Analytical Insights

• Sector-Specific Impacts: Food inflation’s dominance reflects Tanzania’s reliance on agriculture and vulnerability to supply shocks. While energy price relief is positive, the overall cost-of-living increase strains household budgets, particularly for the poor.
• Poverty and Inequality: The disproportionate impact of food inflation on low-income households could widen inequality, as wealthier households are better equipped to absorb price shocks. This may exacerbate urban-rural disparities, given higher urban exposure to non-food costs like rent and fuel.
• Wage Dynamics: Rising costs may fuel labor market tensions, but the informal sector’s dominance limits broad wage adjustments, potentially increasing reliance on social safety nets.
• Long-Term Stability: The stable headline inflation rate and declining core inflation suggest effective macroeconomic management, but addressing food supply chain issues is critical to sustaining this stability.

Conclusion

Inflation in Tanzania, at 3.3% in June 2025, remains manageable but masks sector-specific pressures, particularly in food (5.6%), which significantly impacts the cost of living for low-income households. This could exacerbate poverty and malnutrition risks, especially in rural areas. Wage demands are likely to rise, particularly in formal sectors, but the informal economy’s dominance limits broad relief. While macroeconomic stability is maintained, addressing food supply chain disruptions is critical to mitigating cost-of-living pressures and ensuring long-term economic stability. Targeted policies, such as food subsidies or infrastructure improvements, could alleviate these challenges.

Below is a table presenting the Annual Inflation Rates by Main Groups for June 2025, based on the data from the provided document. The table includes the main groups, their respective weights in the National Consumer Price Index (NCPI), and the 12-month percent change (annual inflation rate) for June 2025.

Notes:

• The 12-Month Percent Change represents the annual inflation rate for each group, calculated as the percentage change in the NCPI from June 2024 to June 2025 (base year: 2020 = 100).
• The Housing, Water, Electricity, Gas, and other group has the highest inflation rate at 7.2%, driven by items like rentals and utilities.
• Information and Communication recorded a 0.0% inflation rate, indicating price stability in this sector.
• The overall All Items Index inflation rate is 3.3%, reflecting a stable macroeconomic environment within Tanzania’s target range of 3–5%.

Below is a table summarizing key figures related to inflation in Tanzania for June 2025, drawn from the provided document and incorporating relevant details from the earlier context. The table focuses on essential metrics to provide a concise overview of inflation, its sectoral impacts, and related economic indicators.

Notes:

• Headline Inflation: The 3.3% rate in June 2025 aligns with SADC/EAC benchmarks, indicating macroeconomic stability.
• Food Inflation: The 5.6% rate (May 2025) and 3.5% for June 2025 reflect supply chain issues, notably transportation disruptions, impacting staples critical to low-income households.
• Core Inflation: The decline to 1.9% suggests stable pricing for non-volatile goods, beneficial for policy planning.
• Economic Context: Rising food and housing costs disproportionately affect low-income households, potentially increasing poverty and malnutrition risks. The informal sector’s dominance complicates wage adjustments, heightening pressure on social safety nets.
• Data Source: Figures are primarily from the provided NCPI document (June 2025), with poverty and stunting rates from external sources (World Bank, Demographic and Health Survey).

This table consolidates critical inflation-related figures to highlight their implications for cost of living and economic stability.