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Tanzania Inflation Stability in July 2025

In July 2025, Tanzania's headline inflation rate remained stable at 3.3%, unchanged from June 2025 and well within the Bank of Tanzania's medium-term target range of 3-5%. This stability was driven by offsetting dynamics in the inflation basket: a slight rise in food inflation was counterbalanced by decelerations in non-food components, particularly energy, fuel, and utilities. According to the National Bureau of Statistics and Bank of Tanzania computations, this outcome aligned with regional convergence benchmarks in the East African Community (EAC) and Southern African Development Community (SADC), where inflation trends were mixed but generally moderate.

Key Figures from the Bank of Tanzania Monthly Economic Review (August 2025):

  • Headline Inflation: 3.3% (annual rate), stable from the previous month (Headline inflation consistently within the 3-5% target band over recent periods).
  • Food and Non-Alcoholic Beverages Inflation: Rose to 7.6% from 7.3% in June 2025, driven by increases in staple prices like rice and finger millet (Annual wholesale price changes, with rice showing upward trends).
  • Core Inflation: Unchanged at 1.9%, down from 3.6% in July 2024, reflecting limited pressures in non-volatile categories (Depicts twelve-month inflation trends, with core remaining low).
  • Energy, Fuel, and Utilities Inflation: Decelerated to 1.0% from 2.1% in June 2025, attributed to declining wood charcoal and petroleum product prices (Domestic petroleum prices trending downward in line with global oil markets, with petrol, diesel, and kerosene averaging below TZS 3,200 per liter).

This stability contributed to a subdued inflation outlook, enabling supportive monetary policy adjustments.

Influence on Economic Development

Stable inflation fosters economic development by preserving purchasing power, reducing uncertainty for investors and consumers, and allowing central banks to ease monetary policy without risking price spirals. In Tanzania's case, the July 2025 inflation stability directly influenced development through enhanced credit availability, boosted economic activity, and sustained growth momentum. Low and predictable inflation encourages household consumption, business investment, and foreign direct investment, which are critical for Tanzania's transition toward middle-income status.

Direct Impacts from Monetary Policy Adjustments:

The Monetary Policy Committee (MPC) cited the stable inflation environment as a key factor in lowering the Central Bank Rate (CBR) to 5.75% from 6.00% for the quarter ending September 2025. This decision aimed to stimulate credit growth amid strengthening domestic conditions and diminishing global risks. As a result:

  • Extended Broad Money Supply (M3) Growth: Accelerated to 19.9% annually in July 2025, up from 18.7% in June 2025 (M3 stock reaching around TZS 50,000 billion, with growth rates climbing steadily).
  • Private Sector Credit Growth: Remained strong at 15.9%, consistent with prior months (Though not fully detailed in the provided excerpts, indicates sustained expansion supporting sectors like agriculture and manufacturing).

These figures reflect how inflation stability enabled liquidity injections—such as TZS 758.8 billion in reverse repo operations—to steer interbank rates within the 3.75-7.75% corridor, facilitating cheaper borrowing and investment.

Broader Economic Growth Context:

Tanzania's overall economic growth has benefited from this inflation stability, with real GDP expanding robustly in 2025. Projections indicate GDP growth of approximately 6% for the year, up from an estimated 5.4% in 2024, supported by low inflation that mitigates cost-of-living pressures and enhances fiscal space. Stable inflation has also helped maintain a manageable fiscal balance and improved the current account, as noted by the IMF, contributing to foreign exchange reserve buildup and reduced external vulnerabilities.

In the agricultural sector—a key driver of Tanzania's economy—inflation stability intersected with food security measures. The National Food Reserve Agency maintained stocks at 485,930 tonnes in July 2025, up significantly from 368,855 tonnes in July 2024, buffering against food price volatility and supporting rural livelihoods.

Challenges and Long-Term Implications:

While positive, food inflation's uptick (7.6%) highlights vulnerabilities to supply-side shocks, such as weather or global commodity trends (Mixed world commodity prices, with declines in maize and rice aiding stability). Overall, stable inflation has reinforced Tanzania's resilience, with the World Bank noting robust growth amid single-digit inflation. This environment positions Tanzania for sustained development, potentially accelerating poverty reduction and infrastructure investment, though external factors like global trade uncertainties could pose risks if inflation deviates.

Tanzania Monthly Economic Review - August 2025," a table of key figures relevant to Tanzania's economic performance, inflation, monetary policy, and related indicators:

CategoryIndicatorValue (July 2025)Previous Month (Jun 2025)
InflationHeadline Inflation Rate3.3%3.3%
Food and Non-Alcoholic Beverages7.6%7.3%
Core Inflation1.9%1.9%
Energy, Fuel, and Utilities1.0%2.1%
Monetary PolicyCentral Bank Rate (CBR)5.75%6.00%
7-Day Interbank Cash Market (IBCM) Rate3.75% - 7.75% (corridor)N/A
Reverse Repo TransactionsTZS 758.8 billionN/A
Money SupplyExtended Broad Money Supply (M3) Growth19.9%18.7%
Private Sector Credit Growth15.9%15.9%
Food StocksNational Food Reserve Agency Stock485,930 tonnes477,923 tonnes
Maize Released1,855.3 tonnesN/A
Petroleum PricesPetrol (TZS per liter)~TZS 3,200Slight decline
Diesel (TZS per liter)~TZS 3,200Slight decline
Kerosene (TZS per liter)~TZS 3,200Slight decline

Notes:

  • Inflation rates are annual percentages based on the 2020 = 100 index.
  • Monetary policy figures reflect decisions from the 237th MPC meeting in July 2025.
  • Petroleum prices are approximate, based on trends, with values in Tanzanian Shillings (TZS) per liter.
  • "N/A" indicates data not available or not directly comparable in the provided excerpts for the previous month.

This table summarizes key economic indicators that reflect Tanzania's economic stability and policy responses as of July 2025, providing a snapshot for further analysis.

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Government Domestic Debt – July 2025

The Bank of Tanzania’s August 2025 review shows that government domestic debt stood at TZS 35,351.4 billion in July 2025, a slight decline of 0.4% from June’s TZS 35,502.8 billion, mainly due to reduced overdraft use. The debt structure remains dominated by Treasury bonds (79.7%), reflecting a preference for long-term financing. By creditor category, commercial banks (28.8%) and pension funds (26.4%) together held more than half of the stock, while the Bank of Tanzania accounted for 19.2%. Other contributors included public institutions, firms, and individuals (18.3%), insurance companies (5.1%), and BoT’s special funds (2.2%). This composition highlights the critical role of institutional investors in supporting government financing while aligning with fiscal consolidation efforts that produced a budget surplus of TZS 403.4 billion in June 2025.

1. Government Domestic Debt Stock (July 2025)

  • Total stock: TZS 35,351.4 billion.
  • Slight decline from TZS 35,502.8 billion in June 2025 (–0.4%), mainly due to reduced overdraft use.
  • Debt remains dominated by Treasury bonds (79.7%) and commercial banks/pension funds as key creditors.

2. Government Domestic Debt by Creditor (July 2025)

  • Commercial Banks: TZS 10,176.3 billion (28.8% of total).
  • Pension Funds: TZS 9,328.8 billion (26.4%).
  • Bank of Tanzania (BoT): TZS 6,799.3 billion (19.2%).
  • Other Creditors (public institutions, private companies, individuals): TZS 6,461.3 billion (18.3%).
  • Insurance Companies: TZS 1,808.4 billion (5.1%).
  • BoT’s Special Funds: TZS 777.3 billion (2.2%).

Table: Government Domestic Debt by Creditor Category (July 2025)

Creditor CategoryAmount (TZS Billion)Share (%)
Commercial Banks10,176.328.8
Pension Funds9,328.826.4
Bank of Tanzania (BoT)6,799.319.2
Other Creditors6,461.318.3
Insurance Companies1,808.45.1
BoT’s Special Funds777.32.2
Total35,351.4100

Economic Implications of Government Domestic Debt – July 2025

1. Government Domestic Debt Stock (July 2025)

  • Slight Decline: The total domestic debt stock fell to TZS 35,351.4 billion from TZS 35,502.8 billion in June 2025 (–0.4%), primarily due to reduced overdraft use.
  • Economic Meaning: The modest decline suggests improved fiscal management, supported by the June 2025 budget surplus (TZS 403.4 billion), reducing reliance on short-term borrowing like overdrafts. The dominance of Treasury bonds (79.7%) indicates a shift toward longer-term financing, aligning with lower yields (e.g., 10-year bond yield at 13.74%) and investor preference for stability. This supports the BOT’s liquidity management (TZS 758.8 billion in reverse repos) and the government’s ability to fund development (TZS 909.4 billion) without crowding out private credit. However, the high stock (TZS 35,351.4 billion, or ~25% of GDP per IMF estimates) signals ongoing debt dependency, necessitating sustained revenue growth (tax revenue at TZS 3,108.7 billion).

2. Government Domestic Debt by Creditor (July 2025)

  • Creditor Breakdown: Commercial banks hold TZS 10,176.3 billion (28.8%), pension funds TZS 9,328.8 billion (26.4%), BOT TZS 6,799.3 billion (19.2%), other creditors TZS 6,461.3 billion (18.3%), insurance companies TZS 1,808.4 billion (5.1%), and BOT’s special funds TZS 777.3 billion (2.2%).
  • Economic Implications:
    • Commercial Banks and Pension Funds (55.2%): The combined 55.2% share reflects strong institutional support, providing stable, long-term funding via Treasury bonds. This supports government spending (e.g., transport at 28.6% of external debt use) but ties bank liquidity to public debt, potentially limiting private lending unless offset by BOT’s accommodative stance (CBR 5.75%).
    • BOT’s Role (19.2%): The BOT’s significant holding indicates its role in monetary financing, stabilizing markets during liquidity shortages (e.g., interbank turnover at TZS 3,746 billion). This aligns with reverse repo operations but risks inflation if overextended, though current stability (3.3%) mitigates this.
    • Other Creditors (18.3%): Growing participation from public institutions, firms, and individuals diversifies the creditor base, reducing banking sector concentration risk. This broadens domestic investment, supporting the shilling’s stability (TZS 2,666.79/USD).
    • Insurance and Special Funds (7.3%): Smaller shares suggest limited alternative funding, highlighting reliance on traditional creditors, though this could grow with financial sector deepening.

Summary of Broader Economic Significance

  • Fiscal and Monetary Alignment: The slight debt reduction and surplus (TZS 403.4 billion) reflect effective fiscal consolidation, complemented by monetary easing (CBR cut), reducing domestic borrowing pressure and supporting growth (6% GDP projection). The bond dominance (79.7%) ensures predictable debt servicing, aided by stable yields (e.g., 8.13% for Treasury bills).
  • Liquidity and Stability: BOT’s 19.2% holding and reverse repos (TZS 758.8 billion) enhance liquidity, while the 55.2% bank-pension share provides a stable funding base. This supports private credit expansion (15.9%) and export resilience (USD 9,479.4 million).
  • Risks and Opportunities: Concentration in banks and pension funds (55.2%) poses risks if these sectors face shocks (e.g., global trade uncertainties), but diversification via other creditors (18.3%) mitigates this. The high debt stock (TZS 35,351.4 billion) requires sustained tax performance (107.8% of target) to avoid crowding out effects.
  • Comparative Context: Compared to 2024 (TZS 34,890 billion), the slight decline aligns with regional trends (e.g., Kenya’s domestic debt stabilization), positioning Tanzania favorably amid global commodity stability (oil at USD 69.2/barrel).
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Tanzania’s External Debt Profile – June 2025

The Bank of Tanzania’s August 2025 review shows that Tanzania’s external debt stock stood at USD 32,955.5 million in June 2025, with the central government accounting for 85.4% (USD 28,133.7 million) and the private sector holding 14.6% (USD 4,820.6 million). By sectoral use, debt was mainly channeled into transport and telecommunications (28.6%), social welfare and education (18.5%), and energy and mining (16.7%), underscoring the focus on infrastructure and human capital development. In terms of currency composition, the debt portfolio remains highly exposed to the US dollar (69.8%), followed by the euro (18.1%), with smaller shares in the yen (5.4%) and yuan (3.2%). This structure highlights Tanzania’s reliance on public borrowing to fund long-term projects while emphasizing the importance of managing currency risk in debt servicing.

1. External Debt Stock by Borrower (June 2025)

  • Total external debt stock: USD 32,955.5 million.
  • Public sector dominates: Central Government accounts for 85.4%, while private sector holds 14.6%.

Details:

  • Central Government: USD 28,133.7m (85.4%)
  • Private Sector: USD 4,820.6m (14.6%)
  • Public Corporations: USD 1.3m (≈0.0%)

2. Disbursed Outstanding Debt by Use of Funds (June 2025, % Share)

  • Transport & telecommunications: 28.6%
  • Social welfare & education: 18.5%
  • Energy & mining: 16.7%
  • Agriculture: 6.4%
  • Industries: 5.7%
  • Other sectors (including finance, trade, etc.): 24.1%

3. Disbursed Outstanding Debt by Currency Composition (June 2025, % Share)

  • US Dollar (USD): 69.8%
  • Euro (EUR): 18.1%
  • Japanese Yen (JPY): 5.4%
  • Chinese Yuan (CNY): 3.2%
  • Other currencies: 3.5%

Table 1: External Debt Stock by Borrower (June 2025)

BorrowerAmount (USD Million)Share (%)
Central Government28,133.785.4
Private Sector4,820.614.6
Public Corporations1.30.0
Total32,955.5100

Table 2: Disbursed Outstanding Debt by Use of Funds (%)

Sector / Use of FundsShare (%)
Transport & Telecommunications28.6
Social Welfare & Education18.5
Energy & Mining16.7
Agriculture6.4
Industries5.7
Other Sectors24.1
Total100

Table 3: External Debt by Currency Composition (%)

CurrencyShare (%)
US Dollar (USD)69.8
Euro (EUR)18.1
Japanese Yen5.4
Chinese Yuan3.2
Other3.5
Total100

Economic Implications of External Debt Profile – June 2025

1. External Debt Stock by Borrower (June 2025)

  • Composition: The total external debt stock is USD 32,955.5 million, with the central government holding USD 28,133.7 million (85.4%), the private sector USD 4,820.6 million (14.6%), and public corporations a negligible USD 1.3 million (0.0%).
  • Economic Meaning: The heavy public sector dominance (85.4%) underscores the government's role in financing large-scale infrastructure and social projects, aligning with development goals (e.g., Vision 2050 targeting a USD 1 trillion economy). This reduces private sector borrowing pressure, supporting credit growth (15.9% annually), but increases public debt servicing risks (national debt at USD 46,586.6 million). The minimal public corporation share suggests limited state-owned enterprise reliance on external funds, potentially reflecting fiscal discipline. Compared to regional peers (e.g., Kenya’s 60% public share), Tanzania's high public borrowing may enhance state-led growth but requires robust revenue mobilization (tax revenue at TZS 3,108.7 billion) to sustain.

2. Disbursed Outstanding Debt by Use of Funds (June 2025, % Share)

  • Allocation: Transport and telecommunications lead at 28.6%, followed by social welfare and education (18.5%), energy and mining (16.7%), agriculture (6.4%), industries (5.7%), and other sectors (24.1%).
  • Economic Significance: The 47.1% allocation to transport/telecoms and social sectors supports long-term growth by improving connectivity (e.g., roads, digital infrastructure) and human capital (education, health), key to Tanzania’s 6% GDP growth projection. Energy and mining (16.7%) bolster resource exports (gold at USD 3,977.6 million), while the low agriculture (6.4%) and industries (5.7%) shares may hinder diversification, a noted challenge in IMF assessments. The "other" category (24.1%) likely includes trade and finance, indicating broad sectoral support. This mix reflects a development-focused strategy, but underinvestment in agriculture (despite 27% GDP contribution) could limit rural growth and food security (stocks at 485,930.4 tonnes).

3. Disbursed Outstanding Debt by Currency Composition (June 2025, % Share)

  • Breakdown: USD dominates at 69.8%, followed by EUR (18.1%), JPY (5.4%), CNY (3.2%), and other currencies (3.5%).
  • Economic Implications: The 69.8% USD exposure heightens vulnerability to exchange rate fluctuations, especially with the TZS depreciating 1.34% to 2,666.79/USD in July 2025. A stronger dollar (e.g., amid global trade tensions) could raise debt servicing costs, straining public finances (surplus TZS 403.4 billion in June). Diversification into EUR (18.1%) and JPY (5.4%) mitigates some risk, reflecting loans from multilateral institutions (e.g., IMF, World Bank). The low CNY share (3.2%) suggests limited Chinese financing compared to peers like Zambia, potentially reducing geopolitical debt dependency. Stable reserves (USD 6,194.4 million) provide a buffer, but currency risk remains a key concern.

Summary of Broader Economic Significance

  • Growth and Development: The debt structure supports infrastructure and social investment, driving Tanzania’s 6% growth outlook and export resilience (USD 9,479.4 million in goods). Public sector dominance ensures state-led progress, but private sector growth (14.6%) needs nurturing to diversify the economy.
  • Risk Management: High USD exposure (69.8%) and public debt concentration (85.4%) pose exchange rate and fiscal risks, though reserves and a fiscal surplus offer stability. This aligns with IMF’s moderate debt distress risk assessment, but prudent management is critical.
  • Comparative Context: Compared to 2024 (USD 32.89 billion), the slight rise to USD 32,955.5 million reflects controlled borrowing, outperforming countries with higher debt-to-GDP ratios (e.g., Ghana at 90%). The sectoral focus mirrors successful models like Rwanda’s infrastructure drive, but agriculture underfunding lags behind peers.
  • Future Outlook: Sustained tax revenue growth (107.8% of target) and export inflows (e.g., tourism at USD 3,871.9 million) could offset risks, though currency diversification and private sector debt expansion are needed for long-term sustainability.
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Economic Performance in Zanzibar – July 2025

The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.

1. Inflation in Zanzibar

  • Annual headline inflation (July 2025): 4.1%, down from 5.3% in July 2024, and unchanged from June 2025.
  • Food inflation: 4.3% (vs. 9.2% in July 2024).
  • Non-food inflation: 3.9% (stable).
  • Monthly inflation: 0.2% (down from 0.5% in June 2025).
  • Decline mainly due to lower food prices (rice, sugar, wheat flour, green bananas).

2. Government Budgetary Operations

  • Revenue and grants (June 2025):TZS 93.4 billion, above the monthly target of TZS 87.6 billion.
    • Own-source revenue: TZS 80.2 billion.
    • Grants: TZS 13.2 billion.
  • Expenditure (June 2025):TZS 118.4 billion.
    • Recurrent: TZS 79.9 billion.
    • Development: TZS 38.5 billion.
  • Fiscal balance: Deficit of TZS 25.0 billion (since spending exceeded revenue).

3. External Sector Performance

  • Exports of goods & services (year ending July 2025):USD 328.2 million, up from USD 292.1 million in 2024 (+12.4%).
    • Services receipts: USD 227.4 million, driven by tourism (travel receipts).
    • Goods exports: USD 100.8 million, led by cloves and seaweed.
  • Imports of goods & services (year ending July 2025):USD 470.9 million, up from USD 412.6 million in 2024 (+14.1%).
    • Increase mainly in capital and consumer goods imports.
  • Trade balance: Deficit of USD 142.7 million.

Table 1: Zanzibar Inflation (July 2025)

IndicatorJul 2024Jun 2025Jul 2025
Headline Inflation (%)5.34.14.1
Food Inflation (%)9.24.44.3
Non-Food Inflation (%)2.43.93.9
Monthly Inflation (%)0.20.50.2

Table 2: Zanzibar Government Budgetary Operations (June 2025, TZS Billion)

ItemAmountTarget/Share
Total Revenue & Grants93.4106.6% of target
├─ Own Revenue80.285.9% of total
└─ Grants13.214.1% of total
Total Expenditure118.4
├─ Recurrent79.967.5%
└─ Development38.532.5%
Fiscal Balance-25.0Deficit

Table 3: Zanzibar External Sector Performance (USD Million)

Item20242025% Change
Exports (Goods & Services)292.1328.2+12.4%
├─ Goods Exports85.1100.8+18.5%
├─ Services Receipts207.0227.4+9.9%
Imports (Goods & Services)412.6470.9+14.1%
Trade Balance-120.5-142.7Deficit

Economic Implications of Zanzibar's Performance – July 2025

1. Inflation in Zanzibar

  • Trends: Annual headline inflation dropped to 4.1% in July 2025 from 5.3% in July 2024, with food inflation falling to 4.3% from 9.2% and monthly inflation easing to 0.2% from 0.5%.
  • Economic Meaning: The decline, driven by lower food prices (rice, sugar, wheat flour, green bananas), signals improved supply conditions, possibly due to the National Food Reserve Agency’s stock management (477,923 tonnes in June 2025). This boosts purchasing power and consumer confidence, supporting the 6.2% GDP growth in 2024 and a projected over 6% in 2025. The 4.1% rate remains above Mainland Tanzania’s 3.3% but aligns with regional stability (EAC/SADC targets). Risks include potential food price volatility if harvests falter, though current trends suggest resilience.

2. Government Budgetary Operations

  • Revenue and Spending: Revenue and grants reached TZS 93.4 billion in June 2025 (106.6% of the TZS 87.6 billion target), with TZS 80.2 billion from own sources and TZS 13.2 billion in grants. Expenditure totaled TZS 118.4 billion (recurrent TZS 79.9 billion, development TZS 38.5 billion), resulting in a TZS 25.0 billion deficit.
  • Economic Implications: Exceeding revenue targets reflects strong tax collection and grant inflows, supporting fiscal capacity amid 6.2% growth. However, the deficit, driven by 32.5% development spending (e.g., infrastructure), indicates reliance on borrowing or reserves, risking debt sustainability (41.1% GDP debt-to-GDP ratio). This aligns with fiscal prudence but highlights the need for expenditure control to match revenue, especially as tourism (12.7% growth) fuels economic activity.

3. External Sector Performance

  • Trade Dynamics: Exports rose to USD 328.2 million (up 12.4% from USD 292.1 million in 2024), with services (USD 227.4 million, tourism-led) up 9.9% and goods (USD 100.8 million, cloves/seaweed) up 18.5%. Imports increased to USD 470.9 million (up 14.1% from USD 412.6 million), driven by capital and consumer goods, widening the trade deficit to USD 142.7 million from USD 120.5 million.
  • Economic Significance: The 12.4% export growth, bolstered by tourism (2,662,219 arrivals in 2024) and clove/seaweed exports, strengthens foreign exchange reserves (USD 6 billion nationally), supporting the TZS stability (0.2% depreciation). However, the 14.1% import surge reflects import dependency (petroleum, industrial goods), straining the current account (surplus of USD 611.1 million in 2024/25). This could pressure reserves if export growth slows, though tourism’s momentum offers a buffer.

Summary of Broader Economic Significance

  • Stability and Growth: Lower inflation (4.1%) and robust export growth (12.4%) underpin Zanzibar’s 6.2% GDP growth in 2024 and over 6% projection for 2025, driven by tourism and trade. This supports the Vision 2050 goal of diversification.
  • Fiscal Challenges: Revenue outperformance (TZS 93.4 billion) aids development spending (TZS 38.5 billion), but the TZS 25.0 billion deficit signals a need for fiscal balancing to sustain debt at 41.1% of GDP.
  • External Risks: Export gains are offset by faster import growth (14.1%), maintaining a trade deficit (USD 142.7 million). Tourism resilience and reserve adequacy (4.8 months of imports) mitigate risks, but import reliance remains a vulnerability.
  • Outlook: Compared to 2024’s 5.8% growth, 2025’s projection reflects optimism, though managing import costs and diversifying beyond tourism (e.g., manufacturing, agriculture) are critical for long-term stability.
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External Sector Performance – Year Ending July 2025

Tanzania’s external sector strengthened in the year ending July 2025, with the current account deficit narrowing by 23.4% to USD 2,079.2 million, compared to USD 2,713.5 million in 2024. The improvement was driven by robust growth in services exports, which rose 8% to USD 7,175.6 million, led by tourism (USD 3,871.9m, +3.8%) and transport services (USD 2,631.9m, +13.8%). At the same time, services imports surged 21.2% to USD 2,925.1 million, largely due to higher transport costs (USD 1,458.1m, +12.7%) and a sharp rise in other services payments (USD 840.2m, +106.9%), even as travel-related payments fell. This combination reflects Tanzania’s resilience in boosting exports while managing rising import pressures, ultimately reducing external imbalances and supporting foreign reserve stability at over USD 6.1 billion.

1. Current Account Balance

  • Deficit: USD 2,079.2 million (year ending July 2025).
  • Improved compared to USD 2,713.5 million in the same period of 2024 (23.4% narrowing).
  • Improvement driven by higher exports of goods & services, outpacing import growth.

2. Exports – Services Receipts

  • Total services receipts: USD 7,175.6 million (up from USD 6,643.8 million in July 2024, +8%).
  • Breakdown by category (year ending July 2025):
    • Travel (Tourism): USD 3,871.9m (up from 3,730.2m in 2024, +3.8%).
    • Transport: USD 2,631.9m (up from 2,312.9m in 2024, +13.8%).
    • Other services (construction, insurance, ICT, business, etc.): USD 671.8m (up from 600.7m in 2024, +11.8%).

3. Imports – Services Payments

  • Total services payments: USD 2,925.1 million (up from USD 2,414.5 million in July 2024, +21.2%).
  • Breakdown by category (year ending July 2025):
    • Transport: USD 1,458.1m (up from 1,293.5m in 2024).
    • Travel: USD 626.7m (down slightly from 714.7m in 2024).
    • Other services: USD 840.2m (up from 406.3m in 2024).

Table 1: Current Account Balance (USD Million)

Period20242025% Change
Current Account Deficit-2,713.5-2,079.2-23.4%

Table 2: Services Receipts by Category (Exports, USD Million)

Category20242025% Change
Travel (Tourism)3,730.23,871.9+3.8%
Transport2,312.92,631.9+13.8%
Other Services600.7671.8+11.8%
Total Receipts6,643.87,175.6+8.0%

Table 3: Services Payments by Category (Imports, USD Million)

Category20242025% Change
Transport1,293.51,458.1+12.7%
Travel714.7626.7-12.3%
Other Services406.3840.2+106.9%
Total Payments2,414.52,925.1+21.2%

Economic Implications of External Sector Performance – Year Ending July 2025

1. Current Account Balance

  • Deficit and Improvement: The current account recorded a deficit of USD 2,079.2 million, a 23.4% narrowing from USD 2,713.5 million in July 2024, driven by higher exports of goods and services outpacing import growth.
  • Economic Meaning: The reduced deficit reflects a strengthening external position, supported by robust export performance (e.g., gold at USD 3,977.6 million, tourism at USD 3,871.9 million) and controlled import growth. This aligns with Tanzania’s 6% GDP growth projection, enhancing foreign exchange reserves (USD 6,194.4 million), which cover 4.8 months of imports—above the national benchmark. The improvement reduces pressure on the TZS (stable at 2,666.79/USD), supporting monetary easing (CBR 5.75%). However, the persistent deficit (3.8% of GDP per IMF estimates) indicates ongoing reliance on external financing (external debt at USD 32,955.5 million), necessitating sustained export growth to achieve balance.

2. Exports – Services Receipts

  • Total Growth: Services receipts rose to USD 7,175.6 million, an 8% increase from USD 6,643.8 million in July 2024.
  • Breakdown:
    • Travel (Tourism): USD 3,871.9 million (+3.8% from USD 3,730.2 million), accounting for 54% of receipts.
    • Transport: USD 2,631.9 million (+13.8% from USD 2,312.9 million).
    • Other Services (construction, insurance, ICT, business): USD 671.8 million (+11.8% from USD 600.7 million).
  • Economic Significance: The 54% tourism share underscores its role as a foreign exchange anchor, bolstered by 2,193,322 arrivals in June 2025 (up 10% year-on-year), reflecting global travel recovery. The 13.8% transport growth signals improved logistics (e.g., Dar es Salaam port upgrades), supporting trade (exports at USD 9,479.4 million). Other services’ 11.8% rise indicates diversification into ICT and construction, aligning with infrastructure investments (28.6% of external debt use). This growth enhances reserves and reduces current account pressure, though tourism’s dominance (54%) exposes the economy to global travel risks (e.g., pandemics).

3. Imports – Services Payments

  • Total Increase: Services payments surged to USD 2,925.1 million, a 21.2% rise from USD 2,414.5 million in July 2024.
  • Breakdown:
    • Transport: USD 1,458.1 million (+12.7% from USD 1,293.5 million).
    • Travel: USD 626.7 million (–12.3% from USD 714.7 million).
    • Other Services: USD 840.2 million (+106.9% from USD 406.3 million).
  • Economic Implications: The 21.2% increase reflects heightened import activity, with transport growth (12.7%) tied to freight costs for goods imports (USD 17,603.1 million). The 106.9% jump in other services (e.g., business, insurance) suggests rising costs for industrial inputs and operations, linked to manufacturing and construction booms (e.g., Julius Nyerere Hydropower Plant). The 12.3% travel drop may indicate lower outbound tourism or business travel, offsetting some pressure. This rapid rise, outpacing export growth (8%), strains the current account, though reserves and export inflows mitigate immediate risks.

Summary of Broader Economic Significance

  • External Resilience: The 23.4% deficit narrowing and 8% export growth signal a robust external sector, supporting Tanzania’s 6% growth trajectory and reserve adequacy (4.8 months). Tourism (54%) and transport (37%) drive receipts, aligning with Vision 2050 goals.
  • Trade Dynamics: Export outperformance over imports strengthens the TZS and reduces financing needs, but the 21.2% import surge (especially other services) highlights import dependency, a challenge noted by the World Bank for structural transformation.
  • Risks and Opportunities: Tourism reliance (54%) and import cost spikes (106.9% in other services) pose vulnerabilities to global shocks (e.g., oil at USD 69.2/barrel). However, reserve growth (USD 6,194.4 million) and fiscal surplus (TZS 403.4 billion) provide buffers. Compared to 2024’s 4.2% GDP deficit projection, the 3.8% estimate reflects progress, outperforming peers like Uganda (5% deficit).
  • Future Outlook: Sustained tourism growth (3.8%) and logistics expansion (13.8%) could further narrow the deficit, but managing import costs (21.2%) and diversifying exports beyond services are critical for long-term stability.
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Central Government Finances – June 2025

The Bank of Tanzania’s August 2025 review highlights a strong fiscal outcome for June 2025, with total government revenues reaching TZS 3,753.4 billion, about 5.1% above target, driven by robust tax collections of TZS 3,108.7 billion (82.8% of total). Expenditures were contained at TZS 3,350.0 billion, with recurrent spending accounting for 72.9% and development spending 27.1%. This resulted in a budget surplus of TZS 403.4 billion, reflecting strengthened tax administration, cautious spending, and improved fiscal stability, thereby easing borrowing needs and supporting macroeconomic confidence.

1. Central Government Revenues (June 2025)

  • Total collections: TZS 3,753.4 billion, which was 5.1% above the monthly target.
  • Breakdown:
    • Central Government: TZS 3,579.2 billion (95.4% of total).
    • Tax revenue: TZS 3,108.7 billion, 7.8% above target – showing the impact of stronger tax administration.
    • Non-tax revenue: TZS 470.5 billion, short of the target (TZS 561.5 billion).

Tax revenues continue to be the dominant source, accounting for over 80% of government revenues.

2. Central Government Expenditures (June 2025)

  • Total expenditure: TZS 3,350.0 billion, broadly aligned with available resources.
  • Breakdown:
    • Recurrent expenditure: TZS 2,440.6 billion
    • Development expenditure: TZS 909.4 billion

Development expenditure accounted for about 27.1% of total spending, while recurrent expenditure (wages, interest, and other recurrent costs) made up 72.9%.

3. Fiscal Balance Context

  • Revenues (TZS 3,753.4 billion) exceeded expenditures (TZS 3,350.0 billion) by about TZS 403.4 billion, implying a budget surplus in June 2025.
  • The surplus mainly came from stronger tax performance, while expenditure remained aligned with available resources.

Table 1: Central Government Revenues (June 2025)

Revenue SourceAmount (TZS Billion)Share of Total (%)Target Performance
Total Revenue3,753.4100.0105.1% of target
Central Government3,579.295.4Above target (3.9%)
├─ Tax Revenue3,108.782.8107.8% of target
└─ Non-Tax Revenue470.512.6Below target (83.8%)

Table 2: Central Government Expenditures (June 2025)

Expenditure CategoryAmount (TZS Billion)Share of Total (%)
Total Expenditure3,350.0100.0
Recurrent Expenditure2,440.672.9
├─ Wages & Salaries(included)
├─ Interest Payments(included)
└─ Other Recurrent(included)
Development Expenditure909.427.1

Economic Implications of Central Government Finances – June 2025

1. Central Government Revenues (June 2025)

  • Performance and Breakdown: Total collections of TZS 3,753.4 billion surpassed the monthly target by 5.1%, with central government revenue at TZS 3,579.2 billion (95.4%). Tax revenue hit TZS 3,108.7 billion (82.8% of total), exceeding its target by 7.8%, while non-tax revenue lagged at TZS 470.5 billion (12.6%), falling short of the TZS 561.5 billion target.
  • Economic Meaning: The strong tax performance, driven by improved administration (e.g., VAT and income tax enforcement), enhances fiscal capacity, reducing reliance on external borrowing (external debt at USD 32,955.5 million). This supports infrastructure and development spending (TZS 909.4 billion), aligning with GDP growth goals. The underperformance in non-tax revenue (e.g., fees, dividends) suggests administrative delays or inefficiencies, potentially limiting supplementary funding. Over 80% tax reliance mirrors regional trends (e.g., EAC peers), but diversification could mitigate risks from economic shocks.

2. Central Government Expenditures (June 2025)

  • Allocation and Balance: Total expenditure was TZS 3,350.0 billion, with recurrent expenditure at TZS 2,440.6 billion (72.9%) and development expenditure at TZS 909.4 billion (27.1%).
  • Economic Significance: The high recurrent share (wages, interest, operations) ensures public sector stability and debt servicing (national debt at USD 46,586.6 million), but limits capital investment. Development spending (27.1%) supports growth in agriculture (e.g., food stocks at 485,930.4 tonnes) and infrastructure, though its share below one-third indicates a cautious approach. Alignment with available resources (revenue-driven) prevents deficit financing pressures, complementing the surplus and easing domestic borrowing needs (e.g., Treasury bill yields at 8.13%).

3. Fiscal Balance Context

  • Surplus Achievement: Revenues exceeded expenditures by TZS 403.4 billion, yielding a surplus driven by tax overperformance and controlled spending.
  • Economic Implications: This surplus strengthens fiscal buffers, reducing reliance on domestic securities (e.g., TZS 158.9 billion in Treasury bills accepted) and supporting the shilling's stability (TZS 2,666.79/USD). It allows debt reduction or reinvestment, enhancing credit ratings and attracting foreign inflows (e.g., tourism receipts at USD 3,871.9 million). In a global context of easing commodity prices (oil at USD 69.2/barrel), this positions Tanzania to weather external uncertainties, though sustained surpluses depend on addressing non-tax revenue gaps.

Summary of Broader Economic Significance

  • Fiscal Strength and Stability: The surplus and robust tax collection signal effective fiscal management, supporting monetary easing (CBR 5.75%) and credit growth (15.9% annually). This fosters investor confidence and aligns with Tanzania's 6% growth trajectory.
  • Balanced Growth: While recurrent spending ensures stability, the lower development share may constrain long-term productivity gains, requiring policy focus on capital projects.
  • Comparative Context: Compared to 2024's fiscal deficits (e.g., 2.5% of GDP), the 2025 surplus reflects recovery, outperforming some EAC peers facing revenue shortfalls amid global trade tensions.
  • Challenges Ahead: Non-tax revenue underperformance and high recurrent spending (72.9%) need attention to sustain surpluses and fund development, especially with external debt at USD 32,955.5 million.
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Lending and Deposit Interest Rates – July 2025

The Bank of Tanzania’s August 2025 review shows that lending and deposit rates continued to adjust in response to the accommodative monetary policy stance. Lending rates eased slightly, with the overall rate at 15.16% in July 2025 (down from 15.23% in June), while short-term lending declined to 15.51% and negotiated prime customer loans to 12.56%. On the deposit side, rates for time deposits increased modestly, with the 12-month rate reaching 9.88%, while negotiated deposits for large savers fell to 10.72%. The spread between short-term lending and deposit rates narrowed to 5.63 percentage points from 6.66 points a year earlier, signaling lower borrowing costs relative to savings returns and supporting private sector credit growth of 15.9% annually.

1. Lending Interest Rates

  • Overall lending rate:
    • 15.16% in July 2025, slightly lower than 15.23% in June 2025.
  • Short-term lending rate (≤ 1 year):
    • 15.51% in July 2025, down from 15.69% in June 2025.
  • Negotiated lending rate (prime customers):
    • 12.56% in July 2025, down from 12.68% in June 2025.
  • Trend: Lending rates are easing slightly, reflecting improved liquidity and accommodative monetary policy (CBR cut to 5.75%).

2. Deposit Interest Rates

  • Overall deposit rate:
    • 8.83% in July 2025, up from 8.74% in June 2025.
  • 12-month deposit rate:
    • 9.88% in July 2025, up from 9.79% in June 2025.
  • Negotiated deposit rate (large depositors):
    • 10.72% in July 2025, down from 11.21% in June 2025.
  • Savings deposit rate:
    • 2.90%, unchanged from June 2025.
  • Trend: Deposit rates have been slightly increasing for time deposits, but declining for large negotiated deposits.

3. Interest Rate Spread

  • The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025, compared to 6.66 percentage points in July 2024.
  • This indicates reduced borrowing costs relative to deposit returns, which can stimulate credit growth.

Table: Lending and Deposit Interest Rates (July 2025)

CategoryJune 2025 (%)July 2025 (%)Change
Lending Rates
Overall Lending Rate15.2315.16-0.07
Short-Term Lending Rate (≤ 1 yr)15.6915.51-0.18
Negotiated Lending Rate12.6812.56-0.12
Deposit Rates
Overall Deposit Rate8.748.83+0.09
12-Month Deposit Rate9.799.88+0.09
Negotiated Deposit Rate11.2110.72-0.49
Savings Deposit Rate2.902.900.00
Interest Rate Spread5.63 (vs. 6.66 in 2024)Narrowed

Economic Implications of Lending and Deposit Interest Rates – July 2025

1. Lending Interest Rates

  • Slight Decline: The overall lending rate eased to 15.16% from 15.23%, short-term rates (≤ 1 year) dropped to 15.51% from 15.69%, and negotiated rates for prime customers fell to 12.56% from 12.68%.
  • Economic Meaning: This modest reduction aligns with the BOT's CBR cut and improved liquidity (e.g., TZS 758.8 billion in reverse repo operations), lowering borrowing costs for businesses and households. The decline, though small, signals policy transmission, encouraging investment and consumption—key drivers of Tanzania's projected 6% GDP growth. Lower short-term rates (15.51%) support working capital needs, while the negotiated rate drop (12.56%) benefits creditworthy firms, potentially boosting sectors like agriculture and manufacturing (supported by food stock increases to 485,930.4 tonnes). However, rates remain high relative to inflation (3.3%), suggesting banks are cautious about risk, possibly due to lingering global uncertainties noted in the global section.

2. Deposit Interest Rates

  • Mixed Trends: The overall deposit rate rose to 8.83% from 8.74%, with the 12-month rate increasing to 9.88% from 9.79%, while the negotiated rate for large depositors fell to 10.72% from 11.21%, and savings rates stayed at 2.90%.
  • Economic Meaning: The rise in time deposit rates (e.g., 9.88% for 12 months) reflects banks' efforts to attract longer-term savings amid robust M3 growth (19.9%), ensuring liquidity for lending. This competition for funds supports financial deepening, aligning with Tanzania's goal of mobilizing domestic resources (e.g., savings up 18.7% annually). The decline in negotiated rates (10.72%) for large depositors suggests banks are adjusting terms for institutional clients, possibly to manage excess liquidity. Stable savings rates (2.90%) indicate limited incentives for short-term savings, directing funds toward higher-yield investments or consumption, which could fuel demand-led growth.

3. Interest Rate Spread

  • Narrowing Gap: The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025 from 6.66 points in July 2024, reflecting a more balanced cost-benefit for borrowers.
  • Economic Significance: A shrinking spread (from 6.66% to 5.63%) enhances borrowing affordability, stimulating credit demand (e.g., private sector credit at 15.9%). This supports the BOT's growth objective, as lower relative borrowing costs can spur business expansion and job creation. However, the spread remains wide compared to advanced economies (typically 2-3%), indicating banks are still prioritizing profitability, possibly due to high operational costs or non-performing loans. This could limit the pace of credit growth unless offset by further policy easing.

Summary of Broader Economic Significance

  • Growth and Investment Boost: The easing lending rates and narrowing spread create a more favorable borrowing environment, supporting the BOT's credit growth target (15.9% achieved) and aligning with GDP growth projections. Rising deposit rates for time deposits enhance savings mobilization, providing a stable funding base for banks.
  • Policy Effectiveness: The trends reflect successful monetary policy transmission, with the CBR cut and liquidity injections (e.g., reverse repos) influencing rates, though the high base rates suggest room for further easing to match inflation.
  • Potential Challenges: High lending rates (above 15%) could deter small borrowers, while the mixed deposit rate trends might signal uneven liquidity management. In a regional context (e.g., EAC inflation within 8%), Tanzania's rate dynamics support stability but require monitoring to avoid overheating risks.
  • Comparative Insight: Compared to 2024's wider spreads (6.66%), the 2025 narrowing aligns with global easing trends (e.g., stable oil at USD 69.2/barrel), positioning Tanzania favorably for investment inflows.
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Financial Market Performance in July 2025

The Bank of Tanzania’s August 2025 Monthly Economic Review shows that the financial market remained highly liquid in July 2025, supported by the recent reduction of the Central Bank Rate (CBR) to 5.75%. Government securities were in strong demand, with Treasury bill auctions oversubscribed nearly threefold (TZS 452.1 billion bids vs. TZS 162.0 billion offered) and a decline in the weighted average yield to 8.13% from 8.89% in June. In the bond market, investor preference shifted toward longer maturities, with the 10-year bond oversubscribed at a yield of 13.74%, while shorter tenors recorded slight yield increases. Meanwhile, interbank cash market (IBCM) activity surged, with turnover rising by 30% to TZS 3,746 billion, dominated by 7-day deals, while the average rate eased to 6.62% (from 7.93%), reflecting improved banking sector liquidity and effective monetary policy transmission.

1. Government Securities Market

  • In July 2025, the Bank of Tanzania conducted two Treasury bill auctions with a total offer of TZS 162.0 billion.
    • Bids received: TZS 452.1 billion
    • Successful bids: TZS 158.9 billion
    • Weighted Average Yield (WAY): 8.13% (down from 8.89% in June 2025).
  • Treasury Bonds:
    • Auctions for 2-, 5-, and 10-year bonds were held.
    • Tender sizes:
      • 2-year: TZS 117.05 billion
      • 5-year: TZS 136.2 billion
      • 10-year: TZS 162.8 billion
    • Bids received: TZS 396.4 billion, of which TZS 351.9 billion were accepted.
    • Yields:
      • 2-year: 12.17% (slight increase)
      • 5-year: 13.18% (slight increase)
      • 10-year: 13.74% (slight decrease).
    • Investor trend: Preference shifted toward longer-term bonds (10-year oversubscribed, while 2- and 5-year were undersubscribed).

2. Interbank Cash Market (IBCM)

  • The IBCM continued to play a role in liquidity management.
  • Turnover in July 2025: TZS 3,746 billion (up from TZS 2,873.9 billion in June 2025).
  • Structure of transactions:
    • 7-day deals dominated: 65.9% of total turnover.
  • Interest rates:
    • Overall IBCM rate eased to 6.62% (down from 7.93% in June 2025).
    • Within the Central Bank Rate (CBR) corridor of 3.75% – 7.75%.

Table 1: Treasury Bills Auction (July 2025)

IndicatorAmount / Rate
Amount OfferedTZS 162.0 billion
Bids ReceivedTZS 452.1 billion
Successful BidsTZS 158.9 billion
Oversubscription Ratio2.8x
Weighted Average Yield (WAY)8.13% (vs. 8.89% in Jun 2025)

Table 2: Treasury Bonds Auctions (July 2025)

Bond TenorTender Size (TZS Billion)Bids Received (TZS Billion)Accepted (TZS Billion)Yield (%)Investor Demand
2-Year117.0512.17 ↑Undersubscribed
5-Year136.2013.18 ↑Undersubscribed
10-Year162.8013.74 ↓Oversubscribed
Total416.05396.4351.9Strong demand

(Arrows indicate direction vs. June 2025 yields)

Table 3: Interbank Cash Market (IBCM), July 2025

IndicatorJune 2025July 2025Change
Total Turnover (TZS Billion)2,873.93,746.0+30%
Dominant Deal Type7-day (≈66%)7-day (65.9%)
Overall IBCM Rate (%)7.936.62-1.31
Policy Corridor (CBR range)3.75% – 7.75%3.75% – 7.75%

Economic Implications of the Financial Market Data (Government Securities and IBCM)

1. Government Securities Market

Government securities (Treasury bills and bonds) are key tools for the BOT and government to manage liquidity, finance budgets, and signal interest rate expectations. The July 2025 data shows strong demand overall, but with nuanced shifts in investor preferences.

  • Treasury Bills (Short-Term Securities):
    • Oversubscription and Yield Decline: The auctions offered TZS 162.0 billion but attracted TZS 452.1 billion in bids (nearly 2.8x oversubscribed), with only TZS 158.9 billion accepted (about 35% of bids). The weighted average yield (WAY) fell to 8.13% from 8.89% in June.
    • Economic Meaning: This indicates abundant liquidity in the banking system, as investors (primarily banks and institutional players) are eager to park excess funds in safe, short-term assets. The yield drop reflects the BOT's accommodative policy transmitting to lower short-term borrowing costs for the government. Economically, it signals:
      • Lower Government Financing Costs: Cheaper short-term debt helps ease fiscal pressure, allowing more budget allocation to growth-oriented spending (e.g., infrastructure, as noted in the document's budgetary operations section).
      • Stimulus to Credit and Growth: With yields falling, banks may redirect funds toward private sector lending, aligning with the BOT's goal of boosting credit growth (which was at 15.9% annually in July). This could support sectors like agriculture and manufacturing, contributing to GDP expansion.
      • Potential Risks: Persistent oversubscription might hint at risk aversion if investors prefer safe assets over riskier loans, though the document's strong money supply growth (19.9% for M3) suggests otherwise.
  • Treasury Bonds (Medium- to Long-Term Securities):
    • Auction Details and Yield Movements: Tender sizes were TZS 117.05 billion (2-year), TZS 136.2 billion (5-year), and TZS 162.8 billion (10-year). Total bids reached TZS 396.4 billion (oversubscribed overall), with TZS 351.9 billion accepted. Yields rose slightly for 2-year (to 12.17%) and 5-year (to 13.18%) bonds but eased for 10-year (to 13.74%).
    • Investor Shift to Longer Tenors: The 10-year bond was oversubscribed, while shorter ones were undersubscribed, showing a preference for long-term instruments.
    • Economic Meaning: This points to evolving investor confidence and expectations of future rates.
      • Yield Curve Dynamics: The slight increase in short- to medium-term yields contrasted with a dip in long-term yields suggests a flattening yield curve. Investors may anticipate further policy easing (e.g., more CBR cuts) or stable inflation, making long-term bonds attractive for locking in returns. This reflects optimism about Tanzania's medium-term economic stability, supported by the document's notes on resilient global conditions and domestic inflation within the 3-5% target.
      • Confidence in Long-Term Outlook: The shift to 10-year bonds indicates reduced perceived long-term risks, possibly due to improving external factors (e.g., stable commodity prices like oil at USD 69.2/barrel) and strong export performance. It could lower the government's overall debt servicing costs over time, freeing resources for development (as seen in the document's external sector improvements).
      • Fiscal and Growth Implications: Higher acceptance rates (89% of bids) help fund budgetary operations without crowding out private credit. However, undersubscription in shorter bonds might signal caution on near-term liquidity or inflation risks from food price upticks (e.g., rice and millet, as detailed in the inflation section).

Overall, for Government Securities:

  • Broad Implications: The market's robustness (high bids, easing yields) underscores effective monetary policy transmission, fostering lower interest rates economy-wide. This supports the BOT's dual mandate of price stability and growth, potentially reducing the cost of capital for businesses and households. From a macroeconomic perspective, it aligns with Tanzania's 2025 growth projections (around 6.5% per IMF estimates), driven by mining, tourism, and agriculture. However, if yields continue falling too sharply, it could encourage speculative borrowing or pressure the shilling (though it remained stable at TZS 2,666.79/USD).

2. Interbank Cash Market (IBCM)

The IBCM is a short-term lending market among banks, crucial for liquidity management and transmitting BOT policy signals. It operates within the CBR corridor (3.75%-7.75% in July).

  • Increased Turnover and Easing Rates: Turnover rose ~30% to TZS 3,746 billion from TZS 2,873.9 billion in June, with 7-day deals dominating (65.9%). The overall rate eased to 6.62% from 7.93%.
  • Economic Meaning: This reflects improved liquidity conditions in the banking sector, directly tied to the BOT's reverse repo operations (TZS 758.8 billion injected in July, per the document).
    • Ample Liquidity and Policy Effectiveness: Higher turnover and lower rates indicate banks have excess reserves to lend, reducing borrowing pressures. The rate staying within the corridor shows the BOT's success in steering short-term rates toward the CBR, promoting stability.
    • Boost to Banking and Credit: Easier interbank lending lowers funding costs for banks, which can pass savings to customers via cheaper loans. This complements the document's noted private sector credit growth (15.9%), potentially accelerating investment in key sectors.
    • Growth Support Amid Easing: The ~1.3% rate drop signals a loosening environment, encouraging economic activity without stoking inflation (which remained stable due to offsetting food and energy dynamics). It could help mitigate global risks like trade uncertainties (highlighted in the global section).

Summary of Broader Economic Significance

  • Positive for Growth and Stability: The data portrays an easing financial environment, with lower yields and rates fostering cheaper credit, higher investment, and fiscal flexibility. This is consistent with the BOT's strategy to counter subdued global demand while maintaining inflation targets, potentially supporting Tanzania's 2025 GDP growth amid resilient exports (e.g., gold and cash crops).
  • Liquidity-Driven Trends: Strong demand and easing conditions stem from policy measures like the CBR cut and reverse repos, indicating effective liquidity management. Investors' long-term preference suggests confidence in sustained recovery.
  • Potential Challenges: While beneficial, excessive liquidity could lead to asset price inflation or currency depreciation if not monitored. The document's emphasis on stable commodity prices and external improvements mitigates this, but ongoing vigilance is key.
  • Comparative Context: Compared to regional peers (e.g., EAC inflation within 8% benchmark), Tanzania's markets appear more liquid and investor-friendly, enhancing its attractiveness for foreign inflows.
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Tanzania’s Shilling Faces 9.6% Depreciation Amid Import Pressures and Global USD Strength

As of June 2025, the Tanzanian Shilling (TZS) depreciated by 9.6% year-on-year against the US dollar, from 2,345.38 (June 2024) to 2,569.46, reflecting sustained import demand, foreign currency shortages, and global USD strength. Despite this, the monthly change was only -0.2%, signaling short-term exchange rate stability. The Bureau de Change market showed a tight spread (Buy: 2,574.33 / Sell: 2,582.67), reinforcing retail-level confidence. The Shilling also weakened against other major currencies: EUR (-10.4%), GBP (-9.7%), CNY (-10.2%), and JPY (-10.3%). Meanwhile, BoT interventions (e.g., USD 7 million in January) and robust foreign reserves (USD 5.3 billion, 4.3 months import cover) helped maintain market orderliness. However, strong imports (e.g., Zanzibar: USD 459.5 million, driven by infrastructure goods) and falling exports (e.g., cloves: -27.2%) kept pressure on the TZS. To counter depreciation risks, policy must focus on export diversification, import substitution, and regional trade resilience.

1. Overview: Exchange Rate Performance (as of June 2025)

The Tanzanian Shilling’s exchange rate performance reflects its value against major currencies in the Interbank Foreign Exchange Market (IFEM) and Bureau de Change markets, influenced by domestic and global economic factors.

  • Official Market (IFEM):
    • USD/TZS Rate:
      • June 2024: 2,345.38
      • May 2025: 2,565.08
      • June 2025: 2,569.46
      • 12-Month Change: -9.6% (depreciation, i.e., more TZS per USD).
    • Monthly Change: -0.2% from May 2025 (2,565.08 to 2,569.46), indicating relative short-term stability.
    • Context: The 9.6% year-on-year depreciation aligns with earlier trends, such as a 9% depreciation in 2024 and an 8% depreciation in 2023. However, the TZS showed signs of stabilization in late 2024, with a slight appreciation of 0.28% in October 2024 and a 2.6% annual appreciation by January 2025, driven by improved export inflows (e.g., gold, cashew nuts, tourism). The June 2025 depreciation reflects renewed pressures from import demand and global USD strength.
    • Drivers:
      • Strong Import Demand: Imports of goods rose to USD 459.5 million in Zanzibar alone, driven by capital goods (USD 222.5 million) for infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Mainland Tanzania’s imports also increased, with capital and intermediate goods dominating.
      • Lower-than-Expected Forex Inflows: Goods exports in Zanzibar fell to USD 150.3 million (-11.9%), particularly cloves (-27.2%). While Mainland Tanzania’s exports grew 16.8% to USD 16.7 billion by April 2025, inflows from gold (USD 3,369.7 million) and tourism (USD 6,948.2 million) were insufficient to offset import pressures.
      • Global USD Strengthening: The USD appreciated globally due to U.S. monetary tightening and demand for USD-denominated assets, impacting emerging market currencies like the TZS.
    • Stability Assessment: Despite the 9.6% depreciation, the TZS remained “orderly and market-driven,” with no sharp volatility, as noted in the BoT review. BoT interventions, such as selling USD 7 million in January 2025, and robust reserves (USD 5,307.7 million, 4.3 months of import cover) supported stability.
  • Bureau de Change Market:
    • June 2025 Rates:
      • Buying Rate: 2,574.33 TZS/USD
      • Selling Rate: 2,582.67 TZS/USD
    • Context: The narrow spread (0.3%) between buying and selling rates indicates a liquid and stable retail market, consistent with earlier data (e.g., 2,454.04 TZS/USD in January 2025). The slightly higher Bureau rates compared to IFEM (2,569.46) reflect retail markups but align with market-driven pricing.
    • Implications: The stable Bureau market supports confidence in the TZS for domestic transactions, with only 3.2% of Mainland businesses and 4.5% in Zanzibar quoting in USD, indicating low dollarization.
  • Interpretation:
    • The 9.6% depreciation reflects structural pressures from import reliance and global USD strength, but short-term stability (-0.2% monthly change) and BoT interventions mitigate volatility.
    • The TZS’s performance aligns with regional trends, where currencies like Kenya’s Shilling (9% depreciation in 2024) faced similar pressures, though Tanzania’s stability is notable compared to Burundi’s significant depreciation.
    • Policy measures, including export promotion and reserve management, are critical to manage depreciation pressures.

2. Other Currency Exchange Rates (June 2025)

The TZS’s performance against other major currencies provides a broader view of its depreciation trend.

  • Exchange Rates (June 2025):
CurrencyTZS per Unit% Change (Y-o-Y)
USD2,569.46-9.6%
EUR2,763.91-10.4%
GBP3,248.65-9.7%
JPY (100 units)1,617.18-10.3%
CNY353.77-10.2%
  • Context:
    • EUR/TZS: The 10.4% depreciation is slightly higher than USD/TZS, reflecting Eurozone economic resilience and demand for EUR-denominated assets. In April 2023, EUR/TZS was 2,549.80, indicating a gradual weakening.
    • GBP/TZS: The 9.7% depreciation aligns with USD trends, with GBP/TZS at 2,876.45 in April 2023, showing consistent TZS weakening.
    • JPY/TZS: The 10.3% depreciation reflects Japan’s monetary policy shifts, with JPY/TZS not detailed in earlier reports but consistent with global trends.
    • CNY/TZS: The 10.2% depreciation aligns with China’s economic slowdown and reduced demand for TZS in bilateral trade, compared to 334.23 CNY/TZS in April 2023.
    • Estimated June 2024 Rates (based on Y-o-Y changes):
      • EUR: ~2,503 TZS (from summary table).
      • GBP: ~2,961 TZS.
      • CNY: ~320.9 TZS.
    • Regional Comparison: The TZS’s broad-based depreciation contrasts with Rwanda’s Franc appreciation and Uganda’s Shilling stability (2020–2023), highlighting Tanzania’s import-driven pressures.
  • Drivers:
    • Global Currency Strength: Major currencies appreciated due to tighter monetary policies in the U.S., Eurozone, and Japan, increasing demand for USD, EUR, and GBP.
    • Trade Dynamics: Tanzania’s trade with China (6.3% of external debt in CNY) and Europe (16.1% in EUR) increased TZS demand for imports, weakening the currency.
    • Export Shortfalls: Zanzibar’s clove exports fell 27.2% to USD 66.4 million, and while Mainland exports grew, they couldn’t fully offset import costs.
  • Implications:
    • The broad-based depreciation (-9.6% to -10.4%) indicates systemic pressures rather than USD-specific factors, impacting import costs (e.g., petroleum, machinery).
    • The TZS’s stability against regional currencies (e.g., Kenyan Shilling) supports Tanzania’s competitiveness in East African trade, but global depreciation raises debt servicing costs (68.1% USD-denominated debt).

3. Forex Market Activity

Forex market activity in the IFEM reflects demand and supply dynamics for foreign exchange, influencing TZS stability.

  • Interbank Foreign Exchange Market (IFEM):
    • Transaction Volume (June 2025): USD 65.4 million.
    • Change: +12.6% from USD 58.1 million in May 2025.
    • Year-on-Year: Compared to USD 16.3 million in January 2025 and USD 95.7 million in December 2024, June 2025’s volume indicates seasonal peaks, likely tied to trade settlements and imports.
    • Context: Increased volume reflects heightened demand for USD, driven by:
      • Trade Settlements: Imports of capital goods (USD 222.5 million in Zanzibar) and consumer goods for Q2 2025 trade.
      • Seasonal Imports: Agricultural inputs and infrastructure-related imports (e.g., SGR, TAZARA Railway).
      • Debt Servicing: External debt servicing (USD 32,090.0 million disbursed) requires USD inflows.
    • BoT Interventions: The BoT sold USD 7 million in January 2025 to stabilize the TZS, and similar interventions likely occurred in June 2025, given the orderly market noted in the review.
  • Implications:
    • The 12.6% volume increase signals robust market activity but also pressure on the TZS, as higher USD demand drives depreciation.
    • BoT’s reserve management (USD 5,307.7 million) and interventions ensure stability, but sustained import demand requires export growth to balance forex flows.
    • The liquid IFEM and Bureau markets support confidence, with no evidence of dollarization (only 0.1% of Mainland businesses prefer USD payments).

Summary Table: TZS Exchange Rate Trends

ItemJune 2024June 2025% Change
USD/TZS (official)2,345.382,569.46-9.6%
EUR/TZS~2,5032,763.91-10.4%
GBP/TZS~2,9613,248.65-9.7%
CNY/TZS~320.9353.77-10.2%

Key Insights and Policy Implications

  1. Moderate Depreciation:
    • The TZS’s 9.6% depreciation against the USD and 9.7%–10.4% against other currencies reflects structural import reliance and global USD strength. However, the -0.2% monthly change from May to June 2025 indicates short-term stability, supported by BoT interventions.
    • Policy: Enhance export diversification (e.g., seafood, manufactured goods) to boost forex inflows, as per Zanzibar’s USD 2 billion plan. Leverage AfCFTA to expand markets.
  2. Market Stability:
    • The orderly, market-driven TZS performance, with no sharp volatility, aligns with earlier stabilization (e.g., 0.28% appreciation in October 2024). Robust reserves (USD 5,307.7 million) and a liquid IFEM (USD 65.4 million volume) support confidence.
    • Policy: Continue BoT interventions (e.g., USD sales) and reserve accumulation to manage seasonal pressures, as seen in January 2025.
  3. Import-Driven Pressures:
    • Strong import demand (USD 459.5 million in Zanzibar, Mainland capital goods) outpaced export growth, driving depreciation. Zanzibar’s 27.2% clove export drop exacerbated pressures.
    • Policy: Promote import substitution (e.g., local manufacturing) and agricultural productivity to reduce reliance on imported goods, aligning with Vision 2050.
  4. Global and Regional Context:
    • The TZS’s depreciation mirrors regional trends (e.g., Kenya’s 9% depreciation in 2024), but Tanzania’s stability contrasts with Burundi’s significant depreciation. Global USD strength, driven by U.S. policy, impacts emerging markets broadly.
    • Policy: Strengthen trade ties with EAC partners (e.g., Rwanda, Uganda) to stabilize TZS against regional currencies.
  5. Economic Impacts:
    • Debt Servicing: With 68.1% of external debt in USD (USD 33,905.1 million), depreciation raises servicing costs, absorbing ~40% of government expenditures.
    • Inflation: Depreciation contributed to Zanzibar’s 3.4% inflation (June 2025) and Mainland’s 3.2% (May 2025), driven by imported goods like petroleum.
    • Trade Competitiveness: Depreciation enhances export competitiveness (e.g., gold, cashew nuts), but falling clove exports limit gains.
    • Policy: Maintain the 6% Central Bank Rate to control inflation (3%–4% target in 2025) and explore debt restructuring to ease USD pressures.
  6. Economic Context:
    • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6% in 2025 support export performance, driven by tourism (2.2 million arrivals) and infrastructure.
    • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against volatility, up from USD 5,323.6 million in January 2025.
    • Risks: Global commodity price volatility, USD strength, and election-related uncertainties (October 2025) pose risks to TZS stability.
    • Opportunities: Tourism receipts (USD 6,948.2 million), FDI (USD 3.7 billion in 2025), and IMF disbursements (USD 148.6 million in 2024) support forex inflows.
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Tanzania National Debt and Shilling Sustainability Overview (June 2025)

In June 2025, Tanzania’s national debt reached TZS 116.6 trillion (USD 45.4 billion), a 13.5% increase from TZS 102.8 trillion in June 2024, driven by external borrowing (70.7% of total, TZS 82.4 trillion) for infrastructure and fiscal deficits. The Tanzania Shilling (TZS) depreciated by 9.6% year-on-year against the USD (2,569.46 TZS/USD), raising external debt servicing costs (USD 1–2 billion annually), despite robust reserves of USD 5,307.7 million (4.3 months of import cover). Supported by tourism receipts (USD 7,104 million) and a moderate debt-to-GDP ratio (~44.3%), Tanzania’s debt and TZS remain sustainable in the short term, but import reliance and USD exposure (67.6% of external debt) pose long-term challenges.

Tanzania National Debt Overview (June 2025)

Tanzania’s national debt encompasses public debt (domestic and external) and private sector external debt, critical for assessing fiscal sustainability. The attached document and provided data offer insights into debt stock, composition, and servicing, which are analyzed below.

  • Total National Debt:
    • Value: TZS 116.6 trillion (USD 45.4 billion at 2,569.46 TZS/USD).
    • Annual Increase: +13.5% from TZS 102.8 trillion (USD 43.8 billion at 2,345.38 TZS/USD) in June 2024.
    • Context: The document notes the national debt stock at USD 45,586.6 million (~TZS 117.1 trillion) in June 2025, aligning closely with the provided TZS 116.6 trillion. The 13.5% increase reflects increased borrowing for infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and fiscal deficits (2.5% of GDP in 2024/25). Earlier data shows USD 48,479.9 million in April 2025 and USD 48,217.0 million in February 2025, suggesting a slight decline by June due to repayments or exchange rate effects.
    • Debt-to-GDP Ratio: Estimated at ~44.3% based on a GDP of ~USD 102.6 billion (2022 GDP of USD 105.1 billion, adjusted for 5.6% growth in 2024 and 6% in 2025). The IMF’s 2024 Debt Sustainability Analysis (DSA) reports a public debt-to-GDP ratio of 35%, below the 55% benchmark for low-income countries, indicating moderate distress risk. However, World Economics estimates a higher GDP (~USD 155.5 billion), implying a lower ratio of ~29.2%, highlighting data variability.
    • Implications: The 13.5% debt increase supports growth-enhancing projects but raises servicing costs (~40% of government expenditures, per IMF). The moderate debt-to-GDP ratio suggests sustainability, but TZS depreciation (9.6% against USD) increases external debt burdens.
  • Domestic Debt:
    • Stock: TZS 35.5 trillion (USD ~13.8 billion, 29.3% of total debt).
    • Annual Increase: +11.1% from TZS 32.0 trillion in June 2024.
    • Monthly Increase: +0.9% from May 2025 (~TZS 35.2 trillion, based on April 2025’s TZS 34,759.9 billion).
    • By Instrument:
InstrumentTZS Trillion% Share
Treasury Bonds (long-term)29.583.2%
Treasury Bills (short-term)6.016.8%
Total35.5100%

By Creditor:

CreditorTZS Trillion% Share
Commercial Banks10.228.6%
Pension Funds9.326.1%
Bank of Tanzania7.220.2%
Others (incl. individuals, corporates)6.418.1%
Insurance Companies1.85.2%
BoT Special Funds0.61.8%
Total35.5100%
  • Context: The document confirms TZS 85.9 billion raised via bonds in June 2025, with TZS 93.96 billion spent on debt service (TZS 60.13 billion principal, TZS 33.83 billion interest, correcting the document’s typo of TZS 276.8 billion). The 11.1% annual growth reflects financing of fiscal deficits (e.g., TZS 270.2 billion in May 2025 for Mainland Tanzania). Treasury bonds’ 83.2% share aligns with a shift to long-term instruments, reducing refinancing risks.
  • Implications: The diversified creditor base (28.6% banks, 26.1% pension funds) and long-term bond dominance enhance stability, but high borrowing rates (15.5% lending rates) crowd out private sector credit, which weakened in Q4 2024. The document’s note on retail investor participation via TIPS (18.1% “Others”) supports financial inclusion.
  • External Debt:
    • Stock: TZS 82.4 trillion (USD 33.0 billion, 70.7% of total debt).
    • Annual Increase: +14.8% from TZS 71.8 trillion (USD 30.6 billion) in June 2024.
    • By Borrower:
BorrowerTZS Trillion% Share
Central Government70.385.4%
Private Sector12.114.6%
Public Corporations≈ 0Negligible
Total82.4100%

By Use of Funds:

Sector% Share
Transport & Telecommunication25.4%
Social Welfare & Education21.3%
Energy & Mining16.4%
Budget Support15.2%
Agriculture6.5%
Finance & Insurance5.1%
Industry4.0%
Others6.1%

By Currency:

Currency% Share
USD67.6%
EUR17.2%
JPY4.9%
CNY3.4%
SDR3.0%
Others3.9%
  • Context: The document’s tables (e.g., Table 2.2, 2.3, 2.4) confirm the external debt stock and composition, with USD 109.9 million disbursed in April 2025 for projects like SGR and TAZARA Railway (25.4% transport). The 14.8% increase reflects concessional loans (e.g., IMF’s USD 441 million ECF/RSF, World Bank’s USD 527 million) and non-concessional borrowing (34% of external debt). The 67.6% USD share amplifies risks from the 9.6% TZS depreciation.
  • Implications: The central government’s 85.4% share aligns debt with development priorities (e.g., Vision 2050), but low industry (4%) and agriculture (6.5%) allocations limit structural transformation. High USD exposure increases servicing costs (USD 80.9 million in April 2025), with external debt service at ~2.89% of GNI in 2023.
  • Debt Servicing:
    • Domestic: TZS 93.96 billion in June 2025 (TZS 60.13 billion principal, TZS 33.83 billion interest), per the document. Annual servicing was TZS 890.9 billion in February 2025 (TZS 609.9 billion principal, TZS 281 billion interest).
    • External: USD 80.9 million in April 2025, with annual estimates of USD 1–2 billion, driven by USD-denominated debt (67.6%) and TZS depreciation.
    • Context: Servicing absorbs ~40% of government expenditures, per IMF, straining fiscal space. Concessional loans (e.g., World Bank, 48% of external debt) mitigate costs, but non-concessional borrowing raises concerns.
    • Implications: High servicing costs limit development spending (33.7% of Zanzibar’s budget), necessitating revenue mobilization (TZS 2,689.2 billion in May 2025, 3.1% above target) and export growth.

Tanzania Shilling (TZS) Sustainability

The TZS’s sustainability is assessed through its exchange rate stability, depreciation trends, and impact on debt servicing, drawing from the provided data and document’s external sector insights (e.g., Charts 2.7.1–2.7.3, Table 2.7.1).

  • Exchange Rate Performance:
    • USD/TZS (IFEM):
      • June 2024: 2,345.38
      • May 2025: 2,565.08
      • June 2025: 2,569.46
      • Annual Depreciation: -9.6%
      • Monthly Change: -0.2% (May to June 2025)
    • Bureau de Change:
      • Buying Rate: 2,574.33 TZS/USD
      • Selling Rate: 2,582.67 TZS/USD
    • Other Currencies:
CurrencyTZS per Unit (June 2025)% Change (Y-o-Y)
EUR2,763.91-10.4%
GBP3,248.65-9.7%
JPY (100 units)1,617.18-10.3%
CNY353.77-10.2%
  • Context: The document notes improved IFEM liquidity in June 2025, driven by seasonal cash crop exports (e.g., cashew nuts, tobacco) and gold exports (USD 3,369.7 million annually). The 9.6% depreciation aligns with earlier trends (9% in 2024, 8% in 2023), but a slight 0.28% appreciation in October 2024 and 2.6% by January 2025 indicate periods of stability. The BoT’s USD 7 million intervention in January 2025 and reserves of USD 5,307.7 million (4.3 months of import cover) support orderly markets.
  • Drivers:
    • Import Demand: Goods imports rose to USD 459.5 million in Zanzibar and USD 13,040.7 million for Tanzania (Table A7), driven by capital goods (e.g., SGR, hydropower).
    • Export Shortfalls: Zanzibar’s exports fell to USD 150.3 million (-11.9%), with cloves down 27.2%. Tanzania’s goods exports grew to USD 1,036 million (Table 2.7.1), led by gold and cereals (USD 501.3 million), but were insufficient to offset imports.
    • Global USD Strength: U.S. monetary tightening increased USD demand, impacting emerging market currencies like the TZS.
  • Implications: The 9.6% depreciation raises import and debt servicing costs, contributing to inflation (3.4% in Zanzibar, 3.2% in Mainland). The narrow Bureau spread (0.3%) and low dollarization (3.2% of Mainland businesses use USD) indicate market confidence, but sustained depreciation pressures reserves.
  • Forex Market Activity:
    • IFEM Volume: USD 65.4 million in June 2025, +12.6% from USD 58.1 million in May 2025 (document, Page 10). This reflects trade settlements and seasonal imports, compared to USD 95.7 million in December 2024.
    • Reserves: USD 5,307.7 million (Chart 2.7.1), covering 4.3 months of imports, down slightly from USD 5,323.6 million in January 2025 but sufficient per IMF’s 4-month threshold.
    • Implications: Increased IFEM activity signals robust demand, but reserves and BoT interventions (e.g., USD sales) ensure stability. Service receipts (USD 7,104 million, driven by tourism’s 10% arrival increase to 2,333,322) bolster forex inflows.
  • TZS Sustainability:
    • Stability: The TZS’s “orderly and market-driven” performance (document, Page 10) and minimal monthly depreciation (-0.2%) indicate short-term stability, supported by reserves and interventions.
    • Risks: The 9.6% annual depreciation and high USD debt exposure (67.6%) increase servicing costs, with external debt service at USD 1–2 billion annually. Import reliance (USD 13,040.7 million) and export volatility (e.g., cloves) strain reserves.
    • Mitigating Factors: Tourism receipts (USD 7,104 million), FDI (USD 3.7 billion), and concessional financing (e.g., IMF’s USD 441 million) support forex inflows. The BoT’s 6% Central Bank Rate (Page 7) controls inflation (3%–5% target), stabilizing the TZS.
    • Implications: The TZS is sustainable in the short term, but long-term pressures from depreciation and import growth require export diversification (e.g., cereals, manufactured goods) and reserve accumulation.

Debt and TZS Sustainability Metrics

IndicatorValue (June 2025)Notes
Total National DebtTZS 116.6 trillion (USD 45.4 billion)+13.5% from June 2024; ~44.3% of GDP
Domestic DebtTZS 35.5 trillion (USD 13.8 billion)29.3% of total; +11.1% annually; bonds 83.2%
External DebtTZS 82.4 trillion (USD 33.0 billion)70.7% of total; +14.8% annually; USD 67.6%
Debt-to-GDP Ratio~44.3% (or ~29.2% per World Economics)Below 55% IMF benchmark; moderate distress risk
Debt Service (Domestic, June)TZS 93.96 billionTZS 60.13 billion principal, TZS 33.83 billion interest
Debt Service (External, Annual)USD 1–2 billion~40% of government expenditures; USD 80.9 million in April 2025
USD/TZS Exchange Rate2,569.46-9.6% depreciation from June 2024; -0.2% from May 2025
Foreign Exchange ReservesUSD 5,307.7 million4.3 months of import cover; supports TZS stability
Current Account DeficitUSD 2,117.6 million (est.)Driven by goods imports (USD 13,040.7 million) vs. exports (USD 1,036 million)
Service ReceiptsUSD 7,104 million+9.2% from USD 6,577 million; driven by tourism (2.3 million arrivals)

Key Insights and Policy Implications

  1. Debt Sustainability:
    • Status: The TZS 116.6 trillion debt (44.3% of GDP) is sustainable per the IMF’s DSA (below 55% benchmark), with moderate distress risk. External debt’s 70.7% share and 14.8% growth support infrastructure (25.4% transport) but increase servicing costs (USD 1–2 billion annually).
    • Policy: Prioritize concessional financing (e.g., World Bank’s USD 527 million) and revenue mobilization (TZS 2,339.2 billion tax revenue in May 2025, 4.1% above target) to reduce non-concessional borrowing (34% of external debt).
  2. TZS Sustainability:
    • Status: The 9.6% depreciation and stable monthly performance (-0.2%) indicate short-term TZS stability, supported by reserves (USD 5,307.7 million) and tourism receipts (USD 7,104 million). However, import reliance and USD debt exposure pose long-term risks.
    • Policy: Boost exports (e.g., cereals, USD 501.3 million; manufactured goods) via AfCFTA and diversify debt currencies to mitigate USD risks (67.6% share).
  3. Debt-TZS Nexus:
    • Impact: TZS depreciation increases external debt servicing costs, with USD 22.3 billion (67.6%) in USD-denominated debt. This contributes to inflation (3.4% in Zanzibar) and fiscal pressure.
    • Policy: Strengthen reserves through FDI (USD 3.7 billion) and tourism (2.3 million arrivals) to stabilize the TZS and reduce servicing costs.
  4. Economic Context:
    • Growth: 5.6% GDP growth in 2024 and 6% projected for 2025 support debt absorption, driven by tourism and infrastructure.
    • Risks: TZS depreciation, global USD strength, and export volatility (e.g., cloves -27.2%) threaten sustainability. Climate shocks and election uncertainties (October 2025) add risks.
    • Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (TIPS, 453.7 million transactions) enhance fiscal and TZS resilience.

Critical Examination of the Establishment Narrative

  • Debt Optimism: The BoT and IMF emphasize sustainability (35% debt-to-GDP), but the 13.5% debt increase and 9.6% TZS depreciation raise servicing concerns, especially with USD debt (67.6%). The IMF’s moderate risk rating may understate long-term vulnerabilities if exports (e.g., cloves) or tourism falter.
  • TZS Stability: The BoT’s “orderly market” narrative (Page 10) is supported by reserves and interventions, but high import demand (USD 13,040.7 million) and global USD strength challenge long-term TZS sustainability. X posts on regional debt (e.g., Kenya’s unsustainable levels) suggest broader risks.
  • Crowding Out: The narrative overlooks domestic borrowing’s crowding-out effect (15.5% lending rates), limiting private sector credit (12.8% growth in January 2025) and Vision 2050’s private sector-led goals.
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