1. External Debt Stock by Borrower

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

2. Disbursed Outstanding Debt by Use of Funds

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

3. Disbursed Outstanding Debt by Currency Composition

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

Summary Snapshot

Additional Insights and Outlook

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

Tanzania External Debt Overview - May 2025: Key Figures

1. Overview of Trade Performance

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

2. Exports of Goods and Services

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

3. Imports of Goods and Services

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

4. Policy Recommendations

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

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

5. Economic Implications

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

Tanzania Exports and Imports - May 2025: Key Figures

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

1. Inflation

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

2. Government Budgetary Operations

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

3. External Sector Performance

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

Additional Insights and Outlook

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

Zanzibar Economic Performance - May 2025: Key Figures

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

1. Central Government Revenues

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

2. Central Government Expenditures

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

3. Key Observations

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

Summary Table – April 2025

Additional Insights and Outlook

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

Tanzania Government Budget Operations - April 2025: Key Figures

1. Current Account Balance

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

2. Exports – Services Receipts by Category

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

3. Imports – Services Payments

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

Additional Insights and Outlook

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

Tanzania External Sector Performance - May 2025: Key Figures

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

Tanzania’s interest rate trends in May 2025 reflect a balanced monetary environment, with stable lending rates (15.18%) supporting credit growth (12.8% in January 2025) and rising deposit rates (8.58%) strengthening bank funding. The narrowing interest rate spread (6.24%) indicates improved banking efficiency, but high lending rates and low savings rates (2.52%) highlight structural challenges in credit access and financial inclusion

1. Lending Interest Rates

• Overview: Lending interest rates reflect the cost of borrowing for individuals, businesses, and prime clients in Tanzania’s banking sector. These rates are influenced by the Bank of Tanzania’s (BoT) monetary policy, particularly the Central Bank Rate (CBR) at 6%, private sector credit demand, and macroeconomic conditions like inflation (3.2% headline in May 2025).
• May 2025 Performance:
  • Overall Weighted Average Lending Rate:
    • May 2024: 15.47%
    • April 2025: 15.16%
    • May 2025: 15.18%
  • Short-Term Lending Rate (≤1 year):
    • May 2024: 15.98%
    • April 2025: 16.15%
    • May 2025: 15.96%
  • Negotiated Lending Rate (Prime Clients):
    • May 2024: 12.69%
    • April 2025: 12.88%
    • May 2025: 12.99%
• Context and Analysis:
  • Stability with Slight Fluctuations: The overall weighted average lending rate remained stable at 15.18% in May 2025, up slightly from 15.16% in April 2025 but down from 15.47% in May 2024. This stability reflects cautious credit conditions, driven by the BoT’s steady CBR at 6% and efforts to keep the 7-day interbank rate within the 4–8% policy band. The slight increase from April to May (2 basis points) may indicate marginal adjustments in response to rising food inflation (5.6%, Document, Page 4) or liquidity tightness in some banks (IBCM rate at 7.98%).
  • Short-Term Lending Rate Decline: The short-term lending rate (≤1 year) dropped to 15.96% in May 2025 from 16.15% in April 2025, suggesting banks are slightly easing terms for short-term borrowers, possibly to support working capital needs in sectors like agriculture, which saw 12.8% credit growth in January 2025. Compared to May 2024 (15.98%), the rate is nearly unchanged, indicating consistent pricing for short-term credit.
  • Negotiated Lending Rate Increase: The negotiated rate for prime clients rose to 12.99% in May 2025 from 12.88% in April 2025 and 12.69% in May 2024. This 11-basis-point increase from April to May signals rising costs for preferred borrowers, likely reflecting banks’ higher risk pricing amid inflationary pressures and tight liquidity (7-day interbank rate near 8%). Prime clients, typically large corporates or low-risk borrowers, benefit from lower rates due to their creditworthiness, but the upward trend suggests banks are adjusting margins to maintain profitability.
  • Economic Drivers: Lending rates remain high (15.18% overall) due to structural factors, including high operational costs in Tanzania’s banking sector, limited credit access (only 15% of adults had bank loans in 2023), and reliance on government securities (T-Bill yields at 8.89%, T-Bond yields at 12.94–15.29%). The BoT’s monetary policy, aimed at anchoring inflation within the 3–7% SADC target, supports rate stability but limits significant reductions. Rising food inflation and global uncertainties (e.g., U.S. tariff risks) may keep banks cautious, maintaining high lending rates to mitigate risks.
  • Implications: Stable but high lending rates (15.18% overall, 15.96% short-term) constrain credit access for small and medium enterprises (SMEs), which are critical for Tanzania’s economy (contributing 35% to GDP). The rise in negotiated rates (12.99%) could increase borrowing costs for corporates, potentially slowing investment in key sectors like manufacturing or agriculture. However, the slight decline in short-term rates (15.96%) may ease liquidity pressures for businesses with short-term financing needs, supporting economic activity (projected 6.0% GDP growth in 2025).

2. Deposit Interest Rates

• Overview: Deposit interest rates reflect the returns offered by banks to attract savings and time deposits, which fund lending activities. These rates are influenced by competition among banks, liquidity conditions, and the BoT’s monetary policy. Higher deposit rates incentivize savings but increase banks’ funding costs.
• May 2025 Performance:
  • Overall Time Deposit Rate:
    • May 2024: 7.65%
    • April 2025: 7.82%
    • May 2025: 8.58%
  • 12-Month Time Deposit Rate:
    • May 2024: 8.97%
    • April 2025: 9.27%
    • May 2025: 9.72%
  • Negotiated Deposit Rate:
    • May 2024: 9.72%
    • April 2025: 10.52%
    • May 2025: 10.64%
  • Savings Deposit Rate:
    • May 2024: 2.87%
    • April 2025: 2.89%
    • May 2025: 2.52%
• Context and Analysis:
  • Modest Increase in Time Deposits: The overall time deposit rate rose significantly to 8.58% in May 2025 from 7.82% in April 2025 and 7.65% in May 2024, a 76-basis-point increase month-on-month and 93-basis-point increase year-on-year. The 12-month time deposit rate also increased to 9.72% from 9.27% in April 2025 and 8.97% in May 2024. These rises indicate stronger competition among banks to attract longer-term deposits, likely to fund increased lending (private sector credit growth at 12.8% in January 2025) or offset liquidity tightness (IBCM volume up to TZS 3,267 billion).
  • Negotiated Deposit Rate Growth: The negotiated deposit rate climbed to 10.64% in May 2025 from 10.52% in April 2025 and 9.72% in May 2024, a 12-basis-point increase month-on-month and 92-basis-point increase year-on-year. This reflects banks offering higher rates to high-value depositors (e.g., corporates, institutions) to secure stable funding, especially as government borrowing competes for liquidity (T-Bond bids at TZS 1,032.5 billion).
  • Savings Deposit Rate Decline: The savings deposit rate fell to 2.52% in May 2025 from 2.89% in April 2025 and 2.87% in May 2024, a 37-basis-point drop month-on-month. This decline suggests banks are prioritizing longer-term time deposits over retail savings, which offer lower returns and are less stable for funding lending activities. The low savings rate aligns with Tanzania’s low savings culture (15% household savings rate in 2023), limiting retail deposit growth.
  • Economic Drivers: The rise in time deposit rates (8.58% overall, 9.72% for 12-month) reflects banks’ response to liquidity demands, as evidenced by the IBCM’s 7-day rate near the 8% upper bound. Competition for deposits is intensified by government securities’ attractive yields (T-Bills at 8.89%, T-Bonds at 15.29%), which draw funds away from bank deposits. The BoT’s liquidity management, using REPOs and Reverse REPOs, ensures overall system liquidity but does not fully address disparities among banks, pushing deposit rates upward. The decline in savings rates (2.52%) may discourage retail savings, potentially slowing financial inclusion efforts (40% of adults banked in 2023).
  • Implications: Higher time deposit rates (8.58%, 9.72%) strengthen banks’ funding base, supporting credit expansion in key sectors like agriculture and trade. However, increased funding costs could further elevate lending rates, squeezing bank margins (see interest rate spread below). The drop-in savings rates (2.52%) may deter retail depositors, limiting banks’ access to low-cost funds and reinforcing reliance on high-cost time deposits or interbank borrowing. Policymakers may need to promote savings incentives to boost financial inclusion and deposit growth.

3. Interest Rate Spread

• Overview: The interest rate spread, the difference between lending and deposit rates, measures banking sector efficiency, risk pricing, and profitability. A narrower spread indicates improved efficiency or competitive pressures, while a wider spread reflects higher risk premiums or operational costs.
• May 2025 Performance:
  • Short-Term Interest Spread:
    • May 2024: 7.01%
    • April 2025: 6.88%
    • May 2025: 6.24%
• Context and Analysis:
  • Narrowing Spread: The short-term interest spread (difference between short-term lending rate and deposit rate) narrowed to 6.24% in May 2025 from 6.88% in April 2025 and 7.01% in May 2024, a 64-basis-point reduction month-on-month and 77-basis-point reduction year-on-year. Using provided data, the short-term lending rate (15.96%) and an inferred short-term deposit rate (e.g., 12-month time deposit rate at 9.72%) yield a spread of approximately 6.24%, confirming the provided figure.
  • Drivers of Narrowing: The narrowing spread reflects improved banking efficiency, likely due to technological advancements (e.g., mobile banking, 60% penetration in 2023) and increased competition (28 commercial banks in Tanzania). The rise in deposit rates (8.58% overall, 9.72% for 12-month) outpaced the slight increase in lending rates (15.18% overall), compressing bank margins. The BoT’s stable monetary policy (CBR at 6%) and liquidity management (IBCM volume at TZS 3,267 billion) support a more competitive environment, reducing spreads.
  • Economic Context: Tanzania’s banking sector faces high operational costs (e.g., branch networks, cybersecurity) and credit risks (non-performing loans at 4.8% in 2023), which historically widened spreads. The narrowing to 6.24% suggests banks are absorbing higher deposit costs to remain competitive, especially as government securities (T-Bonds at 15.29%) offer alternative investment options. The spread’s reduction aligns with earlier trends, as January 2025 data showed a spread of 6.5% (lending at 15.3%, deposits at 8.8%).
  • Implications: A narrower spread (6.24%) indicates improved efficiency and competitiveness, benefiting borrowers through relatively stable lending rates. However, tighter profit margins could pressure smaller banks, potentially leading to consolidation or reduced lending to riskier sectors like SMEs. The BoT may need to monitor spreads to ensure banks remain profitable while supporting credit growth (targeting 15% private sector credit growth in 2025).

Summary Table

Additional Insights and Implications

• Policy Support: The BoT’s CBR at 6% and liquidity management (REPOs, IBCM rate at 7.98%) anchor interest rate stability, aligning with inflation targets (3–7% SADC benchmark). Government interventions, like the NFRA’s 47,238-tonne food release, help curb food inflation (5.6%), indirectly supporting rate stability by reducing inflationary pressures.
• Risks:
  • High Lending Rates: At 15.18%, lending rates constrain SME financing, potentially slowing economic diversification (agriculture, manufacturing targeted for growth in 2025/26 budget).
  • Low Savings Rates: The 2.52% savings rate may discourage retail deposits, limiting banks’ low-cost funding and slowing financial inclusion (40% banked adults in 2023).
  • Tight Liquidity: The IBCM’s 7-day rate near 8% suggests liquidity disparities, which could push deposit rates higher, further narrowing spreads and squeezing bank profits.
• Outlook: Stable lending rates and rising deposit rates support economic growth (projected 6.0% GDP in 2025), but the BoT must address high lending costs and low savings rates to boost credit access and financial inclusion. Continued export growth (16.8% in April 2025) and infrastructure investments will sustain liquidity, provided global uncertainties (e.g., geopolitical tensions) do not escalate.

Tanzania Interest Rates - May 2025: Key Figures

Budget, Government Burden, and PPP Potential

Tanzania’s government, under President Samia Suluhu Hassan, has implemented an ambitious array of public investment projects from 2020 to 2025, spanning agriculture, transport, energy, water, health, education, and other sectors. These projects, detailed in a comprehensive table below, aim to drive inclusive economic growth, enhance infrastructure, and improve social services, aligning with Tanzania’s Development Vision 2025 and the Third Five-Year Development Plan (FYDP III). This cases study evaluates the economic potential of these projects, calculates their total budget, assesses their fiscal burden on the government, and explores how Public-Private Partnerships (PPPs) could mitigate this burden while enhancing outcomes.

Total Budget of Public Investment Projects

Tanzania’s 2020–2025 public investment projects, spanning 25 initiatives across agriculture, transport, energy, water, health, education, social protection, mining, and ICT, have a total budget of TZS 27,737B–29,309B (USD 10.67B–11.27B). Key allocations include agriculture (TZS 900B–1,230B, e.g., TZS 600B–800B for irrigation), transport (TZS 9,730B–10,190B, e.g., TZS 7,500B for SGR), energy (TZS 8,400B–8,500B, e.g., TZS 7,600B for JNHPP), water (TZS 2,320B), health (TZS 300B–450B), education (TZS 1,107.4B–1,217.4B), social protection (TZS 3,640B), mining (TZS 50B–80B), and ICT (TZS 220B–330B). These projects drive economic growth (6% GDP in 2025), create jobs (e.g., 41,117 from new investments), and enhance exports (USD 16.7B in 2025), but strain the TZS 56.49T 2025/26 budget, consuming 9.8–10.4% annually. Public-Private Partnerships could save TZS 6,934B–7,327B, reduce the fiscal deficit from 3% to 2–2.1% of GDP, and boost growth by 0.5–1% through private sector efficiency and investment.

Economic Potential of the Projects

The economic potential of these projects is substantial, addressing critical needs across sectors and fostering inclusive growth. Below are key highlights:

• Agriculture (TZS 900B–1,230B): Projects like irrigation expansion (983,466.06 ha) and improved seed availability (72,031.9 tons in 2024) boost agricultural productivity, supporting food security and increasing farmer incomes by an estimated 20–30%. Multiplier effects include growth in agro-processing, transport, and rural markets, contributing to 26% of GDP in 2024.
• Transport (TZS 9,730B–10,190B): The SGR (TZS 7,500B) and BRT (TZS 1,200B) reduce transport costs by up to 30%, enhance trade efficiency, and create jobs (e.g., 9,376 jobs from SGR). Port improvements (35% increase in container handling) and Air Tanzania expansion boost exports (e.g., cashew nuts up 141% in 2025), stimulating logistics and tourism.
• Energy (TZS 8,400B–8,500B): The JNHPP (2,115 MW, TZS 7,600B) increases electricity capacity from 1,601.84 MW in 2020 to 4,031.71 MW in 2025, reducing energy costs for industries by 15–20% and supporting manufacturing growth (8.1% of GDP in 2023). Rural electrification enhances productivity and quality of life.
• Water (TZS 2,320B): Water supply projects benefit 5,985,500 people, improving urban (91.6%) and rural (85%) access, reducing healthcare costs by 10–15% due to better sanitation, and boosting productivity.
• Health (TZS 300B–450B): Advanced diagnostic equipment and increased medicine availability (86.2% in 2025) improve health outcomes, potentially reducing mortality by 5–10% and supporting medical tourism.
• Education (TZS 1,107.4B–1,217.4B): Free education and scholarships increase enrollment (436,332 students with loans in 2025), building human capital and supporting long-term GDP growth (projected 6% in 2025).
• Social Protection, Mining, and ICT (TZS 3,910B–4,050B): TASAF empowers vulnerable groups, mining boosts GDP contribution to 10%, and ICT expansion (13,820 km fiber network) supports digital economy growth (14.3% in 2024).

Overall, these projects drive GDP growth (5.5% in 2024, projected 6% in 2025), create jobs (e.g., 41,117 from new investments in 2025), and enhance export revenues (USD 16.7B in 2025). Multiplier effects stimulate related industries, reduce poverty, and improve living standards.

Fiscal Burden on the Government

Tanzania’s 2025/26 national budget is TZS 56.49T, with domestic revenue projected at TZS 31.38T (70.7%) and a fiscal deficit of 3% of GDP (TZS 4.7T). The total project budget (TZS 27,737B–29,309B) spans five years (2020–2025), equating to an annual average of TZS 5,547B–5,862B, or 9.8–10.4% of the 2025/26 budget. This is significant, given that development expenditure in 2025/26 is TZS 757.79B for the Ministry of Finance alone, with total development spending likely around TZS 15T–20T annually.

• Debt Servicing: Tanzania’s external debt is USD 7.9B (TZS 20.54T), with 40% of government

System: government expenditures absorbed by debt servicing (TZS 8.2T annually). This places a heavy burden on the government, as development projects compete with recurrent expenditures (TZS 19.43T in 2025/26) and debt servicing.

• Budget Credibility Issues: The 2017 and 2022 PEFA assessments highlight weak budget credibility, cash management, and commitment control, leading to unpredictable funding for development projects. This suggests potential delays or underfunding for some projects, particularly large-scale ones like SGR and JNHPP, which rely heavily on external borrowing.
• Donor Dependency: Tanzania remains donor-dependent, with external funding (e.g., USD 650M from the World Bank for water projects) covering gaps in domestic revenue. However, donor funding is declining, increasing pressure on domestic resources.

The fiscal burden is substantial, as the government must balance these investments with recurrent costs, debt repayment, and social services, potentially straining fiscal discipline and increasing the deficit if revenues (TZS 26.73T from TRA in 2025/26) fall short.

Impact of Public-Private Partnerships (PPPs)

Implementing these projects through PPPs could significantly alleviate the fiscal burden and enhance efficiency, as outlined in the Public Private Partnership (Amendment) Act No. 4 of 2023 and its regulations. Below, we analyze the potential impacts of PPPs, supported by figures:

Benefits of PPPs

1. Reduced Fiscal Burden:
   • PPPs shift a portion of the financial burden to private investors, reducing government expenditure. For example, the SGR (TZS 7,500B) could have private partners fund 30–50% (TZS 2,250B–3,750B), significantly lowering the government’s debt-financed share.
   • The JNHPP (TZS 7,600B) could leverage private investment for operations and maintenance, saving an estimated TZS 1,000B–2,000B in government costs over time.
   • The World Bank notes that PPPs in water supply (e.g., USD 650M SRWSSP) have improved service delivery through private management, reducing government operational costs by 20–30%.
2. Enhanced Efficiency and Innovation:
   • Private sector expertise can accelerate project delivery and improve quality. For instance, port improvements (TZS 500B–700B) under PPPs could reduce ship waiting times further (from 7 days to 5 days), increasing revenue by 10–15% through higher container throughput.
   • ICT projects (TZS 220B–330B) could benefit from private tech firms’ innovation, potentially doubling internet penetration (from 46% to 80%) and boosting digital economy growth by 5–10%.
3. Attracting Foreign Investment:
   • The PPP Amendment Act offers tax incentives and streamlined processes, attracting foreign direct investment (FDI). In 2025, TIC recorded USD 3.7B in project registrations, a 32% increase from 2024, partly due to PPP reforms. For example, Air Tanzania’s expansion (TZS 200B–300B) could attract private airlines or logistics firms, reducing government funding by 20–40%.
   • Mining projects (TZS 50B–80B) could see increased FDI through PPPs, boosting mineral revenue (10% of GDP in 2024) by an additional 2–3%.
4. Improved Governance:
   • PPP regulations mandate quarterly implementation reports, enhancing transparency and reducing corruption risks, which historically inflate project costs by 10–20%.

Challenges of PPPs

1. Regulatory and Transparency Issues:
   • Despite reforms, Tanzania scores low (1.25/5) on regulatory governance, compared to Kenya and Uganda (3.25/5). Inconsistent tax regimes and bureaucratic delays could deter private investors.
   • The Natural Resources and Wealth Act and Mining Laws pose obstacles to foreign investment, potentially limiting PPP participation in mining and energy projects.
2. Limited Success in Past PPPs:
   • Historically, successful PPPs have been rare due to complex regulations and high financial risks for investors. For example, state-owned enterprises (SOEs) like TANESCO benefit from sovereign credit guarantees, crowding out private competition.
3. Risk of Indirect Expropriation:
   • Confiscatory tax regimes or regulatory actions could reduce investor confidence, potentially increasing project costs by 5–10% to account for risk premiums.

Hypothetical PPP Scenario

If 50% of the total project budget (TZS 13,868B–14,654B) were financed through PPPs:

• Government Savings: The government could save TZS 6,934B–7,327B over five years, or TZS 1,387B–1,465B annually, reducing the fiscal deficit by 30–35% (from 3% to 2–2.1% of GDP).
• Economic Impact: Private investment could accelerate GDP growth by 0.5–1%, reaching 6.5–7% by 2026, driven by faster project completion and higher efficiency.
• Job Creation: PPPs could create an additional 20,000–30,000 jobs (e.g., in SGR and port projects), as private firms often prioritize efficiency and scale.
• Risk Mitigation: Enhanced dispute resolution mechanisms (e.g., ICSID arbitration) and tax incentives could increase investor confidence, potentially doubling FDI in infrastructure (from USD 3.7B to USD 7B by 2026).

Comparison: Government-Funded vs. PPP

• Government-Funded:
  • Full cost (TZS 27,737B–29,309B) borne by the government, increasing debt (USD 7.9B in 2025) and debt servicing costs (TZS 8.2T annually).
  • Risk of budget overruns and delays due to weak cash management (PEFA 2022).
  • Limited private sector innovation, potentially reducing efficiency by 10–20%.
• PPP:
  • Shared costs reduce government expenditure by 30–50%, freeing funds for social services (e.g., TZS 787.4B for education).
  • Faster project delivery (e.g., BRT completion could be 20% faster) and higher quality due to private expertise.
  • Potential for higher GDP growth (0.5–1%) and job creation (20–30% more than government-led projects).
  • Risks include regulatory hurdles and investor reluctance due to past PPP failures.

Government Budget Impact

The TZS 27,737B–29,309B project cost over five years represents 49–52% of the 2025/26 national budget (TZS 56.49T). This heavy reliance on government funding strains fiscal resources:

• Recurrent vs. Development Spending: Recurrent expenditure (TZS 19.43T) and debt servicing (TZS 8.2T) consume 48% of the 2025/26 budget, leaving limited room for development spending (TZS 15T–20T).
• Fiscal Deficit: The 3% GDP deficit (TZS 4.7T) could widen if project costs escalate or revenues (TZS 31.38T) underperform, potentially requiring more borrowing.
• Donor Funding: External loans and grants (e.g., USD 227M for climate projects) are critical but declining, increasing pressure on domestic revenue (16.7% of GDP in 2025/26).

PPPs could reduce this burden by shifting 30–50% of costs to private investors, saving TZS 6,934B–7,327B and narrowing the deficit to 2–2.1% of GDP, aligning with fiscal discipline goals. However, regulatory reforms must address transparency and investor confidence to ensure PPP success.

Conclusion

Tanzania’s 2020–2025 public investment projects, with a total budget of TZS 27,737B–29,309B, have significant economic potential, driving GDP growth to 6% in 2025, creating over 41,000 jobs, and boosting exports by 16.8%. Agriculture, transport, energy, and water projects enhance productivity, connectivity, and living standards, with multiplier effects in related industries. However, the fiscal burden is substantial, consuming 9.8–10.4% of the annual budget and risking a wider deficit. PPPs could save TZS 6,934B–7,327B, accelerate growth by 0.5–1%, and create additional jobs, but require stronger regulatory frameworks to overcome historical challenges. By balancing government funding with PPPs, Tanzania can achieve sustainable growth while maintaining fiscal stability, paving the way for Vision 2025’s middle-income status.

Public Investment Projects in Tanzania (2020–2025)

Below is a table summarizing public investment projects implemented across various sectors. The table includes project descriptions, budgets, locations, economic potential, and multiplier effects for citizens.

Notes

• Budget Sources: Budgets were sourced from web references where possible (e.g., TanzaniaInvest, World Bank, KPMG). Where exact figures were unavailable, estimates were derived from sector budgets (e.g., TZS 1.24T for agriculture in 2025) or costs of similar projects, with percentages allocated based on project priority (e.g., irrigation as 50–60% of agriculture budget).
• Assumptions: Estimates assume proportional allocation from sector budgets (e.g., agriculture: TZS 1.24T; transport: TZS 2.75T; energy: TZS 2.2T for 2025/26). Costs for infrastructure projects (e.g., SGR, BRT) align with reported figures or regional benchmarks.
• Limitations: Some budgets remain estimates due to lack of project-specific data in public sources. Truncated document sections limited precise allocations for certain projects (e.g., sugar production, diagnostic equipment).
• Economic Potential: Focuses on direct benefits like job creation, income generation, and improved access to services, tailored to each project’s objectives.
• Multiplier Effects: Highlights indirect benefits such as stimulating related industries (e.g., agro-processing for agriculture, logistics for transport), boosting local economies, and enhancing productivity or quality of life.

Tanzania is experiencing an unprecedented surge in Foreign Direct Investment (FDI), positioning itself as East Africa’s premier investment hub. With a strong policy and infrastructure reform agenda, Tanzania is not only attracting capital but also creating jobs, transferring technology, and reducing poverty in line with its Vision 2050 of achieving a USD 1 trillion economy.

Key Trends and Performance (2023–Q3 2024/25)

• FDI Growth: FDI increased from USD 1.3–1.6 billion in 2023 to USD 6.56 billion in 2024, representing a more than 400% jump. In Q3 of 2024/25 alone, Tanzania attracted USD 1.36 billion.
• Projects & Jobs: In 2024, 901 projects were registered with a total capital of USD 9.31 billion, creating 212,293 jobs, the highest since 1991. In Q3 2024/25 alone, 24,444 jobs were created.
• GDP Growth: FDI-driven growth led to a GDP increase from 5.3% in 2023 to 5.5% in 2024, with a projection of 8% by 2030.

Main FDI Sectors

1. Manufacturing – Led all sectors with 377 projects valued at USD 3.1 billion in 2023 alone.
2. Transport & Infrastructure – Contributed over USD 1.2 billion.
3. Agriculture – Projected to attract USD 2 billion in agro-processing FDI by 2030.
4. Renewable Energy – With USD 3 billion projected by 2030, including strategic projects like the Julius Nyerere Hydropower Plant.
5. Real Estate – Driven by policy changes allowing 99-year leases, it attracted USD 185.54 million in Q3 2024/25 from UAE investors.

Policy and Institutional Reforms

• TISEZA Act 2025: Merged TIC and EPZA, introduced a USD 50 million threshold for strategic projects, expedited permits, and established a national land bank.
• National Land Policy 2023: Enabled long-term lease access to land for foreign investors.
• Tanzania Electronic Investment Window (TeIW): Reduced investment registration times from 60 to 30 days.
• One Stop Facilitation Centre (PISC): Supports 80% of investors, easing FDI logistics.

Challenges Still to Address

• Infrastructure Gaps: Only 45% of Tanzanians had electricity access in 2023, hindering scalability of SEZs.
• Land Disputes: Affect around 20% of investment projects, especially in rural zones.
• Bureaucratic Inefficiencies: 15% of FDI projects experienced delays due to poor inter-ministerial coordination.
• Foreign Exchange Shortages and regional disparities persist, particularly in Nyasa Zone.

2025–2030 Strategic Goals

• USD 15 billion in annual FDI by 2030.
• 1 million jobs created by 2030.
• USD 5 billion in infrastructure investment: 20,000 km of roads and 10,000 MW energy capacity.
• 50% of FDI projects to be joint ventures.
• 95% of all FDI applications processed digitally via TeIW.
• USD 1 billion directed to underserved regions like Nyasa Zone.

Inclusive and Sustainable Growth

Programs like Vikapu Bomba (training 5,000 women in 2024 and targeting 50,000 by 2030) and SEZs like Kibaha Textile Park (projected 38,400 jobs) emphasize inclusive development. FDI also aligns with SDG 8 (Decent Work) and SDG 13 (Climate Action) by promoting green energy and equitable employment.

Conclusion

Tanzania’s FDI trajectory showcases how robust policy, sectoral strategy, and institutional reform can unlock transformative economic growth. By addressing remaining gaps and promoting equity, Tanzania is on course to become a regional economic powerhouse by 2030.

The Tanzania Revenue Authority (TRA) achieved significant milestones in tax collection during the 2024/25 fiscal year (July 2024 – June 2025), reflecting enhanced administrative efficiency, taxpayer compliance, and technological advancements.

Key Highlights

• Total Collection: TZS 32.26 trillion, exceeding the target of TZS 31.05 trillion (103.9% performance rate).
• Annual Growth: 16.7% increase from TZS 27.64 trillion in 2023/24.
• Quarter 4 (April – June 2025): Collected TZS 8.22 trillion against a target of TZS 7.84 trillion (104.8% performance, 15.8% growth from Q4 2023/24).
• Monthly Achievements:
  • Consistently surpassed monthly targets for 12 consecutive months, a record since TRA’s establishment in 1996.
  • Average monthly collection: TZS 2.69 trillion, the highest in TRA history.
  • Peak collection: TZS 3.58 trillion in December 2024.
• Major Milestones:
  • Exceeded the annual target for the first time since 2015/16.
  • Recorded the highest single-month collection in December 2024.

Monthly Collection Breakdown (FY 2024/25)

Revenue Forecast for FY 2025/26

The TRA has set a target of TZS 36.066 trillion for the 2025/26 fiscal year, reflecting an anticipated growth of 11.8% from 2024/25. This ambitious target is supported by:

• Continued taxpayer education and compliance initiatives.
• Deployment of modern tax systems (IDRAS, TANCIS).
• Strengthened cooperation with business communities.
• Enhanced staff performance monitoring and accountability.

Projected Monthly Targets for 2025/26

Implications for Tanzania’s Economic Development (2025/26 Budget)

The TRA’s strong revenue performance in 2024/25 and the optimistic forecast for 2025/26 are critical for funding Tanzania’s TZS 56.49 trillion budget for 2025/26, which aims to achieve 6% GDP growth and aligns with the Third Five-Year National Development Plan (2021/22–2025/26) and Vision 2025. Below are the key implications for economic development:

1. Strengthened Fiscal Capacity

• Domestic Revenue Mobilization: The TRA is projected to collect TZS 36.066 trillion in 2025/26, contributing significantly to the budgeted TZS 38.9 trillion in domestic revenues (70.1% of the total budget). This reduces reliance on external financing, which is expected to contribute TZS 16.02 trillion (including grants and loans).
• Fiscal Discipline: The TRA’s consistent overperformance (103.9% in 2024/25) and a controlled budget deficit (TZS 30 billion in January 2025) reflect improved tax administration and fiscal management, enabling sustainable funding for development projects.
• Reduced External Debt Dependency: With domestic revenue covering over 70% of the budget, Tanzania is moving toward greater self-reliance, despite an external debt of $32.89 billion in September 2024.

2. Support for Flagship Infrastructure Projects

The TRA’s revenue surplus supports the completion of strategic projects outlined in the 2025/26 budget, including:

• Standard Gauge Railway (SGR): Enhancing transport infrastructure to boost trade and regional connectivity.
• Julius Nyerere Hydropower Project (2,115 MW): Increasing electricity production to support industrial growth.
• Ruhudji (358 MW) and Rumakali (222 MW) Hydropower Plants: Expanding energy access for economic activities.
• Liquefied Natural Gas (LNG) Project: Positioning Tanzania as a regional energy hub.
• John Magufuli Bridge (Kigongo-Busisi): Improving domestic and cross-border connectivity.

These projects drive industrial capacity, competitiveness, and job creation, aligning with the budget’s theme of “Inclusive Economic Transformation through Strengthening Domestic Revenue Mobilization.”

3. Economic Growth and Job Creation

• GDP Growth: The 2025/26 budget targets 6% GDP growth, building on 5.5% growth in 2024 (TZS 156.6 trillion GDP). The TRA’s revenue performance supports investments in key sectors like agriculture (26% of GDP), construction (13%), and mining (10%), which are critical for economic expansion.
• Job Creation: The budget aims to create employment opportunities, with 41,117 jobs projected from $3.7 billion in registered investment projects (January–May 2025). Strong tax revenue enables funding for human capital development, including education and health initiatives.
• Private Sector Growth: Improved tax compliance and a 20% annual increase in private sector credit indicate robust business activity, further supported by tax reforms like VAT exemptions for farmers, producers, and clean energy.

4. Social and Human Capital Development

• Health and Education: The 2025/26 budget allocates funds for training 28,000 health workers, expanding specialist services to 9 referral hospitals, and revitalizing pharmaceutical production (e.g., ARV manufacturing in Arusha). Education investments focus on skills development to support industrialization.
• Elections and Social Services: Significant allocations for the 2025 general elections and social welfare programs ensure inclusive growth, funded primarily through domestic revenue.

5. Digital and Technological Advancements

• Tax Systems: The deployment of modern systems like IDRAS and TANCIS has enhanced tax collection efficiency, contributing to the TRA’s record performance. These systems are expected to sustain revenue growth in 2025/26.
• Digital Economy: The budget supports ICT growth (projected at 13.5% by 2026), including over 400 communication towers in rural areas and the National Digital Economy Strategic Framework 2024–2034, fostering digital inclusivity and economic transformation.

6. Challenges and Risks

• Tax Base Expansion: Tanzania’s tax-to-GDP ratio (14.9% in 2024/25) remains below the Sub-Saharan Africa average (18.6%), indicating a need to broaden the tax base, particularly in agriculture and the informal economy.
• Global and Regional Risks: Potential global economic slowdown, geopolitical tensions, and the 2025 general elections may dampen investment and growth.
• Debt Management: Rising external debt ($32.89 billion) requires prudent fiscal policies to maintain creditworthiness.

Conclusion

The TRA’s exceptional performance in 2024/25, with a record-breaking TZS 32.26 trillion collected, underscores Tanzania’s progress in domestic revenue mobilization. The forecasted TZS 36.066 trillion for 2025/26 will play a pivotal role in funding the TZS 56.49 trillion budget, supporting infrastructure, industrialization, and social development. By reducing reliance on external financing and fostering inclusive growth, Tanzania is poised to achieve its 6% GDP growth target and advance toward Vision 2050. However, addressing challenges like the narrow tax base and global economic uncertainties will be critical to sustaining this trajectory.

As Tanzania advances toward its Vision 2050 goals, a robust and inclusive tax system is becoming increasingly central to the country’s development strategy. The Tanzania Investment and Consultant Group Ltd. (TICGL), through its recent report “Tanzania’s Tax System and Economic Development (2025–2030)”, sheds light on how the government’s tax reforms are driving economic growth, while also revealing critical systemic challenges that must be addressed.

Economic Progress Anchored in Tax Reform

Tanzania’s economy has shown resilience and promise, with GDP growth projected at 6.0% in 2025 and 7.0% by 2028. Key growth sectors include:

• Manufacturing: 156 projects registered in 2025 worth $3.7 billion, creating 41,117 jobs.
• Agriculture: Boosted by a ¥22.7 billion Japanese loan, the sector employs 65% of the workforce and contributes 26% of GDP.
• Clean energy: Investment commitments of $40 billion (Mission 300 Summit) raised electricity production from 1,602 MW to 3,077 MW by 2025.

Much of this development has been supported by rising tax revenues. In 2024/25, the Tanzania Revenue Authority (TRA) collected TZS 29.41 trillion, including a record TZS 3.587 trillion in December 2024 alone. This revenue funded critical initiatives such as:

• $650 million Sustainable Rural Water Supply Program
• ICT infrastructure in Dodoma and Kigoma
• Education and health investment, currently at 3.3% and 1.2% of GDP, respectively

Key Issues Hindering Fiscal and Inclusive Growth

Despite these gains, the study outlines ten pressing issues that must be tackled to ensure sustainable development:

1. Narrow Tax Base

Only 7% of Tanzania’s population is registered as taxpayers. With the informal sector employing 72% of the workforce, vast economic activity remains untaxed. This limited base restricts the country’s fiscal space and puts pressure on the formal sector.

2. High VAT Refund Arrears

Businesses faced TZS 1.2 trillion in unpaid VAT refunds in 2024. These delays affect cash flows, particularly for exporters and SMEs, and hinder business expansion.

3. Excessive Compliance Costs

Complex procedures and audit burdens increase operating costs by 10–20% for private enterprises. This discourages SMEs from entering or staying in the formal economy.

4. Business-Discouraging Tax Rates

The 30% corporate income tax and 10% withholding tax on retained earnings introduced in 2025 significantly burden SMEs. For example, SMEs (95% of all businesses) reported a 15% drop in reinvestment capacity due to this withholding tax.

5. Rural-Urban Disparities

Access to financial services is 85% in urban areas but just 55% in rural regions. This gap affects tax registration, compliance, and equitable access to public services.

6. Public Debt Pressure

Public debt stood at 45.5% of GDP in 2022/23. The fiscal deficit reached 2.5% of GDP in 2024/25, with borrowing of TZS 6.62 trillion domestically and TZS 2.99 trillion externally, highlighting the need for increased domestic revenue.

7. Inequitable Tax Benefit Distribution

Only 30% of eligible smallholder farmers accessed the tax exemptions meant for agricultural productivity. This shows a gap between policy design and grassroots impact.

8. Digital Divide

Although digital tax platforms improved compliance by 12% (2023–2024), poor digital literacy and infrastructure outside urban areas limit effectiveness.

9. Climate Vulnerability

Tanzania risks losing up to 0.5% of GDP by 2050 due to climate-related disruptions. While green taxes were proposed (e.g., TZS 500 billion carbon tax), implementation is still nascent.

10. Tensions with Private Sector

The private sector perceives some reforms—such as the 10% withholding tax—as hostile to reinvestment. This could dampen momentum in sectors like manufacturing, where private investment is essential.

The Way Forward

The report outlines several reforms to address these issues:

• Expand the tax base: Lowering the VAT registration threshold to TZS 50 million could increase registered taxpayers by 15%, raising TZS 2 trillion more annually.
• Introduce simplified presumptive taxes: This would formalize 10% of the informal sector, adding TZS 1.5 trillion in new revenue per year.
• Automate VAT refunds: Clearing 80% of refund arrears by 2027 could boost business confidence and increase investment by 5%.
• Invest in digital infrastructure: Increasing rural access to tax platforms could reduce evasion by 15%, generating an additional TZS 3 trillion by 2030.
• Sustain green growth: Implementing green taxes to support $227 million in climate adaptation will ensure resilience and help meet Tanzania’s net-zero targets.

Conclusion

Tanzania’s tax system is a cornerstone of its economic transformation agenda. While the country has made impressive strides in revenue mobilization and sectoral development, major structural and operational issues remain. Addressing these through inclusive, technology-driven, and equity-focused reforms is not only vital for achieving Vision 2050 but also for securing a prosperous and resilient future for all Tanzanians.