Overview of Tanzania's Monetary Policy

The Bank of Tanzania's primary goal in monetary policy is to maintain price stability and support economic growth. The current monetary policy framework involves several key elements:

1. Policy Rate: The central bank rate (policy rate) was maintained at 6% for the quarter ending September 2024. This decision aligns with the goal to keep inflation below the target of 5%.
2. Inflation:
   • Mainland Tanzania: Inflation remained low at 3-4% over the past year. In April and May 2024, it was recorded at 3% and 3.1% respectively.
   • Zanzibar: Inflation declined to the medium target of 5%.
3. GDP Growth:
   • Mainland Tanzania: Real GDP growth was 5.1% in 2023, up from 4.7% in 2022. The growth was driven by sectors such as agriculture, mining, quarrying, construction, and financial intermediation. The first and second quarters of 2024 showed strong growth at 5% and 5.4% respectively.
   • Zanzibar: The economy grew by 7.4% in 2023, compared to 6.8% in 2022, mainly driven by tourism-related activities, construction, and real estate.
4. Private Sector Credit Growth: Estimated at 16.4% during the second quarter of 2024, compared with 17.1% in the preceding quarter. The banking sector remained liquid, profitable, and well-capitalized, with an improved asset quality as reflected by a lower Non-Performing Loan (NPL) ratio of 4.4% in May 2024.
5. Current Account:
   • The current account deficit narrowed to USD 959.2 million in the quarter ending June 2024, from USD 977.8 million in the corresponding quarter in 2023.
   • In Zanzibar, the current account surplus increased to USD 421.5 million in the year ending June 2024, compared to USD 411.5 million in the corresponding period in 2023.
6. Foreign Exchange Reserves: Remained adequate, above USD 5 billion at the end of June 2024, covering more than 4 months of projected imports. The foreign currency liquidity improved due to increased inflows from tourism, gold, and traditional exports.
7. Exchange Rate: The exchange rate depreciated by around 2.2% in the quarter, faster than the 1.8% depreciation in the first quarter of 2024. In the retail market, the depreciation rate was around 3.2% for the quarter.

Instruments and Implementation

The Bank of Tanzania uses various monetary policy instruments, including:

• Repurchase Agreements (Repo and Reverse Repo)
• 35-day and 91-day Treasury Bills
• Statutory Minimum Reserve Requirement Ratio (SMR)
• Sale or Purchase of Foreign Currency in the Interbank Foreign Exchange Market
• Standing Lending Facilities (Intraday and Lombard Loan Windows)

These instruments help to align the operating target variable (7-day interbank interest rate) along the policy rate. The implementation is characterized by high transparency, with regular communication of MPC decisions to banks and the public.

The monetary policy implementation during April-June 2024 was deemed successful, with the 7-day interbank rate staying within +/- 200 basis points of the policy rate and showing improvement compared to the preceding quarter.

The bank also aims to improve the money market through reforms such as the ‘Frontclear’ umbrella guarantee facility, reviewing the collateral framework for government securities, the regulatory framework for liquid assets eligibility, and the pricing framework for monetary policy instruments.

Tax Collection Efficiency Mark Tanzania's Fiscal Year 2023/2024

First Quarter (Robo ya Kwanza: July-September)

For the first quarter of 2022/2023, the actual tax collection was TZS 5,924,493.01 million. The target for the first quarter of 2023/2024 was set at TZS 6,745,293.35 million. The actual collection for this period in 2023/2024 was TZS 6,574,845.86 million, which is approximately 2.53% below the target but represents a year-over-year increase of 10.96% from the previous year's actual collection.

Second Quarter (Robo ya Pili: October-December)

In the second quarter of 2022/2023, the actual tax collection was TZS 6,561,658.01 million. The target for the second quarter of 2023/2024 was set at TZS 7,460,410.20 million. The actual collection for this period in 2023/2024 was TZS 7,341,719.12 million, falling short of the target by approximately 1.59%. However, this is a year-over-year increase of 11.88% from the actual collection of the previous year.

Third Quarter (Robo ya Tatu: January-March)

The actual tax collection for the third quarter of 2022/2023 was TZS 5,936,715.24 million. The target for the same quarter in 2023/2024 was TZS 6,966,477.40 million. The actual collection in 2023/2024 was TZS 6,634,890.46 million, which is about 4.77% below the target. Despite missing the target, this still marks an 11.76% increase from the previous year's actual collection.

Fourth Quarter (Robo ya Nne: April-June)

For the fourth quarter of 2022/2023, the actual tax collection stood at TZS 5,715,589.31 million. The target for the fourth quarter of 2023/2024 was TZS 7,125,289.72 million. The actual collection for this period in 2023/2024 was TZS 7,087,140.82 million, which is just 0.54% below the target. This represents a significant year-over-year increase of 23.98% from the previous year's actual collection.

Annual Totals

The total actual tax collection for the year 2022/2023 was TZS 24,138,455.57 million. The target for the year 2023/2024 was TZS 28,297,470.67 million. The total actual collection for 2023/2024 came to TZS 27,638,596.26 million, which is approximately 2.33% below the target. However, this reflects an overall increase of 14.47% from the previous year’s total actual collection.

Summary

• First Quarter: 10.96% increase in actual collections year-over-year, but 2.53% below the 2023/2024 target.
• Second Quarter: 11.88% year-over-year increase, 1.59% below the 2023/2024 target.

Third Quarter (continued)

• Third Quarter: 11.76% year-over-year increase in actual collections, but 4.77% below the 2023/2024 target. This indicates a strong year-over-year growth, though slightly below the set target for 2023/2024.

Fourth Quarter (Robo ya Nne: April-June)

• Fourth Quarter: The year-over-year increase in actual collections was 23.98%, the highest among all quarters, demonstrating significant improvement compared to the same period in the previous year. The actual collection was only 0.54% below the target for 2023/2024, indicating a very close achievement of the set goal.

Annual Totals

• Annual Totals: For the entire fiscal year, the total actual tax collection in 2023/2024 was TZS 27,638,596.26 million, which is a 14.47% increase from the previous year's total of TZS 24,138,455.57 million. Despite the increase, the total collection was 2.33% below the overall target of TZS 28,297,470.67 million for 2023/2024.

Conclusion

The data highlights a consistent year-over-year increase in tax collections across all quarters, showing significant progress in tax revenue generation:

• First Quarter: 10.96% increase, 2.53% below target.
• Second Quarter: 11.88% increase, 1.59% below target.
• Third Quarter: 11.76% increase, 4.77% below target.
• Fourth Quarter: 23.98% increase, 0.54% below target.
• Annual Increase: 14.47% overall increase, 2.33% below annual target.

The tax collection performance for 2023/2024 demonstrates strong growth in comparison to 2022/2023, with each quarter showing improvements despite slight shortfalls in meeting the targeted figures. The most notable growth occurred in the fourth quarter, indicating a positive trend towards the end of the fiscal year.

Tanzania across the fiscal years 2022/2023 and 2023/2024 provides several insights into the country's economic development

Tanzania in 2023/2024 indicates a robust and growing economy, marked by substantial improvements in tax revenue. The consistent growth in tax collections, despite falling slightly short of ambitious targets, suggests effective economic policies and a resilient economic structure. These positive indicators are likely to contribute to further economic development, enhanced public services, and improved infrastructure, setting a solid foundation for Tanzania's future growth and prosperity.

Strong Economic Growth

Year-over-Year Increase in Tax Collection:

• The consistent year-over-year increases in tax collections across all quarters indicate strong economic growth. The significant increases, especially the 23.98% growth in the fourth quarter, suggest robust economic activity and improvements in the efficiency of tax collection mechanisms.

Improved Tax Collection Efficiency

Narrow Gaps Between Targets and Actual Collections:

• The relatively small percentage differences between the targets and actual collections (e.g., 2.53% below target in the first quarter, 1.59% below target in the second quarter) demonstrate improved accuracy in setting realistic tax revenue targets and enhanced efficiency in tax collection. This improvement can be attributed to better compliance, stronger enforcement of tax laws, and possibly broadening the tax base.

Economic Stability and Resilience

Sustained Growth Across Quarters:

• The sustained growth across all four quarters, with increases ranging from 10.96% to 23.98%, reflects economic stability and resilience. This indicates that the economy is not only growing but also capable of maintaining momentum despite potential challenges.

Potential Areas for Improvement

Meeting Targets:

• While the actual collections have shown significant improvements, the fact that they fell slightly short of the targets (e.g., 2.33% below the annual target) suggests room for further enhancements. On addressing the shortfall could involve strengthening tax administration and compliance efforts further, reducing tax evasion, and fostering an even more conducive business environment.

Positive Economic Indicators

Increased Revenue for Development:

• The increased tax revenue provides the government with more resources for development projects, social services, and infrastructure improvements. This is critical for sustained economic development and improving the quality of life for citizens.

Encouraging Investment

Confidence in Economic Policies:

• The positive trends in tax collection can boost confidence among investors and international stakeholders in Tanzania's economic policies and governance. This could lead to increased foreign and domestic investments, further spurring economic growth.

Source: TRA-2024

Maendeleo ya Kiuchumi ya Tanzania: Utulivu, Ukuaji, na Uangalifu wa Kifedha

Hali ya Kiuchumi ya Dunia

• Ukuaji na Mfumuko wa Bei: Ukuaji wa uchumi wa dunia umeimarika, ukichochewa na utendaji bora wa uchumi wa nchi zilizoendelea na zinazoendelea. Mfumuko wa bei unashuka lakini bado uko juu ya viwango vya kabla ya janga kutokana na kulegezwa kwa sera za ukali na kupungua kwa bei za nishati na chakula.

Utendaji wa Kiuchumi wa Ndani

Mfumuko wa Bei

• Mfumuko wa Bei wa Jumla: Ulibaki ndani ya lengo la asilimia 5, ukiwa asilimia 3.1 mnamo Mei 2024. Mfumuko wa bei wa msingi ulikuwa asilimia 3.6.
• Mfumuko wa Bei wa Chakula: Ulipungua hadi asilimia 1.6 kutoka asilimia 8.5 mwaka mmoja uliopita, ikionyesha upatikanaji wa chakula sokoni licha ya kuongezeka kwa gharama za usafirishaji.
• Nishati, Mafuta, na Huduma za Umma: Mfumuko wa bei uliongezeka hadi asilimia 9.8 mnamo Mei 2024 kutoka asilimia 9.3 mnamo Aprili 2024 kutokana na kuongezeka kwa bei za mkaa wa miti, kuni, na bei za pampu za ndani.

Pesa na Mikopo

• Ugavi wa Pesa: Ugavi mpana wa fedha (M3) uliongezeka kwa asilimia 12.2 mnamo Mei 2024, ukichochewa na mikopo kwa sekta binafsi.
• Mikopo kwa Sekta Binafsi: Ukuaji ulikuwa asilimia 16.5 mnamo Mei 2024, na sekta za kilimo, viwanda, na ujenzi zikionyesha ukuaji mkubwa zaidi.

Viwango vya Riba

• Viwango vya Mikopo: Kiwango cha jumla cha riba ya mikopo kilipungua hadi asilimia 15.23 mnamo Mei 2024 kutoka asilimia 15.42 mnamo Aprili 2024. Kiwango cha riba kilichokubaliwa kilipungua hadi asilimia 12.68 kutoka asilimia 13.95.
• Viwango vya Amana: Kiwango cha jumla cha riba ya amana kiliongezeka hadi asilimia 8.05 kutoka asilimia 7.44, ikionyesha kupungua kwa tofauti ya riba.

Masoko ya Fedha

• Hati za Serikali: Mnada wa hati za hazina na dhamana za serikali ulishinda, na wastani wa mavuno ya hati za hazina ukipungua hadi asilimia 7.86 kutoka asilimia 10.33. Mavuno ya dhamana za miaka 15 yaliongezeka hadi asilimia 15.16 kutoka asilimia 13.66 mnamo Februari 2024.
• Soko la Fedha Kati ya Mabenki: Thamani ya jumla ya miamala mnamo Mei 2024 ilikuwa TZS bilioni 1,581.2, na kiwango cha riba cha IBCM kiliongezeka hadi asilimia 7.34 kutoka asilimia 7.02.
• Soko la Kubadilisha Fedha za Kigeni Kati ya Mabenki: Iliimarika kwa dola za Kimarekani milioni 10.3 zilizofanyiwa biashara mnamo Mei 2024 ikilinganishwa na dola za Kimarekani milioni 2.3 mnamo Aprili 2024. Shilingi ilipungua thamani kwa asilimia 11.6 kwa mwaka.

Shughuli za Bajeti ya Serikali

• Mapato na Matumizi: Mapato ya ndani kwa Aprili 2024 yalikuwa TZS bilioni 2,119, sawa na asilimia 94.1 ya lengo. Matumizi ya serikali yalikuwa TZS bilioni 2,480.4, yakilenga matumizi ya kipaumbele na TZS bilioni 1,882.8 kwa matumizi ya kawaida na TZS bilioni 597.5 kwa matumizi ya maendeleo.

Maendeleo ya Deni

• Deni la Taifa: Jumla ya deni ilikuwa dola za Kimarekani milioni 43,119.8 mwishoni mwa Mei 2024, na deni la nje likiwa asilimia 72.4. Deni la nje lilikua kwa asilimia 1 mwezi kwa mwezi hadi dola za Kimarekani milioni 31,212.4.

Utendaji wa Kiuchumi Zanzibar

• Mfumuko wa Bei: Ulibaki ndani ya malengo.
• Shughuli za Bajeti ya Serikali: Zililenga kudumisha utulivu wa kifedha.
• Utendaji wa Sekta ya Nje: Mwelekeo mzuri uliendelea katika biashara na utalii.

Viashiria hivi vikuu vya kiuchumi vinaonyesha hali ya sasa ya kiuchumi na mwelekeo wa Tanzania, kuonyesha mazingira thabiti ya mfumuko wa bei, ukuaji wa ugavi wa fedha, kuimarika kwa shughuli za soko la fedha, na viwango vya deni vinavyoweza kudhibitiwa. Shughuli za bajeti ya serikali zinalenga ukusanyaji wa mapato na udhibiti wa matumizi, zikiwa na msisitizo kwenye miradi ya maendeleo na utulivu wa kifedha.

Viashiria muhimu vya kiuchumi vinapendekeza mambo kadhaa kuhusu maendeleo ya kiuchumi ya Tanzania:

Viashiria vinaonyesha mwelekeo mzuri kwa ujumla wa maendeleo ya kiuchumi ya Tanzania, ukijulikana na mfumuko wa bei thabiti, ukuaji wa ugavi wa fedha na mikopo, usimamizi mzuri wa kifedha, na hali ya deni inayoweza kudhibitiwa. Msimamo kwenye kilimo, maendeleo ya miundombinu, na utulivu wa soko la fedha unalingana na malengo ya ukuaji wa kiuchumi endelevu. Kuendelea kuzingatia maeneo haya, pamoja na hatua za kuboresha mazingira ya biashara na hali ya uwekezaji, kutakuwa muhimu kwa kudumisha na kuharakisha mwelekeo huu wa ukuaji.

Mazingira Thabiti ya Mfumuko wa Bei

• Mfumuko wa Bei wa Chini: Kiwango cha mfumuko wa bei wa jumla kimehifadhiwa ndani ya lengo la nchi la asilimia 5, kikiwa asilimia 3.1 mnamo Mei 2024. Utulivu huu unaonyesha sera bora za kifedha na za kimonetari, kuhakikisha utulivu wa bei na kulinda nguvu ya ununuzi ya watumiaji.
• Udhibiti wa Bei za Chakula: Kupungua kwa kiasi kikubwa kwa mfumuko wa bei wa chakula kutoka asilimia 8.5 hadi asilimia 1.6 kwa mwaka kunaonyesha upatikanaji wa kutosha wa chakula, ikionyesha maboresho katika uzalishaji wa kilimo na usambazaji.

Ukuaji Chanya wa Pesa na Mikopo

• Ukuaji wa Ugavi wa Pesa: Ukuaji wa asilimia 12.2 wa ugavi mpana wa fedha (M3) unaashiria mahitaji mazuri ya pesa yanayochochewa na shughuli za kiuchumi. Ukuaji huu ni muhimu kwa kuunga mkono shughuli za biashara na uwekezaji.
• Upanuzi wa Mikopo kwa Sekta Binafsi: Ukuaji wa asilimia 16.5 wa mikopo kwa sekta binafsi, hasa katika kilimo, viwanda, na ujenzi, unaonyesha imani katika sekta hizi na uwezo wao wa kuchochea ukuaji wa kiuchumi. Msimamo kwenye kilimo ni muhimu kwa uchumi wa kilimo kama Tanzania.

Kuimarika kwa Hali ya Masoko ya Fedha

• Hati za Serikali: Kujaa kwa mnada wa hati za hazina na dhamana za serikali kunaonyesha imani kubwa ya wawekezaji katika hati za serikali, ikitoa serikali fedha muhimu kwa ajili ya miradi ya maendeleo.
• Utulivu wa Soko la Kati ya Mabenki: Miamala ya soko la fedha kati ya mabenki inayofanyika kwa nguvu na kiwango cha riba cha soko la fedha kati ya mabenki kinachoimarika kinaonyesha utulivu wa ukwasi katika sekta ya benki, ikiunda mazingira ya kifedha yanayoaminika kwa biashara.

Shughuli za Bajeti ya Serikali na Usimamizi wa Kifedha

• Ukusanyaji wa Mapato: Uwezo wa serikali kukusanya asilimia 94.1 ya lengo lake la mapato unaonyesha sera nzuri za kodi na hatua za kiutawala. Mapato haya ni muhimu kwa ufadhili wa huduma za umma na miundombinu.
• Udhibiti wa Matumizi: Matumizi ya serikali yaliyopangwa vizuri, yakilenga matumizi ya kipaumbele, yanaonyesha usimamizi mzuri wa kifedha. Ugawaji wa fedha nyingi kwa matumizi ya maendeleo unaonyesha kujitolea kwa ukuaji wa kiuchumi wa muda mrefu.

Viwango vya Deni Vinavyoweza Kudhibitiwa

• Hali ya Deni Inayoweza Kudhibitiwa: Jumla ya deni la taifa, ikiwa na ongezeko dogo, na deni la nje linalosimamiwa kwa ufanisi, inapendekeza kuwa Tanzania inahifadhi deni katika viwango vinavyoweza kudhibitiwa. Usimamizi mzuri wa deni ni muhimu kwa kuepuka migogoro ya kifedha na kuhakikisha utulivu wa kiuchumi.

Maendeleo ya Kisekta

• Sekta ya Kilimo: Msimamo kwenye kilimo kupitia mikopo iliyoongezeka na usambazaji bora wa chakula ni muhimu kwa uchumi ambapo sehemu kubwa ya idadi ya watu inategemea kilimo kwa maisha.
• Utalii na Biashara: Mapato yaliyoimarika kutoka kwa utalii na mauzo ya nje ya kilimo yanachangia vyema kwenye utendaji wa sekta ya nje, kuunga mkono akiba za fedha za kigeni na utulivu wa kiuchumi.

Madhara ya Kuongezeka kwa Deni la Taifa kwenye Thamani ya Shilingi ya Tanzania

Kuongezeka kwa deni la taifa la Tanzania, hasa deni la nje, kuna uhusiano mkubwa na kushuka kwa thamani ya shilingi ya Tanzania. Uhusiano huu una athari mbalimbali za kiuchumi, ikiwa ni pamoja na gharama kubwa za kulipa deni, shinikizo la mfumuko wa bei, na athari kwenye ukuaji wa uchumi na uwekezaji. Kusimamia mambo haya ni muhimu kwa kudumisha utulivu wa kiuchumi na kukuza maendeleo endelevu.

Kuongezeka kwa Deni la Taifa

• Kiwango cha Sasa cha Deni: Deni la taifa la Tanzania lilikuwa TZS 103,487,716.68 milioni mwishoni mwa Mei 2024, na ongezeko likisababishwa zaidi na kuongezeka kwa deni la nje, ambalo linachangia asilimia 72.4 ya jumla ya deni.
• Deni la Nje: Deni la nje liliongezeka kwa asilimia 1 mwezi hadi mwezi kufikia TZS 75,065,920 milioni mwishoni mwa Mei 2024.

Kushuka kwa Thamani ya Shilingi ya Tanzania

• Kuporomoka kwa Shilingi: Shilingi ya Tanzania ilishuka kwa asilimia 11.6 dhidi ya dola ya Marekani kwa mwaka, na kiwango cha wastani cha ubadilishaji wa TZS 2,599.05 kwa dola moja ya Marekani mnamo Mei 2024 ikilinganishwa na TZS 2,584.69 kwa dola moja ya Marekani mwezi uliopita.

Uhusiano wa Kiuchumi

1. Deni na Thamani ya Sarafu:
   • Kuongezeka kwa Deni: Kuongezeka kwa deni la taifa, hasa deni la nje, kunaongeza mahitaji ya sarafu za kigeni kwani nchi inahitaji kulipa deni lake kwa sarafu za kigeni. Hii inaweza kusababisha kushuka kwa thamani ya sarafu ya ndani ikiwa mahitaji ya sarafu za kigeni yatapita usambazaji.
   • Imani ya Wawekezaji: Kuongezeka kwa viwango vya deni kunaweza kuathiri vibaya imani ya wawekezaji, na kusababisha kupungua kwa uwekezaji wa kigeni na mtiririko wa mitaji, jambo ambalo linaweza kudhoofisha zaidi sarafu ya ndani.
2. Gharama za Kulipa Deni:
   • Gharama za Juu: Kadiri shilingi inavyoporomoka, gharama ya kulipa deni la nje kwa sarafu ya kigeni inaongezeka. Hii inaweza kusababisha nakisi kubwa ya bajeti kwani sarafu ya ndani inahitajika zaidi kukidhi mahitaji ya deni, jambo linaloweza kusababisha kukopa zaidi na mzunguko mbaya wa deni na kushuka kwa thamani.
   • Shinikizo la Bajeti: Kuongezeka kwa gharama za kulipa deni kunaweza kulibana bajeti ya serikali, na kupeleka fedha kwenye miradi muhimu ya maendeleo na huduma za kijamii.

Athari za Kiuchumi

1. Mfumuko wa Bei:
   • Mfumuko wa Bei ya Kuagiza: Kuporomoka kwa thamani ya shilingi kunafanya bidhaa na huduma zinazoagizwa kuwa ghali zaidi, na kusababisha kupanda kwa bei kwa bidhaa na huduma zilizoagizwa. Hii inaweza kuchangia mfumuko wa bei kwa ujumla katika uchumi, na kupunguza nguvu ya kununua na kuongeza gharama za maisha kwa Watanzania.
   • Mfumuko wa Bei ya Gharama: Kuongezeka kwa gharama za uagizaji kunaweza kusababisha mfumuko wa bei ya gharama, ambapo biashara zinapandisha bei kwa walaji kutokana na ongezeko la gharama za vifaa vya uagizaji.
2. Ukuaji wa Uchumi:
   • Athari kwa Uwekezaji: Thamani dhaifu ya sarafu na viwango vya juu vya deni vinaweza kuzuia uwekezaji wa ndani na wa nje kutokana na ongezeko la kutokuwa na uhakika na gharama kubwa za kufanya biashara.
   • Ushindani wa Mauzo ya Nje: Kwa upande mzuri, shilingi dhaifu inaweza kufanya bidhaa za Tanzania kuwa nafuu na kushindana kimataifa, jambo linaloweza kuongeza mapato ya mauzo ya nje na kusaidia kupunguza baadhi ya athari hasi.
3. Mizania ya Malipo:
   • Nakisi Inayopanuka: Kushuka kwa thamani kunaweza kuongeza nakisi ya akaunti ya sasa ikiwa ongezeko la gharama za uagizaji litapita faida za ushindani wa mauzo ya nje.
   • Kupungua kwa Akiba: Ili kuimarisha sarafu, benki kuu inaweza kutumia akiba za fedha za kigeni, jambo ambalo linaweza kupunguza akiba hizo na kudhoofisha zaidi utulivu wa kiuchumi.

Takwimu kutoka Hati Hii

• Hisa za Deni: TZS 103,487,716.68 milioni (Mei 2024)
• Deni la Nje: TZS 75,065,920 milioni (Mei 2024)
• Kiwango cha Kubadilisha Shilingi: TZS 2,599.05 kwa dola moja ya Marekani (Mei 2024)
• Kuporomoka: Asilimia 11.6 kila mwaka

Athari za Kushuka kwa Thamani ya Shilingi kwenye Uchumi wa Tanzania

Kupungua kwa thamani ya shilingi ya Tanzania dhidi ya dola ya Marekani kunaweza kuwa na athari kadhaa kwenye uchumi.

Kushuka kwa Thamani kwa Mwezi

Viwango vya Kubadilisha Fedha:

• Aprili 2024: TZS 2,584.69 kwa dola moja ya Marekani
• Mei 2024: TZS 2,599.05 kwa dola moja ya Marekani

Hii inaonyesha kwamba shilingi ilipungua kwa takriban 0.56% kwa mwezi mmoja.

Kushuka kwa Thamani kwa Mwaka

Kiwango cha Kubadilisha Fedha Mwaka Mmoja Uliopita:

• Mei 2023: Takriban TZS 2,328.24 kwa dola moja ya Marekani (imehesabiwa awali)

Hii inaonyesha shilingi ilipungua kwa 11.6% kwa mwaka mmoja.

Athari za Kiuchumi

1. Mfumuko wa Bei:
   • Gharama za Uagizaji: Kadri shilingi inavyopungua thamani, gharama za bidhaa zinazoagizwa nje huongezeka. Kwa mfano, ikiwa bidhaa inagharimu USD 100:
     • Mei 2023: TZS 232,824
     • Mei 2024: TZS 259,905
   • Kuongezeka kwa gharama hizi za uagizaji kunaweza kusababisha bei za juu kwa watumiaji, na kuchangia mfumuko wa bei.
2. Ushindani wa Bidhaa za Nje:
   • Shilingi dhaifu inaweza kufanya bidhaa za Tanzania kuwa nafuu na kushindana zaidi katika masoko ya kimataifa. Kwa mfano, ikiwa bidhaa imeuzwa kwa TZS 1,000,000:
     • Mei 2023: USD 429.57
     • Mei 2024: USD 384.73
   • Kushuka kwa bei hii kwa dola za Marekani kunaweza kuongeza mahitaji ya bidhaa za Tanzania nje ya nchi, na kuongeza mapato ya nje.
3. Deni la Nje:
   • Huduma ya Deni: Ikiwa Tanzania ina deni lililowekwa kwa fedha za kigeni, kulihudumia deni hili kunakuwa ghali zaidi. Kwa mfano, ikiwa nchi ina deni la USD bilioni 1:
     • Mei 2023: TZS 2.328 trilioni
     • Mei 2024: TZS 2.599 trilioni
   • Kuongezeka kwa mzigo huu kunaweza kuathiri bajeti ya serikali na afya ya kifedha.
4. Utalii:
   • Mvuto: Shilingi dhaifu inaweza kufanya Tanzania kuwa kivutio zaidi kwa watalii, kwani fedha zao za kigeni zitakuwa na uwezo mkubwa wa ununuzi. Kwa mfano, USD 1,000:
     • Mei 2023: TZS 2,328,240
     • Mei 2024: TZS 2,599,050
   • Hii inaweza kuongeza mapato ya utalii, na kunufaisha uchumi.
5. Uwekezaji:
   • Uwekezaji wa Kigeni: Kupungua kwa thamani kunaweza kuathiri uwekezaji wa kigeni. Kwa upande mmoja, mali za ndani zinapokuwa nafuu zinaweza kuwavutia wawekezaji wa kigeni wanaotafuta fursa za bei nafuu. Kwa upande mwingine, wasiwasi kuhusu kushuka zaidi kwa thamani unaweza kuzuia uwekezaji kutokana na hasara zinazoweza kutokea kwenye thamani ya fedha.

Hivyo, kupungua kwa thamani ya shilingi ya Tanzania, kama inavyoonyeshwa na kushuka kwa 0.56% kwa mwezi na 11.6% kwa mwaka, kuna athari nyingi za kiuchumi:

• Kuongezeka kwa gharama za uagizaji kunakosababisha mfumuko wa bei.
• Kuimarisha ushindani wa bidhaa za nje kutokana na bei za chini kwa fedha za kigeni.
• Kuongezeka kwa mzigo wa deni la nje.
• Kuongezeka kwa mvuto wa Tanzania kama eneo la utalii.
• Athari mchanganyiko kwenye uwekezaji wa kigeni, kulingana na mitazamo ya wawekezaji kuhusu utulivu wa fedha.

Mambo haya kwa pamoja yanaathiri maendeleo ya uchumi wa Tanzania, na kuathiri maamuzi ya sera na mikakati ya kiuchumi.

The depreciation of the Tanzania shilling against the US dollar can have several implications for the economy.

Monthly Depreciation

Exchange Rates:

• April 2024: TZS 2,584.69 per US dollar
• May 2024: TZS 2,599.05 per US dollar

This indicates the shilling depreciated by approximately 0.56% in one month.

Annual Depreciation

Exchange Rate One Year Ago:

• May 2023: Approximately TZS 2,328.24 per US dollar (calculated previously)

This shows the shilling depreciated by 11.6% over one year.

Economic Implications

1. Inflation:
   • Import Costs: As the shilling depreciates, the cost of imported goods increases. For example, if a product costs USD 100:
     • May 2023: TZS 232,824
     • May 2024: TZS 259,905
   • This increase in import costs can lead to higher prices for consumers, contributing to inflation.
2. Export Competitiveness:
   • A weaker shilling can make Tanzania exports cheaper and more competitive in international markets. For instance, if a product is priced at TZS 1,000,000:
     • May 2023: USD 429.57
     • May 2024: USD 384.73
   • This price reduction in USD terms can boost demand for Tanzania products abroad, potentially increasing export revenue.
3. Foreign Debt:
   • Debt Servicing: If Tanzania has foreign-denominated debt, servicing this debt becomes more expensive. For example, if the country has USD 1 billion in debt:
     • May 2023: TZS 2.328 trillion
     • May 2024: TZS 2.599 trillion
   • This increased burden can strain the government’s budget and fiscal health.
4. Tourism:
   • Attractiveness: A weaker shilling can make Tanzania a more attractive destination for tourists, as their foreign currency will have greater purchasing power. For instance, USD 1,000:
     • May 2023: TZS 2,328,240
     • May 2024: TZS 2,599,050
   • This can lead to increased tourism revenue, benefiting the economy.
5. Investment:
   • Foreign Investment: Depreciation can impact foreign investment. On one hand, cheaper local assets may attract foreign investors looking for bargains. On the other hand, uncertainty about further depreciation might deter investment due to potential losses in currency value.

Hence, the depreciation of the Tanzania shilling, evidenced by the 0.56% monthly and 11.6% annual decline, has multifaceted economic implications:

• Higher import costs leading to inflation.
• Improved export competitiveness due to lower prices in foreign currency terms.
• Increased burden of foreign-denominated debt.
• Enhanced attractiveness of Tanzania as a tourist destination.
• Mixed effects on foreign investment, depending on investor perceptions of currency stability.

These factors collectively impact Tanzania's economic development, influencing policy decisions and economic strategies.

The increase in Tanzania's national debt, particularly external debt, has a significant relationship with the depreciation of the Tanzania shilling. This relationship has various economic implications, including higher debt servicing costs, potential inflationary pressures, and impacts on economic growth and investment. Managing these factors is crucial for maintaining economic stability and fostering sustainable development.

National Debt Increase

• Current Debt Level: The national debt of Tanzania was USD 43,119.8 million at the end of May 2024, with an increase driven mainly by a rise in external debt, which accounts for 72.4 percent of the total debt.
• External Debt: External debt stock increased by 1 percent month-on-month to USD 31,212.4 million at the end of May 2024.

Depreciation of the Tanzania Shilling

• Shilling Depreciation: The Tanzania shilling depreciated by 11.6 percent against the US dollar over the year, with an average exchange rate of TZS 2,599.05 per US dollar in May 2024 compared to TZS 2,584.69 per US dollar in the preceding month.

Economic Relationship

1. Debt and Currency Value:
   • Increased Debt: Higher national debt, especially external debt, increases the demand for foreign currency as the country needs to service its debt in foreign currencies. This can lead to depreciation of the local currency if the demand for foreign currency exceeds supply.
   • Investor Confidence: Rising debt levels can negatively affect investor confidence, leading to reduced foreign investment and capital outflows, which can further weaken the local currency.
2. Debt Servicing Costs:
   • Higher Costs: As the shilling depreciates, the cost of servicing external debt in foreign currency terms increases. This can lead to higher fiscal deficits as more local currency is needed to meet debt obligations, potentially leading to more borrowing and a vicious cycle of debt and depreciation.
   • Fiscal Pressure: Increased debt servicing costs can strain the government’s budget, diverting funds from essential development projects and social services.

Economic Implications

1. Inflation:
   • Imported Inflation: Depreciation of the shilling makes imports more expensive, leading to higher prices for imported goods and services. This can contribute to overall inflation in the economy, eroding purchasing power and increasing the cost of living for Tanzanian.
   • Cost-Push Inflation: Higher import costs can lead to cost-push inflation, where businesses pass on the higher costs of imported inputs to consumers.
2. Economic Growth:
   • Investment Impact: A weaker currency and higher debt levels can discourage foreign and domestic investment due to increased uncertainty and higher costs of doing business.
   • Export Competitiveness: On the positive side, a weaker shilling can make Tanzania exports cheaper and more competitive internationally, potentially boosting export revenues and helping to offset some of the negative impacts.
3. Balance of Payments:
   • Widening Deficit: Depreciation can exacerbate the current account deficit if the increase in the cost of imports outweighs the gains from increased export competitiveness.
   • Reserves Depletion: To stabilize the currency, the central bank may use foreign exchange reserves, which can deplete the reserves and further undermine economic stability.

Figures 

• Debt Stock: USD 43,119.8 million (May 2024)
• External Debt: USD 31,212.4 million (May 2024)
• Shilling Exchange Rate: TZS 2,599.05 per USD (May 2024)
• Depreciation: 11.6 percent annually

Global Economic Situation

• Growth and Inflation: Global growth has improved, driven by better-than-expected performance in advanced and emerging economies. Inflation is declining but remains above pre-pandemic levels due to eased policy tightening by central banks and moderating energy and food prices.

Domestic Economic Performance

1. Inflation
   • Headline Inflation: Remained within the target of 5 percent, at 3.1 percent in May 2024. Core inflation was at 3.6 percent.
   • Food Inflation: Decreased to 1.6 percent from 8.5 percent a year earlier, indicating food adequacy in markets despite rising transportation costs.
   • Energy, Fuel, and Utilities: Inflation increased to 9.8 percent in May 2024 from 9.3 percent in April 2024 due to higher prices of wood charcoal, firewood, and domestic pump prices.
2. Money and Credit
   • Money Supply: Extended broad money supply (M3) grew by 12.2 percent in May 2024, driven by private sector credit.
   • Credit to Private Sector: Growth was at 16.5 percent in May 2024, with agriculture, manufacturing, and building and construction sectors showing the highest growth.
3. Interest Rates
   • Lending Rates: Overall lending rate decreased to 15.23 percent in May 2024 from 15.42 percent in April 2024. The negotiated lending rate decreased to 12.68 percent from 13.95 percent.
   • Deposit Rates: Overall deposit rate increased to 8.05 percent from 7.44 percent, indicating a narrowing interest spread.
4. Financial Markets
   • Government Securities: Treasury bills and bonds auctions were oversubscribed, with the weighted average yield for Treasury bills easing to 7.86 percent from 10.33 percent. The yield for 15-year Treasury bonds increased to 15.16 percent from 13.66 percent in February 2024.
   • Interbank Cash Market: Total value of transactions in May 2024 was TZS 1,581.2 billion, with the overall IBCM interest rate increasing to 7.34 percent from 7.02 percent.
   • Interbank Foreign Exchange Market: Improved with USD 10.3 million traded in May 2024 compared to USD 2.3 million in April 2024. The shilling depreciated by 11.6 percent annually.
5. Government Budgetary Operations
   • Revenue and Expenditure: Domestic revenue for April 2024 was TZS 2,119 billion, equivalent to 94.1 percent of the target. Government expenditure was TZS 2,480.4 billion, focusing on priority spending with TZS 1,882.8 billion for recurrent expenditure and TZS 597.5 billion for development expenditure.
6. Debt Developments
   • National Debt: Total debt stock was USD 43,119.8 million at the end of May 2024, with external debt accounting for 72.4 percent. External debt increased by 1 percent month-on-month to USD 31,212.4 million.

Economic Performance in Zanzibar

• Inflation: Inflation remained within targets.
• Government Budgetary Operations: Focused on maintaining fiscal stability.
• External Sector Performance: Continued positive trends in trade and tourism.

These key economic indicators highlight the current economic conditions and trends in Tanzania, indicating a stable inflation environment, growing money supply, improving financial market activities, and manageable debt levels. The government’s budgetary operations focus on revenue collection and expenditure control, with an emphasis on development projects and fiscal stability.

The key economic indicators from the document suggest several aspects of Tanzania's economic development

The indicators point to a generally positive trajectory for Tanzania's economic development, characterized by stable inflation, growing money supply and credit, effective fiscal management, and a manageable debt situation. The emphasis on agriculture, infrastructure development, and financial market stability aligns with sustainable economic growth and development goals. Continued focus on these areas, coupled with measures to enhance the business environment and investment climate, will be crucial for maintaining and accelerating this growth trajectory.

1. Stable Inflation Environment

• Low Inflation: The headline inflation rate is maintained within the country’s target of 5 percent, standing at 3.1 percent in May 2024. This stability indicates effective fiscal and monetary policies, ensuring price stability and protecting the purchasing power of consumers.
• Controlled Food Prices: The significant reduction in food inflation from 8.5 percent to 1.6 percent over a year reflects an adequate supply of food, suggesting improvements in agricultural productivity and distribution.

2. Positive Money and Credit Growth

• Growth in Money Supply: The 12.2 percent growth in extended broad money supply (M3) signals a healthy demand for money driven by economic activities. This growth is essential for supporting business operations and investments.
• Private Sector Credit Expansion: The 16.5 percent growth in credit to the private sector, particularly in agriculture, manufacturing, and construction, demonstrates confidence in these sectors and their potential to drive economic growth. The focus on agriculture is crucial for an agrarian economy like Tanzania.

3. Improving Financial Market Conditions

• Government Securities: Oversubscription in Treasury bills and bonds auctions indicates strong investor confidence in government securities, providing the government with necessary funds for development projects.
• Interbank Market Stability: Active interbank cash market transactions and a stable interbank interest rate suggest liquidity stability in the banking sector, fostering a reliable financial environment for businesses.

4. Government Budgetary Operations and Fiscal Management

• Revenue Collection: The government’s ability to collect 94.1 percent of its revenue target highlights effective tax policies and administrative measures. This revenue is essential for funding public services and infrastructure.
• Expenditure Control: The streamlined government expenditure, focusing on priority spending, indicates prudent fiscal management. The allocation of significant funds to development expenditure reflects a commitment to long-term economic growth.

5. Manageable Debt Levels

• Sustainable Debt Stock: The national debt stock, with a marginal increase, and external debt being managed effectively, suggests that Tanzania is maintaining debt at sustainable levels. Effective debt management is critical for avoiding fiscal crises and ensuring economic stability.

6. Sectoral Developments

• Agricultural Sector: The focus on agriculture through increased credit and improved food supply is vital for an economy where a large portion of the population depends on agriculture for livelihood.
• Tourism and Trade: Improved receipts from tourism and agricultural exports contribute positively to the external sector performance, supporting foreign exchange reserves and economic stability.

External Debt

In May 2021, Tanzania's external debt stood at 75,367,435.00 million TZS. By April 2023, this figure increased to 81,239,648.00 million TZS, marking significant growth over nearly two years. However, by May 2024, external debt slightly decreased to 78,967,372.00 million TZS, reflecting a 3% decline over the past month but a 5% increase over the previous year.

• May 2021: 75,367,435.00 million TZS
• April 2023: 81,239,648.00 million TZS
• May 2024: 78,967,372.00 million TZS
  • 1 Month Change: -3% (decrease from April 2023 to May 2024)
  • 1 Year Change: +5% (increase from May 2023 to May 2024)

Domestic Debt

On the domestic debt front, the figures also show growth over time but at a more modest pace. In May 2021, domestic debt was recorded at 28,339,200.00 million TZS. By April 2023, it had risen to 31,339,300.00 million TZS, and by May 2024, it slightly decreased to 30,969,400.00 million TZS. This represents a 1% decrease over the past month but a notable 9% increase over the past year.

• May 2021: 28,339,200.00 million TZS
• April 2023: 31,339,300.00 million TZS
• May 2024: 30,969,400.00 million TZS
  • 1 Month Change: -1% (decrease from April 2023 to May 2024)
  • 1 Year Change: +9% (increase from May 2023 to May 2024)

Total Debts

When combining both external and domestic debts, the total debts for Tanzania have been substantial. In May 2021, the total debts amounted to 103,706,635.00 million TZS. This figure increased to 112,578,948.00 million TZS by April 2023. By May 2024, the total debts had slightly decreased to 109,936,772.00 million TZS, indicating a 2% decline over the last month but a 6% increase compared to the previous year.

• May 2021: 103,706,635.00 million TZS
• April 2023: 112,578,948.00 million TZS
• May 2024: 109,936,772.00 million TZS
  • 1 Month Change: -2% (decrease from April 2023 to May 2024)
  • 1 Year Change: +6% (increase from May 2023 to May 2024)

Key Observations

• External debt shows a slight decline over the past month but has increased over the year.
• Domestic debt has slightly decreased in the past month but shows significant growth over the year.
• Total debts have decreased slightly in the last month but have increased overall over the past year.

Tanzania's debts over the specified periods

Tanzania is experiencing a gradual increase in its debt levels over the years, with short-term measures in place to manage or reduce debts temporarily. The overall trend of increasing debt highlights the importance of sustainable debt management strategies to ensure economic stability and growth.

1. Overall Debt Increase: The total debt of Tanzania has generally increased from May 2021 to May 2024. Despite slight monthly fluctuations, the overall trend shows a significant rise in debt levels over the three-year period.
2. Monthly Changes:
   • In the last month (from April 2023 to May 2024), there is a slight decrease in both external and domestic debts, resulting in a 2% reduction in total debts. This suggests some short-term measures might have been taken to reduce the debt or perhaps there was a payoff or restructuring of existing debts.
3. Annual Changes:
   • Over the last year (from May 2023 to May 2024), both external and domestic debts have increased. External debt rose by 5%, while domestic debt saw a more substantial increase of 9%. This indicates ongoing borrowing or accumulation of debt, possibly to finance projects or manage economic challenges.
4. Comparative Analysis:
   • External debt saw a slight decrease in the last month (-3%), indicating a potential focus on managing or reducing foreign obligations.
   • Domestic debt also showed a minor decrease (-1%) over the last month, which might reflect efforts to manage internal borrowing.
5. Debt Management:
   • The data reflects that while there are efforts to manage debt in the short term (as seen by the monthly decreases), the long-term trend indicates growing debt. This could be due to various factors such as financing for development projects, budget deficits, or economic adjustments.
6. Economic Implications:
   • The increase in debt over the year might imply that Tanzania is investing in long-term growth initiatives or facing fiscal pressures that necessitate borrowing.
   • The management of debt (both reductions and increases) indicates a balancing act between addressing immediate financial needs and managing long-term financial health.

Impact on the Economy and the Average Citizen:

The continued increase in national debt can significantly harm the economy and the average citizen by increasing taxes, reducing public services, causing inflation, crowding out private investment, and putting pressure on the exchange rate. Effective debt management and prudent fiscal policies are essential to mitigate these risks and ensure sustainable economic development that benefits all citizens.

1. Higher Taxes and Reduced Public Spending:
   • Debt Servicing Costs: As national debt increases, the government must allocate a larger portion of its budget to service the debt (interest payments and principal repayments). This can lead to higher taxes or reduced spending on essential public services such as healthcare, education, and infrastructure, directly affecting the quality of life of the average citizen.
   • Example: If a significant portion of the 6% annual increase in total debt is financed by domestic borrowing, the government might need to increase taxes to meet its debt obligations, reducing disposable income for households.
2. Inflation and Cost of Living:
   • Monetary Policy: To manage rising debt levels, the government may resort to printing more money, leading to inflation. Increased inflation reduces the purchasing power of the currency, making goods and services more expensive for the average citizen.
   • Example: If the government increases the money supply to manage the 9% annual rise in domestic debt, it could lead to inflation, increasing the cost of living.
3. Crowding Out Private Investment:
   • Interest Rates: High levels of domestic borrowing can lead to higher interest rates as the government competes with the private sector for available funds. Higher interest rates can deter private investment and borrowing, stifling economic growth and job creation.
   • Example: The 1% monthly decrease in domestic debt suggests a temporary relief, but the 9% annual increase implies a longer-term trend of crowding out private investment, affecting business growth and employment opportunities.
4. Exchange Rate Pressure:
   • External Debt Repayments: Increased external debt requires repayment in foreign currencies. This can put pressure on the country’s foreign exchange reserves, potentially leading to a depreciation of the local currency. A weaker currency increases the cost of imports, contributing to higher inflation.
   • Example: The 5% annual increase in external debt indicates rising foreign obligations, which can strain Tanzania’s foreign exchange reserves and depreciate the TZS, making imported goods more expensive for citizens.
5. Reduced Social Services and Development Projects:
   • Budget Constraints: Increased debt servicing limits the government’s ability to fund social services and development projects, which are crucial for improving living standards and reducing poverty.
   • Example: With a 6% annual increase in total debt, the government may cut funding for social programs, affecting access to education, healthcare, and social security for the average citizen.

Economic Implications and Analysis

Tanzania's debt development indicates a balanced approach to leveraging debt for economic development while taking short-term steps to manage debt levels. The investments supported by this borrowing are likely aimed at fostering long-term growth, improving infrastructure, and enhancing public services. However, maintaining debt sustainability through effective fiscal policies and strategic investments remains critical to ensuring that the economic benefits of borrowing are realized without compromising future financial stability.

1. Economic Growth and Development:
   • Rising Debt Levels: The overall increase in debt from May 2021 to May 2024 indicates significant borrowing, which can be associated with efforts to finance large-scale infrastructure projects, enhance public services, and stimulate economic growth. Such investments are crucial for long-term development but need to be managed prudently to avoid unsustainable debt levels.
   • Infrastructure and Services: Increased borrowing might be directed toward developing critical infrastructure like roads, bridges, energy projects, and improving healthcare and education. These investments can boost productivity, attract foreign investments, and improve living standards.
2. Short-Term Debt Management:
   • Monthly Decrease: The 1-month decline in both external (-3%) and domestic debt (-1%) suggests short-term measures to reduce debt levels. This could involve paying off or restructuring existing loans, reflecting a focus on maintaining fiscal stability and avoiding excessive debt accumulation.
3. Long-Term Fiscal Strategy:
   • Annual Increase: The annual rise in both external (+5%) and domestic (+9%) debt indicates ongoing borrowing to support economic activities. While this supports growth, it also highlights the need for a robust fiscal strategy to ensure that debt levels remain sustainable and do not burden future economic development.
4. Domestic vs. External Debt:
   • Domestic Debt Increase: The higher percentage increase in domestic debt (9% over the year) compared to external debt (5% over the year) suggests a strategy to rely more on internal sources of financing. This can reduce dependency on foreign loans and mitigate exposure to exchange rate risks and international market fluctuations.
   • External Debt Management: The slight decrease in external debt over the last month indicates efforts to manage foreign obligations, potentially through negotiations for better terms or prioritizing repayments.
5. Economic Stability and Risks:
   • Debt Servicing: Increased debt levels imply higher future debt servicing costs. Effective management of these costs is essential to avoid diverting funds from essential services and development projects.
   • Sustainability: The 6% annual increase in total debt underscores the importance of monitoring debt sustainability. It is crucial to ensure that the borrowed funds are used efficiently to generate economic returns that can support repayment and further growth.

Interbank Cash Market (IBCM)

The Interbank Cash Market (IBCM) is a crucial platform where banks trade shilling liquidity among themselves:

• Transactions in May 2024: The total value of transactions in the IBCM during May 2024 was TZS 1,581.2 billion, which is a decrease from the TZS 1,768.4 billion traded in April 2024.
• Transaction Duration: The 7-day transactions were the most prevalent, making up 58.5 percent of the total market turnover.
• Interest Rates: The overall interest rate in the IBCM saw an increase, rising to 7.34 percent in May 2024 from 7.02 percent in April 2024.

Interbank Foreign Exchange Market (IFEM)

The Interbank Foreign Exchange Market (IFEM) is where banks trade foreign currencies, and it showed notable activity in May 2024:

• Market Participants: Only commercial banks participated in the IFEM during May 2024.
• Volume of Trades: The banks sold a total of USD 10.3 million in May 2024, a significant increase from the USD 2.3 million traded in April 2024.
• Exchange Rate: The Tanzanian shilling (TZS) traded at an average rate of TZS 2,599.05 per US dollar in May 2024, compared to TZS 2,584.69 per US dollar in April 2024.
• Annual Depreciation: On an annual basis, the shilling depreciated by 11.6 percent.

These markets are vital in maintaining liquidity and foreign exchange stability in the banking sector, with fluctuations in transaction volumes and interest rates reflecting broader economic trends.

The Interbank Cash Market (IBCM) and Interbank Foreign Exchange Market (IFEM) provide significant insights into Tanzania's economic development

The activity in the IBCM and IFEM points to a dynamic but challenging economic environment in Tanzania, with significant roles played by the banking sector, tourism, and agriculture in shaping economic outcomes.

Interbank Cash Market (IBCM)

1. Liquidity Management:
   • Decrease in Transactions: The reduction in the total value of transactions from TZS 1,768.4 billion to TZS 1,581.2 billion suggests changes in liquidity demand among banks. This could be due to various factors, including shifts in economic activity, government policies, or changes in reserve requirements.
   • Interest Rate Increase: The rise in the overall IBCM interest rate from 7.02 percent to 7.34 percent indicates a tightening of liquidity. Higher interest rates can signal increased demand for short-term funds or a response to inflationary pressures.
2. Economic Activity:
   • Dominance of 7-day Transactions: The predominance of 7-day transactions, accounting for 58.5 percent of total market turnover, reflects banks' preference for short-term liquidity arrangements. This could point to cautious financial strategies amidst economic uncertainties.

Interbank Foreign Exchange Market (IFEM)

1. Foreign Exchange Stability:
   • Increased Trade Volume: The significant rise in USD traded (from USD 2.3 million to USD 10.3 million) suggests heightened foreign exchange activity, likely driven by seasonal factors such as tourism and agricultural exports. This increase indicates a more dynamic foreign exchange market and improved foreign currency liquidity.
   • Exchange Rate Fluctuation: The slight depreciation of the shilling from TZS 2,584.69 to TZS 2,599.05 per US dollar in one month, and the annual depreciation of 11.6 percent, highlight pressures on the local currency. This could be due to trade imbalances, inflation, or external economic conditions.
2. Economic Growth Indicators:
   • Tourism and Agriculture: The improvement in the IFEM due to seasonal receipts from tourism and agricultural exports underscores the importance of these sectors to Tanzania's economy. Strong performance in these areas supports foreign exchange reserves and overall economic stability.

Overall Economic Implications

1. Economic Health:
   • The trends in IBCM and IFEM reflect ongoing adjustments in the banking sector to maintain liquidity and manage foreign exchange risks. These adjustments are crucial for economic stability and growth.
   • The increase in interest rates and the depreciation of the shilling suggest inflationary pressures and potential challenges in maintaining purchasing power.
2. Sectoral Contributions:
   • The reliance on tourism and agriculture for foreign exchange highlights these sectors' roles in economic development. Policies aimed at boosting these sectors could further enhance economic stability and growth.
3. Policy Implications:
   • The data suggests a need for careful monetary and fiscal policies to manage liquidity, control inflation, and stabilize the exchange rate.
   • Encouraging diversification of the economy and strengthening key sectors like tourism and agriculture can provide a more resilient economic foundation.