In 2024, the World's Best Banks in Africa have demonstrated exceptional resilience and strategic acumen amid challenging economic conditions across the continent. Despite facing significant hurdles such as local currency crises in Egypt and Nigeria, as well as economic stagnation in South Africa, leading banks have not only withstood these pressures but have also achieved record-breaking profits and growth. These banks have been distinguished by their effective leadership, innovative strategies, and a focus on sustainable and green financing. Noteworthy performers include South Africa's Standard Bank, which reported a significant increase in earnings and return on equity, and Nigeria's Zenith Bank, which defied economic turmoil to post triple-digit profit growth.

Banks like CRDB Bank in Tanzania have pioneered sustainable investments, while institutions like Access Bank in Ghana are expanding through aggressive mergers and acquisitions. These banks have successfully navigated the complex macroeconomic landscape by leveraging technology, digitalization, and a strategic focus on core business operations, positioning themselves as leaders in the African banking sector.

In 2024, CRDB Bank in Tanzania has emerged as a standout institution among Africa's best banks, as recognized in the World’s Best Banks 2024—Africa list. Despite the challenging economic landscape across the continent, characterized by currency crises in Egypt and Nigeria and sluggish growth in South Africa, CRDB Bank has demonstrated remarkable resilience and strategic prowess.

Factors contributed to CRDB Bank’s recognition:

CRDB Bank’s recognition as one of the world's best banks in Africa for 2024 underscores its strategic leadership, innovative initiatives, and commitment to sustainable growth. These factors have enabled the bank to navigate economic challenges effectively and position itself as a leader in Tanzania’s banking sector.

Sustainable Investment and Innovation

CRDB Bank has pioneered sustainable investment in Tanzania by issuing the country's first-ever green bond, the $300 million Kijani bond. This bond is aimed at financing environmentally friendly projects, aligning the bank’s operations with global trends in sustainable finance. This initiative underscores the bank's commitment to integrating environmental, social, and governance (ESG) criteria into its core business strategies.

Technological Advancements

CRDB Bank has heavily invested in technology and digital innovation. This focus has facilitated a significant increase in customer transactions via digital channels, enhancing customer experience and operational efficiency. The bank’s digital footprint is a crucial aspect of its strategy to remain competitive and meet the evolving needs of its clientele.

Strategic Leadership

The bank’s leadership has been instrumental in navigating the complexities of the local and regional economic environment. The management’s ability to make strategic decisions, such as focusing on core business areas and leveraging digital technologies, has played a vital role in CRDB Bank’s success. Their leadership has enabled the bank to maintain stability and achieve growth even amid economic challenges.

Financial Performance

CRDB Bank's financial performance has been robust. By mobilizing deposits and extending loans, the bank has successfully grown its balance sheet. This strategic focus on expanding its financial base has contributed to its strong market position in Tanzania. The bank has also introduced new products and services, catering to a broader customer base and addressing diverse financial needs.

Market Position

CRDB Bank continues to solidify its market presence in Tanzania. Its strategic initiatives, combined with a focus on customer-centric services and sustainable finance, have reinforced its status as a leading financial institution in the region. The bank’s ability to adapt to new realities, including climate change, further enhances its market position and future prospects.

Awards and Recognition

CRDB Bank’s recognition in the World’s Best Banks 2024—Africa list is a testament to its exceptional performance and strategic initiatives. This award highlights the bank’s leadership in sustainable investment, innovation, and resilience in the face of economic challenges.

Community Impact

Beyond financial metrics, CRDB Bank has made significant contributions to the local community. By promoting green financing and supporting sustainable projects, the bank is not only driving economic growth but also fostering environmental stewardship. This dual focus on economic and environmental goals reflects the bank’s comprehensive approach to corporate responsibility.

Tanzania banks can strengthen their position and compete effectively with the best banks in Africa, contributing to the overall growth and stability of the region’s financial sector:

1. Strengthen Sustainable Investment Initiatives

Building on the success of CRDB Bank’s $300 million Kijani bond, Tanzania banks should continue to lead in sustainable and green financing. Developing more financial products that support environmental sustainability will not only attract responsible investors but also align with global financial trends.

2. Invest in Digital Transformation

Investment in technology and digital innovation is crucial. Banks should enhance their digital banking platforms to improve customer experience and operational efficiency. By offering seamless digital services and leveraging mobile banking, they can increase accessibility and convenience for customers.

3. Enhance Leadership and Strategic Decision-Making

Strong leadership is essential. Tanzania banks need to cultivate visionary leaders who can navigate economic challenges and make strategic decisions that drive growth. Leadership training and development programs can help build a pool of capable leaders.

4. Expand Financial Inclusion

Banks should work on expanding their reach to underserved populations. By promoting financial inclusion through innovative banking solutions, such as agency banking and mobile money services, they can tap into new customer segments and increase their market share.

5. Focus on Core Business Growth

Mobilizing deposits and extending credit prudently are fundamental to growing the balance sheet. Banks should focus on expanding their core banking operations while maintaining a robust risk management framework to safeguard asset quality.

6. Foster Strategic Partnerships and Acquisitions

Exploring strategic partnerships and acquisitions can help Tanzania banks expand their footprint across Africa. By learning from the success of Pan-African banks like Access Bank, they can identify opportunities for growth through mergers and acquisitions.

7. Innovate with New Products and Services

Continuous innovation is key to staying competitive. Banks should develop and introduce new financial products and services tailored to meet the evolving needs of their customers. This includes offering tailored solutions for SMEs, corporate clients, and retail customers.

8. Implement Robust Risk Management Practices

Maintaining a strong focus on risk management will help banks navigate economic uncertainties. By implementing comprehensive risk assessment and mitigation strategies, they can ensure stability and resilience.

9. Attract and Retain Talent

Investing in human capital is critical. Banks should focus on attracting and retaining skilled professionals by offering competitive compensation, professional development opportunities, and a conducive work environment.

10. Embrace ESG Criteria

Incorporating Environmental, Social, and Governance (ESG) criteria into their operations can enhance their reputation and appeal to socially conscious investors. This involves not only focusing on green financing but also ensuring ethical practices and social responsibility in their operations.

11. Expand Regional Presence

Banks should consider expanding their operations beyond Tanzania to other promising markets in Africa. Regional expansion can diversify their revenue streams and reduce dependency on the local market.

Source: Global Financing 2024

Number of Telecom and Mobile Money Subscriptions (2023):

In 2023, Tanzania had a total of 70,290,876 telecom subscriptions, with Vodacom leading the market with 21,272,484 subscriptions, followed by Tigo with 19,698,263. Airtel had 19,146,016 subscriptions, while Hallotel and TTCL had 8,529,919 and 1,644,194 subscriptions, respectively.

For mobile money subscriptions, the total stood at 52,875,129. Vodacom led again with 20,043,178 subscriptions, followed by Tigo with 16,260,532. Airtel had 11,166,688 subscriptions, while Hallotel and TTCL had 4,034,261 and 1,370,470 subscriptions, respectively.

Trends in Subscriptions (Past Three Years):

Between 2021 and 2023, mobile subscriptions in Tanzania grew from 54,044,384 to 70,215,144, indicating a steady increase. Fixed subscriptions, on the other hand, fluctuated slightly from 71,834 in 2021 to 75,132 in 2023.

The penetration rate of mobile subscriptions also saw a notable increase, from 88% in 2021 to 111% in 2023, indicating that there were more mobile subscriptions than the total population.

Mobile Money Transactions:

The number of mobile money transactions increased significantly from 3,752,084,894 in 2021 to 5,273,086,154 in 2023. This indicates a growing reliance on mobile money services for financial transactions in Tanzania.

The number of mobile money subscriptions also saw substantial growth during this period, from 35,285,767 in 2021 to 52,875,129 in 2023, indicating an expanding user base for mobile financial services.

Internet Subscription:

Internet subscriptions in Tanzania witnessed steady growth from 29,103,482 in 2021 to 35,885,592 in 2023. This growth is indicative of increasing internet penetration and access to online services, which is crucial for information dissemination, education, and economic development.

Number of internet users in Africa as of January 2024, by country.

As of January 2024, Tanzania is among the top ten African countries with the highest number of internet users. Nigeria leads the continent with over 103 million users, followed by Egypt with more than 82 million. In these leading digital markets, the majority of web traffic, over 86.2%, comes from mobile devices, while around 13.3% is from PCs. This trend is driven by the lower cost and lesser infrastructure requirements of mobile connections compared to fixed-line internet for desktop PCs.

Looking ahead, Africa's internet user base is expected to grow significantly. From 2024 to 2029, the number of users is projected to increase by 337.3 million, marking a growth rate of 51.79%. By 2029, the continent's internet user count is anticipated to reach 1.1 billion, despite an online penetration rate of 43%, which is still below the global average of approximately 68%.

Tanzania's digital transmission and information economy:

Tanzania's progress in digital transformation and its significance for the country's information economy. It emphasizes the need for continued investment in digital infrastructure, policies, and skills development to harness the full potential of digital technologies for economic and social development.

1. Digital Connectivity Growth: The steady increase in telecom and mobile money subscriptions over the past years, along with the rise in internet subscriptions, indicates the country's expanding digital connectivity. This growth is essential for facilitating communication, accessing information, and conducting financial transactions.
2. Mobile Money Adoption: The significant growth in mobile money subscriptions and transactions reflects the increasing adoption of digital financial services in Tanzania. Mobile money has become a crucial aspect of the country's financial ecosystem, enabling access to banking services, promoting financial inclusion, and driving economic activity.
3. Internet Access: The rise in internet subscriptions signifies the growing access to online services and information dissemination. Internet access plays a vital role in education, enabling e-learning opportunities, and supports economic development through e-commerce, entrepreneurship, and access to global markets.
4. Penetration Levels: The penetration levels exceeding 100% for mobile subscriptions indicate that many Tanzanians have multiple mobile phone subscriptions, highlighting the widespread use of mobile devices for communication and accessing digital services.
5. Information Economy: The data reflects the importance of the information economy in Tanzania's development. The increasing reliance on digital technologies for communication, financial transactions, and access to information underscores the role of the digital sector in driving economic growth and innovation.

Tanzania's digital transmission roles in driving economic growth:

Tanzania's digital transmission infrastructure plays a crucial role in driving economic growth by enhancing connectivity, promoting financial inclusion, fostering entrepreneurship and innovation, improving productivity, and facilitating access to global markets and government services.

1. Enhanced Connectivity: The expansion of telecom subscriptions, mobile money services, and internet access improves connectivity across the country. This connectivity facilitates communication, enables access to markets, and fosters collaboration among businesses, ultimately leading to increased economic activity.
2. Financial Inclusion: Mobile money services provide access to basic financial services for a significant portion of the population who were previously underserved by traditional banking infrastructure. This inclusion leads to greater participation in formal economic activities, savings, and investment, contributing to overall economic growth.
3. Increased Efficiency: Digital transmission streamlines business operations, reduces transaction costs, and increases efficiency in various sectors such as finance, agriculture, and commerce. Mobile banking and online transactions enable faster and more secure payments, reducing the time and resources required for financial transactions.
4. Entrepreneurship and Innovation: Improved connectivity and access to information through digital transmission empower entrepreneurs and innovators. They can leverage digital platforms to launch businesses, access markets, and develop new products and services tailored to local needs. This fosters entrepreneurship and stimulates innovation, driving economic growth and job creation.
5. Access to Information and Education: Internet access and digital platforms provide access to information, education, and training opportunities, enabling individuals to acquire new skills and knowledge. This supports human capital development, improves productivity, and enhances the quality of the workforce, all of which are essential for sustained economic growth.
6. Global Market Access: Digital transmission enables Tanzanian businesses to access global markets, expanding their reach beyond domestic borders. E-commerce platforms allow small and medium-sized enterprises (SMEs) to market their products and services internationally, increasing export opportunities and contributing to foreign exchange earnings.
7. Government Efficiency and Service Delivery: Digital transmission facilitates e-government services, improving the efficiency of public administration and service delivery. Online platforms for tax payments, business registration, and other government services reduce bureaucracy, corruption, and transaction costs, fostering a more conducive environment for business and economic growth.

Brief overview of Tanzania's digital landscape.

Data Presentation:

Telecom and Mobile Money Subscriptions (2023)

Trends in Subscriptions (Past Three Years)

Mobile Money Transactions

Internet Subscription

Source: TCRA Report 2023.

Policy and Infrastructure Measures for Gasoline Price Stability in Tanzania

To stabilize gasoline prices in Tanzania and minimize economic impact on the population, a multifaceted strategy is essential. In April 2024, gasoline prices rose to 1.25 USD/Liter from 1.24 USD/Liter in March, with historical prices averaging 1.02 USD/Liter from 1991 to 2024. Key measures include stabilizing the Tanzania Shilling, establishing strategic petroleum reserves, investing in renewable energy, enhancing fuel storage and transport infrastructure, and rationalizing taxes. Projections suggest prices will reach 1.27 USD/Liter by the end of Q2 2024, 1.33 USD/Liter in 2025, and 1.37 USD/Liter in 2026. Effective policy and infrastructure improvements can mitigate these increases, ensuring long-term price stability.

1. Global Oil Prices

The fluctuation in global oil prices directly impacts the cost of gasoline in Tanzania. Global geopolitical tensions, supply chain disruptions, and decisions by major oil-producing countries influence these prices. For instance, the peak price of 1.60 USD/Liter in August 2022 can be linked to such global events, including the Russia-Ukraine conflict, which significantly disrupted global oil supplies.

2. Exchange Rates

The value of the Tanzania Shilling (TZS) against the US Dollar (USD) affects gasoline prices. Since Tanzania imports oil, a weaker Shilling means higher costs for importing gasoline. This exchange rate volatility adds to the overall cost of gasoline in the local market.

3. Inflation

General inflation trends in the economy contribute to the rising costs of goods and services, including gasoline. As inflation increases, the cost of production, transportation, and distribution of gasoline also rises, leading to higher prices at the pump.

4. Government Policies

Changes in taxation, subsidies, and other regulatory policies can impact gasoline prices. For example, a reduction in fuel subsidies or an increase in fuel taxes would lead to higher retail prices. While specific data on policy changes aren't provided, it's a crucial factor to consider.

5. Supply and Demand Dynamics

Domestic supply constraints and changes in demand for gasoline affect prices. High demand with limited supply capacity can push prices up. The historical average of 1.02 USD/Liter from 1991 to 2024 suggests that supply and demand have fluctuated over time, impacting prices.

Data-Driven Analysis

• Historical Prices: The average price from 1991 to 2024 was 1.02 USD/Liter, indicating long-term upward pressure on prices.
• Record High and Low: The peak of 1.60 USD/Liter in August 2022 and the low of 0.42 USD/Liter in December 1991 show significant volatility.
• Recent Trends: The increase to 1.25 USD/Liter in April 2024 from 1.24 USD/Liter in March 2024 indicates ongoing upward trends.
• Projections: Expected prices of 1.27 USD/Liter by the end of Q2 2024, 1.33 USD/Liter in 2025, and 1.37 USD/Liter in 2026 suggest sustained price increases driven by the aforementioned factors.

Tanzania requires a holistic approach involving monetary stability, strategic reserves, diversified energy sources, improved infrastructure, targeted government interventions, inflation control, energy efficiency, and international cooperation:

Stabilize Exchange Rates

• Policy Implementation: Implement monetary policies that stabilize the Tanzania Shilling against the US Dollar. This can include maintaining foreign exchange reserves and controlling inflation.
• Diversify Exports: Increase the export of goods and services to strengthen the Shilling, reducing the impact of currency fluctuations on fuel import costs.

Strategic Reserves and Supply Management

• Establish Fuel Reserves: Create strategic petroleum reserves to cushion against global oil price shocks. These reserves can be used to stabilize supply during periods of high volatility.
• Diversify Supply Sources: Secure fuel supply from multiple sources to reduce dependency on any single country or region, thus mitigating risks associated with geopolitical tensions.

Promote Alternative Energy Sources

• Invest in Renewables: Increase investment in renewable energy sources such as solar, wind, and hydroelectric power. This reduces dependency on imported oil and contributes to long-term energy stability.
• Incentivize Alternatives: Provide incentives for the adoption of alternative fuels and energy-efficient technologies in transportation and other sectors.

Improve Energy Infrastructure

• Enhance Storage Facilities: Develop modern fuel storage and distribution infrastructure to reduce losses and inefficiencies, ensuring a more reliable supply chain.
• Upgrade Transport Networks: Improve road and rail infrastructure to facilitate efficient fuel transport, reducing logistical costs and potential price increases.

Government Subsidies and Taxation Policies

Subsidize Critical Periods: Implement targeted subsidies during periods of high global oil prices to shield consumers from abrupt price hikes.

• Rationalize Taxes: Review and rationalize fuel taxes to balance between generating government revenue and maintaining affordable fuel prices for consumers.

Inflation Control

• Monitor Inflation: Adopt measures to control inflation, such as prudent fiscal policies and controlling money supply growth.
• Cost Management: Encourage cost management practices across sectors to prevent inflationary pressures from escalating fuel prices.

Encourage Energy Efficiency

• Public Awareness Campaigns: Conduct campaigns to educate the public and businesses about energy conservation and efficiency measures.
• Support Efficient Technologies: Provide incentives for the adoption of fuel-efficient vehicles and industrial machinery.

International Cooperation

• Engage in Regional Agreements: Collaborate with neighboring countries to create regional strategies for energy security and price stabilization.
• Participate in Global Markets: Actively participate in international oil markets and forums to stay informed and influence global oil pricing mechanisms.

The Impact of Global Oil Prices on Tanzania's Gasoline Market

In April 2024, gasoline prices in Tanzania rose to 1.25 USD/Liter from 1.24 USD/Liter in March. Historically, prices averaged 1.02 USD/Liter from 1991 to 2024, peaking at 1.60 USD/Liter in August 2022 and reaching a low of 0.42 USD/Liter in December 1991. By the end of Q2 2024, prices are expected to be 1.27 USD/Liter, with long-term projections of 1.33 USD/Liter in 2025 and 1.37 USD/Liter in 2026, according to TICGL Economics' models.

Gasoline Prices in Tanzania: Detailed Analysis

Recent Trends

• April 2024: Gasoline prices in Tanzania increased to 1.25 USD/Liter.
• March 2024: The price was 1.24 USD/Liter.
• Historical Average: From 1991 to 2024, the average price has been 1.02 USD/Liter.

Historical Extremes

• All-Time High: The highest recorded price was 1.60 USD/Liter in August 2022.
• Record Low: The lowest recorded price was 0.42 USD/Liter in December 1991.

Short-Term Forecast

• By the end of the current quarter (Q2 2024), gasoline prices are expected to reach 1.27 USD/Liter.

Long-Term Projections

• 2025: Prices are projected to trend around 1.33 USD/Liter.
• 2026: Prices are expected to increase to approximately 1.37 USD/Liter.

Factors Influencing Gasoline Prices

1. Global Oil Prices: Tanzania, like many other countries, is affected by fluctuations in global oil prices. These are influenced by factors such as geopolitical tensions, supply chain disruptions, and changes in production levels by major oil-producing countries.
2. Exchange Rates: The value of the Tanzania Shilling against the US Dollar can impact gasoline prices. A weaker Shilling means higher import costs for oil.
3. Government Policies: Taxation and subsidies on fuel can significantly alter retail prices. Changes in these policies can lead to sudden price adjustments.
4. Supply and Demand: Domestic factors such as changes in demand for gasoline and supply constraints can also affect prices.
5. Inflation: General inflation trends in the economy can lead to higher gasoline prices as part of broader cost increases for goods and services.

Context of Historical Prices

• 1991 - 2024 Average: The long-term average price of gasoline being 1.02 USD/Liter reflects periods of both stability and volatility in the global and local markets.
• Price Spike in August 2022: The spike to 1.60 USD/Liter could have been driven by specific global events such as the aftermath of the COVID-19 pandemic and the Russia-Ukraine conflict, which had significant impacts on global oil prices.

Future Projections and Economic Models

• The projections by TICGL Economics are based on global macroeconomic models and analysts' expectations. These projections take into account current trends, historical data, and potential future events that could influence the market.
• 1.27 USD/Liter by End of Q2 2024: This short-term forecast suggests a moderate increase in prices, likely reflecting ongoing market adjustments.
• 1.33 USD/Liter in 2025 and 1.37 USD/Liter in 2026: These longer-term projections indicate a gradual increase, possibly reflecting expected economic growth and inflationary trends.

Economic Implications

• Consumers: Rising gasoline prices can increase transportation costs, impacting household budgets and the cost of goods.
• Businesses: Higher fuel costs can lead to increased operational expenses, particularly for businesses dependent on transportation and logistics.
• Government: Price trends can influence policy decisions regarding fuel subsidies, taxation, and energy policy.

Tanzania Ranks Fourth in Africa for Private Infrastructure Investment with USD 308 Million

Tanzania has emerged as one of the top 10 African countries with the largest private infrastructure investment (PPI), ranking fourth with an investment of USD 308 million. This accomplishment underscores the crucial role of private investment in addressing the infrastructure deficit in low- and middle-income nations, particularly in Africa. Private infrastructure investment is essential for fostering economic growth and overcoming the limitations imposed by inadequate infrastructure.

Tanzania's Ranking and Investment:

• Tanzania is ranked fourth in Africa for private infrastructure investment.
• The country has attracted USD 308 million in PPI.

Top African Countries in PPI:

• Egypt leads with USD 2306 million.
• South Africa follows with USD 1044 million.
• Senegal ranks third with USD 316 million.
• Tanzania is fourth with USD 308 million.

Importance of PPI:

• Private investment is crucial due to the limited financial resources of governments.
• PPI brings in cash, expertise, and flexibility to infrastructure projects, supplementing public funds and easing fiscal constraints.
• The profit-driven approach of private investors fosters accountability and innovation, leading to cost-effective and high-quality infrastructure solutions.

Impact on Economic Development:

• Infrastructure is fundamental to any economy, including water supply, electricity systems, transportation networks, and telecommunications.
• Poor infrastructure can severely hinder economic growth, industrialization, and access to basic services in Africa.
• Private investors have made significant contributions to improving infrastructure over the years.

Global Investment Trends:

• According to a World Bank report, the private sector invested $86 billion into infrastructure development in low- and middle-income nations in 2023, despite a 5% decline from the previous year.
• In 2023, 68 countries received investments across 322 projects, an increase from 54 countries and 260 projects in 2022.
• Notably, countries like Guinea Bissau, Libya, Papua New Guinea, São Tomé and Príncipe, and Suriname secured their first PPI transactions in over a decade.

Role of Governments and Private Sector:

Governments:

• Play a crucial role in infrastructure development but face financial constraints.
• Need to create conducive environments for private investment through policies and regulations.

Private Sector:

• Offers the necessary capital and expertise for infrastructure projects.
• Drives innovation and efficiency through profit-driven incentives.
• Helps bridge the infrastructure gap, contributing to economic growth and improved public services.

Hence, Tanzania's position among the top African countries in PPI shows the country's potential and the positive impact of private investments on infrastructure development. The involvement of the private sector is vital for overcoming infrastructure challenges, fostering economic growth, and improving the quality of life in low- and middle-income nations. As private investments continue to flow into Africa, countries like Tanzania are well-positioned to leverage these resources for sustainable development and economic prosperity.

Private investors can make significant contributions to improving infrastructure in Tanzania despite government financial constraints:

1. Collaborative Public-Private Partnerships (PPPs)

Private investors should engage in public-private partnerships to leverage both public and private resources. These partnerships can combine government support with private sector efficiency and capital, enabling large-scale infrastructure projects that neither party could undertake alone.

2. Innovative Financing Models

Investors can utilize innovative financing models such as blended finance, which combines concessional funds from development agencies with private capital. This approach can reduce risks and attract more investment into critical infrastructure sectors.

3. Risk Mitigation Strategies

Implementing risk mitigation strategies such as political risk insurance and guarantees can protect investments from unforeseen political and economic instability. This encourages more private investment by providing a safety net against potential losses.

4. Local Capacity Building

Investors should focus on building local capacity by involving local contractors and workforce in their projects. This not only boosts the local economy but also ensures sustainability and local support for infrastructure projects.

5. Technology and Innovation

Leveraging cutting-edge technology and innovative solutions can enhance the efficiency and sustainability of infrastructure projects. Technologies such as smart grids, renewable energy systems, and advanced construction techniques can lead to cost-effective and high-quality infrastructure.

6. Sustainable and Inclusive Projects

Focusing on sustainability and inclusivity in infrastructure projects ensures long-term benefits. This includes investing in green infrastructure, renewable energy, and projects that promote social inclusion, such as affordable housing and accessible transportation.

7. Policy Advocacy

Private investors should actively engage with government stakeholders to advocate for favorable policies and regulatory reforms. This can include pushing for streamlined permitting processes, tax incentives, and legal frameworks that facilitate private investment in infrastructure.

8. Transparent and Accountable Practices

Maintaining transparency and accountability in project execution builds trust with the government and the public. Clear communication of project goals, timelines, and progress can foster a positive investment climate and enhance investor confidence.

9. Long-term Commitment

Adopting a long-term perspective on investments can lead to more stable and sustained infrastructure development. Private investors should focus on projects that offer long-term economic benefits and consider the overall impact on Tanzania's development goals.

Debt Management Challenges and Economic Sustainability in Tanzania

Tanzania's debt management challenges are showed by the trends in its external and domestic debts, which have significant implications for the country's economic sustainability:

Rising Debt Levels:

• Over the past year, Tanzania's external debt increased by 11%, rising from TZS 75,667,240 million in March 2023 to TZS 83,716,435 million in March 2024. Similarly, domestic debt grew by 15%, from TZS 26,853,400 million to TZS 30,753,800 million during the same period.
• The overall debt has increased by 12% year-on-year, from TZS 102,520,640 million to TZS 114,470,235 million.

Monthly Debt Fluctuations:

• Despite the annual increase, there was a 2% decrease in both external and domestic debts from February 2024 to March 2024. This short-term reduction could indicate efforts to manage debt levels more prudently, but it may also reflect temporary fluctuations rather than a sustained trend.

Economic Growth and Debt Sustainability:

• The reliance on both external and domestic borrowing to finance development projects can be beneficial if these investments lead to significant economic returns. However, if the borrowed funds are not effectively utilized, they can lead to higher debt servicing costs without corresponding economic benefits.
• The growing debt levels suggest that Tanzania faces challenges in generating sufficient domestic revenue to finance its development needs without resorting to increased borrowing. This reliance on debt financing poses risks to long-term economic sustainability, as it may lead to higher debt service obligations that could strain fiscal resources.

Debt Management Strategies:

• Effective debt management strategies are crucial to ensuring that the increasing debt levels do not undermine economic stability. This includes prioritizing investments with high economic returns, improving fiscal discipline, and enhancing domestic revenue mobilization.
• The 2% month-on-month decrease in total debt indicates some level of debt repayment or reduction, which is a positive sign. However, sustained efforts are required to manage debt levels effectively and ensure that borrowed funds contribute to sustainable economic growth.

Hence, Tanzania is experiencing significant debt management challenges, as evidenced by the substantial increases in both external and domestic debts over the past year. While these debts have the potential to support economic growth through infrastructure and development projects, the high levels of borrowing raise concerns about long-term economic sustainability. Effective debt management, prudent fiscal policies, and strategic investment of borrowed funds are essential to ensure that Tanzania's debt remains sustainable and contributes positively to the country's economic development.

Tanzania can manage its debt more sustainably, reduce fiscal risks, and ensure long-term economic stability and growth:

Enhance Domestic Revenue Mobilization:

• Tax Reforms: Implementing comprehensive tax reforms to widen the tax base, improve tax collection efficiency, and reduce tax evasion. This includes simplifying tax laws, improving compliance, and enhancing the capacity of tax authorities.
• Diversifying Revenue Sources: Reducing dependency on a few revenue sources by diversifying the economy. Investing in sectors such as tourism, agriculture, mining, and manufacturing can create more stable and varied revenue streams.

Prudent Public Expenditure Management:

• Prioritizing Expenditures: Focusing on high-impact projects that promote economic growth and social development. Prioritizing investments in infrastructure, education, healthcare, and other sectors that can yield long-term economic benefits.
• Enhancing Efficiency: Improving the efficiency of public spending by reducing waste, corruption, and inefficiencies. Implementing robust public financial management systems and ensuring transparency and accountability in government expenditures.

Debt Sustainability Analysis and Management:

• Conducting Regular Debt Sustainability Assessments: Regularly assessing debt levels to ensure they remain within sustainable limits. Using tools like the Debt Sustainability Framework (DSF) to analyze and monitor debt levels and potential risks.
• Developing a Medium-Term Debt Management Strategy (MTDS): Formulating and implementing a comprehensive MTDS that outlines the government’s borrowing plans, debt management objectives, and strategies to achieve them. This includes setting clear limits on borrowing and prioritizing concessional loans over commercial borrowing.

Strengthening Institutional Frameworks:

• Enhancing Debt Management Institutions: Building the capacity of institutions responsible for debt management. Providing training and resources to improve their ability to manage and monitor public debt effectively.
• Strengthening Legal and Regulatory Frameworks: Enforcing robust legal and regulatory frameworks to ensure responsible borrowing and lending practices. This includes setting clear guidelines for public borrowing and debt management.

Promoting Economic Diversification and Growth:

• Investing in Key Sectors: Focusing on sectors with high growth potential to diversify the economy and reduce reliance on external debt. Investments in agriculture, manufacturing, tourism, and technology can stimulate economic growth and create jobs.
• Supporting Private Sector Development: Creating a conducive environment for private sector growth by improving infrastructure, reducing bureaucratic barriers, and providing access to finance. A vibrant private sector can drive economic growth and reduce the need for public borrowing.

Enhancing Transparency and Accountability:

• Publishing Debt Data: Regularly publishing comprehensive and accurate data on public debt to enhance transparency and build public trust. This includes providing information on the terms, conditions, and use of borrowed funds.
• Engaging Stakeholders: Involving civil society, the private sector, and other stakeholders in discussions on debt management and economic policies. Encouraging public participation can lead to more informed decision-making and greater accountability.

Promoting Sustainable Economic Policies:

• Implementing Structural Reforms: Undertaking structural reforms to improve the business environment, enhance productivity, and promote sustainable economic growth. This includes reforms in areas such as land tenure, labor markets, and financial services.
• Fostering Regional Integration: Enhancing regional trade and economic integration to expand markets, improve competitiveness, and attract investment. Participating in regional initiatives can create new economic opportunities and reduce dependency on external borrowing.

Loan Interest Rates Decline Amid Improved Credit Risk in Tanzania

The information provided pertains to the monitoring and performance of interest rates in a given financial market, presumably managed by the Central Bank. Here's a breakdown and more details on the different aspects mentioned:

7-day Interbank Cash Market (IBCM) Rate

The IBCM rate is a short-term interest rate at which banks lend to one another for a period of seven days. This rate is crucial as it reflects the liquidity conditions in the banking system and influences other interest rates in the economy.

• Central Bank Rate (CBR): This is the benchmark interest rate set by the Central Bank, in this case, at 5.5% for the first quarter of 2024.
• CBR Corridor: The Central Bank monitors the IBCM rate to ensure it remains within a band or corridor around the CBR. This corridor is +/-200 basis points, which means the IBCM rate should stay between 3.5% and 7.5%.
• Recent Performance: In March 2024, the 7-day interest rate eased to 7.16%, down from 7.28% in February 2024. This indicates that the rate remained within the desired band set by the Central Bank.

Interest Rates on Loans

Interest rates on loans offered by banks have broadly declined compared to the rates from March 2023.

• Credit Risk Improvement: The decline in loan interest rates is attributed to an improvement in credit risk. This is measured by the ratio of non-performing loans (NPLs), which fell to 4.3% in March 2024. This is below the Bank of Tanzania's tolerable threshold of 5%, indicating better loan repayment rates and lower risk.

Short-term and 12-month Deposit Rates

• Short-term Interest Rate: The short-term interest rate for loans or deposits (typically less than one year) eased to an average of 16.17%.
• 12-month Deposit Rate: The interest rate on deposits with a one-year maturity increased to an average of 8.94%.

Interest Rate Spread

The spread between the one-year lending rate and the deposit rate narrowed:

• One-year Lending Rate vs. Deposit Rate: The spread reduced to 7.23 percentage points in March 2024 from 8.73 percentage points in March 2023. This narrowing spread indicates that while both lending and deposit rates have adjusted, the rates on deposits have increased more relative to the lending rates over the past year.

Central Bank's role in managing monetary policy and ensuring financial stability through the regulation of interest rates and monitoring of credit risks in the banking sector.

• Economic Signals: The central bank's effective control of the IBCM rate within the desired band indicates a stable monetary policy environment.
• Bank Lending and Borrowing: The decline in loan interest rates and the narrowing spread between lending and deposit rates suggest improved confidence in the banking sector and potentially more favorable conditions for borrowers.
• Investment Environment: Higher deposit rates might encourage savings, while lower lending rates can stimulate borrowing and investment, contributing to economic growth.

Focusing on the interest rates and Tanzania's economic stability:

Central Bank Rate (CBR) and Interbank Cash Market Rate:

• The Central Bank of Tanzania (BoT) set the CBR at 5.5% for Q1 2024.
• The 7-day Interbank Cash Market (IBCM) rate remained within the CBR corridor of 3.5% to 7.5%, indicating effective monetary policy implementation. The rate eased to 7.16% in March 2024, down from 7.28% in February 2024.
• Maintaining the IBCM rate within the target corridor shows the BoT's ability to manage short-term liquidity in the banking system, which is essential for economic stability.

Loan Interest Rates:

• The decline in interest rates on loans compared to March 2023 suggests an improvement in lending conditions.
• Lower loan interest rates can stimulate borrowing and investment by businesses and consumers, potentially boosting economic growth.

Credit Risk Improvement:

• The reduction in the ratio of non-performing loans (NPLs) to 4.3% in March 2024, below the BoT's tolerable threshold of 5%, indicates improved credit risk management and a healthier banking sector.
• A lower NPL ratio reflects better loan repayment rates, enhancing the stability and confidence in the financial system.

Short-term and 12-month Deposit Rates:

• The short-term interest rate averaged 16.17%, showing a reduction, while the 12-month deposit rate increased to 8.94%.
• Higher deposit rates can attract savings, providing banks with more funds to lend, while lower short-term borrowing costs can stimulate economic activity.

Interest Rate Spread:

• The narrowing spread between one-year lending and deposit rates from 8.73 percentage points in March 2023 to 7.23 percentage points in March 2024 suggests a more competitive lending environment.
• A reduced spread implies that banks might be lowering their profit margins on loans, potentially due to increased competition or improved economic conditions.

Economic Stability Indicators

Effective Monetary Policy:

• The BoT's ability to keep the IBCM rate within the desired range indicates effective monetary policy, which is crucial for controlling inflation and ensuring economic stability.
• By managing interest rates effectively, the BoT can influence economic activities such as investment, consumption, and savings, contributing to overall economic stability.

Banking Sector Health:

• The decline in NPLs and improved credit risk environment suggest a robust and stable banking sector.
• A stable banking sector is critical for economic stability as it ensures the smooth functioning of financial intermediation, which is essential for economic growth.

Encouraging Investment and Savings:

• Lower loan interest rates can encourage borrowing for investment, leading to economic growth.
• Higher deposit rates can encourage savings, providing a stable source of funding for banks and promoting financial stability.

Economic Growth Prospects:

• Improved credit conditions, along with competitive lending and borrowing rates, indicate positive economic growth prospects.
• As businesses and consumers find it more affordable to borrow, this can lead to increased investment in productive activities, job creation, and overall economic development.

Foreign Exchange Reserves Surge Bolsters Tanzania's Economic Prospects 

As of March 2024, the external sector performance of the economy showed significant improvements, particularly in the areas of trade balance and foreign exchange reserves:

Trade Balance and Current Account Deficit

1. Exports Increase: There was a notable increase in exports during this period, this uptick indicates a stronger performance in goods and services being sold abroad.
2. Imports Decline: Simultaneously, there was a decrease in imports. This could be due to a variety of factors such as reduced domestic demand, substitution with local goods, or economic policies aimed at curbing imports.
3. Current Account Deficit Reduction: The combined effect of increased exports and decreased imports led to a significant reduction in the current account deficit. Specifically, the deficit was halved to USD 2,584.1 million for the year up to March 2024, compared to USD 5,282.2 million during the same period in 2023. This represents a substantial improvement in the country's balance of payments situation, indicating better external sector health.

Foreign Exchange Reserves

1. Increase in Reserves: Foreign exchange reserves rose to USD 5,327.1 million by the end of March 2024. This is an increase from USD 5,012.5 million at the end of March 2023.
2. Adequacy of Reserves: The reserves at this level were deemed adequate, sufficient to finance 4.4 months of projected imports of goods and services. This adequacy is a crucial indicator of economic stability, providing a buffer against external shocks and supporting the country's ability to meet its international financial obligations.

This overview reflects a robust improvement in the external sector, contributing to overall economic resilience and stability.

• Economic Stability: The improvements in the current account deficit and the increase in foreign exchange reserves are positive signs for the country's economic stability. A lower current account deficit reduces dependency on external borrowing and improves investor confidence.
• Policy Impact: The performance could be attributed to effective economic policies aimed at boosting exports, such as incentives for exporters, and measures to reduce imports, possibly through tariffs or promoting domestic alternatives.
• Future Outlook: Sustaining this positive trend would require continued focus on enhancing export capacities and managing import demands. Additionally, maintaining adequate foreign exchange reserves is essential for ongoing economic health and to safeguard against potential global economic uncertainties.

The increase in foreign exchange reserves and their adequacy to finance 4.4 months of projected imports provide insights into Tanzania's economic growth and overall economic health:

Positive Economic Indicators

1. Strengthened Economic Stability: The rise in foreign exchange reserves from USD 5,012.5 million to USD 5,327.1 million indicates a stronger economic position. Higher reserves can buffer the economy against external shocks, such as sudden capital outflows or commodity price volatility. This stability is crucial for sustained economic growth.
2. Improved Investor Confidence: Adequate reserves signal to international investors and credit rating agencies that Tanzania has the financial means to meet its external obligations. This can lead to improved credit ratings and lower borrowing costs, facilitating more foreign direct investment (FDI) and portfolio investment, which are vital for economic growth.
3. Support for Currency Stability: Sufficient foreign exchange reserves help stabilize the Tanzania shilling. A stable currency reduces inflationary pressures from imported goods and enhances the predictability of the business environment, encouraging both domestic and foreign investments.

Trade Balance Improvement

1. Boost in Export Earnings: The increase in exports suggests that Tanzania's production sectors, such as agriculture, mining, or manufacturing, are performing well. This growth in exports contributes directly to GDP growth and foreign exchange earnings, which in turn bolster the reserves.
2. Reduced Import Dependency: The decline in imports indicates either an improvement in local production substituting for imported goods or a strategic reduction in non-essential imports. Reduced import bills help improve the trade balance and conserve foreign exchange.

Economic Growth Prospects

1. Enhanced Fiscal Space: With reduced current account deficits and higher reserves, Tanzania's government may have more fiscal space to invest in infrastructure, healthcare, education, and other critical areas that support long-term economic growth.
2. Macroeconomic Management: Effective management of the balance of payments and foreign exchange reserves suggests competent macroeconomic policies. Such policies are essential for creating a conducive environment for growth by ensuring low inflation, stable interest rates, and a reliable financial system.

Challenges and Considerations

While the increase in foreign exchange reserves and improvements in the trade balance are positive signs, sustaining this trajectory involves addressing several challenges:

1. Diversification: Tanzania needs to continue diversifying its export base to reduce vulnerability to commodity price fluctuations and global market changes.
2. Structural Reforms: Continued structural reforms in key sectors (like agriculture, mining, and manufacturing) are necessary to enhance productivity and competitiveness.
3. Investment in Human Capital: Investing in education and skills development is crucial to support the growing sectors and ensure inclusive economic growth.

Hence, the improved foreign exchange reserves position and reduction in the current account deficit indicate a robust external sector performance, contributing positively to Tanzania's economic growth. These developments reflect sound economic policies and provide a foundation for continued growth, stability, and resilience against external shocks. To maintain this positive momentum, Tanzania must focus on diversification, structural reforms, and human capital development.

Tanzania's Export-Led Economic Growth and Trade Dynamics

In the year ending March 2024, exports of goods and services showed robust growth, rising by 13.6 percent to reach USD 14,301.4 million. This significant increase was primarily driven by various factors, including strong performances in traditional goods, particularly in exports of tobacco, coffee, cotton, and cashew nuts. These traditional goods exports saw a substantial increase from USD 758.4 million to USD 1,031 million. This growth can be attributed to both price and volume effects.

Non-traditional goods exports also saw a notable increase, rising by 1.3 percent to USD 6,286.7 million. The main contributors to this growth were gold, horticultural products, and oil seeds. Gold exports, in particular, stood out, amounting to USD 3,106.6 million, which accounted for nearly half of all non-traditional exports. The increase in horticultural product exports, driven by a rise in vegetable exports, especially melons and chickpeas, also played a significant role in this growth.

Service receipts, totaling USD 6,562.2 million, also saw a substantial increase from the previous year, driven mainly by travel and transportation receipts. The recovery of the tourism sector played a significant role in this increase, with tourist arrivals recording a notable annual increase of 21.9 percent to 1,919,447. This recovery is consistent with the global tourism industry trends. On a monthly basis, service receipts reached USD 542.3 million in March 2024, compared to USD 481 million in March 2023.

In contrast, imports of goods and services declined to USD 16,033.5 million in the year to March 2024 from USD 17,124.2 million in the corresponding year. This decline was mainly due to decreases in imports of refined white petroleum products, fertilizers, and industrial supplies. On a monthly basis, goods imports were USD 1,148.3 million in March 2024 compared to USD 1,170.7 million in March 2023.

Service payments also declined to USD 2,265.5 million compared with USD 2,578.6 million in the year ending March 2023. This decrease was primarily due to a decline in freight payments following a fall in imports.

The primary income account deficit widened to USD 1,504.4 million from USD 1,362.4 million recorded in the year to March 2023, mainly due to higher interest payments abroad. On a monthly basis, the primary account recorded a deficit of USD 108.4 million, higher than the deficit of USD 99.5 million in March 2023.

On a positive note, the secondary income account balance improved to a surplus of USD 652.9 million from a surplus of USD 612.8 million in the year ending March 2023. This improvement was primarily due to an increase in personal transfers. On a monthly basis, the secondary income account recorded a surplus balance of USD 45.2 million in March 2024, slightly lower than USD 50.4 million in a similar period in 2023.

Exports, imports, and Tanzania's economic growth:

1. Export Growth: Tanzania experienced significant growth in exports of both goods and services, with a 13.6 percent increase in the year ending March 2024. This growth was driven by various factors, including strong performances in traditional goods such as tobacco, coffee, cotton, and cashew nuts, as well as non-traditional goods like gold, horticultural products, and oil seeds. Additionally, service receipts, particularly from travel and transportation, contributed to export growth.
2. Import Decline: In contrast to export growth, imports of goods and services declined during the same period. This decline can be attributed to decreases in imports of refined white petroleum products, fertilizers, and industrial supplies. Lower imports of goods and services resulted in a decrease in overall spending on imports.
3. Trade Balance: The combination of export growth and import decline suggests an improvement in Tanzania's trade balance. With exports outpacing imports, Tanzania likely experienced a reduction in its trade deficit, or possibly even achieved a trade surplus. A favorable trade balance is generally associated with economic growth as it indicates increased competitiveness and the ability to meet domestic demand while also generating revenue from exports.
4. Sectoral Growth: The performance of specific sectors, such as agriculture (traditional goods) and mining (gold exports), played a significant role in driving export growth. This suggests that these sectors are contributing positively to Tanzania's economic expansion, potentially creating employment opportunities and stimulating further investment.
5. Tourism Sector Recovery: The increase in service receipts, driven by a recovery in the tourism sector, indicates that Tanzania's efforts to revive tourism after the pandemic have been successful. This recovery not only boosts service exports but also has broader implications for the economy, including job creation and income generation.

Navigating Tanzania's Economic Landscape: Insights from Interbank Markets

In March 2024, the interbank cash market (IBCM) remained a vital tool for banks to manage fluctuations in their shilling liquidity. Transactions in the IBCM totaled TZS 1,694.3 billion, showing a slight increase from TZS 1,604.9 billion in the previous month. Among these transactions, 7-day transactions continued to dominate, comprising 54.3 percent of the total market turnover. Despite the increased activity, the overall IBCM interest rate decreased slightly to 7.10 percent from 7.20 percent in the preceding month, indicating relatively stable market conditions.

The Interbank Foreign Exchange Market (IFEM) also played a crucial role in March 2024, facing significant demand for foreign exchange, particularly for the US dollar. This demand was driven by global dynamics affecting the US dollar and a decrease in seasonal inflows from tourism and crop exports. The Central Bank sold USD 76.75 million in the IFEM, while commercial banks sold USD 8.8 million during the month. As a result, the shilling traded at an average rate of TZS 2,563.07 per US dollar, compared to TZS 2,547.74 per US dollar in the previous month and TZS 2,322.16 per US dollar in the same month in 2023. This depreciation translated to an annual depreciation rate of 9.4 percent, reflecting the shilling's weakening against the US dollar over the year.

Overall, both the IBCM and IFEM played critical roles in maintaining liquidity and managing foreign exchange transactions for banks in March 2024. While the IBCM helped banks smooth fluctuations in shilling liquidity, the IFEM faced challenges due to high demand for the US dollar and reduced inflows from key sectors like tourism and exports. These dynamics contributed to the shilling's depreciation against the US dollar over the year, impacting the exchange rate and potentially affecting various sectors of the economy.

Focusing on Tanzania's economic growth:

The activity in the IBCM and IFEM reflects a dynamic financial sector, the challenges such as currency depreciation and reduced inflows from key sectors pose risks to Tanzania's economic growth.

1. Interbank Cash Market (IBCM) Activity: The fact that banks are using the IBCM to manage liquidity fluctuations suggests that the financial sector is active and responsive. This can be indicative of a healthy financial system, which is essential for supporting economic growth by efficiently allocating capital.
2. Stable Interest Rates: Despite fluctuations in liquidity, the overall interest rate in the IBCM decreased slightly. This stability in interest rates can indicate that the central bank's monetary policy is effective in managing inflation and supporting economic stability.
3. Interbank Foreign Exchange Market (IFEM) Dynamics: The high demand for foreign exchange, particularly the US dollar, in the IFEM indicates a need for international transactions. This demand may reflect Tanzania's engagement in global trade and investment activities, which are vital for economic growth.
4. Shilling Depreciation: The depreciation of the Tanzania shilling against the US dollar can have mixed effects on the economy. On one hand, it may boost exports by making Tanzania goods cheaper for foreign buyers. On the other hand, it can increase the cost of imports, potentially leading to inflationary pressures.
5. Impact on Key Sectors: Reduced inflows from tourism and crop exports may have adverse effects on sectors heavily reliant on these industries. Tourism is a significant contributor to Tanzania's GDP, and any decline in tourism revenue can hinder economic growth. Similarly, agriculture, including crop exports, plays a crucial role in Tanzania's economy, and reduced export earnings can constrain growth in this sector.