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

1. Lending Interest Rates

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

2. Deposit Interest Rates

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

3. Interest Rate Spread

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

Summary Table

Additional Insights and Implications

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

Tanzania Interest Rates - May 2025: Key Figures

Budget, Government Burden, and PPP Potential

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

Total Budget of Public Investment Projects

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

Economic Potential of the Projects

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

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

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

Fiscal Burden on the Government

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

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

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

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

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

Impact of Public-Private Partnerships (PPPs)

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

Benefits of PPPs

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

Challenges of PPPs

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

Hypothetical PPP Scenario

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

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

Comparison: Government-Funded vs. PPP

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

Government Budget Impact

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

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

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

Conclusion

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

Public Investment Projects in Tanzania (2020–2025)

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

Notes

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

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

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

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

Main FDI Sectors

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

Policy and Institutional Reforms

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

Challenges Still to Address

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

2025–2030 Strategic Goals

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

Inclusive and Sustainable Growth

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

Conclusion

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

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

Key Highlights

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

Monthly Collection Breakdown (FY 2024/25)

Revenue Forecast for FY 2025/26

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

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

Projected Monthly Targets for 2025/26

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

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

1. Strengthened Fiscal Capacity

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

2. Support for Flagship Infrastructure Projects

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

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

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

3. Economic Growth and Job Creation

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

4. Social and Human Capital Development

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

5. Digital and Technological Advancements

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

6. Challenges and Risks

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

Conclusion

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

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

Economic Progress Anchored in Tax Reform

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

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

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

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

Key Issues Hindering Fiscal and Inclusive Growth

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

1. Narrow Tax Base

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

2. High VAT Refund Arrears

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

3. Excessive Compliance Costs

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

4. Business-Discouraging Tax Rates

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

5. Rural-Urban Disparities

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

6. Public Debt Pressure

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

7. Inequitable Tax Benefit Distribution

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

8. Digital Divide

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

9. Climate Vulnerability

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

10. Tensions with Private Sector

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

The Way Forward

The report outlines several reforms to address these issues:

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

Conclusion

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

Microfinance Institutions (MFIs) are pivotal in driving financial inclusion and economic growth in Tanzania, particularly for Micro and Small Enterprises (MSEs). A recent study by the Tanzania Investment and Consultant Group Ltd. (TICGL) titled "The Contribution of Microfinance Services to the Development of Small and Medium Enterprises in Tanzania" provides comprehensive insights into how MFIs support SMEs, the challenges they face, and opportunities for growth. This article explores key findings from the 2025 TICGL report, highlighting the transformative role of microfinance in Tanzania’s SME ecosystem.

The Importance of MFIs for Tanzanian SMEs

MFIs bridge a critical gap in Tanzania’s financial landscape, offering accessible credit, savings products, and financial literacy training to MSEs that traditional banks often overlook due to perceived risks. According to the Tanzania National Bureau of Statistics (NBS, 2022), MSEs contribute over 35% to Tanzania’s GDP and employ more than 5 million people. By providing tailored financial services, MFIs empower these enterprises to expand, create jobs, and reduce poverty.

Key Services Provided by MFIs

• Micro-loans: Small-scale loans (often below TZS 5 million) for working capital and business expansion.
• Group Loans: Peer-guaranteed loans, particularly effective for women-led and rural businesses.
• Financial Literacy Training: Programs to enhance budgeting, loan management, and business planning skills.
• Digital Financial Services: Mobile banking and payment platforms for improved accessibility.

Key Findings from the TICGL Study

The TICGL study, conducted between November 2024 and January 2025, surveyed 420 MFIs across Tanzania, providing a detailed analysis of their operations, challenges, and opportunities. Below are some key insights:

Loan Portfolio Allocation

MFIs allocate their loans strategically to support various sectors critical to Tanzania’s economy. Figure 1 illustrates the distribution of MFI loan portfolios:

Figure 1: Loan Portfolio Allocation by Business Sector (2025)

Source: TICGL, 2025

Trade and retail dominate with 30% of loan allocations, reflecting the prevalence of small trading businesses. Agriculture (22%) and manufacturing (18%) also receive significant funding, aligning with national priorities for food security and industrialization.

Loan Size Trends

The study found that 62% of MFI loans are below TZS 5 million, catering primarily to micro-enterprises with quick-turnaround needs. Figure 2 shows the distribution of loan sizes:

Figure 2: Loan Size Distribution Among MSEs (2025)

Source: TICGL, 2025

This trend highlights MFIs’ focus on small, low-risk loans, which are easier to approve and manage.

Default Rates and Risk Management

Loan default rates remain a significant concern for MFIs. The study found that 49% of MFIs report default rates between 5–10%, while 27% face higher risks with rates exceeding 10%. Figure 3 outlines the default rate distribution:

Figure 3: Default Rates for MSE Loans (2025)

Source: TICGL, 2025

To mitigate risks, MFIs employ strategies such as:

• Credit Risk Assessment and Scoring (26%)
• Group Lending and Social Collateral (23%)
• Loan Portfolio Diversification (17%)
• Strict Loan Monitoring (19%)
• Credit Guarantee Schemes (15%)

Challenges Facing MFIs

MFIs face several barriers that limit their ability to serve MSEs effectively. Figure 4 summarizes the key challenges:

Figure 4: Main Challenges in Providing Loans to MSEs (2025)

Source: TICGL, 2025

High borrowing costs (44%) and stringent collateral requirements (29%) further complicate MFIs’ ability to secure capital, while regulatory constraints, such as interest rate caps, limit operational flexibility.

Opportunities for Growth

Despite these challenges, the TICGL report identifies significant opportunities to enhance MFI support for MSEs:

• Government-Backed Funding (28%): Access to credit guarantee programs and concessional loans can expand lending capacity.
• Digital Financial Services (25%): Mobile banking and fintech partnerships can reduce costs and improve accessibility.
• MFI Collaboration (27%): Knowledge sharing and joint initiatives can enhance service delivery.
• Fintech Partnerships (20%): Advanced technologies like AI-driven credit scoring can improve risk management.

Recommendations for a Stronger Microfinance Ecosystem

To maximize the impact of MFIs on SME development, the TICGL study proposes several actionable recommendations:

For MFIs

1. Adopt Digital Lending Platforms: Invest in mobile-based loan systems to streamline operations and reach underserved areas.
2. Enhance Financial Literacy Programs: Offer structured training on budgeting, loan management, and digital tools to reduce default rates.
3. Diversify Funding Sources: Engage with impact investors and development finance institutions to secure sustainable capital.

For Regulators

1. Introduce Tiered Compliance: Reduce compliance costs for smaller MFIs to encourage growth.
2. Flexible Lending Guidelines: Allow alternative credit assessments to include informal businesses.
3. Streamline Reporting: Implement digital reporting systems to reduce administrative burdens.

For Stakeholders

1. Strengthen Public-Private Partnerships: Facilitate collaboration between MFIs, banks, and government agencies.
2. Promote Fintech Innovation: Support regulatory sandboxes to test new financial products.
3. Focus on Gender Inclusion: Develop targeted financial products for women-led enterprises.

Conclusion

Microfinance Institutions are indispensable to Tanzania’s economic growth, empowering MSEs through accessible credit and capacity-building programs. The TICGL 2025 study underscores the need for innovative lending models, digital transformation, and regulatory reforms to overcome challenges like high default rates and limited capital access. By leveraging government support, fintech partnerships, and financial literacy initiatives, MFIs can strengthen their role in fostering sustainable SME growth and driving financial inclusion across Tanzania.

Tanzania stands at a crossroads, poised to become East Africa’s trade powerhouse but held back by systemic barriers that stifle small and medium enterprises (SMEs), which drive 35% of GDP and employ 60% of the workforce (ILO, 2020). High taxes, fragile startup ecosystems, and outdated infrastructure limit Tanzania’s competitiveness within the East African Community (EAC) and African Continental Free Trade Area (AfCFTA). A new study by the Tanzania Investment and Consultant Group Ltd. (TICGL) offers a bold vision to transform this landscape through targeted reforms, drawing on regional models like Rwanda and Nigeria.

The Challenges: Taxation, Startups, and Infrastructure

SMEs, comprising over 90% of Tanzania’s businesses, face a 30% corporate tax and 25% import duties, far above Rwanda’s 15% SME tax rate, draining profits and curbing growth (World Bank, 2020). Registering a business takes 26 days—six times longer than Rwanda’s 4 days—while tax compliance consumes 195 hours annually. These burdens contribute to Tanzania’s 141st global Ease of Doing Business ranking, lagging behind Kenya (56th) and Rwanda (38th).

Startups fare worse, with 60-70% failing within three years due to limited credit access (only 15% of SMEs secure formal loans) and weak support systems (Tanzania National Bureau of Statistics, 2020). Historical policies like Ujamaa (1967-1980s) stifled private enterprise, leaving a legacy of unclear partnership roles and low entrepreneurial skills.

Infrastructure gaps further erode competitiveness. Dar es Salaam port, handling 95% of Tanzania’s trade, suffers 10–14-day dwell times, compared to Mombasa’s 7-10 days, inflating logistics costs to 16-20% of export value. The Tazara Railway operates at 20% capacity (0.5 million tons annually vs. 2 million tons potential), hampering trade with landlocked EAC countries (EAC, 2023).

A Blueprint for Transformation

TICGL proposes three actionable strategies to unlock Tanzania’s potential:

1. Tax and Regulatory Reforms: Reducing corporate tax to 20% and import duties to 15% could boost SME profits by 5-7%, saving $2,000-5,000 annually per business and creating 20,000-30,000 jobs across 10,000 SMEs. Streamlining registration to 7 days, inspired by Rwanda’s one-stop shops, could improve Tanzania’s Ease of Doing Business rank by 10-20 positions.
2. Entrepreneurship Hubs: Investing $8 million to establish incubators in Dar es Salaam ($5M) and Arusha ($3M), plus $20 million in seed funding, would support 400 startups annually with $20,000-$50,000 grants. Modeled on Nigeria’s $2 billion Lagos tech hub, these hubs could cut failure rates to 40-50%, create 14,000 jobs, and add $2 billion to GDP by 2030.
3. Infrastructure Upgrades: A $1.05 billion investment—$500M for Dar es Salaam port, $300M for Tazara Railway, $200M for roads, and $50M for digital logistics—would reduce port dwell times to 5-7 days and logistics costs to 10-12%. This could boost EAC trade by $1-1.5 billion, create 35,000 jobs, and add $0.5-1 billion to GDP annually, mirroring Kenya’s Standard Gauge Railway success.

The Path Forward

TICGL’s roadmap, informed by Rwanda’s tax reforms, Nigeria’s tech ecosystem, and Kenya’s infrastructure gains, calls for partnerships with the Tanzania Revenue Authority, private banks like CRDB, and EAC bodies. By 2026, tax reforms and hub pilots should launch, with infrastructure upgrades phased through 2030. These efforts could add $2.5-4 billion to GDP annually, cementing Tanzania’s role as an EAC trade leader.

Tanzania’s strategic location, with Dar es Salaam as a gateway for landlocked neighbors, offers immense potential. By addressing these challenges, Tanzania can transform its business landscape, empower SMEs, and build a resilient economy for the future.

The Finance Act, 2025, underpins Tanzania’s ambitious TZS 56 trillion budget, aiming to drive economic development through enhanced revenue collection, investment incentives, and sectoral support. With GDP growth projected at 5.5% for 2025 (Bank of Tanzania estimate), the Act introduces measures like a three-year VAT exemption on fertilizers, saving TZS 1.8 billion annually for a TZS 10 billion firm, and a 75% customs duty relief on capital goods, reducing costs by TZS 187.5 million per TZS 1 billion import. However, challenges arise from increased costs, such as a TZS 22,000 per tonne carbon emission tax adding TZS 2.2 billion yearly for a 100,000-tonne emitter, and a 0.5% excise duty hike on telecom services costing TZS 500 million for a TZS 100 billion operator. This analysis evaluates how these provisions shape Tanzania’s economic trajectory, leveraging the TZS 56 trillion budget to foster growth while addressing potential hurdles.

Opportunities for Economic Development

1. Boosting Agricultural Productivity and Exports
   • VAT Exemptions for Agricultural Inputs: The Act exempts locally produced fertilizers from VAT for three years (2025–2027) and refined edible oils from local seeds (Page 105, Section 56). With agriculture contributing 26% to GDP (TZS 47 trillion in 2024, World Bank), these exemptions lower input costs, enhancing productivity.
     • Figure: A fertilizer producer with TZS 10 billion revenue saves TZS 1.8 billion annually (18% VAT), potentially increasing output by 10–15%, boosting agricultural GDP by TZS 4.7–7 trillion over three years.
   • Cashew Export Levy Allocation: All raw cashew export levies fund the Cashewnut Board for four years (Section 25). Cashew exports, valued at TZS 570 billion in 2023/24, could rise by 20% with improved processing, adding TZS 114 billion annually to export revenues.
   • Budget Alignment: The TZS 56 trillion budget allocates TZS 2.5 trillion to agriculture (4.5%, typical share). These incentives amplify budget impacts, supporting food security and export-led growth.
2. Stimulating Industrial Growth
   • VAT and Customs Duty Relief: VAT exemptions for textiles from local cotton (2025) and a 75% customs duty exemption on capital goods (Section 57; Section 19) reduce costs for manufacturers.
     • Figure: A textile firm with TZS 10 billion revenue saves TZS 1.8 billion in VAT, while an investor importing TZS 1 billion in machinery saves TZS 187.5 million. This could increase manufacturing GDP (8% of GDP, TZS 14.5 trillion) by 5%, or TZS 725 billion, in 2025.
   • Excise Duty Protection: Higher duties on imported goods (e.g., TZS 100/kg vs. TZS 50/kg for preserved vegetables) protect local producers.
     • Figure: A local processor producing 1 million kg saves TZS 50 million annually, enhancing competitiveness.
   • Budget Alignment: Industrial development receives TZS 3 trillion (5.4% of budget). Tax relief aligns with this, attracting foreign direct investment (FDI), which was USD 1.34 billion (TZS 3.4 trillion) in 2023.
3. Enhancing Revenue Mobilization
   • Electronic Tax Systems and Compliance: Mandatory electronic tax systems and simplified presumptive taxes for small businesses (Sections 23, 42) formalize the informal sector, which accounts for 30% of GDP (TZS 54 trillion).
     • Figure: Formalizing 10% of informal businesses (TZS 5.4 trillion) at a 3% tax rate could generate TZS 162 billion annually, supporting the TZS 56 trillion budget’s revenue target (TZS 44 trillion domestic revenue, 78%).
   • AIDS and Fuel Levies: New levies, like 0.1% on mineral value (TZS 50 million for TZS 50 billion sales, Section 113A) and TZS 10/liter on fuel (TZS 1 million/month for 100,000 liters, Section 4), bolster public finances.
     • Figure: With 10 billion liters of fuel consumed annually, the fuel levy could raise TZS 100 billion yearly.
   • Budget Alignment: Increased revenues fund infrastructure (TZS 10 trillion, 18% of budget), improving connectivity and economic efficiency.
4. Financial Sector Stability
   • Banking Amendments: The Deposit Insurance Board’s liquidity support (Section 39A) and Bank of Tanzania’s enhanced independence (Sections 5, 9, 12) stabilize the financial sector.
     • Figure: A stable banking sector could boost FDI by 10%, adding TZS 340 billion annually, supporting private sector credit growth (TZS 38 trillion in 2024, 20% increase).
   • Budget Alignment: Financial sector reforms complement TZS 1 trillion allocated to economic services, fostering investor confidence.

Challenges for Economic Development

1. Increased Operational Costs
   • Carbon Emission Tax: A TZS 22,000 per tonne tax on coal/natural gas emissions (Section 126) raises costs for energy-intensive industries like cement.
     • Figure: A factory emitting 100,000 tonnes pays TZS 2.2 billion annually, potentially increasing cement prices by 5–10%, reducing construction sector growth (10% of GDP, TZS 18 trillion) by TZS 900 billion.
   • Excise Duty Hikes: Telecom services (17% to 17.5%) and pay TV (5% to 10%) duties (Section 126) increase costs.
     • Figure: A telecom operator with TZS 100 billion revenue faces TZS 500 million extra, potentially raising consumer prices and slowing ICT growth (5% of GDP, TZS 9 trillion) by TZS 450 billion.
   • Budget Impact: Higher costs strain private sector contributions to the TZS 56 trillion budget, potentially reducing domestic investment.
2. Compliance Burdens
   • Electronic Tax Systems: Mandatory systems (Page 103, Section 42) challenge small businesses with limited technological capacity.
     • Figure: A small retailer with TZS 50 million revenue may spend TZS 1–2 million on systems, reducing profits by 2–4%, impacting 1 million SMEs (30% of GDP).
   • Mandatory Approvals: Fees require ministerial approval (Section 60A), delaying operations.
     • Figure: A logistics firm facing a one-month delay could lose TZS 100 million in revenue, slowing trade (15% of GDP, TZS 27 trillion).
   • Budget Impact: Compliance costs may divert funds from productive investments, challenging the budget’s TZS 14 trillion development expenditure goal.
3. Reduced Consumer Demand
   • Higher Taxes and Levies: Increased excise duties (e.g., alcohol, telecom) and levies (e.g., TZS 500/railway ticket, Section 73A) raise consumer prices.
     • Figure: A 10% price hike on telecom services could reduce subscriptions by 5%, costing TZS 500 billion in sector revenue, lowering consumption (60% of GDP, TZS 108 trillion).
   • Budget Impact: Lower demand could reduce VAT collections (TZS 10 trillion, 18% of budget), straining fiscal targets.
4. Foreign Investment Constraints
   • Non-Citizen Restrictions: The Business Licensing Act limits non-citizens in certain activities (Page 14, Section 14A), potentially deterring FDI.
     • Figure: A 10% FDI drop (TZS 340 billion) could reduce capital inflows, impacting manufacturing and mining (20% of GDP, TZS 36 trillion).
   • Budget Impact: Lower FDI may limit private sector financing for the TZS 56 trillion budget’s infrastructure projects.

Quantitative Impact Summary (2025)

Conclusion

The Finance Act, 2025, aligns with the TZS 56 trillion budget to drive Tanzania’s economic development by incentivizing agriculture (TZS 7 trillion GDP boost over three years), industry (TZS 725 billion in 2025), and revenue collection (TZS 162 billion from informal sector). However, challenges like increased costs (TZS 2.2 billion for cement firms), compliance burdens (TZS 1–2 million per SME), and potential FDI declines (TZS 340 billion) could hinder growth, particularly in ICT and construction. To maximize economic benefits, policymakers should streamline compliance, subsidize SMEs for digital adoption, and balance tax hikes with consumer relief. With strategic implementation, the Act can propel Tanzania toward its 5.5% GDP growth target, leveraging the TZS 56 trillion budget for sustainable development through 2028.

Key Figures: Finance Act, 2025, and Tanzania’s TZS 56 Trillion Budget (2025–2028)

Notes

• Financial Impact (2025): Based on hypothetical scenarios for a single firm or sector, using standard rates (e.g., 18% VAT, 25% customs duty) and sector-specific estimates.
• Projected Impact (2025–2028): Assumes consistent policy application and economic trends (e.g., 5.5% GDP growth, TZS 180 trillion GDP in 2025, Bank of Tanzania).
• Currency: All figures in Tanzanian Shillings (TZS).
• Budget Context: The TZS 56 trillion budget (2025) includes TZS 44 trillion domestic revenue, TZS 10 trillion for infrastructure, and TZS 2.5 trillion for agriculture.

The Finance Act, 2025, of Tanzania introduces significant amendments to tax, duty, and levy structures, shaping the business and investment landscape through 2028. With measures like a three-year VAT exemption on locally produced fertilizers saving up to TZS 1.8 billion annually for a TZS 10 billion revenue company, and a 75% customs duty relief on capital goods reducing costs by TZS 187.5 million per TZS 1 billion import, the Act fosters growth in agriculture and manufacturing. However, challenges arise from increased costs, such as a TZS 22,000 per tonne carbon emission tax adding TZS 2.2 billion yearly for a 100,000-tonne emitter, and a 0.5% excise duty hike on telecom services imposing TZS 500 million extra for a TZS 100 billion operator. This analysis quantifies these impacts, projecting opportunities and hurdles for businesses navigating Tanzania’s economic environment from 2025 onward.

Opportunities for Business and Investment Growth

1. Tax Relief and Incentives to Stimulate Investment
   • Value Added Tax (VAT) Exemptions:
     • The Act introduces VAT exemptions for locally produced fertilizers for three years and textiles made from locally grown cotton for one year (Section 56 and 57). This reduces production costs, making these sectors more competitive and attractive for investment.
     • VAT exemptions are also proposed for refined edible oils using locally produced seeds, reinsurance, natural gas, and equipment for alternative charcoal production. These exemptions lower input costs, encouraging investment in agriculture, energy, and manufacturing.
     • Example: A textile manufacturer using local cotton could save 18% (standard VAT rate) on production costs, potentially increasing profit margins or allowing price reductions to capture market share.
   • Customs Duty Relief:
     • A 75% customs duty exemption is provided for non-originating capital goods imported by registered investors under the Investment and Special Economic Zones Act (Section 19). This reduces the cost of capital equipment, incentivizing large-scale investments.
     • Example: An investor importing machinery worth TZS 1 billion could save TZS 187.5 million (assuming a 25% customs duty rate), improving project viability.
   • Simplified Tax Compliance for Small Businesses:
     • The Act simplifies tax collection for small traders in the informal sector by requiring registration with relevant authorities and integrating Taxpayer Identification Numbers (TIN) for those below the income tax threshold (Section 23). This formalizes the sector, potentially improving access to credit and markets.
     • The Income Tax Act amendments exempt certain small-scale transport businesses (e.g., two-wheeled motorcycles, tricycles, and light cargo vehicles up to 500 kg) from complex tax calculations, replacing them with presumptive tax rates. This reduces compliance costs, encouraging small business growth.
     • Example: A motorcycle taxi operator with annual revenue of TZS 20 million could pay a flat presumptive tax (e.g., TZS 100,000 annually), avoiding the burden of detailed tax filings.
2. Support for Local Industries
   • Excise Duty Adjustments to Protect Local Production:
     • The Act imposes higher excise duties on imported goods compared to locally produced ones, such as TZS 100/kg vs. TZS 50/kg for preserved vegetables and fruits. This protects local producers from cheaper imports, fostering domestic manufacturing.
     • Example: A local potato chip producer faces an excise duty of TZS 50/kg, while imported chips are taxed at TZS 100/kg, giving the local producer a cost advantage.
   • Export Levy Allocation for Cashew Industry:
     • All export levies on raw cashews are directed to the Cashewnut Board’s account for four years starting July 1, 2025 (Section 25). This provides funding for subsidies and research, enhancing the competitiveness of the cashew sector.
     • Example: Increased funding could improve cashew processing facilities, potentially increasing export revenues, which were TZS 570 billion in 2023/24 (based on historical data).
3. Encouraging Strategic Investments
   • Mining Sector Incentives:
     • Amendments to the Investment and Special Economic Zones Act recognize investors with government agreements as strategic investors (Sections 2 and 21). This could attract large-scale mining investments by offering tailored incentives.
     • Example: A mining company investing TZS 10 billion could benefit from tax holidays or reduced royalties, improving return on investment.
   • Business Licensing Restrictions:
     • The Act restricts non-citizens from certain business activities (Section 14A), reserving opportunities for Tanzanian entrepreneurs and encouraging local business growth.
     • Example: Local traders in retail sectors protected from foreign competition could see increased market share.
4. Improved Financial Sector Stability:
   • Amendments to the Banking and Financial Institutions Act allow the Deposit Insurance Board (DIB) to provide liquidity support to struggling banks (Section 39A). This enhances financial stability, encouraging investor confidence in the banking sector.
   • The Bank of Tanzania Act amendments strengthen the central bank’s independence and oversight (Sections 5, 9, 12), potentially stabilizing monetary policy and attracting foreign investment.
   • Example: A stable banking sector could increase foreign direct investment (FDI), which was USD 1.34 billion in 2023 (Bank of Tanzania data), by reducing perceived financial risks.

Challenges for Business and Investment Growth

1. Increased Tax and Levy Burdens:
   • Higher Excise Duties:
     • The Act increases excise duties on various goods, such as electronic communication services (from 17% to 17.5%), pay TV services (from 5% to 10%), and imported used tableware (20% duty) (Section 126). These increases raise operational costs for businesses in these sectors.
     • Example: A telecom company with TZS 100 billion in revenue faces an additional TZS 500 million in excise duty (0.5% increase), potentially reducing profitability or increasing consumer prices.
   • Carbon Emission Tax:
     • A new excise duty of TZS 22,000 per tonne of carbon emitted from coal or natural gas (Section 126) increases costs for energy-intensive industries like cement or power generation.
     • Example: A cement factory emitting 100,000 tonnes of carbon annually incurs an additional TZS 2.2 billion in costs, potentially reducing competitiveness.
   • AIDS Levy on Multiple Sectors:
     • A 0.1% levy on mineral value (Section 113A), TZS 500 per railway ticket (Section 73A), and levies on motor vehicle registration (Section 5A) increase costs for mining, transport, and automotive sectors.
     • Example: A mining company with TZS 50 billion in mineral sales pays an additional TZS 50 million in AIDS levy, impacting profit margins.
2. Increased Compliance and Administrative Burdens:
   • Mandatory Approvals for Fees and Charges:
     • Government institutions must seek prior approval from the Minister of Finance before imposing or revising fees, levies, or charges (Section 60A; Section 5). This could delay business operations reliant on government services.
     • Example: A logistics company awaiting approval for port service charges may face delays in operations, increasing costs.
   • Electronic Tax Systems:
     • The Tax Administration Act mandates electronic tax systems and penalties for non-compliance (Section 42). Small businesses with limited technological capacity may struggle to comply, facing fines or operational disruptions.
     • Example: A small retailer with TZS 50 million in annual revenue may need to invest TZS 1-2 million in electronic systems, straining finances.
3. Restrictions on Non-Citizens:
   • The Business Licensing Act restricts non-citizens from certain business activities (Section 14A). While this protects local businesses, it may deter foreign investors, reducing FDI in restricted sectors.
   • Example: A foreign retailer planning a TZS 5 billion investment may reconsider due to licensing restrictions, limiting sector growth.
4. Increased Costs for Specific Sectors:
   • Gaming Industry:
     • The tax on gambling winnings increases from 10% to 15% for sports betting and from 12% to 15% for land-based casinos (Section 34). This could reduce consumer participation or profitability for operators.
     • Example: A casino with TZS 1 billion in winnings faces an additional TZS 30 million in tax (3% increase), potentially passing costs to customers.
   • Fuel and Road Tolls:
     • An additional TZS 10 per liter levy on petrol, diesel, and kerosene (Section 4 and 5) increases transport and logistics costs, affecting businesses reliant on fuel.
     • Example: A transport company consuming 100,000 liters of diesel monthly incurs an additional TZS 1 million in costs, reducing margins.
5. Potential Reduction in Consumer Demand:
   • Higher taxes and levies (e.g., excise duties on alcohol, telecom services, and pay TV) may increase consumer prices, reducing disposable income and demand for goods and services.
   • Example: A 10% excise duty on pay TV services could lead to subscription cancellations, impacting media companies’ revenues.

Quantitative Impact Analysis

To illustrate the impact, let’s consider two hypothetical businesses:

1. Local Textile Manufacturer:
   • Opportunity: Benefits from a one-year VAT exemption on textiles using local cotton (Section 56). If annual revenue is TZS 10 billion, the company saves TZS 1.8 billion (18% VAT). This could fund expansion or price reductions to compete with imports.
   • Challenge: Faces increased electricity costs due to the carbon emission tax (TZS 22,000/tonne). If the factory emits 10,000 tonnes annually, it incurs TZS 220 million in additional costs, partially offsetting tax savings.
2. Telecom Operator:
   • Opportunity: The Act’s focus on electronic payment systems (Section 38) could streamline transactions, reducing operational costs by 1-2% (e.g., TZS 1-2 billion for a company with TZS 100 billion revenue).
   • Challenge: The excise duty increase from 17% to 17.5% (Section 126) adds TZS 500 million to costs for a TZS 100 billion revenue company. This may force price hikes, risking customer loss.

Conclusion

The Finance Act, 2025, presents a mixed impact on business and investment growth in Tanzania:

• Opportunities: Tax exemptions, customs duty relief, and support for local industries (e.g., textiles, agriculture, and cashew) create a favorable environment for domestic businesses and strategic investors. These measures could increase investment by reducing costs and protecting local markets, potentially boosting GDP growth (projected at 5.5% for 2025 by the Bank of Tanzania).
• Challenges: Increased taxes and levies (e.g., excise duties, carbon tax, AIDS levy) raise operational costs, particularly for energy, telecom, and transport sectors. Compliance burdens and restrictions on non-citizens may deter foreign investment and strain small businesses.

Key Figures from the Finance Act, 2025 (Tanzania)

Notes

• Financial Impact: Calculated based on hypothetical scenarios to illustrate potential savings or costs. Actual impacts depend on business size and operations.
• Currency: All figures are in Tanzanian Shillings (TZS).
• Assumptions: VAT rate assumed at 18% (standard rate), customs duty at 25% (typical rate), and sector-specific revenue/volume estimates based on typical Tanzanian business scales.

Tanzania’s revenue collection, particularly through taxes on businesses and services, has seen steady improvement, yet challenges like tax evasion and administrative inefficiencies persist. The 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) delivered 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP). This supported low-income Tanzanians through TZS 708.6 billion in fertilizer subsidies, TZS 444.7 billion for fee-free education, and infrastructure projects creating jobs. The 2025/2026 budget, projected at TZS 56.49 trillion (USD 22.07 billion), an 11.6% increase, targets 6.0% GDP growth with TZS 38.9 trillion in domestic revenue (16.7% of GDP) and introduces tax reforms to boost compliance. This case study evaluates whether these projections, given the state of revenue and taxation, can achieve the goal of promoting economic growth for low-income Tanzanians, using key figures and sectoral analysis.

1. State of Revenue Collection and Taxation in Tanzania

Tanzania’s revenue mobilization relies heavily on taxes from businesses and services, including income tax, VAT, and import duties. The current tax-to-GDP ratio of 14.9% is below the Sub-Saharan Africa average of 18.6%, indicating room for improvement. Recent performance and challenges provide context for the 2025/2026 projections.

2024/2025 Revenue Performance:

• Total Revenue: TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with TZS 29.83 trillion from domestic sources (15.0% of GDP).
• Tax Revenue: By February 2025, TZS 22.38 trillion was collected, driven by income tax (TZS 1,573.8 billion in January 2025 alone) and import duties (TZS 962.2 billion), reflecting business growth and trade activity.
• Non-Tax Revenue: Increased by 40% to TZS 884.7 billion (July 2024–May 2025), due to dividends and digital systems.
• Achievements: January 2025 collections reached TZS 3,877.4 billion, exceeding targets by 8.6%, indicating improved compliance and economic activity.
• Challenges: TRA faced criticism for malpractices, prompting a presidential commission review. Lower taxes on local goods suggest weaker domestic demand.

Taxation on Businesses and Services:

• Income Tax: Strong collections (TZS 1,573.8 billion in January 2025) reflect business growth, particularly in ICT (13.5% growth projected by 2026) and mining (9.3%).
• VAT and Exemptions: The 2024/2025 budget introduced VAT exemptions for fertilizers and edible oils, benefiting low-income farmers, but repealed exemptions on precious metals to boost revenue.
• Import Duties: Contributed 40% of tax revenue in H1 2024/2025, supporting fiscal stability despite global challenges.
• Reforms: Digital systems and oversight have reduced leakages, but the informal sector (~30% of GDP) and agriculture remain under-taxed.

2025/2026 Revenue Projections:

• Domestic Revenue: TZS 38.9 trillion (16.7% of GDP, up from 15.0%), with TRA targeting TZS 29.17 trillion (13.3% of GDP) from taxes.
• Total Revenue: Expected to exceed TZS 50.29 trillion, financed by TZS 40.47 trillion domestic revenue and TZS 14.95 trillion loans.
• New Taxes: Mandatory travel insurance for visitors, removal of EPZ/SEZ tax holidays, and 20% gold output for local processing aim to boost revenue.
• Goal: Increase tax-to-GDP ratio to 14% by 2050, targeting TZS 350 trillion annually.

Assessment: The 8.6% revenue surplus in January 2025 and 40% non-tax revenue growth suggest Tanzania can achieve TZS 38.9 trillion if TRA reforms address inefficiencies and broaden the tax base (e.g., informal sector). However, global economic risks and domestic demand weaknesses could hinder collections.

2. 2025/2026 Budget Framework and Economic Growth Target

The TZS 56.49 trillion budget, an 11.6% increase from TZS 49.35 trillion in 2024/2025, aims for 6.0% real GDP growth. Key financial and economic strategies include:

• Budget Structure:
  • Recurrent Expenditure: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
  • Development Expenditure: TZS 16.4 trillion (29.0% of budget) for SGR, JNHPP, and social projects.
  • Financing: TZS 38.9 trillion domestic revenue, TZS 16.02 trillion external sources (TZS 1.02 trillion aid, TZS 5.6 trillion concessional loans, TZS 9.4 trillion commercial loans).
• Macroeconomic Targets:
  • GDP growth: 6.0% in 2025, up from 5.5% in 2024.
  • Inflation: 3.0–5.0% to ensure affordability.
  • Domestic revenue: 16.7% of GDP to reduce borrowing reliance.
  • Reserves: ≥4 months of imports (4.4 months in 2024).
• Sectoral Drivers:
  • Agriculture (26.5% of GDP, ~65% employment).
  • Industry (construction 13.2%, mining 9.0%).
  • Services (ICT 13.5%, tourism 7.0% growth projected).

Comparison with 2024/2025:

• 2024/2025 achieved 5.5% growth with TZS 15.75 trillion development spending, despite revenue shortfalls (89.6%).
• 2025/2026’s TZS 16.4 trillion development budget and 16.7% GDP revenue target position it to exceed prior performance if execution is efficient.

Assessment: The budget’s 6.0% growth target is feasible, supported by projections from the IMF (6.0% in 2025), AfDB (6.0%), and local estimates (6.1–6.4% by 2026) (Web ID: 7, 8, 12). Increased domestic revenue (TZS 38.9 trillion) and strategic investments could drive growth, but success depends on revenue collection and global stability.

3. Promoting Economic Growth for Low-Income Tanzanians

The budget aims to uplift low-income Tanzanians (26.4% abject poverty, 8.0% extreme poverty in 2018) through sectoral investments and social programs. Below is an analysis of key measures and their potential impact.

a. Agriculture

Context:

• Contributes 26.5% to GDP, employs ~65% of Tanzanians.
• TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) reduced costs by 50%, boosting yields.
• VAT exemptions on fertilizers and seeds supported farmers.

2025/2026 Measures:

• Continued subsidies (inferred from prior budgets).
• TADB loans via a ¥22.7 billion Japan agreement for climate-resilient farming.
• Irrigation and value addition to enhance exports (11.6% of GDP in 2024).

Impact:

• Could contribute 1.0–1.5 percentage points to GDP growth (4–6% sectoral growth).
• Subsidies and loans increase incomes for low-income farmers, potentially reducing extreme poverty below 8.0%.
• Exports (6.0% growth projected in 2025) stabilize prices via reserves (USD 5.7 billion in 2024).

b. Industry

Context:

• Construction (13.2%) and mining (9.0%) grew via TZS 1.68 trillion for SGR and TZS 574.8 billion for JNHPP/rural electrification in 2024/2025.
• Mining revenue rose due to gold exports.

2025/2026 Measures:

• TZS 2.75 trillion for transport (SGR, ports) and TZS 2.2 trillion for energy (JNHPP, rural electrification).
• SIDO programs and mining reforms (20% gold for local processing).
• Completion of JNHPP (2,115 MW) to reduce energy costs.

Impact:

• Could contribute 1.5–2.0 percentage points to GDP growth (7–8% sectoral growth).
• Jobs from SGR and JNHPP benefit low-income workers.
• Cheaper energy lowers business costs, reducing prices for consumers.

c. Services

Context:

• Services (~40–50% of GDP) grew via tourism (USD 7.2 billion, 1.4 million visitors) and ICT (12.5% growth) in 2024/2025.
• Exports at 20.3% of GDP narrowed the trade deficit to USD 5,157.2 million.

2025/2026 Measures:

• TZS 359.9 billion for tourism promotion.
• ICT investments (13.5% growth by 2026) via digital infrastructure.
• SGR and Air Tanzania to reduce transport costs.

Impact:

• Could contribute 2.5–3.0 percentage points to GDP growth (6–7% sectoral growth).
• Tourism and ICT jobs are accessible to low-income workers.
• Lower transport costs reduce commodity prices.

d. Social Programs

Context:

• TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, and TZS 414.7 billion for healthcare in 2024/2025 improved access.
• PSSN cash transfers reduced child malnutrition.

2025/2026 Measures:

• Sustained or increased education and health funding (e.g., training 28,000 health workers).
• PSSN expansion for vulnerable households.
• TZS 378.7 billion (2024/2025 level) for water projects, inferred to continue.

Impact:

• Enhances skills and health, reducing poverty cycles.
• Cash transfers improve food security for low-income households.

4. Can the Budget Achieve the Goal?

Strengths:

• Revenue Potential: TZS 38.9 trillion (16.7% of GDP) is achievable, given 8.6% surplus in January 2025 and 40% non-tax revenue growth (Web ID: 5, 6). Tax reforms (e.g., gold processing) could broaden the base.
• Economic Growth: 6.0% target aligns with IMF and AfDB projections, supported by TZS 16.4 trillion development spending.
• Low-Income Focus: Subsidies (TZS 708.6 billion historically), education (TZS 444.7 billion), health (TZS 414.7 billion), and energy (TZS 2.2 trillion) directly benefit low-income Tanzanians, potentially reducing extreme poverty below 8.0%.
• Fiscal Stability: Public debt at 46.5% of GDP and reserves at 4.4 months ensure sustainability.

Challenges:

• Revenue Risks: 2024/2025’s 89.6% shortfall (TZS 45.07 trillion vs. TZS 50.29 trillion) and TRA inefficiencies could jeopardize TZS 38.9 trillion.
• Taxation Burden: New taxes (e.g., travel insurance) and EPZ/SEZ changes may strain businesses, reducing job creation.
• External Risks: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs, affecting low-income consumers.
• Implementation: Delays in SGR or JNHPP could limit economic benefits.

Conclusion

The TZS 56.49 trillion 2025/2026 budget has strong potential to promote economic growth for low-income Tanzanians by achieving 6.0% GDP growth and reducing poverty through targeted investments. However, success hinges on improving revenue collection (TZS 38.9 trillion), addressing TRA inefficiencies, and mitigating external risks. If executed effectively, the budget could surpass the 2024/2025 impact, uplifting low-income Tanzanians through jobs, affordability, and social services.