Strengthening Financial Reserves and Expanding Government Financing

1. Assets

• Total Assets: TZS 24,383,497,509 (July 2024) vs. TZS 24,053,944,299 (June 2024)
• Cash and Cash Equivalent: TZS 5,757,525,936 (July 2024) down from TZS 6,134,001,974 (June 2024)
• Holdings of Special Drawing Rights (SDRs): Significant increase to TZS 24,351,879 (July 2024) from TZS 3,128,172 (June 2024)
• Gold: TZS 76,146,910 (July 2024) up from TZS 72,500,972 (June 2024)
• Foreign Currency Marketable Securities: TZS 7,972,789,612 (July 2024) up from TZS 7,786,633,780 (June 2024)
• Advances to Government: TZS 4,881,173,693 (July 2024) up from TZS 4,339,144,564 (June 2024)
• Equity Investments: TZS 139,716,050 (July 2024) slightly up from TZS 137,636,976 (June 2024)

2. Liabilities

• Total Liabilities: TZS 21,838,324,567 (July 2024) vs. TZS 21,680,428,229 (June 2024)
• Currency in Circulation: TZS 8,232,834,306 (July 2024) up from TZS 8,039,712,115 (June 2024)
• Deposits - Banks and Non-Bank Financial Institutions: TZS 2,663,665,800 (July 2024) down from TZS 2,886,546,472 (June 2024)
• Deposits - Others: TZS 1,880,606,846 (July 2024) up from TZS 1,676,983,773 (June 2024)
• Foreign Currency Financial Liabilities: TZS 5,169,465,636 (July 2024) down from TZS 5,297,148,931 (June 2024)
• IMF Related Liabilities: TZS 1,169,639,527 (July 2024) slightly up from TZS 1,152,242,790 (June 2024)
• Allocation of Special Drawing Rights (SDRs): TZS 2,022,413,379 (July 2024) up from TZS 1,977,704,094 (June 2024)

3. Equity

• Total Equity: TZS 2,545,172,942 (July 2024) up from TZS 2,373,516,070 (June 2024)
• Reserves: TZS 2,445,172,942 (July 2024) up from TZS 2,273,516,070 (June 2024)

Overall Summary

• The Bank of Tanzania's financial position shows an increase in total assets and equity from June to July 2024.
• Key changes include increases in holdings of SDRs, gold reserves, foreign currency marketable securities, and advances to the government.
• Liabilities also increased, primarily due to the growth in currency circulation and deposits from non-banking institutions.

Bank of Tanzania as of July 2024 provides insights into various aspects of Tanzania's economic development. Here's what the data suggests

Tanzania appears to be on a path of economic growth, supported by increased financial reserves, active government financing, and rising economic activity. However, careful management of inflation, debt, and reliance on international financial support will be crucial to ensure sustainable economic development.

1. Increased Foreign Reserves and SDR Holdings

• Foreign Currency Marketable Securities and Holdings of Special Drawing Rights (SDRs) have increased.
• The rise in foreign reserves and SDR holdings indicates that Tanzania is bolstering its financial buffers against external shocks, which is a positive sign for economic stability and confidence in the Tanzanian economy. It may also reflect successful export performance or increased foreign investment, which contributes to a healthier balance of payments.

2. Growth in Government Financing

• Advances to Government have increased significantly.
• The government is borrowing more from the central bank, which could be aimed at financing development projects, infrastructure, or other critical public expenditures. While this can drive economic growth by stimulating investment, it also suggests that the government is relying more on domestic financing, which may increase domestic debt if not managed carefully.

3. Higher Currency in Circulation

• The Currency in Circulation has increased.
• An increase in currency circulation is often linked to higher economic activity, as businesses and consumers engage in more transactions. This could signal a growing economy with rising demand for goods and services. However, it might also point to inflationary pressures if the increase in currency supply outpaces economic growth.

4. Increased Equity and Reserves

• Total Equity and Reserves have grown.
• The increase in reserves and equity indicates that the Bank of Tanzania is strengthening its financial position, possibly to support monetary policy initiatives or to ensure stability in the financial system. This is crucial for maintaining investor confidence and managing inflation, which are important for sustainable economic development.

5. Mixed Signals in Liabilities

• While there is a decrease in Foreign Currency Financial Liabilities and Deposits from Banks and Non-Bank Financial Institutions, there is an increase in Deposits from Others and IMF Related Liabilities.
• The reduction in foreign currency liabilities could imply an improved external debt position or successful repayments, which is positive. However, the increased reliance on IMF-related liabilities suggests that Tanzania might be depending more on international financial support, which could be a double-edged sword depending on how the funds are utilized.

Overall Implications for Economic Development

• Strengthened Financial Position: The data suggests that Tanzania is building a more robust financial system with increased reserves and equity, which is vital for long-term economic stability.
• Active Government Financing: The rise in government advances indicates ongoing investments in development projects, which are crucial for economic growth. However, it also highlights the need for prudent fiscal management to avoid excessive domestic debt.
• Rising Economic Activity: Increased currency circulation points to growing economic activity, which is a positive sign of development. However, inflation management will be key to sustaining this growth.

Tanzania's position in the list of African countries with the weakest currencies, as of August 2024, highlights certain economic challenges the country faces. The Tanzania Shilling (TZS) ranks 8th among the weakest currencies in Africa, with an exchange rate of approximately 2,699.92 TZS per US dollar.

Economic Implications for Tanzania:

1. Inflationary Pressure: A weak Tanzania Shilling can lead to inflation, particularly in an economy that relies heavily on imports. Essential goods like fuel, medicine, and food, which are often imported, become more expensive as the currency weakens. This results in higher costs for consumers, reducing their purchasing power.
2. Impact on Local Commerce: The depreciation of the shilling could make imported goods prohibitively expensive, potentially benefiting local producers by making their goods more competitive domestically. However, if local industries rely on imported raw materials, their production costs could rise, leading to higher prices even for locally produced goods.
3. Investment Ecosystem: A weak currency can deter foreign investment, as investors may perceive the economy as unstable. This can lead to reduced capital inflows, slowing economic growth. Moreover, the cost of repaying foreign-denominated debt increases, placing additional strain on the national budget.
4. Exports and Trade Balance: On the positive side, a weaker shilling can make Tanzania's exports cheaper and more competitive on the global market. This could improve the trade balance if the country can increase its export volumes. However, if the global demand for Tanzania's exports is low, this advantage might not fully materialize.
5. Social Impact: The depreciation of the currency and the resultant inflation could exacerbate poverty and inequality, particularly in rural areas where people are more vulnerable to price changes. This could lead to increased social tensions and potentially destabilize the country.

Comparative Context:

• São Tomé & Príncipe and Sierra Leone top the list with extremely high exchange rates, indicating severe economic challenges, far greater than Tanzania's.
• Nigeria, the largest economy in Africa, also appears on the list, suggesting that even larger economies can face significant currency depreciation.

The ranking of the top 10 African countries with the weakest currencies as of August 2024 provides insight into the economic challenges faced by these nations

These exchange rates reflect a combination of inflation, economic mismanagement, and external factors affecting these countries' economies. While weaker currencies can sometimes benefit export-driven growth, the overall impact tends to increase the cost of living, reduce purchasing power, and hinder economic development. For Tanzania, ranked 8th on this list, the key challenge is managing inflation and stabilizing the economy to prevent further currency depreciation.

1. São Tomé & Príncipe (Dobra - STD)

• Exchange Rate: 22,281.8 STD per USD
  • Context: The Dobra’s extremely high exchange rate indicates severe depreciation, reflecting the small island nation's economic instability. With such a weak currency, the cost of imports becomes prohibitively expensive, straining the economy and making essential goods less accessible to the population.

2. Sierra Leone (Leone - SSL)

• Exchange Rate: 20,969.5 SSL per USD
  • Context: Sierra Leone’s economy is heavily reliant on natural resources, and the Leone’s weakness suggests significant economic stress. The high exchange rate exacerbates inflation, increasing the cost of living and putting pressure on local businesses that depend on imported goods.

3. Guinea (Guinean Franc - GNF)

• Exchange Rate: 8,630 GNF per USD
  • Context: Guinea’s currency reflects challenges in managing inflation and economic stability. Despite the country’s rich natural resources, including bauxite, the Guinean Franc's weakness limits economic growth and makes it difficult for the government to control rising prices.

4. Madagascar (Malagasy Ariary - MGA)

• Exchange Rate: 4,600 MGA per USD
  • Context: Madagascar’s economy is primarily agrarian, and the depreciation of the Ariary makes importing machinery and fuel expensive, hindering economic development. The currency's weakness also affects the purchasing power of consumers, particularly in urban areas.

5. Uganda (Ugandan Shilling - UGX)

• Exchange Rate: 3,725.10 UGX per USD
  • Context: Uganda’s economy, which has been growing steadily, is still vulnerable to currency fluctuations. The depreciation of the Ugandan Shilling impacts inflation rates and increases the cost of imported goods, though it may benefit export sectors like agriculture.

6. Burundi (Burundian Franc - BIF)

• Exchange Rate: 2,878 BIF per USD
  • Context: Burundi’s economic challenges, including political instability and limited access to international markets, are reflected in the weak Burundian Franc. The high exchange rate increases the cost of imports, which are essential for development, and adds to the economic burden on the population.

7. Democratic Republic of Congo (Congolese Franc - CDF)

• Exchange Rate: 2,871 CDF per USD
  • Context: The Congolese Franc’s depreciation is a result of ongoing political instability and economic mismanagement. The weak currency increases the cost of living, especially in urban centers, and hinders the country’s ability to leverage its vast natural resources effectively.

8. Tanzania (Tanzania Shilling - TZS)

• Exchange Rate: 2,699.92 TZS per USD
  • Context: Tanzania's relatively high exchange rate compared to stronger African currencies points to inflationary pressures and economic challenges. While the weaker Shilling could make Tanzania exports more competitive, it also raises the cost of imports, affecting both consumers and businesses.

9. Malawi (Kwacha - MWK)

• Exchange Rate: 1,734.5 MWK per USD
  • Context: Malawi’s Kwacha reflects the country’s struggles with economic diversification and reliance on agriculture. The weak currency leads to higher costs for imported goods, which are critical for both consumers and the agricultural sector.

10. Nigeria (Naira - NGN)

• Exchange Rate: 1,590 NGN per USD
  • Context: Despite being Africa’s largest economy, Nigeria’s Naira has weakened significantly due to inflation, reliance on oil exports, and economic mismanagement. The high exchange rate affects the cost of living and puts pressure on businesses reliant on imported goods.

GDP Growth Overview:

• GDP Growth: Tanzania's GDP at market prices showed growth from TZS 42,631,798 million in June 2022 to TZS 51,181,943 million in December 2023.

The sectoral contributions to Tanzania's GDP

Overall Economic Activity:

• The total economic activity, including all sectors, increased from TZS 39,848,131 million in June 2022 to TZS 47,346,113 million in December 2023.

Percentage Contribution to GDP:

• Agriculture contributed around 27.7% in June 2023.
• Industry and Construction had a significant share, around 29.4% in June 2023.
• Services also had a high contribution, around 36.8% in June 2023.

Tanzania's economy, driven by strong performances in agriculture, industry, and services sectors

Sector Contributions (in Percentage)

Analysis:

• Agriculture, Hunting, and Forestry increased its contribution slightly, from 30.1% to 31.6%.
• Industry and Construction saw a small decline from 32.5% to 29.5%.
• Services grew from 37.4% to 39.0%, remaining the dominant contributor.
• Mining and Quarrying and Manufacturing had marginal increases in their contributions.

Analysis of Tanzania's GDP Economic Development (June 2022 - December 2023)

Tanzania's economic development from June 2022 to December 2023 showcases a diversified economy with strong performances in services and agriculture. The overall growth is a positive sign of economic stability and potential, with ongoing improvements across multiple sectors suggesting a promising future for Tanzania’s economic landscape. The continued expansion of the services sector, in particular, may pave the way for sustained growth and development in the coming years.

1. Overview of GDP Growth

Tanzania's GDP at market prices experienced significant growth from TZS 42,631,798 million in June 2022 to TZS 51,181,943 million in December 2023. This reflects an overall robust economic expansion, driven by various sectors contributing to this upward trajectory.

2. Sectoral Contributions to GDP

The key sectors contributing to Tanzania's GDP show a dynamic yet consistent pattern of development:

• Agriculture, Hunting, and Forestry:
  • Growth: The sector increased from TZS 12,010,526 million in June 2022 to TZS 14,943,066 million in December 2023.
  • Percentage Contribution: This sector's contribution to GDP grew slightly from 30.1% in June 2022 to 31.6% in December 2023.
  • Implication: Agriculture continues to be a foundational pillar of Tanzania’s economy, with a slight but steady increase in its contribution, reflecting improvements in productivity and perhaps favorable market conditions.
• Industry and Construction:
  • Growth: Industry and construction grew from TZS 12,950,909 million in June 2022 to TZS 13,977,368 million in December 2023.
  • Percentage Contribution: Despite the absolute growth, the sector's relative contribution to GDP decreased from 32.5% to 29.5%.
  • Implication: While the sector remains strong, its decreasing percentage contribution suggests either a slower growth rate compared to other sectors or that other sectors are expanding more rapidly.
• Mining and Quarrying:
  • Growth: This sector rose from TZS 3,553,026 million to TZS 4,244,243 million over the period.
  • Percentage Contribution: The contribution slightly increased from 8.9% to 9.0%.
  • Implication: Mining and quarrying remain important but with modest growth, reflecting either stable output or market conditions that limit faster expansion.
• Manufacturing:
  • Growth: Manufacturing expanded from TZS 2,879,571 million to TZS 3,650,506 million.
  • Percentage Contribution: The sector's share in GDP increased slightly from 7.2% to 7.7%.
  • Implication: Manufacturing is on a gradual upward trend, which could indicate ongoing industrialization efforts, but it still contributes a smaller portion compared to other sectors.
• Services:
  • Growth: The services sector experienced significant growth, rising from TZS 14,886,697 million to TZS 18,486,102 million.
  • Percentage Contribution: This sector's contribution increased from 37.4% to 39.0%.
  • Implication: The services sector is the largest and fastest-growing sector, underscoring its role as the main driver of economic activity in Tanzania. This growth could be attributed to expansions in trade, finance, telecommunications, and other service-related industries.

3. Total Economic Activity

The total economic activity across all sectors grew from TZS 39,848,131 million in June 2022 to TZS 47,346,113 million in December 2023. This overall growth highlights the economy's resilience and consistent expansion, with all sectors contributing to the upward trend.

4. Implications for Tanzania's Economic Development

The data reflects a balanced economic development across various sectors, with services emerging as the dominant force, followed by agriculture, industry, and construction. The slight decline in the percentage contribution of industry and construction suggests that while these sectors are growing, they are being outpaced by others, particularly services.

The agriculture sector remains crucial, with its increased percentage contribution indicating that it still plays a significant role in the livelihood of the majority of Tanzanians and in the overall economy. Meanwhile, the consistent growth in manufacturing and mining points to ongoing industrialization and resource exploitation, albeit at a slower pace than other sectors.

Total Debt Stock: The report presents data on both external and domestic debt stocks. The total debt stock has shown a rising trend over time, with figures such as USD 42,681.0 million in June 2023 and USD 45,555.8 million in June 2024.

1. External Debt: The external debt stock includes loans from various categories such as bilateral, multilateral, and commercial debts, with a significant portion owed by the central government. For instance, the external debt stock was USD 33,333.8 million in June 2024, up from USD 30,201.7 million in March 2024.
2. Domestic Debt: The domestic debt stock was USD 12,158.0 million as of June 2024, contributing 28.7% of the total debt stock.
3. Exchange Rates: The exchange rate of Tanzanian Shilling (TZS) against the US Dollar (USD) has seen a gradual depreciation, from TZS 2,307.9/USD in September 2022 to TZS 2,626.9/USD in June 2024.
4. Debt Service: The external debt service as a percentage of exports has fluctuated, with figures such as 7.8% in March 2023 and 24.6% in June 2024.
5. Sectoral Distribution of GDP: The report also provides a breakdown of GDP by various sectors, showing the performance of agriculture, industry, construction, and mining sectors.

Tanzania's debt development and economic indicators as a key aspects of the country's economic trajectory

Tanzania's economic development is at a critical juncture. While the country appears to be investing in its growth, the rising debt levels and associated risks underline the importance of effective debt management and the need for policies that support economic diversification, increased productivity, and sustainable growth. Without careful management, the benefits of borrowing could be overshadowed by the burdens of debt service, potentially slowing down the country's economic momentum.

1. Rising Debt Levels

• Total Debt Increase: The increase in total debt from USD 42,681.0 million in June 2023 to USD 45,555.8 million in June 2024 suggests that Tanzania is increasingly relying on both external and domestic borrowing. This could indicate efforts to finance development projects or manage budget deficits but also raises concerns about debt sustainability.
• External vs. Domestic Debt: The fact that external debt constitutes a significant portion of the total debt (USD 33,333.8 million in June 2024) compared to domestic debt (USD 12,158.0 million in June 2024) reflects Tanzania's reliance on foreign sources for financing. This dependency could make the country vulnerable to external shocks, such as changes in global interest rates or exchange rates.

2. Exchange Rate Depreciation

• The depreciation of the Tanzanian Shilling (TZS) against the US Dollar from TZS 2,307.9/USD in September 2022 to TZS 2,626.9/USD in June 2024 indicates a weakening of the local currency. This depreciation can increase the cost of servicing external debt and contribute to inflationary pressures, which can negatively impact the economy, particularly for import-dependent sectors.

3. Debt Service Burden

• The rise in external debt service as a percentage of exports from 7.8% in March 2023 to 24.6% in June 2024 suggests that a growing portion of export earnings is being used to service debt. This could limit the resources available for other critical economic needs, such as infrastructure development, social services, or investment in productive sectors.

4. Sectoral GDP Distribution

• The data on sectoral distribution of GDP highlights the structure of Tanzania's economy, with agriculture, industry, construction, and mining being key contributors. The performance of these sectors will be crucial in determining the country's ability to generate the necessary revenue to manage its debt and support economic growth.

5. Economic Development Challenges

• The combination of rising debt, currency depreciation, and increasing debt service obligations points to potential challenges in Tanzania's economic development. While borrowing can help finance important projects and stimulate growth, it also carries risks if the debt is not managed prudently. If not accompanied by robust economic growth, these factors could lead to economic instability, reduced investment, and slower development progress.

Jumla ya Deni la Tanzania: Taarifa hii inatoa data kuhusu hisa za deni la nje na la ndani. Hisa za jumla za deni zimeonyesha mwelekeo wa kupanda kwa muda, ukiwa na takwimu kama TZS 42,681.0 milioni mnamo Juni 2023 na TZS 45,555.8 milioni mnamo Juni 2024.

1. Deni la Nje: Hisa za deni la nje zinajumuisha mikopo kutoka makundi mbalimbali kama vile mikopo ya kibalozi, ya kimataifa, na ya kibiashara, ambapo sehemu kubwa inadaiwa na serikali kuu. Kwa mfano, hisa za deni la nje zilikuwa TZS 33,333.8 milioni mnamo Juni 2024, kutoka TZS 30,201.7 milioni mnamo Machi 2024.
2. Deni la Ndani: Hisa za deni la ndani zilikuwa TZS 12,158.0 milioni hadi Juni 2024, zikichangia 28.7% ya hisa za jumla za deni.
3. Mabadiliko ya Viwango vya Kubadilishana: Kiwango cha kubadilishana Shilingi ya Tanzania (TZS) dhidi ya Dola ya Marekani (USD) kimeonyesha kupungua taratibu, kutoka TZS 2,307.9/USD mnamo Septemba 2022 hadi TZS 2,626.9/USD mnamo Juni 2024.
4. Huduma ya Deni: Huduma ya deni la nje kama asilimia ya mauzo ya nje imekuwa ikipanda, ikiwa na takwimu kama 7.8% mnamo Machi 2023 na 24.6% mnamo Juni 2024.
5. Ugawaji wa Pato la Taifa Kulingana na Sekta: Taarifa pia inatoa mgawanyo wa Pato la Taifa kulingana na sekta mbalimbali, ikionyesha utendaji wa sekta za kilimo, viwanda, ujenzi, na madini.

Maendeleo ya Deni la Tanzania na Viashiria vya Kiuchumi kama Vipande Muhimu vya Mwelekeo wa Uchumi wa Nchi

Maendeleo ya kiuchumi ya Tanzania yuko katika hatua muhimu. Ingawa nchi inaonekana kuwekeza katika ukuaji wake, viwango vya juu vya deni na hatari zinazohusiana zinaonyesha umuhimu wa usimamizi mzuri wa deni na haja ya sera zinazounga mkono utofauti wa kiuchumi, kuongezeka kwa tija, na ukuaji endelevu. Bila usimamizi wa makini, faida za kukopa zinaweza kuzidiwa na mzigo wa huduma za deni, hali inayoweza kupunguza kasi ya maendeleo ya kiuchumi ya nchi.

1. Kuongezeka kwa Viwango vya Deni
   • Kuongezeka kwa Deni Jumla: Kuongezeka kwa deni jumla kutoka TZS 42,681.0 milioni mnamo Juni 2023 hadi TZS 45,555.8 milioni mnamo Juni 2024 kunaonyesha kwamba Tanzania inategemea zaidi mikopo ya nje na ya ndani. Hii inaweza kuashiria jitihada za kufadhili miradi ya maendeleo au kusimamia upungufu wa bajeti lakini pia inajenga wasiwasi kuhusu kuegemea kwenye deni.
   • Deni la Nje dhidi ya Deni la Ndani: Ukweli kwamba deni la nje lina sehemu kubwa ya deni jumla (TZS 33,333.8 milioni mnamo Juni 2024) ikilinganishwa na deni la ndani (TZS 12,158.0 milioni mnamo Juni 2024) unaonyesha utegemezi wa Tanzania kwenye vyanzo vya kigeni vya fedha. Utegemezi huu unaweza kufanya nchi kuwa hatarini kwa mshtuko wa nje, kama vile mabadiliko katika viwango vya riba vya kimataifa au viwango vya kubadilishana.
2. Kupungua kwa Kiwango cha Kubadilishana
   • Kupungua kwa Shilingi ya Tanzania (TZS) dhidi ya Dola ya Marekani kutoka TZS 2,307.9/USD mnamo Septemba 2022 hadi TZS 2,626.9/USD mnamo Juni 2024 kunaonyesha kudhoofika kwa sarafu ya ndani. Kupungua huku kunaweza kuongeza gharama ya huduma ya deni la nje na kuchangia kwa shinikizo la mfumuko wa bei, hali inayoweza kuathiri uchumi, hasa kwa sekta zinazotegemea uagizaji.
3. Mzigo wa Huduma ya Deni
   • Kuongezeka kwa huduma ya deni la nje kama asilimia ya mauzo ya nje kutoka 7.8% mnamo Machi 2023 hadi 24.6% mnamo Juni 2024 kunaonyesha kwamba sehemu kubwa ya mapato ya mauzo ya nje inatumika kulipia deni. Hii inaweza kupunguza rasilimali zinazopatikana kwa mahitaji mengine muhimu ya kiuchumi, kama vile maendeleo ya miundombinu, huduma za kijamii, au uwekezaji katika sekta zinazozalisha.
4. Ugawaji wa Pato la Taifa Kulingana na Sekta
   • Takwimu kuhusu ugawaji wa Pato la Taifa kulingana na sekta inaonyesha muundo wa uchumi wa Tanzania, huku kilimo, viwanda, ujenzi, na madini vikichangia kwa kiasi kikubwa. Utendaji wa sekta hizi utakuwa muhimu katika kuamua uwezo wa nchi wa kupata mapato ya kutosha kusimamia deni na kuunga mkono ukuaji wa kiuchumi.
5. Changamoto za Maendeleo ya Kiuchumi
   • Mchanganyiko wa kuongezeka kwa deni, kupungua kwa sarafu, na ongezeko la majukumu ya huduma ya deni unaonyesha changamoto zinazowezekana katika maendeleo ya kiuchumi ya Tanzania. Ingawa kukopa kunaweza kusaidia kufadhili miradi muhimu na kuchochea ukuaji, pia kuna hatari ikiwa deni halitasimamiwa kwa busara. Ikiwa hatakuhusishwa na ukuaji thabiti wa kiuchumi, mambo haya yanaweza kusababisha kutokuwa na utulivu wa kiuchumi, kupungua kwa uwekezaji, na kupungua kwa maendeleo.

The government's financial operations during the quarter, emphasizing the revenue generation and the allocation of funds across various sectors.

1. Revenue Collection:
   • Total Revenue: TZS 7,273.6 billion.
   • Tax Revenue: TZS 6,334.4 billion, representing 87.1% of the total revenue.
   • Percentage of Target Achieved: 93.2% of the targeted revenue.
   • The strong performance was primarily due to income taxes and local government collections.
2. Government Expenditure:
   • Total Expenditure: TZS 8,912.3 billion.
   • Recurrent Expenditure: TZS 5,225.2 billion.
   • Development Expenditure: TZS 3,687.1 billion.
3. Fiscal Deficit:
   • The government faced a fiscal deficit, given that expenditures (TZS 8,912.3 billion) exceeded revenue collections (TZS 7,273.6 billion).
4. National Debt:
   • Total Debt Stock: USD 42,359.7 million.
   • External Debt: USD 30,201.7 million (71.3% of the total debt).
   • Domestic Debt: USD 12,158 million (28.7% of the total debt).

The fiscal operations insights into Tanzania's economic development during the quarter ending June 2024

The fiscal operations reveal that Tanzania is focused on economic development through substantial investments in infrastructure and public services. However, the fiscal deficit and high debt levels suggest the need for careful management to ensure long-term sustainability and avoid potential economic challenges.

1. Revenue Collection and Economic Activity

• Total Revenue (TZS 7,273.6 billion): The government was able to collect a substantial amount of revenue, indicating robust economic activity. High revenue collection, especially from taxes (TZS 6,334.4 billion), reflects strong economic performance, as businesses and individuals are generating income and profits, contributing to tax revenues.
• 93.2% of the Revenue Target Achieved: Although the government fell slightly short of its revenue target, achieving over 90% indicates effective tax collection mechanisms and a relatively healthy economy.

2. Expenditure and Economic Growth

• High Total Expenditure (TZS 8,912.3 billion): The government is spending significantly on both recurrent and development expenditures. This level of spending can stimulate economic growth, particularly through development projects, which contribute to infrastructure development, job creation, and long-term economic benefits.
• Development Expenditure (TZS 3,687.1 billion): A substantial portion of the budget is dedicated to development, which is crucial for fostering sustainable economic growth. This suggests that the government is investing in sectors that can boost productivity, such as infrastructure, education, and healthcare.

3. Fiscal Deficit and Economic Sustainability

• Fiscal Deficit: The fiscal deficit (expenditures exceeding revenues) could indicate that the government is either investing heavily in growth-driving projects or is facing challenges in balancing its budget. While moderate deficits can be sustainable if they are funding growth, persistent large deficits could lead to increased borrowing, which may pose risks to economic stability if not managed well.

4. National Debt and Future Economic Pressure

• Total Debt Stock (USD 42,359.7 million): Tanzania’s debt levels are high, with a significant portion (71.3%) being external debt. While borrowing can finance development, high debt levels might constrain future fiscal space and could lead to increased debt servicing costs. This could pressure the government to generate higher revenues in the future or cut back on expenditures, which could impact economic growth.

5. Economic Development Implications

• Investment in Development: The significant development expenditure indicates a focus on long-term economic growth, which could enhance productivity and improve living standards in Tanzania over time.
• Revenue Growth: The strong revenue collection, particularly from taxes, suggests a growing economy with increasing business activity and individual incomes, which are positive indicators of economic development.
• Debt Concerns: The high level of national debt, especially external debt, might be a concern for future economic stability. The government will need to ensure that the debt is used effectively for growth-enhancing projects and that debt levels remain sustainable.

The external sector showed signs of improvement, driven by increased exports and a reduction in the current account deficit, despite a slight increase in imports.

1. Current Account Deficit:
   • The current account deficit narrowed to USD 902.8 million in the quarter ending June 2024, down from USD 977.8 million in the same quarter in 2023. This improvement was largely due to strong export performance and favorable global commodity prices.
2. Exports:
   • Total exports of goods and services increased to USD 3,377.1 million in the quarter ending June 2024, up from USD 2,998.3 million in the corresponding quarter of 2023.
   • Traditional Exports: Increased to USD 115.5 million from USD 80.2 million.
   • Non-Traditional Exports: Reached USD 1,639.7 million, up from USD 1,554.8 million.
   • Gold Exports: Rose to USD 774.3 million from USD 759.1 million in the same period in 2023.
   • Key contributors to the export growth include tourism, gold, and tobacco.
3. Imports:
   • The total imports of goods and services saw a slight increase to USD 3,747.6 million in the quarter ending June 2024, compared to USD 3,754 million in the same period in 2023.
4. Foreign Exchange Reserves:
   • Tanzania's foreign exchange reserves remained robust at USD 5,345.5 million, covering 4.4 months of projected imports. This is in line with both national and East African Community (EAC) benchmarks.

The external sector performance with economic development

The external sector's performance reflects Tanzania's ongoing efforts toward economic development. The improvements in export performance, reduction in the current account deficit, and stable foreign reserves indicate a positive trajectory, contributing to overall economic growth, stability, and resilience against external shocks.

1. Export Growth:
   • The increase in total exports of goods and services, from USD 2,998.3 million to USD 3,377.1 million, indicates a strengthening of Tanzania's productive capacity and global competitiveness. The growth in traditional and non-traditional exports, particularly in gold, tourism, and agricultural products like tobacco, reflects diversification and resilience in the country's economy. This export performance is crucial for generating foreign exchange, supporting the Tanzanian shilling, and contributing to economic stability.
2. Reduction in Current Account Deficit:
   • The narrowing of the current account deficit from USD 977.8 million to USD 902.8 million is a positive sign. It suggests that Tanzania is improving its balance of payments position, likely due to increased export earnings and potentially more sustainable levels of import consumption. A lower deficit reduces reliance on external borrowing, enhancing the country’s financial stability and fostering a more favorable environment for investment.
3. Stable Foreign Exchange Reserves:
   • Tanzania's foreign exchange reserves, covering 4.4 months of imports, reflect a strong buffer against external shocks. This level of reserves provides confidence in Tanzania’s ability to meet its international obligations and protect the economy from volatile external conditions, such as fluctuating commodity prices or global financial instability. Stable reserves are also crucial for maintaining investor confidence and ensuring the smooth operation of trade.
4. Implications for Economic Growth:
   • The positive performance in the external sector is generally associated with stronger economic growth. Increased exports, especially in high-value sectors like gold and tourism, can lead to higher GDP growth. Moreover, the ability to manage the current account deficit and maintain stable foreign reserves suggests that the government’s economic policies are effectively supporting sustainable economic development.
5. Sectoral Development:
   • The growth in specific sectors like tourism, agriculture, and mining indicates progress in diversifying the economy, which is critical for reducing dependency on any single industry. This diversification helps mitigate risks and ensures more balanced and inclusive economic growth.

Latest Economic update from the Bank of Tanzania's Economic Development for the quarter ending June 2024

1. GDP Growth: Tanzania's GDP grew by an estimated 5.4% in the second quarter of 2024. Annual growth is also projected at 5.4%, driven by sectors such as agriculture, construction, mining, and financial intermediation.
2. Inflation: The headline inflation rate slowed to 3.1% in the quarter ending June 2024, down from 4.0% in the corresponding period of 2023. The stable inflation is attributed to effective fiscal and monetary policies and a sufficient domestic food supply. Inflation is expected to remain below 5%.
3. Monetary Policy: The Bank of Tanzania maintained a 7-day interbank rate within a (+/-) 200 basis point range of the 6% Central Bank Rate (CBR), averaging 7.49%. Money supply growth slowed to 10.3%, aligning with efforts to moderate liquidity and anchor inflation expectations at a medium-term target of 5%.
4. Private Sector Credit: Credit to the private sector grew by 17.2%, with significant contributions from the agricultural, manufacturing, and mining sectors. Personal loans also accounted for a substantial share of the growth.
5. Government Fiscal Operations: Revenue collection for the quarter ending March 2024 was TZS 7,273.6 billion, with tax revenue amounting to TZS 6,334.4 billion. Government expenditure was TZS 8,912.3 billion, with recurrent activities and development projects accounting for TZS 5,225.2 billion and TZS 3,687.1 billion, respectively.
6. External Sector: The current account deficit narrowed to USD 902.8 million, attributed to strong export performance and favorable global commodity prices. Exports of goods and services increased to USD 3,377.1 million, with tourism, gold, and tobacco being key contributors. Foreign exchange reserves remained robust at USD 5,345.5 million, covering 4.4 months of projected imports.
7. National Debt: The total national debt was USD 42,359.7 million at the end of June 2024, with 71.3% being external debt.

The key aspects of Tanzania's economic development, indicating steady progress and stability in various sectors

Tanzania is on a path of steady economic growth, with strategic investments in key sectors, effective monetary and fiscal management, and a focus on maintaining stability. These elements are fundamental for achieving long-term economic development and improving the overall standard of living for its population.

1. Steady GDP Growth:

• GDP Growth: The projected GDP growth of 5.4% reflects consistent economic expansion. Sectors such as agriculture, construction, and mining, which are crucial for Tanzania’s development, are driving this growth. This suggests that the country is continuing to invest in infrastructure and natural resources, contributing to overall economic development.

2. Low and Stable Inflation:

• Inflation: The inflation rate of 3.1% is well within the government's target, demonstrating effective management of monetary policy. Low inflation helps maintain purchasing power and encourages investment, which is essential for sustainable economic growth.

3. Support for Private Sector Growth:

• Private Sector Credit Growth: The 17.2% growth in credit to the private sector, particularly in agriculture, manufacturing, and mining, indicates that these sectors are receiving the necessary financial support to expand. This is crucial for job creation, income generation, and industrialization, which are key pillars of economic development.

4. Government Fiscal Discipline:

• Fiscal Operations: The government's focus on collecting substantial revenue and managing expenditure effectively reflects a commitment to fiscal discipline. The balance between recurrent and development expenditures indicates a focus on both maintaining government operations and investing in long-term projects that will drive future growth.

5. Robust External Sector:

• Current Account Deficit and Exports: The narrowing of the current account deficit, driven by strong exports in tourism, gold, and tobacco, indicates a healthy external sector. This not only brings in foreign exchange but also strengthens Tanzania’s position in the global market, which is essential for economic resilience and development.
• Foreign Exchange Reserves: Maintaining robust foreign exchange reserves is crucial for stabilizing the economy against external shocks, which supports long-term economic development.

6. National Debt Management:

• National Debt: While the national debt is significant, the fact that a large portion is external suggests ongoing international investment and borrowing to support development projects. Proper management of this debt is critical for sustaining economic development without leading to fiscal stress.

Overall Implications for Economic Development

• Diversification and Industrialization: The emphasis on sectors like agriculture, manufacturing, and mining indicates efforts toward diversifying the economy and moving away from over-reliance on a few commodities. This diversification is crucial for long-term economic stability and growth.
• Investment in Infrastructure: The growth in construction reflects ongoing investment in infrastructure, which is vital for supporting other sectors of the economy, such as trade and industry.
• Social and Economic Stability: Low inflation and stable fiscal policies contribute to a predictable economic environment, which is attractive to both domestic and foreign investors. This stability is essential for sustained economic development.

The 2023/24 financial report of the Bank of Tanzania

1. Monetary Policy and Inflation:
   • The Bank maintained a 7-day interbank rate within a (+/-) 200 basis point range of the 6% Central Bank Rate (CBR), with an average rate of 7.49%.
   • Money supply growth slowed to 10.3%, which reflects the Bank's efforts to moderate liquidity and maintain inflation expectations at its medium-term target of 5%.
   • Inflation decreased to 3.1% in the quarter ending June 2024, from 4.0% in the corresponding period in 2023, driven by effective fiscal and monetary policies as well as sufficient domestic food supply.
2. Private Sector Credit Growth:
   • Private sector credit grew at 17.2%, driven primarily by the agricultural, manufacturing, and mining sectors, with personal loans accounting for the largest share.
3. Government Revenue and Expenditure:
   • Revenue collection for the quarter ending March 2024 amounted to TZS 7,273.6 billion, with TZS 6,334.4 billion derived from tax revenue, which was 93.2% of the target.
   • Government expenditure totaled TZS 8,912.3 billion, with recurrent activities and development projects accounting for TZS 5,225.2 billion and TZS 3,687.1 billion, respectively.
4. National Debt:
   • The national debt stock was USD 42,359.7 million by the end of June 2024, with 71.3% of this being external debt and 28.7% public domestic debt.
5. External Sector Performance:
   • The current account deficit narrowed to USD 902.8 million from USD 977.8 million in the same quarter in 2023, supported by strong export performance and favorable global commodity prices.
   • Exports of goods and services increased to USD 3,377.1 million, with tourism, gold, and tobacco being key contributors.

Tanzania's economic landscape during the 2023/24 period

Tanzania is on a path of steady economic development, with a focus on maintaining monetary stability, supporting private sector growth, and effectively managing government finances. The improvements in the external sector and inflation control further indicate that the country is managing its economic challenges well, positioning itself for sustained growth in the future. However, careful management of external debt and continued investment in key sectors will be essential to ensure long-term economic prosperity.

1. Monetary Stability and Inflation Control:

• Inflation Control: The Bank of Tanzania has successfully kept inflation at a low level, decreasing it to 3.1% from 4.0% in the previous year. This indicates effective monetary policy management, which is crucial for economic stability and growth.
• Monetary Policy: The maintenance of the 7-day interbank rate within a set range and controlled money supply growth (10.3%) shows the Central Bank's focus on stabilizing the economy and managing liquidity, which supports long-term economic development.

2. Private Sector Growth:

• Credit Growth: The significant growth in private sector credit (17.2%), particularly in key sectors like agriculture, manufacturing, and mining, points to a robust expansion in economic activities. The emphasis on these sectors is essential for economic diversification and sustainability.
• Sectoral Investment: The focus on personal loans and investments in critical sectors suggests a growing confidence in the economy, with increased access to credit likely stimulating further economic development and job creation.

3. Government Revenue and Expenditure:

• Revenue Performance: The government's strong revenue collection performance, achieving 93.2% of its target, indicates effective tax administration and fiscal discipline. This is vital for funding public services and infrastructure, which are key drivers of economic growth.
• Balanced Expenditure: The balanced allocation of expenditure between recurrent activities and development projects suggests a strategic approach to fostering both immediate and long-term economic growth. The emphasis on development projects, in particular, is crucial for improving infrastructure and enhancing the country's productive capacity.

4. National Debt Management:

• Debt Sustainability: The national debt, which stood at USD 42.4 billion, with a significant portion being external debt (71.3%), reflects the country's reliance on external financing. While this can support development projects, it also underscores the importance of sustainable debt management to avoid long-term economic vulnerabilities.

5. External Sector Performance:

• Export Growth: The increase in exports, particularly in tourism, gold, and tobacco, suggests a strengthening external sector. This is positive for economic development, as it brings in foreign exchange and supports the balance of payments.
• Current Account Deficit: The narrowing of the current account deficit indicates improved trade performance, which is crucial for external stability and economic resilience.

The depreciation of the Tanzania shilling, marked by a 1.0% monthly decline and a 12.5% annual drop, reflects broader economic challenges. Addressing these challenges will require a combination of monetary policy adjustments, fiscal measures, and strategies to enhance economic stability and investor confidence.

Overview of Depreciation:

The Tanzania shilling has experienced notable depreciation recently:

1. Monthly Depreciation:
   • June 2024 Exchange Rate: TZS 2,626.07 per USD
   • Previous Month (May 2024) Exchange Rate: TZS 2,599.05 per USD
   • Monthly Change: TZS 27.02 (Depreciation of approximately 1.0%)
2. Annual Depreciation:
   • June 2024 Annual Depreciation: 12.5% compared to the same month in the previous year

Detailed Breakdown:

1. Monthly Depreciation:

• Calculation: The shilling depreciated by TZS 27.02 per USD from May to June 2024.
• Percentage Change: Percentage Change=(New Rate−Old Rate/Old Rate)×100
• Percentage Change=(2,626.07−2,599.05/2,599.05)×100≈1.0%

Implications: A 1.0% depreciation in one month suggests a relatively moderate decline, but it highlights a trend of weakening in the currency, possibly driven by economic factors like trade imbalances or inflation.

2. Annual Depreciation:

• Calculation: A 12.5% depreciation over the year represents a significant weakening.
• Implications: This substantial annual depreciation can lead to higher import costs, increased inflation, and potentially reduced purchasing power for Tanzania consumers. It reflects underlying issues such as trade deficits, inflationary pressures, or capital outflows.

Factors Contributing to Depreciation:

1. Trade Imbalances:
   • Trade Deficits: Persistent trade deficits can put downward pressure on the currency as the demand for foreign currencies to pay for imports exceeds the supply from exports.
2. Inflationary Pressures:
   • Domestic Inflation: Higher inflation rates relative to trading partners can erode the currency's value as purchasing power decreases.
3. Capital Flight:
   • Outflows: Significant capital outflows or reduced foreign investment can contribute to a weaker currency by increasing demand for foreign currencies.
4. Economic Uncertainties:
   • Market Sentiment: Economic uncertainties, including political instability or changes in economic policy, can affect investor confidence and lead to currency depreciation.

Economic Implications:

1. Impact on Imports and Inflation:
   • Higher Costs: A weaker shilling increases the cost of importing goods and services, contributing to inflationary pressures. This can affect the cost of living and business operations.
2. Effect on Investment:
   • Investment Climate: Currency depreciation can affect the investment climate, potentially deterring foreign investors due to increased risk or lower returns in local currency terms.
3. Policy Responses:
   • Monetary and Fiscal Measures: The central bank might need to adjust monetary policy, such as raising interest rates or implementing measures to stabilize the currency. Fiscal policy adjustments could also be necessary to address the underlying economic issues contributing to the depreciation.