External Debt

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

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

Domestic Debt

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

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

Total Debts

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

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

Key Observations

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

Tanzania's debts over the specified periods

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

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

Impact on the Economy and the Average Citizen:

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

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

Economic Implications and Analysis

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

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

Interbank Cash Market (IBCM)

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

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

Interbank Foreign Exchange Market (IFEM)

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

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

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

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

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

Interbank Cash Market (IBCM)

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

Interbank Foreign Exchange Market (IFEM)

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

Overall Economic Implications

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

Boosting Exports, Tourism, and Foreign Investment Amidst Growing Imports

The external sector performance in Tanzania reflects the country's interactions with the global economy through trade, foreign direct investments, and other international economic activities. Here are the key details based on the document:

Trade Performance

• Exports and Imports:
  • Total Exports: The value of exports of goods and services in May 2024 was USD 11,020.2 million, an increase from USD 10,419.8 million in May 2023. This growth is driven by higher receipts from tourism and non-traditional exports.
  • Total Imports: The value of imports of goods and services in May 2024 stood at USD 14,152.7 million, slightly up from USD 13,849.5 million in May 2023. The increase is largely attributed to higher imports of intermediate and consumer goods.

Balance of Payments

• Current Account Deficit: The current account deficit widened to USD 3,132.5 million in May 2024 from USD 2,963.7 million in May 2023. The widening deficit is primarily due to a higher increase in imports relative to exports.
  • Exports of Goods: USD 6,742.8 million in May 2024, compared to USD 6,205.1 million in May 2023.
  • Imports of Goods: USD 10,215.8 million in May 2024, compared to USD 9,771.2 million in May 2023.

Tourism Receipts

• Tourism: Receipts from tourism, a major foreign exchange earner, increased to USD 3,051.5 million in May 2024 from USD 2,853.4 million in May 2023. This growth is attributed to an increase in the number of tourist arrivals and higher average spending per tourist.

Foreign Exchange Reserves

• Foreign Reserves: The Bank of Tanzania maintained foreign exchange reserves equivalent to about 4.5 months of import cover, which is above the country's benchmark of 4 months. This level of reserves is crucial for ensuring stability in the exchange rate and for covering import needs.

Exchange Rate

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

Foreign Direct Investment (FDI)

• FDI Inflows: The country continued to attract foreign direct investments, particularly in mining, manufacturing, and tourism sectors, contributing positively to the external sector performance and economic growth.

Hence, The external sector performance highlights Tanzania's active engagement in international trade, with notable increases in both exports and imports. The growth in tourism receipts and foreign direct investments indicates a positive outlook for the country’s foreign exchange earnings. The current account deficit, while widening, is managed with adequate foreign exchange reserves. The depreciation of the shilling, however, poses challenges but is mitigated by the reserves maintained by the Bank of Tanzania.

The external sector performance reflects a dynamic and growing Tanzania economy

The external sector performance reflects a dynamic and growing Tanzania economy with increasing engagement in global trade. The positive trends in exports and tourism, coupled with sustained FDI inflows, demonstrate robust economic activity and growth potential. However, the widening current account deficit and shilling depreciation highlight the need for balanced policies to support export growth, manage import levels, and maintain currency stability.

1. Growth in Exports and Imports

• Exports Increase: The growth in total exports to USD 11,020.2 million in May 2024 from USD 10,419.8 million in May 2023 indicates a positive trend in the country's export capacity. This growth, driven by tourism and non-traditional exports, reflects Tanzania's ability to diversify its export base and enhance its foreign exchange earnings.
• Imports Increase: The rise in imports to USD 14,152.7 million from USD 13,849.5 million indicates robust domestic demand, likely fueled by economic activities and development projects requiring intermediate and consumer goods. While this contributes to a trade deficit, it also suggests an expanding economy that is investing in growth.

2. Current Account Deficit

• Widening Deficit: The increase in the current account deficit to USD 3,132.5 million from USD 2,963.7 million suggests that the country is importing more than it exports. While this can be a sign of robust domestic consumption and investment, it also highlights the need to further enhance export performance and reduce dependency on imports.

3. Tourism Sector Performance

• Tourism Receipts: The significant increase in tourism receipts to USD 3,051.5 million indicates a thriving tourism sector. This growth supports economic development by generating foreign exchange, creating jobs, and stimulating related industries such as hospitality, transportation, and retail.

4. Foreign Exchange Reserves

• Adequate Reserves: Maintaining foreign exchange reserves equivalent to 4.5 months of import cover shows prudent fiscal management. These reserves provide a buffer against external shocks, support the stability of the Tanzania shilling, and ensure the country can meet its international obligations.

5. Exchange Rate Dynamics

• Shilling Depreciation: The 11.6 percent depreciation of the Tanzania shilling against the US dollar indicates some pressure on the currency, possibly from higher import demand or external economic factors. While depreciation can make exports more competitive, it also makes imports more expensive, affecting inflation and purchasing power.

6. Foreign Direct Investment (FDI)

• FDI Inflows: Continued attraction of FDI, particularly in key sectors like mining, manufacturing, and tourism, highlights investor confidence in Tanzania's economic prospects. FDI brings in capital, technology, and expertise, contributing to economic growth and development.

Hence, Tanzania is on a positive development trajectory, leveraging its export and tourism sectors while managing external economic challenges through prudent fiscal and monetary policies. Continued focus on enhancing export capacity, attracting FDI, and maintaining adequate foreign exchange reserves will be crucial for sustaining this growth and ensuring long-term economic stability.

Government Budgetary Operations and Fiscal Management

Tanzania is focusing on improving revenue collection efficiency, managing expenditures prudently, and prioritizing development projects to foster sustainable economic growth. The budgetary operations reflect a commitment to fiscal stability and economic development.

Revenue Collection:

• Domestic Revenue: In April 2024, Tanzania's domestic revenue, which includes central and local government collections, was TZS 2,119 billion. This was 94.1 percent of the target for the month, demonstrating strong performance in revenue collection.
• Central Government Revenue: TZS 2,036.1 billion, with TZS 1,821.6 billion from tax revenue and TZS 214.6 billion from non-tax revenue.

Tax Categories Performance:

• Taxes on Imports: TZS 592.9 billion in 2024, compared to TZS 416.5 billion in 2023.
• Income Tax: TZS 384.5 billion in 2024, compared to TZS 258.4 billion in 2023.
• Taxes on Local Goods and Services: TZS 732.1 billion in 2024, compared to TZS 467.1 billion in 2023.
• Other Taxes: TZS 411.9 billion in 2024, compared to TZS 126.9 billion in 2023.
• Non-Tax Revenue: TZS 214.6 billion in 2024, compared to TZS 116.5 billion in 2023.

Government Expenditure:

• Total Expenditure: In April 2024, government expenditure amounted to TZS 2,480.4 billion, allocated as follows:
  • Recurrent Expenditure: TZS 1,882.8 billion, including wages and salaries, interest costs, and other recurrent expenditures.
  • Development Expenditure: TZS 597.5 billion, directed towards development projects.

Breakdown of Central Government Expenditure:

• Wages and Salaries: TZS 752.3 billion in 2024 estimates, compared to TZS 575.0 billion in 2023 actuals.
• Interest Costs: TZS 317.1 billion in 2024 estimates, compared to TZS 258.4 billion in 2023 actuals.
• Other Recurrent Expenditure: TZS 573.2 billion in 2024 estimates, compared to TZS 467.1 billion in 2023 actuals.
• Development Expenditure: TZS 597.5 billion in 2024, compared to TZS 126.9 billion in 2023 actuals.

Fiscal Management:

• 2024/25 National Budget Proposal: The budget estimate is TZS 49.35 trillion, an 11.2 percent increase from the previous year.
  • Revenue Estimates: Domestic revenue is projected to be 70.1 percent of the budget, focusing on improving compliance and leveraging ICT for efficiency.
  • Expenditure Allocation: Development expenditure is expected to account for 30 percent of the budget, prioritizing flagship projects outlined in the Five-Year Development Plan III.

Summary of Budget Frame for 2023/24 and 2024/25:

• Total Resources:
  • 2023/24: TZS 43,510,082 million
  • 2024/25: TZS 49,345,688 million
• Domestic Revenue:
  • 2023/24: TZS 30,503,207 million
  • 2024/25: TZS 34,610,646 million
• Grants:
  • 2023/24: TZS 5,466,215 million
  • 2024/25: TZS 5,130,613 million
• Loans:
  • 2023/24: TZS 7,540,841 million
  • 2024/25: TZS 9,604,428 million
• Total Expenditure:
  • 2023/24: TZS 43,510,082 million
  • 2024/25: TZS 49,345,688 million
• Recurrent Expenditure:
  • 2023/24: TZS 30,178,271 million
  • 2024/25: TZS 34,590,391 million
  • Debt Service:
    • 2023/24: TZS 10,469,759 million
    • 2024/25: TZS 13,121,466 million
  • Wages and Salaries:
    • 2023/24: TZS 10,882,126 million
    • 2024/25: TZS 11,767,987 million
• Development Expenditure:
  • 2023/24: TZS 13,331,811 million
  • 2024/25: TZS 14,755,296 million

Key Fiscal Assumptions:

• Real GDP Growth: Projected at 5.4 percent in 2024.
• Inflation: Targeted within a range of 3 to 5 percent.
• Revenue to GDP: Domestic revenue at 15.8 percent and tax revenue at 12.9 percent of GDP.
• Budget Deficit: Maintained at 3 percent of GDP.
• Foreign Exchange Reserves: Maintaining reserves to cover 4 months of imports.

Tanzania's Interest Rates

Lower Borrowing Costs and Higher Savings Returns Amidst Narrowing Spreads

The trends in Tanzania's banking sector, showing a more favourable environment for both borrowers and savers. The reduction in loan interest rates can drive economic activity, while the higher deposit rates can increase the savings rate, contributing to overall economic stability and growth.

Interest Rates on Loans:

• Overall Lending Rate: Decreased to an average of 15.23 percent in May 2024 from 15.42 percent in April 2024.
• Negotiated Lending Rate: Dropped to an average of 12.68 percent in May 2024 from 13.95 percent in the previous month. This rate reflects the interest charged on loans negotiated between banks and their customers, often for large or corporate clients.

Interest Rates on Deposits:

• Overall Deposit Rate: Increased to an average of 8.05 percent in May 2024 from 7.44 percent in April 2024. This rate indicates the return that savers earn on their deposits.

Interest Spread:

• One-Year Lending vs. Deposit Rates: The interest spread, which is the difference between the average lending rate and the deposit rate for one-year terms, narrowed to 6.83 percentage points in May 2024 from 7.72 percentage points in April 2024. This narrowing spread suggests that the cost of borrowing is becoming more favorable, and the returns on savings are improving.

Implications

• Easing Borrowing Costs: The decrease in lending rates indicates that borrowing has become more affordable for businesses and individuals, which can stimulate economic activity by encouraging investment and consumption.
• Increased Savings Returns: The increase in deposit rates offers better returns to savers, which can incentivize savings and enhance the capital available for lending.
• Narrowing Spread: A narrowing interest spread typically signals a competitive banking environment where the cost of borrowing is reduced, and savings are adequately rewarded. This balance supports financial stability and economic growth by facilitating access to credit while encouraging savings.

Summary Table:

The Insurance Sector in Tanzania

Performance Overview:

• Net Worth: The insurance sector's total net worth increased from TZS 690.5 billion in 2022 to TZS 742.2 billion in 2023, showing a growth of 7.5%.
• Investments: Total investments in the insurance sector rose by 12.7%, from TZS 1,169.7 billion to TZS 1,318.5 billion. This growth indicates stronger financial positions as assets outgrew liabilities.
• Gross Premiums Written: The total gross premiums written, combining general and life insurance, increased by 8.9% to TZS 1,238.5 billion. Specifically, premiums for general insurance increased by 8.8% to TZS 974.0 billion, and for life insurance, they grew by 9.2% to TZS 264.5 billion​​.

Market Dynamics:

• Digital Platforms and Bancassurance: The growth in the insurance sector was significantly driven by the use of digital insurance platforms and bancassurance. These innovations introduced new products, business channels, and expanded outreach, especially to rural areas. Consequently, motor insurance premiums rose from TZS 287.2 million to TZS 339.8 million, increasing its market share from 32.1% to 34.9%​​.

Financial Soundness Indicators:

• Retention Ratio: The retention ratio for general insurance increased to 53.3% from 49.4% in 2022, while life insurance retained 83.3%, down slightly from 85.7% in 2022. These ratios are within the regulatory thresholds, indicating balanced risk exposure and market stability.
• Liquidity Ratio: In 2023, the liquidity ratio for general insurers improved to 140.4% from 106.8% in 2022. For life insurers, it improved to 90.0% from 79.9% in the previous year​​.

Regulatory Developments:

• Guidelines Issued: The Tanzania Insurance Regulatory Authority (TIRA) introduced several guidelines in 2023 to enhance industry practices and consumer protection. These included guidelines on retention and reinsurance management, accreditation of automobile repairers, and medical insurance and health service provider registration​.

Growth and Resilience:

• The insurance subsector demonstrated robust growth and resilience. Total assets increased by 12.1% to TZS 1,870.8 billion by the end of 2023, while total liabilities rose by 10.2% to TZS 1,128.7 billion, indicating an increase in financial obligations due to higher policy payouts​​.

Insights on Tanzania's Economic Development from the Insurance Sector

The performance and trends in Tanzania's insurance sector provide several important insights into the broader economic development of the country:

1. Growth and Financial Stability

• Increased Net Worth and Investments: The insurance sector's net worth and total investments grew significantly, indicating a strengthening financial position. This growth reflects an increase in economic activities and confidence in the financial system.
  • Net Worth Growth: From TZS 690.5 billion in 2022 to TZS 742.2 billion in 2023 (7.5% growth).
  • Investment Growth: From TZS 1,169.7 billion to TZS 1,318.5 billion (12.7% growth).

2. Expanding Market and Accessibility

• Rising Gross Premiums: The increase in gross premiums written signifies a growing market for insurance products, driven by higher economic activity and improved public awareness.
  • Total Gross Premiums: Increased by 8.9% to TZS 1,238.5 billion.
  • General Insurance Premiums: Grew by 8.8% to TZS 974.0 billion.
  • Life Insurance Premiums: Grew by 9.2% to TZS 264.5 billion.
• Digital Platforms and Bancassurance: The adoption of digital platforms and bancassurance expanded insurance outreach, particularly in rural areas, enhancing financial inclusion and accessibility to insurance services.
• Motor Insurance Premiums: Increased from TZS 287.2 million to TZS 339.8 million, boosting its market share from 32.1% to 34.9%.

3. Financial Soundness and Risk Management

• Improved Retention and Liquidity Ratios: Better retention and liquidity ratios for insurers indicate prudent risk management and financial health.
  • General Insurance Retention Ratio: Improved to 53.3% from 49.4%.
  • Life Insurance Retention Ratio: Maintained at 83.3%, slightly down from 85.7%.
  • General Insurance Liquidity Ratio: Improved to 140.4% from 106.8%.
  • Life Insurance Liquidity Ratio: Improved to 90.0% from 79.9%.

4. Regulatory Enhancements

• New Guidelines: The Tanzania Insurance Regulatory Authority (TIRA) introduced guidelines to improve industry practices and consumer protection, fostering a stable and transparent insurance market.
  • Guidelines on retention and reinsurance management, accreditation of automobile repairers, and registration of medical insurance and health service providers were introduced.

5. Economic Resilience

• Growth in Assets and Liabilities: The increase in total assets and liabilities of the insurance sector reflects economic resilience and the capacity to handle higher policy payouts.
  • Total Assets: Increased by 12.1% to TZS 1,870.8 billion.
  • Total Liabilities: Rose by 10.2% to TZS 1,128.7 billion.

Implications for Economic Development

• Financial Inclusion: The expansion of digital insurance platforms and bancassurance has increased accessibility to insurance products, particularly in rural areas, contributing to financial inclusion.
• Economic Confidence: The growth in the insurance sector suggests rising economic confidence among businesses and individuals, which is crucial for sustained economic growth.
• Risk Mitigation: A robust insurance sector supports economic development by providing risk mitigation mechanisms for businesses and individuals, encouraging investment and economic activities.
• Regulatory Strength: The proactive regulatory environment ensures the stability and integrity of the insurance sector, fostering a secure financial ecosystem.

The growth and development of Tanzania's insurance sector indicate positive economic development, characterized by increased financial stability, expanding market accessibility, improved risk management, and a supportive regulatory framework.

The capital market in Tanzania.

1. Total Investment:
   • Increased by 9.3% to TZS 37,410.1 billion by the end of 2023, from TZS 33,998.4 billion in the previous year.
2. Trading Activities:
   • Equity and bond market trading activities rose by 31.4%, reaching TZS 4,154.6 billion by the end of 2023.
3. Collective Investment Schemes:
   • Net Asset Value (NAV) increased by 50.2%, reaching TZS 1,841.7 billion from TZS 1,226.3 billion in the previous year.
4. Equity Market:
   • Total equity turnover at the Dar es Salaam Stock Exchange (DSE) increased by 68.5% to TZS 255.2 billion from TZS 133.7 billion the previous year.
   • Growth driven by significant transactions, including the acquisition of 68.3% of shareholding in Tanga Cement Plc by Scancem International.
5. Market Capitalisation:
   • The equity market's depth, as measured by the ratio of total market capitalization to GDP, decreased to 9.8% from 11.9% in the preceding year.
6. Foreign Participation:
   • Foreign investor participation was significant, with local investors accounting for 42.7% on the buy side and 30.8% on the sell side.
7. Primary Market:
   • Government securities depicted discounted prices, increasing yields for investors.
   • Bond auctions were on average undersubscribed by 9.0% in 2023 compared to an oversubscription of 27.0% in the previous year.
   • Weighted average yield to maturity increased across all maturities.

The growth and resilience of the capital market are critical for Tanzania's economic development. Increased investment and trading activities indicate a robust financial environment conducive to economic growth. The significant rise in equity turnover and NAV of investment schemes highlights growing investor confidence and a conducive regulatory environment. The substantial foreign investor participation reflects Tanzania's improving attractiveness as an investment destination, which can further stimulate economic activities and development.

Insights on Tanzania's Economic Development from the Capital Market

The performance and trends in Tanzania's capital market provide valuable insights into the broader economic development of the country:

1. Investment Growth

• Total Investment Increase: The capital market saw a significant increase in total investment by 9.3% to TZS 37,410.1 billion by the end of 2023, compared to TZS 33,998.4 billion in the previous year. This growth indicates a strong flow of capital into the market, which is essential for funding economic activities and projects.

2. Increased Trading Activities

• Rising Trading Volumes: The increase in trading activities by 31.4% to TZS 4,154.6 billion signifies a more active and liquid market. Higher trading volumes reflect investor confidence and provide businesses with better access to capital for expansion and development.

3. Collective Investment Schemes

• NAV Growth: The substantial growth in the Net Asset Value (NAV) of collective investment schemes by 50.2%, reaching TZS 1,841.7 billion, highlights an increasing interest in diversified investment options. This growth supports financial stability and offers more opportunities for investors.

4. Equity Market Performance

• Equity Turnover Increase: The equity market experienced a significant rise in total turnover by 68.5% to TZS 255.2 billion, driven by notable transactions like the acquisition of a major shareholding in Tanga Cement Plc. This increase demonstrates a robust market for equities, providing companies with capital for growth and development.

5. Market Capitalisation

• Depth of Equity Market: Although the ratio of total market capitalization to GDP decreased to 9.8% from 11.9%, the substantial equity turnover and active trading suggest a growing market depth and the potential for future growth.

6. Foreign Investor Participation

• Significant Foreign Involvement: The high level of foreign investor participation indicates that Tanzania is an attractive destination for international investors. This inflow of foreign capital can drive economic growth, create jobs, and stimulate various sectors of the economy.

7. Primary Market Activity

• Government Securities: The increase in yields for government securities and the average undersubscription of bond auctions by 9.0% suggest a cautious yet active investment environment. Higher yields can attract more investment in government projects, contributing to economic development.

Implications for Economic Development

• Capital Availability: The increased investment and trading activities in the capital market ensure that businesses have access to the necessary capital for growth and expansion, which is vital for economic development.
• Financial Inclusion and Investor Confidence: The growth in collective investment schemes and substantial foreign investor participation reflect increasing financial inclusion and confidence in the market. This confidence is crucial for sustained economic growth and stability.
• Economic Resilience: The resilience of the capital market amidst global financial challenges highlights the robustness of Tanzania's financial system. A strong capital market can buffer the economy against external shocks and support long-term development.
• Infrastructure and Development Projects: The active primary market for government securities suggests that the government can secure funding for infrastructure and development projects, which are essential for economic progress.

Steady Economic Growth and Financial Stability in Tanzania

Macroeconomic Environment

1. Global Context:
   • The global economy showed resilience in 2023 despite high interest rates, sluggish trade, and geopolitical conflicts.
   • Global inflation decreased to 5.9% in 2023 from 9.2% in 2022, with a projection to further decelerate to 4.8% in 2024.
   • The global economic growth slowed to 3.1% in 2023 from 3.5% in the previous year due to supply-chain disruptions, geopolitical uncertainty, prolonged war in Ukraine, climate-related disasters, and tight monetary policies.
   • The IMF revised its global economic growth projection for 2024 to 3.1%, supported by the strengthening of the US, Emerging Markets, Developing Economies, and fiscal support in China​​.

Household Debts

1. Financial Condition:
   • Household disposable income increased, attributed to higher salaries for government employees and new employment opportunities.
   • Household debt-to-income ratio rose slightly to 52.8% in 2023 from 51.0% in 2022, due to increased salary income and debt repayments​​.
   • Household borrowing and repayment improved, with an increase in disbursed and outstanding personal loans. This trend is due to a higher appetite for bank lending to households and improved borrowers' ability to repay debts​​.

Banking Sector

1. Banking Sub-Sector:
   • The banking sub-sector-maintained robustness and stability with sufficient capital, liquidity, and minimized credit risk.
   • Total assets increased by 17.4% to TZS 54,263.0 billion in 2023, mainly driven by increased deposits.
   • The top six banks, considered systemically important, accounted for more than 65.2% of total deposits, necessitating close monitoring for systemic risks​.
   • Total funding improved by 17.5% to TZS 49,130.6 billion in 2023, with the ratio of core deposits to total funding increasing to 60.0%​​.
   • Loans, advances, and overdrafts dominated banking sector assets, accounting for 57.2% of the total assets​.

Non-Bank Sector Risk

1. Non-Bank Sector:
   • This sector includes insurance, social security, and open-ended collective investment schemes.
   • Total financial system assets grew to TZS 75,288,430.0 million in 2023, with banks accounting for 72.1% of GDP and 31.9% of total financial system assets​.

Tanzania is on a path of steady economic development, characterized by increasing financial stability, improving household welfare, and a supportive environment for business growth.

Macroeconomic Stability

• Resilience in the Global Context: Tanzania's economy is part of a global economy that has shown resilience despite significant challenges such as high interest rates, geopolitical conflicts, and climate-related disasters.
• Inflation Control: The global trend of decreasing inflation suggests potential positive spillover effects for Tanzania, contributing to economic stability.

Household Financial Health

• Increasing Disposable Income: The rise in household disposable income, driven by higher salaries for government employees and new employment opportunities, indicates improved economic welfare.
• Manageable Household Debt: Despite an increase in the household debt-to-income ratio to 52.8%, the rise in income and better debt repayment capacity reflect a healthy and sustainable growth in household borrowing.

Corporate Sector Strength

• Rebound in Business Activities: Improvement in non-financial corporate financing suggests a recovery in business activities, which is crucial for economic growth and job creation.

Robust Banking Sector

• Growth in Assets and Deposits: The significant increase in banking sector assets and deposits points to a strong and growing financial sector.
• Systemic Importance of Major Banks: The dominance of the top six banks highlights the need for vigilant regulatory oversight to mitigate systemic risks, ensuring financial stability.
• Loan Growth: The banking sector's focus on loans, advances, and overdrafts suggests a supportive environment for business and personal finance, facilitating economic activities.

Non-Bank Financial Sector

• Expansion of Financial Assets: The growth in total financial system assets, including the non-bank sector, indicates a broadening of the financial system and diversification of financial services available to businesses and individuals.

Implications for Tanzania's Economic Development

• Economic Growth: The positive trends in household income, corporate financing, and banking sector stability are likely to support sustained economic growth.
• Financial Inclusion: The improvement in household borrowing and repayment capacity suggests enhanced financial inclusion, which is critical for broad-based economic development.
• Investment Opportunities: The expanding financial assets and stable economic environment may attract both domestic and foreign investments, further boosting economic development.
• Policy and Regulatory Focus: Ensuring vigilant oversight of the financial sector, particularly the systemically important banks, will be essential in maintaining financial stability and supporting economic growth.

VEHICLE PARKING SIGNIFICANTLY IMPACT THE ECONOMIC DEVELOPMENT OF DAR ES SALAAM

Introduction
The city of Dar es Salaam is one of the fastest-growing cities in Africa. This growth is accompanied by an increase in the population and the use of vehicles. Parking challenges have become an important part of discussions about economic development and urban well-being. This study examine the impact of vehicle parking on the economic development of Dar es Salaam, considering the population expected to reach 8 million.

Global Context

• Urban Growth and Vehicles: According to United Nations reports, 55% of the world's population lives in urban areas, and this number is expected to increase to 68% by 2050. Urban growth comes with an increase in vehicle usage, with over 1.4 billion vehicles worldwide by 2023.
• Parking Challenges: Large cities like New York, Tokyo, and London have invested in parking infrastructure and traffic control policies to reduce congestion and improve economic development. The cost of constructing parking facilities can reach up to $1.5 billion per project in major cities.

African Context

• Urban Growth: Africa is experiencing rapid urban growth, with 40% of its residents living in urban areas, expected to rise to 60% by 2050. This implies an increase in vehicles and challenges in parking infrastructure.
• Parking Challenges: Cities like Lagos, Nairobi, and Johannesburg have long faced parking challenges. For instance, Lagos estimates losing over $1 billion annually due to traffic congestion.

East African Context

• Urban Growth: East Africa is witnessing rapid urban growth, with Nairobi growing at a rate of 4% annually. This leads to an increase in vehicles and parking infrastructure challenges.
• Parking Projects: Cities like Nairobi and Kampala have begun investing in parking infrastructure and road improvements to reduce congestion. A four-story parking project in Nairobi is estimated to cost over $20 million.

Tanzania and Dar es Salaam Context

• Growth of Dar es Salaam: According to the 2022 census, Dar es Salaam has a population of 5.38 million, expected to reach 8 million by 2030.
• Number of Vehicles: Tanzania had over 1.5 million vehicles by 2023, with a large percentage located in Dar es Salaam.
• Parking Challenges: Major challenges include traffic congestion, lack of parking spaces, and an increase in road accidents. For example, traffic congestion is estimated to cost the city's economy over $200 million annually.

Development Opportunities

• Infrastructure Innovation: Investing in modern parking infrastructure such as multi-story parking, public parking, and digital parking management technologies can improve efficiency.
• Digital Technologies: Utilizing technology such as digital payment systems, parking space tracking through mobile apps, and electronic parking systems can reduce congestion and increase local government revenue.
• Traffic Management Policies: Implementing robust traffic and parking management policies such as paid parking and designated public parking areas.

This study demonstrate how vehicle parking significantly impact the economic development of Dar es Salaam. Considering the existing challenges and opportunities, the government and private sector can collaborate to develop better parking infrastructure, reduce traffic congestion, and strengthen the city's economy.

References

• United Nations, World Cities Report 2020.
• World Bank, East African Economic Outlook 2021.
• National Statistics of Tanzania, Population and Housing Census 2022.

Tanzania's Rising Attractiveness in Foreign Direct Investment: A 2023 Snapshot

Global Context

In the global context, Tanzania has shown modest but steady growth in attracting Foreign Direct Investment (FDI). Inflows into the country have contributed significantly to various sectors, particularly in natural resources, infrastructure, and tourism. Tanzania's FDI inflows in 2023 were reported at $1.3 billion, showing a slight increase from the previous year​​. Despite the global downturn in FDI, Tanzania's relative stability and economic reforms have continued to attract investment.

Africa Context

In Africa, FDI inflows decreased by 3% in 2023, totaling $53 billion. While some regions and industries within Africa saw declines, there were sectors like chemicals and electronics which registered increases in project values. The top recipients included countries like Egypt and Nigeria, which attracted larger volumes of FDI. European countries remain significant investors in Africa, with the Netherlands, France, the United States, and the United Kingdom holding substantial FDI stocks in the continent​​. The value of greenfield projects announced in Africa dropped from $196 billion in 2022 to $175 billion in 2023, although the number of projects increased by 7%​​.

East Africa Context

In the East African context, Tanzania is one of the leading recipients of FDI. The region collectively attracted significant investments, and Tanzania's $2.4 billion positioned it competitively among its neighbors. This influx is partly driven by investments in key sectors such as mining, manufacturing, and services, which are critical for the country's economic development.

Tanzania stands out as a notable destination for FDI. The region overall has attracted various investments, particularly in sectors like renewable energy, infrastructure, and manufacturing. The East African Community (EAC) has been working towards creating a more favorable investment climate, which has positively impacted Tanzania's ability to attract FDI. Specific data on Tanzania within the East African context indicates that despite regional challenges, the country continues to see investment flows aimed at exploiting its rich natural resources and growing consumer market​​.

Within East Africa, Tanzania is one of the leading countries in terms of attracting FDI. Inflows have been substantial, contributing to significant economic activities and infrastructure development. Compared to its neighbors:

• Kenya received slightly less, with FDI inflows of approximately $1.504 billion.
• Uganda received around $2.886 billion, reflecting a higher level of FDI but with specific sectors drawing investment.

Tanzania's Economic Development Through FDI

FDI has been crucial for Tanzania's economic development, playing a key role in several sectors:

• Mining and Natural Resources: Significant investments have been made in the mining sector, contributing to economic growth and exports.
• Infrastructure Development: FDI has been instrumental in developing infrastructure projects, including roads, ports, and energy facilities.
• Manufacturing and Industry: Investments in manufacturing have helped diversify the economy, creating jobs and enhancing industrial capacity.
• Tourism: The tourism sector has benefited from foreign investments, enhancing facilities and services, thereby attracting more international visitors.

Overall, FDI has not only provided capital but also technology transfer, managerial expertise, and access to international markets, which are critical for sustainable economic growth.

Figures and Data

• Global FDI Flows: Declined from $1.6 trillion in 2021 to $1.3 trillion in 2023​​.
• Africa FDI Inflows: Reduced by 3% to $53 billion in 2023, with notable investments in renewable energy and manufacturing sectors​.
• East Africa: Continues to attract diverse investments, with Tanzania playing a significant role in the region's FDI landscape​.

These trends highlight Tanzania's strategic importance in both regional and global investment landscapes, emphasizing the need for continued efforts to improve the investment climate and leverage FDI for economic development.

Economic Development Impact

FDI has played a critical role in Tanzania's economic development by:

• Creating Jobs: The influx of FDI has led to job creation in various sectors such as mining, manufacturing, and services.
• Enhancing Infrastructure: Significant investments in infrastructure projects, including roads, ports, and energy, have been facilitated by foreign investments.
• Technology Transfer: FDI has brought in new technologies and expertise, improving productivity and competitiveness.
• Diversifying the Economy: FDI has contributed to diversifying Tanzania's economy, reducing reliance on traditional sectors like agriculture and mining.

References:

• United Nations Conference on Trade and Development (UNCTAD). "World Investment Report 2024." Accessed June 29, 2024.
• World Bank. "Foreign Direct Investment Inflows to Tanzania." Accessed June 29, 2024.
• "Investment Trends Monitor." January 2024. Accessed June 29, 2024.
• East African Community (EAC). "Annual Report on Investment in East Africa." Accessed June 29, 2024.