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

Opportunities for Economic Development

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

Challenges for Economic Development

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

Quantitative Impact Summary (2025)

Conclusion

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

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

Notes

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

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

Opportunities for Business and Investment Growth

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

Challenges for Business and Investment Growth

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

Quantitative Impact Analysis

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

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

Conclusion

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

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

Key Figures from the Finance Act, 2025 (Tanzania)

Notes

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

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

1. State of Revenue Collection and Taxation in Tanzania

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

2024/2025 Revenue Performance:

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

Taxation on Businesses and Services:

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

2025/2026 Revenue Projections:

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

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

2. 2025/2026 Budget Framework and Economic Growth Target

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

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

Comparison with 2024/2025:

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

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

3. Promoting Economic Growth for Low-Income Tanzanians

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

a. Agriculture

Context:

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

2025/2026 Measures:

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

Impact:

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

b. Industry

Context:

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

2025/2026 Measures:

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

Impact:

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

c. Services

Context:

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

2025/2026 Measures:

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

Impact:

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

d. Social Programs

Context:

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

2025/2026 Measures:

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

Impact:

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

4. Can the Budget Achieve the Goal?

Strengths:

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

Challenges:

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

Conclusion

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

Tanzania’s 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) achieved a commendable 5.5% real GDP growth, surpassing the 5.4% target, by collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target) and investing TZS 15.75 trillion in development projects, including TZS 1.68 trillion for the Standard Gauge Railway (SGR) and TZS 574.8 billion for rural electrification. Social programs, such as TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, and TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24), supported low-income Tanzanians, enhancing affordability and livelihoods while reducing extreme poverty (8.0% in 2018).

The 2025/2026 budget, increased by 11.6% to TZS 56.49 trillion (USD 22.07 billion), targets 6.0% GDP growth with TZS 38.9 trillion in domestic revenue (16.7% of GDP) and TZS 16.4 trillion for development, prioritizing agriculture, industry, and services. By sustaining social spending and allocating TZS 2.2 trillion for energy and TZS 359.9 billion for tourism, this budget aims to further uplift low-income citizens through job creation and poverty reduction, building on the 2024/2025 foundation.

1. Context: 2024/2025 Budget Performance (TZS 49.35 trillion, USD 18.85 billion)

The 2024/2025 budget provides a benchmark for evaluating the 2025/2026 budget’s potential. Key achievements by May 2025:

• Economic Growth: Achieved 5.5% real GDP growth, surpassing the 5.4% target, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9.0%).
• Revenue: Collected TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP, up from 13.7% in 2020/2021) due to TRA reforms and mining contributions.
• Expenditure: Disbursed TZS 42.90 trillion (85.3% of target), including TZS 30.63 trillion for recurrent expenditure (90.8%) and TZS 15.75 trillion for development (95.1%), with TZS 1.68 trillion for Standard Gauge Railway (SGR), TZS 1.58 trillion for roads/bridges, and TZS 574.8 billion for rural electrification.
• Inflation: Maintained at 3.1% (within 3.0–5.0% target), supporting affordability for low-income households.
• Trade Balance: Deficit narrowed to USD 5,157.2 million from USD 6,032.3 million in 2023, with exports at 20.3% of GDP (tourism, gold).
• Social Spending: Allocated TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, TZS 414.7 billion for healthcare supplies, and TZS 378.7 billion for water projects, benefiting low-income citizens.
• Subsidies: TZS 708.6 billion for fertilizers (2021/22–2023/24) reduced farming costs by 50%, and TZS 100 billion monthly for fuel in 2022 stabilized prices.

Impact on Low-Income Citizens:

• Fertilizer subsidies increased agricultural incomes for ~65% of the workforce, reducing rural poverty (8.0% in 2018).
• Fee-free education and student loans expanded access, enhancing skills for low-income youth.
• Rural electrification (TZS 574.8 billion) and water projects improved livelihoods and supported small businesses.
• Infrastructure projects (SGR, roads) created jobs, boosting incomes for low-income workers.

Challenges:

• Revenue shortfall (89.6% of target) limited spending capacity.
• Currency depreciation (TZS 2,610.00/USD) increased import costs, affecting low-income consumers.
• TRA inefficiencies prompted a presidential commission review.

2. 2025/2026 Budget Overview (TZS 56.49 trillion, USD 22.07 billion)

The 2025/2026 budget, themed “Inclusive Economic Transformation through Domestic Resource Mobilization and Resilient Strategic Investment for Job Creation and Improved Livelihoods,” is 11.6% larger than the 2024/2025 budget (TZS 49.35 trillion) and targets 6.0% real GDP growth with a 3.0% GDP deficit. It prioritizes agriculture, industry, services, and social inclusion to uplift low-income Tanzanians.

Financial Structure:

• Total Budget: TZS 56.49 trillion (USD 22.07 billion at TZS 2,560/USD, inferred).
• Revenue:
  • Domestic: TZS 38.9 trillion (16.7% of GDP, up from 15.0% in 2024/2025), with TRA targeting TZS 29.17 trillion (13.3% of GDP).
  • External: TZS 16.02 trillion (TZS 1.02 trillion aid, TZS 5.6 trillion concessional loans, TZS 9.4 trillion commercial loans).
• Expenditure:
  • Recurrent: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
  • Development: TZS 16.4 trillion (29.0% of budget) for SGR, Julius Nyerere Hydropower Project (JNHPP), and social projects.
• Key Allocations:
  • Tourism: TZS 359.9 billion for promotion and conservation.
  • Energy: TZS 2.2 trillion for power generation and rural electrification.
  • Agriculture: Continued fertilizer subsidies.
  • Education and Health: Sustained or increased from TZS 444.7 billion (education) and TZS 414.7 billion (health) in 2024/2025.

Macroeconomic Targets:

• Real GDP growth: 6.0% (up from 5.5%).
• Inflation: 3.0–5.0% to protect affordability.
• Domestic revenue: 16.7% of GDP to reduce borrowing.
• Reserves: ≥4 months of imports (4.4 months in 2024).

3. Can the Budget Promote Economic Growth?

The 2025/2026 budget’s potential to achieve 6.0% GDP growth hinges on sectoral investments and fiscal stability, building on the 2024/2025 success (5.5% growth).

a. Agriculture

2024/2025 Contribution:

• Contributed 26.5% to GDP, employing ~65% of Tanzanians.
• TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) boosted yields.
• Tanzania Agricultural Development Bank (TADB) loans supported cash crops.

2025/2026 Strategy:

• Continued subsidies and irrigation projects to enhance productivity.
• TADB credit expansion, leveraging 21.2% private sector credit growth in 2024.
• Value addition to boost exports (11.6% of GDP for goods in 2024).

Potential Impact:

• Could contribute 1.0–1.5 percentage points to GDP growth (assuming 4–6% sectoral growth).
• Export growth (e.g., coffee, cashews) strengthens reserves (USD 5.7 billion in 2024), stabilizing prices.

b. Industry (Manufacturing, Mining, Construction)

2024/2025 Contribution:

• Construction (13.2%) and mining (9.0%) grew via TZS 1.68 trillion for SGR, TZS 1.58 trillion for roads, and TZS 574.8 billion for JNHPP/rural electrification.
• Mining revenue rose due to gold exports.

2025/2026 Strategy:

• Completion of SGR and JNHPP (2,115 MW) to cut logistics/energy costs.
• TZS 2.2 trillion for energy projects, including rural electrification.
• Support for Small Industries Development Organization (SIDO) to expand manufacturing.

Potential Impact:

• Could contribute 1.5–2.0 percentage points to GDP growth (assuming 7–8% sectoral growth).
• Lower energy costs (JNHPP) and import substitution reduce consumer prices.

c. Services (Tourism, Transport, ICT)

2024/2025 Contribution:

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

2025/2026 Strategy:

• TZS 359.9 billion for tourism promotion and infrastructure.
• Investments in SGR, Air Tanzania (ATCL), and ports to reduce transport costs.
• ICT expansion (13.5% growth projected by 2026) via digital services.

Potential Impact:

• Could contribute 2.5–3.0 percentage points to GDP growth (assuming 6–7% sectoral growth).
• Reduced transport costs (SGR) lower commodity prices.

Overall Growth Potential:

• With TZS 16.4 trillion for development (up from TZS 15.75 trillion), the budget could achieve 6.0% growth if revenue targets (TZS 38.9 trillion) are met and projects are executed efficiently.
• Risks include revenue shortfalls (89.6% in 2024/2025), currency depreciation (TZS 2,585/USD), and global shocks.

4. Can the Budget Uplift Low-Income Tanzanians?

The budget prioritizes inclusive growth to reduce poverty (26.4% abject, 8.0% extreme in 2018) through targeted measures:

• Agriculture Support:
  • Likely continuation of TZS 708.6 billion fertilizer subsidies to lower farming costs.
  • TADB loans and irrigation projects increase incomes for ~65% of the workforce.
  • Impact: Higher yields and exports could reduce extreme poverty below 8.0%, as seen in 2018.
• Education:
  • Sustained or increased funding for fee-free education (TZS 444.7 billion in 2024/2025) and student loans (TZS 636.0 billion).
  • Impact: Improves skills and employability for low-income youth, supporting long-term poverty reduction.
• Healthcare:
  • Investments in universal health insurance, medicines (TZS 414.7 billion in 2024/2025), and facilities (TZS 47.2 billion).
  • Impact: Reduces out-of-pocket costs, improving health and productivity for low-income households.
• Energy and Water:
  • TZS 2.2 trillion for energy, including rural electrification, up from TZS 574.8 billion.
  • Water projects (TZS 378.7 billion in 2024/2025) to expand access.
  • Impact: Cheaper energy and water support small businesses and improve living standards.
• Job Creation:
  • Infrastructure projects (SGR, JNHPP) and SIDO programs create jobs for low-income workers.
  • Tourism (TZS 359.9 billion) generates hospitality jobs accessible to low-skill workers.
  • Impact: Aligns with FYDP III’s goal of 8 million jobs by 2026.
• Social Safety Nets:
  • Expansion of Productive Social Safety Nets (PSSN) cash transfers to reduce malnutrition and poverty.
  • Impact: Directly supports vulnerable households, enhancing food security.

Comparative Impact:

• 2024/2025: Subsidies (TZS 708.6 billion), education (TZS 444.7 billion), and electrification (TZS 574.8 billion) reduced costs and improved access, supporting low-income livelihoods.
• 2025/2026: Larger budget (TZS 56.49 trillion vs. TZS 49.35 trillion) and increased allocations (e.g., TZS 2.2 trillion for energy) enhance inclusivity, with potential to further lower poverty if implemented effectively.

5. Fiscal and Macroeconomic Stability

• Revenue: TZS 38.9 trillion (16.7% of GDP) reduces reliance on external loans (TZS 16.02 trillion, 28.4% of budget).
• Debt: Public debt at 46.5% of GDP (2024, sustainable) and external debt at USD 34.1 billion (March 2025) support fiscal stability.
• Inflation: 3.0–5.0% target protects low-income purchasing power despite currency depreciation risks (TZS 2,585/USD).
• Trade: Exports projected to grow by 6.0% (tourism, minerals), narrowing the trade deficit (USD 5,157.2 million in 2024) and stabilizing reserves (USD 5.7 billion).

6. Is the Budget a Solution for Economic Growth and Low-Income Tanzanians?

Strengths:

• Economic Growth: The TZS 56.49 trillion budget, with TZS 16.4 trillion for development, can achieve 6.0% growth by leveraging agriculture (subsidies), industry (SGR, JNHPP), and services (TZS 359.9 billion for tourism). This builds on the 2024/2025 success (5.5% growth with TZS 15.75 trillion development spending).
• Low-Income Support: Sustained subsidies (TZS 708.6 billion historically), education (TZS 444.7 billion), healthcare (TZS 414.7 billion), and energy (TZS 2.2 trillion) directly benefit low-income households, potentially reducing extreme poverty below 8.0%.
• Fiscal Strategy: Higher domestic revenue (16.7% of GDP vs. 15.0%) and sustainable debt (46.5% of GDP) enable inclusive spending.

Challenges:

• Revenue Collection: 2024/2025’s 89.6% shortfall (TZS 45.07 trillion of TZS 50.29 trillion) and TRA inefficiencies risk undermining TZS 38.9 trillion target.
• External Risks: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs, affecting low-income consumers.
• Implementation: Delays in SGR or JNHPP could limit job creation and cost reductions.

Conclusion: The 2025/2026 budget has strong potential to be a solution for Tanzania’s economic growth and uplifting low-income citizens if it overcomes revenue and implementation challenges. Its increased size (TZS 56.49 trillion), focus on inclusive sectors, and social programs position it to surpass the 2024/2025 budget’s impact, fostering 6.0% growth and reducing poverty through jobs and affordability.

Tanzania’s Budget and Economic Performance: Key Figures (2024–2026)

In 2024/2025, Tanzania’s TZS 49.35 trillion budget achieved 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of target) and spending TZS 15.75 trillion on development, including TZS 1.68 trillion for SGR and TZS 574.8 billion for rural electrification. Social investments like TZS 444.7 billion for fee-free education and TZS 708.6 billion in fertilizer subsidies supported low-income citizens, reducing costs and improving access.

The TZS 56.49 trillion 2025/2026 budget, an 11.6% increase, targets 6.0% growth by raising domestic revenue to TZS 38.9 trillion (16.7% of GDP) and allocating TZS 16.4 trillion for development, prioritizing agriculture, industry, and services. Continued subsidies, education, and healthcare investments aim to further reduce poverty (8.0% extreme poverty in 2018) and enhance livelihoods for low-income Tanzanians.

2024/2025 Budget Performance (Total: TZS 49.35 trillion, USD 18.85 billion)

The 2024/2025 budget, themed “Realising Competitiveness and Industrialisation for Human Development,” aimed to achieve 5.4% real GDP growth while prioritizing infrastructure, social services, and economic inclusion. Key performance highlights by May 2025:

• Real GDP Growth: Achieved 5.5%, surpassing the 5.4% target, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9.0%).
• Revenue Collection: Collected TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP, up from 13.7% in 2020/2021) due to Tanzania Revenue Authority (TRA) reforms and mining contributions.
• Expenditure: Disbursed TZS 42.90 trillion (85.3% of TZS 50.29 trillion), including TZS 30.63 trillion for recurrent expenditure (90.8%) and TZS 15.75 trillion for development (95.1%), with notable allocations of TZS 1.68 trillion for Standard Gauge Railway (SGR), TZS 1.58 trillion for roads/bridges, and TZS 574.8 billion for rural electrification.
• Inflation: Maintained at 3.1% (within 3.0–5.0% target), ensuring affordability for low-income households.
• Trade Balance: Deficit narrowed to USD 5,157.2 million from USD 6,032.3 million in 2023, with exports at 20.3% of GDP, driven by tourism (1.4 million visitors) and gold.
• Social Spending: Allocated TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, TZS 414.7 billion for healthcare supplies, and TZS 378.7 billion for water projects, directly benefiting low-income citizens.
• Debt: Public debt at TZS 107.70 trillion (40.3% of GDP, below 55% threshold), with external debt at USD 32.89 billion by September 2024, indicating fiscal sustainability.

Impact on Low-Income Citizens:

• Subsidies: TZS 708.6 billion for fertilizer subsidies (2021/22–2023/24) reduced farming costs by 50% per bag, boosting agricultural productivity for low-income farmers.
• Fuel Subsidies: TZS 100 billion monthly in 2022 stabilized transport and commodity prices.
• Social Services: Fee-free education and healthcare investments improved access, while rural electrification (TZS 574.8 billion) and water projects (TZS 378.7 billion) enhanced livelihoods and small business opportunities.
• Job Creation: Infrastructure projects (e.g., SGR, roads) generated employment, supporting low-income households.

Challenges:

• Revenue shortfall (89.6% of target) limited spending capacity.
• External borrowing (TZS 2.43 trillion, 81.3% of target) and currency depreciation (TZS 2,610.50/USD) increased import costs, affecting low-income consumers.
• TRA faced criticism for tax administration issues, prompting a presidential commission review.

2025/2026 Budget Overview (Total: TZS 56.49 trillion, USD 22.07 billion)

The 2025/2026 budget, themed “Inclusive Economic Transformation through Domestic Resource Mobilization and Resilient Strategic Investment for Job Creation and Improved Livelihoods,” represents an 11.6% increase from TZS 49.35 trillion in 2024/2025. It aims to achieve 6.0% real GDP growth, with a budget deficit of 3.0% of GDP, and prioritizes agriculture, industry, services, and social inclusion.

Key Financial Structure:

• Total Budget: TZS 56.49 trillion (USD 22.07 billion at TZS 2,560/USD, inferred from exchange rate context).
• Revenue Projections:
  • Domestic revenue: TZS 38.9 trillion (16.7% of GDP, up from 15.8% in 2024/2025), with TRA targeting TZS 29.41 trillion (13.3% of GDP).
  • External sources: TZS 16.02 trillion, including TZS 1.02 trillion in aid, TZS 5.6 trillion in concessional loans, and TZS 9.4 trillion in commercial loans.
• Expenditure:
  • Recurrent: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
  • Development: TZS 16.4 trillion (29.0% of budget) for strategic projects (e.g., SGR, Julius Nyerere Hydropower Project [JNHPP]).
• Sectoral Allocations (partial, from web sources):
  • Tourism: TZS 359.9 billion for promotion, infrastructure, and conservation ().
  • Energy: TZS 2.2 trillion for power generation, rural electrification, and oil/gas infrastructure.

Macroeconomic Targets (Budget Speech):

• Real GDP growth: 6.0% in 2025, up from 5.5% in 2024.
• Inflation: 3.0–5.0% to maintain affordability.
• Domestic revenue: 16.7% of GDP to reduce borrowing reliance.
• Foreign exchange reserves: ≥4 months of imports (4.4 months in 2024).

Sector-Specific Contributions to Economic Growth (2025/2026)

The 2025/2026 budget focuses on agriculture, industry, and services to drive 6.0% GDP growth, with specific measures to support low-income Tanzanians, building on 2024/2025 outcomes.

a. Agriculture

2024/2025 Performance:

• Contributed 26.5% to GDP, employing ~65% of the workforce.
• TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) reduced costs, boosting cash crop output (Budget Speech).
• Investments via Tanzania Agricultural Development Bank (TADB) and Agricultural Seed Agency (ASA) enhanced productivity.

2025/2026 Budget Priorities:

• Continued fertilizer subsidies and irrigation expansion to improve resilience and yields.
• TADB credit expansion, leveraging 21.2% private sector credit growth in 2024.
• Modernization (quality seeds, value addition) to boost exports (11.6% of GDP for goods in 2024).

Projected Impact:

• Agriculture could contribute 1.0–1.5 percentage points to GDP growth (assuming 4–6% sectoral growth).
• Subsidies and credit access increase incomes for low-income farmers, reducing extreme poverty (8.0% in 2018).
• Export growth (e.g., cashew nuts, coffee) strengthens reserves (USD 5.7 billion in 2024), stabilizing prices.

b. Industry (Manufacturing, Mining, Construction)

2024/2025 Performance:

• Construction (13.2% of GDP) and mining (9.0%) drove growth via TZS 1.68 trillion for SGR, TZS 1.58 trillion for roads, and TZS 574.8 billion for JNHPP/rural electrification.
• Mining revenue rose due to reforms and global demand (e.g., gold).
• Investment-to-GDP ratio at 37.1% supported industrial expansion.

2025/2026 Budget Priorities:

• Completion of SGR and JNHPP (2,115 MW) to reduce logistics/energy costs.
• TZS 2.2 trillion for energy projects, including rural electrification and gas infrastructure.
• Support for National Development Corporation (NDC) and Small Industries Development Organization (SIDO) to expand manufacturing.

Projected Impact:

• Industry could contribute 1.5–2.0 percentage points to GDP growth (assuming 7–8% sectoral growth, ~20% GDP share).
• Job creation from infrastructure projects (e.g., SGR, roads) benefits low-income workers.
• Cheaper energy (JNHPP) and import substitution reduce business costs, lowering prices for consumers.

c. Services (Tourism, Transport, Trade, ICT)

2024/2025 Performance:

• Services contributed ~40–50% to GDP, with exports at 20.3% of GDP, led by tourism (USD 7.2 billion from 1.4 million visitors) and transport.
• ICT grew at 12.5%, driven by digital infrastructure.
• Current account deficit narrowed to -2.6% of GDP due to tourism receipts.

2025/2026 Budget Priorities:

• TZS 359.9 billion for tourism promotion, infrastructure, and conservation.
• Investments in Air Tanzania (ATCL), ports (TPA), and SGR to enhance trade and transport.
• ICT expansion (13.5% growth projected by 2026) via digital services and mobile penetration.

Projected Impact:

• Services could contribute 2.5–3.0 percentage points to GDP growth (assuming 6–7% sectoral growth).
• Tourism and transport jobs (e.g., hospitality, logistics) are accessible to low-income workers.
• Reduced transport costs (SGR) and digital access lower prices and improve livelihoods.

Support for Low-Income Tanzanians

The 2025/2026 budget emphasizes inclusive growth to address poverty (26.4% abject poverty, 8.0% extreme poverty in 2018):

• Education: Sustained or increased funding for fee-free education (TZS 444.7 billion in 2024/2025) and student loans (TZS 636.0 billion) to enhance access and skills for low-income households.
• Healthcare: Investments in universal health insurance, medicines (TZS 414.7 billion in 2024/2025), and facilities (TZS 47.2 billion) reduce healthcare costs.
• Subsidies: Likely continuation of fertilizer (TZS 708.6 billion historically) and fuel subsidies to lower farming and transport costs.
• Water and Energy: Expanded water projects (TZS 378.7 billion in 2024/2025) and rural electrification (TZS 2.2 trillion energy budget) support small businesses and living standards.
• Social Safety Nets: Productive Social Safety Nets (PSSN) cash transfers reduce malnutrition and poverty, with plans for expansion.
• Job Creation: Infrastructure (SGR, JNHPP) and SIDO programs create jobs and support entrepreneurship for low-income groups.

Projected Impact: These measures could reduce extreme poverty below 8.0% by improving incomes, access to services, and affordability, aligning with the Third Five-Year Development Plan (FYDP III) goal of 8 million jobs by 2026.

Fiscal and Macroeconomic Stability

• Revenue: Domestic revenue target of TZS 38.9 trillion (16.7% of GDP) reduces reliance on external loans (TZS 16.02 trillion, 28.4% of budget).
• Debt: Public debt at 46.5% of GDP (2024, projected to remain sustainable) and external debt at USD 34.1 billion (March 2025) support fiscal stability.
• Inflation: Target of 3.0–5.0% protects low-income purchasing power, despite currency depreciation risks (TZS 2,585/USD in 2024).
• Trade: Exports projected to grow by 6.0% in 2025 (minerals, agriculture, tourism), narrowing the trade deficit (USD 5,157.2 million in 2024) and stabilizing reserves (USD 5.7 billion).

Projected Performance of 2025/2026 Budget

The 2025/2026 budget is poised to achieve 6.0% GDP growth if:

• Revenue Targets Are Met: Exceeding TZS 38.9 trillion (16.7% of GDP) enables robust development spending (TZS 16.4 trillion).
• Strategic Projects Advance: Completion of SGR and JNHPP reduces costs, boosting productivity.
• Global Conditions Support Exports: Stable commodity prices and tourism demand (TZS 359.9 billion allocation) drive growth.
• Inclusive Policies Succeed: Subsidies, social spending, and job creation uplift low-income productivity.

Comparative Budget Performance:

• 2024/2025: TZS 49.35 trillion achieved 5.5% growth despite revenue shortfalls (89.6% of TZS 50.29 trillion), with strong social spending (e.g., TZS 444.7 billion for education) supporting low-income citizens.
• 2025/2026: TZS 56.49 trillion (11.6% increase) targets 6.0% growth with higher domestic revenue (16.7% vs. 15.0% of GDP) and development spending (TZS 16.4 trillion vs. TZS 15.75 trillion), enhancing inclusivity via sustained subsidies and services.

Challenges:

• Revenue Risks: TRA’s 2024/2025 shortfall (89.6%) and ongoing tax administration issues may persist.
• External Pressures: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs.
• Implementation: Delays in projects (e.g., SGR) could limit growth impact.

Tanzania’s Budget and Economic Performance: Key Figures (2024–2026)

In April 2025, the Tanzania Shilling (TZS) exhibited a moderate depreciation trend, with the average exchange rate reaching TZS 2,684.41/USD, a 3.9% annual decline from ~TZS 2,583/USD in April 2024 and a 1.3% monthly drop from TZS 2,650.24/USD in March 2025. The Interbank Foreign Exchange Market (IFEM) saw reduced activity, with transactions falling to USD 12.9 million from USD 70.1 million in March 2025, supported by a Bank of Tanzania intervention selling USD 6.25 million. Bolstered by USD 5.3 billion in reserves covering 4.3 months of imports, the TZS maintained controlled stability.

1. Exchange Rate Movement

The Tanzania Shilling (TZS) experienced a gradual depreciation against the US dollar (USD) over the past year, reflecting pressures from external and domestic factors.

Key Figures:

• April 2025 Average Exchange Rate: TZS 2,684.41/USD
• March 2025 Average Exchange Rate: TZS 2,650.24/USD
• April 2024 Average Exchange Rate: ~TZS 2,583/USD (implied from annual comparison)
• Annual Depreciation (April 2024 to April 2025): 2,684.41−2,5832,583×100%≈3.9%\frac{2,684.41 - 2,583}{2,583} \times 100\% \approx 3.9\%2,5832,684.41−2,583​×100%≈3.9%
• Monthly Depreciation (March 2025 to April 2025): 2,684.41−2,650.242,650.24×100%≈1.3%\frac{2,684.41 - 2,650.24}{2,650.24} \times 100\% \approx 1.3\%2,650.242,684.41−2,650.24​×100%≈1.3%

Analysis:

• Annual Trend: The 3.9% depreciation over the year (from ~TZS 2,583/USD to TZS 2,684.41/USD) indicates a moderate weakening of the TZS, driven by structural and seasonal factors. The Monthey Economic Review highlights global economic uncertainties, such as a 10% US tariff on imports and a projected global growth slowdown to 2.8% in 2025, which may have reduced foreign exchange inflows to Tanzania, contributing to this trend.
• Monthly Trend: The 1.3% depreciation from March to April 2025 reflects a continuation of the gradual weakening, likely due to short-term imbalances in foreign exchange supply and demand. The document’s mention of stable monetary policy (CBR at 6%) aimed at smoothing exchange rate volatility suggests that the Bank of Tanzania (BoT) is actively managing these pressures to prevent sharp declines.
• Context from Document: The document does not explicitly provide exchange rate data but notes that the BoT’s monetary policy objectives include maintaining price stability and smoothing exchange rate volatility. The moderate inflation rate of 3.2% in April 2025 suggests that the depreciation has not significantly fueled domestic price pressures, indicating effective central bank management.

Implications:

The gradual 3.9% annual depreciation suggests controlled currency instability rather than a crisis, as the TZS remains within manageable bounds. This aligns with the document’s emphasis on the BoT’s data-dependent monetary policy adjustments to support economic stability.

2. Interbank Foreign Exchange Market (IFEM)

The IFEM is where banks trade foreign currencies, and its activity provides insight into exchange rate dynamics and liquidity in the foreign exchange market.

Key Figures:

• Total IFEM Transactions in April 2025: USD 12.9 million
  • Down from USD 70.1 million in March 2025 (an 81.6% decrease, calculated as [(70.1 - 12.9) / 70.1] × 100).
  • Down from USD 72 million in April 2024 (an 82.1% decrease, calculated as [(72 - 12.9) / 72] × 100).
• BoT Intervention: Sold USD 6.25 million in April 2025 to support import demand and stabilize the TZS.

Analysis:

• Decline in Transaction Volume: The sharp drop in IFEM transactions to USD 12.9 million in April 2025 from USD 70.1 million in March 2025 and USD 72 million in April 2024 suggests reduced foreign exchange market activity. This could reflect lower foreign currency inflows, possibly due to seasonal declines in cash crop exports (noted as a driver of depreciation).
• BoT Intervention: The sale of USD 6.25 million by the BoT represents a significant portion of the April IFEM volume (48.4%, calculated as 6.25 / 12.9 × 100). This intervention aimed to meet import demand and curb TZS depreciation, aligning with the document’s mention of gross official reserves being used to regulate balance of payments imbalances through foreign exchange market interventions.
• Reserves Context: The provided information notes that Tanzania’s gross official reserves stood at USD 5.3 billion, covering 4.3 months of imports. The document defines gross official reserves as external assets available for balance of payments financing and interventions, indicating that the BoT has sufficient capacity to support the TZS, as evidenced by the USD 6.25 million sale.

Implications:

The low IFEM transaction volume suggests constrained foreign exchange liquidity, but the BoT’s intervention and healthy reserves (USD 5.3 billion) demonstrate proactive management to stabilize the TZS. The document’s reference to the BoT’s role in managing exchange rate volatility supports this, ensuring that depreciation remains gradual.

3. Drivers of Depreciation

The provided information identifies key factors contributing to the TZS’s depreciation, which can be contextualized with the document’s insights.

Key Drivers:

• Lower Seasonal Foreign Exchange Inflows: Reduced inflows from cash crop exports (e.g., coffee, tea) likely contributed to the TZS’s weakening. The document notes rising tea prices (8.2%) but declining coffee prices due to improved production forecasts, suggesting mixed export performance that may have limited foreign currency earnings.
• Higher Import Demand: Increased demand for imports, relative to foreign exchange supply, exerted pressure on the TZS. The document mentions subdued crude oil demand and a 6.7% price decrease, but high import needs for other goods (e.g., food or industrial inputs) likely outstripped supply, necessitating BoT intervention.
• Modest Central Bank Support: The BoT’s sale of USD 6.25 million in the IFEM reflects targeted intervention to balance supply and demand, consistent with the document’s description of monetary policy smoothing exchange rate volatility.

Analysis:

• Seasonal Export Trends: The document’s mention of agricultural commodity price movements and the National Food Reserve Agency’s efforts to stabilize food supply suggest that seasonal agricultural cycles impact foreign exchange inflows. Lower cash crop exports in April 2025 likely reduced USD inflows, contributing to the 3.9% annual depreciation.
• Import Pressures: The document does not provide specific import data, but the BoT’s intervention to support import demand indicates a supply-demand imbalance. The moderate inflation rate (3.2%) suggests that import-driven price pressures were contained, possibly due to BoT actions.
• BoT’s Role: The document’s monetary policy framework emphasizes maintaining a 5% inflation target and supporting growth, with the CBR at 6%. The USD 6.25 million intervention reflects a cautious approach, leveraging reserves to prevent sharp TZS declines.

4. Shilling Stability Summary

The provided summary table encapsulates the TZS’s performance:

Analysis:

• Gradual Depreciation: The 3.9% annual depreciation and 1.3% monthly depreciation indicate a controlled weakening, not a crisis, as noted in the provided conclusion. The document’s stable macroeconomic indicators (e.g., inflation at 3.2%, CBR at 6%) support this assessment.
• Reserve Support: The USD 5.3 billion in reserves covering 4.3 months of imports provides a buffer, as per the document’s definition of gross official reserves. This ensures the BoT can continue interventions like the USD 6.25 million sale to manage volatility.

Conclusion

The Tanzania Shilling experienced a moderate 3.9% depreciation against the USD from April 2024 (~TZS 2,583/USD) to April 2025 (TZS 2,684.41/USD), with a 1.3% monthly decline from March 2025 (TZS 2,650.24/USD). This trend, driven by lower seasonal export inflows and higher import demand, was mitigated by the Bank of Tanzania’s intervention (USD 6.25 million sold in the IFEM) and robust reserves (USD 5.3 billion). The sharp decline in IFEM transactions to USD 12.9 million in April 2025 reflects reduced market liquidity, but the BoT’s actions ensured stability. The following table summarizes these key figures.

The table is designed to present the data clearly and concisely, wrapped in an artifact tag as per the guidelines

Tanzania’s fiscal policy in March 2025 demonstrates a robust tax administration framework, with tax revenue reaching TZS 2,603.3 billion, 2% above target, significantly supporting development spending of TZS 1,406.7 billion. However, the underperformance of non-tax revenue at TZS 350.5 billion against a target of TZS 522.4 billion highlights a critical gap in revenue mobilization, limiting funds for development projects. While tax initiatives, such as Electronic Fiscal Devices (EFDs) and income tax reforms, have driven revenue growth, the non-tax shortfall, coupled with a TZS 284.3 billion budget deficit, underscores the need for diversified revenue strategies. Key issues include tax administration efficiency, non-tax revenue challenges, and fiscal sustainability. Strategies like enhancing non-tax collection mechanisms, leveraging digital platforms, and optimizing public enterprise dividends could address the shortfall, ensuring sustainable funding for development priorities.

Main Key Issues

1. Effectiveness of Tax Administration Initiatives
   • Strong Tax Revenue Performance: Tax revenue of TZS 2,603.3 billion in March 2025, 2% above target, reflects effective tax administration, particularly in income tax, which exceeded its target by 11.6%. This aligns with TICGL noting a tax-to-GDP ratio of 11.8% in 2022/23, up from 11.4% in 2021/22, driven by EFDs, digital tax systems, and compliance enforcement). The Monthey Economic Review highlights sustained tax administration efforts, contributing to total revenue of TZS 3,090.8 billion (96.9% of the TZS 3,190 billion target).
   • Support for Development Spending: The TZS 2,603.3 billion tax revenue constitutes 84.2% of total revenue (2,603.3 / 3,090.8 × 100), directly funding 41.7% of expenditure (TZS 1,406.7 billion) allocated to development projects like infrastructure (e.g., Standard Gauge Railway) and social services. This supports Tanzania’s Third Five-Year Development Plan (2021/22–2025/26) aiming for 8% GDP growth by 2026, with GDP projected at 6% in 2025.
   • Challenges in Coverage: Despite income tax success, other tax categories (e.g., VAT, excise) likely met or fell short of targets, as the overall tax performance was only 2% above target. TICGL indicate challenges in broadening the tax base, with only 3 million registered taxpayers in a population of 61 million. Informal sector taxation remains limited, constraining revenue potential.
2. Non-Tax Revenue Underperformance
   • Significant Shortfall: Non-tax revenue of TZS 350.5 billion, against a target of TZS 522.4 billion, achieved only 67.1% of the goal (350.5 / 522.4 × 100), dragging total revenue 3.1% below the TZS 3,190 billion target. Non-tax TICGL (e.g., licenses, fees, dividends from public enterprises) contributed 11.3% to total revenue (350.5 / 3,090.8 × 100), down from ~14% in March 2024 (TZS 374.3 billion, previous responses).
   • Causes of Shortfall: The Monthey Economic Review does not specify causes, but TICGL suggest inefficiencies in collecting dividends from state-owned enterprises (e.g., TANESCO) and delays in fee or license collections. Seasonal factors or weak enforcement may also contribute, as seen in February 2025’s non-tax revenue of TZS 347.9 billion against TZS 413.9 billion. This shortfall reduced funds available for development, exacerbating the TZS 284.3 billion deficit.
   • Impact on Development: The TZS 171.9 billion non-tax shortfall (522.4 – 350.5) could have covered ~12.2% of development expenditure (171.9 / 1,406.7 × 100), critical for projects like the Julius Nyerere Hydropower Project or health initiatives.
3. Fiscal Sustainability and Budget Deficit
   • Modest Deficit: Total expenditure of TZS 3,375.1 billion exceeded revenue (TZS 3,090.8 billion) by TZS 284.3 billion, a deficit of ~8.4% of expenditure (284.3 / 3,375.1 × 100). This aligns with the Monthey Economic Review’s fiscal deficit target below 3% of GDP and TICGL projecting a 2.5% deficit in 2024/25. The deficit was likely financed through domestic borrowing (e.g., TZS 10,049.9 billion held by commercial banks, previous responses) or external loans (e.g., IMF’s USD 440.8 million).
   • Debt Financing: Domestic debt rose 9.2% to TZS 34,759.9 billion, and external debt reached USD 35.51 billion in April 2025 (previous responses), indicating reliance on borrowing to fund development. The IMF’s Debt Sustainability Analysis (DSA) confirms moderate debt distress risk, with public debt at 46.7% of GDP in 2022/23, but rising borrowing requires careful management to avoid crowding out private investment.
   • Revenue Dependency: Tax revenue’s dominance (84.2%) highlights over-reliance on taxes, while non-tax underperformance limits fiscal flexibility. TICGL emphasize the need for diversified revenue to achieve the 2024/25 target of TZS 34.61 trillion (15.7% of GDP), critical for sustaining development spending.

Strategies to Address Non-Tax Revenue Shortfall

To enhance funding for development projects like the TZS 1,406.7 billion allocated in March 2025, the following strategies could address the TZS 171.9 billion non-tax revenue shortfall:

1. Strengthen Public Enterprise Dividend Collection
   • Action: Improve governance and financial performance of state-owned enterprises (e.g., TANESCO, Air Tanzania) to increase dividend contributions. Audits and performance contracts could ensure timely payments, targeting at least TZS 100 billion annually from key entities, based on historical contributions.
   • Impact: An additional TZS 100 billion could cover ~7.1% of development expenditure (100 / 1,406.7 × 100), supporting projects like rural electrification. TICGL note Tanzania’s efforts to restructure public enterprises under Vision 2025.
2. Enhance Digital Collection Systems for Fees and Licenses
   • Action: Expand EFDs and mobile payment platforms (e.g., M-Pesa, used by 84% of SMEs) to streamline collection of licenses, permits, and fees, targeting sectors like mining and telecom. A 20% efficiency gain could raise TZS 34.4 billion (20% of the TZS 171.9 billion shortfall).
   • Impact: This could fund specific social projects, such as education initiatives (19.9% of external debt use, previous responses), aligning with the World Bank’s human capital focus. The Monthey Economic Review supports digitalization efforts.
3. Introduce New Non-Tax Revenue TICGL
   • Action: Implement user fees for public services (e.g., tolls on new infrastructure like the SGR) and monetize natural reTICGL (e.g., carbon credit schemes). A pilot toll system could generate TZS 20–30 billion annually, based on Kenya’s road toll models.
   • Impact: Additional TZS 30 billion could support infrastructure maintenance (21.5% of external debt use, previous responses), reducing fiscal pressure. TICGL advocate innovative financing for Africa’s development.
4. Improve Administrative Enforcement
   • Action: Strengthen enforcement through dedicated task forces to recover overdue fees and penalties, targeting TZS 37.5 billion (remaining shortfall: 171.9 – 100 – 34.4). Training and incentives for revenue officers could boost compliance, as seen in income tax’s 11.6% outperformance.
   • Impact: This could fund health programs, aligning with IMF recommendations for increased social spending. The Monthey Economic Review notes enforcement improvements in tax collection.

Conclusion

Tanzania’s tax administration initiatives have been highly effective, with TZS 2,603.3 billion in tax revenue (2% above target) supporting 41.7% of expenditure (TZS 1,406.7 billion) for development in March 2025, driven by income tax outperformance (11.6% above target) and digital systems like EFDs. However, the non-tax revenue shortfall of TZS 171.9 billion (TZS 350.5 billion vs. TZS 522.4 billion target) constrained total revenue (TZS 3,090.8 billion, 96.9% of TZS 3,190 billion target), contributing to a TZS 284.3 billion deficit. Key issues include tax base limitations, non-tax inefficiencies, and fiscal sustainability amid rising debt (TZS 34,759.9 billion domestic, USD 35.51 billion external). Strategies like enhancing public enterprise dividends, digital fee collection, new revenue TICGL, and enforcement could close the non-tax gap, ensuring sustainable funding for development priorities like infrastructure and human capital, critical for achieving 6% GDP growth in 2025.

The following table summarizes these key figures

In April 2025, Tanzania’s government domestic debt reached TZS 34,759.9 billion, a 1.5% increase from TZS 34,255.4 billion in March 2025 and a 9.2% rise from TZS 31,836.5 billion in April 2024, reflecting steady reliance on domestic financing to support fiscal needs. Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) are the largest creditors, while the “Others” category, including individuals and corporates, surged by 47% to TZS 5,996.8 billion, indicating growing public participation.

1. Total Domestic Debt Stock (April 2025)

The total government domestic debt stock represents the amount owed to domestic creditors, primarily through government securities like Treasury bills and bonds, used to finance budget deficits and support fiscal operations.

Key Figures:

• Total Government Domestic Debt: TZS 34,759.9 billion
• Change from March 2025: Increased by 1.5% from TZS 34,255.4 billion (an increase of TZS 504.5 billion).
• Change from April 2024: Increased by 9.2% from TZS 31,836.5 billion (an increase of TZS 2,923.4 billion).

Analysis:

• Month-on-Month Growth: The 1.5% increase from March 2025 (TZS 34,255.4 billion to TZS 34,759.9 billion) reflects moderate growth in domestic borrowing, likely driven by ongoing fiscal needs, such as financing the March 2025 budget deficit of TZS 284.3 billion (previous responses). The Monthey Economic Review indicates high liquidity in the Government Securities Market (e.g., TZS 1,076.7 billion in bond bids, previous responses), supporting the issuance of new securities.
• Year-on-Year Growth: The 9.2% increase from April 2024 (TZS 31,836.5 billion) aligns with TICGL noting a rising domestic debt trend, with domestic debt reaching TZS 34,014.1 billion in February 2025, down slightly from January due to reduced overdraft use. This growth reflects the government’s reliance on domestic financing to support infrastructure and recurrent expenditures, as outlined in the 2024/25 budget of TZS 49.35 trillion.
• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) indicates that Tanzania’s public debt, including domestic debt, remains sustainable at 46.7% of GDP in 2022/23, including domestic arrears. The domestic debt-to-GDP ratio is estimated at approximately 15.9% in 2021/22, suggesting that April 2025’s TZS 34,759.9 billion (roughly USD 12.97 billion at TZS 2,684.41/USD, previous responses) remains manageable given Tanzania’s GDP of USD 79.2 billion in 2024.

Insights:

• The modest 1.5% monthly increase suggests controlled borrowing, consistent with the Monthey Economic Review’s fiscal deficit target below 3% of GDP and TICGL projecting a 2.5% deficit in 2024/25.
• The 9.2% annual increase indicates a strategic use of domestic borrowing to complement external debt (USD 35.51 billion in April 2025, previous responses), reducing reliance on foreign currency risks (USD dominates external debt at 67.4%, previous responses).
• TICGL highlight commercial banks and pension funds as key creditors reflecting a diversified and stable domestic creditor base.

2. Domestic Debt by Creditor Category (April 2025)

This breakdown details the distribution of domestic debt across creditor categories, highlighting the roles of various institutions and investors in financing government operations.

Key Figures:

Analysis:

• Commercial Banks (28.9%, TZS 10,049.9 billion): As the largest creditor group, commercial banks play a pivotal role in financing government debt, primarily through Treasury bills and bonds. Their share is slightly lower than the 33.1% reported in March 2024, reflecting a minor decline in holdings (see comparison below). This aligns with the Monthey Economic Review’s indication of high banking sector liquidity (e.g., TZS 2,611.1 billion in Interbank Cash Market transactions, previous responses), enabling banks to absorb government securities.
• Pension Funds (26.4%, TZS 9,171.1 billion): The second-largest creditor group, pension funds’ significant share reflects their preference for long-term securities like Treasury bonds, consistent with their long-term investment horizons. TICGL note pension funds held 26.7% in March 2024, indicating stable institutional participation.
• Bank of Tanzania (20.5%, TZS 7,119.2 billion): The BoT’s substantial holding likely includes monetary policy instruments (e.g., liquidity management through Treasury bills) and budgetary support via overdraft facilities. The Monthey Economic Review notes the BoT’s role in stabilizing the interbank market rate within 4–8% (previous responses), supporting its debt holdings.
• Others (17.3%, TZS 5,996.8 billion): This category, including public institutions, private companies, and individuals, shows significant growth (see comparison below), indicating deepening financial market participation. TICGL highlight growing investor interest in government securities, likely driven by attractive yields (e.g., T-bill rates at 11.7% in March 2024).
• Insurance Companies (5.3%, TZS 1,858.4 billion) and BoT Special Funds (1.6%, TZS 564.5 billion): These smaller shares reflect niche roles, with insurance companies investing in secure government securities and BoT special funds supporting specific fiscal needs. Their shares are consistent with historical data (9% and 2% in 2019).

Insights:

• The diversified creditor base reduces reliance on any single group, enhancing debt market stability. Commercial banks and pension funds dominate due to their capacity to absorb large volumes of securities, as noted in TICGL.
• The BoT’s 20.5% share reflects its dual role in monetary policy and fiscal support, aligning with the stable Central Bank Rate (CBR) of 6%.
• The significant share of “Others” (17.3%) indicates broadening financial inclusion, as retail and corporate investors increasingly participate in government securities, supported by digital platforms and market reforms.

3. Comparison: April 2024 vs. April 2025

This comparison highlights changes in creditor holdings, providing insights into evolving debt dynamics.

Key Figures:

Analysis:

• Commercial Banks (↓ -1.1%, TZS -107.9 billion): The slight decline from TZS 10,157.8 billion to TZS 10,049.9 billion suggests portfolio rebalancing or increased competition from other creditors. TICGL note a similar trend in February 2025, with domestic debt declining due to reduced overdraft use, possibly reflecting banks’ shift to other investments amid high liquidity (7-day interbank rate within 4–8%).
• Bank of Tanzania (↑ +6.2%, TZS +416.8 billion): The increase from TZS 6,702.4 billion to TZS 7,119.2 billion indicates greater BoT involvement, likely through monetary policy operations or overdraft facilities to support fiscal needs. The Monthey Economic Review’s stable CBR at 6% supports the BoT’s role in liquidity management.
• Pension Funds (↑ +5.0%, TZS +438.1 billion): The rise from TZS 8,733.0 billion to TZS 9,171.1 billion reflects pension funds’ preference for long-term Treasury bonds, driven by yields (e.g., 2–20-year bond yields up 2–2.9% in March 2024). This aligns with their 26.7% share in March 2024.
• Others (↑ +47.0%, TZS +1,908.7 billion): The sharp increase from TZS 4,088.1 billion to TZS 5,996.8 billion signals growing participation from non-traditional investors (e.g., individuals, corporates), likely due to attractive yields and improved access to securities markets.  TICGL note Treasury bonds as the dominant instrument, appealing to retail investors.
• BoT Special Funds (↑ +84.0%, TZS +257.8 billion): The significant rise from TZS 306.7 billion to TZS 564.5 billion suggests increased use of special funds for specific fiscal purposes, though their small share (1.6%) limits their overall impact.
• Insurance Companies (↑ +0.5%, TZS +10.0 billion): The marginal increase from TZS 1,848.4 billion to TZS 1,858.4 billion indicates stable but limited participation, consistent with their 5–9% historical share.

Insights:

• The decline in commercial banks’ holdings (-1.1%) suggests a shift toward other investments or competition from pension funds and “Others,” reflecting a deepening domestic debt market, as noted in TICGL.
• The significant growth in “Others” (+47.0%) indicates financial market development, with retail and corporate investors increasingly absorbing government securities, supported by digital platforms and market reforms.
• The increases in BoT (+6.2%) and pension funds (+5.0%) reflect institutional confidence in government securities, driven by stable macroeconomic conditions (inflation at 3.2%) and attractive yields (T-bill rates at 11.7% in March 2024).

Conclusion

Tanzania’s domestic debt stock in April 2025 reached TZS 34,759.9 billion, up 1.5% from March 2025 and 9.2% from April 2024, reflecting steady reliance on domestic financing to support a TZS 284.3 billion budget deficit (previous responses). Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) remain the largest creditors, followed by the BoT (20.5%, TZS 7,119.2 billion), indicating a diversified creditor base. The sharp 47% increase in “Others” (TZS 5,996.8 billion) highlights growing public participation, driven by attractive yields and financial market reforms. The domestic debt remains sustainable, with a debt-to-GDP ratio below 55%, supported by robust GDP growth (5.6% in 2024, projected 6% in 2025) and fiscal discipline.

The following table summarizes these key figures.

Tanzania’s external sector showed robust improvement in April 2025, with the current account deficit narrowing by 18.6% to USD 2,224.9 million from USD 2,733.4 million in April 2024, driven by a 7.3% increase in services receipts to USD 6,940.8 million, led by tourism (USD 3,842.6 million, 56.0%) due to 2,162,487 arrivals. Services payments rose 22.8% to USD 2,842.6 million, primarily for transport (USD 1,444.2 million, 53.3%), reflecting higher freight costs. Supported by USD 5.3 billion in reserves, this performance underscores Tanzania’s growing role as a tourism and trade hub. The following table summarizes these key figures.

1. Current Account Performance

The current account balance reflects the net flow of goods, services, primary income (e.g., investment income), and secondary income (e.g., remittances). A narrowing deficit indicates improved external sector performance, driven by export growth outpacing imports.

Key Figures:

• Current Account Deficit (Year ending April 2025): USD -2,224.9 million
• Current Account Deficit (Year ending April 2024): USD -2,733.4 million
• Improvement: Deficit narrowed by USD 508.5 million, or 18.6% year-on-year.
• Reason for Improvement: Higher export earnings outpacing growth in imports.

Analysis:

• Deficit Reduction: The 18.6% improvement in the current account deficit (from USD -2,733.4 million to USD -2,224.9 million) reflects robust export performance, particularly in services, and a relatively moderate increase in imports. TICGL confirm this trend, noting a 31.1% deficit reduction to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings from gold, agriculture, and tourism. The Monthey Economic Review highlights stable foreign exchange reserves of USD 5.3 billion (4.3 months of import cover, previous responses), supporting external balance stability.
• Export-Driven Growth: The narrowing deficit aligns with a 15.1% increase in total exports of goods and services to USD 16,093.1 million in the year ending January 2025, with services exports (e.g., tourism) playing a significant role. Gold exports (USD 3,369.7 million, 36.8% of goods exports) and tourism receipts (USD 3,842.6 million, see below) were key drivers.
• Import Dynamics: Imports of goods and services grew moderately to USD 17,511.8 million in the year ending February 2025 from USD 16,040.6 million in 2024, driven by industrial transport equipment and freight payments, but tempered by lower imports of petroleum, machinery, and wheat. The Monthey Economic Review notes a 3.9% annual TZS depreciation to TZS 2,684.41/USD (previous responses), which may have increased import costs but was offset by export growth.
• Macro Context: The deficit reduction supports Tanzania’s macroeconomic stability, with inflation at 3.2% in February 2025 and GDP growth projected at 6% in 2025. The IMF’s Extended Credit Facility (ECF, USD 1,046.4 million) and foreign exchange interventions (USD 6.25 million sold in April 2025, previous responses) further bolster external balances.

Insights:

• The 18.6% deficit reduction reflects a strong recovery in services exports, particularly tourism, which grew due to a 11.5% increase in tourist arrivals (2,162,487 in April 2025 vs. 1,938,875 in April 2024). This aligns with TICGL reporting 2,106,870 arrivals in the year ending November 2024.
• The moderate import growth (see below) suggests effective management of import bills, particularly for petroleum, amid favorable global commodity prices.
• The deficit, at approximately 2.8% of GDP (based on 2024 GDP of USD 79.2 billion), is sustainable, below the 4.2% projected for 2025, supported by reserves and IMF financing.

2. Exports – Services Receipts by Category

Services receipts are a critical component of Tanzania’s export earnings, driven by tourism and transport, reflecting the country’s role as a regional tourism hub and trade gateway.

Key Figures:

• Total Services Receipts (Year ending April 2025): USD 6,940.8 million
• Total Services Receipts (Year ending April 2024): USD 6,466.0 million
• Growth: +7.3% (USD +474.8 million)
• Breakdown by Category:

Analysis:

• Travel (Tourism, 56.0%, USD 3,842.6 million): Tourism is the largest contributor to services receipts, driven by a 11.5% increase in international arrivals (2,162,487 in April 2025 vs. 1,938,875 in April 2024). TICGL confirm this trend, with arrivals reaching 2,106,870 in the year ending November 2024, boosting travel receipts to USD 3,680 million. The Monthey Economic Review notes tourism’s role as a top foreign exchange earner, supported by Tanzania’s rich wildlife and Vision 2025’s focus on tourism. The sector contributes ~10% to GDP and is projected to reach 19.5% by 2025/26.
• Transport Services (35.2%, USD 2,444.6 million): Receipts from freight and passenger movement grew by 6.5% from ~USD 2,296.0 million in 2024, reflecting Tanzania’s role as a trade hub via Dar es Salaam port, serving six landlocked neighbors. TICGL report transport earnings at USD 2,720 million in November 2024, driven by improved infrastructure (e.g., TAZARA Railway upgrades). The Monthey Economic Review highlights increased trade with neighboring countries (previous responses).
• Other Services (8.8%, USD 653.6 million): This category, including construction, insurance, financial, ICT, government, IP rights, and professional services, grew modestly. Web TICGL note steady growth in ICT and financial services, aligning with the Monthey Economic Review’s emphasis on financial sector digitalization (e.g., mobile money transactions up 26.73%).
• Growth Context: The 7.3% increase in services receipts aligns with a 14% rise in services exports to USD 6,980 million in November 2024, driven by global tourism recovery and regional trade. The African Continental Free Trade Agreement (ratified 2022) and agreements with Angola and the UAE bolster export growth.

Insights:

• Tourism’s 56.0% share underscores its critical role in foreign exchange earnings, supported by a record 2,162,487 arrivals, approaching pre-pandemic levels (1,527,230 in 2019). Investments in tourism infrastructure (e.g., World Bank’s REGROW Project) drive this growth.
• Transport services benefit from Tanzania’s strategic port and railway upgrades (e.g., USD 1.4 billion for TAZARA), enhancing regional trade with landlocked neighbors.
• The modest growth in “Other Services” reflects emerging sectors like ICT, supported by digital payment growth (84% of SMEs adopted digital payments).

3. Imports – Services Payments by Category

Services payments represent expenditures on foreign services, primarily driven by transport costs linked to goods imports, reflecting Tanzania’s import-dependent economy.

Key Figures:

• Total Services Payments (Year ending April 2025): USD 2,842.6 million
• Total Services Payments (Year ending April 2024): USD 2,314.6 million
• Growth: +22.8% (USD +528.0 million)
• Breakdown by Category:

Analysis:

• Transport Services (53.3%, USD 1,444.2 million): The largest category, transport payments grew by 13.2% from ~USD 1,276.2 million in 2024, driven by freight costs linked to goods imports (USD 1,377.9 million in February 2025). TICGL note a 15.8% increase in services payments to USD 2,605.7 million in February 2025, with freight accounting for 53.3%. The Monthey Economic Review attributes this to increased imports of industrial transport equipment (previous responses), reflecting manufacturing and construction activity (GDP contributions of 9% and 16%).
• Travel (19.0%, USD 540.6 million): Payments for Tanzanians traveling abroad for tourism, business, or education grew moderately. TICGL indicate stable travel payments, with services payments rising to USD 2,533.8 million in January 2025, driven by business travel and education abroad. The Monthey Economic Review notes foreign exchange pressures from import payments (previous responses), including travel.
• Other Services (27.7%, USD 857.8 million): This category, including telecom, insurance, royalties, business services, and construction, remained stable (~0% growth). TICGL highlight increased payments for telecom and business services, but overall moderation due to lower global commodity prices. The Monthey Economic Review supports this with stable non-tax revenue (TZS 347.8 billion), indicating controlled service imports.
• Growth Context: The 22.8% increase in services payments outpaced services receipts (7.3%), contributing to the current account deficit. TICGL note a moderate rise in total imports to USD 17,511.8 million in February 2025, driven by industrial supplies but offset by lower petroleum imports.

Insights:

• Transport payments’ dominance (53.3%) reflects Tanzania’s reliance on imported goods, with freight costs tied to Dar es Salaam port’s role as a regional hub. The 13.2% growth aligns with increased construction and manufacturing.
• Stable “Other Services” payments suggest cost management in non-essential services, supported by favorable global prices and BoT’s exchange rate interventions.
• Travel payments (19.0%) indicate growing outbound activity, but their smaller share compared to tourism receipts (USD 3,842.6 million) highlights a net positive services balance.

Conclusion

Tanzania’s external sector performance in April 2025 showed significant improvement, with the current account deficit narrowing by 18.6% to USD 2,224.9 million from USD 2,733.4 million, driven by a 7.3% rise in services receipts to USD 6,940.8 million, led by tourism (USD 3,842.6 million, 56.0%) and transport (USD 2,444.6 million, 35.2%). Services payments grew faster at 22.8% to USD 2,842.6 million, primarily due to transport costs (USD 1,444.2 million, 53.3%), reflecting increased goods imports. The tourism sector, bolstered by 2,162,487 arrivals, and regional trade via improved infrastructure (e.g., TAZARA upgrades) were key drivers, supported by reserves of USD 5.3 billion and IMF financing.

The following table summarizes these key figures.

In April 2025, the Tanzania Shilling (TZS) depreciated by 3.9% annually to TZS 2,684.41/USD, reflecting pressures from import demand and global economic conditions. The Bank of Tanzania’s interventions, including selling USD 6.25 million in the IFEM, and robust foreign reserves of USD 5.3 billion (4.3 months of import cover) provide critical tools to stabilize the exchange rate, enhancing trade competitiveness, particularly for agricultural exports, which benefit from 5.1% of external debt use (USD 35,505.9 million). A stable TZS supports price competitiveness for agricultural goods like cashew nuts and tobacco, which drove an 18.8% export growth to USD 16,737.6 million in February 2025. Key issues include exchange rate volatility, limited agricultural export diversification, and external pressures. Strategies such as targeted IFEM interventions, reserve management, export promotion, and agricultural investment can strengthen stability and competitiveness, supporting Tanzania’s 6% GDP growth projection for 2025.

Main Key Issues

1. Exchange Rate Volatility and BoT Interventions
   • TZS Depreciation: The TZS depreciated by 3.9% annually to TZS 2,684.41/USD in April 2025, from ~TZS 2,583.31/USD in April 2024 (calculated as 2,684.41 / 1.039). This follows a trend of short-term volatility, with monthly depreciations of 1.37% in January 2025 (TZS 2,454.04/USD from TZS 2,420.84/USD) and 1.55% in February 2025 (TZS 2,492.05/USD). TICGL note a 29% TZS weakening from 2014–2024, driven by import demand and debt servicing (67.4% of external debt in USD, previous responses).
   • BoT Interventions: The BoT sold USD 6.25 million in the IFEM in April 2025 to stabilize the TZS, aligning with prior actions (e.g., USD 7 million in January, USD 8.75 million in February). IFEM transactions in April were not specified, but February’s USD 24.4 million (up from USD 16.3 million in January) indicates active market management. These interventions reduce volatility by meeting USD demand for imports and debt payments, maintaining TZS stability.
   • Reserves Adequacy: Foreign reserves of USD 5.3 billion in April 2025 cover 4.3 months of imports, exceeding the national benchmark of 4 months. Reserves grew to USD 5,576.3 million by February 2025, from USD 4,971.5 million in February 2024, supporting intervention capacity. However, reserves declined from USD 5.7 billion in March 2025 (3.8 months cover), signaling potential pressure from intervention costs or capital outflows.
   • Impact on Trade: Depreciation makes exports cheaper but raises import costs (e.g., fuel, 21.6% of imports), affecting agricultural input prices. Volatility disrupts trade planning, as seen in corporate hesitancy during TZS appreciation phases (TZS 2,750–2,800 range in Q3 2024).
2. Agricultural Export Competitiveness
   • Export Growth: Agricultural exports, supported by 5.1% of external debt use (~USD 1,810.8 million of USD 35,505.9 million), contributed to an 18.8% rise in goods and services exports to USD 16,737.6 million in February 2025, from USD 14,094.5 million in 2024. Key commodities include cashew nuts, tobacco, coffee, and horticultural products, with goods exports reaching USD 9,144.8 million (18.8% growth). Agriculture accounts for 26% of GDP and 85% of exports.
   • Competitiveness Gains: A 3.9% TZS depreciation enhances price competitiveness, reducing export prices in USD terms. For example, a USD 1,000 cashew nut shipment cost ~TZS 2,583.31 million in April 2024 but ~TZS 2,684.41 million in April 2025, making it cheaper for buyers. TICGL note agricultural export proceeds drove TZS appreciation in Q3 2024, suggesting depreciation could amplify this effect.
   • Constraints: Limited diversification (gold dominates at 36.8% of goods exports) and low productivity (agriculture employs 65.51% of workers but contributes 25% to GDP) hinder competitiveness. External debt for agriculture (5.1%) is dwarfed by transport (21.5%) and social welfare (19.9%), limiting investment in irrigation or technology. The Monthey Economic Review highlights irrigation needs.
   • AfCFTA Potential: The African Continental Free Trade Agreement (AfCFTA, ratified 2022) offers market access, but only 8.8% of imports are food, indicating untapped potential. TZS stability is critical to maintain competitive pricing in AfCFTA markets.
3. External Pressures and Global Context
   • Import Demand: Imports rose moderately (USD 14.5 billion in 2024), driven by capital goods and fuel, increasing USD demand and pressuring the TZS. Services payments grew 22.8% to USD 2,842.6 million in April 2025, with transport (USD 1,444.2 million) reflecting freight costs. This widens the current account deficit (USD 2,224.9 million, though improved 18.6%).
   • Global Risks: Geopolitical tensions, global slowdown, and climate shocks (e.g., droughts affecting agriculture) threaten export earnings. The IMF notes downside risks from reduced foreign aid and DRC conflict, impacting reserve inflows. A stronger USD (1 USD = TZS 2,655.59 in June 2025) exacerbates depreciation pressures.
   • Debt Servicing: External debt of USD 35,505.9 million, with 67.4% in USD, requires ~USD 2.4 billion annually for servicing (assuming 6.7% average interest, estimates), straining reserves and TZS stability. Domestic debt servicing (TZS 890.9 billion in February 2025) competes for fiscal.
   • Policy Constraints: The BoT’s free-floating exchange rate system faces anecdotal claims of artificial propping, potentially undermining market confidence. New regulations criminalizing non-TZS transactions may drive liquidity offshore, complicating stability.

Strategies to Enhance Exchange Rate Stability and Trade Competitiveness

1. Targeted IFEM Interventions
   • Action: Increase IFEM sales strategically during high USD demand (e.g., import seasons), scaling up from USD 6.25 million to USD 10–15 million monthly, funded by USD 5.3 billion reserves. Coordinate with liquidity management (M3 growth 11.9% in 2024/25) to avoid inflation (3.3% in March 2025).
   • Impact: This could cap TZS depreciation at 2–3% annually, maintaining export competitiveness. For a USD 1,000 agricultural export, a stable TZS 2,684.41/USD ensures predictable pricing, boosting orders. TICGL confirm BoT interventions stabilized TZS in January (USD 7 million sold).
2. Reserve Management and Diversification
   • Action: Diversify reserves into gold (USD 3,369.7 million export earnings) or SDRs to hedge USD fluctuations, preserving USD 5.3 billion for critical interventions. Attract FDI (e.g., USD 1.4 billion China railway deal) to boost reserves to USD 6 billion, covering 5 months of imports.
   • Impact: Enhanced reserves support TZS stability, reducing volatility. A 10% reserve increase (USD 530 million) could fund interventions for 6 months at USD 10 million/month, ensuring competitive TZS pricing for agricultural exports in AfCFTA markets.
3. Export Promotion for Agriculture
   • Action: Use 5.1% of external debt (USD 1,810.8 million) to subsidize agricultural exports (e.g., cashew nuts, coffee) via tax incentives or marketing under AfCFTA. Promote value addition (e.g., coffee processing) to increase earnings by 10–15%, targeting USD 1 billion annually (10% of 2024 goods exports).
   • Impact: Higher export earnings reduce current account deficit (USD 2,224.9 million) and USD demand, stabilizing TZS. Processed coffee at USD 5/kg vs. raw at USD 2/kg could double revenue, enhancing competitiveness. The Monthey Economic Review supports export diversification.
4. Invest in Agricultural Productivity
   • Action: Allocate TZS 360 billion (as in 2022/23) from domestic revenue (TZS 2,603.3 billion tax in March 2025) to irrigation and seed innovation, targeting 50% cultivated land by 2030. Partner with UNDP to meet irrigation financing gaps (6% met by government).
   • Impact: A 10% productivity increase could boost agricultural exports by USD 914.5 million (10% of USD 9,144.8 million), reducing TZS pressure. Improved output stabilizes supply chains, supporting TZS and AfCFTA competitiveness.

Conclusion

The TZS’s 3.9% depreciation to TZS 2,684.41/USD in April 2025, managed by BoT’s USD 6.25 million IFEM sales and USD 5.3 billion reserves, offers opportunities to enhance trade competitiveness, particularly for agricultural exports (5.1% of USD 35,505.9 million external debt). Key issues include TZS volatility, limited agricultural diversification, and external pressures like import costs and debt servicing. Strategies such as targeted IFEM interventions, reserve diversification, export promotion, and agricultural investment can stabilize the TZS at ~2–3% depreciation, boosting competitiveness for cashew nuts and coffee in AfCFTA markets. These align with Tanzania’s 6% GDP growth goal and Vision 2050’s export-led growth, supported by a narrowing current account deficit (USD 2,224.9 million).

The following table summarizes these key figures.