DP World's $250 Million Investment in Tanzania's Port Infrastructure

Dubai has secured a 30-year agreement with Tanzania to oversee a portion of the Dar es Salaam port, the largest in the country. This deal, despite facing previous opposition from Tanzanian opposition groups and human rights organizations, will see DP World, a state-owned Dubai-based ports operator, take on the lease and operational responsibilities for four of the port's 12 berths.

The port of Dar es Salaam plays a vital role in serving landlocked nations in East and Southern Africa, such as Uganda, Rwanda, Burundi, and Zambia, which is a significant copper producer. According to the Director General of the state-owned Tanzania Ports Authority (TPA), DP World will operate berths four to seven. The Tanzanian government has also been actively seeking other investors to manage berths eight through eleven. The contract with DP World has a 30-year term, with performance evaluations every five years.

The collaboration with DP World aims to enhance the port's efficiency by reducing cargo clearance times and increasing its capacity to accommodate 130 vessels per month, a notable improvement from the current capacity of 90 vessels. During the signing ceremony in Dodoma, DP World's Chairman and Chief Executive, Sultan Ahmed Bin Sulayem, pledged a $250 million investment over the next five years. This investment will primarily focus on upgrading the port's infrastructure, particularly in improving cargo clearing systems and eliminating delays to streamline port operations.

While the Tanzanian parliament endorsed the bilateral agreement between Tanzania and Dubai back in June, it encountered opposition from various quarters, including the Catholic church, legal professionals, activists, and opposition parties, who believed the terms favored DP World and provided limited benefits to Tanzania. In response to these concerns, President Samia Suluhu Hassan emphasized that her administration had considered all perspectives and feedback during the negotiation process with DP World.

The social and economic impacts of Tanzania's 30-year port agreement with DP World are significant and multifaceted:

Social Impacts:

• Employment Opportunities: The collaboration is expected to generate job opportunities in the region, which can help reduce unemployment and improve the livelihoods of local communities.
• Reduced Cargo Clearance Times: The improved efficiency of the port will lead to faster clearance of goods, reducing delays and enhancing trade. This can positively affect various sectors, including agriculture and manufacturing, by ensuring timely access to imported and exported products.
• Enhanced Regional Trade: A more efficient port will encourage increased trade with neighboring landlocked nations in East and Southern Africa, strengthening economic ties and regional cooperation.

Economic Impacts:

• Economic Growth: The investment of $250 million by DP World in port infrastructure will stimulate economic growth and development in Tanzania. It will create opportunities for local businesses to supply goods and services to support the port's operations.
• Increased Capacity: The expanded capacity of the port will accommodate more vessels and cargo, contributing to higher import and export volumes. This is likely to boost economic activities and trade.
• Attracting Investment: The partnership with a well-known global port operator like DP World could attract further foreign direct investment to Tanzania, spurring economic development in various sectors.
• Infrastructure Development: The focus on upgrading the port's infrastructure will have a positive ripple effect on the overall transportation network in the country, further facilitating trade and economic growth.
• Strengthened Regional Position: The efficient operation of Dar es Salaam port will enhance Tanzania's position as a trade gateway for landlocked countries like Uganda, Rwanda, Burundi, and Zambia. This could lead to increased transit trade and economic opportunities for Tanzania.

It's important to note that while this agreement is expected to bring many benefits, it may also have challenges and potential downsides, such as concerns about the terms of the agreement and its impact on local businesses. The social and economic impacts will depend on how well the partnership is managed and how effectively it addresses the needs and interests of the Tanzanian people and economy.

Social Impacts:

Tanzania's 30-year port agreement with DP World carries several potential negative social consequences. Firstly, while the partnership is expected to bring job opportunities, it may also lead to job displacement, particularly if DP World introduces automation or brings in its own workforce. Additionally, the widespread opposition to the agreement, coming from political opposition, activists, and religious institutions like the Catholic church, raises concerns about social discontent and the potential for protests that could disrupt social stability. Infrastructure expansion tied to the agreement may also result in the displacement of local communities, exacerbating social upheaval and community disruptions.

Economic Impacts:

From an economic perspective, the long-term port agreement with DP World could have unfavorable terms that raise concerns about equity, potentially favoring DP World over Tanzania. This could lead to economic imbalances and an unequal distribution of benefits. If the agreement does not prioritize local businesses and suppliers, it may limit the economic advantages that Tanzania can derive from the partnership, impacting local economic growth and development. The agreement may also entail financial risks, possibly increasing Tanzania's debt burden if not managed effectively, diverting vital resources away from other critical sectors. There's a risk of dependence on external expertise and resources due to this partnership, which may pose economic vulnerabilities, and it may result in reduced control over the port's operations, potentially hampering Tanzania's ability to tailor the port's activities to its specific economic needs. Nonetheless, the degree of these negative impacts can be mitigated through careful negotiation, rigorous oversight, and effective governance, and the ultimate success of the partnership hinges on addressing these challenges while maximizing positive social and economic outcomes.

A Look at its 15% Share in Sub-Saharan Africa

Tanzania has emerged as one of the top 10 countries for prospective investments in sub-Saharan Africa, according to a report by KPMG. Leading the pack is South Africa, commanding a significant 50% share, followed by Nigeria at 30%, and Tanzania securing a notable 15%. Further down the list are Ghana, Kenya, and Mauritius, each capturing 14%, with Zambia closely trailing at 11%.

In the course of several years, sub-Saharan Africa has consistently presented itself as a region brimming with potential and opportunities, particularly appealing to astute investors. Abundant natural resources, a burgeoning consumer base, and a youthful workforce have rendered numerous countries within this region as alluring destinations for those keen on participating in the unfolding economic growth narrative.

A recent KPMG report, "Doing Deals in Sub-Saharan Africa," underscores South Africa's prominence in the realm of mergers and acquisitions. South Africa takes the lead, accounting for five of the top ten mega deals in the region. Meanwhile, Nigeria boasts two such deals, while Tanzania, Cameroon, and Angola each secure one position within the top ten rankings.

KPMG's survey further reveals that a substantial 50% of prospective investors are looking towards South Africa, with approximately 30% expressing their interest in engaging in business ventures within Nigeria.

Here is the list of the top 10 African countries to keep an eye on for future investments in sub-Saharan Africa:

Tanzania is perceived as a country with a positive investment climate and opportunities for growth, making it one of the top choices for prospective investors in sub-Saharan Africa:

Tanzania's Rank:

Tanzania is ranked third among the top 10 countries for future investments in sub-Saharan Africa, with a 15% share.

Positive Investment Outlook:

The fact that Tanzania is included in the list of top 10 countries for future investments indicates that it is considered an attractive destination for potential investors. It suggests that Tanzania has a favorable business environment and potential opportunities for investors.

Steady Investment Share:

Although Tanzania's percentage (15%) is lower than South Africa (50%) and Nigeria (30%), it still holds a significant share, which demonstrates a consistent and notable interest from investors.

Investment Potential:

The inclusion of Tanzania in this list highlights its investment potential and suggests that it has qualities that make it a promising market for future investments, making it an appealing prospect for investors looking to participate in the region's economic growth.

Holding the 10th Spot in African Financial Market Rankings

Tanzania stands among the ten African nations with the most vibrant financial markets, ranked tenth in this regard, following South Africa, Mauritius, Nigeria, Uganda, Namibia, Botswana, Kenya, Morocco, and Ghana. This ranking is sourced from the Absa Africa Financial Markets report. The indices listed are derived from the amalgamation of scores from six key economic indicators.

Africa possesses one of the world's most diverse and expansive financial markets. The continent showcases a spectrum of fiscal and economic realities, offering distinct financial securities depending on regional variations. Africa's status as a developing economy, coupled with its rapid adoption of technology, rich mineral resources, and a youthful demographic, makes it an attractive destination for capital investment. This environment ensures the flourishing of nearly any imaginable industry, thereby generating stocks, bonds, and essential raw materials to bolster a thriving economy.

However, a country's financial market performance hinges significantly on factors such as market accessibility, openness, and transparency measures. Utilizing these metrics, Absa Group Limited, formerly known as Amalgamated Banks of South Africa until 2005 and Barclays Africa Group Limited, assessed the African countries with the most prosperous financial markets. The group's objective is to demonstrate how economies can dismantle barriers to investment and promote sustainable growth through their study, the Absa Africa Financial Markets.

Assisted by the United Nations Economic Commission, this year's report for Africa includes 28 nations, including Cabo Verde and Tunisia. Absa gauged Africa's financial market performance based on six economic pillars: market depth, access to foreign exchange, market transparency, tax and regulatory environment, local investor capacity, macroeconomic conditions, and transparency, legal standards, and enforceability. The scores for each pillar are derived from the relative performance of each country for each indicator, subsequently recalibrated to create a uniform scale. The overall results are computed as an average of the scores across all pillars.

Tanzania's financial market performance is relatively stable and falls within the top 10 in Africa, with a moderate index value:

Consistent Ranking:

Tanzania is ranked as the 10th African nation in terms of financial market performance for both 2023 and 2022. This suggests that its financial market performance remained relatively stable over this one-year period.

Index Value:

Tanzania's financial market performance is quantified by an index of 55 for both 2023 and 2022. While this index places Tanzania in the lower half of the top 10, it indicates a moderate level of financial market development.

Stability:

The consistent index value between 2023 and 2022 suggests that Tanzania's financial market did not experience significant fluctuations or drastic changes in performance during this period.

Relative Position:

While Tanzania may not be in the top tier of African countries for financial market performance, it still holds a position among the top 10. This indicates that its financial markets are relatively competitive and offer opportunities for investment and economic activity within the African context.

The research data pertains to various financial transactions and activities in Tanzania's financial sector, specifically related to cash deposits, cash withdrawals, and agent banking transactions:

Cash Deposits:

• In 2022, there were 75,238 cash deposit transactions.
• The total value of these cash deposits in Tanzanian Shillings (TZS) amounted to 81,007,984 billion TZS.
• This represented a significant growth of 53.8% compared to the previous year (2021).
• In 2021, there were 48,923 cash deposit transactions with a total value of 50,942,662 billion TZS.

Cash Withdrawals:

• In 2022, there were 81,007,984 billion TZS in cash withdrawals.
• The volume of cash withdrawals in 2022 was 81,007,984 transactions.
• This marked an impressive growth of 59% compared to 2021.
• In 2021, there were 50,942,662 billion TZS in cash withdrawals, with a transaction volume of 50,942,662.

Agent Banking Transactions:

• In 2022, there were 19,200.3 billion TZS worth of agent banking transactions.
• The volume of these transactions in 2022 was 46,935,798.
• This represented a remarkable growth of 71.1% compared to 2021.
• In 2021, agent banking transactions were valued at 10,779.6 billion TZS, with a transaction volume of 30,706,146.

Number of Agents:

• In 2022, the number of agents increased to 75,238.
• This marked a growth of 52.9% compared to the previous year.
• In 2021, there were 48,923 agents.

Volume and Value:

• The data shows both the volume (the number of transactions) and the value (the amount in TZS) of these financial activities for both years.
• The volume and value for cash deposits, cash withdrawals, and agent banking transactions all experienced substantial growth from 2021 to 2022, indicating increased usage and demand for these services.

The presence of large banks in these channels and the concentration of services in urban areas underscore the role of these channels in expanding financial inclusion and accessibility to a broader population.

The distribution channels for banking services in Tanzania and how these channels are contributing to financial inclusion:

Distribution Channels for Banking Services:

• Banking services in Tanzania are made accessible through various delivery channels.
• These channels include traditional bank branches, agent banking, and digital banking services.

Increase in Number and Usage of Channels:

• Over time, there has been a steady increase in both the number and usage of these banking channels.
• This growth is contributing to enhanced financial inclusion, making financial services more accessible to a broader population.

Branch Network Overview:

• Traditional bank branches are an essential part of the distribution network.
• Large banks play a significant role in the branch network, accounting for 55.2 percent of the total branches.
• The majority of these branches are concentrated in urban centers, making up 51.6 percent of all branches.
• This indicates that urban areas have a higher concentration of traditional bank branches.

Agent Banking Growth:

• Agent banking has experienced substantial growth in several aspects:
  • The number of agents has increased over time.
  • The number of transactions conducted through agent banking has also risen.
  • The value of deposit and withdrawal transactions has shown significant growth.
• This growth signifies the increasing popularity and acceptance of agent banking as a convenient and accessible way to conduct financial transactions.

Large Banks in Agent Banking:

• Large banks are dominant players in the agent banking business.
• They account for a substantial share of agent banking services, representing 59.7 percent of the total market.
• Large banks have a significant presence in the agent banking sector.

Urban Concentration in Agent Banking:

• Similar to traditional bank branches, there is a concentration of agent banking services in urban areas.
• Urban centers account for 56.5 percent of all operating bank agents.
• This concentration suggests that agent banking services are more prevalent and accessible in urban regions.

Agent banking is becoming an increasingly important component of the financial sector in Tanzania, and it is playing a significant role in enhancing financial inclusion by reaching underserved and remote areas. The active participation of large banks and the growth in transactions and agent numbers indicate a positive performance trend in the financial sector, especially in the realm of agent banking services. This expansion of agent banking is likely contributing to increased access to financial services and ultimately fostering economic growth and development in Tanzania.

Growth in Agent Banking:

The fact that agent banking business has been steadily growing in terms of the number of agents, transactions, and the value of deposit and withdrawal transactions is a positive sign. It shows that agent banking services are gaining popularity and acceptance among the population.

Dominance of Large Banks:

The data shows that large banks play a significant role in the agent banking sector, accounting for a substantial portion (59.7 percent) of the market. This indicates that established financial institutions are actively participating in expanding agent banking services, which can contribute to the sector's stability and growth.

Urban Concentration:

The concentration of agent banking services in urban centers (56.5 percent of total operating bank agents) implies that these services are more accessible and widely available in cities and towns. This urban concentration can be seen as a reflection of higher demand in these areas, potentially due to the convenience factor.

This research shows that the financial sector in Tanzania is performing well in terms of stability, asset quality, profitability, credit growth, regulatory oversight, and efforts to expand financial inclusion. These are positive signs for the overall health and development of the sector and, by extension, the national economy.

Sector Composition:

The financial sector in Tanzania comprises banking, microfinance, insurance, capital markets, and social security sub-sectors, with banking dominating, accounting for over 70% of assets.

Asset Quality Improvement:

Non-performing loans (NPLs) decreased from 8.5% to 5.8% due to better credit risk management practices and measures taken by the Bank.

Liquidity and Profitability:

Liquidity ratios exceeded regulatory requirements, although a decrease was attributed to shifts to more profitable investments. Profitability improved, with higher return on assets and equity driven by increased interest income, non-interest income, and operational efficiency.

Foreign Exchange Risk:

Banks reduced their exposure to foreign exchange risk, with the net open position to core capital decreasing from 7.8% to 2.5%.

Growth in Total Assets:

Total assets increased by 17.3% primarily due to higher deposits, borrowings, and retained earnings. Public confidence in the sector, economic activities, and deposit strategies contributed to deposit growth.

Credit Growth:

Loans, advances, and overdrafts increased by 25.3%, driven by a favorable macroeconomic environment, monetary policy, and regulatory measures supporting private sector credit growth.

Expanded Outreach:

The sector expanded through branch networks, agent banking, and digital channels, improving access and usage of banking services.

Regulatory Changes:

The Bank approved acquisitions and license changes, with one microfinance bank being placed under statutory administration and its assets and liabilities transferred to another bank as a resolution option.

Credit Reference System:

The credit reference system improved, with more credit inquiries and reports sold, helping reduce information asymmetry in credit underwriting processes.

Foreign Exchange Services:

Banks and bureaux de change continued to offer foreign currency services, with the Bank strengthening supervision to ensure compliance with legal and regulatory requirements.

The financial sector in Tanzania exhibits several positive indicators regarding its performance:

• Stability and Soundness: The banking sub-sector, which dominates the financial sector, remained stable in terms of capital adequacy, liquidity, asset quality, and profitability. Capital adequacy ratios were above regulatory requirements, indicating financial stability.
• Improved Asset Quality: The decrease in non-performing loans (NPLs) from 8.5% to 5.8% suggests that banks and financial institutions have improved their credit risk management practices. This is a positive sign for the quality of assets in the sector.
• Liquidity and Profitability: Liquidity ratios exceeded regulatory requirements, and profitability increased. This was driven by higher interest income, non-interest income, and operational efficiency, indicating a healthy financial environment.
• Credit Growth: The increase in loans, advances, and overdrafts by 25.3% reflects a favorable macroeconomic environment and regulatory support for private sector credit growth. This is crucial for economic development and indicates the sector's ability to support businesses and individuals.
• Outreach and Access: The sector expanded through various channels, such as branch networks, agent banking, and digital platforms. This implies increased access to financial services, which is essential for financial inclusion and economic growth.
• Regulatory Oversight: The sector is subject to effective regulatory oversight, as evidenced by the Bank's approvals and interventions in cases of non-compliance.
• Credit Reference System: The improvement in the credit reference system, with more credit inquiries and reports sold, indicates increased transparency and a reduction in information asymmetry in credit processes.
• Foreign Exchange Services: The continued provision of foreign exchange services indicates a robust foreign exchange market and enhances financial market functionality.
• Microfinance Inclusion: The issuance of microfinance licenses demonstrates a commitment to financial inclusion and providing access to financial services for underserved populations.
• Regional and International Engagement: Participation in regional and international forums reflects a commitment to aligning with global best practices and enhancing cooperation.

Tanzania's Employment Landscape: A Closer Look at Employment and Labor Dependency

This research provided information on employment rates in Africa, global labor market conditions, and a list of the top ten African countries with the highest employment rates as per the International Labour Organization (ILO):

Tanzania's Employment Rate:

Tanzania is one of the top ten countries in Africa with a high employment rate. Specifically, Tanzania has an employment-to-population ratio of 80.3%, as reported by the International Labour Organization.

Global Population Growth:

According to the United Nations, the global population has reached 8 billion. Sub-Saharan African nations are significant contributors to this population growth, which is a notable factor in the demand for employment.

Employment Challenges in Africa:

The increasing population in Africa is leading to a higher demand for jobs. However, the challenge is that the rate of population growth in Africa is outpacing the creation of new job opportunities. This situation is not unique to Africa and is a global concern.

Global Labor Market Deterioration:

In 2022, the global outlook for labor markets faced significant deterioration, according to the International Labour Organization. Factors contributing to this include emerging geopolitical tensions, the Ukraine conflict, uneven recovery from the pandemic, and supply chain bottlenecks, which have created conditions conducive to stagflation.

Impact of COVID-19:

Most countries worldwide had not yet fully recovered in terms of employment levels and hours worked by 2022, as compared to the pre-pandemic situation in 2019.

African Progress in Employment:

Despite these challenges, some African countries have made commendable progress in addressing employment issues, indicating their commitment to achieving sustainable economic growth and social development.

Importance of Employment Statistics:

The ILO emphasizes the significance of such employment statistics in tracking progress towards both national and international policy objectives.

These statistics provide valuable insights into the employment and dependency dynamics in these African countries. Countries with higher employment rates are better equipped to support their populations, but labor dependency ratios indicate the economic burden of supporting dependents, including children and the elderly, for each employed individual.

Madagascar:

• Employment to Population Ratio: 84.1%
• Labor Dependency Ratio: 0.35
• Madagascar has the highest employment-to-population ratio on the list, indicating that a significant proportion of its working-age population is employed. The low labor dependency ratio suggests that there are fewer dependents for each employed individual, which is favorable for the country's economic and social stability.

Tanzania:

• Employment to Population Ratio: 80.3%
• Labor Dependency Ratio: 1.20
• Tanzania is the second-highest in terms of employment rate but has a moderately higher labor dependency ratio. This means there are more dependents per employed person compared to Madagascar

Burundi:

• Employment to Population Ratio: 78.9%
• Labor Dependency Ratio: 1.34
• Burundi also has a relatively high employment rate, and it has a somewhat higher labor dependency ratio, which implies a larger dependent population for each working individual.

Ethiopia:

• Employment to Population Ratio: 77.3%
• Labor Dependency Ratio: 1.14
• Ethiopia has a strong employment rate, and its labor dependency ratio is relatively lower, indicating a slightly more favorable situation in terms of dependents per worker.

Mozambique:

• Employment to Population Ratio: 75.4%
• Labor Dependency Ratio: 1.35
• Mozambique's employment rate is substantial, but it has a relatively higher labor dependency ratio, suggesting a larger dependent population for each employed person.

Liberia:

• Employment to Population Ratio: 73.8%
• Labor Dependency Ratio: 1.28
• Liberia's employment rate is significant, and its labor dependency ratio is moderate, indicating a relatively balanced situation in terms of dependents per worker.

Niger:

• Employment to Population Ratio: 73.1%
• Labor Dependency Ratio: 1.68
• Niger has a relatively high employment rate, but it also has the highest labor dependency ratio on the list, suggesting a substantial number of dependents for each employed individual.

Eritrea:

• Employment to Population Ratio: 72.5%
• Labor Dependency Ratio: 1.27
• Eritrea has a noteworthy employment rate, and its labor dependency ratio is moderate, indicating a reasonably balanced dependency situation.

Kenya:

• Employment to Population Ratio: 70.3%
• Labor Dependency Ratio: 1.29
• Kenya's employment rate is substantial, and its labor dependency ratio is moderate, suggesting a somewhat balanced situation in terms of dependents per worker.

Angola:

• Employment to Population Ratio: 69.0%
• Labor Dependency Ratio: 1.63
• Angola has a relatively high employment rate, but it also has a higher labor dependency ratio, indicating a substantial dependent population for each employed individual.

Tanzania's employment rates and labor dependency ratios and its potential implications for economic growth:

High Employment Rate in Tanzania:

Tanzania boasts an employment-to-population ratio of 80.3%, which is relatively high. This indicates that a significant portion of the working-age population in Tanzania is employed. A high employment rate is generally positive as it means that more people are participating in the labor force and contributing to economic activities.

Moderate Labor Dependency Ratio:

Tanzania's labor dependency ratio stands at 1.20. This ratio suggests that, on average, there are 1.20 dependents (children, elderly, and others) for each working individual. While this ratio is not exceptionally low, it is moderate and manageable, indicating that the burden of supporting dependents is within reasonable limits.

Implications for Economic Growth:

The combination of a high employment rate and a moderate labor dependency ratio can have several implications for economic growth in Tanzania:

• Positive Economic Potential: A high employment rate means that a substantial part of the population is engaged in economic activities. This can lead to increased production, higher GDP, and potential economic growth.
• Balanced Dependency Ratio: The moderate labor dependency ratio suggests that the country is not overwhelmed with dependents, which is often an economic burden. This can allow families to allocate resources more efficiently and potentially invest in education and other productive endeavors.
• Economic Resilience: A significant portion of the population being employed can contribute to economic resilience and stability, as there is a workforce available to respond to economic challenges and opportunities.

According to the International Labor Organization, below are 10 African countries with the highest employment rate.

Export and Import Trends (2021-2023)

This research provided pertains to Tanzania's export and import statistics for the year 2021, 2022, and an estimate for 2023, along with the percentage change in these values over the past two years:

Export of Goods and Services:

• In 2021, Tanzania's exports of goods and services amounted to $9,197.4 million.
• In 2022, this export value increased to $11,398 million, reflecting a 15% growth over the year.
• The projection for 2023 shows a further increase, reaching $13,140.8 million, which is a 15% increase compared to 2022.
• Over the two-year period from 2021 to 2023, exports have shown substantial growth of 43%.

Import of Goods and Services:

• In 2021, Tanzania's imports of goods and services amounted to $10,260.4 million.
• In 2022, the import value increased significantly to $14,995.6 million, representing a substantial 46% growth in imports.
• The projection for 2023 indicates imports of $16,502.5 million, which is a 10% increase compared to 2022.
• Over the two-year period from 2021 to 2023, imports have shown significant growth of 61%.

Balance of Payment:

• The balance of payment represents the difference between exports and imports. In 2021, Tanzania had a negative balance of payment of -$1,063 million, indicating that imports exceeded exports.
• In 2022, this negative balance further increased to -$3,597.6 million.
• However, the projection for 2023 shows an improvement in the balance of payment, with a negative balance of -$3,361.7 million.
• Despite the ongoing trade deficit, there has been a 7% reduction in the negative balance from 2022 to 2023.
• Over the two-year period from 2021 to 2023, the balance of payment has increased substantially, primarily due to the higher import growth compared to exports, resulting in a 216% increase in the deficit.

While there is strong growth in both exports and imports, the faster growth in imports has led to a widening trade deficit. The improvement in the balance of payment from 2022 to 2023 shows efforts to address this imbalance.

Overall, the economic performance of Tanzania, as indicated by this research, highlights the importance of managing trade imbalances to ensure long-term economic stability and sustainability:

Export Growth:

Tanzania has experienced consistent growth in its exports of goods and services over the period from 2021 to the projected 2023. The 43% increase over this two-year span shows that the country has been successful in expanding its export activities. This growth can be an indicator of economic vitality, as it reflects the country's ability to produce and sell more goods and services to international markets.

Import Growth:

Imports have also grown significantly, with a 61% increase from 2021 to the estimated 2023 figures. While import growth can indicate economic activity and development, a substantially higher import growth rate compared to exports can lead to trade imbalances and potentially strain the balance of payments.

Trade Deficit:

The balance of payment data indicates that Tanzania has been running a trade deficit. This means that the value of goods and services imported exceeds the value of those exported. A trade deficit can have implications for a country's economic performance, as it implies that it is spending more on imports than it is earning from exports. While a trade deficit is not necessarily negative, it can become a concern if it is consistently widening.

Change in Balance of Payment:

The data shows that the balance of payment has improved slightly in 2023, with a 7% reduction in the negative balance compared to 2022. This could be seen as a positive sign, showing that Tanzania is working towards reducing the trade deficit, which is often a goal for policymakers.

Impact of Monetary Contraction on Tanzania's Economy: Analyzes the decline in net domestic assets, domestic claims, and various money supply measures and its potential effects on economic activity.

In August 2023, the money supply in Tanzania exhibited various changes and trends. This research is categorized into different components, including net foreign assets, net domestic assets, and different measures of broad and narrow money supply:

Net Foreign Assets:

• On August 22, net foreign assets were at -17.7 billion units of the currency.
• In July, they were at -0.5 billion units.
• By August 23, they increased to 3.8 billion units.
• This represents a substantial one-month change, with net foreign assets growing by 113%.
• Comparing to the same period the previous year, there has been a significant increase of 566% in net foreign assets.

Bank of Tanzania:

• On August 22, the Bank of Tanzania had -11.2 billion units.
• In July, it had 1.4 billion units.
• By August 23, the Bank of Tanzania's assets increased to 6.1 billion units.
• This represents a one-month change of 77%.
• Compared to the same period the previous year, there has been an increase of 284% in the Bank of Tanzania's assets.

Net Domestic Assets:

• On August 22, net domestic assets were 29.9 billion units.
• In July, they were 30.2 billion units.
• By August 23, they decreased to 22.8 billion units.
• This represents a one-month decline of 32%.
• Compared to the same period the previous year, there has been a decrease of 31% in net domestic assets.

Domestic Claims:

• On August 22, domestic claims were 27.3 billion units.
• In July, they were 23.1 billion units.
• By August 23, they further decreased to 17.5 billion units.
• This represents a one-month decline of 32%.
• Compared to the same period the previous year, there has been a substantial decrease of 56% in domestic claims.

Claims on the Private Sector:

• Claims on the private sector slightly increased from 20.7 billion units in July to 21 billion units in August, representing a 1% increase.

Extended Broad Money (M3):

• The extended broad money supply (M3) decreased from 20.9 billion units in July to 17.4 billion units in August, representing a one-month decline of 20%.
• Compared to the same period the previous year, there has been a 34% increase in M3.

Foreign Currency Deposits:

• Foreign currency deposits decreased from 32.4 billion units in July to 22.5 billion units in August, representing a substantial one-month decline of 44%.
• Compared to the same period the previous year, there has been a 66% increase in foreign currency deposits.

Broad Money Supply (M2):

• The broad money supply (M2) decreased from 17.8 billion units in July to 15.9 billion units in August, representing a one-month decline of 12%.
• Compared to the same period the previous year, there has been a 21% increase in M2.

Other Deposits:

• Other deposits increased from 15.7 billion units in July to 17.1 billion units in August, representing an 8% one-month increase.
• Compared to the same period the previous year, there has been a 13% decrease in other deposits.

Narrow Money Supply (M1):

• The narrow money supply (M1) decreased from 19.2 billion units in July to 15.2 billion units in August, representing a one-month decline of 26%.
• Compared to the same period the previous year, there has been a 41% increase in M1.

Currency in Circulation:

• Currency in circulation increased from 15.2 billion units in July to 16.3 billion units in August, representing a 7% one-month increase.
• Compared to the same period the previous year, there has been a 25% increase in currency in circulation.

Transferable Deposits:

• Transferable deposits decreased from 21.1 billion units in July to 14.7 billion units in August, representing a substantial one-month decline of 44%.
• Compared to the same period the previous year, there has been a 48% increase in transferable deposits.

The contraction in various money supply measures may raise concerns about economic activity in the short term. However, the increase in net foreign assets and central bank assets shows efforts to stabilize or stimulate the economy, which can be important for long-term economic growth:

Net Foreign Assets:

The significant increase in net foreign assets, both in the one-month and one-year comparisons, indicates a substantial influx of foreign currency into the country. This could be due to factors such as foreign investments, trade balances, or financial inflows. An increase in net foreign assets is generally seen as a positive sign for economic stability.

Bank of Tanzania Assets:

The substantial growth in the assets of the central bank (Bank of Tanzania) is indicative of its monetary policy interventions. It shows that the central bank may be actively managing monetary policy to stabilize or stimulate the economy, which can be a response to economic conditions and goals.

Net Domestic Assets and Domestic Claims:

The decline in net domestic assets and domestic claims indicates a reduction in the money supply generated within the country. A decrease in these figures can be interpreted as a contraction in domestic lending and money creation. This might be an attempt to control inflation or address other monetary concerns.

Claims on the Private Sector:

The slight increase in claims on the private sector can show that banks are willing to extend credit to businesses, potentially supporting economic activity and growth.

Extended Broad Money (M3):

The decrease in the extended broad money supply (M3) shows that the overall money supply in the economy has contracted in the short term. This can have implications for economic growth as a decrease in the money supply may lead to reduced spending and investment.

Foreign Currency Deposits:

The sharp decline in foreign currency deposits may indicate reduced confidence in holding foreign currency or other factors impacting the demand for foreign currency. This may have implications for exchange rates and international trade.

Broad Money Supply (M2):

The decrease in M2 indicates a contraction in a broader measure of the money supply, which can affect liquidity and economic activity.

Narrow Money Supply (M1):

The significant decrease in narrow money supply (M1) may indicate reduced cash and liquid assets in circulation. A contraction in M1 can have immediate effects on consumer spending and short-term economic activity.

Currency in Circulation:

The increase in currency in circulation might indicate that people are holding more cash, potentially due to concerns about the stability of financial assets or a preference for cash transactions.

Transferable Deposits:

The decrease in transferable deposits can show a decrease in the availability of short-term, liquid assets, which can have implications for financial stability.

Implications for Economic Growth in 2023

In the Government Budget Performance Evaluation for August 2023, there is a comparison of financial data between 2022 and 2023, with a specific focus on actual operations, the budget, and estimated figures.

The Government Budget Performance Evaluation for August 2023 indicates several notable trends. Government expenditure exceeded the budget primarily due to higher development expenditure, while revenue collection fell short of expectations. The widening deficit is a concerning aspect of this evaluation, as it signifies a substantial increase in the government's financial shortfall, which may necessitate further examination and potential adjustments to financial planning and fiscal policies.

Government Expenditure:

• In 2022, the government allocated a budget of 2,561.1 units for its expenditures. However, in 2023, the actual operations cost slightly more, totaling 2,777.4 units. This represents a 3% increase over the estimated budget. The key components of government expenditure include wages and salaries, interest costs, development expenditure, and other recurrent expenditure.
• Wages and Salaries: Actual wages and salaries in 2023 were 826.4 units, which is 2% lower than the estimated budget of 839.2 units.
• Interest Costs: The government incurred 220 units in interest costs, a 2% reduction from the budgeted 223.9 units.
• Development Expenditure: This category saw an increase, with actual operations in 2023 amounting to 1,160.2 units, which is 7% higher than the budget estimate of 1,083.9 units.
• Other Recurrent Expenditure: Actual operations in this category amounted to 570.8 units, surpassing the estimated budget of 554.8 units by 3%.

Government Revenues:

• The government's revenues are primarily derived from taxes and non-tax sources. In 2023, the actual government revenues were 2,129.7 units, which is 7% less than the budgeted amount of 2,286.8 units.
  • Taxes on Imports: Revenues from taxes on imports reached 764 units in 2023, a 1% decrease from the budgeted 774.2 units.
  • Income Tax: The government collected 487 units in income tax in 2023, representing an 18% reduction from the budgeted 593.2 units.
  • Tax on Local Goods and Services: Revenue from this source increased by 7% in 2023, reaching 453.7 units compared to the estimated budget of 423.5 units.
  • Other Tax: Revenue from other taxes amounted to 109.1 units in 2023, falling 18% below the budgeted 133 units.
  • Non-Tax Revenues: The government generated 315.9 units in non-tax revenues in 2023, marking a 13% decrease from the budgeted 362.9 units.

Deficit:

The budget deficit is the difference between government expenditure and revenue. In 2023, the government faced a deficit of -647.7 units, which represents a 56% increase from the budgeted deficit of -415 units. This significant increase in the deficit raises concerns about the government's fiscal management.

While there are positive signs such as increased development expenditure, the Government of Tanzania faces challenges in terms of revenue collection and budget deficit management. To promote economic growth, the government may need to address these challenges by improving tax collection, managing deficits effectively, and exploring alternative revenue sources. Additionally, a focus on ensuring that development expenditure is directed toward projects that contribute directly to economic growth could be a key strategy for the future:

Expenditure Prioritization:

The government increased its development expenditure in 2023 by 7% compared to the budget estimate. This indicates a commitment to investing in infrastructure, public projects, and economic development, which can be seen as a positive step toward fostering economic growth. Development expenditure often contributes to job creation and improvements in productivity, which can stimulate economic growth.

Revenue Shortfall:

The government's revenue collection fell short of the budgeted amount in 2023, with a 7% deficit. This shortfall might limit the government's ability to fund projects and services that are crucial for economic growth, such as education, healthcare, and infrastructure development. The revenue underperformance could indicate challenges in tax collection or a need for more efficient revenue generation strategies.

Deficit Increase:

The substantial increase in the budget deficit (56%) is concerning. A widening deficit may result in increased government borrowing, which can have adverse consequences for economic growth if not managed properly. It might lead to higher debt service costs and crowd out other essential public investments, potentially hindering economic growth prospects.

Taxation Challenges:

The data indicates a significant decline in income tax revenue and other tax revenues (18% and 18%, respectively) in 2023. This may suggest challenges in tax collection or economic conditions affecting individuals' income. A reduction in income tax revenue could be indicative of economic struggles for citizens, which can impact economic growth negatively.

Non-Tax Revenues:

The decrease in non-tax revenues (13%) is another area of concern. This suggests that the government's non-tax revenue sources, which could include fees, fines, and other non-tax income, have decreased. This might be due to economic conditions affecting these revenue streams, which can, in turn, impact the government's ability to invest in economic growth initiatives.

Debts development

Tanzania's National Debt Trends: Examining External and Domestic Debt Dynamics

August 2023, the national debt of this country amounted to USD 40,574.6 million. This debt includes both public and private external debt. The reduction in debt is primarily due to exchange rate fluctuations, particularly the appreciation of the US dollar in comparison to other currencies, and a substantial part of the debt is external in nature, indicating a significant reliance on foreign borrowing.

National Debt Stock:

The national debt stock refers to the total amount of debt that a country owes. This includes various types of debt, such as public debt (both domestic and external) and private external debt. In this case, the national debt stock was USD 40,574.6 million as of the end of August 2023.

Decrease in Debt:

There was a decrease in the national debt stock by USD 728.1 million in comparison to the previous month. This reduction in debt is primarily attributed to exchange rate fluctuations. Exchange rate fluctuations can impact the value of a country's debt when it is denominated in foreign currencies. In this case, it's stated that the appreciation of the US dollar (USD) against other currencies contributed to the decrease in the debt.

Composition of Debt:

The national debt stock is composed of both public and private external debt. Public debt is typically incurred by the government, and it can be further divided into domestic (owed to domestic creditors) and external (owed to foreign creditors) components. In this situation, external debt constituted 70.5 percent of the overall debt. This means that a significant portion of the country's debt is owed to foreign creditors.

This research provides insights into the changes in a country's national debt over a specific time period. It shows that external debt decreased by 3% in a month but increased by 4% over the year. On the other hand, domestic debt increased by 3% in a month and 16% over the year. The total national debt decreased by 1% in a month but increased by 7% over the year. These numbers reflect the dynamics of the country's external and domestic borrowing and provide valuable information for assessing its fiscal health and economic trends.

The data pertains to the development of a country's national debt as of August 21, July 2023, and August 2023. It includes information about both external debt, domestic debt, and the total debts, along with changes over one month and one year:

External Debt:

• As of August 21, the external debt was Tsh63,473,790.00 million.
• In July 2023, it increased to Tsh67,898,300.00 million.
• However, by August 2023, it decreased to Tsh65,815,190.00 million.
• The one-month change shows a decrease of 3%, indicating that the external debt reduced over the course of a month.
• The one-year change shows an increase of 4%, meaning that compared to August 2022, the external debt increased by 4%.

Domestic Debt:

• As of August 21, the domestic debt was Tsh25,232,700.00 million.
• In July 2023, it increased to Tsh28,506,200.00 million.
• By August 2023, it further increased to Tsh29,226,300.00 million.
• The one-month change shows an increase of 3%, indicating that the domestic debt increased over the course of a month.
• The one-year change shows a substantial increase of 16%, meaning that compared to August 2022, the domestic debt increased by 16%.

Total Debts:

• As of August 21, the total national debt (comprising both external and domestic debt) was Tsh88,706,490.00 million.
• In July 2023, it increased to Tsh96,404,500.00 million.
• However, by August 2023, it decreased to Tsh95,041,490.00 million.
• The one-month change shows a decrease of 1%, indicating that the total national debt reduced over the course of a month.
• The one-year change shows an increase of 7%, meaning that compared to August 2022, the total national debt increased by 7%.

The changes in Tanzania's national debt, both external and domestic, over a specific time period with a complete picture of Tanzania's economic growth.

Debt Composition:

The data shows that both external and domestic debts have increased over the past year. External debt increased by 4%, while domestic debt increased by a substantial 16%. The composition of debt is essential, as it can have different implications for economic growth. High external debt can lead to foreign exchange risks, while high domestic debt can increase the government's interest payment burden.

Total Debt Dynamics:

The total national debt increased by 7% over the past year. An increase in the total debt can be a concern if it outpaces the country's economic growth. It can indicate that the government is borrowing more, which might be used for investments in infrastructure, social programs, or other areas. However, it can also indicate fiscal challenges if the borrowed funds are not used efficiently or if the economy doesn't grow at a rate that can sustain the debt burden.

Short-Term Changes:

The one-month changes in debt levels are relatively small, with a 3% decrease in external debt and a 3% increase in domestic debt. Short-term fluctuations in debt levels can be influenced by various factors, including government policies, borrowing for specific projects, or repayment schedules.

Sustainability:

What's critical in assessing the economic impact of growing national debt is its sustainability. A steadily increasing debt burden can become unsustainable if the country's economic growth doesn't keep pace, leading to fiscal challenges and potential debt crises.