Net Foreign Assets:

• On 22-Aug, it was 3.8.
• On 23-Sep, it increased to 4.3.
• This represents a 12% increase over one month.
• Over the past year, there was a significant increase of 828%.

Bank of Tanzania:

• On 22-Aug, it was 6.1.
• On 23-Sep, it decreased to 2.9.
• This shows a significant decrease of 110% over one month.
• Over the past year, there was a substantial increase of 993%.

Net Domestic Assets:

• On 22-Aug, it was 22.8.
• On 23-Sep, it decreased to 18.
• This represents a 27% decrease over one month.
• Over the past year, there was a decrease of 161%.

Domestic Claims:

• On 22-Aug, it was 17.5.
• On 23-Sep, it increased slightly to 18.1.
• This shows a 3% increase over one month.
• Over the past year, there was a decrease of 86%.

Securities Held by Banks:

• On 22-Aug, it was 24.8.
• On 23-Sep, it decreased to 21.3.
• This represents a 16% decrease over one month.
• Over the past year, there was a 19% increase.

Claims on the Private Sector:

• On 22-Aug, it was 21.
• On 23-Sep, it decreased to 19.5.
• This represents an 8% decrease over one month.
• Over the past year, there was a 13% decrease.

Extended Broad Money (M3):

• On 22-Aug, it was 17.4.
• On 23-Sep, it decreased to 14.5.
• This shows a 20% decrease over one month.
• Over the past year, there was a 6% increase.

Foreign Currency Deposits:

• On 22-Aug, it was 22.5.
• On 23-Sep, it decreased to 16.2.
• This represents a 39% decrease over one month.
• Over the past year, there was a 32% increase.

Broad Money Supply (M2):

• On 22-Aug, it was 15.9.
• On 23-Sep, it decreased to 14.
• This shows a 14% decrease over one month.
• Over the past year, there was a 3% decrease.

Narrow Money Supply (M1):

• On 22-Aug, it was 15.2.
• On 23-Sep, it decreased to 12.8.
• This shows a 19% decrease over one month.
• Over the past year, there was a 21% increase.

Currency in Circulation:

• On 22-Aug, it was 16.3.
• On 23-Sep, it decreased significantly to 10.7.
• This represents a 52% decrease over one month.
• Over the past year, there was a 66% decrease.

Transferable Deposits:

• On 22-Aug, it was 14.7.
• On 23-Sep, it decreased to 13.8.
• This shows a 7% decrease over one month.
• Over the past year, there was a 51% increase.

Tanzania's money supply and its changes over time can offer insights into the country's economic performance:

Net Foreign Assets:

The significant increase in net foreign assets over the past year (828%) shows a substantial inflow of foreign capital, which could be positive for Tanzania's economy. However, the one-month change indicates a decrease of 12%, which may be a short-term fluctuation.

Bank of Tanzania:

The Bank of Tanzania has seen a remarkable increase in assets over the past year (993%), but it has experienced a significant decrease in assets over one month (110%). This could be due to various factors, such as changes in central bank policies or external financial conditions.

Net Domestic Assets:

A decrease of 27% in net domestic assets over one month may indicate a reduction in domestic economic activity or a change in monetary policy. The significant decrease over the past year (161%) shows a longer-term trend.

Extended Broad Money (M3):

M3, which represents the broadest measure of money supply, has decreased by 20% over one month. This could suggest reduced liquidity in the economy, which might be associated with economic challenges or changes in financial markets.

Narrow Money Supply (M1):

M1 has decreased by 19% over one month, indicating a reduction in the most liquid forms of money. This could be a sign of decreased consumer and business spending.

Currency in Circulation:

The sharp decrease of 52% in currency in circulation over one month could be related to changes in consumer behavior, monetary policies, or banking activities. This decrease could be a cause for concern if it represents a loss of confidence in the local currency.

Foreign Currency Deposits:

The 39% decrease in foreign currency deposits over one month might indicate a change in preferences for foreign currencies or a reduction in foreign exchange reserves.

Other Deposits:

The 8% decrease in other deposits over one month and the 40% decrease over the past year could be due to various factors, including changes in saving habits and financial market conditions.

Tanzania's Current Account, which is a part of the country's balance of payments. The Current Account measures the flow of goods, services, income, and current transfers in and out of a country.

The "Goods Account" and the "Current Account Balance" have seen significant changes, with the former decreasing and the latter also showing a substantial decrease in the 1-month period.

Please note that negative values indicate deficits in these accounts.

Goods Account:

• On 22nd September, it was -738.6 million units of the currency.
• On 23rd August, it was -404.4 million units of the currency.
• On 23rd September, it was -475.3 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it decreased by 45.25%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it increased by 17.53%.

 Services Account:

• On 22nd September, it was 177.17 million units of the currency.
• On 23rd August, it was 356.6 million units of the currency.
• On 23rd September, it was 338.9 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it increased by 101.28%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it decreased by -4.96%.

Goods and Services:

• On 22nd September, it was -561.4 million units of the currency.
• On 23rd August, it was -47.8 million units of the currency.
• On 23rd September, it was -136.5 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it decreased by 91.49%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it increased by 185.56%.

Primary Income Account:

• On 22nd September, it was -81.9 million units of the currency.
• On 23rd August, it was -87 million units of the currency.
• On 23rd September, it was -86.1 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it increased by 6.23%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it decreased by -1.03%.

Secondary Income Account:

• On 22nd September, it was 44.6 million units of the currency.
• On 23rd August, it was 49.6 million units of the currency.
• On 23rd September, it was 50.3 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it increased by 11.21%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it increased by 1.41%.

Current Account Balance:

• On 22nd September, it was -598.7 million units of the currency.
• On 23rd August, it was -85.2 million units of the currency.
• On 23rd September, it was -172.2 million units of the currency.
• In the 1-month period from 23rd August to 23rd September, it decreased by 85.77%.
• In the 1-year period from 23rd September (of the previous year) to 23rd September, it increased by 102.11%.

Tanzania's economy has experienced changes in its trade balance and current account position, particularly over the past month. The country's economic situation can be influenced by both domestic and international factors, and these changes may reflect the impact of global economic trends, commodity prices, and the performance of key sectors like tourism and services:

Goods and Services:

The combined "Goods and Services" account shows a substantial change over the past year, with a significant increase of 185.56%. This shows that Tanzania has experienced a notable change in its trade balance, likely due to shifts in the export and import of goods and services.

Goods Account:

The "Goods Account" has seen a 45.25% decrease in just one month. A decrease in the goods account could indicate a decline in the trade balance, which might be influenced by factors such as changes in commodity prices, export demand, or import levels. The 17.53% increase over the past year may be indicative of longer-term economic trends.

Services Account:

The "Services Account" increased by 101.28% in the span of one month, which is a significant change. This could be related to changes in the tourism industry, which is an important sector for Tanzania. The 1-year decrease of -4.96% may reflect the impact of the global economic environment on the services sector.

Current Account Balance:

The "Current Account Balance" has seen a substantial decrease of 85.77% in just one month, indicating that Tanzania's current account deficit has worsened in a short time frame. However, over the past year, it increased by 102.11%, which shows that the situation may have been better compared to the previous year.

Primary Income Account:

This account shows a small increase of 6.23% in one month but has decreased by -1.03% over the past year. This might reflect changes in income flows, such as remittances or foreign investment returns.

Secondary Income Account:

The "Secondary Income Account" has increased by 11.21% in one month and 1.41% over the past year. This may be related to factors like aid, grants, or other transfers.

External Debt:

• On 21st September, it was 63,705,462.00 million of the currency.
• In August 2023, it increased to 66,783,625.00 million of the currency.
• By September 2023, it decreased to 65,120,471.00 million of the currency.
• In the 1-month period from August to September, it decreased by 2%.
• In the 1-year period from September (of the previous year) to September, it increased by 2%.

Domestic Debt:

• On 21st September, it was 25,542,800.00 million of the currency.
• In August 2023, it increased to 29,226,300.00 million of the currency.
• By September 2023, it further increased to 29,449,500.00 million of the currency.
• In the 1-month period from August to September, it increased by 1%.
• In the 1-year period from September (of the previous year) to September, it increased by 15%.

Total Debts:

• On 21st September, the total debt was 89,248,262.00 million of the currency.
• In August 2023, it increased to 96,009,925.00 million of the currency.
• By September 2023, it decreased to 94,569,971.00 million of the currency.
• In the 1-month period from August to September, the total debt decreased by 1%.
• In the 1-year period from September (of the previous year) to September, the total debt increased by 6%.

The decrease in the total debt in the 1-month period is driven by the reduction in external debt, while domestic debt continues to grow. It's important for Tanzania's government to manage its debt levels carefully to ensure sustainable economic growth and stability:

External Debt:

Tanzania's external debt decreased by 2% in one month but increased by 2% over the past year.

Domestic Debt:

Domestic debt increased by 1% in one month and by a significant 15% over the past year.

Total Debts:

The total national debt decreased by 1% in one month but increased by 6% over the past year.

Tanzania's national debt provides some insights into the country's economic situation:

• External Debt: The 2% decrease in external debt over one month shows that Tanzania has been able to reduce its reliance on external borrowing during that period. However, the 2% increase in external debt over the past year indicates that, despite the recent decrease, Tanzania's external debt has been growing over a longer time frame.
• Domestic Debt: The 1% increase in domestic debt in just one month may reflect increased government borrowing from domestic sources. The significant 15% increase in domestic debt over the past year shows that the government has been actively borrowing from domestic markets to fund its activities.
• Total Debts: The 1% decrease in total national debt in one month is primarily due to the reduction in external debt. However, the total debt has still increased by 6% over the past year, reflecting the country's overall borrowing and debt accumulation.

The management of national debt is a critical aspect of economic policy, and Tanzania's government may have specific reasons for its borrowing and debt management strategies. The sustainability of this debt and its impact on the economy will depend on a variety of factors, including the terms of borrowing, economic growth, and the ability to service the debt without causing fiscal stress.:

• The government's decision to reduce external debt over a one-month period could be a strategy to manage its debt burden and reduce reliance on foreign borrowing.
• The increase in domestic debt may indicate that the government is using domestic sources to finance its budget and development projects.
• The overall increase in the total national debt over the past year shows that the government has been actively borrowing to fund its programs and infrastructure projects.

The government's fiscal performance, including expenditure control and revenue generation, and the resulting budget deficit. The actual performance shows a smaller deficit than initially projected, which may have implications for fiscal stability and government finances.

Government Expenditure:

Wages and Salaries:

• Actual Operations (August 2023): 822.9
• Budgeted/Estimated: 825.9
• Percentage Change Between Actual and Estimated: 0%

Interest Costs:

• Actual Operations (August 2023): 285.1
• Budgeted/Estimated: 236.6
• Percentage Change Between Actual and Estimated: 20%

Development Expenditure:

• Actual Operations (August 2023): 1,357.3
• Budgeted/Estimated: 1,392.9
• Percentage Change Between Actual and Estimated: -3%

Other Recurrent Expenditure:

• Actual Operations (August 2023): 562.4
• Budgeted/Estimated: 768.5
• Percentage Change Between Actual and Estimated: -27%

Total Government Expenditure:

• Actual Operations (August 2023): 3,028
• Budgeted/Estimated: 3,224
• Percentage Change Between Actual and Estimated: -6%

Government Revenues:

Taxes on Imports:

• Actual Operations (August 2023): 824.7
• Budgeted/Estimated: 719.4
• Percentage Change Between Actual and Estimated: 15%

Income Tax:

• Actual Operations (August 2023): 988.9
• Budgeted/Estimated: 950.6
• Percentage Change Between Actual and Estimated: 4%

Tax on Local Goods and Services:

• Actual Operations (August 2023): 315.4
• Budgeted/Estimated: 349.6
• Percentage Change Between Actual and Estimated: -10%

Other Tax:

• Actual Operations (August 2023): 114.5
• Budgeted/Estimated: 126.7
• Percentage Change Between Actual and Estimated: -10%

Non-Tax Revenues:

• Actual Operations (August 2023): 293.2
• Budgeted/Estimated: 338.8
• Percentage Change Between Actual and Estimated: -13%

Total Government Revenues:

• Actual Operations (August 2023): 2,537
• Budgeted/Estimated: 2,485
• Percentage Change Between Actual and Estimated: 2%

Deficit:

• Actual Operations (August 2023): -491
• Budgeted/Estimated: -738.8
• Percentage Change Between Actual and Estimated: -34%

Key takeaways from this data:

• Government expenditure in August 2023 was slightly below the budgeted and estimated figures.
• Interest costs exceeded the budgeted amount, indicating increased borrowing costs.
• Development expenditure was slightly less than budgeted.
• Other recurrent expenditure was significantly lower than the budgeted amount.
• Government revenues exceeded the budgeted and estimated figures.
• The budget deficit in August 2023 was smaller than originally estimated.

Tanzania's government was able to maintain some control over its fiscal situation in August 2023, which is a positive sign for the country's economic stability. Effective expenditure management, revenue collection, and deficit reduction are essential components of sound fiscal policy:

Expenditure Control:

The government managed to control its expenditure in August 2023, with actual spending coming in slightly below the budgeted and estimated figures. This shows prudent financial management.

Interest Costs:

The fact that interest costs exceeded the budgeted amount by 20% indicates that the government may have had to pay more in interest on its debt during the month. This could be a result of higher borrowing costs or increased debt servicing requirements. 

Development Expenditure:

Although development expenditure was slightly less than budgeted, it remains a significant part of the budget. This indicates the government's commitment to investment in infrastructure and development projects.

Other Recurrent Expenditure:

The significant decrease in other recurrent expenditure compared to the budgeted amount (-27%) might reflect cost-cutting measures or adjustments in specific spending areas. 

Government Revenues:

Government revenues exceeded the budgeted and estimated figures, which is a positive sign for the country's fiscal health. This could be due to improved tax collection or other sources of revenue.

 Deficit Reduction:

The budget deficit in August 2023 was substantially smaller (-34%) than the initial estimate, indicating that the government managed its finances more efficiently during the month. A reduced deficit is generally positive for fiscal stability.

Tanzania has emerged as one of the top 10 African nations with the most favorable government fiscal situation when considering the balance between government revenue and government expenditure. According to data from the IMF's Fiscal Monitor Report, Tanzania now ranks ninth among African countries with a government overall balance of -3.3 percent of GDP.

The concept of "overall government balance," as defined by the IMF, pertains to the net lending and borrowing activities of the general government. In the realm of macroeconomics, the total government balance stands as a crucial indicator of a country's fiscal health and the management of its public finances. This term typically encompasses the disparity between government revenue and government expenditure, accounting for all revenue sources and types of spending.

According to the IMF, the overall fiscal balance could signify either net lending and borrowing by the general government or the contrast between total revenue, grants, and total expenditure and net lending in certain instances.

The IMF's Fiscal Monitor Report for October comprehensively outlines the overall balance for each nation, encompassing advanced economies, emerging and developing economies, as well as low-income countries. The fiscal gross and net debt figures presented in the Fiscal Monitor are derived from official data sources and estimations made by IMF staff.

When comparing regions, Sub-Saharan African countries exhibit an average overall balance of -4.0, in contrast to Asia's -3.3 and Latin America's -1.2, particularly among low-income developing countries.

Tanzania would depend on how the government uses its fiscal surplus or reduces its fiscal deficit and how it channels the resources to support economic growth and development.

Other factors like political stability, the business environment, and global economic conditions also play a significant role in determining a country's economic advantages.

Tanzania resulting from its government's favorable overall balance. However, having a positive government overall balance or a less negative one (in Tanzania's case, -3.3 percent of GDP) can potentially lead to several economic advantages for the country:

Fiscal Stability:

Maintaining a lower budget deficit can contribute to fiscal stability. It means the government is not overspending and is managing its finances prudently, which can instill confidence in investors and lenders.

Reduced Debt Burden:

A more favorable government overall balance may help reduce the accumulation of public debt. This can free up resources for other essential public investments and services.

Lower Borrowing Costs:

Countries with better fiscal management often benefit from lower interest rates when borrowing money, reducing the cost of servicing debt.

Attracting Investment:

A stable fiscal environment can make Tanzania more attractive to both domestic and foreign investors, as it suggests a lower risk of sudden tax hikes or financial crises.

Economic Growth:

Effective public financial management can support economic growth by ensuring that government resources are allocated efficiently and effectively, promoting infrastructure development, education, and healthcare, which can have positive impacts on the overall economy.

Confidence in the Economy:

A positive government overall balance can enhance confidence in the Tanzanian economy among both citizens and international partners, leading to increased economic activity and investments.

Below are the ten African countries with the highest overall government balance in Africa.

Estimated Budget (Total Collections): 47.42 Tsh. Trillions

This represents the total amount of revenue the government expects to collect during the fiscal year 2024/2025. It includes all sources of income, including internal revenue, aids, domestic credit, and foreign loans.

Internal Revenue: 34.43 Tsh. Trillions

Internal revenue refers to the income generated by the government from sources within the country. This includes taxes, fees, and other revenue streams collected domestically.

Aids: 4.29 Tsh. Trillions

Aids in this context likely refer to financial assistance or grants received by the government from international organizations, foreign governments, or donor countries. These funds are often provided to support specific development projects or programs.

Domestic Credit: 6.14 Tsh. Trillions

Domestic credit is the amount of money borrowed by the government from domestic sources, such as banks or the issuance of government bonds within the country. This can be used to cover budget deficits or fund various government initiatives.

Foreign Loans: 2.55 Tsh. Trillions

Foreign loans represent the funds borrowed by the government from foreign entities, such as international financial institutions or foreign governments. These loans may be used to finance infrastructure projects, economic development, or other national initiatives.

Tanzania can ensure that the estimated budget has a direct and positive impact on the economy at the local level. Effective budget management and the strategic allocation of resources can help promote economic growth, reduce poverty, and improve the overall well-being of its citizens.

For Tanzania to ensure that the estimated budget for the year 2024/2025 has a direct and positive impact on the economy, especially at the local level, key issues to consider and should be taken into account:

Effective Revenue Collection and Management:

Improve the efficiency and effectiveness of internal revenue collection to maximize the funds available for the budget. This includes tackling issues related to tax evasion and enhancing tax administration.

Transparency and Accountability:

Ensure transparency in budget allocation and expenditure. Publish detailed budgets and financial reports to inform the public about how funds are being utilized. Accountability mechanisms, including audits, should be in place to prevent misappropriation of funds.

Infrastructure Development:

Allocate a portion of the budget to infrastructure development projects that can have a direct and immediate impact on the local economy. Investments in roads, bridges, utilities, and other public infrastructure can create jobs, stimulate economic activity, and improve the quality of life for local communities.

Supporting Small and Medium-sized Enterprises (SMEs):

Encourage the growth of local SMEs by providing them with access to credit, training, and market opportunities. This can stimulate entrepreneurship, create jobs, and contribute to economic growth at the grassroots level.

Agricultural and Rural Development:

Invest in agriculture and rural development programs. Agriculture is a significant contributor to Tanzania's economy, and supporting smallholder farmers, promoting agribusiness, and improving access to markets can have a direct impact on rural communities.

Education and Skill Development:

Allocate funds for education and skill development programs to improve the human capital of the local population. A well-educated and skilled workforce is essential for economic growth and innovation.

Healthcare and Social Services:

Prioritize healthcare and social services, as a healthy and well-supported population is more productive. Invest in healthcare infrastructure and services to improve public health.

Regional Equity:

Ensure that budget allocations take into account the specific needs of different regions within the country. Address regional disparities by directing resources to underdeveloped areas.

Monitoring and Evaluation:

Implement a robust system for monitoring and evaluating the impact of budget expenditures. Regularly assess whether the allocated funds are achieving their intended outcomes and make adjustments as necessary.

Public Participation and Consultation:

Engage with local communities and stakeholders in the budget planning process. Seek their input and involve them in decision-making to ensure that budget priorities align with local needs.

Boosting Tanzania's Economy: IMF Allocation of USD 150 Million and Its Economic Implications

Tanzania has joined the list of African countries receiving funds from the IMF's $1 billion initiative. In this allocation, Tanzania will receive $150 million. Senegal leads the list, set to receive $276 million, followed closely by Rwanda, which is designated to receive $262 million. The Democratic Republic of Congo follows with a sum of $200 million, and Tanzania comes in fourth, securing $150 million. Somalia is next in line to receive $100 million, with Gambia receiving $10 million, and COMOROS getting $4.7 million.

This information comes from a report by the East African, and it's worth noting that while eight countries were considered, only seven will benefit from the $1 billion fund.

The International Monetary Fund (IMF) has assessed the economic, financial, social, and governance policies of eight African countries over the past month (October) to bolster their dwindling foreign exchange reserves and provide budgetary support. As a result of these evaluations, seven of the eight countries have committed to financing exceeding $1 billion, pending approval by the IMF Executive Board.

Africa has long grappled with a complex array of challenges, including economic disparities, inadequate healthcare, infrastructure deficiencies, and political uncertainties. The financial assistance provided by the IMF holds the promise of strengthening struggling economies, mitigating the impact of global economic shifts, and creating a foundation for sustainable development.

Typically, the IMF's support for Africa aims to foster an environment where African nations can harness their potential, empowering themselves to build resilient, self-sufficient economies and thriving societies.

With that said here is the list of African countries set to receive funding from the IMF, as seen in a report by the East African.

The funds are used and the success of their deployment will depend on the Tanzanian government's policies and priorities. Careful planning and management are essential to maximize the economic advantages of receiving this financial support.

Receiving USD 150 million from the IMF offers several potential economic advantages for Tanzania:

Financial Stability:

The funds can help stabilize Tanzania's economy by providing an injection of foreign exchange reserves. This stability can help mitigate economic fluctuations and reduce the risk of financial crises.

Budgetary Support:

The funds can be used to support the government's budget, allowing for increased public spending on essential services, infrastructure development, and social programs. This can contribute to economic growth and improved living standards.

Debt Management:

Tanzania can use the funds to manage its debt, making it easier to meet debt service obligations and potentially refinance debt on more favorable terms. This can reduce the financial burden on the government.

Economic Development:

The funds can be directed towards development projects and investments in key sectors of the economy, such as infrastructure, education, and healthcare. This can stimulate economic growth, create jobs, and improve the overall economic well-being of the population.

Resilience to External Shocks:

Tanzania can use the funds to build resilience to external economic shocks, such as fluctuations in global commodity prices or disruptions in international trade. This can help the country better weather economic challenges.

Improved Investment Climate:

By demonstrating the ability to secure financial support from international organizations like the IMF, Tanzania may become a more attractive destination for foreign investment, which can further boost economic growth.

Enhanced Creditworthiness:

Successfully utilizing IMF funds can demonstrate responsible fiscal and monetary policies to international creditors and investors, potentially leading to improved creditworthiness, which can lower borrowing costs in the future.

It's crucial for Tanzania to ensure that any funds received, including those from the IMF, are effectively managed, invested in productive sectors, and aligned with a comprehensive economic development strategy. Transparency, accountability, and sound economic policies are essential to make sure that external financial support positively impacts the country's long-term economic well-being:

Dependency and Moral Hazard:

Relying on external funds can create a dependency on such assistance, leading to a reduced incentive for the government to implement necessary economic reforms and fiscal discipline. This can result in a moral hazard, where Tanzania may not take the necessary steps to ensure sustainable economic growth.

Debt Burden:

Continuously receiving funds without clear economic impact can lead to an accumulation of debt. If the funds are not effectively managed and invested, they may contribute to a growing debt burden, which can become unsustainable in the long run.

Inflation:

If the funds are not channeled into productive investments and instead lead to increased government spending, it can fuel inflation. This can erode the purchasing power of the currency and harm the overall economy, particularly if inflation outpaces wage increases.

Resource Misallocation:

Ineffective use of funds can lead to misallocation of resources, with money going to projects or areas that do not contribute significantly to economic growth. This can result in inefficiencies and waste.

Corruption and Mismanagement:

A continuous inflow of funds without clear oversight and accountability can create opportunities for corruption and mismanagement. This can divert funds away from their intended purposes and hinder economic development.

Crowding Out Private Investment:

If government spending driven by these funds crowds out private investment, it can hinder the development of a vibrant private sector, which is essential for long-term economic growth.

Loss of Sovereignty:

Continuous reliance on external funding can limit the economic sovereignty of Tanzania, as the country may be required to implement specific policies or reforms dictated by the funding source, potentially undermining national interests.

Lack of Ownership and Responsibility:

If the funds do not originate from within the country, there may be a lack of ownership and responsibility for the economic development process among domestic stakeholders, including the government and private sector.

Taxation and Economic Growth in Tanzania: Challenges and Opportunities

The tax rates and structure in Tanzania are designed to balance the need for government revenue with considerations for income inequality and foreign worker taxation.

Monthly Income Tax Rates for Residents:

• Where total monthly income does not exceed Tshs 270,000/=, there is no income tax (NIL).
• Where total monthly income exceeds Tshs 270,000 but does not exceed Tshs 520,000/=, the tax rate is 8% of the amount in excess of Tshs 270,000/=.
• Where total monthly income exceeds Tshs 520,000 but does not exceed Tshs 760,000/=, the tax is calculated as Tshs 20,000/= plus 20% of the amount in excess of Tshs 520,000/=.
• Where total monthly income exceeds Tshs 760,000/= but does not exceed Tshs 1,000,000/=, the tax is calculated as Tshs 68,000/= plus 25% of the amount in excess of Tshs 760,000/=.
• Where total monthly income exceeds Tshs 1,000,000/=, the tax is calculated as Tshs 128,000/= plus 30% of the amount in excess of Tshs 1,000,000/=.

Annual Income Threshold:

The annual income threshold for which no tax is levied is Tshs. 3,240,000/=. This means if your annual income does not exceed this threshold, you won't be subject to income tax.

Withholding Tax for Non-Resident Employees:

• Remunerations paid to a non-resident employee of a resident employer is subject to a withholding tax of 15%. This means that the employer deducts 15% of the non-resident employee's income and remits it to the tax authority.
• The total income of non-resident individuals is chargeable at the rate of 30%. This is the applicable tax rate for non-resident individuals on their total income in Tanzania.

Secondary Employment Tax Rate:

An employee with secondary employment is chargeable at the rate of 30%. If an individual has more than one job, their income from the secondary employment is subject to a flat tax rate of 30%.

Potential Disincentive for High Earners:

High-income individuals may view the progressive tax system as a disincentive to earning more income, as higher earnings are subject to higher tax rates. This could reduce their motivation to invest, work harder, or engage in economic activities that drive growth.

Complexity and Compliance Costs:

A tax system with multiple tax brackets and varying rates can be complex and burdensome for taxpayers to understand and comply with. This complexity can increase compliance costs and discourage investment.

Reduced Secondary Employment:

A flat 30% tax rate on secondary employment may discourage individuals from taking on multiple jobs or engaging in part-time work, potentially limiting their income-generating opportunities.

The provided tax rate for Tanzania it does offer some insights into how the government raises revenue and potentially supports economic development:

Progressive Taxation:

Tanzania's tax system employs a progressive tax structure for residents, meaning that as an individual's income increases, they are subject to higher tax rates. This system is designed to promote income redistribution by taxing higher earners more heavily. Progressive taxation can be seen as a way to address income inequality and potentially support economic growth by funding social programs and infrastructure development.

Threshold for Non-Taxable Income:

The fact that there is a threshold (Tshs. 3,240,000/= annually) under which income is not taxable indicates an attempt to protect low-income individuals from the burden of taxation. This can help improve the financial well-being of those with lower incomes, potentially contributing to poverty reduction and providing them with more disposable income.

Withholding Tax for Non-Resident Employees:

By imposing a withholding tax of 15% on remunerations paid to non-resident employees, the government is generating revenue from foreign workers. This can help support economic growth by capturing a portion of income earned by non-resident individuals working in Tanzania, which can be reinvested in the country's development.

Taxation on Secondary Employment:

Taxing secondary employment at a flat rate of 30% might encourage individuals to limit their secondary employment or engage in more primary, full-time employment. This could potentially boost the labor market and create opportunities for job seekers. However, the 30% flat rate may be perceived as high and could affect the willingness of individuals to take on secondary employment.

Tanzania's government should work on a holistic strategy that combines fiscal policies with other initiatives to promote long-term economic growth and development:

Simplify and Streamline the Tax System:

A complex tax system can be burdensome for taxpayers and can discourage compliance. Simplifying the tax code and making it more user-friendly can encourage voluntary compliance and reduce administrative costs.

Broaden the Tax Base:

Expanding the tax base by including more sources of income or economic activities can increase government revenue. Ensuring that all economic actors contribute their fair share can reduce the burden on those who are currently paying taxes.

Enhance Tax Enforcement:

Strengthening tax enforcement measures to combat tax evasion and fraud is crucial. This includes investing in better tax administration, technology, and training for tax authorities.

Review Tax Rates and Thresholds:

Periodically reviewing tax rates and income thresholds can help ensure that the tax system remains fair and equitable. Adjusting tax rates to match inflation and economic conditions can prevent tax brackets from becoming outdated.

Promote Investment and Job Creation:

Lowering tax rates on certain economic activities, such as small businesses and industries that are significant drivers of employment, can stimulate investment and job creation, which are critical for economic growth.

Consider Incentives for Specific Sectors:

Targeted tax incentives for industries or activities that have the potential to drive economic growth, such as manufacturing or export-oriented sectors, can be effective in spurring development.

Review Withholding Tax for Non-Resident Employees:

Carefully evaluate the withholding tax on non-resident employees. The rate and administration should strike a balance between generating revenue and attracting foreign expertise and investment.

Improve Transparency and Accountability:

Transparency in tax collection and usage of tax revenue can build trust and encourage compliance. Ensuring that tax revenue is used for public infrastructure and services can support economic development.

Align Tax Policy with Economic Goals:

Tax policies should be consistent with broader economic goals, such as poverty reduction, infrastructure development, and investment promotion. A well-crafted tax policy can complement these objectives.

Consult Stakeholders:

Engaging with stakeholders, including the business community, civil society, and tax experts, can provide valuable insights and ensure that tax policies align with the needs and aspirations of the country.

Inflation Rate:

In September 2023, Tanzania's headline inflation rate held steady at 3.3%, remaining unchanged from the previous month, August 2023, but marking a noticeable decline from the previous year, September 2022, when it was 4.8%. Despite this stable inflation rate, the overall index of prices increased from 108.73 in September 2022 to 112.35 in September 2023, indicating a general rise in the prices of goods and services over the course of a year. This tells that, on average, prices in the Tanzanian economy were higher in September 2023 compared to September 2022, despite the headline inflation remaining constant, reflecting the importance of considering long-term trends in price levels alongside short-term inflation rates.

GDP Growth Rate:

Tanzania's GDP growth rate stands at a healthy 5.6 percent, indicating a steady upward trajectory. Comparing it to previous years, there's a consistent increase from 5.5 percent in 2022 and 5 percent in 2021. Key contributing sectors include agriculture, construction, mining, trade, manufacturing, finance, and insurance.

Money Supply:

In August 2023, Tanzania's money supply experienced significant fluctuations in various components, with notable changes in net foreign assets, central bank assets, and different money supply measures. Net foreign assets surged by 113% in one month, indicating a substantial influx of foreign currency, possibly driven by foreign investments or trade balances. The growth in the Bank of Tanzania's assets suggests active monetary policy interventions to stabilize or stimulate the economy. Conversely, net domestic assets and domestic claims decreased, reflecting a contraction in domestic lending and money creation, possibly aimed at addressing monetary concerns. The slight increase in claims on the private sector suggests banks' willingness to extend credit to support economic activity, while the decline in the extended broad money supply (M3) may impact spending and investment. Reduced foreign currency deposits may affect exchange rates and international trade, and contractions in M2 and M1 may influence economic liquidity and consumer spending. An increase in currency in circulation and a decrease in transferable deposits could be indicative of shifts in consumer preferences and financial stability. Overall, these monetary contractions may raise concerns about short-term economic activity, but the efforts to increase net foreign assets and central bank assets signal long-term economic growth and stability.

Import and Export Rate:

Tanzania's trade performance from 2021 to the projected 2023 reveals significant trends. Export of goods and services demonstrated robust growth, with a 43% increase over this period, showcasing Tanzania's successful expansion of its international market presence. Conversely, imports grew by 61%, outpacing exports and leading to a widening trade deficit. The balance of payment, representing the gap between exports and imports, went from a negative balance of -$1,063 million in 2021 to -$3,597.6 million in 2022 but improved slightly to -$3,361.7 million in 2023, marking a 7% reduction in the negative balance. This indicates efforts to address the trade imbalance, emphasizing the importance of managing trade imbalances for long-term economic stability and sustainability in Tanzania.

Budget Analysis:

The Government Budget Performance Evaluation for August 2023 reveals critical insights into Tanzania's fiscal situation for the year, comparing 2022 and 2023 financial data. Notably, government expenditure exceeded the budget due to increased development expenditure, while revenue collection fell short, resulting in a concerning deficit expansion. Government expenditure categories such as wages, salaries, interest costs, and development expenditure saw fluctuations, with wages and salaries and interest costs falling below budget and development expenditure surpassing it.

In terms of government revenues, both tax and non-tax sources underperformed compared to budget projections, leading to a significant deficit increase of 56%. These findings signal challenges in revenue collection and deficit management, potentially hindering economic growth. To address these issues, the government should prioritize improving tax collection, managing deficits, and exploring alternative revenue sources. The focus on development expenditure is a positive step towards fostering economic growth, but the revenue shortfall and deficit increase pose potential obstacles to sustainable economic development.

National Debts:

In August 2023, Tanzania's national debt amounted to USD 40,574.6 million, with a significant portion of it being external debt. This reduction in debt can be attributed to exchange rate fluctuations, particularly the appreciation of the US dollar. The composition of the debt reveals that 70.5 percent of it is owed to foreign creditors, indicating a substantial reliance on foreign borrowing. The data indicates that over the past year, external debt increased by 4% while domestic debt increased by 16%, contributing to a 7% increase in the total national debt. Short-term changes show a 3% decrease in external debt and a 3% increase in domestic debt in a month. It's essential to assess the sustainability of this growing debt burden concerning the country's economic growth.

In the Government Budget Performance Evaluation for August 2023, it is noted that government expenditure exceeded the budget due to higher development expenditure, while revenue collection fell short of expectations, resulting in a widening deficit. The actual government revenues in 2023 were 7% less than the budgeted amount, primarily driven by declines in income tax and other tax revenues. This significant budget deficit increase of 56% raises concerns about fiscal management and may lead to increased government borrowing. The government must address revenue collection challenges, manage deficits effectively, and explore alternative revenue sources while prioritizing development expenditure for economic growth.

The Monetary Policy Committee (MPC) held its 28th Meeting on October 27, 2023, to review the implementation of monetary policy and assess the state of the economy.

In light of the current economic conditions, the MPC decided to maintain the less accommodative monetary policy. This policy will continue to be closely coordinated with fiscal and structural policies, and monetary measures will be implemented to achieve the targets set under the Extended Credit Facility Program for the quarter ending December 2023.

Successful Monetary Policy:

The less accommodative monetary policy implemented in August, September, and October 2023 effectively maintained liquidity at appropriate levels. This policy, combined with supportive fiscal and structural measures, helped control inflation, support economic activities, and maintain financial stability.

Global Economic Environment:

The global economic growth remained weak due to factors such as monetary policy tightening, geopolitical tensions, and high oil prices. While inflation eased in many countries, it still exceeded targets, leading central banks to continue monetary policy tightening.

Domestic Economic Performance:

The domestic economy saw satisfactory growth in the first and second quarters of 2023, with a projected annual growth rate of 5.3 percent. Inflation trended downwards, largely due to declining food prices. Money supply (M3) and credit to the private sector grew significantly, driven by an improved business environment and less accommodative monetary policy.

Government Budget Performance:

Government revenue was strong during the first quarter of 2023/24, and expenditure aligned with available resources.

Current Account Deficit:

The current account deficit narrowed year-on-year, but remained high due to increased commodity prices in the world market. The deficit is expected to gradually improve, driven by earnings from tourism, gold, and traditional export crops.

Foreign Exchange Reserves:

Foreign exchange reserves remained above $5 billion, providing adequate import cover. The banking sector remained well-capitalized and profitable, with reduced non-performing loans.

Improved Foreign Currency Situation:

Shortages of foreign currency were gradually improving due to earnings from tourism, minerals, manufacturing, and cash crops. The central bank's efforts to address foreign currency denominated loans extended to importers also contributed to the improvement.

Tanzania's economic performance in 2023 has been positive, with growth, inflation control, and overall economic stability being key features of its performance. The government's fiscal discipline and effective management of the financial sector have also contributed to these positive economic outcomes.

Growth:

Tanzania's economy showed satisfactory growth in the first and second quarters of 2023, with growth rates of 5.4 percent and 5.2 percent, respectively. The annual growth rate is projected to reach 5.3 percent in 2023. This indicates that the Tanzanian economy has been performing well and maintaining a positive growth trajectory.

Inflation:

Inflation in Tanzania trended downward, particularly since June 2023, reaching 3.3 percent in September 2023. This decrease is associated with declining food prices. This suggests that the country has been successful in managing inflationary pressures.

Money Supply and Credit:

Money supply (M3) grew significantly, surpassing the target, driven by strong private sector credit growth. Credit to the private sector also increased, primarily in agricultural activities. This demonstrates robust lending activity and increased business investment.

Government Budget Performance:

Government revenue during the first quarter of 2023/24 was strong, and expenditures were aligned with available resources. This suggests effective fiscal management and budget discipline.

Current Account Deficit:

While the current account deficit narrowed year-on-year, it remained high due to increased commodity prices in the world market. However, there is an expectation of gradual improvement in the deficit, driven by earnings from tourism, gold, and traditional export crops.

Foreign Exchange Reserves:

Tanzania's foreign exchange reserves remained above $5 billion, indicating stability and the ability to cover import requirements.

Banking Sector:

The banking sector in Tanzania was reported to be adequately capitalized, liquid, and profitable. Non-performing loans decreased significantly, which should encourage banks to increase lending to the private sector.

Foreign Currency Situation:

The reported shortage of foreign currency was gradually improving, driven by earnings from various sectors and measures taken by the central bank and the government.