Tanzania’s external sector showcased remarkable strength in November 2024, with the current account deficit narrowing by 35% to USD 2,025.8 million. Exports surged by 14.2% to USD 15,872.9 million, driven by gold and tourism, while imports grew modestly by 2.7%. Foreign exchange reserves increased to USD 5,056.8 million, covering 4.1 months of imports, exceeding benchmarks. This performance highlights Tanzania’s growing global competitiveness and economic resilience, ensuring a stable foundation for sustainable growth.

The external sector demonstrated notable improvements in November 2024, driven by robust export growth, a reduced current account deficit, and strong foreign exchange reserves. These factors underline the resilience and recovery of Tanzania's economy.

1. Current Account Balance

• The current account deficit narrowed significantly by 35% to USD 2,025.8 million in the year ending November 2024, compared to USD 3,115.8 million in the corresponding period in 2023.
• This improvement was attributed to strong export performance and controlled import growth.

2. Exports

• Total Exports: Increased by 14.2% to USD 15,872.9 million in the year ending November 2024, up from USD 13,901.2 million in the same period in 2023.
• Goods Exports:
  • Rose to USD 8,887.1 million, compared to USD 7,771.7 million in 2023.
  • Mineral exports dominated, with gold alone contributing USD 3,320.9 million, accounting for 83.1% of mineral exports and 37.4% of total goods exports.
• Services Exports:
  • Increased to USD 6,985.9 million, up by 14% year-on-year, driven by growth in tourism receipts and transportation earnings.
  • Tourism receipts: Grew by 11.1% to USD 3,681.5 million, supported by increased tourist arrivals (2,106,870 tourists, compared to 1,781,214 in 2023).

3. Imports

• Total Imports: Grew modestly by 2.7% to USD 16,582.7 million, compared to USD 16,142.1 million in 2023.
• Goods Imports: Accounted for 85% of the total import bill, driven by industrial supplies and refined petroleum products.
  • Petroleum imports: Declined by 7% to USD 2,578.5 million, primarily due to favorable price effects.

4. Foreign Exchange Reserves

• Reserves rose to USD 5,056.8 million, up from USD 4,850.8 million in November 2023.
• The reserves were sufficient to cover 4.1 months of projected imports, meeting and exceeding the national benchmark of 4 months.

Key Figures in Summary

Implications:

1. Export-Led Recovery:
   • The substantial growth in exports, particularly from gold and tourism, highlights the resilience of Tanzania's external sector and its role in economic recovery.
2. Sustainable Import Growth:
   • Modest growth in imports, with a decline in petroleum imports, reflects effective management of import bills despite global challenges.
3. Strengthened External Resilience:
   • The increase in foreign exchange reserves and a narrowing current account deficit underscore Tanzania's improved ability to weather external shocks and maintain macroeconomic stability.

The external sector's performance in November 2024 illustrates Tanzania's growing strength in exports, particularly in minerals and tourism, coupled with controlled imports and robust reserve levels. This positions the economy well for sustainable growth and resilience against global uncertainties.

Tanzania's external sector performance in November 2024 highlight several important trends and insights about the country's economic standing and resilience

1. Positive Export Performance Drives Recovery

• The 14.2% growth in total exports (to USD 15,872.9 million) signals Tanzania's increasing competitiveness in global markets, especially in key sectors like gold mining and tourism.
• Tourism receipts grew by 11.1%, supported by higher tourist arrivals, emphasizing the sector's role as a major foreign exchange earner.

2. Controlled Import Growth Reflects Stability

• The 2.7% rise in imports demonstrates Tanzania's ability to manage its import bills effectively, ensuring that the trade deficit does not widen excessively.
• The 7% decline in petroleum imports reflects price advantages and efficient consumption, contributing to reduced external pressure.

3. Narrowed Current Account Deficit Signals Economic Improvement

• The 35% reduction in the current account deficit to USD 2,025.8 million shows improved external balances, supported by strong export earnings and controlled import bills.
• This reduction boosts the country's ability to withstand external shocks and enhances investor confidence.

4. Strengthened Foreign Exchange Reserves Indicate Resilience

• Reserves reached USD 5,056.8 million, covering 4.1 months of imports, exceeding the national benchmark. This signals robust external sector health and the ability to manage future trade or financial shocks.

5. Implications for Economic Stability

• Improved External Balances: Growth in exports coupled with a narrowing deficit reflects Tanzania's strengthening position in international trade.
• Reduced Vulnerability: Higher foreign exchange reserves and a slower pace of depreciation indicate greater resilience to global uncertainties.
• Sectoral Contribution: Gold and tourism emerge as pivotal drivers of the economy, underscoring the importance of further developing these sectors.

Key Takeaways

1. Economic Resilience: The narrowing current account deficit and growing reserves underline Tanzania's improving external stability.
2. Export Diversification Potential: While gold and tourism dominate, there is potential to expand other export sectors for sustained growth.
3. Global Competitiveness: The performance of key exports reflects Tanzania's ability to leverage favorable global conditions and enhance its economic footprint.

Conclusion

The external sector performance in November 2024 tells a story of recovery, resilience, and growth. Tanzania is strengthening its global economic position through robust exports, effective import management, and growing foreign exchange reserves, laying a strong foundation for sustainable economic progress.

Supporting Economic Stability and Growth

Tanzania's lending and deposit interest rates in November 2024 reflected a stable financial environment conducive to economic growth. The overall lending rate remained unchanged at 15.67%, ensuring consistent borrowing costs, while the negotiated lending rate slightly eased to 12.77%, benefiting prime borrowers. On the other hand, deposit rates experienced a modest decline, with the overall deposit rate at 8.18% and the negotiated deposit rate at 10.14%, signaling sufficient liquidity in the banking system. The narrowing short-term interest spread to 5.93 percentage points highlights improved efficiency and competition in the banking sector, fostering a more supportive financial landscape.

Interest Rates Overview: Lending and Deposit Rates

The report highlights stable trends in both lending and deposit interest rates for November 2024, with slight variations compared to previous months. These rates indicate the cost of borrowing and the return on savings within the Tanzanian financial system.

1. Lending Interest Rates

• Overall Lending Rate: Remained unchanged at 15.67%, reflecting stability in the cost of credit for borrowers.
• Negotiated Lending Rate: Marginally decreased to 12.77% from 12.93% in October 2024.
  • Negotiated rates are typically offered to large borrowers or prime customers, highlighting some relaxation in credit terms for preferred clients.

2. Deposit Interest Rates

• Overall Deposit Rate: Declined slightly to 8.18%, down from 8.25% in October 2024.
• Negotiated Deposit Rate: Dropped to 10.14%, compared to 10.27% in October.
  • This reflects a slight reduction in returns offered by banks to attract savings.

3. Interest Rate Spread

• The spread between lending and deposit rates provides insight into banking profitability and efficiency.
  • The short-term interest spread narrowed to 5.93 percentage points in November 2024, compared to 6.47 percentage points in the same period of 2023.
  • This narrowing suggests increased competition among banks or improved cost efficiencies in financial intermediation.

Key Figures in Summary

Interpretation

The stable lending rates suggest consistent credit availability for businesses and individuals, crucial for economic activity. The slight decline in deposit rates may reflect ample liquidity in the banking system, reducing the need for banks to aggressively attract deposits. The narrowing interest rate spread is a positive development, indicating potential benefits for borrowers through lower borrowing costs and increased banking competition.

The information on lending and deposit interest rates reveals several insights into Tanzania's financial and economic environment

1. Stable Lending Rates Indicate Credit Availability

• The unchanged overall lending rate of 15.67% reflects a consistent cost of borrowing, ensuring businesses and individuals have access to credit for economic activities.
• The slight drop in the negotiated lending rate to 12.77% highlights increased flexibility for prime borrowers, likely supporting key sectors and large-scale investments.

2. Declining Deposit Rates Reflect Ample Liquidity

• The reduction in the overall deposit rate to 8.18% suggests that banks are less aggressive in attracting deposits. This is likely due to sufficient liquidity in the banking system.
• The decrease in the negotiated deposit rate to 10.14% aligns with this trend, further indicating that banks have access to alternative funding sources or are managing their liquidity efficiently.

3. Narrowing Interest Rate Spread Points to Efficiency

• The narrowing of the short-term interest spread to 5.93 percentage points from 6.47% in 2023 indicates:
  • Improved competition among banks, potentially lowering borrowing costs for consumers.
  • Greater efficiency in financial intermediation, which benefits the broader economy.

4. Economic Implications

• For Borrowers: Stable and slightly reduced borrowing rates make credit accessible and affordable, encouraging investment and consumption, particularly in key sectors like agriculture and SMEs.
• For Savers: Lower deposit rates might discourage savings, but they reflect a stable banking environment where liquidity pressures are minimal.
• For the Banking Sector: A narrowing spread suggests competitive pressures or operational improvements that can foster a healthier financial system.

Overall Insight

The interest rate trends reveal a balanced approach to monetary and financial stability in Tanzania. By keeping borrowing costs stable and deposit rates manageable, the Bank of Tanzania supports sustained economic growth while maintaining a well-functioning banking system. This is particularly important in an economy experiencing strong credit demand and seasonal cash flow pressures.

In November 2024, the Bank of Tanzania maintained a cautious yet supportive monetary policy to ensure economic stability. With a 7-day Interbank Cash Market (IBCM) rate averaging 8.29%, slightly above the Central Bank Rate (CBR) of 6%, the policy aimed to balance liquidity amid high seasonal cash demands for crop purchases. The extended broad money supply (M3) grew by 13.6%, driven by foreign asset growth, while private sector credit expanded by 15.3%, highlighting strong economic activity, particularly in agriculture and SME financing. This measured approach reflects the Bank’s commitment to fostering sustainable growth and financial stability.

Policy Implementation

• The Bank of Tanzania maintained a 7-day Interbank Cash Market (IBCM) rate within a corridor of ±200 basis points around the Central Bank Rate (CBR), set at 6%.
• The 7-day IBCM rate averaged 8.29%, slightly above the CBR corridor, due to low liquidity in the banking sector influenced by seasonal cash demands for crop purchases.

Liquidity Management

• Reverse repurchase agreements (reverse repos) decreased to TZS 2,578.5 billion, from TZS 2,887.9 billion in October 2024.
• Lombard facility usage also declined to TZS 3,870.4 billion from TZS 5,601.1 billion in October.

Money Supply

• Extended broad money supply (M3) grew by 13.6%, driven by foreign asset increases in the banking sector.
• Private sector credit expanded by 15.3%, a slight deceleration from 17% in October and 18.3% in November 2023.

Figures

1. Interest Rates:
   • IBCM 7-day rate: Averaged 8.29% in November 2024.
   • Central Bank Rate (CBR): Set at 6%.
2. Monetary Transactions:
   • Reverse repos: TZS 2,578.5 billion.
   • Lombard facility: TZS 3,870.4 billion.
3. Money Supply Components:
   • M3: TZS 49,510.7 billion, growing at 13.6% annually.
   • Private Sector Credit: Grew at 15.3%.
4. Credit Allocation:
   • Significant growth in agriculture (41.9%), personal loans (19.2%), and building & construction (16.6%).

The monetary policy report highlights the Bank of Tanzania's actions and the state of monetary indicators in November 2024, offering insights into the economic environment

Policy Stance

1. Monetary Tightening:
   • The slightly elevated 7-day Interbank Cash Market (IBCM) rate (8.29%) compared to the Central Bank Rate (CBR) (6%) suggests tightened liquidity conditions. This reflects the seasonal cash demand for crop purchases, especially after a bumper harvest.
2. Controlled Liquidity Management:
   • The use of reverse repos and the Lombard facility to manage liquidity declined, indicating an improvement in banking sector liquidity.

Economic Activity Reflected Through Money Supply

1. Money Supply Growth (M3):
   • The 13.6% growth in M3 is healthy and suggests adequate liquidity in the economy to support economic activities.
   • The growth was driven primarily by foreign currency deposits, reflecting the importance of foreign inflows.
2. Private Sector Credit Growth:
   • A 15.3% expansion in private-sector credit shows strong credit demand and confidence in economic activities. However, the slight decline from previous months (17% in October) hints at moderating credit expansion.
3. Sectoral Focus:
   • The highest credit growth in agriculture (41.9%) signals robust demand for financing in the sector, likely tied to crop purchases and investment in production.
   • Personal loans dominate total credit (38.7%), reflecting their importance in consumption and SME financing.

Key Implications

1. Economic Resilience:
   • Despite seasonal liquidity pressures, the monetary system is effectively balanced, ensuring adequate support for economic activities without overheating.
2. Agriculture as a Driver:
   • The strong focus on agriculture financing suggests the sector's critical role in the economy, especially during harvest periods.
3. Sustainable Credit Growth:
   • Moderate private sector credit growth ensures economic expansion without excessive risks of inflation or non-performing loans.
4. Foreign Influence:
   • The prominence of foreign currency deposits highlights Tanzania's reliance on international trade, tourism, and remittances for liquidity.

Policy Outlook

The report suggests the Bank of Tanzania is maintaining a cautious yet supportive monetary stance, balancing liquidity to promote growth while containing inflationary pressures. The focus on agriculture and personal loans supports essential sectors of the economy.

Challenges and Opportunities

Tanzania, as a key player among East African low-income countries, faces significant hurdles in achieving middle-income status. While progress in areas like agriculture and infrastructure development has been modest, the nation’s untapped potential in industrialization, tourism, and regional trade offers avenues for growth. By addressing challenges such as low productivity, poverty reduction, and governance reforms, Tanzania can emulate the successes of regional peers like Ethiopia and Rwanda to accelerate its economic transformation.

Tanzania’s Position Relative to East Africa and LICs

1. Economic Growth:
   • Per capita GDP growth in LICs, including Tanzania, has been slow. Median growth for LICs was just 1.5% (2000-09), dropping further to 1.3% (2010-19), and 0.1% (2020-24)​.
   • Among East African countries, Ethiopia and Rwanda outpaced others, with annual per capita growth rates of 6.5% and 4.6%, respectively, over the same periods​.
2. Poverty Reduction:
   • LICs, including many in East Africa, saw a decline in extreme poverty by 17 percentage points since 2000, slower compared to middle-income transitions​.
   • In Tanzania, agriculture and services remain key sectors but lag in productivity compared to industrialized sectors​.
3. Structural Transformation:
   • The share of agriculture in employment remains high across LICs, averaging 28% of GDP, higher than in transitioning middle-income nations, which show more balanced outputs between agriculture, industry, and services​.
4. Productivity and Employment:
   • Agricultural productivity in LICs grew slower than in other sectors, while service and industrial sectors showed more dynamism in countries like Kenya and Uganda, highlighting Tanzania's potential for improvement​.

Key Regional Comparisons

• Ethiopia and Rwanda have experienced robust structural changes driven by policy reforms and investment in industrialization, making them standout performers in East Africa.
• Kenya's growth is supported by better trade openness and service sector expansions​.
• Tanzania's economic prospects are tied closely to its agricultural productivity and untapped potential in industrialization and tourism.

Recommendations for Tanzania

• Sectoral Reforms:
  • Accelerate industrial development to reduce the over-reliance on agriculture.
  • Improve governance to attract more investments and integrate regional trade opportunities.
• Poverty and Productivity:
  • Invest in agricultural modernization to boost productivity and reduce poverty more effectively.
  • Leverage youthful demographics for labor-intensive sectors.

The challenges and opportunities facing low-income countries (LICs), including Tanzania, and provides a context for understanding its position within East Africa and globally.

1. Economic Position of LICs:

• LICs are struggling to achieve middle-income status, with slow economic growth and high levels of poverty.
• Tanzania, as an LIC, shares similar challenges with other East African nations, such as reliance on agriculture, limited industrialization, and weak institutional frameworks.

2. East Africa’s Economic Standouts:

• Ethiopia and Rwanda demonstrate strong growth due to structural reforms, investment in infrastructure, and industrial policies.
• Kenya benefits from a more diversified economy, trade openness, and vibrant services sector.
• Tanzania, while progressing, lags behind these countries in structural transformation and industrial growth.

3. Challenges for Tanzania:

• Low Productivity in Agriculture: Agriculture accounts for a large share of GDP but remains low in productivity, limiting income growth.
• Limited Industrialization: Tanzania has not transitioned enough labor and output into higher productivity sectors like manufacturing.
• Poverty Stagnation: Extreme poverty reduction has slowed, with a significant portion of the population still living on less than $2.15 a day.

4. Opportunities for Tanzania:

• Demographics: A youthful population can drive economic growth if educated and employed productively.
• Natural Resources: Abundant resources, such as minerals and tourism potential, can fuel growth if managed effectively.
• Regional Integration: Leveraging East African Community (EAC) trade and infrastructure projects can enhance competitiveness and market access.

5. Lessons from East Africa:

• Ethiopia and Rwanda: Investments in industrial parks, export-oriented policies, and agricultural modernization have spurred growth.
• Kenya: A strong private sector and focus on trade services have boosted economic resilience.
• Tanzania’s Potential: By learning from these successes, Tanzania can prioritize:
  • Infrastructure development.
  • Agricultural productivity reforms.
  • Policies to attract foreign investment and foster industrialization.

6. Policy Recommendations:

• Investment in Human Capital: Enhance education and healthcare to build a productive workforce.
• Structural Reforms: Simplify business regulations, improve governance, and foster public-private partnerships (PPPs).
• Climate Adaptation: Address vulnerabilities to climate shocks by investing in resilient infrastructure and sustainable practices.

7. Global Context:

• LICs like Tanzania face external pressures such as declining global trade growth, high debt burdens, and geopolitical tensions.
• International assistance (e.g., concessional financing and debt relief) is critical for Tanzania to sustain investments in growth and poverty reduction.

Implications for Tanzania:

Tanzania has significant growth potential but must address critical bottlenecks in governance, productivity, and industrialization. Learning from regional peers and leveraging its demographic and resource advantages could fast-track its transition to middle-income status. This requires strategic investments, effective policies, and stronger regional and global integration.

The Tanzania Revenue Authority (TRA) demonstrated exceptional performance in the first half of the 2024/2025 fiscal year, consistently exceeding revenue targets with efficiency rates above 100% and achieving year-on-year growth ranging from 15% to 23.6%. With total collections peaking at TZS 3.587 trillion in December 2024, driven by strengthened economic activities and improved tax compliance, TRA's strategic initiatives have set a solid foundation for continued growth. Forecasts for January–June 2025 project sustained revenue momentum, reinforcing TRA's pivotal role in enhancing Tanzania’s fiscal stability and economic development.

1. Overview of Monthly Performance

The table shows the revenue collections compared to targets and highlights both efficiency (how much was collected compared to the target) and growth (how much collections increased compared to the previous year).

2. Key Observations

A. Efficiency (Target Achievement)

• July 2024: Revenue collection was 104.45% of the target (TZS 2.347 trillion collected against a target of TZS 2.247 trillion).
• October 2024: The highest efficiency was recorded at 107.45%, showing TRA’s strong performance in meeting and exceeding targets.
• December 2024: Efficiency was 103.52%, indicating slight overperformance relative to the target of TZS 3.465 trillion.

B. Growth (Year-on-Year Increase)

• July 2024: Revenue grew by 21.04% from TZS 1.939 trillion in July 2023/2024 to TZS 2.347 trillion in 2024/2025.
• October 2024: This month recorded the highest growth at 23.60%, a sign of increased economic activity or improved tax compliance mechanisms.
• December 2024: Growth was 17.61%, an improvement of TZS 0.537 trillion compared to December 2023/2024.

3. Breakdown of Key Drivers

1. Revenue Growth Factors
   • Improved economic activity during the year, particularly in key sectors like trade and services.
   • Strengthened tax administration and enforcement measures by TRA.
2. Efficiency in Exceeding Targets
   • Enhanced compliance through digital tax systems (e.g., EFDs).
   • Improved taxpayer education and monitoring contributed to high revenue performance.
3. Month-on-Month Trends
   • The largest revenue collection occurred in December 2024 (TZS 3.587 trillion), likely due to increased economic activity during the holiday season.
   • July 2024 saw a strong start with significant growth and efficiency, setting the pace for subsequent months.

4. Highlights and Takeaways

• Consistent Growth: Revenue growth ranged from 15% to 23.6%, demonstrating resilience in collections despite possible economic challenges.
• Exceeding Targets: TRA consistently achieved over 100% efficiency, showing effective planning and execution.
• Peak Collection: December was the strongest month in absolute collections, reflecting seasonal economic patterns.

Forecast for revenue collections by the Tanzania Revenue Authority (TRA) for the next six months (January–June 2025), based on the average growth rate observed between July and December 2024/2025:

Key Observations:

1. January 2025: Forecasted collections are TZS 3.97 trillion, an increase from December 2024 due to consistent growth momentum.
2. June 2025: Collections are projected to reach TZS 6.60 trillion, reflecting significant month-on-month growth.
3. Trend: Revenue is expected to grow steadily due to sustained improvements in tax compliance and economic activities.

Tanzania Revenue Authority (TRA) for July–December 2024/2025 and the forecast for January–June 2025 offers key insights into the efficiency, growth, and trends of revenue collections:

1. Efficiency (Target Achievement)

• TRA consistently exceeded revenue targets, achieving efficiency rates above 100% across all months, with a peak of 107.45% in October 2024.
• This indicates robust tax collection strategies, improved taxpayer compliance, and effective administrative measures.
• Even in December, where targets are typically ambitious, TRA managed to collect 3.587 trillion TZS, surpassing the target by 3.52%.

2. Growth (Year-on-Year Comparison)

• Revenue collections showed steady growth compared to the previous fiscal year, ranging from 15.01% in September to a high of 23.60% in October.
• The high growth rates suggest:
  • Strengthened economic activity, particularly in trade and services.
  • Enhanced enforcement of tax compliance and digital systems like EFDs.

3. Seasonal Trends and Peaks

• July 2024: Marked a strong start with 21.04% growth, setting a positive trajectory for subsequent months.
• December 2024: Registered the highest collections in absolute terms (3.587 trillion TZS), attributed to increased holiday-related economic activity.

4. Key Drivers Behind Performance

• Economic Growth: Expansion in key sectors such as trade and services contributed to rising tax revenues.
• Technological Integration: Use of digital tax systems and improved enforcement mechanisms enhanced compliance.
• Taxpayer Education: Increased awareness among taxpayers likely reduced evasion and improved voluntary compliance.

5. Forecast for January–June 2025

• Forecasted collections project sustained growth, with revenues rising from 3.97 trillion TZS in January to 6.60 trillion TZS in June 2025.
• The steady increase indicates momentum in tax collection strategies and economic performance.
• By June 2025, collections are expected to reflect nearly 66% growth compared to January 2025, showcasing robust monthly expansion.

6. Overall Insights

1. Consistency in Exceeding Targets: TRA’s ability to consistently exceed revenue targets demonstrates strong institutional efficiency.
2. Sustained Growth: Growth rates of 15–23.6% suggest resilience in economic activities despite potential challenges.
3. Strategic Focus: December’s peak collections and the upward forecast highlight the importance of seasonal and economic patterns in TRA’s strategies.
4. Future Prospects: The optimistic forecast for January–June 2025 underscores TRA's capability to leverage momentum and maintain revenue collection growth.

Remittance flows play a pivotal role in Tanzania's economic landscape, contributing $757 million in inward remittances in 2024, equivalent to 1.0% of GDP. While the country lags behind regional peers such as Kenya and Uganda, these private transfers offer a stable source of foreign exchange and household income. With modest outward remittances of $161 million, Tanzania remains a net recipient, highlighting opportunities to strengthen diaspora engagement and leverage remittances for sustainable development. This comparative regional analysis underscores the untapped potential to enhance financial inclusion, promote labor mobility, and foster economic resilience.

Inward Remittance Flows:

• 2024 Estimated Inflows: Tanzania received approximately $757 million, contributing to 1.0% of GDP.
• Comparative Position in East Africa:
  • Kenya received $4,800 million (4.6% of GDP).
  • Uganda received $1,492 million (2.6% of GDP).
  • Rwanda received $537 million (3.9% of GDP).
  • Burundi received $49 million (1.6% of GDP).

Tanzania ranks lower in absolute remittance inflows compared to Kenya and Uganda but surpasses Rwanda and Burundi. The proportion of remittances relative to GDP (1.0%) suggests moderate reliance compared to Kenya (4.6%) or Uganda (2.6%)​.

Outward Remittance Flows:

• 2023 Outflows: Tanzania recorded remittance outflows of $161 million, equating to 0.2% of GDP.
• Comparative Position in East Africa:
  • Kenya had outflows of $40 million (minimal, 0.0% of GDP).
  • Uganda had outflows of $218 million (0.4% of GDP).
  • Rwanda had outflows of $94 million (0.7% of GDP).
  • Burundi had outflows of $16 million (0.4% of GDP).

Tanzania's outward remittances are moderate among East African peers, with higher outflows than Kenya but lower than Uganda​.

Insights and Context:

1. Inward Remittances:
   • Key Source of Foreign Exchange: Moderate contribution to Tanzania's economy, reflecting a growing diaspora engagement but trailing behind Kenya and Uganda.
   • Potential for Growth: With improved diaspora engagement strategies and reduced transaction costs, Tanzania can enhance remittance inflows.
2. Outward Remittances:
   • Reflecting Increased Labor Movements: Outflows signify Tanzanian expatriates and foreign nationals sending funds abroad.
   • Balance with Inflows: The country maintains a favorable net remittance position, with inflows significantly higher than outflows.

Tanzania’s strategic focus could involve:

• Strengthening financial inclusivity to capture more remittances.
• Enhancing bilateral agreements to facilitate smoother remittance channels.
• Promoting investment opportunities for the diaspora to convert remittances into economic growth.

Key Implications of Remittance Flows

1. Diaspora Contributions

• Inward Remittances: At $757 million (1.0% of GDP) in 2024, remittances highlight the economic contributions of Tanzanians abroad. Although the volume is lower than peers like Kenya and Uganda, it still represents a stable source of foreign exchange and household income for recipients.
• Opportunity: With better diaspora engagement and reduced costs of money transfers, Tanzania can harness this resource to boost economic resilience and poverty reduction.

2. Limited Reliance Compared to Neighbors

• Kenya (4.6% of GDP) and Uganda (2.6% of GDP) are far more dependent on remittances relative to GDP. Tanzania's lower percentage suggests:
  • A less mature remittance market, with scope for growth.
  • Economic diversification, reducing dependence on external flows compared to peers.

3. Outward Remittances: Evidence of Regional Integration

• Tanzania's $161 million outflows (0.2% of GDP) reflect:
  • Cross-border labor movements, with Tanzanian expatriates working in other countries.
  • Presence of foreign nationals in Tanzania who remit earnings home.

This indicates regional and global labor market integration, although the scale of outflows remains modest compared to inflows.

4. Economic Development Indicator

• Inward Focus: A growing remittance inflow indicates increasing engagement with the diaspora and improvements in financial systems to capture these flows.
• Outward Focus: Moderate outward flows suggest that Tanzania is a net recipient of remittances, which is typical for developing economies. However, outflows may grow with increased labor migration and regional trade integration.

Regional Position

• Kenya dominates East Africa in remittance inflows due to a well-established and globally dispersed diaspora, along with efficient remittance channels.
• Tanzania's Moderate Rank: It holds a middle position in the region, above smaller economies like Burundi and Rwanda but behind Kenya and Uganda. This reflects the potential for Tanzania to grow its influence in regional labor markets and attract more remittances.

Policy and Strategy Implications

1. Financial Inclusion & Infrastructure:
   • Encourage the use of formal remittance channels by improving accessibility to banking and mobile money services.
   • Negotiate lower transaction costs with international financial institutions.
2. Diaspora Engagement:
   • Launch programs to strengthen connections with Tanzanians abroad, encouraging investments and remittances.
3. Domestic Investment Opportunities:
   • Offer attractive incentives for the diaspora to invest in productive sectors such as real estate, agriculture, and technology.
4. Labor Export Programs:
   • Promote skilled labor migration through agreements with countries seeking workers, particularly in sectors like healthcare, education, and construction.

What It Tells About Tanzania's Future

The remittance data suggests Tanzania has untapped potential to:

• Leverage its diaspora for economic development.
• Enhance its role in regional labor markets.
• Develop policies that reduce reliance on external aid by maximizing stable, private flows like remittances.

The banking and finance sector in Tanzania is undergoing a remarkable transformation. Anchored by digital innovation, regulatory reforms, and increased financial inclusivity, this sector is driving significant economic growth. An exploration of its current landscape, challenges, and opportunities.

Sector Growth and Digital Transformation

By 2024, Tanzania's banking assets reached TZS 43 trillion (USD 18 billion), equivalent to 20% of the GDP. This growth has been powered by a surge in mobile banking, which saw a 116% increase in mobile accounts between 2019 and 2024. As of 2024, mobile money accounts exceeded 55.8 million, with monthly transactions surpassing 310 million. By 2030, these accounts are projected to grow to 90 million, marking a pivotal shift towards digital financial services.

Financial Inclusivity

The financial inclusion rate in Tanzania rose from 16% in 2009 to 70% in 2024, driven by mobile and microfinance services. Urban areas boast 85% financial access, but rural regions lag at 55%, reflecting significant disparities. The government aims for a 75% inclusion rate by 2025 and an ambitious 90% by 2030.

Challenges in the Sector

Despite the impressive growth, Tanzania’s banking sector faces critical challenges:

• High Compliance Costs: Stringent regulations have increased operational expenses by 20%, impacting profitability.
• Rural Access: A lack of physical bank branches in rural areas leaves many reliant on mobile banking.
• Lending Rates: High average interest rates (16%) restrict SMEs' access to affordable credit, stifling private sector growth.

Opportunities for Investment

1. Digital and Mobile Banking: Projected to grow at 12% annually, this sector offers vast potential for fintech and infrastructure investments.
2. SME Financing: With SMEs comprising over 90% of businesses but only 16% accessing formal finance, the loan market is poised for a 10% annual growth.
3. Green Financing: This emerging sector, targeting eco-friendly projects, is expected to grow by 15% yearly, particularly in agriculture and renewable energy.

Future Outlook

By 2030, Tanzania’s banking landscape will likely host 60-65 banks, with microfinance representing 30% of total assets. With streamlined regulations and targeted digital literacy programs, financial inclusivity could rise to 85-90%. Investment in key sectors like digital banking, SME financing, and green financing is anticipated to create a competitive, resilient, and inclusive banking environment.

Conclusion

Tanzania’s banking sector is at the cusp of transformative growth. Addressing compliance challenges, bridging urban-rural disparities, and fostering innovations in digital finance will be critical. With the right investments and policy adjustments, the sector is well-positioned to drive inclusive economic development and solidify Tanzania's leadership in East Africa's financial landscape.

Introduction

Tanzania's recent tax reforms and policy adjustments are creating transformative shifts in its economic landscape. The fiscal year 2023/2024 witnessed a tax revenue increase of 14.47%, reaching TZS 27.64 trillion, underscoring a robust yet evolving economic environment. While achieving substantial growth, Tanzania still faces challenges in compliance, investment attraction, and equitable contributions across sectors.

Key Achievements and Challenges

1. Tax Revenue Growth and Sector Contributions
   • Tax revenue rose by TZS 3.5 trillion from the previous year, with the services sector leading at 28.2% of contributions (TZS 7.8 trillion), followed by trade (23.6%) and manufacturing (17.7%).
   • The agriculture sector, employing over 65% of the workforce, accounted for only 5.6% of the revenue. This discrepancy calls for reforms to harness agriculture’s full economic potential.

Figure 1: Tax Contribution by Sector

1. Services: 28.2%
2. Trade: 23.6%
3. Manufacturing: 17.7%
4. Agriculture: 5.6%
5. Compliance and Ease of Doing Business
   • Compliance costs average 2% of annual revenues, disproportionately burdening SMEs, which also face challenges from regulatory complexity and frequent policy shifts.
   • Tanzania’s Ease of Doing Business score stands at 59, reflecting moderate barriers such as high corporate tax rates (30%) compared to Kenya’s 25%.
6. Investment Climate and Foreign Direct Investment (FDI)
   • FDI inflows in 2024 reached USD 1.5 billion, primarily in agriculture, energy, and mining, with an anticipated 10% annual growth.
   • Persistent issues include regulatory inconsistencies and limited infrastructure, particularly in transportation and energy.

Future Projections and Policy Recommendations

1. Growth Projections for 2030
   • Tax revenue is expected to almost double to TZS 40 trillion.
   • FDI inflows may reach USD 2.8 billion with regulatory enhancements.
   • The Ease of Doing Business score could improve to 70 through streamlined tax systems.

Figure 2: 2030 Projections

1. Tax Revenue: TZS 40 trillion
2. FDI Inflows: USD 2.8 billion
3. Agricultural Growth: 8% annually
4. Manufacturing Growth: 7% annually
5. Policy Recommendations
   • Simplify Tax Processes: Streamline procedures for SMEs, reducing compliance costs.
   • Educate and Empower: Raise awareness about tax incentives to increase accessibility for businesses.
   • Focus on Inclusivity: Extend support to the informal economy to integrate it into the formal tax system.
   • Stabilize Regulatory Environment: Predictable policies can foster investor confidence and long-term planning.

Conclusion

Tax reforms and policy planning remain central to Tanzania’s economic trajectory. By addressing systemic barriers and promoting inclusivity, the country can unlock sustained growth across key sectors like agriculture, tourism, and manufacturing. Proactive reforms could establish Tanzania as a competitive investment destination in East Africa.

Tanzania stands at a pivotal moment in its economic evolution, with the employment landscape undergoing a gradual transformation from a predominantly informal workforce toward increased formalization. This shift promises enhanced economic stability, improved social welfare, and better tax revenue collection for national development.

Current Employment Dynamics

As of 2024, Tanzania’s workforce reflects a striking division:

• Formal Sector: 10.17 million workers (28% of the workforce), primarily in private companies (91.75% of formal jobs).
• Informal Sector: 25.95 million workers (72%), dominated by agriculture and fishing (65–70%), retail and commerce (10–15%), and manufacturing (5–8%).

The unemployment rate, measured at 8.9% in 2022, represents a slight decline from 9% in 2021 and is projected to improve further, reaching 8.1% by 2030.

Formalization’s Role in Economic Development

The drive to increase formal employment, targeting a rise from 28% in 2024 to 38% by 2030, is accompanied by several advantages:

1. Tax Revenue Growth: Formal sector taxes already contribute over TZS 27.64 trillion annually, fueling public services and infrastructure development.
2. Social Protections: Expansion in formal employment ensures broader access to pensions, health insurance, and job security.
3. Economic Planning: A formal workforce aids accurate economic monitoring, investment planning, and resource allocation.

Sectoral Transformation

By 2030, formal sector employment is expected to diversify:

• Manufacturing and industry: 25% (3.95 million jobs)
• Services and tourism: 22% (3.48 million jobs)
• Modern agriculture: 20% (3.16 million jobs)

Conversely, the informal sector will remain significant, with traditional agriculture comprising 55% of informal jobs (approximately 14.18 million).

Challenges in Formalization

Tanzania faces several obstacles in its formalization journey:

• Resistance from Informal Entities: Many businesses perceive formalization as cumbersome or costly.
• Skill Gaps: Workforce readiness for formal roles remains insufficient.
• Infrastructure Deficits: Regional disparities in infrastructure limit growth opportunities.

Regional and Demographic Insights

Regions such as Dar es Salaam and Mwanza illustrate the current dichotomy. In Dar es Salaam, out of a total workforce of 5.38 million:

• 785,674 workers (14.6%) are in formal employment.
• 2.02 million (85.4%) are in informal jobs.

Policy Recommendations

1. Streamlining Business Registration: Simplified procedures can incentivize formalization.
2. Agricultural Modernization: Integrating rural workers into formal value chains can foster productivity.
3. Skill Development: Aligning educational programs with formal sector needs is vital.
4. Digital Transformation: Investments in digital tools for SMEs can create pathways from informal to formal business practices.

Future Projections

Future Projections Summary:

Tanzania's employment landscape is projected to shift significantly between 2024 and 2030, emphasizing formalization:

1. Current Employment (2024):
   • Formal Employment: 28%
   • Informal Employment: 71.8%
2. Target for 2030:
   • Formal Employment: 38%
   • Informal Employment: 62%

Conclusion

Tanzania’s transition to a formalized workforce marks a significant step in its economic development strategy. Achieving inclusive growth, however, will require targeted investments, infrastructural improvements, and effective policy execution. By addressing challenges and leveraging opportunities, the nation can secure sustainable development and improved living standards for its citizens.

Introduction
Public-Private Partnerships (PPPs) are central to Tanzania’s strategy for achieving sustainable development and economic transformation. Through innovative financial models and collaboration, the government aims to address infrastructure, energy, and social challenges while leveraging private sector efficiency and capital. These partnerships are aligned with Tanzania’s Vision 2025, focusing on inclusivity and growth.

Development Budget and Cost-Sharing Model
From 2021/22 to 2024/25, Tanzania allocated 54.575 trillion TZS to development projects, with 33.794 trillion TZS sourced domestically. The government employs an 80-20 cost-sharing model, where 80% of project funding is contributed by the private sector, significantly reducing the government’s financial burden. This model not only minimizes upfront costs but also allocates risk, with the private sector absorbing potential project overruns.

The development plan is expected to create approximately 10,000 jobs, with 8,000 positions in the private sector. Moreover, it is anticipated to boost annual economic output by 1 trillion TZS, enhancing Tanzania’s position as a regional economic hub.

Major Projects and Their Impact

1. Infrastructure Development
   • The Standard Gauge Railway enhances regional connectivity, fostering trade and reducing transport costs.
   • The Kigongo-Busisi Bridge facilitates commerce in the Lake Zone by improving accessibility.
   • The Msalato International Airport expands international connectivity, promoting tourism and trade.
2. Energy Projects
   • The Julius Nyerere Hydropower Project, with a capacity of 2,115 MW, stabilizes Tanzania’s energy supply, supporting industrial growth.
   • Rural electrification initiatives aim to provide universal energy access, particularly benefiting underserved rural communities.
3. Social Investments
   Investments in education and healthcare infrastructure are improving access to essential services. The government’s commitment to fee-free basic education and enhanced healthcare services highlights its dedication to uplifting the quality of life for citizens.

The Julius Nyerere Hydropower Project alone is projected to generate 31.725 billion TZS in annual revenue, showcasing the financial efficiency of PPP initiatives.

Comparative Insights from Africa
Tanzania’s PPP model mirrors successful regional practices. For instance, Kenya’s Nairobi Expressway, funded 80% by the private sector, has significantly reduced traffic congestion while generating $25 million in annual toll revenue. Similarly, Rwanda’s Kigali Innovation City has created 50,000 digital jobs, boosting the country’s tech ecosystem. Morocco’s Noor Solar Power Complex demonstrates the environmental benefits of PPPs, powering two million homes and reducing carbon emissions by 760,000 tons annually.

These examples highlight the potential for Tanzania to replicate such successes, particularly in renewable energy, transportation, and technology sectors.

Recommendations for Strengthening Tanzania’s PPPs

1. Sectoral Priorities:
   Focus on critical areas such as transportation, renewable energy, water supply, and digital transformation to ensure long-term sustainability and social impact.
2. Regulatory Enhancements:
   Establish clear frameworks and standardized contracts to improve project consistency and build investor confidence.
3. Public Awareness:
   Engage communities through education campaigns on PPP benefits to foster acceptance and reduce resistance to development projects.
4. Risk Management:
   Allocate risks effectively between public and private partners, ensuring stability and balanced collaboration.

Conclusion
Tanzania’s strategic use of PPPs is transforming its economic landscape, fostering job creation, enhancing infrastructure, and improving access to essential services. Flagship projects like the Standard Gauge Railway and Julius Nyerere Hydropower Project underscore the potential of PPPs to drive economic growth and inclusivity. By addressing challenges such as regulatory gaps and expanding partnerships to sectors like healthcare and education, Tanzania can solidify its position as a regional leader in sustainable development.