Regional and Continental Insights

Tanzania's recent activities with the International Monetary Fund (IMF) underscore its proactive approach to using external financing for economic growth and stability. As of December 25, 2024, Tanzania has a total outstanding IMF credit of $1.009 billion, with $155.99 million in new disbursements during December 2024. This positioning highlights Tanzania as a key player in East Africa, actively addressing immediate economic challenges while also setting its sights on long-term development. Below is a detailed analysis of Tanzania's performance compared to other East African and African countries, offering valuable insights into its regional and continental positioning.

Tanzania's Position in East Africa

Tanzania is performing strongly among East African nations. Here's how Tanzania compares to its neighbors:

Tanzania:

• Total Outstanding Credit (Dec 25, 2024): $1,009,260,000
• Disbursements (Dec 1–25, 2024): $155,990,000
• Repayments (Dec 1–25, 2024): $0

East African Peers:

1. Kenya:
   • Outstanding Credit: $3,022,009,900
   • Disbursements: $0
   • Repayments: $0 Kenya holds significantly higher outstanding IMF credit than Tanzania but did not receive any new disbursements in this period.
2. Uganda:
   • Outstanding Credit: $992,750,000
   • Disbursements: $0
   • Repayments: $0 Uganda’s outstanding credit is slightly lower than Tanzania's, and no disbursements or repayments occurred during the period.
3. Rwanda:
   • Outstanding Credit: $614,767,500
   • Disbursements: $138,626,360
   • Repayments: $0 Rwanda has received notable disbursements, but its total outstanding credit remains lower than Tanzania’s.
4. Burundi:
   • Outstanding Credit: $100,600,000
   • Disbursements: $0
   • Repayments: $0 Burundi’s outstanding credit is significantly lower than Tanzania's, and there has been no activity in disbursements or repayments.
5. South Sudan:
   • Outstanding Credit: $246,000,000
   • Disbursements: $0
   • Repayments: $0 South Sudan's outstanding credit is also lower than Tanzania’s.

Summary for East Africa:
Tanzania ranks second in terms of outstanding IMF credit after Kenya but leads in disbursements for the period, demonstrating an active engagement with IMF resources for economic support.

Tanzania's Position in Africa

While Tanzania’s outstanding credit is moderate compared to other African countries, it is crucial to understand its position relative to some of Africa’s larger economies.

Top African Economies:

• Egypt: $8,741,181,682
• South Africa: $1,144,200,000
• Nigeria: $613,625,000

Comparable Countries:

• Ghana: $2,514,421,000
• Mozambique: $553,800,000
• Zambia: $992,860,000

Key Figures:

• Total Outstanding Credit in Africa: At $1.009 billion, Tanzania’s total credit places it among the moderate credit borrowers in Africa.
• Disbursements: Tanzania’s $155.99 million in disbursements ranks among the highest in Africa for the period, comparable to Ghana and Rwanda.
• Repayments: Tanzania made no repayments during the period, similar to most East African countries.

Insights

1. Tanzania’s Growing Dependence on IMF Support

Tanzania's $155.99 million in new disbursements suggests an increasing reliance on IMF funding. This support is likely directed at addressing budget deficits, financing economic reforms, or driving infrastructure projects that are critical for the country’s growth. The total outstanding credit of $1.009 billion is moderate compared to larger African economies like Egypt and South Africa but indicates Tanzania’s growing dependence on external financing.

2. Regional Competitiveness (East Africa)

Tanzania ranks as the second-largest borrower in East Africa, with $1.009 billion in outstanding IMF credit, trailing behind Kenya’s $3.02 billion. However, Tanzania’s high disbursements of $155.99 million indicate a more active utilization of IMF resources compared to Kenya, which did not receive any new IMF loans during this period. This proactive financial management puts Tanzania in a strong position to leverage external resources for sustainable development.

3. Tanzania’s Position in Africa

Tanzania occupies a balanced position in Africa. Its $1.009 billion in outstanding IMF credit is far below the levels seen in Egypt and South Africa, which have more significant credit exposures. However, Tanzania’s engagement with the IMF through substantial disbursements signals a robust and strategic use of external resources to finance economic reforms and projects critical for long-term growth.

4. Economic Implications

The high disbursements Tanzania has received suggest the country is channeling IMF funds into critical sectors such as energy, agriculture, and infrastructure. While the absence of repayments indicates a focus on securing resources for immediate needs rather than servicing debt, it highlights potential financial pressure. Despite this, Tanzania’s moderate debt load compared to larger economies provides a buffer to manage repayment obligations effectively in the future.

Broader Themes for Tanzania

1. Growth Potential

Tanzania’s active engagement with the IMF and strategic borrowing position the country to drive economic growth. By utilizing IMF resources, particularly in sectors requiring external capital, Tanzania is laying the groundwork for future growth.

2. Caution on Debt Management

While Tanzania’s debt levels are moderate, its increasing reliance on external financing must be closely monitored. This trend could potentially pose risks if not managed prudently, especially in the face of global economic volatility.

3. Leadership in East Africa

Tanzania’s strategic borrowing places it in a leadership role in East Africa, using IMF resources effectively to support its development agenda. This could enhance its regional influence and attract additional international support.

Conclusion

Tanzania’s strategic use of IMF resources demonstrates its proactive approach to managing economic challenges and fostering long-term growth. While its debt levels remain manageable, continued borrowing suggests the need for careful fiscal planning to ensure sustainability and maximize the benefits of these funds. Regionally, Tanzania is emerging as a leader in leveraging IMF support, setting an example for other East African nations in utilizing international resources for national development.

Tanzania’s engagement with the IMF is not just about addressing short-term challenges—it reflects a long-term vision of economic transformation and stability. By balancing the need for external financing with fiscal responsibility, Tanzania is paving the way for a prosperous future.

Tanzania maintained a stable annual headline inflation rate of 3.0% in November 2024, reflecting effective monetary management. However, rising costs in key categories such as food and energy signal emerging price pressures. With food inflation increasing to 3.3% and energy costs up by 5.7%, these shifts highlight the need for proactive measures to safeguard household welfare and economic resilience.

National Consumer Price Index (NCPI) report for November 2024 for Tanzania, incorporating the key findings and figures provided:

1. Headline Inflation

• The annual headline inflation rate remained at 3.0% in November 2024, unchanged from October 2024, indicating price stability.
• The overall NCPI index rose from 112.67 in November 2023 to 116.05 in November 2024, showing a year-on-year increase of 3.0% in consumer prices.

2. Food and Non-Alcoholic Beverages

• Annual Inflation Rate: Increased to 3.3% in November 2024, up from 2.5% in October 2024.
• This category carries significant importance, with a weight of 28.2% in the NCPI.
• Monthly Price Movement: Prices rose by 1.2% from October to November 2024, reflecting seasonal and supply-side influences.

Significant food price increases (October–November 2024):

• Finger millet grains: +4.2%
• Maize grains: +4.1%
• Fresh fish: +4.4%
• Groundnuts: +5.0%
• Beef meat: +3.5%
• Fresh cassava: +3.3%

3. Core Inflation

• Definition: Core inflation excludes volatile and seasonal items, focusing on a stable consumption basket (e.g., processed foods, clothing, personal care items).
• Annual Rate: Increased slightly to 3.3% in November from 3.2% in October 2024.
• Coverage: This measure includes 297 items and constitutes 73.9% of the NCPI.
• Items excluded: Unprocessed food, energy, and utilities (except maize flour).

4. Non-Food Items

Significant price increases (October–November 2024):

• Charcoal: +1.5% (driven by seasonal demand and limited supply).
• Household appliances: +0.6% (due to exchange rate effects or supply constraints).
• Footwear for men: +0.6% (possibly reflecting higher input costs).
• Household furniture: +0.4%.
• Personal care products: +0.4%.

5. Energy, Fuel, and Utilities

• The Energy, Fuel, and Utilities Index recorded a 5.7% annual increase. This reflects higher global energy prices or adjustments in local tariffs.
  • Likely driven by costs in electricity, water, and fuels like kerosene.

6. Services, Goods, and Education Indices

• Services Index: Up 2.3% annually, reflecting modest price increases in service-related industries (transportation, healthcare, etc.).
• Goods Index: Increased by 3.3%, indicating general upward price movement for tangible products.
• Education Services: Saw a 3.1% annual increase, likely influenced by rising costs in tuition fees or related expenses.

Analysis of Inflation Trends

• Stability: A headline inflation rate of 3.0% over two months shows effective inflation management, reflecting balanced monetary and fiscal policies.
• Upward pressures: Food prices (e.g., maize, millet, fish, and groundnuts) and non-food categories like energy and charcoal have seen notable increases, which may impact households disproportionately depending on income levels.
• Core Inflation: Slight upward movement in core inflation indicates broader, consistent price increases in stable goods and services, a key indicator of underlying inflation trends.

Implications

• Households: Rising food and non-food prices may strain lower-income households, especially with the increase in essentials like maize and charcoal.
• Monetary Policy: The Bank of Tanzania's policies appear effective, maintaining inflation within the targeted range, but vigilance is needed due to creeping food inflation.
• Seasonal Variations: Some price increases (e.g., charcoal and maize) could be seasonal and might ease with improved supply or post-harvest periods.

The National Consumer Price Index (NCPI) report for November 2024 provides insights into the state of inflation in Tanzania and its potential implications for households, businesses, and policymakers.

1. Inflation Stability

• Headline inflation remaining stable at 3.0% shows that the cost of goods and services is rising at a moderate pace.
• This reflects effective monetary policies by the Bank of Tanzania, keeping inflation within a manageable range and fostering economic stability.

2. Food Price Pressures

• Food and Non-Alcoholic Beverages inflation increased from 2.5% in October to 3.3% in November 2024, driven by notable price hikes in staple foods like maize, millet, and cassava.
• This indicates seasonal pressures or supply chain challenges, which may be affecting the availability of key food items.
• With 28.2% weight in the NCPI, food inflation has a significant impact on overall inflation, especially for low-income households that spend a large portion of their income on food.

3. Rising Costs of Essentials

• The increase in core inflation to 3.3% signals price increases in non-volatile items such as household goods, footwear, and personal care products.
• These changes indicate broad price pressures that may not be temporary and could reflect rising production costs, import tariffs, or exchange rate fluctuations.

4. Energy and Utilities

• The 5.7% annual increase in the Energy, Fuel, and Utilities index highlights growing energy costs, which could affect transportation, manufacturing, and household budgets.
• Rising energy prices might be linked to global market trends or domestic adjustments in utility tariffs, potentially impacting businesses and consumers alike.

5. Broader Economic Trends

• The Services Index (+2.3%) and Goods Index (+3.3%) suggest that both tangible goods and services are experiencing moderate price increases.
• Education services inflation (+3.1%) could indicate rising school fees, a potential concern for households with school-going children.

Key Takeaways

1. For Households: Rising food and energy costs may place pressure on low-income families, especially as food and energy represent a significant share of their expenditures.
2. For Policymakers: The government and the Bank of Tanzania need to monitor food supply chains, energy prices, and exchange rate impacts to ensure inflation does not accelerate beyond the target range.
3. For Businesses: Companies may face higher input costs, particularly in energy and utilities, which could translate to higher product prices and impact consumer demand.
4. Economic Resilience: The stable overall inflation rate indicates that Tanzania's economic management is sound, but the upward movement in specific categories suggests the need for proactive measures to control price hikes in essential items.

Conclusion

While inflation in Tanzania is stable overall, the report highlights underlying pressures in food prices and energy costs. These pressures could have a ripple effect on household budgets and business operations if not managed effectively. Continuous monitoring and targeted interventions (e.g., supporting food production and reducing energy costs) will be critical to sustaining economic stability.

The Q3 2024 Index of Industrial Production (IIP) highlights a 5.5% quarterly growth in Tanzania's industrial sector, driven primarily by robust manufacturing performance. While sectors like beverages, tobacco, and non-metallic mineral products show significant expansion, traditional industries such as mining, textiles, and utilities face stagnation or decline. The findings emphasize the need for targeted support to lagging industries and strategies to sustain growth in high-performing sectors.

Overall Index Performance

• Quarter-over-quarter performance: The overall IIP rose from 104.9 in Q2 2024 to 110.6 in Q3 2024, a growth of 5.5%.
• Year-over-year performance: Compared to Q3 2023 (index: 107.1), the IIP grew by 3.3% in Q3 2024.

This indicates a steady recovery and growth trajectory in Tanzania's industrial production.

Manufacturing Sector

• Weight in total index: 58%
• Quarterly growth: The sector achieved 8.8% growth, with the index increasing from 107.5 in Q2 2024 to 117.0 in Q3 2024, making it the strongest-performing sector.
• Key contributors to growth:
  • Non-metallic mineral products: Increased by 20.9%, driven by construction and infrastructure projects.
  • Tobacco products: Increased by 18.7%, likely due to export demand and domestic market expansion.
  • Beverages: Increased by 18.0%, supported by seasonal demand and production efficiency.
• Declines within manufacturing:
  • Printing and media: Declined by -16.7%, reflecting reduced demand for printed materials.
  • Textiles: Declined by -15.5%, possibly due to competition from imports or high production costs.
  • Machinery repair/installation: Declined by -12.4%, suggesting reduced industrial investment or maintenance activities.

Other Major Sectors

Mining and Quarrying

• Weight in total index: 28.8%
• Quarter-over-quarter performance: Stagnant at 95.4.
• Year-over-year performance: Declined by -2.1%.
  This stagnation reflects challenges such as fluctuating global demand, operational issues, or regulatory constraints.

Electricity, Gas, Steam, and Air Conditioning

• Weight in total index: 11.7%
• Quarter-over-quarter performance: Modest growth of 1.5%.
• Year-over-year performance: Declined by -2.2%, suggesting lower demand or capacity challenges in the utilities sector.

Water Supply & Waste Management

• Weight in total index: 1.5%
• Quarter-over-quarter performance: Increased slightly by 1.1%.
• Year-over-year performance: Declined significantly by -7.3%, indicating issues in operational capacity or investment in the sector.

Year-over-Year Standout Performers

1. Rubber and plastic products: Grew by +24.4%, reflecting increased industrial and consumer use.
2. Beverages: Grew by +23.6%, supported by both domestic consumption and export.
3. Paper products: Grew by +23.1%, likely driven by demand from packaging and related industries.

Biggest Year-over-Year Declines

1. Textiles: Declined by -24.3%, showing continued struggles with competition, costs, or market access.
2. Printing and media: Declined by -15.7%, emphasizing a shift toward digital media consumption.
3. Basic metals: Declined by -12.3%, reflecting reduced industrial activity or exports in the sector.

Key Insights

• The manufacturing sector is the main driver of industrial growth, with strong contributions from beverages, tobacco, and non-metallic minerals.
• The performance across sectors remains uneven:
  • Growth is concentrated in consumer-oriented and export-driven industries.
  • Traditional industries such as mining, utilities, and textiles face stagnation or decline.
• The mixed performance underscores the need for targeted support for struggling sectors and policies to sustain momentum in high-performing ones.

The Index of Industrial Production (IIP) for Tanzania in Q3 2024 tells a story of sectoral disparity and shifting dynamics in the industrial economy.

1. Positive Overall Growth

• The 5.5% quarterly increase and 3.3% annual growth reflect overall recovery and resilience in Tanzania's industrial sector.
• This growth is primarily driven by the manufacturing sector, which is performing strongly.

2. Manufacturing is the Key Driver

• Manufacturing, with a significant 58% weight in the index, is leading growth due to:
  • Strong demand for construction materials (non-metallic minerals).
  • Increased production of beverages and tobacco products.
  • Rising export and local consumption in high-performing industries.
• Consumer-oriented industries like beverages and tobacco are thriving, suggesting domestic consumption and export markets are supporting growth.

3. Uneven Sectoral Performance

• Mining and Quarrying: Stagnation at 95.4 shows the sector is under pressure, potentially due to:
  • Volatility in global commodity prices.
  • Regulatory or operational hurdles.
• Utilities (electricity, gas, water): Marginal or negative performance indicates challenges in expanding capacity or meeting demand.

4. Year-over-Year Declines in Traditional Industries

• Textiles (-24.3%) and Printing (-15.7%) are facing structural issues, such as:
  • Competition from imports or substitutes.
  • Shifting consumer preferences, especially toward digital media.
• Basic metals (-12.3%) and machinery repair suggest weaker industrial investment, which may impact future capacity.

5. A Dynamic Shift in Industrial Focus

• The standout performers—rubber, plastic, beverages, and paper products—point to a shift towards diversified and consumer-driven industries.
• Declines in traditional manufacturing like textiles and metals suggest that the economy is moving away from labor-intensive, lower-value industries toward higher-value, diversified production.

6. Challenges to Address

• Stagnation in mining and utilities needs strategic interventions, such as:
  • Modernizing infrastructure.
  • Improving regulatory frameworks to attract investment.
• Struggling industries (e.g., textiles and printing) may require:
  • Support to boost competitiveness.
  • Diversification to align with global trends.

7. Strategic Implications

Tanzania's industrial sector is on a growth trajectory, its performance is uneven, driven by a few high-performing sub-sectors. To sustain this growth, Tanzania must:

• Capitalize on high-growth sectors like manufacturing, beverages, and construction materials.
• Revive lagging industries through policy support, investment, and innovation.
• Foster diversification to reduce dependency on a few key industries.

The Bank of Tanzania's financial position for November 2024 reflects a delicate balance between supporting fiscal needs and maintaining economic stability. Key changes include a 2.5% decline in total assets to TZS 25.39 trillion, driven by reduced cash reserves, alongside increased advances to the government by TZS 470 billion. These movements highlight fiscal pressures, external obligation management, and the central bank's critical role in stabilizing the economy amidst tightening financial conditions.

Bank of Tanzania's Statement of Financial Position as of November 30, 2024, with figures and key changes compared to October 2024:

1. Total Assets

• November 2024: TZS 25,388,447,414
• October 2024: TZS 26,040,992,974
• Change: Decreased by TZS 652,545,560 (approximately 2.5%).

This decline reflects changes in various asset components, most notably the sharp drop in cash and cash equivalents, offset partially by an increase in advances to the government.

2. Major Asset Components

a. Foreign Currency Marketable Securities

• Value: TZS 8,136,841,550
• Observation: This remains the largest asset on the Bank’s balance sheet, indicating the institution's significant reliance on foreign investments.

b. Cash and Cash Equivalents

• November 2024: TZS 4,879,028,404
• October 2024: TZS 6,028,657,113
• Change: Decreased by TZS 1,149,628,709 (~19.1%).

This sharp decline could signal increased liquidity outflows, possibly to meet operational obligations or support the financial system.

c. Advances to Government

• November 2024: TZS 5,394,166,906
• October 2024: TZS 4,924,120,304
• Change: Increased by TZS 470,046,602 (~9.5%).

The rise indicates higher support for government financing needs, which may align with fiscal demands or debt management objectives.

3. Total Liabilities

• November 2024: TZS 22,685,046,183
• October 2024: TZS 23,185,162,980
• Change: Decreased by TZS 500,116,797 (approximately 2.2%).

This reflects reductions in foreign currency financial liabilities, indicating a likely repayment or adjustment of external obligations.

4. Major Liability Components

a. Currency in Circulation

• November 2024: TZS 8,625,807,089
• October 2024: TZS 8,589,148,419
• Change: Increased by TZS 36,658,670 (~0.4%).

This small increase is consistent with seasonal factors or economic growth-related cash demand.

b. Foreign Currency Financial Liabilities

• November 2024: TZS 4,933,972,124
• October 2024: TZS 5,410,348,462
• Change: Decreased by TZS 476,376,338 (~8.8%).

This reduction suggests repayments or reduced foreign currency obligations, contributing to the overall liability decline.

c. Bank and Non-Bank Financial Institution Deposits

• Value: TZS 3,231,602,090
• Observation: These deposits remain a significant liability, reflecting funds entrusted by financial institutions to the Bank of Tanzania.

5. Equity Position

• Total Equity: TZS 2,703,401,231
• October 2024: TZS 2,855,829,994
• Change: Decreased by TZS 152,428,763 (~5.3%).

Breakdown:

• Paid-Up Capital: Unchanged at TZS 100,000,000.
• Reserves: Decreased from TZS 2,755,829,994 to TZS 2,603,401,231, reflecting lower retained earnings or adjustments to reserve accounts.

6. Notable Changes and Observations

1. Cash and Cash Equivalents:
   The TZS 1.15 trillion drop signals significant liquidity pressures or policy interventions.
2. Advances to Government:
   The TZS 470 billion rise indicates greater reliance on central bank funding for fiscal operations.
3. Currency in Circulation:
   A slight increase of TZS 36.7 billion aligns with consistent cash demand.
4. Foreign Currency Financial Liabilities:
   A reduction of TZS 476 billion highlights improved external balance management.

The November 2024 statement reveals efforts to balance liquidity support to the economy and reduce external obligations. While the decline in total assets and equity signals tightening financial conditions, the increase in advances to the government underscores the central bank's role in supporting fiscal policy.

The Bank of Tanzania's Statement of Financial Position for November 2024 with key insights about the central bank's financial health, economic priorities, and operational trends.

1. Liquidity Pressures and Operational Adjustments

• Sharp decline in Cash and Cash Equivalents (down TZS 1.15 trillion):
  This indicates liquidity outflows, possibly due to:
  • Interventions in the financial markets to stabilize the Tanzanian shilling.
  • Support to commercial banks or other financial institutions.
  • Seasonal outflows, such as government spending obligations (e.g., salary payments or infrastructure financing).

2. Increased Government Financing

• Advances to Government up by TZS 470 billion (9.5%):
  This suggests the government relied more heavily on the central bank for funding in November. Potential reasons include:
  • Budgetary shortfalls requiring deficit financing.
  • Delays in revenue collection or international financing.
  • Efforts to finance ongoing development projects or meet fiscal priorities.

3. Stable Domestic Economic Activity

• Currency in Circulation slightly increased (up TZS 36.7 billion):
  This minor growth suggests stable domestic demand for cash, possibly reflecting:
  • Economic activity proceeding without major shocks.
  • Seasonal increases in cash needs (e.g., for holiday spending).

4. Improved Management of External Obligations

• Foreign Currency Financial Liabilities decreased by TZS 476 billion (8.8%):
  This points to:
  • Successful repayment or refinancing of foreign liabilities.
  • A reduction in dependence on external financing, possibly due to improved forex inflows or lower external debt servicing.

5. Decline in Equity Reflects Tight Financial Conditions

• Equity reduced by 5.3% (TZS 152.4 billion):
  These decreases, primarily due to lower reserves, could mean:
  • Lower profits or unrealized losses from foreign currency marketable securities (e.g., due to forex volatility or interest rate changes).
  • The central bank might be absorbing shocks to stabilize the economy, at the cost of its reserve position.

6. Overall Economic Implications

1. Fiscal Dependence:
   The government’s increased reliance on central bank funding highlights fiscal pressures. This could signal challenges in meeting revenue targets or higher expenditure demands.
2. Monetary Tightening Signals:
   The reduction in liabilities and cash reserves indicates the central bank might be tightening liquidity to control inflation or stabilize the currency.
3. Economic Stability:
   Stable currency in circulation and reduced foreign liabilities suggest the central bank is managing to maintain economic stability despite challenges.

Key Concerns

• Shrinking Assets:
  A 2.5% decline in total assets reflects constrained central bank resources, which may limit its ability to respond to future shocks.
• Reliance on Domestic Borrowing:
  Increased advances to the government could crowd out private sector borrowing and hinder growth if sustained.

Conclusion

The statement shows a central bank balancing multiple priorities: supporting government financing, managing external liabilities, and maintaining domestic liquidity. However, shrinking reserves and declining assets may signal the need for tighter fiscal discipline and a cautious approach to monetary policy.

Msimamo wa kifedha wa Benki Kuu ya Tanzania kwa Novemba 2024 unaonyesha juhudi za taasisi hiyo kusawazisha kati ya msaada wa kifedha na uthabiti wa kiuchumi. Kupungua kwa mali jumla kwa 2.5%, hasa kutokana na kupungua kwa akiba ya fedha taslimu na ongezeko kubwa la mikopo kwa serikali, kunaonyesha majibu ya benki kuu dhidi ya changamoto za kiuchumi na kifedha zilizopo. Ifuatayo ni uchambuzi wa kina wa taarifa ya kifedha na takwimu muhimu.

1. Total Assets (Mali Jumla)

Novemba 2024: TZS 25,388,447,414
Oktoba 2024: TZS 26,040,992,974
Mabadiliko: Imepungua kwa TZS 652,545,560 (~2.5%)

Kupungua huku kunatokana na mabadiliko katika vipengele vya mali, hususan:

• Kupungua kwa kasi kwa fedha taslimu na sawa na taslimu.
• Ongezeko la mikopo kwa serikali.

2. Major Asset Components (Vipengele Vikuu vya Mali)

a. Hati za Nje Zinazoweza Kuuzwa Sokoni

• Thamani: TZS 8,136,841,550
• Uchambuzi: Hati hizi zinaendelea kuwa mali kubwa zaidi kwenye mizania ya Benki Kuu, ikisisitiza utegemezi wa uwekezaji wa nje.

b. Fedha Taslimu na Sawa na Taslimu

• Novemba 2024: TZS 4,879,028,404
• Oktoba 2024: TZS 6,028,657,113
• Mabadiliko: Imepungua kwa TZS 1,149,628,709 (~19.1%)

Kupungua huku kwa kiasi kikubwa kunaonyesha changamoto za ukwasi, zinazoweza kusababishwa na:

• Hatua za soko kuthibiti thamani ya shilingi ya Tanzania.
• Msaada kwa taasisi za kifedha.
• Matumizi ya msimu ya serikali, kama mishahara na miradi ya maendeleo.

c. Mikopo kwa Serikali

• Novemba 2024: TZS 5,394,166,906
• Oktoba 2024: TZS 4,924,120,304
• Mabadiliko: Imeongezeka kwa TZS 470,046,602 (~9.5%)

Ongezeko hili linaonyesha utegemezi mkubwa wa serikali kwa ufadhili wa benki kuu ili kufidia mapungufu ya bajeti, kusaidia miradi ya maendeleo, au kudhibiti madeni.

3. Jumla ya Madeni

Novemba 2024: TZS 22,685,046,183
Oktoba 2024: TZS 23,185,162,980
Mabadiliko: Imepungua kwa TZS 500,116,797 (~2.2%)

Kupungua huku kunatokana na kupungua kwa madeni ya kifedha ya sarafu za kigeni, ishara ya usimamizi bora wa wajibu wa nje.

4. Vipengele Vikuu vya Madeni

a. Fedha Katika Mzunguko

• Novemba 2024: TZS 8,625,807,089
• Oktoba 2024: TZS 8,589,148,419
• Mabadiliko: Imeongezeka kwa TZS 36,658,670 (~0.4%)

Ongezeko hili dogo linaonyesha mahitaji thabiti ya fedha ndani ya nchi, yakichochewa na sababu za msimu na shughuli za kiuchumi.

b. Madeni ya Kifedha ya Sarafu za Kigeni

• Novemba 2024: TZS 4,933,972,124
• Oktoba 2024: TZS 5,410,348,462
• Mabadiliko: Imepungua kwa TZS 476,376,338 (~8.8%)

Kupungua huku kunaonyesha:

• Malipo yaliyofanikiwa au urejeshwaji wa madeni ya nje.
• Kuongezeka kwa mapato ya fedha za kigeni au kupungua kwa gharama za huduma za madeni ya nje.

c. Amana za Mabenki na Taasisi Zisizo za Kibenki

• Thamani: TZS 3,231,602,090
• Uchambuzi: Amana hizi zinaendelea kuwa sehemu kubwa ya madeni, zikionyesha fedha zilizowekwa na taasisi za kifedha kwa Benki Kuu ya Tanzania.

5. Equity Position (Nafasi ya Hisa)

Novemba 2024: TZS 2,703,401,231
Oktoba 2024: TZS 2,855,829,994
Mabadiliko: Imepungua kwa TZS 152,428,763 (~5.3%)

Mgawanyo:

• Mtaji Ulioingizwa: TZS 100,000,000 (haujabadilika)
• Akiba: Imepungua kutoka TZS 2,755,829,994 hadi TZS 2,603,401,231, ikionyesha mapato madogo yaliyobaki au hasara ambazo hazijagunduliwa.

6. Notable Trends and Observations

a. Changamoto za Ukwasi:
Kupungua kwa TZS 1.15 trilioni katika fedha taslimu kunaonyesha changamoto kubwa za ukwasi, labda kutokana na hatua za sera au mahitaji ya kifedha.

b. Utegemezi wa Kifedha:
Ongezeko la TZS 470 bilioni la mikopo kwa serikali linaonyesha shinikizo za bajeti na utegemezi wa serikali kwa ufadhili wa benki kuu.

c. Shughuli Thabiti za Ndani:
Ongezeko dogo la fedha katika mzunguko linaonyesha mahitaji thabiti ya fedha kwa shughuli za kiuchumi zinazoendelea.

d. Usimamizi wa Madeni ya Nje:
Kupungua kwa TZS 476 bilioni kwa madeni ya sarafu za kigeni kunaonyesha usimamizi bora wa madeni ya nje, kupunguza utegemezi kwa ufadhili wa nje.

e. Changamoto za Hisa:
Kupungua kwa asilimia 5.3 ya hisa kunaonyesha hali ngumu ya kifedha, labda kutokana na faida ndogo au marekebisho ya akiba ili kuhimili changamoto za kiuchumi.

Hitimisho

Taarifa ya kifedha ya Novemba 2024 inaonyesha Benki Kuu ikijaribu kusawazisha vipaumbele vingi: kusaidia shughuli za serikali, kudumisha ukwasi, na kusimamia wajibu wa nje. Licha ya kupungua kwa mali jumla na hisa, hatua za benki kuu zinaonyesha dhamira ya kudumisha uthabiti wa uchumi na kushughulikia changamoto za kifedha.

In October 2024, Zanzibar's economy demonstrated resilience, showing strong fiscal performance, improved external trade, and effective management of inflationary pressures. While inflation rose moderately, the government exceeded revenue targets, and external sector performance strengthened with an increasing current account surplus and robust exports. Despite some challenges, Zanzibar's economy remains on a positive trajectory, with strategic fiscal management and growing export potential.

1. Inflation Analysis

In October 2024, Zanzibar's inflation showed an upward trend in comparison to the previous month but remained lower than the same period in 2023.

• Headline Inflation:
  • 5.8% (up from 4.8% in September 2024)
  • Lower than 6.5% in October 2023.
• Inflation Components:
  • Non-food Inflation:
    • 4.1% (up from 2.8% in September).
    • The increase is mainly driven by rising kerosene and petrol prices.
  • Food Inflation:
    • 8.2% (up from 7.3% in September).
    • Key contributors:
      • Fish: Rising demand and supply constraints.
      • Jasmine Rice: Price increases linked to global supply and domestic production challenges.
      • Edible Cooking Oil: Price hikes caused by supply chain disruptions.
  • Month-to-Month Inflation:
    • 0.1% (compared to -0.9% in October 2023), indicating slight price increases in the short term.

2. Government Budgetary Operations

The government’s budget performance in October 2024 reflected strong revenue generation, but also substantial expenditure.

• Total Revenue and Grants:
  • TZS 158.3 billion (domestic revenue: TZS 143.2 billion, exceeding the target by 1.9%).
• Tax Revenue:
  • Total Tax Revenue:
    • TZS 129.3 billion (exceeded target by 4.8%).
  • Key Components:
    • Tax on Imports: TZS 25.9 billion.
    • VAT and Excise Duties: TZS 44.7 billion.
    • Income Tax: TZS 27.4 billion.
    • Other Taxes: TZS 31.4 billion.
• Non-Tax Revenue:
  • TZS 13.9 billion (81.3% of the target).
• Government Expenditure:
  • Total Expenditure: TZS 283.1 billion.
    • Recurrent Expenditure: TZS 163.5 billion.
    • Development Expenditure: TZS 119.6 billion.
      • Local Financing: TZS 68.1 billion.
      • Foreign Resources: The remaining balance.

3. External Sector Performance

Zanzibar’s external sector exhibited a positive trend, with an increase in the current account surplus and stronger export performance.

• Current Account:
  • The current account remained in surplus.
  • It increased to USD 520.4 million (up from USD 335.8 million), showing stronger economic health.
• Exports:
  • Total Goods and Services:
    • USD 1,077.3 million (up from USD 972.1 million), driven by various sectors, particularly tourism.
  • Cloves Exports:
    • USD 22.1 million (declined by 18.6% due to cyclical nature of production).
  • Monthly Exports (October 2024):
    • USD 110.1 million (up from USD 84.4 million).
• Imports:
  • Total Imports:
    • Declined by 11.3% to USD 575.4 million.
  • Capital Goods:
    • Decreased to USD 51 million (from USD 79.6 million), possibly due to reduced infrastructure and machinery purchases.
  • Monthly Imports (October 2024):
    • USD 70.6 million.

4. Key Economic Indicators

• Revenue Performance: Strong revenue generation, particularly from taxes.
• Expenditure Management: The government efficiently managed its recurrent and development expenditures.
• External Sector Performance: Improving trade balance with a positive current account surplus and increasing exports.
• Inflation Pressures: Moderate inflation driven by food and fuel prices, manageable within the overall context.
• Fiscal Balance: Zanzibar has balanced fiscal operations with strong revenue and controlled expenditures.

Overall Economic Performance

• Fiscal Management:
  Improved fiscal management, with the government meeting and exceeding its revenue targets and allocating strategic resources.
• External Position:
  Strong external sector performance, with a positive current account surplus and improving export performance. However, imports have declined, particularly in capital goods.
• Inflation Management:
  Inflation remains at a manageable level, with moderate pressures mainly from food prices and energy costs.
• Revenue and Expenditure:
  Effective revenue collection and strategic expenditure allocation, supporting both recurrent and development needs.
• Tourism and Export Growth:
  The tourism sector continues to be a major contributor, with export growth in goods and services.
• Declining Import Dependency:
  The decline in imports, especially capital goods, suggests a shift towards local production or more efficient use of foreign resources.

In summary, Zanzibar's economy shows resilience with improving fiscal and external sector performance, despite facing some inflationary pressures. The strong performance in revenue collection and controlled expenditure management indicates a solid foundation for continued economic growth.

Zanzibar's economic performance in October 2024 with key insights:

1. Moderate Inflation Pressures:
   Inflation has risen, but the overall increase is moderate (5.8% in October 2024 compared to 4.8% in September). The rise in food inflation, driven by increased prices of fish, rice, and cooking oil, and the rise in non-food inflation due to higher kerosene and petrol prices, indicate inflationary pressures. However, the month-to-month inflation rate is positive at 0.1%, suggesting that the inflation increase is gradual and not an immediate crisis.
2. Strong Revenue Performance:
   Zanzibar has exceeded its revenue targets, with tax revenue surpassing expectations by 4.8%. Key contributors to this performance include taxes on imports, VAT and excise duties, and income taxes. This indicates a robust tax collection system and strong economic activity, which is helping to support the government’s fiscal health.
3. Effective Expenditure Management:
   Despite the strong revenue performance, the government has managed its expenditures well. The government’s total expenditure is substantial at TZS 283.1 billion, but it is well-managed, with clear allocations for recurrent spending and development projects. Local financing of development expenditure is notably high, suggesting efforts to support projects without overly relying on foreign loans.
4. Improving External Sector:
   Zanzibar's external sector has improved, with the current account surplus increasing significantly (from USD 335.8 million to USD 520.4 million). The growth in exports, particularly in goods and services (from USD 972.1 million to USD 1,077.3 million), shows that Zanzibar is improving its trade balance and increasing its foreign earnings. The decline in imports, particularly in capital goods, could suggest a reduction in dependency on foreign goods, which is a positive sign of local production capacity or shifting priorities.
5. Resilient Economic Position:
   Overall, Zanzibar’s economy demonstrates resilience. Despite inflationary pressures, it is maintaining strong fiscal performance, with effective revenue collection, strategic expenditure allocation, and a positive external position. The tourism sector continues to be a strong driver of exports, contributing to overall economic growth.
6. Declining Import Dependency:
   A decrease in imports, especially capital goods, might indicate a move toward local production or more efficient utilization of foreign resources, which would reduce dependency on foreign imports in the long term.

Key Takeaways:

• Zanzibar's economy is on a positive trajectory with improving fiscal health, growing external reserves, and effective management of inflation.
• The revenue performance is strong, and the government's expenditure is well-targeted, with an emphasis on sustainable development and local financing.
• External trade is improving, with a stronger export performance and a current account surplus, though the import decline indicates a shift toward reducing dependency on foreign goods.
• Inflation, although moderate, poses some risks, primarily from food and fuel prices, which will need to be managed carefully.

Overall, Zanzibar's economy is stable and growing, with effective fiscal policies and an improving external sector, though managing inflation and ensuring sustainable import-export balances will be key to continued prosperity.

In 2024, Tanzania’s external sector demonstrated significant improvement, marked by a narrowing of the current account deficit, strong export performance, and a robust recovery in tourism. Key drivers such as higher gold exports and increased tourist arrivals contributed to the positive outlook, while controlled import growth and adequate foreign exchange reserves ensured external stability. These developments reflect effective economic management, positioning Tanzania for continued resilience and growth in the global market.

1. Current Account

• Deficit Narrowing: The current account deficit for the year ending October 2024 narrowed to USD 2,212.3 million, compared to USD 3,281.9 million for the year ending October 2023. This marks an improvement of USD 1,069.6 million or a 32.6% reduction in the deficit.
• Improvement Drivers: The reduction in the current account deficit is attributed to:
  • Export growth: A substantial increase in exports.
  • Favorable commodity prices: Particularly in gold and other key exports like tobacco, coffee, and cashew nuts.

2. Exports Performance

• Total Exports: Tanzania's total exports reached USD 15,497.8 million, reflecting a 12.9% increase compared to the previous year.

Traditional Exports:

• These grew from USD 910.2 million to USD 1,148.3 million, driven primarily by:
  • Tobacco
  • Coffee
  • Cashew nuts

Non-traditional Exports:

• Increased from USD 6,352.9 million to USD 6,922.7 million. Breakdown:
  • Gold: 47.8% of non-traditional exports, a major contributor to the export increase.
  • Horticultural Products: USD 496.2 million (up from USD 414.6 million).
  • Manufactured Goods: USD 1,315.0 million, contributing to the non-traditional export growth.

3. Services Receipts

• Total receipts from services grew to USD 6,950.6 million, up from USD 6,041.5 million. Key components:
  • Travel (Tourism): USD 3,676.1 million (19.7% increase), with tourist arrivals totaling 2,095,919.
  • Transport Earnings: USD 2,693.6 million, up from USD 2,340.8 million, indicating strong performance in logistics and shipping services.

4. Imports Performance

• Total Imports: USD 16,485.8 million, a 2.3% increase compared to the previous year.
• Key categories contributing to the import growth:
  • Iron and steel
  • Sugar for industrial use
  • Plastic items
  • Footwear
• Monthly Imports (October 2024):
  • Goods: USD 1,257.6 million
  • Services: USD 236.9 million

5. Foreign Exchange Reserves

• Reserves: USD 5,417.74 million, sufficient to cover 4.4 months of projected imports, exceeding the national benchmark of 4 months.
• This indicates a solid foreign exchange buffer, helping to manage import payments and external shocks.

6. Primary Income Account

• Deficit: The primary income account deficit widened to USD 1,777.8 million, compared to USD 1,542.4 million in the previous year. The deterioration was primarily due to:
  • Increased interest payments abroad, which have added pressure on the income balance.

7. Secondary Income Account

• Surplus: The surplus declined to USD 553.4 million from USD 641.5 million, with the surplus for October 2024 standing at USD 44.8 million. This is a decrease in the secondary income inflows, likely due to a reduction in remittances or other transfers.

8. World Commodity Prices (October 2024)

• Crude Oil: USD 74 per barrel, up from USD 72.4, influencing the import costs, particularly for petroleum-related goods.
• Gold: Prices continued to rise, benefiting Tanzania’s export revenue, especially from gold.
• Coffee, Tea, and Rice: Prices showed mixed trends, which likely had varied effects on Tanzania's agricultural export performance.

Key Observations:

1. Strong Export Performance: Both traditional (tobacco, coffee, cashew nuts) and non-traditional exports (especially gold) performed well, supporting Tanzania’s export growth.
2. Tourism Recovery: The tourism sector has shown a robust recovery, with a 19.7% increase in receipts, driven by a rise in tourist arrivals.
3. Import Growth Moderation: Despite a rise in imports, the growth rate has moderated to 2.3%, indicating controlled import spending.
4. Adequate Foreign Exchange Reserves: Reserves at USD 5,417.74 million are strong enough to cover 4.4 months of imports, supporting external stability.
5. Improved Trade Balance: The narrowing of the current account deficit and strong export growth indicate a better trade balance.
6. Robust Service Sector: The service sector, particularly tourism and transport, has performed well, contributing significantly to foreign exchange earnings.

Conclusion:

Tanzania’s external sector performance in 2024 shows:

• Improved trade balance, driven by strong export growth and controlled imports.
• Resilient tourism sector, contributing to increased services receipts.
• Strong foreign exchange reserves provide an adequate buffer for economic stability.
• Improved external position indicates effective economic management and resilience in the face of external shocks.

The analysis of Tanzania’s external sector performance in 2024 with positive trends and key insights about the country’s economic position:

1. Improved Economic Stability:
   • The narrowing of the current account deficit from USD 3.28 billion to USD 2.21 billion indicates a stronger balance of payments. This improvement suggests better economic management, with exports growing and imports being controlled, contributing to a healthier external position.
2. Strong Export Growth:
   • Total exports increased by 12.9%, with both traditional and non-traditional exports performing well. The growth in gold exports (nearly 48% of non-traditional exports), tobacco, coffee, and horticultural products shows that Tanzania is maintaining its competitiveness in key global markets.
3. Resilient Tourism Sector:
   • The tourism sector's recovery is evident in the 19.7% increase in tourism receipts, driven by more tourist arrivals (2,095,919). This sector is a key contributor to foreign exchange earnings and overall economic resilience, signaling a strong recovery from the challenges posed by global disruptions (such as the COVID-19 pandemic).
4. Moderate Import Growth:
   • While imports increased by 2.3%, the controlled growth reflects a balanced approach to foreign spending, suggesting that Tanzania is managing its consumption of foreign goods effectively. The moderation in import growth also helps in narrowing the trade deficit.
5. Adequate Foreign Exchange Reserves:
   • Tanzania's foreign exchange reserves of USD 5.42 billion, covering 4.4 months of imports, are sufficient to support external payments and protect against shocks. The reserves exceeding the national benchmark of 4 months demonstrate the country’s financial resilience.
6. Challenges in Primary Income and Secondary Income Accounts:
   • The primary income deficit has widened due to increased interest payments abroad, which reflects the costs associated with foreign debt or external financing. The secondary income surplus has decreased, which could indicate lower remittance flows or a drop in other transfers.
7. Commodity Price Trends:
   • The rise in gold prices and slight increase in crude oil prices are favorable for Tanzania’s export revenue (especially gold), while the increase in oil prices may lead to higher import costs, especially for petroleum-related goods.

Overall Implications:

• Strengthened External Position: The narrowing current account deficit, strong export performance, and adequate foreign exchange reserves indicate that Tanzania's external sector is strengthening.
• Economic Resilience: Despite global challenges, Tanzania’s economy shows resilience through growth in exports (especially gold) and services (tourism and transport).
• Effective Economic Management: The performance reflects the government’s effective management of external relations, particularly with controlling imports and maintaining stable foreign reserves.
• Opportunities for Growth: The strong export and tourism performances offer significant opportunities for further growth in these sectors, contributing to Tanzania's broader economic development.

In summary, Tanzania’s external sector is performing well, with stronger exports, a resilient tourism sector, moderate import growth, and adequate reserves. However, challenges remain, particularly regarding increased foreign debt payments.

Tanzania’s debt profile reflects a balanced approach to managing both external and domestic debt. With a slight reduction in external debt and a growing reliance on domestic borrowing, the country is strategically navigating fiscal pressures. The government's careful mix of external loans and domestic securities, supported by a diverse creditor base, aims to maintain fiscal stability while mitigating risks associated with currency fluctuations and interest payments. This strategic debt management is crucial for sustaining the country’s economic growth and development.

The debt developments in Tanzania, particularly in the context of external and domestic debt, showcase a strategic approach to debt management.

1. External Debt:

• Total external debt has decreased by 1.5%, bringing it to USD 32,976.9 million as of October 2024.
• Monthly changes:
  • External loans disbursed amounted to USD 285.1 million, mainly directed to the central government.
  • External debt service was USD 288.4 million:
    • Principal repayment: USD 200.3 million
    • Interest payments: The remaining balance of USD 88.1 million (288.4M - 200.3M).

2. External Debt Stock by Borrowers:

Central Government:

• Total amount: USD 25,452.9 million (77.2% of total external debt).
• Disbursed Outstanding Debt (DOD): USD 25,208.8 million (76.4%).
• Interest arrears: USD 252.1 million (0.8%).

Private Sector:

• Total amount: USD 7,520.3 million (22.8%).
• DOD: USD 6,191.6 million (18.8%).
• Interest arrears: USD 1,328.7 million (4.0%).

Public Corporations:

• Amount: USD 3.8 million.
• DOD: USD 3.8 million.
• Interest arrears: USD 0.0 million.

3. Domestic Debt:

• Domestic debt increased by TZS 407.48 billion, totaling TZS 33,023.2 billion.
• Main driver: The government's utilization of the overdraft facility.

Breakdown by Instruments:

• Treasury bonds account for 78% of the total domestic debt.
• Government securities represent 84.5% of the total domestic debt (TZS 27,900.1 billion).
• Non-securitized debt makes up 15.5% (TZS 5,123.0 billion).

4. Domestic Debt by Creditor:

• Commercial banks: 28.8% (TZS 9,510.2 billion).
• Bank of Tanzania (BOT): 21.4% (TZS 7,064.7 billion).
• Pension funds: 27.3% (TZS 9,003.3 billion).
• Insurance companies: 5.8% (TZS 1,913.8 billion).
• BOT's special funds: 1.3% (TZS 420.3 billion).
• Others: 15.5% (TZS 5,110.8 billion).

5. Disbursed Outstanding Debt by Currency Composition:

• United States Dollar (USD): 68.0%.
• Euro: 16.2%.
• Chinese Yuan: 6.2%.
• Other currencies: 9.6%.

Key Observations:

1. External Debt:
   • The external debt shows a decreasing trend with a slight reduction of 1.5%.
   • The central government remains the dominant borrower, holding 77.2% of the total external debt.
   • The currency composition of the debt is well-diversified, with USD comprising the largest share at 68.0%.
2. Domestic Debt:
   • The domestic debt is on an increasing trend, mainly driven by the government's overdraft facility.
   • Treasury bonds represent the largest share (78%) in domestic debt.
   • The creditor base is highly diversified, with commercial banks, pension funds, and the Bank of Tanzania being the largest creditors.
3. Overall Debt Management:
   • Strategic mix: Tanzania maintains a balanced approach between external and domestic debt.
   • The currency diversification helps mitigate risks associated with exchange rate fluctuations.
   • Tanzania’s domestic borrowing is supported by a strong institutional framework, including commercial banks, pension funds, and insurance companies.
   • Prudent debt service management is evident, with careful balancing of principal repayments and interest payments.

The debt profile indicates a strategic approach to debt management, with a well-balanced mix of external and domestic debt. The diversification of creditors and currency composition helps manage risks, while prudent debt servicing ensures that the debt remains sustainable. The increasing reliance on domestic debt and the government's use of overdraft facilities should be monitored to ensure continued fiscal stability.

Tanzania's debt developments with valuable insights into the country’s fiscal health and debt management strategy.

1. Decline in External Debt:

• Decrease in External Debt: Tanzania's external debt decreased by 1.5%, indicating a slight reduction in the country’s reliance on foreign borrowing. This could be a result of repayments or a slowdown in new external borrowing. It may also suggest a deliberate effort to manage the debt burden.
• External Debt Service Management: Although the total external debt decreased, the country is still servicing significant debt with monthly repayments (USD 288.4 million), which includes both principal (USD 200.3 million) and interest payments. This shows that while external borrowing is reducing, the debt still needs careful management, particularly regarding interest payments.

2. Dominance of Central Government Borrowing:

• Central Government's Share: The central government accounts for 77.2% of external debt, reflecting the government's dominant role as the primary borrower. This suggests that the government is using external loans for financing projects or covering budget deficits.
• Interest Arrears: The central government has some interest arrears (USD 252.1 million), which could indicate delayed payments, a factor that could affect credit ratings or future borrowing costs.

3. Private Sector Debt and Interest Arrears:

• The private sector holds 22.8% of external debt, and the interest arrears for the private sector (USD 1.3 billion) are relatively high. This could indicate challenges in the private sector's ability to service foreign debt, potentially impacting business operations and investment.

4. Rising Domestic Debt:

• Increased Domestic Debt: Domestic debt rose by TZS 407.48 billion to a total of TZS 33,023.2 billion, indicating that the government is increasingly relying on local sources of financing. This increase is attributed to the government's overdraft facility, which may be a sign of short-term fiscal pressures or a gap in domestic revenue collection.
• Treasury Bonds Dominate: Treasury bonds, which make up 78% of domestic debt, show the government's reliance on long-term debt instruments to finance its budget. Treasury bonds are generally seen as a more stable form of debt because they have predictable repayment schedules.
• Diversified Creditor Base: The domestic debt is held by various creditors, including commercial banks, pension funds, and the Bank of Tanzania. This indicates a broad and strong domestic investor base that is willing to purchase government debt, which can support financial stability.

5. Currency Composition and Risk Management:

• The currency composition of external debt (68% in USD) reflects Tanzania’s vulnerability to exchange rate fluctuations. A heavy reliance on the USD exposes the country to risks from a strengthening or weakening of the dollar against the Tanzanian Shilling.
• Diversified Currency Exposure: The presence of other currencies like the Euro (16.2%) and Chinese Yuan (6.2%) helps mitigate this risk, but the dominance of the USD still signals a potential concern if the exchange rate were to become volatile.

6. Strategic Debt Management Approach:

• Balanced External and Domestic Debt: Tanzania appears to have a strategic mix of external and domestic debt, which helps manage risk. By increasing reliance on domestic debt, the government can reduce exposure to global market fluctuations (e.g., foreign exchange risks).
• Institutional Framework: The strong participation of commercial banks, pension funds, and other institutional investors in the domestic debt market demonstrates confidence in the government's fiscal policies and ensures that the debt is well-supported by domestic capital.

7. Overall Debt Sustainability:

• The analysis suggests that Tanzania is managing its debt carefully, with a mix of external and domestic debt that helps balance foreign exposure and domestic financial sector development.
• While external debt is decreasing, domestic debt is increasing, which may signal short-term pressures. However, the diversity of creditors and instruments (e.g., Treasury bonds) in the domestic debt market provides a buffer.
• The government appears to have a prudent debt service management strategy, balancing principal repayment and interest to ensure continued access to credit.

Conclusion:

The debt developments point to a strategic approach to managing Tanzania’s overall debt profile. However, there are some risks and challenges:

• Domestic debt growth may indicate rising fiscal pressures and reliance on local borrowing.
• External debt servicing remains substantial despite a decrease in the total external debt.
• The currency mix could pose risks to debt sustainability due to exposure to exchange rate fluctuations.

Overall, Tanzania's debt management appears balanced and strategically planned, with strong institutional support for domestic borrowing and an eye on reducing external debt. However, the country must continue to monitor its debt sustainability carefully, particularly regarding domestic borrowing and interest arrears in the private sector.

Tanzania's government demonstrated effective fiscal management in September 2024, surpassing revenue targets and maintaining a strategic balance between recurrent and development expenditures. With total revenue collections of TZS 3,069.4 billion, exceeding estimates by 3.8%, the government has shown improved tax compliance and efficient resource allocation. Despite a budget deficit, the emphasis on sustainable debt management and investment in long-term development underscores the country's commitment to economic growth and stability.

Tanzania's Government Budgetary Operations for September 2024 shows strong fiscal performance, highlighted by above-target revenue collections, disciplined expenditure, and strategic resource allocation.

1. Revenue Collections

Total Revenue: TZS 3,069.4 billion

• Exceeded monthly estimates by 3.8%: This shows an overall positive revenue performance, surpassing expectations for September 2024.

Breakdown:

• A. Central Government Collections: TZS 2,971 billion (104.7% of estimates)
  • Tax Revenue: TZS 2,640.5 billion (Exceeded estimates by 6.9%)
  • Non-tax Revenue: TZS 330.5 billion

Specific Tax Collections:

• Taxes on Imports: TZS 938.5 billion
  • This represents a significant portion of total tax revenue, driven by import duties and taxes.
• Income Tax: TZS 1,144.2 billion
  • Income tax collections are a critical component, reflecting strong economic activity and compliance.
• Local Goods and Services Taxes: TZS 405.4 billion
  • These taxes contribute notably to the revenue stream, supported by domestic consumption.
• Other Taxes: TZS 152.4 billion
  • Includes a range of smaller taxes across various sectors.
• Non-tax Revenue: TZS 330.5 billion
  • Includes income from government-owned enterprises and other non-tax sources.

B. Local Government Authorities Collections:

• These are based on local government own resources, representing a smaller portion of total revenue but important for decentralized fiscal operations.

2. Government Expenditure

Total Expenditure: TZS 3,350.5 billion

• This exceeds total revenue, indicating a budget deficit for September 2024. However, the government has maintained a balanced approach to manage the deficit.

Breakdown:

• A. Recurrent Expenditure: TZS 2,213.5 billion
  • Wages and Salaries: TZS 925.0 billion (This is the largest recurrent expense, necessary for public sector employee compensation).
  • Interest Costs: TZS 327.8 billion (Reflects government debt servicing obligations).
  • Other Recurrent Expenditure: TZS 960.7 billion (This includes operational costs for government functions and services).
• B. Development Expenditure: TZS 1,137.0 billion
  • This is focused on long-term projects, infrastructure development, and capital investment to stimulate economic growth.

3. Performance Drivers

Strong Revenue Performance Due To:

• Enhanced Tax Administration: Efforts to streamline and improve the efficiency of tax collection mechanisms, possibly through digitalization or better enforcement.
• Improved Tax Compliance: Increasing taxpayer compliance through awareness, better collection systems, or stricter enforcement.
• Effective Collection Mechanisms: Strengthened capacity in tax collection, potentially including technology-driven solutions, regional offices, or specialized units.

Expenditure Management:

• The government has aligned spending with available revenue, ensuring that expenditures do not exceed capacity.
• Expenditures are well balanced between recurrent (ongoing government operations) and development (infrastructure and capital projects) needs.
• Prioritization is evident, with key areas such as wages and interest costs being well-managed while maintaining development goals.

4. Budget Balance and Financing

• Revenue exceeded targets, which helped mitigate the budget deficit and kept the government within fiscal discipline.
• The government focused on efficient resource allocation, with particular emphasis on balancing development spending and recurrent expenditures.
• Fiscal discipline is maintained, with efforts to keep the deficit within sustainable levels while focusing on investments that will yield long-term economic benefits.

Key Observations:

• Revenue Collection Exceeded Targets: The government's ability to exceed its revenue targets demonstrates effective tax policy and administration.
• Strong Tax Revenue Performance: The largest contributors to tax revenue, such as income tax and taxes on imports, reflect the government's capacity to capture economic activity.
• Balanced Expenditure Allocation: A good balance between meeting the needs of the public sector (wages) and development investments.
• Fiscal Discipline Maintained: Despite higher expenditure, the government has managed to keep spending within sustainable limits.
• Strategic Resource Allocation: Focus on development expenditure highlights the government’s commitment to long-term economic growth.

Overall Budgetary Performance

The budgetary performance for September 2024 shows that Tanzania has managed its finances effectively with:

• Above-target revenue collections
• Disciplined expenditure execution
• Strategic resource allocation, emphasizing development spending
• Fiscal sustainability maintained despite a small budget deficit

This demonstrates robust fiscal management, positioning the government well to support both short-term operations and long-term development projects that will drive economic growth.

Tanzania's Government Budgetary Operations for September 2024 with key insights into the country's fiscal health and management:

1. Strong Revenue Performance:

• The government exceeded its revenue target by 3.8%, collecting TZS 3,069.4 billion. This indicates effective tax collection mechanisms, improved compliance, and efficient administration.
• Tax Revenue was the largest contributor (over 85% of total revenue), with significant collections from income tax, import taxes, and local goods and services taxes. This suggests a robust economic activity, especially in trade and income generation.

2. Disciplined Expenditure Management:

• Expenditure exceeded revenue, leading to a budget deficit, but the government carefully balanced its spending between recurrent (wages, interest) and development (infrastructure, capital projects) needs.
• The government allocated significant resources to wages and salaries (making up 27.6% of the total expenditure), essential for public sector operations, and to interest costs (9.8%), highlighting the importance of managing public debt.
• Development expenditure (approximately 33.9% of total expenditure) shows a commitment to long-term economic growth and infrastructure development, aiming to stimulate future economic growth.

3. Fiscal Discipline and Strategic Resource Allocation:

• Despite the deficit, the government demonstrated fiscal discipline, focusing on maintaining sustainable debt levels and prioritizing key spending areas.
• Strategic allocation of resources between recurrent and development spending reflects careful planning to support both immediate needs (such as government operations) and long-term investments in infrastructure and growth.

4. Positive Economic Outlook:

• The strong performance of tax revenue and the balanced expenditure allocation indicate a healthy fiscal environment. This sets a positive tone for Tanzania's economic stability and growth potential.
• The government's ability to exceed revenue targets and manage its budget effectively shows an effective approach to managing economic challenges and maintaining fiscal sustainability.

In summary, Tanzania’s September 2024 budget performance reflects effective fiscal management, with strong revenue collections, disciplined spending, and a focus on development. Although there was a budget deficit, the government’s approach demonstrates fiscal responsibility and a focus on long-term growth, ensuring economic stability while prioritizing key areas like wages, debt servicing, and infrastructure development.

In October 2024, the Tanzania Shilling showed signs of stabilization, appreciating slightly against the US Dollar after months of depreciation. This shift can be attributed to improved foreign exchange liquidity from key export sectors such as cashew nuts, gold, and tourism, alongside strategic interventions by the Bank of Tanzania. Despite a gradual depreciation trend over the years, recent developments suggest a positive turn in external sector performance and effective exchange rate management.

1. Exchange Rate Movements:

• October 2024:
  • Average exchange rate: TZS 2,719.91 per USD
• September 2024:
  • Average exchange rate: TZS 2,727.41 per USD
• Annual depreciation rate: 8.98% (improved from 10.11% in September 2024)

The Tanzania Shilling showed a slight improvement in October 2024, appreciating by 0.28% compared to September 2024. This indicates a stabilization trend after several months of depreciation. The depreciation rate over the past year has decreased, suggesting that external pressures on the currency may be easing.

2. Key Factors Affecting the Exchange Rate:

A. Improved Foreign Exchange Liquidity:

Several key export sectors have contributed to increased foreign exchange inflows, which helped stabilize the Shilling:

1. Cashew Nut Exports: This is a significant foreign exchange earner for Tanzania. The increased demand for cashew nuts on the global market likely contributed to stronger inflows of foreign currency.
2. Gold Exports: Tanzania is one of the top gold producers in Africa, and higher gold prices globally have boosted foreign currency inflows.
3. Tourism Earnings: As the tourism sector continues to recover post-pandemic, the influx of foreign currency from tourism has provided additional support to the Shilling.

B. Bank of Tanzania Intervention:

1. Limited Market Participation: The central bank has limited its participation in the foreign exchange market in October, intervening less than in previous months.
2. Net Purchase of USD 4.5 Million: The Bank of Tanzania made a modest net purchase of USD 4.5 million in October, which indicates a targeted, cautious approach to stabilizing the currency without overextending reserves.
3. Purpose: The Bank’s primary objective was to mitigate excessive exchange rate volatility. Their strategy seems to have been effective, contributing to the Shilling’s stabilization in October.

3. Historical Exchange Rate Data (2017-2023):

A look at historical data reveals a gradual depreciation trend of the Tanzania Shilling over the years, but with some periods of relative stability:

• 2017: TZS 2,228.9 per USD
• 2018: TZS 2,263.8 per USD
• 2019: TZS 2,288.2 per USD
• 2020: TZS 2,294.1 per USD
• 2021: TZS 2,297.8 per USD
• 2022: TZS 2,303.1 per USD
• 2023: TZS 2,382.1 per USD

From 2017 to 2023, the Shilling depreciated steadily, with the rate increasing by about TZS 150 per USD over the period. This is consistent with inflationary pressures and a growing trade deficit.

4. Interbank Foreign Exchange Market (IFEM) Activity:

The Interbank Foreign Exchange Market (IFEM) activity shows significant changes in the volume of transactions:

• October 2024: USD 50.7 million in transactions
• September 2024: USD 8.35 million in transactions

The sharp increase in market activity reflects growing demand and supply for foreign exchange in the market, indicating heightened foreign exchange transactions. This could be tied to the improved liquidity from exports and the increasing demand for USD in the economy.

5. Summary and Key Insights:

1. Gradual Depreciation Trend: Over the past few years, the Tanzania Shilling has faced a consistent depreciation trend against the US Dollar. However, the pace of depreciation has slowed in recent months, particularly in October 2024.
2. Recent Improvement in Exchange Rate Stability: The exchange rate improved in October 2024, with the Shilling appreciating slightly from September, signaling a positive shift in external sector performance.
3. Reduced Depreciation Pressure: The improved foreign exchange liquidity from key exports like cashew nuts, gold, and tourism earnings helped ease pressure on the Shilling. This has reduced the depreciation pressure that has been prevalent over the past several years.
4. Effective Market Management: The Bank of Tanzania’s careful intervention in the market (with a net purchase of USD 4.5 million) and its efforts to reduce volatility appear to have been effective in stabilizing the Shilling.
5. Growing Market Activity in IFEM: The notable increase in IFEM transactions, from USD 8.35 million in September to USD 50.7 million in October, indicates a more active foreign exchange market. This may suggest more participation by businesses and financial institutions in currency transactions, potentially contributing to exchange rate stabilization.

6. Conclusion:

The recent appreciation of the Tanzania Shilling and the improved annual depreciation rate suggest that external sector performance is improving. Factors such as strong export performance, particularly in cashew nuts, gold, and tourism, have bolstered foreign exchange liquidity. Additionally, the Bank of Tanzania's careful market interventions have contributed to the exchange rate’s stability, easing pressure on the Shilling.