Tanzania's fiscal operations in October 2025 reflected disciplined execution amid a challenging global environment, with domestic revenues achieving 96.1% of target (TZS 2,328.5 billion) and total expenditures at 76.4% of target (TZS 2,343.6 billion), resulting in a modest deficit of TZS 15.1 billion. This performance marks a YoY revenue growth of 9.4%, outpacing the 6% national GDP expansion for FY2024/25, while under-execution in development spending (47.2% of target) highlights absorption challenges in project implementation. Per the Bank of Tanzania's (BoT) Monthly Economic Review for November 2025, this aligns with the FY2025/26 budget's focus on revenue mobilization (targeting 16.5% of GDP) and expenditure prioritization, supporting Vision 2050 goals of upper-middle-income status by 2050.

Economic Implications: The controlled deficit (0.2% of monthly GDP estimate) reinforces fiscal sustainability, keeping public debt at ~50% of GDP (below the 55% EAC threshold) and enabling monetary policy flexibility (CBR at 5.75%). This cushions against external shocks like oil price volatility, sustaining 3.5% inflation and 6% growth projections for 2025. However, low development absorption risks delaying infrastructure multipliers (e.g., 1.5% GDP boost from energy projects), potentially constraining private investment and job creation (youth unemployment at 13.4%). Enhanced TRA digitalization could lift tax buoyancy, adding TZS 1-2 trillion annually to fund social spending, per World Bank estimates, fostering inclusive growth and poverty reduction (from 26.4% in 2024). Read More: Tanzania Government Revenue at 87.2% of Target, Spending at 71.9%

CENTRAL GOVERNMENT REVENUES (OCTOBER 2025)

Central government revenues totaled TZS 2,328.5 billion, comprising tax (90.3%), non-tax (9.7%), and LGA own-source (2.8%) collections. This exceeded October 2024 levels by 9.4%, driven by trade recovery and administrative reforms, but missed targets due to seasonal VAT lags and LGA inefficiencies.

Revenue Performance Table

Source: BoT computations (provisional). Additional Details: Tax breakdown: Income tax +12% YoY (TZS 850B), import duties +15% (TZS 450B), fuel levies +8% (TZS 120B). Non-tax surge from regulatory fees (e.g., mining licenses up 20%). LGAs lag due to capacity gaps in 184 districts.

Economic Implications: Near-target revenues (13.1% GDP tax ratio) signal improving buoyancy from AfCFTA integration, boosting FX inflows (reserves at USD 6.2B, 4.7 months cover) and crowding-in private credit (16.1% YoY). Non-tax outperformance diversifies sources, reducing aid reliance (down to 5% of budget), but LGA shortfalls strain local services (health/education 21.5% allocation), risking inequality (Gini 40.4). IMF's 2025 Article IV praises this for fiscal consolidation, projecting 3% deficit, but urges LGA reforms to unlock TZS 500B annually, enhancing decentralization and rural growth.

Year-on-Year (YoY) Growth (Oct 2024 → Oct 2025)

Economic Implications: 9.4% growth outstrips 5.6% FY2024/25 GDP, implying revenue elasticity >1, supporting counter-cyclical spending amid 6.9% Q4 forecast. Non-tax +43.8% reflects SOE efficiency (e.g., TPDC dividends), adding fiscal buffers for climate resilience (USD 500M adaptation needs), per SECO 2025 Report. Yet, modest tax growth signals informal sector dominance (50% economy), constraining multipliers; Deloitte's 2025 Outlook recommends digital invoicing to raise yields 2%, fueling 7% medium-term growth.

Key Drivers of Revenue Performance

• Increased collections in: Income tax (formal sector expansion), import duties (trade +15%), fuel levies (consumption rebound).
• Lower performance in: PAYE (employment slowdown), excise on domestic goods (manufacturing dip), VAT on local goods (supply chain frictions).
• Non-tax exceeded target: Higher from services, fees, dividends (e.g., mining royalties up 25%).

Economic Implications: Drivers tie to export boom (gold +38.9%, tourism +28%), enhancing reserves and shilling stability (appreciation 9.5% YoY), per BoT. This mitigates import inflation (oil -12.5%), sustaining 3.5% CPI. However, VAT/excise shortfalls highlight manufacturing vulnerabilities (3.5% growth), risking 0.5% GDP drag; KPMG's Finance Act 2025 analysis notes new levies (e.g., 10% on retained earnings) could add TZS 300B, bolstering buffers for 6% growth while curbing deficits.

CENTRAL GOVERNMENT EXPENDITURES (OCTOBER 2025)

Total outlays reached TZS 2,343.6 billion (80% recurrent, 20% development), below target due to delayed external disbursements and procurement bottlenecks, but +7.2% YoY, aligning with 65% development bias in FY2025/26 budget (TZS 51.1 trillion total).

Expenditure Performance Table

Source: Ministry of Finance, BoT (provisional). Additional Details: Recurrent: Salaries TZS 1,132B (+5% YoY), interest TZS 283B (domestic 70%). Development: Infra 55% (roads/energy), social 30%.

Economic Implications: 76.4% execution preserves space for debt service (6.5% budget), keeping spreads low (6.28% lending-deposit) and supporting M3 growth (21.5%). Recurrent focus sustains consumption (3.5% private demand), but low dev. absorption delays 2% GDP from projects (e.g., rail/ports), per World Bank CPF 2025-29. IMF warns of election-year risks, but disciplined spending implies 3% deficit, freeing resources for green bonds (USD 1B potential), enhancing resilience.

Breakdown of Development Expenditure

Economic Implications: Local dominance (59.4%) reduces FX exposure (external debt 69.5%), stabilizing TZS and reserves (USD 6.2B). Funds infra multipliers (1.2% GDP from hydropower), but foreign shortfalls risk 0.8% growth shortfall; SECO recommends streamlined procurement to hit 7% absorption, unlocking AfCFTA gains (USD 1B trade).

FISCAL BALANCE

Fiscal Deficit (October 2025)

Interpretation: Small deficit due to expenditure restraint; fully domestically financed (83.6% dev. spend).

Economic Implications: Modest gap (vs. 3.5% annual) signals prudence, aligning with IMF's growth-friendly consolidation, curbing debt (49.6% GDP) and inflation pass-through. Enables 4.7-month import cover, but persistent under-spending may idle TZS 5T in unabsorbed funds, per Deloitte; policy tweaks (e.g., PPPs) could amplify 6.9% Q4 growth.

INTERPRETATION & ANALYSIS

1. Revenue Trends

Strong 96% achievement from TRA modernization (digital tracking +20% compliance) and non-tax inflows, but LGA weakness (67.4%) persists.

Economic Implications: Buoyancy supports 13.1% tax/GDP, funding 21.5% social allocation, reducing poverty 1-2pp annually (World Bank). LGA gaps strain devolution, risking service delivery; reforms could add 0.5% growth via local multipliers.

• Expenditure Trends

Below-target due to dev. delays (47.2%), recurrent high from wages/interest.

Economic Implications: Discipline aids reserves buildup (+14% YoY), but low capex hampers productivity (manufacturing 5.2%); IMF urges 70% absorption for 7% growth, leveraging FY2025/26's TZS 33T dev. envelope.

• Fiscal Position

Small TZS 15.1B deficit indicates discipline amid execution hurdles.

Economic Implications: Enhances credibility, lowering yields (10.8% bonds), crowding-in FDI (USD 1.5B Q3). Supports 6% growth, but election risks (Oct 2025) demand vigilance; SECO projects sustained momentum via infra.

SUMMARY TABLE – CENTRAL GOVERNMENT REVENUE VS EXPENDITURE

Overall Outlook: October's operations underscore resilience, positioning Tanzania for 6%+ growth amid AfCFTA, but absorption and LGA reforms are key to unlocking USD 10B potential by 2030 (World Bank).