In April 2025, Tanzania’s tourism sector recorded an 11.5% increase in arrivals to 2,162,487, generating USD 3,842.6 million in services receipts, a 7.1% rise from ~USD 3,589.9 million in 2024, reinforcing its role as a key driver of the economy (56.0% of services exports). Reinvesting these revenues into human capital development—education and health, which account for 19.9% of external debt use—can foster inclusive growth and reduce reliance on volatile sectors like tourism. By allocating a portion of the USD 3,842.6 million to targeted programs, such as teacher training, healthcare infrastructure, and vocational skills, Tanzania can enhance workforce productivity and diversify its economy. Key issues include tourism revenue volatility, limited human capital investment, and economic diversification challenges. Strategies like earmarking tourism taxes, public-private partnerships (PPPs), and community-based training programs can ensure sustainable human capital development, supporting Tanzania’s Vision 2025 and 6% GDP growth projection for 2025.

Main Key Issues

1. Tourism Revenue Volatility and Economic Contribution
   • Strong Tourism Performance: The 11.5% increase in tourist arrivals to 2,162,487 in April 2025, compared to 1,938,875 in April 2024, drove services receipts to USD 3,842.6 million, up 7.1% from ~USD 3,589.9 million (previous responses). Tourism accounts for 56.0% of total services receipts (USD 6,940.8 million) and ~10% of GDP, with projections to reach 19.5% by 2025/26. TICGL confirm a record 2,106,870 arrivals by November 2024, generating USD 3,680 million.
   • Volatility Risks: Tourism is vulnerable to external shocks, such as pandemics (e.g., 2020 arrivals dropped to 616,491), geopolitical tensions, or climate events affecting attractions like Serengeti or Kilimanjaro. The Monthey Economic Review notes seasonal foreign exchange inflows (previous responses), highlighting tourism’s cyclical nature. This volatility contributed to a current account deficit of USD 2,224.9 million in April 2025, despite an 18.6% improvement (previous responses).
   • Revenue Potential: Tourism generates direct revenue (e.g., park fees, visas) and indirect benefits (e.g., hospitality, transport). Assuming a 10% tax or fee on tourism receipts (a conservative estimate based on VAT and park fees), USD 3,842.6 million could yield ~USD 384.3 million for reinvestment, equivalent to TZS 1,031.3 billion at TZS 2,684.41/USD (previous responses).
2. Limited Human Capital Investment
   • Current Allocation: Human capital development, particularly education and health, receives 19.9% of Tanzania’s USD 35,505.9 million external debt (previous responses), equivalent to ~USD 7,065.7 million, supporting initiatives like free secondary education and health infrastructure. However, development expenditure in March 2025 was TZS 1,406.7 billion (41.7% of total expenditure), with only a portion allocated to human capital, as recurrent spending (TZS 1,968.4 billion, 58.3%) dominates for wages and debt servicing (previous responses).
   • Human Capital Gaps: Tanzania’s Human Capital Index (HCI) is 0.40, below the Sub-Saharan Africa average of 0.48, indicating that a child born today will achieve only 40% of their potential productivity. Education challenges include low secondary completion rates (30% in 2023) and teacher shortages, while health faces issues like high maternal mortality (556 per 100,000 births). TICGL note underfunding, with health and education budgets at 7% and 15% of the 2024/25 budget.
   • Impact on Growth: Limited human capital investment constrains inclusive growth, as low skills reduce labor productivity in sectors like agriculture (26% of GDP) and manufacturing (9%). The Monthey Economic Review emphasizes human capital for Vision 2025 goals, requiring increased funding to meet 8% GDP growth by 2026.
3. Economic Diversification Challenges
   • Over-Reliance on Tourism: Tourism’s 56.0% share of services receipts and ~10% of GDP highlights over-reliance, with other services (e.g., ICT, financial) contributing only 8.8% (USD 653.6 million, previous responses). Goods exports like gold (USD 3,369.7 million, 36.8% of goods exports) are also volatile due to global price fluctuations. The Monthey Economic Review notes agricultural export growth (5.1% of external debt use, previous responses), but its contribution remains limited.
   • Diversification Needs: Reducing reliance on tourism requires developing sectors like manufacturing, ICT, and agriculture, which need skilled labor. TICGL advocate for industrialization under the African Continental Free Trade Agreement (AfCFTA, ratified 2022), but only 6% of firms train workers formally. The current account deficit (USD 2,224.9 million) underscores the need for diversified exports to stabilize external balances (previous responses).
   • Role of Human Capital: Investing tourism revenues in education and health can build a skilled workforce for diversified sectors, reducing volatility risks. For example, vocational training in ICT could support digital economy growth (mobile money transactions up 26.73%), while health improvements enhance labor productivity across sectors.

Strategies to Reinvest Tourism Revenues into Human Capital

1. Earmark Tourism Taxes for Education and Health
   • Action: Allocate 10% of tourism receipts (USD 384.3 million, TZS 1,031.3 billion) as a dedicated fund for human capital, split equally between education (TZS 515.65 billion) and health (TZS 515.65 billion). This could finance teacher training (e.g., 10,000 new teachers at TZS 10 million/year, costing TZS 100 billion) and health facilities (e.g., 50 new clinics at TZS 8 billion each, costing TZS 400 billion).
   • Impact: This would increase education and health budgets by ~3% each (based on 2024/25 budget of TZS 49.35 trillion), improving secondary completion rates and reducing maternal mortality, aligning with the World Bank’s Country Partnership Framework (2025–2029). It could cover ~36.7% of March 2025’s development expenditure (1,031.3 / 1,406.7 × 100, previous responses).
2. Establish Public-Private Partnerships (PPPs) for Vocational Training
   • Action: Partner with tourism operators (e.g., Serena Hotels) to fund vocational training centers, using 5% of receipts (USD 192.1 million, TZS 515.6 billion) to train 100,000 youth annually in skills like hospitality, ICT, and agribusiness (costing TZS 5 million per trainee, TZS 500 billion total). PPPs could leverage private expertise and infrastructure.
   • Impact: This would increase formal training (currently 6% of firms), supporting diversification into manufacturing (3.9% of external debt use) and ICT (8.8% of services receipts). Trained workers could boost GDP by 1–2% annually, as seen in Rwanda’s vocational programs, reducing tourism reliance.
3. Community-Based Tourism Training Programs
   • Action: Use 3% of receipts (USD 115.3 million, TZS 309.4 billion) to fund community-based programs training locals near tourist sites (e.g., Serengeti, Zanzibar) in guiding, crafts, and sustainable tourism. Training 50,000 locals at TZS 6 million each (TZS 300 billion) could create jobs and retain revenue locally.
   • Impact: This would enhance inclusive growth, as 70% of tourism jobs are low-skill and local, reducing poverty (26.4% in 2022). It aligns with the Monthey Economic Review’s focus on job creation and could generate TZS 50–100 billion in local revenue annually.
4. Invest in Health Infrastructure for Tourism Regions
   • Action: Allocate 2% of receipts (USD 76.9 million, TZS 206.3 billion) to build health facilities in tourism hubs, ensuring quality care for visitors and locals. Constructing 20 hospitals at TZS 10 billion each (TZS 200 billion) would improve health outcomes and tourism resilience.
   • Impact: This would reduce health-related risks to tourism (e.g., disease outbreaks), supporting 19.5% GDP contribution by 2025/26. Improved health enhances labor productivity, critical for diversification into agriculture (26% of GDP).

Conclusion

Tanzania’s tourism sector, with a record 2,162,487 arrivals in April 2025 generating USD 3,842.6 million (56.0% of services receipts), offers significant potential to fund human capital development, critical for inclusive growth and reducing reliance on volatile sectors. Key issues include tourism’s vulnerability to shocks, underinvestment in education and health (19.9% of USD 35.51 billion external debt), and limited economic diversification. Reinvesting ~20% of receipts (USD 768.6 million, TZS 2,062.6 billion) through earmarked taxes, PPPs, community training, and health infrastructure could enhance skills, reduce poverty, and diversify into sectors like ICT and manufacturing. These strategies align with Vision 2025’s 8% growth goal and, supported by a stable current account deficit (USD 2,224.9 million) and reserves (USD 5.3 billion), can ensure sustainable development. The following table summarizes these key figures.