1. Overview of Trade Performance

• Tanzania’s external sector is a critical driver of economic growth, with exports contributing to foreign exchange earnings and imports supporting infrastructure and industrial development. The trade balance reflects a persistent deficit due to higher import demand, though export growth, particularly in minerals and tourism, has narrowed the gap. The current account deficit improved by 26% to TZS 5.71 trillion (USD 2,117.5 million) in the year ending May 2025, driven by strong export performance.
• Total Trade (Year Ending May 2025):
  • Exports of Goods and Services: TZS 45.83 trillion (USD 16,994.7 million), up 19.2% from USD 14,258.2 million in May 2024.
  • Imports of Goods and Services: TZS 47.72 trillion (USD 17,686 million), up 9.6% from USD 16,141.9 million in May 2024.
  • Trade Deficit: TZS 1.89 trillion (USD 701.3 million), narrowed from USD 1,009 million in Q3 2024, reflecting export-driven improvements.
• Economic Drivers: Export growth is fueled by gold, agriculture, and tourism, supported by the Third Five-Year Development Plan (FYDP III, 2021/22–2025/26) and AfCFTA participation. Imports are driven by capital-intensive projects (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and consumer demand. The Tanzanian shilling’s 3.82% depreciation (TZS 2,698.42/USD) boosts export competitiveness but raises import costs.

2. Exports of Goods and Services

• Overview: Tanzania’s exports include goods (minerals, agricultural products, manufactured goods) and services (tourism, transport). Gold and tourism dominate, accounting for 36.8% and 23.2% of total exports, respectively, in 2024. Agricultural exports benefit from global demand, while services leverage Tanzania’s natural attractions and logistics improvements.
• Export Composition (Year Ending May 2025):
  • Goods Exports: TZS 26.67 trillion (USD 9,894.9 million), up from USD 7,758.7 million (+27.5%) in May 2024.
    • Gold: TZS 10.34 trillion (USD 3,835.5 million), 36.8% of goods exports, up 23.1% due to high global prices (USD 3,326/oz) and production increases (1.9 million oz, web:18). Beneficiation policies (e.g., local refining) and BoT gold purchases (976.51 kg) enhance earnings.
    • Cashew Nuts: TZS 1.05 trillion (USD 389.9 million, estimated based on 141% growth), driven by global demand and competitive pricing.
    • Coffee: TZS 0.80 trillion (USD 296.8 million, estimated based on 66.3% growth, supported by improved trade policies.
    • Tobacco: TZS 0.86 trillion (USD 318.8 million, 4.7% of goods exports, web:22), up 32% due to higher productivity.
    • Cloves (Mainly Zanzibar): TZS 0.15 trillion (USD 55.5 million, provided data), down 10.2% due to production and price declines.
    • Horticulture (Vegetables, Fruits, Seeds): TZS 0.84 trillion (USD 312 million, 4.3%), supported by the Horticulture Exports Accelerator Program.
    • Other (Gemstones, Textiles, Fish): TZS 2.63 trillion (USD 976.3 million, estimated), with fish and marine products up 4.3% (USD 4.1 million, provided data) and textiles benefiting from cotton exports to South Asia.
  • Services Exports: TZS 19.16 trillion (USD 7,099.8 million), up 9.2% from USD 6,499.4 million.
    • Travel (Tourism): TZS 10.55 trillion (USD 3,910 million, estimated, 55.1% of services), up 10% due to 2,170,360 tourist arrivals (+10.6% from 1,961,870, provided data). Key attractions include Mount Kilimanjaro, Serengeti, and Zanzibar beaches.
    • Transport Services: TZS 3.83 trillion (USD 1,420 million, ~20%, provided data), up due to improved port and railway infrastructure (e.g., Dar es Salaam port, SGR.
    • Other Services (Construction, Insurance, ICT, Royalties): TZS 4.78 trillion (USD 1,769.8 million, ~25%, provided data), driven by ICT (453.7 million TIPS transactions, web:6) and construction projects.
• Key Destinations:
  • India: 21.4% (~TZS 9.81 trillion), mainly gold and cashew nuts.
  • South Africa: 15.4% (~TZS 7.06 trillion), gold and agricultural products.
  • UAE: 9.4% (~TZS 4.31 trillion), minerals and textiles.
  • Switzerland: 6.4% (~TZS 2.93 trillion), gold.
  • China: 5.9% (~TZS 2.70 trillion), agricultural and manufactured goods.
  • DR Congo: 4.3% (~TZS 1.97 trillion), agricultural products.
• Trends and Drivers:
  • Gold Dominance: Gold’s 36.8% share reflects high global prices and mining reforms. The Epanko Graphite Project signals mineral diversification.
  • Tourism Growth: Tourism receipts (TZS 10.55 trillion) are driven by 2,662,219 arrivals in 2024 (+20%, web:6) and infrastructure (e.g., Mikumi SGR gate). The sector contributes 19.5% to GDP in 2025/26.
  • Agricultural Surge: Cashew nuts (+141%), coffee (+66.3%), and tobacco (+32%) benefit from AfCFTA and trade missions (web:15). Zanzibar’s clove exports (TZS 0.15 trillion) face challenges from market downturns.
  • Services Expansion: Transport earnings (TZS 3.83 trillion) reflect regional logistics improvements (24% intra-African trade rise to USD 5.18 billion, web:6), while ICT and construction grow with infrastructure investments.
• Implications:
  • Strengths: Export growth (19.2%) narrows the current account deficit (TZS 5.71 trillion), supported by reserves (TZS 13.86 trillion, USD 5,136.6 million). Tourism and gold ensure robust foreign exchange inflows.
  • Challenges: Overreliance on gold (36.8%) and tourism (23.2%) risks exposure to global price and demand fluctuations (web:17). Clove exports’ decline (TZS 0.15 trillion, -10.2%) highlights agricultural vulnerabilities.
  • Outlook: Continued export growth (projected +15% in 2025, web:18) depends on diversification (e.g., horticulture) and infrastructure (e.g., SGR). AfCFTA and trade agreements (e.g., Tanzania-UAE, web:24) will boost market access.

3. Imports of Goods and Services

• Overview: Tanzania’s imports support its capital-intensive growth model, with capital goods and industrial inputs dominating. The 9.6% import growth reflects infrastructure demand and consumer needs, particularly in tourism and manufacturing.
• Import Composition (Year Ending May 2025):
  • Goods Imports: TZS 26.67 trillion (USD 9,894.8 million, estimated based on national import share), up from USD 9,693.4 million in May 2024.
    • Petroleum Oils: TZS 6.95 trillion (USD 2,578.5 million, 19.9% of goods imports, web:22), down 7% due to global price effects and domestic energy investments (e.g., Julius Nyerere Hydropower Plant).
    • Machinery and Mechanical Appliances: TZS 4.94 trillion (USD 1,830 million, 12.1%), for infrastructure (e.g., SGR, hydropower).
    • Vehicles and Transport Equipment: TZS 4.34 trillion (USD 1,610 million, 10.7%), supporting logistics and construction.
    • Electrical Machinery and Equipment: TZS 2.58 trillion (USD 955 million, 6.32%), for industrial and ICT applications.
    • Wheat and Meslin: TZS 0.84 trillion (USD 310 million, 3.1%), reflecting food import needs.
    • Other (Chemicals, Plastics, Consumer Goods): TZS 6.96 trillion (USD 2,581.3 million, estimated), including fertilizers and manufactured articles.
  • Services Imports: TZS 7.67 trillion (USD 2,841.7 million), up 27.0% from USD 2,324.9 million.
    • Freight (Transport): TZS 3.66 trillion (USD 1,356.5 million, 47.7%, provided data), driven by import volumes of capital goods and fuel.
    • Other Services (Construction, Insurance, ICT, Financial): TZS 4.01 trillion (USD 1,485.2 million, ~52.3%, provided data), linked to infrastructure projects and financial services.
• Key Origins:
  • China: 27.5% (~TZS 13.12 trillion), machinery and electronics.
  • India: 12.9% (~TZS 6.16 trillion), petroleum and chemicals.
  • UAE: 9.4% (~TZS 4.49 trillion), refined petroleum.
  • Saudi Arabia: 6.1% (~TZS 2.91 trillion), petroleum products.
  • Japan: 4.3% (~TZS 2.05 trillion), vehicles and machinery.
• Trends and Drivers:
  • Capital-Intensive Growth: Imports of machinery (TZS 4.94 trillion) and vehicles (TZS 4.34 trillion) support infrastructure projects (e.g., SGR, TZS 7.72 trillion budget allocation) and manufacturing (9% GDP).
  • Petroleum Decline: Petroleum imports (TZS 6.95 trillion, -7%) reflect hydropower advancements (235 MW from Julius Nyerere dam, web:17) and plans for LNG and oil pipelines by 2026.
  • Freight Costs: The 27.0% rise in services imports (TZS 7.67 trillion) is driven by freight (47.7%), linked to port congestion and global shipping costs. The Tanzania Shipping Agency Corporation’s monopoly may elevate costs.
  • Food Imports: Wheat imports (TZS 0.84 trillion) highlight food security gaps, despite domestic production increases (557,228 tonnes maize).
• Implications:
  • Economic Support: Imports fuel 6% GDP growth, with capital goods (TZS 4.94 trillion) and vehicles (TZS 4.34 trillion) enabling infrastructure and trade (24% intra-African trade rise).
  • Trade Deficit: The TZS 1.89 trillion deficit reflects import reliance, exacerbated by TZS depreciation (3.82%), increasing costs by ~TZS 0.73 trillion for USD-denominated imports.
  • Outlook: Reducing petroleum imports (via LNG, hydropower) and boosting local manufacturing can narrow the deficit. AfCFTA’s tariff reductions (90% of products) will lower import costs but require infrastructure upgrades.

4. Policy Recommendations

To enhance Tanzania’s trade performance, the following actions are recommended based on the analysis:

1. Diversify Exports:
   • Action: Invest in horticulture (TZS 0.84 trillion exports) and manufacturing (e.g., textiles, TZS 0.10 trillion, web:17) via the Horticulture Exports Accelerator Program and SEZ incentives. Support clove production in Zanzibar (TZS 0.15 trillion, -10.2%) with irrigation and market access.
   • Impact: Reduces reliance on gold (TZS 10.34 trillion, 36.8%) and tourism (TZS 10.55 trillion, 23.2%), mitigating global price risks.
   • Example: The AfCFTA Guided Trade Initiative can boost agricultural exports to DR Congo (TZS 1.97 trillion).
2. Reduce Import Dependence:
   • Action: Accelerate domestic energy production (e.g., LNG, Julius Nyerere dam) to cut petroleum imports (TZS 6.95 trillion, 19.9%). Promote import substitution in manufacturing (e.g., wheat processing, TZS 0.84 trillion, web:22) via MKUMBI II reforms.
   • Impact: Narrows the trade deficit (TZS 1.89 trillion) and mitigates TZS depreciation effects.
   • Example: The 2025/26 budget’s VAT exemptions for farmers can boost local food production.
3. Enhance Logistics Infrastructure:
   • Action: Upgrade Dar es Salaam port and railways (e.g., SGR, Mikumi gate, web:6) to reduce freight costs (TZS 3.66 trillion, 47.7% of services imports). Address port congestion via private investment.
   • Impact: Lowers import costs and boosts transport earnings (TZS 3.83 trillion, web:6). Supports intra-African trade (TZS 13.98 trillion).
   • Example: The Tanzania Shippers Council’s collaboration to reduce logistics costs aligns with AfCFTA goals.
4. Strengthen Tourism and Services:
   • Action: Expand tourism marketing to Asia and Americas (71.6% of Zanzibar arrivals from Europe) and invest in ICT (TZS 4.78 trillion in other services). The 2025/26 tourism budget (TZS 0.36 trillion) can fund new attractions.
   • Impact: Sustains tourism receipts (TZS 10.55 trillion) and diversifies services exports.
   • Example: World Travel Awards 2025 recognition can attract more visitors.
5. Improve Trade Facilitation:
   • Action: Streamline TANCIS documentation and reduce non-tariff barriers (e.g., port delays). Leverage AfCFTA to eliminate tariffs on 90% of products.
   • Impact: Enhances export competitiveness and reduces import costs, supporting the trade balance.
   • Example: The Dar es Salaam International Trade Fair (June–July 2025) can promote local products.

5. Economic Implications

• Export Strengths: Gold (TZS 10.34 trillion) and tourism (TZS 10.55 trillion) drive foreign exchange inflows, supporting reserves (TZS 13.86 trillion) and GDP growth (6%). Agricultural exports (TZS 3.60 trillion combined for cashew, coffee, tobacco, horticulture) leverage AfCFTA markets.
• Import Challenges: High capital goods (TZS 4.94 trillion) and freight costs (TZS 3.66 trillion) widen the trade deficit (TZS 1.89 trillion), with TZS depreciation (3.82%) adding ~TZS 0.73 trillion to USD-denominated costs.
• Sustainability: The current account deficit (TZS 5.71 trillion) is manageable with reserves covering 4.2 months. However, import reliance risks external vulnerabilities, requiring diversification and domestic production.
• Outlook: Exports are projected to grow 15% in 2025 (web:18), driven by minerals, agriculture, and tourism. Reducing petroleum imports (via LNG, web:17) and enhancing logistics can further narrow the deficit, supporting Vision 2050’s USD 1 trillion GDP goal.

Tanzania Exports and Imports - May 2025: Key Figures

Note: USD conversion based on TZS 2,698.42/USD (May 2025).

1. Inflation

• Overview: Inflation in Zanzibar, measured by the Consumer Price Index (CPI), reflects the cost of living for a basket of goods and services, including food, transport, utilities, and housing. A declining inflation rate supports household purchasing power and aligns with the Bank of Tanzania’s (BoT) medium-term target of 3–5% for the United Republic of Tanzania. Zanzibar’s inflation is influenced by local factors (e.g., food supply) and external pressures (e.g., global fuel prices).
• May 2025 Performance:
  • Headline Inflation: 4.2% in May 2025, down from 4.3% in April 2025 and significantly lower than 5.3% in May 2024, reflecting a 20.8% year-on-year decline.
  • Key Components:
    • Food Inflation: 3.9% in May 2025 (down from 4.1% in April 2025, 8.9% in May 2024). The decline is driven by improved food supply, with the National Food Reserve Agency (NFRA) holding 557,228 tonnes of maize in April 2025, up from 340,102 tonnes in April 2024, and releasing 29,834 tonnes to stabilize prices.
    • Non-Food Inflation: 4.6% in May 2025 (up from 4.4% in April 2025), driven by transport (e.g., +4.8% in January 2025) and utilities, reflecting global fuel price pressures and infrastructure demand.
    • Core Inflation: 3.8% in May 2025 (unchanged from April 2025), driven by clothing, housing, and education services, indicating stable demand for non-volatile items.
• Context and Analysis:
  • Food Inflation Decline: The drop from 8.9% (May 2024) to 3.9% (May 2025) reflects improved agricultural output and NFRA intervention. Favorable rainfall patterns in 2024/25 supported crop production (e.g., maize, rice), reducing food price volatility. However, Zanzibar’s reliance on imported food (e.g., USD 521.6 million total imports in January 2025,) exposes it to global price fluctuations.
  • Non-Food Inflation Rise: The slight increase to 4.6% reflects higher transport and utility costs, linked to global fuel prices and infrastructure projects (e.g., construction up 5.8% in 2024,). Zanzibar’s tourism-driven economy increases demand for transport services, pushing costs.
  • Core Inflation Stability: The stable 3.8% core inflation indicates consistent demand for services like housing and education, supported by tourism recovery (2,662,219 arrivals in 2024,) and construction growth.
  • Economic Drivers: The BoT’s monetary policy (6% Central Bank Rate) and fiscal discipline (e.g., revenue growth,) keep inflation within the 3–5% target. However, the Tanzanian shilling’s 2.6% depreciation in 2025 raises import costs, exerting upward pressure on non-food inflation.
• Implications:
  • Positive Impact: Declining headline inflation (4.2%) enhances purchasing power, supporting consumption in a tourism-driven economy (7.1% growth,). Food inflation’s drop to 3.9% aligns with stable food stocks.
  • Challenges: Rising non-food inflation (4.6%) and shilling depreciation risk eroding gains, particularly for import-dependent Zanzibar (USD 379.8 million imports, provided data). Global fuel price volatility and La Niña-related supply disruptions pose risks.
  • Outlook: Inflation is projected to stabilize around 3.4% in 2025, supported by prudent policies and food supply stability. Continued NFRA interventions and renewable energy investments (e.g., solar,) can mitigate non-food inflation pressures.

2. Government Budgetary Operations

• Overview: Zanzibar’s government budget reflects revenue mobilization (taxes, non-tax sources, grants) and expenditure (recurrent and development). The budget supports the Zanzibar Development Vision 2050, focusing on tourism, infrastructure, and social services, but persistent deficits require external and domestic financing.
• May 2025 Performance:
  • Revenue and Grants: TZS 109.2 billion collected in May 2025, up 11.2% from May 2024.
    • Tax Revenue: TZS 99.8 billion (91.4% share):
      • VAT and Excise Duties: TZS 42.9 billion
      • Income Tax: TZS 24.0 billion
      • Import Duties: TZS 19.8 billion
      • Other Taxes: TZS 13.1 billion
    • Non-Tax Revenue: TZS 9.4 billion (8.6% share), including fees and licenses.
  • Expenditure: TZS 129.4 billion, up 6.8% from May 2024.
    • Recurrent Spending: TZS 98.8 billion, with TZS 57.3 billion for wages and salaries.
    • Development Spending: TZS 30.6 billion, supporting infrastructure and social projects.
  • Budget Deficit: TZS 20.2 billion, financed through external (e.g., Chinese grants,) and domestic borrowing.
• Context and Analysis:
  • Revenue Growth: The 11.2% increase to TZS 109.2 billion aligns with January 2025’s TZS 115.6 billion (+5.2% from December 2024,). Tax revenue (91.4%) benefits from tourism-driven VAT and import duties, with 2,662,219 tourist arrivals in 2024 boosting collections (). Non-tax revenue (8.6%) reflects improved licensing, supported by reforms to ease business regulations.
  • Expenditure Trends: Recurrent spending (TZS 98.8 billion, 76.4% of total) prioritizes wages (TZS 57.3 billion), reflecting public sector employment (e.g., education, health). Development spending (TZS 30.6 billion, 23.6%) supports infrastructure (e.g., port rehabilitation,) and aligns with 5.8% construction growth.
  • Budget Deficit: The TZS 20.2 billion deficit (down from TZS 22.3 billion in January 2025,) reflects improved revenue but persistent spending pressures. Financing includes domestic bonds (15.29% yields) and external grants (e.g., TZS 185 billion from China for health,).
  • Economic Drivers: Tourism growth (7.1%,) and trade (7.1%,) drive revenue, while infrastructure investments (e.g., Zanzibar port,) increase spending. The 2024/25 budget (TZS 1.43 trillion revenue,) targets fiscal discipline but faces a TZS 190 billion annual deficit.
• Implications:
  • Strengths: Strong revenue growth (11.2%) supports fiscal stability, with tax revenue (91.4%) reflecting tourism and trade gains. Development spending (TZS 30.6 billion) aligns with Vision 2050 priorities.
  • Challenges: The TZS 20.2 billion deficit and high recurrent spending (76.4%) limit fiscal space. Reliance on external financing (e.g., Chinese grants,) and domestic borrowing (15.5% lending rates) increases debt servicing costs.
  • Outlook: Revenue is projected to grow with tourism (6%+ growth,) and trade reforms (e.g., AfCFTA,). Fiscal discipline and expenditure controls are needed to reduce the deficit, as recommended by the World Bank.

3. External Sector Performance

• Overview: Zanzibar’s external sector reflects trade in goods (e.g., cloves, seaweed) and services (e.g., tourism), with a persistent trade deficit due to high import dependence. Tourism and clove exports are key foreign exchange earners, but global price fluctuations and production challenges impact performance.
• May 2025 Performance:
  • Exports of Goods and Services: USD 172.7 million, down 3.9% from May 2024.
    • Clove: USD 55.5 million, down 10.2% year-on-year, due to lower production and global prices.
    • Seaweeds: USD 9.8 million, up 2.1%.
    • Manufactured Goods: USD 3.7 million, up 8.6%.
    • Fish & Marine: USD 4.1 million, up 4.3%.
  • Imports: USD 379.8 million, up 10.1% from May 2024.
    • Capital Goods: USD 166.0 million, for infrastructure and manufacturing.
    • Consumer Goods: USD 134.9 million, driven by tourism and household demand.
    • Intermediate Goods: USD 78.9 million, including fuel and raw materials.
  • Trade Deficit: USD 207.1 million (USD 379.8M imports – USD 172.7M exports), widened from January 2025’s USD 387.4 million.
• Context and Analysis:
  • Export Decline: The 3.9% drop to USD 172.7 million reflects clove export challenges (USD 55.5 million, -10.2%), due to production fluctuations (down from USD 46.8 million in January 2025,) and global price declines. Seaweed (+2.1%), manufactured goods (+8.6%), and fish (+4.3%) show resilience, supported by export zones and processing reforms. Tourism receipts, included in services, bolster exports (USD 3,910 million nationally,).
  • Import Growth: The 10.1% rise to USD 379.8 million aligns with January 2025’s USD 521.6 million (+4.5%,). Capital goods (USD 166.0 million) support construction (5.8% growth,) and manufacturing (7% in Zanzibar,). Consumer goods (USD 134.9 million) reflect tourism demand, while intermediate goods (USD 78.9 million) include fuel, impacted by global prices.
  • Trade Deficit: The USD 207.1 million deficit, though narrower than January 2025’s USD 387.4 million, reflects import dependence. Tourism and remittances (USD 589.1 million nationally,) offset some losses, supported by reserves (USD 5,136.6 million).
  • Economic Drivers: Tourism (7.1% growth,) and infrastructure (e.g., port upgrades,) drive imports, while clove production volatility and global demand weaken exports. AfCFTA and trade agreements (e.g., Tanzania-Mozambique,) support export growth.
• Implications:
  • Strengths: Growth in seaweed, manufactured goods, and fish exports diversifies earnings. Tourism receipts (55.1% of national service exports,) and reserves (4.2 months import cover) ensure stability.tanzaniainvest.com
  • Challenges: Clove export decline (-10.2%) and high import growth (10.1%) widen the trade deficit, exacerbated by shilling depreciation (2.6%, Document, Page 12). Import reliance (USD 379.8 million) risks external vulnerabilities.
  • Outlook: Export diversification (e.g., manufacturing,) and tourism growth (6%+ in 2025,) can narrow the deficit. Investments in agriculture (e.g., seaweed,) and renewable energy will reduce import dependence.

Additional Insights and Outlook

• Economic Context: Zanzibar’s economy grew 6.2% in 2024, driven by tourism (7.1%) and construction (5.8%), with 2025 projections over 6%. Inflation (4.2%) and revenue growth (TZS 109.2 billion) support stability, but the trade deficit (USD 207.1 million) and budget deficit (TZS 20.2 billion) pose challenges.
• Policy Support: The BoT’s 6% CBR and fiscal reforms (e.g., VAT efficiency,) stabilize inflation and revenue. Chinese grants (TZS 185 billion,) and World Bank support (CPF 2025-2029,) fund infrastructure, reducing deficit pressures.
• Risks: Shilling depreciation (2.6%, Document, Page 12), global price volatility, and climate shocks (e.g., La Niña,) threaten inflation and trade. Overreliance on tourism and cloves risks external shocks.
• Outlook: Zanzibar’s 2025 growth (6%+) will rely on tourism, manufacturing, and trade reforms (e.g., AfCFTA,). Diversifying exports and reducing import reliance (e.g., via agriculture,) are critical for sustainability.

Zanzibar Economic Performance - May 2025: Key Figures

Note: USD conversion based on exchange rate of ~TZS 2,698/USD.