Tanzania’s current account deficit narrowed significantly to USD 2,117.6 million in the year ending June 2025, a 24.3% improvement from USD 2,797.7 million in June 2024. This USD 680.1 million reduction reflects robust growth in goods and services exports, especially from tourism and transport, which drove the net goods & services deficit down by 61.7% to USD 676.6 million. Service receipts rose to USD 7,110.4 million (+8.1%), led by travel (USD 3,934.5 million, +6.9%) and transport (USD 2,530.0 million, +9.8%), supported by a 10% increase in tourist arrivals. However, rising primary income outflows (USD 1,949.6 million, +17.9%) due to external debt servicing and a drop in remittances (USD 508.7 million, -18.1%) partially offset these gains. Meanwhile, foreign reserves stood at USD 5,307.7 million, covering 4.3 months of imports, above the national benchmark. Despite a surge in outbound travel spending (+51.4%), Tanzania’s external sector continues to show resilience, highlighting the importance of export diversification, tourism investment, and policy measures to manage foreign exchange outflows.

1. Current Account Performance

The current account balance reflects Tanzania’s trade in goods and services, primary income (e.g., interest and dividends), and secondary income (e.g., personal transfers and remittances) with the rest of the world. A deficit indicates that outflows exceed inflows, often financed by external borrowing or reserves.

Key Figures (Year Ending June 2025)

• Current Account Balance:
  • June 2025: Deficit of USD 2,117.6 million, a 24.3% improvement (USD 680.1 million reduction) from USD 2,797.7 million in June 2024.
  • Context: The narrowing deficit aligns with trends observed in earlier periods, such as a 31.1% reduction to USD 2,021.5 million in January 2025 and a 35% reduction to USD 2,025.8 million in November 2024. This improvement is driven by robust export growth (+17.7%) and better services performance, supported by global economic recovery and favorable commodity prices.
  • Drivers:
    • Goods & Services (Net): Improved by 61.7% to a deficit of USD 676.6 million from USD 1,764.7 million, reflecting strong export performance (e.g., gold, cashew nuts, tourism) and moderated import growth.
    • Primary Income (Net): Deficit widened by 17.9% to USD 1,949.6 million, driven by higher interest and dividend payments abroad, likely linked to external debt servicing (e.g., USD 32,955.5 million external debt, 67.6% USD-denominated) and foreign investments.
    • Secondary Income (Net): Surplus declined by 18.1% to USD 508.7 million, reflecting lower personal transfers (e.g., remittances), possibly due to global economic tightening or migration patterns.
  • Implications: The narrowing deficit signals improved external sector resilience, supported by tourism and commodity exports. However, persistent deficits and rising primary income outflows highlight the need for enhanced export diversification and remittance strategies. The African Development Bank projects a current account deficit of 4.2% of GDP in 2025, indicating sustained but manageable pressures.
• Foreign Exchange Reserves:
  • June 2025: USD 5,307.7 million, covering 4.3 months of projected imports, above the national benchmark of 4 months.
  • Context: Reserves increased from USD 5,056.8 million in November 2024 and USD 5,323.6 million in January 2025, reflecting improved export inflows and IMF disbursements (e.g., USD 148.6 million under the Extended Credit Facility in December 2024).
  • Implications: Adequate reserves mitigate exchange rate volatility (Tanzanian Shilling depreciated 8% in 2023), but sustained export growth is critical to maintain cover above 4 months.

2. Exports – Service Receipts by Category

Service receipts represent earnings from Tanzania’s service exports, including tourism (travel), transport, and other services (e.g., financial, insurance, ICT). These are critical to narrowing the current account deficit.

Total Service Receipts (Year Ending June 2025)

• Amount: USD 7,110.4 million
• Change: +8.1% from USD 6,578.7 million in 2024 (USD 531.7 million increase).
• Context: The growth aligns with earlier trends, such as a 14% increase to USD 6,985.9 million in November 2024 and a 7.3% increase to USD 6,940.8 million in April 2025, driven by tourism and transport earnings.

Category Breakdown

• Travel (Tourism):
  • June 2025: USD 3,934.5 million (55.3% of total service receipts).
  • Change: +6.9% from USD 3,679.7 million in 2024 (USD 254.8 million increase).
  • Tourist Arrivals: Increased by 10% to 2,193,322 in 2025 from 1,994,242 in 2024, consistent with a 20% annual increase to 2,662,219 in 2024 and 2,106,870 in November 2024.
  • Context: Tourism receipts reflect Tanzania’s growing global appeal, with awards like Africa’s Leading Destination 2025 and investments in promotion (e.g., TZS 359.9 billion tourism budget for 2025/26). Key markets include Europe, Kenya, and the U.S., with new initiatives like Marriott’s Mapito Safari Camp in Serengeti.
  • Drivers: Increased arrivals are driven by post-COVID recovery, reduced tourism license fees (up to 80% cuts), and infrastructure improvements (e.g., Dodoma Transport Project),.
  • Implications: Tourism’s 55.3% share of service receipts underscores its role as a foreign exchange earner, supporting Vision 2050’s 19.5% GDP contribution target by 2025/26. Sustained marketing and conservation investments are critical.
• Transport:
  • June 2025: USD 2,530.0 million (35.6% of total service receipts).
  • Change: +9.8% from USD 2,304.3 million in 2024 (USD 225.7 million increase).
  • Context: Growth aligns with earlier periods, such as USD 2,718.7 million in November 2024 (+15.8%) and USD 2,690.0 million in October 2024, driven by freight earnings from improved port efficiency and trade with landlocked neighbors (e.g., Zambia, Rwanda).
  • Drivers: Investments in transport infrastructure (e.g., Standard Gauge Railway, TAZARA Railway revitalization with USD 1.4 billion from China) and intra-African trade growth (24% to USD 5.18 billion in 2024) boost earnings.
  • Implications: Transport’s growth supports Tanzania’s role as a regional trade hub, but reliance on freight requires sustained infrastructure funding.
• Other Services:
  • June 2025: USD 645.9 million (9.1% of total service receipts).
  • Change: +8.6% from USD 594.6 million in 2024 (USD 51.3 million increase).
  • Context: Includes financial, insurance, and ICT services. The growth is consistent with digital payment advancements (e.g., Tanzania Instant Payment System with 453.7 million transactions in 2024) and financial inclusion efforts (87% adult target by 2030).
  • Implications: Growth in “Other Services” reflects financial sector deepening, but its small share limits its impact on the current account.

Tourism Highlight

• Arrivals: The 10% increase to 2,193,322 tourists reflects sustained recovery, with 2024 seeing 2,662,219 arrivals and November 2024 at 2,106,870. Key drivers include global promotion, reduced fees, and awards like Africa’s Leading Destination 2025.
• Implications: Tourism’s resilience supports foreign exchange inflows, but seasonality (e.g., low season pressures in Q1 2025) and global competition require ongoing investment in infrastructure and marketing.

3. Imports – Service Payments

Service payments represent Tanzania’s expenditures on imported services, such as outbound travel, freight, and other services (e.g., financial, consulting).

Total Service Payments (Year Ending June 2025)

• Amount: USD 2,894.0 million
• Change: +22.7% from USD 2,359.5 million in 2024 (USD 534.5 million increase).
• Context: The increase follows a 22.8% rise to USD 2,842.6 million in April 2025 and a 10.2% rise to USD 2,533.8 million in January 2025, driven by freight and outbound travel.

Category Breakdown

• Travel (Outbound):
  • June 2025: USD 867.9 million (30.0% of total service payments).
  • Change: +51.4% from USD 573.2 million in 2024 (USD 294.7 million increase).
  • Context: The surge aligns with increased consumer spending abroad, possibly driven by a growing middle class and business travel. Earlier data (e.g., April 2025) lacks specific outbound travel figures, but service payments rose due to freight.
  • Drivers: Increased outbound travel reflects economic growth (5.6% in 2024) and higher disposable incomes, but it strains foreign exchange reserves.
  • Implications: The sharp increase offsets export gains, requiring policies to promote domestic tourism and manage foreign exchange outflows.
• Transport:
  • June 2025: USD 1,453.2 million (50.2% of total service payments).
  • Change: Near-flat (≈ 0%) from USD 1,453.0 million in 2024.
  • Context: Stable payments reflect consistent freight costs tied to trade volumes. Earlier data shows freight accounted for 53.3% of service payments in April 2025, driven by industrial transport equipment imports.
  • Drivers: Imports of capital goods (e.g., machinery, transport equipment) for infrastructure projects (e.g., SGR, TAZARA) sustain freight costs,.
  • Implications: Stable transport payments align with trade growth but highlight reliance on imported goods, necessitating export diversification.
• Other Services:
  • June 2025: USD 573.2 million (19.8% of total service payments).
  • Change: -17.1% from USD 691.1 million in 2024 (USD 117.9 million decrease).
  • Context: The decline suggests cost efficiencies or reduced outsourcing in financial, insurance, or consulting services, aligning with digital payment growth and financial inclusion.
  • Implications: Reduced payments improve the services balance, but the small share limits its impact on the current account.

Summary Snapshot

Final Insights and Policy Implications

1. Current Account Improvement:
   • The 24.3% deficit reduction (USD 2,117.6 million) reflects strong export growth (+17.7%) and services performance, supported by tourism (2.2 million arrivals) and transport infrastructure. However, rising primary income outflows (USD 1,949.6 million) due to external debt servicing (40% of government expenditures) and declining remittances (USD 508.7 million) temper gains.
   • Policy: Diversify exports (e.g., horticulture, manufactured goods) and boost remittance inflows through diaspora engagement to further narrow the deficit.
2. Tourism’s Critical Role:
   • Tourism receipts (USD 3,934.5 million, +6.9%) are a cornerstone of service exports, driven by a 10% increase in arrivals and global recognition. Investments in infrastructure (e.g., Dodoma Transport Project, TAZARA) and promotion (TZS 359.9 billion budget) are paying off.
   • Policy: Sustain tourism growth through conservation, reduced fees, and targeting high-value markets (e.g., Europe, U.S.) while addressing seasonality risks.
3. Transport Sector Growth:
   • Transport receipts (USD 2,530.0 million, +9.8%) reflect Tanzania’s role as a regional trade hub, supported by port efficiency and intra-African trade growth (USD 5.18 billion in 2024). Projects like SGR and TAZARA enhance freight earnings.
   • Policy: Continue infrastructure investments and regional trade agreements (e.g., AfCFTA) to boost transport earnings, but monitor freight cost stability.
4. Outbound Travel Pressures:
   • The 51.4% surge in outbound travel payments (USD 867.9 million) reflects growing consumer spending abroad, straining foreign exchange reserves. Stable transport payments (USD 1,453.2 million) indicate consistent trade-related costs.
   • Policy: Promote domestic tourism and manage foreign exchange outflows through targeted incentives (e.g., tax breaks for local travel).
5. Economic Context:
   • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6.0% in 2025 support export performance, driven by agriculture, tourism, and manufacturing.
   • Monetary Policy: The BoT’s 6% Central Bank Rate and 3%–5% inflation target ensure liquidity and exchange rate stability, supporting external sector performance.
   • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against global shocks, but USD appreciation risks remain.
6. Risks and Opportunities:
   • Risks: Rising outbound travel costs, USD-denominated debt servicing (67.6% of external debt), and global commodity price volatility could widen the deficit. Climate shocks and geopolitical tensions also pose risks.
   • Opportunities: Investments in tourism, transport, and digital payments (e.g., TIPS), alongside reforms like MKUMBI II, can sustain export growth and financial inclusion

Debt Structure, Shilling and Figures

As of May 2025, Tanzania’s national debt stood at TZS 107.70 trillion, comprising TZS 72.94 trillion in external debt and TZS 34.76 trillion in domestic debt. The external debt stock, equivalent to approximately USD 34.1 billion (using an exchange rate of TZS 2,884.42 per USD from April 2025), was primarily held by multilateral institutions and directed toward key sectors such as transportation (21.5%) and telecommunications. The central government accounted for 78.3% of external debt (USD 26.7 billion), with 67.7% of this debt denominated in US dollars (USD 23.1 billion). Domestic debt, at TZS 34.26 trillion in March 2025, was largely financed by commercial banks (29%) and pension funds (26.5%), with Treasury bonds dominating at 78.2%.

In May 2025, principal repayments on external debt amounted to USD 267 million. Debt servicing costs are significant, with historical data indicating that external debt servicing consumed up to 40% of government expenditures in earlier years. For 2023, total debt service was 2.89% of Gross National Income (GNI), and in 2025, servicing the external debt (at concessional rates) and domestic debt (at 15.5% lending rates) could cost approximately USD 1–2 billion and TZS 5.31 trillion annually, respectively. These costs divert resources from productive investments, potentially straining fiscal space.

Impact on the Tanzania Shilling

The Tanzania Shilling’s stability in May 2025 is supported by several factors related to debt management and economic performance:

• Foreign Exchange Reserves: The Bank of Tanzania (BoT) reported foreign exchange reserves of USD 5,360 million in May 2025, covering 4.2 months of imports, which exceeds the national benchmark of 4 months. By March 2025, reserves had increased to USD 5,700 million, covering 3.8 months of imports, indicating sustained adequacy. These reserves provide a buffer against external shocks, reducing pressure on the Shilling and enabling the BoT to meet external debt obligations without significant currency devaluation.
• Export Performance: Robust export growth, particularly in gold (24.5% increase) and cashew nuts (141% increase), contributed to a 16.8% rise in exports to USD 16.7 billion in the year ending April 2025. Gold prices, at USD 2,983.25 per ounce in March 2025, further bolstered foreign exchange inflows, supporting the Shilling’s stability.
• Fiscal and Monetary Policy: The BoT maintained the Central Bank Rate (CBR) at 6% in April 2025 to safeguard economic stability amid global uncertainties. Prudent fiscal policy, with a fiscal deficit trending toward 3% of GDP, and stringent monetary policy have kept inflation low at 3.2% in May 2025, below the BoT’s 5% target. Low inflation reduces pressure on the Shilling by maintaining purchasing power and stabilizing import costs.

Despite these stabilizing factors, the Shilling experienced a 3.86% annual depreciation against the USD, trading at TZS 2,884.42 per USD in April 2025. This depreciation, though improved from the previous month, reflects pressures from external debt servicing and import demands. The high USD denomination of external debt (67.7%) exacerbates these pressures, as a depreciating Shilling increases the local currency cost of debt servicing by approximately TZS 2.37 trillion for the USD 34.1 billion external debt, based on a 2.6% depreciation rate.

Foreign Exchange Interventions and Their Role

The BoT’s interventions in the Interbank Foreign Exchange Market (IFEM) have been critical to maintaining the Shilling’s stability. In January 2025, the BoT sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation amid a 1.37% month-on-month weakening of the Shilling (from TZS 2,420.84 to TZS 2,454.04 per USD). Similar interventions likely occurred in April and May 2025, as the document notes that seasonal inflows from cash crops and gold exports, combined with BoT actions, mitigated depreciation pressures. However, IFEM transactions declined significantly from USD 95.7 million in December 2024 to USD 16.3 million in January 2025, suggesting reduced market activity, possibly due to lower trade or investor participation.

These interventions, supported by adequate reserves, have ensured short-term stability, with the Shilling appreciating by 2.6% year-on-year from January 2024 to January 2025. The BoT’s ability to intervene is bolstered by improved current account performance, with the deficit narrowing by 31.1% to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings and moderate import growth.

Potential Risks to Long-Term Shilling Stability

The composition of Tanzania’s external debt and reliance on commodity-driven inflows pose several risks to the Shilling’s long-term stability:

1. High USD Denomination of External Debt: With 67.7% of the USD 34.1 billion external debt denominated in US dollars (USD 23.1 billion), the Shilling is highly exposed to exchange rate fluctuations. A further depreciation, such as the 2.6% observed in 2024, increases debt servicing costs in local currency, potentially requiring the BoT to draw down reserves or increase borrowing, both of which could weaken the Shilling.
2. Commodity Price Volatility: Tanzania’s foreign exchange inflows heavily depend on gold and agricultural exports (e.g., cashew nuts, coffee). While gold prices were strong at USD 2,983.25 per ounce in March 2025, declines in coffee (-2%) and sugar (-1.5%) prices highlight vulnerability to global commodity market fluctuations. A downturn in gold prices or reduced export demand could strain reserves and pressure the Shilling.
3. Global Economic Uncertainties: The document highlights risks from global trade tariffs and geopolitical tensions, with the IMF projecting global growth at 2.8% in 2025. Rising global interest rates could increase external borrowing costs, particularly for non-concessional loans, further straining fiscal resources and reserves needed to stabilize the Shilling.
4. Fiscal Constraints and Crowding-Out Effects: High domestic borrowing (TZS 34.26 trillion) and lending rates (15.5%) crowd out private sector investment, weakening credit growth and economic diversification. This limits the economy’s ability to generate sustainable foreign exchange inflows, increasing reliance on volatile commodity exports and BoT interventions.
5. Climate and Structural Risks: Climate change could reduce agricultural output, a key export sector, with the World Bank estimating a potential 4% GDP growth reduction by 2050 due to climate impacts. Slow structural transformation and shallow financial markets further constrain Tanzania’s ability to diversify revenue sources, heightening Shilling vulnerability.

Mitigating Factors and Policy Measures

Tanzania’s authorities are implementing measures to mitigate these risks:

• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) classifies Tanzania’s risk of external debt distress as moderate, with public debt at 35% of GDP in 2024, well below the 55% benchmark. Access to concessional financing from multilateral institutions reduces servicing costs compared to commercial loans.
• Revenue Mobilization: The government collected TZS 2,441 billion in April 2025, with tax revenue exceeding targets by 1.5% due to improved administration. The proposed TZS 56.49 trillion 2025/26 budget aims to enhance revenue through new taxes and levies, reducing reliance on borrowing.
• Export Diversification: Investments in infrastructure (48% of World Bank financing) and sectors like manufacturing and tourism (projected to drive 6% GDP growth in 2025) aim to reduce reliance on commodity exports.
• Monetary Policy: The BoT’s 6% CBR and interventions in the IFEM demonstrate proactive management of liquidity and exchange rate stability. Food reserves (587,062 tonnes, with 32,598 tonnes released) help stabilize food prices, supporting low inflation and Shilling stability.

Conclusion

In May 2025, Tanzania’s national debt developments and foreign exchange interventions have supported the Tanzania Shilling’s short-term stability, with reserves of USD 5,360 million (4.2 months of import cover) and export-driven inflows mitigating a 3.86% annual depreciation. BoT interventions in the IFEM, backed by strong gold and cashew nut exports, have prevented sharp fluctuations, maintaining the Shilling at TZS 2,884.42 per USD in April 2025. However, the high USD denomination of external debt (67.7% of USD 34.1 billion), reliance on volatile commodity exports, and global uncertainties pose risks to long-term stability. A potential further depreciation could increase debt servicing costs by TZS 2.37 trillion, straining reserves and fiscal space. Continued prudent fiscal and monetary policies, alongside diversification efforts, are critical to sustaining Shilling stability and supporting Tanzania’s projected 6% GDP growth in 2025.

Table: Key Economic Figures Impacting Tanzania Shilling Stability (May 2025)

Notes and Explanations

1. Debt Figures: The total national debt (TZS 107.70 trillion) and its breakdown into external (USD 34.1 billion) and domestic (TZS 34.26 trillion) components reflect Tanzania’s borrowing profile. The high USD denomination (67.7%) of external debt increases vulnerability to exchange rate fluctuations, as a 2.6% depreciation could raise servicing costs by approximately TZS 2.37 trillion (calculated as 2.6% of TZS 72.94 trillion).
2. Foreign Exchange Reserves: Reserves of USD 5,360 million in May 2025 and USD 5,700 million in March 2025 provide a buffer for debt servicing and exchange rate stabilization. The 4.2-month import cover exceeds the national benchmark, supporting short-term Shilling stability.
3. Exchange Rate: The Shilling’s depreciation to TZS 2,884.42 per USD reflects pressures from debt servicing and imports, mitigated by BoT interventions (e.g., USD 7 million sale in January 2025). The 2.6% appreciation from January 2024 to January 2025 indicates effective short-term management.
4. Export Performance: Strong export growth (USD 16.7 billion, up 16.8%) driven by gold and cashew nuts bolsters foreign exchange inflows, critical for reserve accumulation and Shilling stability. Gold’s high price (USD 2,983.25 per ounce) is a key factor but introduces volatility risk.
5. Current Account and Inflation: The narrowed current account deficit (USD 2,175 million) and low inflation (3.2%) reduce pressure on the Shilling, supporting its purchasing power and import affordability.
6. Debt Servicing Costs: Estimated based on historical data (2.89% of GNI in 2023) and domestic lending rates (15.5%). These costs strain fiscal resources, potentially requiring reserve drawdowns or further borrowing, which could weaken the Shilling.

This table provides a concise overview of the key figures driving the Tanzania Shilling’s stability in May 2025, highlighting the interplay between debt developments, foreign exchange interventions, and external sector performance, as well as underlying risks from debt composition and commodity reliance.