Tanzania’s external debt, totaling USD 33.1 billion in November 2024, highlights a focus on infrastructure, social services, and energy projects, with the central government holding 76.8% of the debt. Multilateral creditors account for the majority, offering favorable terms, while commercial borrowing poses higher costs. Despite aligning debt use with development goals, currency risks and rising debt servicing obligations underscore the importance of prudent debt management and sustainable financing strategies.
1. External Debt Overview
As of November 2024, Tanzania's total external debt stock stood at USD 33,137.7 million, representing 72.1% of the country’s total national debt. This reflects a slight decrease of 0.6% compared to October 2024 due to debt service payments exceeding new disbursements.
2. External Debt Stock by Borrower
The distribution of external debt stock by borrower categories highlights the dominance of central government borrowing:
Central Government: USD 25,433.6 million (76.8% of external debt).
Private Sector: USD 7,700.3 million (23.2% of external debt).
Public Corporations: USD 3.8 million (negligible share).
3. Distributed Outstanding Debt by Use of Funds
The allocation of external debt shows how the borrowed funds are utilized across various sectors:
Transportation and Telecommunications:21.4% (key investments in infrastructure).
Social Welfare and Education:20.4% (focus on improving public services).
Energy and Mining:15.0% (supporting energy production and mining activities).
Balance of Payments (BoP) and Budget Support:18.4%.
Other sectors include:
Agriculture:5.2%.
Finance and Insurance:4.1%.
Real Estate and Construction:4.7%.
4. Distributed Outstanding Debt by Creditor Composition
The distribution of external debt by creditor category as of November 2024 is as follows:
Multilateral Institutions: USD 18,055.7 million (54.5%) – These include international financial institutions such as the World Bank and IMF.
Commercial Creditors: USD 11,854.9 million (35.8%).
Export Credit Agencies: USD 1,799.1 million (5.4%).
Bilateral Creditors: USD 1,428.0 million (4.3%).
5. Currency Composition of External Debt
Tanzania’s external debt is mainly denominated in the following currencies:
United States Dollar (USD):68.2%.
Euro:16.2%.
Chinese Yuan:6.1%.
Others:9.6%.
Summary of Key Figures:
Indicator
Value
Share (%)
External Debt Stock
USD 33,137.7 million
100%
- Central Government
USD 25,433.6 million
76.8%
- Private Sector
USD 7,700.3 million
23.2%
- Public Corporations
USD 3.8 million
Negligible
Multilateral Creditors
USD 18,055.7 million
54.5%
Commercial Creditors
USD 11,854.9 million
35.8%
Transportation and Telecom Use
-
21.4%
Social Welfare and Education Use
-
20.4%
These figures reflect Tanzania’s strategy to invest heavily in infrastructure and social services while maintaining reliance on multilateral and commercial creditors for financial support
The analysis of Tanzania's external debt and its distribution with important insights into the country's borrowing strategies and development priorities
1. High Reliance on Central Government Borrowing
The central government accounts for the majority (76.8%) of external debt, indicating that the government is the primary entity responsible for securing and utilizing external financing.
This reliance reflects the government’s role in funding large-scale projects, particularly in infrastructure and social development, which are critical for long-term growth.
Implication: The burden of repayment largely falls on public finances, emphasizing the need for sound debt management and productive use of borrowed funds.
2. Sectoral Distribution Aligns with Development Goals
Significant portions of the debt are allocated to:
Transportation and Telecommunications (21.4%) to improve connectivity and trade.
Social Welfare and Education (20.4%) to enhance human capital.
Energy and Mining (15%) to address energy needs and exploit natural resources.
The allocation highlights the government’s focus on infrastructure-driven growth and poverty reduction through investments in public services.
Implication: The focus on infrastructure and social services suggests a long-term strategy to stimulate economic growth and improve the standard of living.
3. Dominance of Multilateral Creditors
With 54.5% of external debt owed to multilateral institutions, Tanzania benefits from concessional loans, which typically have lower interest rates and longer repayment periods.
The reliance on commercial creditors (35.8%), however, reflects a shift toward costlier financing, possibly due to limited access to concessional funding.
Implication: While multilateral debt offers favorable terms, increasing commercial debt could raise debt servicing costs, adding pressure on public finances.
4. Currency Composition Risks
The dominance of the US dollar (68.2%) in the debt portfolio exposes Tanzania to exchange rate risks. A depreciation of the Tanzanian shilling against the dollar could significantly increase repayment costs.
Diversification into other currencies like the Euro and Chinese Yuan mitigates this risk to some extent but remains insufficient.
Implication: Exchange rate volatility poses a challenge, requiring careful monitoring and hedging strategies.
5. Debt Management and Sustainability Concerns
Although the funds are directed toward productive sectors, the growing stock of external debt demands effective management to ensure it does not surpass sustainable levels.
Increasing reliance on debt-financed projects must yield returns sufficient to cover repayment obligations.
Conclusion: Tanzania’s external debt strategy reflects a focus on long-term development, prioritizing infrastructure, social services, and energy projects. However, the reliance on central government borrowing and commercial creditors, coupled with exchange rate risks, underscores the need for prudent debt management, enhanced domestic revenue mobilization, and productive utilization of borrowed funds.
The banking and finance sector in Tanzania is undergoing a remarkable transformation. Anchored by digital innovation, regulatory reforms, and increased financial inclusivity, this sector is driving significant economic growth. An exploration of its current landscape, challenges, and opportunities.
Sector Growth and Digital Transformation
By 2024, Tanzania's banking assets reached TZS 43 trillion (USD 18 billion), equivalent to 20% of the GDP. This growth has been powered by a surge in mobile banking, which saw a 116% increase in mobile accounts between 2019 and 2024. As of 2024, mobile money accounts exceeded 55.8 million, with monthly transactions surpassing 310 million. By 2030, these accounts are projected to grow to 90 million, marking a pivotal shift towards digital financial services.
Financial Inclusivity
The financial inclusion rate in Tanzania rose from 16% in 2009 to 70% in 2024, driven by mobile and microfinance services. Urban areas boast 85% financial access, but rural regions lag at 55%, reflecting significant disparities. The government aims for a 75% inclusion rate by 2025 and an ambitious 90% by 2030.
Challenges in the Sector
Despite the impressive growth, Tanzania’s banking sector faces critical challenges:
High Compliance Costs: Stringent regulations have increased operational expenses by 20%, impacting profitability.
Rural Access: A lack of physical bank branches in rural areas leaves many reliant on mobile banking.
Lending Rates: High average interest rates (16%) restrict SMEs' access to affordable credit, stifling private sector growth.
Opportunities for Investment
Digital and Mobile Banking: Projected to grow at 12% annually, this sector offers vast potential for fintech and infrastructure investments.
SME Financing: With SMEs comprising over 90% of businesses but only 16% accessing formal finance, the loan market is poised for a 10% annual growth.
Green Financing: This emerging sector, targeting eco-friendly projects, is expected to grow by 15% yearly, particularly in agriculture and renewable energy.
Future Outlook
By 2030, Tanzania’s banking landscape will likely host 60-65 banks, with microfinance representing 30% of total assets. With streamlined regulations and targeted digital literacy programs, financial inclusivity could rise to 85-90%. Investment in key sectors like digital banking, SME financing, and green financing is anticipated to create a competitive, resilient, and inclusive banking environment.
Conclusion
Tanzania’s banking sector is at the cusp of transformative growth. Addressing compliance challenges, bridging urban-rural disparities, and fostering innovations in digital finance will be critical. With the right investments and policy adjustments, the sector is well-positioned to drive inclusive economic development and solidify Tanzania's leadership in East Africa's financial landscape.
Tanzania’s outstanding IMF credit of $853.3 million positions it as the third-largest borrower among East African Community (EAC) members, following Kenya ($3.02 billion) and Uganda ($992.8 million). This figure underscores Tanzania’s moderate reliance on IMF resources compared to Kenya’s significantly higher borrowing, which reflects its fiscal challenges. Rwanda and Burundi, with outstanding credits of $476.1 million and $100.6 million respectively, trail behind. Tanzania’s borrowing highlights a balanced approach, addressing financing needs while maintaining debt sustainability in the region.
Rank in East Africa: 3rd largest among East African Community (EAC) members.
Context: This amount reflects Tanzania's reliance on IMF financing relative to regional peers.
East African Countries Comparison
Kenya: $3,022,009,900
Holds the highest outstanding IMF credit in East Africa.
Recently received an additional disbursement of $455.7 million, further elevating its position.
Uganda: $992,750,000
Second-highest in the region, with a credit position close to $1 billion.
Tanzania: $853,270,000
Third-largest, indicating moderate borrowing compared to Kenya and Uganda.
Rwanda: $476,141,140
Significantly lower than Tanzania but shows active use of IMF facilities.
Burundi: $100,600,000
The smallest credit position in the EAC, reflecting limited IMF engagement.
Insights
Kenya's High Credit: Kenya’s large IMF borrowing aligns with its economic challenges, such as fiscal deficits and external imbalances. The additional disbursement highlights its need for ongoing support.
Tanzania's Moderate Position: Tanzania's IMF credit is substantial but reflects a more conservative borrowing approach compared to Kenya. This aligns with its relatively stable macroeconomic environment in recent years.
Rwanda and Burundi: Their smaller credit levels could indicate less reliance on IMF resources or limited access due to policy or capacity considerations.
Comparison with Other African Countries
Key Context: Across Africa, countries like Egypt, Nigeria, and South Africa often have significant IMF credit levels due to their larger economies or ongoing economic reforms.
Regional Variation: East African countries like Tanzania and Uganda show moderate use of IMF facilities, balancing economic reforms with external support.
The comparison of Tanzania's IMF credit position with other East African countries and its context within Africa highlights the following insights:
1. Economic Management and Policy Approach
Tanzania's Moderate Position:
Tanzania's $853.3 million IMF credit suggests that the country has been relatively prudent in seeking external financing compared to Kenya and Uganda.
This aligns with Tanzania's historically cautious borrowing and stable macroeconomic management, focusing on long-term growth and sustainability.
The reliance on IMF funds indicates Tanzania is addressing external shocks or developmental financing gaps but is not over-leveraging.
2. Regional Dynamics
Kenya's Dominance:
Kenya’s significantly higher credit position ($3 billion) shows its more immediate financial challenges, possibly driven by larger fiscal deficits, debt servicing pressures, or external imbalances.
This reliance might reflect Kenya’s prioritization of aggressive infrastructure development, which requires external support.
Uganda vs. Tanzania:
Uganda's slightly higher credit ($992.8 million) points to slightly higher funding needs, perhaps due to different economic or social priorities.
Rwanda and Burundi:
These countries' lower IMF credits reflect either limited access, smaller economies, or differing economic strategies, particularly Burundi's smaller borrowing capacity.
3. Tanzania's Position as a Balanced Borrower
Being third in East Africa shows Tanzania strikes a balance between:
Using IMF funds to address short-term needs and maintaining sustainable debt levels.
Managing economic risks, avoiding excessive dependency, and maintaining room for further borrowing if needed.
4. Implications for Development and Reform
Tanzania’s borrowing strategy indicates:
A focus on maintaining investor confidence and creditworthiness.
A potential readiness to address fiscal or external gaps while preserving economic stability.
Moderate IMF reliance reflects policy consistency in achieving economic targets, supporting reforms, and mitigating global economic risks like inflation or commodity price volatility.
5. Global and African Position
In Africa, Tanzania's IMF credit indicates moderate external dependency compared to major borrowers like Kenya, South Africa, or Egypt, suggesting steady progress in economic resilience and diversified funding.
Key Takeaway
Tanzania’s IMF credit position signals cautious borrowing and economic stability compared to its peers, balancing development needs with sustainable debt management. This approach positions Tanzania favorably for long-term growth while maintaining flexibility to handle future challenges.
Opportunities, Challenges, and the Road to 2030
Small and Medium Enterprises (SMEs) are the backbone of Tanzania’s economy, accounting for 35% of the Gross Domestic Product (GDP) and providing 50% of national employment. The sector, which includes over 95% of the country’s businesses, spans industries such as agriculture, manufacturing, services, and construction. Despite its scale, Tanzania SMEs face systemic barriers that inhibit their growth and sustainability. This article explores the current landscape of Tanzania’s SME sector, emphasizing market dynamics, policy frameworks, and resource access.
1. Market Distribution and Sector Dynamics
SMEs are concentrated in four primary sectors:
Agriculture: Accounts for 40% of SMEs, playing a vital role in food security and rural employment.
Manufacturing: Covers 30%, primarily focusing on food processing, textiles, and consumer goods.
Services: Represents 25%, encompassing retail, hospitality, and professional services.
Construction: Holds 5%, spurred by urbanization and infrastructure development initiatives.
This distribution reflects the sector’s diversity and potential; however, 72% of Tanzania SMEs operate informally, limiting their access to credit and government incentives. As of 2023, only 30-50% of SMEs survive past five years, highlighting the need for increased support and formalization.
2. Financial and Resource Accessibility
The financial accessibility for Tanzania SMEs remains limited, with only 20% of SMEs obtaining formal financial services. High-interest rates (17-20%) and stringent collateral requirements make traditional financing inaccessible for many, leading most SMEs to rely on personal savings. Technological resources are also unevenly distributed, with urban areas adopting digital solutions such as mobile money at higher rates than rural areas, where infrastructure and digital literacy are lagging.
Figures:
Formal Financial Access: 20% of SMEs.
Mobile Money Penetration: 53%, primarily benefiting urban SMEs.
3. Regulatory Challenges and Policy Initiatives
High compliance costs, complex tax structures, and prolonged registration procedures discourage many SMEs from formalizing. Tanzania ranks 141st on the World Bank's Ease of Doing Business Index, with 70% of SMEs reporting compliance difficulties due to multiple tax obligations and labor regulations.
Figures:
Ease of Doing Business Ranking: 141 out of 190 countries.
Tax Compliance Difficulty: 70% of SMEs struggle with regulatory requirements.
4. Investment Landscape and Opportunities
High-potential sectors, including agribusiness, ICT, and tourism, present opportunities for growth. Tanzania’s agribusiness SMEs make up 40% of the sector, benefiting from regional demand and the nation’s arable land. The ICT sector is expanding, driven by rising mobile penetration and digital adoption, creating prospects for e-commerce and digital financial services. However, challenges such as inadequate infrastructure and limited financing hinder SME investment and sectoral expansion.
Figures:
Agribusiness Sector: 40% of SMEs.
Projected FDI Growth: +50% with infrastructure and policy improvements by 2030.
5. Projections for 2030 and Conclusion
If Tanzania strengthens support for SMEs, particularly through simplified regulatory frameworks, digital infrastructure, and financing options, the SME sector’s GDP contribution could reach 45% by 2030, with employment rising to 60%. Improving access to formal financing, especially in rural areas, and expanding digital infrastructure are crucial steps for empowering SMEs to drive economic resilience and sustainability.
2030 Projections:
GDP Contribution: 45% (up from 35%).
Employment Contribution: 60% (up from 50%)(SME Market Landscape).
In conclusion, Tanzania’s SMEs are essential for economic stability and job creation. With targeted policies and resources, SMEs can enhance their impact on the economy, contributing to a diversified, inclusive, and resilient Tanzania by 2030.
To promote sustainable economic growth, Tanzania is increasingly leveraging Public-Private Partnerships (PPPs) to improve financial efficiency and boost investment in key sectors. Over the 2021/22 to 2024/25 fiscal years, Tanzania allocated a total of 54.575 trillion TZS to its development budget, with 33.794 trillion TZS sourced domestically. By implementing PPPs under an 80-20 cost-sharing model, the government aims to reduce its financial burden, enhance service delivery, create jobs, and increase revenue through private sector collaboration. This article explores the impact and strategic approach of PPPs in Tanzania’s economic development.
1. Development Budget Allocation and Funding Trends
Across four fiscal years, Tanzania’s development budget reveals a structured approach to funding large-scale infrastructure, energy, social services, and economic development projects. The allocation data highlights the prioritization of domestic financing over external funds, underscoring a commitment to fiscal responsibility and self-reliance.
Fiscal Year
Total Development Budget (TZS Trillions)
Domestic Funding (TZS Trillions)
External Funding (TZS Trillions)
2021/22
13.33
10.37
2.96
2022/23
15.00
12.31
2.70
2023/24
11.49
N/A
N/A
2024/25
14.755
11.114
3.640
Total
54.575
33.794
9.3
This budget structure, with over 60% sourced domestically, signals Tanzania’s shift towards utilizing internal revenue for growth, allowing foreign financing to focus on specific, large-scale projects.
2. Key Recurring Projects and Economic Impact
Tanzania’s development agenda targets large-scale projects in infrastructure, energy, social services, and economic development to achieve comprehensive growth.
Infrastructure Projects: Major projects, such as the Standard Gauge Railway (SGR) and the Kigongo-Busisi Bridge, will enhance connectivity within East Africa and reduce trade costs. With a total expected investment of 5 trillion TZS in infrastructure, these projects will elevate Tanzania as a regional logistics hub.
Energy Projects: The Julius Nyerere Hydropower Project (2,115 MW) and rural electrification initiatives will improve energy security and support industrial growth, contributing over 1 trillion TZS annually to the economy.
Social Services: Education and healthcare investments, including infrastructure expansion and student loans, aim to improve Tanzanian human capital, essential for economic resilience.
Economic Development: Investments in agriculture, industrial development, and Special Economic Zones (SEZs) are expected to create jobs and attract foreign investment, boosting economic diversification.
3. Financing Strategies for Development
To finance these ambitious projects, Tanzania adopts a diversified approach, with the following methods:
Domestic Revenue: Emphasis on internal revenue collection to fund projects, which minimizes reliance on external debt.
Concessional Loans and Grants: Collaborations with international donors and development banks support specific projects.
Public-Private Partnerships (PPPs): By mobilizing private sector investment in critical sectors, PPPs significantly reduce the government’s financial burden and improve efficiency.
4. Economic Benefits of Public-Private Partnerships (PPPs)
PPPs offer a unique model for maximizing resource utilization while minimizing financial risks to the government. The 80-20 cost-sharing model illustrates substantial economic benefits:
a) Cost Savings
Through PPPs, project costs are shared, reducing government expenditure. For instance:
On a 500 billion TZS infrastructure project, the government only contributes 100 billion TZS, with the private sector covering 400 billion TZS.
This model also introduces efficiencies that can lower project costs by 20%, saving an additional 20 billion TZS.
b) Increased Investment and Economic Output
By leveraging PPPs, Tanzania’s 54.575 trillion TZS development budget could attract an estimated 43.66 trillion TZS from the private sector, enabling increased investments in other critical areas.
c) Risk Mitigation
With an 80% private sector contribution, the government’s risk exposure is substantially reduced. For example, in a 200 billion TZS project, a cost overrun of 30 billion TZS would mean the government only covers 6 billion TZS, transferring the remaining 24 billion TZS risk to private investors.
d) Enhanced Revenue Sharing
Infrastructure projects like the Julius Nyerere Hydropower Project can enhance revenue through efficient PPP implementation. With a 2,115 MW capacity, an estimated revenue of 10 million TZS per MW annually could see a 15% efficiency increase under PPPs, yielding an additional 31.725 billion TZS in revenue.
e) Job Creation and Economic Stimulation
PPPs can create approximately 10,000 jobs, injecting 10 billion TZS into the economy annually. This job creation benefits local economies and provides citizens with employment opportunities, improving livelihoods and increasing domestic consumption.
f) Long-term Economic Growth
By facilitating infrastructure development, PPPs can increase trade efficiency by 5%, which translates to a 1 trillion TZS boost in annual economic output. This growth benefits both the government and private sector through improved services and a broader tax base.
5. Strategic Advantages of PPPs for Tanzania’s Development Goals
Reduced Capital Outlay: The government’s 20% contribution allows for optimal allocation of public funds, supporting other essential services.
Enhanced Service Delivery: PPPs bring private sector expertise, accelerating project timelines and improving quality.
Long-term Sustainability: By integrating private sector investment, Tanzania ensures the longevity and adaptability of its infrastructure and energy assets.
Competitive Regional Positioning: Improved infrastructure and energy resources strengthen Tanzania’s position as a leading trade and logistics hub in East Africa.
The strategic implementation of Public-Private Partnerships in Tanzania is driving sustainable economic growth, enhancing service delivery, and creating employment opportunities. By balancing risk, leveraging private investment, and focusing on key sectors, Tanzania is building a resilient economy that benefits both the public and private sectors. Through continued collaboration, PPPs will play a crucial role in realizing Tanzania’s long-term development goals.
Addressed Infrastructure, Regulatory Efficiency, and Public Service Challenges
The Business Ready 2024 report provides an assessment of Tanzania's business environment based on three key pillars: Regulatory Framework, Public Services, and Operational Efficiency
Regulatory Framework: Tanzania scored 65.00 points, placing it in the third quintile, meaning its regulatory environment is moderately favorable. This includes regulations that govern business entry, labor, taxation, and financial services, though there is room for improvement in areas like market competition and insolvency.
What it Means: The Regulatory Framework pillar focuses on the laws, rules, and regulations that businesses must follow in Tanzania. A score of 65.00 indicates that while the regulatory environment is moderately favorable, it still has areas that need improvement.
Strengths: Tanzania has made progress in areas like business entry, taxation, and labor regulations. These areas provide businesses with a stable set of rules for operation.
Areas for Improvement: The score suggests that Tanzania could enhance regulations governing market competition and business insolvency, where businesses might face difficulties related to anticompetitive behavior or delays in resolving insolvency matters.
What is Measured: This pillar assesses the rules, laws, and regulations that businesses must follow as they enter, operate, and exit the market. It focuses on whether these regulations are clear, fair, and supportive of entrepreneurial activity.
Key Areas Measured:
Business Entry: The ease with which businesses can register and start operating.
Indicator: Time, cost, and complexity involved in starting a business.
Labor: The flexibility and protections offered by labor laws, including hiring, firing, and worker protections.
Indicator: Availability of paid leave, overtime regulations, and worker dismissal processes.
Indicator: Laws governing credit access, ease of securing loans, and the stability of financial services.
International Trade: The regulatory environment that affects import/export activities and cross-border transactions.
Indicator: Time and costs involved in clearing customs, and regulations around cross-border electronic payments and contracts.
Taxation: The rules governing business tax obligations.
Indicator: Clarity of tax laws, time to file, and availability of tax services.
What It Tells About Tanzania:
Score: 65.00 points
Tanzania performs moderately well here, showing that the country has a decent legal framework to regulate business activities, but there is room for improvement in areas like market competition and business insolvency.
Example: While it’s fairly easy to start a business in Tanzania, there may still be inefficiencies in accessing financial services or dealing with labor regulations that slow down business growth.
Public Services: Tanzania's score for public services is 51.56 points, placing it in the fourth quintile. This reflects challenges in public service provision that support businesses, including utility services and government institutions related to business regulation.
What it Means: This pillar evaluates the quality of government-provided services that help businesses comply with regulations, such as utility services (electricity, water), online tax services, and other government support structures.
Challenges: Tanzania’s low score in this area reflects inefficiencies or gaps in public services. For example, businesses may struggle with frequent power outages or delays in obtaining permits, which can slow down operations.
Examples: The time to obtain a construction permit could be long, and delays in utility services (like electricity) could further hinder business activities. In some economies, businesses face multiple power outages each month, and this might be contributing to Tanzania's lower score in public services.
What is Measured: This pillar looks at the quality of public services provided by the government that are necessary for businesses to function, including utility services, government transparency, and the infrastructure that supports business compliance with regulations.
Key Areas Measured:
Utility Services: Access to essential services such as electricity, water, and internet.
Indicator: Frequency and duration of power outages, reliability of water services, and internet availability.
Taxation: Availability and accessibility of online tax services for businesses.
Indicator: Whether businesses can file taxes electronically, access support via online tools, and comply with tax obligations efficiently.
International Trade: Efficiency of customs and border management systems.
Indicator: Whether coordinated border management systems are in place and how easily businesses can trade across borders.
Financial Services: Availability of credit registries and bureaus that collect business-related data.
Indicator: How well businesses can access credit and how transparently financial data is managed.
What It Tells About Tanzania:
Score: 51.56 points
Tanzania faces challenges in the quality of its public services, particularly in providing reliable utility services and modernized government support.
Example: Frequent power outages or delays in obtaining construction permits could hinder businesses, while limited online tax services might add to compliance costs.
Utility Services: Businesses in Tanzania likely deal with infrastructure challenges, such as power reliability, which impacts operational efficiency.
Operational Efficiency: Tanzania performed better in operational efficiency with a score of 62.15 points, placing it in the third quintile. This category measures how efficiently businesses can comply with regulations and access public services.
What it Means: The Operational Efficiency pillar measures how easy it is for businesses to comply with regulations and access services. Tanzania’s score in this pillar suggests that businesses face some challenges but generally have moderate success in navigating the regulatory landscape and accessing the services they need.
Strengths: Tanzania’s operational efficiency score is stronger than its public services score. This suggests that, while services may be lacking, businesses are still able to function reasonably well. Examples of operational challenges might include delays in filing and paying taxes or resolving commercial disputes, which could affect day-to-day business activities.
Areas for Improvement: The time to settle a commercial dispute in Tanzania could be a challenge. In some economies, resolving disputes can take up to five years, while top-performing economies resolve them in a fraction of the time. Tanzania likely faces inefficiencies in this regard, impacting overall business operations.
What is Measured: This pillar evaluates how easy it is for businesses to comply with the regulatory framework and access public services. It measures the practical implementation of the rules and services described under the first two pillars.
Key Areas Measured:
Business Entry: Time and effort required to navigate business registration processes.
Indicator: The time, number of procedures, and costs involved in registering a business.
Dispute Resolution: Efficiency of the legal system in resolving commercial disputes.
Indicator: Time and cost to resolve business-related disputes in court.
Labor: How easily businesses can comply with labor regulations, including wage reporting and health and safety compliance.
Indicator: Time to process payroll and ensure compliance with labor laws.
Financial Services: Ease with which businesses can secure loans and financial products.
Indicator: Time to secure a loan or access other financial services.
International Trade: Time and cost to comply with trade regulations, including import/export processes.
Indicator: Time and number of documents needed to import/export goods.
What It Tells About Tanzania:
Score: 62.15 points
Tanzania’s operational efficiency score indicates that while businesses face some challenges, they are still able to operate within the regulatory framework.
Example: The time required to resolve commercial disputes may be longer than average, but businesses can generally navigate labor laws and financial services without excessive delays. The average number of power outages might also be an issue, but businesses find ways to work around these challenges.
Tanzania's scores in the Business Ready 2024 report provide valuable insights into the country's economic development by highlighting strengths and challenges in its business environment. Here's a breakdown of what these figures reveal about Tanzania's economic development:
1. Regulatory Framework (Score: 65.00)
Moderately Supportive Regulations: With a score of 65.00, Tanzania has a moderately favorable regulatory environment for businesses. This indicates that the country has established a basic legal framework for business operations, but there are still obstacles that prevent optimal economic performance.
Impact on Economic Development: The regulatory framework is crucial for promoting investment and entrepreneurship. Tanzania’s score shows that businesses can operate under fairly stable regulations, but inefficiencies, especially in market competition and insolvency laws, could slow business expansion and investment.
Challenges: The legal infrastructure needs to improve to make the economy more competitive and resilient, particularly in handling market disputes and allowing businesses to recover from financial distress. A stronger regulatory environment could lead to increased investor confidence, which is key to fostering long-term economic growth.
2. Public Services (Score: 51.56)
Weak Infrastructure and Public Services: Tanzania’s score of 51.56 in the Public Services pillar reflects significant challenges, particularly in the quality and reliability of government services and infrastructure like electricity, water, and internet.
Impact on Economic Development: Weak public services hinder business productivity. Frequent power outages, delays in obtaining construction permits, and limited access to digital public services all contribute to higher operational costs for businesses, which, in turn, reduces overall economic efficiency and growth.
Challenges: Tanzania’s economic development is constrained by the inefficiency of its public services, which affects business sustainability and the ease of doing business. Improving public service delivery, especially infrastructure and digital services, is essential for boosting productivity and attracting both domestic and foreign investment.
Potential for Growth: Investments in infrastructure, especially utilities, could unlock greater productivity in sectors like manufacturing and agriculture, leading to job creation and improved economic growth.
3. Operational Efficiency (Score: 62.15)
Moderate Operational Effectiveness: A score of 62.15 suggests that while businesses in Tanzania can function within the regulatory framework, they face delays and inefficiencies, such as resolving commercial disputes and securing public services like permits.
Impact on Economic Development: Delays in resolving disputes and inefficiencies in business procedures directly affect the cost of doing business. While Tanzania has made some progress in enabling business operations, the remaining inefficiencies reduce business competitiveness and slow down economic expansion.
Challenges: The slow pace of dispute resolution and challenges in accessing public services mean businesses spend more time and resources complying with regulations, which could otherwise be used to expand their operations or innovate. For Tanzania's economy to grow faster, it needs to improve judicial efficiency, simplify regulatory processes, and make it easier for businesses to access financing and other services.
Potential for Growth: Enhanced operational efficiency would attract more businesses and investors, facilitating economic diversification and boosting sectors like trade, technology, and financial services.
Overall Economic Development Insights:
Moderate Progress but Room for Improvement: Tanzania’s scores show that while there has been progress in developing a business-friendly environment, significant challenges remain. Improvements in public services and operational efficiency are crucial to creating an environment where businesses can thrive, which would in turn drive economic growth.
Infrastructure and Service Delivery are Key Bottlenecks: Weaknesses in public services, particularly infrastructure like electricity and water, are limiting business productivity and deterring investment. Addressing these challenges would have a substantial positive impact on economic development, particularly in industrial and agricultural sectors, which rely heavily on reliable infrastructure.
Regulatory and Judicial Reforms: The regulatory framework provides a foundation for economic growth, but further reforms are needed, particularly in market competition and insolvency laws. Accelerating dispute resolution and making regulations clearer and more predictable will foster a more dynamic and competitive private sector, driving economic expansion.
Strategic Recommendations for Economic Development:
Invest in Infrastructure: Improving utility services, especially reliable electricity and internet access, will lower operational costs and improve productivity across sectors, boosting overall economic growth.
Strengthen the Legal and Regulatory Environment: Enhancing regulations related to market competition, insolvency, and business disputes will create a more favorable environment for entrepreneurship and innovation, encouraging more domestic and foreign investment.
Improve Public Service Delivery: Streamlining processes such as tax filing, permit issuance, and customs procedures through digitalization would significantly reduce the cost of doing business and improve Tanzania’s global competitiveness.
As of the period ending on December 31, 2023, both NMB Bank and CRDB Bank have exhibited notable financial performance, reflecting various key metrics that are indicative of their operational strength and market presence.
NMB Bank reported total assets amounting to 12.2 trillion Tanzania Shillings, representing a remarkable 19% growth. This increase underscores the bank's ability to expand its asset base, possibly through effective investment strategies or successful acquisition initiatives. On the other hand, CRDB Bank demonstrated a total asset growth of 14%, reaching 13.2 trillion Tanzania Shillings. Although slightly lower than NMB Bank's growth rate, this still signifies a substantial increase in the bank's overall financial standing.
In terms of total deposits, NMB Bank recorded 8.4 trillion Tanzania Shillings, marking an 11% growth. This suggests a consistent influx of funds into the bank, likely driven by customer trust and effective deposit mobilization efforts. CRDB Bank, while also experiencing growth, posted a total deposit figure of 8.9 trillion Tanzania Shillings, reflecting an 8% increase. This showcases the bank's ability to attract and retain deposits, albeit at a slightly lower growth rate compared to NMB Bank.
Loan and advances, a critical aspect of banking operations, showed significant growth for both institutions. NMB Bank reported a loan and advances portfolio of 7.7 trillion Tanzania Shillings, reflecting a substantial 28% increase. This growth may indicate the bank's proactive approach in extending credit facilities to businesses and individuals. Similarly, CRDB Bank exhibited a robust performance in this area with a loan and advances portfolio of 8.5 trillion Tanzania Shillings, reflecting a commendable 23% growth.
Moving on to profitability, NMB Bank demonstrated strong financial results. The bank reported a profit before tax of 775 billion Tanzania Shillings, indicating a notable 26% increase. Additionally, the profit after tax for NMB Bank amounted to 542 billion Tanzania Shillings, reflecting a similar 26% growth. These figures underscore the bank's ability to generate profits efficiently, possibly through effective cost management and revenue generation strategies.
CRDB Bank, while also delivering positive financial results, exhibited a profit before tax of 599 billion Tanzania Shillings, showing a 20% increase. The profit after tax for CRDB Bank stood at 424 billion Tanzania Shillings, reflecting a 21% growth. These figures indicate the bank's capacity to maintain solid profitability, although at a slightly lower growth rate compared to NMB Bank.
Hence, both NMB Bank and CRDB Bank demonstrated commendable financial performance for the period ended December 31, 2023, with NMB Bank showcasing higher growth rates in key areas such as total assets, total deposits, loan and advances, as well as profitability. These financial indicators provide valuable insights into the operational efficiency and market competitiveness of the two banks during the specified period.
The health and competitiveness of these banks in the Tanzania financial sector:
The financial data reveals that both NMB Bank and CRDB Bank are robust financial institutions, with NMB Bank showcasing higher growth rates in key areas. Investors, regulators, and other stakeholders may use this information to assess the banks' financial health, operational strategies, and overall market competitiveness.
Asset Growth and Stability:
NMB Bank has shown a higher growth rate in total assets (19%) compared to CRDB Bank (14%). This suggests that NMB Bank has been successful in expanding its asset base, possibly through strategic investments or acquisitions, making it a key player in the market.
Deposit Mobilization:
Both banks experienced growth in total deposits, indicating the ability to attract and retain customer funds. NMB Bank's 11% growth in deposits may suggest effective deposit mobilization efforts, while CRDB Bank, with an 8% growth, also demonstrated strength in this area but at a slightly lower rate.
Lending Activities:
Both banks exhibited substantial growth in loan and advances portfolios, suggesting active participation in lending to businesses and individuals. NMB Bank's 28% growth and CRDB Bank's 23% growth in this category indicate a willingness to extend credit and support economic activities.
Profitability:
NMB Bank reported higher growth rates in both profit before tax (26%) and profit after tax (26%) compared to CRDB Bank, which reported a 20% growth in profit before tax and a 21% growth in profit after tax. This signifies that NMB Bank was more efficient in managing costs or generating revenues during the specified period.
Overall Competitiveness:
The data suggests that NMB Bank had a relatively stronger financial performance during this period, with higher growth rates in key metrics. However, CRDB Bank also demonstrated positive growth across various parameters, indicating its stability and competitiveness in the market.
Market Positioning:
NMB Bank's higher growth rates across multiple financial indicators might position it as a more dynamic and rapidly growing institution. CRDB Bank, while still showing positive growth, might be perceived as slightly more conservative or stable in its approach.
The forecasting performance in the coming year (2024) requires consideration of various factors, including economic conditions, regulatory changes, and the banks' strategic initiatives.