Tanzania’s financial transactions landscape is undergoing a significant digital transformation, with Electronic Fund Transfers (EFT) surging by 44.7% in volume from 14.57 million in 2020 to 21.08 million in 2024, while cheque transactions continue to decline. The value of EFT transactions grew by 77%, reaching TZS 16,769.88 billion in 2024, signaling a strong shift toward digital payments. Conversely, TZS cheque usage dropped by 36% in volume and 17% in value, while USD cheque transactions plummeted by 44% in volume and 35.7% in value over the same period. This trend reflects the increasing adoption of faster, more secure electronic payment methods, reducing reliance on traditional cheques in Tanzania's financial system.

The data from Electronic Fund Transfers (EFT), Tanzanian Shilling (TZS) cheque transactions, and United States Dollar (USD) cheque transactions highlight key shifts in Tanzania's financial landscape, indicating a preference for digital payments while traditional cheque usage declines.

1. Electronic Fund Transfers (EFT): Strong and Consistent Growth

• Volume of transactions rose from 14.57 million in 2020 to 21.08 million in 2024, reflecting a 44.7% increase over five years.
• Value of transactions increased from TZS 9,479.10 billion in 2020 to TZS 16,769.88 billion in 2024, growing by 77% over the period.
• The growth rate in volume and value remained positive every year, with double-digit growth in 2023 (13%) and 2024 (11%).

What It Means:

✅ Rising preference for digital payments as more businesses and individuals shift from paper-based payments to electronic fund transfers.
✅ Higher transaction values indicate increased economic activity, financial inclusion, and confidence in digital banking infrastructure.

2. TZS Cheque Transactions: Steady Decline

• The volume of TZS cheque transactions fell by 36%, from 651,829 in 2020 to 418,388 in 2024.
• The value of transactions dropped from TZS 2,118.08 billion in 2020 to TZS 1,758.04 billion in 2024, a 17% decline.
• The rate of decline accelerated over time, with a 14% drop in cheque volume and a 7% drop in cheque value in 2024 alone.

What It Means:

✅ Paper-based payments are rapidly declining, as businesses and individuals move towards faster, more efficient digital alternatives.
✅ Reduced cheque dependency indicates financial sector modernization, possibly driven by regulatory support and increased banking efficiency.

3. USD Cheque Transactions: Sharpest Decline

• Volume of USD cheque transactions declined by 44%, from 113,643 in 2020 to 63,244 in 2024.
• Value of transactions dropped from USD 238.22 million in 2020 to USD 153.04 million in 2024, a 35.7% reduction.
• The biggest single-year drop occurred in 2024, with a 28% decline in volume and 20% decline in value.

What It Means:

✅ Foreign currency cheque usage is declining even faster than local cheque transactions, signaling an even greater shift towards electronic payments in international trade and finance.
✅ Declining USD cheque usage could indicate improved international banking channels, such as wire transfers, mobile money, and SWIFT transactions.

Final Thought: Digital Over Paper-Based Transactions

The trends in TACH transactions clearly show that Tanzania is moving towards a digital payment ecosystem. Electronic Fund Transfers (EFT) are rising, while cheque transactions (both TZS and USD) are declining. This shift suggests:

• A more efficient banking system where businesses prefer instant fund transfers over cheques.
• A likely policy push towards financial digitization, reducing reliance on paper-based transactions.
• Stronger financial inclusion, as electronic transactions make payments faster, cheaper, and more accessible to a wider population.

TACH Transactions Trends (2020–2024)

The data from Electronic Fund Transfers (EFT), Tanzanian Shilling (TZS) cheque transactions, and United States Dollar (USD) cheque transactions highlight key shifts in Tanzania's financial landscape, indicating a preference for digital payments while traditional cheque usage declines.

1. Electronic Fund Transfers (EFT): Strong and Consistent Growth

Key Takeaways:

✅ Transaction volume grew by 44.7% from 14.57 million in 2020 to 21.08 million in 2024.
✅ Transaction value surged by 77% from TZS 9,479.10 billion to TZS 16,769.88 billion.
✅ The growth rate remained positive every year, with strong double-digit increases in 2023 and 2024.

What It Means:

• Increasing adoption of electronic payments by businesses and individuals.
• Higher transaction values signal economic expansion and greater financial activity.

2. TZS Cheque Transactions: Steady Decline

Key Takeaways:

❌ Cheque volume dropped by 36% from 651,829 in 2020 to 418,388 in 2024.
❌ Cheque value declined by 17%, from TZS 2,118.08 billion to TZS 1,758.04 billion.
❌ The decline accelerated over time, with 14% fewer cheques in 2024 compared to 2023.

What It Means:

• Businesses and individuals are reducing cheque usage, shifting to faster and more secure electronic payment methods.
• Financial sector modernization is accelerating, with paper-based payments becoming obsolete.

3. USD Cheque Transactions: Sharpest Decline

Key Takeaways:

❌ USD cheque volume declined by 44% from 113,643 in 2020 to 63,244 in 2024.
❌ USD cheque value dropped by 35.7%, from USD 238.22 million to USD 153.04 million.
❌ The biggest single-year decline happened in 2024, with a 28% drop in volume and 20% drop in value.

What It Means:

• International trade and corporate transactions are shifting towards electronic alternatives like wire transfers and SWIFT payments.
• Foreign currency cheque usage is declining even faster than local cheque transactions, suggesting increased adoption of digital banking solutions.

Final Thought: The Rise of Digital Transactions

The TACH transaction trends from 2020 to 2024 clearly show Tanzania’s transition towards a digital payment ecosystem:
✅ Electronic Fund Transfers (EFT) are rapidly increasing, showing confidence in digital banking.
❌ Cheque transactions (both TZS and USD) are steadily declining, highlighting the phasing out of paper-based payments.

Tanzania's merchant ecosystem has experienced remarkable growth, with the number of registered merchants rising from 33,037 in 2020 to over 1.3 million in 2024. This rapid expansion has driven a surge in transactions, increasing from 24 million in 2020 to over 329 million in 2024, with transaction values soaring from TZS 1.62 trillion to TZS 26.9 trillion over the same period. Dar es Salaam leads in merchant adoption, contributing significantly to the rise in digital payments, followed by Mwanza and Mbeya. These figures highlight the increasing role of merchants in Tanzania’s digital economy, reflecting broader economic growth and financial inclusion.

The data in Annex K: Merchant Statistics provides a detailed breakdown of merchant distribution, transaction volume, and transaction value across different regions of Tanzania for the years 2020 to 2024.

1. Merchant Distribution

• Merchant distribution by region: This table outlines the number of merchants by region for 2020–2024, showing growth in the number of merchants in each area. For instance:
  • Dar es Salaam stands out with significant growth, increasing from 13,164 merchants in 2020 to 394,863 merchants in 2024.
  • Mwanza also shows significant growth, from 1,587 merchants in 2020 to 117,530 merchants in 2024.
  • Arusha has the third-largest growth, increasing from 2,973 merchants in 2020 to 67,336 merchants in 2024.
• Institutional Category Breakdown:
  • Electronic Money Issuers (EMIs) dominate the merchant landscape, growing significantly over the years. They reached 1,189,384 merchants in 2024, compared to 12,103 in 2020.
  • Banks and Financial Institutions and Non-banks (Aggregators) make up the remainder, with the number of banks increasing modestly over the period, while non-banks (aggregators) show large growth, especially in 2024 (reaching 127,803 merchants).

2. Number of Merchant Transactions

• Transactions by region: This table provides transaction volume data per region for 2020–2024.
  • Dar es Salaam continues to lead in transaction volumes, increasing from 3.5 million transactions in 2020 to 122.8 million in 2024.
  • Mwanza follows closely, with a surge from 3.3 million transactions in 2020 to 32.3 million in 2024.
  • Mbeya also shows growth, reaching 26.99 million transactions in 2024 from 4.2 million in 2020.
• Institutional Categories:
  • Electronic Money Issuers continue to be the primary driver of transaction volume, with 286.7 million transactions recorded in 2024, up from 19.5 million in 2020.
  • Banks and Financial Institutions show steady growth, while Non-banks (Aggregators) display the largest increase, reflecting a shift in the market.

3. Merchant Transaction Value

• Transaction Value by Region: The total transaction values in Tanzanian Shillings (TZS) for each region.
  • Dar es Salaam remains the highest in transaction value, reaching 8.83 trillion TZS in 2024, up from 435 billion TZS in 2020.
  • Mwanza follows with 2.33 trillion TZS in 2024, a significant rise from 155.5 billion TZS in 2020.
  • Mbeya shows significant growth, moving from 199.2 billion TZS in 2020 to 1.81 trillion TZS in 2024.
• Institutional Categories:
  • Electronic Money Issuers (EMIs) lead in transaction value, with 16.16 trillion TZS in 2024.
  • Banks and Financial Institutions also have notable figures, jumping from 300.7 billion TZS in 2020 to 9.6 trillion TZS in 2024.
  • Non-banks (Aggregators) show an increase in transaction value, totaling 1.16 trillion TZS in 2024.

Summary Insights:

• The number of merchants and transaction volumes are growing at a fast pace, particularly in major cities like Dar es Salaam and Mwanza.
• The rise in the number of merchants is accompanied by a significant increase in transaction volume and value, with Electronic Money Issuers (EMIs) dominating the market.
• Non-banks (Aggregators) are playing a larger role in the market, especially in 2024, indicating a shift towards digital financial solutions beyond traditional banks.

Merchant Statistics

Table 1: Merchant Distribution by Region

Merchant Transactions by Region (Number of Transactions)

Merchant Transaction Value (TZS Billion)

Tanzania's external debt reached USD 33.91 billion in January 2025, placing it among the top 10 most indebted African countries. This marks a significant rise from USD 2.47 billion in 2011, reflecting increased borrowing for infrastructure and economic development. The central government holds 77.4% of the debt, with USD 185.4 million paid for debt servicing in December 2024. Despite this, Tanzania’s debt-to-GDP ratio remains at 47.2%, below the IMF’s 55% risk threshold. However, careful debt management is crucial to ensure economic stability and sustainable growth.

​As of January 2025, Tanzania's external debt stood at approximately USD 33,905.10 million, a slight decrease from USD 34,075.50 million in December 2024. This positions Tanzania among the top ten African countries with substantial external debt.​

Historical Context: Over the years, Tanzania's external debt has exhibited significant growth:​

• December 2011: USD 2,469.70 million​
• December 2023: USD 29,541.7 million ​
• November 2024: USD 33,137.7 million ​
• December 2024: USD 34,075.50 million​
• January 2025: USD 33,905.10 million​

Composition of External Debt: The central government holds the majority of this debt, accounting for approximately 77.4% as of December 2024. The remaining portion is attributed to the private sector. ​

Debt Service and Disbursements: In December 2024, Tanzania received external loan disbursements totaling USD 376.8 million, primarily allocated to the central government. During the same period, the country serviced its external debt with payments amounting to USD 185.4 million, which included USD 111.2 million in principal repayments and USD 74.2 million in interest payments. ​

Public Debt Relative to GDP: As of November 2024, Tanzania's total public debt, encompassing both external and domestic obligations, was USD 38,243.5 million. This figure represents approximately 47.2% of the nation's Gross Domestic Product (GDP). ​

International Financial Support: In December 2024, the International Monetary Fund (IMF) completed a review under the Extended Credit Facility arrangement with Tanzania, resulting in an immediate disbursement of about USD 148.6 million. Additionally, the IMF approved a disbursement of approximately USD 55.9 million under the Resilience and Sustainability Facility, totaling USD 204.5 million in financial support. ​

These figures underscore Tanzania's significant external debt position within Africa, highlighting the importance of ongoing fiscal management and international financial collaborations.

Top ten African countries with high external debt based on 2025 data:

1. South Africa – USD 176,314 million (Sep 2024)
2. Egypt – USD 155,204 million (Sep 2024)
3. Tunisia – TND 128,856 million (Sep 2024)
4. Mauritius – MUR 96,713 million (Dec 2024)
5. Angola – USD 50,260 million (Dec 2023)
6. Nigeria – USD 42,900 million (Sep 2024)
7. Namibia – NAD 36,036 million (Jun 2024)
8. Tanzania – USD 33,905 million (Jan 2025)
9. Malawi – MWK 5,887,049 million (Dec 2023)
10. Burundi – BIF 1,873,263 million (Dec 2024)

Tanzania’s external debt and its position among African countries with significant debt levels:

1. Tanzania’s Debt Growth is Significant

• Tanzania's external debt has increased dramatically from USD 2.47 billion in 2011 to USD 33.91 billion in January 2025.
• This consistent rise reflects increased borrowing for infrastructure, public services, and economic projects but also raises concerns about debt sustainability.

2. Tanzania is Among Africa’s Top 10 Most Indebted Countries

• At USD 33.91 billion, Tanzania ranks 8th in Africa for external debt.
• While this debt level is high, it is still lower than economies like South Africa (USD 176.3B), Egypt (USD 155.2B), and Nigeria (USD 42.9B).

3. Most of Tanzania’s Debt is Public

• 77.4% of Tanzania’s external debt is held by the central government, meaning the government is the primary borrower.
• This suggests reliance on international loans for development, infrastructure, and fiscal needs.

4. Debt Servicing is a Major Challenge

• In December 2024, Tanzania borrowed USD 376.8M but also had to repay USD 185.4M (including interest payments).
• This means that a significant portion of revenues is spent on debt servicing, which could limit spending on public services.

5. IMF and International Financial Support Play a Key Role

• The IMF provided USD 204.5M in December 2024 to support Tanzania’s financial stability.
• This suggests Tanzania relies on international financial institutions to manage its debt obligations and sustain economic programs.

6. Tanzania’s Debt-to-GDP Ratio is Still Manageable

• Tanzania’s total public debt (domestic + external) was USD 38.24 billion, accounting for 47.2% of GDP in November 2024.
• While below the IMF’s 55% risk threshold, continued borrowing without sufficient economic growth could lead to debt distress.

7. Comparison with Other African Countries

• South Africa and Egypt have the highest external debts, but their economies are larger and more diversified.
• Nigeria has slightly higher debt than Tanzania, but its economy benefits from oil revenues.
• Tanzania’s debt is higher than Malawi, Burundi, and Namibia, suggesting it is borrowing at a faster rate.

Final Conclusion

Tanzania's rising external debt reflects ambitious economic growth plans but also poses risks of debt distress if borrowing continues at this rate without sufficient revenue growth. Proper debt management, economic diversification, and increased exports are crucial to ensuring sustainability.

Tanzania’s total external debt stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024 due to ongoing repayments. The government accounted for 76.4% (USD 25,896.7 million) of total external debt, while the private sector held 23.6% (USD 8,004.7 million), down by 1.8%. The decline in private sector borrowing may indicate reduced access to foreign credit, while high government debt levels raise concerns about future repayment obligations.

1. Total External Debt Stock Slightly Declined

• Tanzania’s total external debt stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024.
• The decrease was mainly due to repayments made by both the government and private institutions.

2. Government vs. Private Sector Borrowing

• Government external debt accounted for 76.4% (USD 25,896.7 million) of total external debt.
• Private sector external debt accounted for 23.6% (USD 8,004.7 million).

Comparison of Government and Private Sector External Debt (January 2025)

3. Implications of External Debt Trends

✅ The government remains the largest borrower (76.4%), indicating reliance on external financing for major projects.
✅ The private sector's external debt share (23.6%) shows businesses are accessing foreign funding but at a declining rate (-1.8%).
⚠ The reduction in private sector borrowing may limit business expansion and foreign investment in Tanzania.
⚠ Debt repayments are helping reduce total debt, but the government still holds a significant portion of external liabilities.

Key Insights from Tanzania’s External Debt (January 2025)

1. The Government Remains the Biggest Borrower (76.4%)

• The government’s external debt stood at USD 25,896.7 million, accounting for 76.4% of total external debt.
• This suggests that public projects such as infrastructure, energy, and social services are heavily financed by external loans.

What It Means:

✅ Government borrowing supports long-term development, ensuring investments in key sectors like transport and energy.
⚠ A high share of external debt means future repayments could put pressure on national finances, especially if revenue growth is slow.

2. Private Sector Borrowing is Declining (-1.8%)

• Private sector external debt dropped to USD 8,004.7 million (23.6%), a 1.8% decline from December 2024.
• This indicates reduced access to foreign credit by businesses or lower demand for external financing.

What It Means:

⚠ Private companies may be facing challenges in securing international loans, which could slow business expansion.
✅ A reduction in private sector borrowing could signal that companies are focusing on local financing options.

3. Total External Debt is Declining (-0.5%)

• The total external debt declined slightly by 0.5%, showing that both the government and private sector are repaying some of their loans.

What It Means:

✅ Debt repayments are ongoing, helping to manage overall debt levels.
⚠ Despite repayments, the government still holds a significant portion of external debt, meaning fiscal risks remain.

Overall Economic Implications

🔹 Positive Signs:
✅ Government borrowing is supporting infrastructure and public services.
✅ Debt repayments are reducing total external liabilities.
✅ Private sector reliance on foreign debt is decreasing, possibly indicating local financing alternatives.

🔸 Challenges:
⚠ A high government share (76.4%) means future debt servicing costs could strain national finances.
⚠ A decline in private sector borrowing could slow economic expansion and private investment.
⚠ Continued reliance on external debt means Tanzania remains exposed to exchange rate fluctuations and global credit conditions.

Zanzibar’s economy grew by 6.2% in 2024, up from 5.6% in 2023, driven by tourism (7.1%) and construction (5.8%), while agriculture lagged at 3.5%. However, inflation rose to 4.3% in January 2025, fueled by higher food (+5.6%) and transport costs (+4.8%). The trade deficit widened to USD 387.4 million, as imports increased to USD 521.6 million (+4.5%), outpacing exports of USD 134.2 million (+2.9%). Despite a 5.2% rise in revenue to TZS 115.6 billion, government spending exceeded collections by TZS 22.3 billion, maintaining a budget deficit.

1. Zanzibar’s GDP Growth: Strong Expansion Driven by Services and Industry

• Zanzibar’s economy grew by 6.2% in 2024, up from 5.6% in 2023.
• Growth was mainly driven by services (7.1%) and industry (5.8%), while agriculture expanded by 3.5%.

Sectoral Growth Breakdown (2024 GDP Growth Rates)

What It Means:

✅ Tourism and trade are driving economic expansion, supported by increased visitor arrivals.
✅ The construction sector is growing, boosting industrial performance.
⚠ Agriculture is growing slowly (3.5%), indicating the need for modernization and investment.

2. Inflation: Slight Increase Due to Rising Food and Transport Costs

• Inflation in Zanzibar stood at 4.3% in January 2025, up from 4.0% in December 2024.
• The increase was mainly driven by higher food prices (+5.6%) and transport costs (+4.8%).

What It Means:

⚠ Higher food prices are putting pressure on household purchasing power.
✅ Inflation remains moderate and within the acceptable range.

3. Trade Performance: Imports Rising Faster than Exports

Exports Grew but Remain Low Compared to Imports

• Total exports reached USD 134.2 million in January 2025, an increase of 2.9% from December 2024.
• Clove exports (USD 46.8 million) and seaweed exports (USD 12.1 million) remained the top earners.

Imports Increased, Widening Trade Deficit

• Total imports rose to USD 521.6 million (+4.5%), led by fuel and construction materials.
• The trade deficit widened to USD 387.4 million, reflecting higher demand for imported goods.

What It Means:

⚠ Zanzibar remains a net importer, increasing reliance on foreign exchange inflows from tourism and remittances.
✅ Growth in clove and seaweed exports helps sustain the economy.

4. Government Revenue and Spending: Improved Collection but Budget Deficit Persists

• Total revenue collection reached TZS 115.6 billion in January 2025, a 5.2% increase from December 2024.
• Tax revenue accounted for 85.3% of total revenue, supported by higher VAT and import duties.
• Total government expenditure stood at TZS 137.9 billion, leaving a budget deficit of TZS 22.3 billion.

What It Means:

✅ Revenue collection is improving, reducing reliance on external funding.
⚠ The government continues to spend more than it collects, increasing the need for budget control measures.

Summary of Key Trends in Zanzibar’s Economy (January 2025)

Economic Implications of Zanzibar’s Performance

🔹 Positive Signs:
✅ Economic growth remains strong (6.2%), driven by tourism and construction.
✅ Revenue collection is improving, reducing fiscal pressure.
✅ Clove and seaweed exports are supporting foreign exchange earnings.

🔸 Challenges:
⚠ Inflation is rising, increasing the cost of living.
⚠ Imports are growing faster than exports, widening the trade deficit.
⚠ Government spending exceeds revenue, creating a budget deficit.

Key Insights from Zanzibar’s Economic Performance (January 2025)

1. Strong Economic Growth (6.2%) Driven by Tourism and Industry

• Zanzibar’s economy expanded by 6.2% in 2024, up from 5.6% in 2023.
• Growth was driven by tourism (services up 7.1%) and construction (industry up 5.8%).

What It Means:

✅ Tourism recovery is fueling service sector growth, increasing employment and foreign exchange.
✅ Construction and industrial expansion indicate long-term development and infrastructure improvements.
⚠ Agriculture is growing slowly (3.5%), meaning rural incomes and food security could be affected.

2. Inflation is Rising (4.3%), Driven by Higher Food and Transport Costs

• Inflation increased to 4.3% in January 2025, from 4.0% in December 2024.
• Food prices (+5.6%) and transport costs (+4.8%) were the main drivers.

What It Means:

⚠ The rising cost of living could reduce household purchasing power.
✅ Inflation remains manageable but needs monitoring to prevent further increases.

3. Trade Deficit Widening as Imports Outpace Exports

• Total exports reached USD 134.2 million (+2.9%), driven by clove exports (USD 46.8 million) and seaweed (USD 12.1 million).
• Imports rose to USD 521.6 million (+4.5%), mainly due to higher fuel and construction material imports.
• Trade deficit widened to USD 387.4 million, increasing Zanzibar’s reliance on foreign currency inflows.

What It Means:

⚠ Zanzibar depends heavily on imports, making the economy vulnerable to global price fluctuations.
✅ Growing exports of cloves and seaweed help offset some trade losses.

4. Government Revenue is Growing, But Deficit Remains

• Total revenue collection rose to TZS 115.6 billion (+5.2%), supported by higher tax collection (85.3% of revenue).
• Total expenditure stood at TZS 137.9 billion, leaving a budget deficit of TZS 22.3 billion.

What It Means:

✅ Tax revenues are improving, reducing reliance on external aid.
⚠ The government continues to spend more than it collects, requiring better budget management.

Overall Economic Implications

🔹 Positive Signs:
✅ Strong economic growth (6.2%) shows resilience and investment expansion.
✅ Tourism and construction remain key drivers of Zanzibar’s economy.
✅ Revenue collection is improving, supporting government operations.

🔸 Challenges:
⚠ Inflation is rising, increasing living costs for households.
⚠ Imports are outpacing exports, widening the trade deficit.
⚠ Government spending exceeds revenue, requiring fiscal adjustments.

The Bank of Tanzania's Statement of Financial Position as of January 2025 shows a 1.6% increase in total assets, reaching TZS 25.24 trillion from TZS 24.85 trillion in December 2024. This growth is driven by a 25.3% rise in government advances (TZS 5.67 trillion) and a 6.6% increase in foreign currency marketable securities (TZS 7.74 trillion), highlighting stronger financial buffers. However, currency in circulation declined by 6.0% (TZS 8.15 trillion), signaling possible shifts towards digital transactions or controlled liquidity. Meanwhile, foreign reserves improved, with gold holdings rising by 12.5% (TZS 82.18 billion) and Special Drawing Rights (SDRs) surging by 260% (TZS 27.48 billion), reflecting increased international financial support. Despite a 21.8% increase in equity (TZS 2.18 trillion), the central bank’s growing advances to the government raise concerns about fiscal sustainability.

Breakdown of the Bank of Tanzania Statement of Financial Position

1. Assets (Total: TZS 25.24 Trillion)

Assets grew from TZS 24.85 trillion (Dec 2024) to TZS 25.24 trillion (Jan 2025), an increase of TZS 393.5 billion.

Key Components of Assets:

• Cash and Cash Equivalent: Decreased from TZS 5.78 trillion to TZS 5.26 trillion (-8.9%).
• Holdings of Special Drawing Rights (SDRs): Increased significantly from TZS 7.64 billion to TZS 27.48 billion (+260%).
• Gold Reserves: Increased from TZS 73.08 billion to TZS 82.18 billion (+12.5%).
• IMF Quota: Grew from TZS 1.23 trillion to TZS 1.29 trillion (+4.8%).
• Foreign Currency Marketable Securities: Increased from TZS 7.26 trillion to TZS 7.74 trillion (+6.6%).
• Government Securities: Increased slightly from TZS 2.03 trillion to TZS 2.04 trillion.
• Advances to Government: Grew significantly from TZS 4.53 trillion to TZS 5.67 trillion (+25.3%).
• Loans and Receivables: Slight increase from TZS 940.37 billion to TZS 946.97 billion (+0.7%).
• Equity Investments: Increased from TZS 143.63 billion to TZS 150.39 billion (+4.7%).
• Inventories: Increased sharply from TZS 453.64 billion to TZS 561.78 billion (+23.8%).
• Deferred Currency Cost: Slight decrease from TZS 114.34 billion to TZS 112.07 billion (-2.0%).
• Other Assets: Dropped significantly from TZS 1.25 trillion to TZS 320.20 billion (-74.4%).
• Property, Plant & Equipment: Slight decrease from TZS 1.01 trillion to TZS 1.009 trillion.
• Lease & Intangible Assets: Minimal changes.

2. Liabilities (Total: TZS 23.06 Trillion)

Liabilities remained stable at TZS 23.06 trillion, with minor fluctuations.

Key Components of Liabilities:

• Currency in Circulation: Decreased from TZS 8.67 trillion to TZS 8.15 trillion (-6.0%).
• Deposits (Banks & Non-Banks): Increased from TZS 3.34 trillion to TZS 3.51 trillion (+5.1%).
• Other Deposits: Increased from TZS 2.82 trillion to TZS 3.10 trillion (+9.9%).
• Foreign Currency Financial Liabilities: Slight increase from TZS 4.51 trillion to TZS 4.56 trillion (+1.1%).
• BoT Liquidity Papers: Increased slightly from TZS 537.54 billion to TZS 547.39 billion.
• Provisions & Other Liabilities: Decreased from TZS 163.33 billion to TZS 133.64 billion (-18.2%).
• IMF Related Liabilities: Constant at TZS 1.17 trillion.
• SDR Allocations: Increased from TZS 1.77 trillion to TZS 1.86 trillion (+4.8%).

3. Equity (Total: TZS 2.18 Trillion)

Equity rose from TZS 1.79 trillion to TZS 2.18 trillion (+21.8%).

Key Components of Equity:

• Reserves: Increased significantly from TZS 1.69 trillion to TZS 2.08 trillion (+23.1%).
• Authorized & Paid-up Capital: Constant at TZS 100 billion.

Key Observations & Figures

1. Increase in Total Assets: TZS 393.5 billion (+1.6%).
2. Growth in Equity: TZS 389.9 billion (+21.8%) due to a rise in reserves.
3. Decrease in Currency in Circulation: TZS 519.2 billion (-6.0%).
4. Significant Increase in Advances to Government: TZS 1.15 trillion (+25.3%).
5. Surge in Special Drawing Rights (SDRs): TZS 19.8 billion (+260%).
6. Foreign Currency Marketable Securities Grew: TZS 480.6 billion (+6.6%).
7. Major Drop in Other Assets: TZS 931.1 billion (-74.4%).

The Bank of Tanzania's Statement of Financial Position (Jan 2025) reveals key insights into the country's monetary, fiscal, and financial stability

1. Monetary and Economic Trends

• Currency in Circulation Declined (-6.0%)
  → This could indicate reduced cash demand, possibly due to increased digital transactions, lower inflationary pressure, or economic slowdown affecting consumer spending.
• Increase in Foreign Currency Marketable Securities (+6.6%)
  → Suggests higher foreign reserves, improving exchange rate stability and economic resilience against external shocks.
• Growth in Gold Reserves (+12.5%)
  → Shows the Bank of Tanzania is strengthening its gold holdings as a hedge against currency fluctuations and inflation.
• Advances to Government Increased Sharply (+25.3%)
  → The government borrowed more from the central bank, likely for budget support, infrastructure projects, or debt servicing.
• Special Drawing Rights (SDRs) Surge (+260%)
  → The country received more IMF support, which could be used to boost reserves or finance balance-of-payments needs.

2. Financial Sector Stability

• Bank Deposits Increased (+5.1%)
  → Confidence in the banking sector is improving as financial institutions hold more deposits with the central bank.
• Reduction in Other Assets (-74.4%)
  → Suggests a shift in asset management, possibly due to debt repayments, asset reclassification, or balance sheet restructuring.
• Rise in Government Securities (+0.4%)
  → Indicates continued investment in domestic bonds, helping to finance government projects while maintaining liquidity.
• Growth in IMF-related Liabilities (+4.8%)
  → Reflects ongoing international obligations and external financing reliance.

3. Fiscal and Policy Implications

• Equity (Reserves) Increased (+23.1%)
  → The central bank is strengthening financial buffers, which enhances economic resilience.
• Foreign Currency Financial Liabilities Slightly Up (+1.1%)
  → Indicates controlled external debt exposure, ensuring manageable foreign obligations.
• Drop in Provisions & Other Liabilities (-18.2%)
  → May reflect reduced outstanding liabilities, signaling better financial discipline.

What It Means for Tanzania

1. The economy is stabilizing, but government borrowing is increasing.
   • The rise in advances to government suggests higher fiscal spending, which can stimulate economic growth but raises concerns about debt sustainability.
2. The central bank is strengthening reserves and foreign asset holdings.
   • Increased foreign securities, SDRs, and gold reserves show an effort to stabilize the Tanzanian shilling (TZS) and prepare for external shocks.
3. Monetary policies are shifting towards liquidity control and financial sector stability.
   • The reduction in currency circulation and rise in bank deposits indicate a move towards digital transactions and reduced inflationary pressure.
4. Increased IMF-related assets and liabilities show continued reliance on international financing.
   • This highlights Tanzania’s need for external support to balance fiscal and monetary policies.

Final Thought: Growth with Fiscal Caution

Tanzania’s financial position is improving, but government borrowing and external financing remain key risks. If these trends continue, careful monetary and fiscal management will be needed to sustain growth without increasing debt vulnerabilities.

The Tanzania Shilling (TZS) showed significant appreciation in December 2024, reversing the depreciation trend observed in previous months. The currency’s movement was influenced by increased foreign exchange inflows, monetary policy adjustments, and external economic conditions.

1. Exchange Rate Appreciation

• The Tanzania Shilling appreciated by 9.3% in December 2024, strengthening to TZS 2,420.84 per USD from TZS 2,659.03 per USD in November 2024.
• On an annual basis, the Shilling appreciated by 3.8%, compared to a 6.3% depreciation recorded in the previous month.
• This appreciation was one of the largest monthly gains in recent years, signaling strong demand for the Shilling and improved foreign exchange reserves​.

2. Factors Behind the Shilling’s Strengthening

The appreciation of the TZS was driven by multiple factors:
✅ Increased Foreign Exchange Inflows:

• Exports of cashew nuts, tobacco, and gold surged, bringing in more US dollars.
• Tourism earnings rose, contributing to a stronger balance of payments.
  ✅ Monetary Policy Adjustments:
• The Bank of Tanzania (BoT) intervened in the market, selling USD 2 million to stabilize the exchange rate.
• Interest rates in the Interbank Foreign Exchange Market (IFEM) improved, attracting more liquidity.
  ✅ Global Economic Conditions:
• Easing US Federal Reserve interest rates reduced pressure on emerging market currencies, benefiting the Tanzanian Shilling.

3. Impact of a Stronger Shilling

🔹 Positive Effects

• Lower import costs: A stronger TZS makes imported goods, fuel, and raw materials cheaper, helping to reduce inflationary pressures.
• Improved investor confidence: A stable currency encourages foreign direct investment (FDI) and supports economic growth.
• Stronger foreign reserves: The BoT’s foreign exchange reserves rose to USD 5,500.5 million in December 2024, covering 4.5 months of imports, aligning with EAC and SADC benchmarks.

🔹 Potential Risks

• Reduced export competitiveness: A stronger TZS could make Tanzania’s exports more expensive, potentially slowing export growth.
• Impact on debt servicing: If Tanzania holds foreign-denominated debt, a strengthening shilling could affect repayment costs depending on hedging strategies.

Key Takeaways:

• The TZS appreciated by 9.3% in one month, reaching TZS 2,420.84 per USD, driven by strong exports, foreign exchange inflows, and monetary policy interventions.
• Foreign reserves improved to USD 5,500.5 million, covering 4.5 months of imports.
• While the stronger Shilling helps lower import costs and inflation, it may affect export competitiveness in the long run.

The Bank of Tanzania’s monetary policy remains crucial in balancing currency stability, inflation control, and economic growth​

Implications for Credit, Savings, and Economic Growth

In December 2024, Tanzania’s interest rates showed mixed movements, reflecting shifts in monetary policy and banking sector dynamics. The overall lending rate declined to 15.17% from 15.67%, making credit more affordable, while deposit rates rose to 8.33% from 8.18%, incentivizing savings. The spread between short-term lending and deposit rates narrowed to 6.12 percentage points, down from 7.02% in December 2023, signaling increased banking sector efficiency. These trends suggest a pro-growth monetary policy stance, aimed at boosting investment and economic activity while maintaining financial stability​

The interest rates in Tanzania, as reported in the Bank of Tanzania's Monthly Economic Review (January 2025), are as follows:

Lending and Deposit Interest Rates (December 2024)

1. Overall Lending Rate:
   • 15.17%, down from 15.67% in November 2024.
2. Negotiated Lending Rate:
   • 12.83%, up from 12.77% in November 2024.
3. Overall Deposit Rate:
   • 8.33%, up from 8.18% in November 2024.
4. Negotiated Deposit Rate:
   • 10.39%, up from 10.14% in November 2024.
5. Short-term Lending Rate (Up to 1 Year):
   • 15.74%, compared to 15.56% in November 2024.
6. Savings Deposit Rate:
   • 2.84%, up from 2.69% in November 2024.
7. 12-Month Time Deposit Rate:
   • 9.62%, slightly lower than 9.63% in November 2024.

Interest Rate Spread

• The spread between short-term lending and deposit rates narrowed to 6.12 percentage points from 7.02 percentage points in December 2023.

The changes in interest rates reflect key economic and monetary policy dynamics in Tanzania

1. Declining Lending Rates (15.17% from 15.67%)

• A lower lending rate means credit is becoming cheaper, making it easier for businesses and individuals to borrow.
• This suggests monetary easing, where the Bank of Tanzania (BoT) is supporting economic growth by making loans more accessible.
• The increase in negotiated lending rates (12.83%), however, indicates that some banks are charging higher rates based on risk assessment, suggesting credit risk concerns in certain sectors.

2. Rising Deposit Rates (8.33% from 8.18%)

• Higher deposit rates encourage savings, helping banks to attract more funds.
• The increase in negotiated deposit rates (10.39%) suggests that banks are competing more for deposits, possibly due to:
  • Higher demand for liquidity.
  • The need to fund loan growth.

3. Narrowing Interest Rate Spread (6.12% from 7.02%)

• A lower spread means the difference between lending and deposit rates is shrinking, which usually implies:
  • More efficiency in the banking system.
  • Increased competition among banks, forcing them to offer better rates to depositors while reducing borrowing costs.

4. Implications for the Economy

• Encourages borrowing: More businesses and individuals can take loans for investment and consumption.
• Supports economic growth: Easier access to credit can drive investments, job creation, and productivity.
• Sustains inflation stability: If lending is growing without excessive inflation, the economy can expand sustainably.
• Indicates liquidity adjustments: BoT is managing liquidity by influencing rates, ensuring banks have enough funds to lend.

Overall Takeaway

The trend suggests a pro-growth monetary policy stance, with lower borrowing costs stimulating economic activities, while banks adjust their deposit rates to maintain liquidity and profitability. However, higher negotiated lending rates in some cases suggest that banks remain cautious about credit risks in certain sectors.

Introduction

Tanzania's recent tax reforms and policy adjustments are creating transformative shifts in its economic landscape. The fiscal year 2023/2024 witnessed a tax revenue increase of 14.47%, reaching TZS 27.64 trillion, underscoring a robust yet evolving economic environment. While achieving substantial growth, Tanzania still faces challenges in compliance, investment attraction, and equitable contributions across sectors.

Key Achievements and Challenges

1. Tax Revenue Growth and Sector Contributions
   • Tax revenue rose by TZS 3.5 trillion from the previous year, with the services sector leading at 28.2% of contributions (TZS 7.8 trillion), followed by trade (23.6%) and manufacturing (17.7%).
   • The agriculture sector, employing over 65% of the workforce, accounted for only 5.6% of the revenue. This discrepancy calls for reforms to harness agriculture’s full economic potential.

Figure 1: Tax Contribution by Sector

1. Services: 28.2%
2. Trade: 23.6%
3. Manufacturing: 17.7%
4. Agriculture: 5.6%
5. Compliance and Ease of Doing Business
   • Compliance costs average 2% of annual revenues, disproportionately burdening SMEs, which also face challenges from regulatory complexity and frequent policy shifts.
   • Tanzania’s Ease of Doing Business score stands at 59, reflecting moderate barriers such as high corporate tax rates (30%) compared to Kenya’s 25%.
6. Investment Climate and Foreign Direct Investment (FDI)
   • FDI inflows in 2024 reached USD 1.5 billion, primarily in agriculture, energy, and mining, with an anticipated 10% annual growth.
   • Persistent issues include regulatory inconsistencies and limited infrastructure, particularly in transportation and energy.

Future Projections and Policy Recommendations

1. Growth Projections for 2030
   • Tax revenue is expected to almost double to TZS 40 trillion.
   • FDI inflows may reach USD 2.8 billion with regulatory enhancements.
   • The Ease of Doing Business score could improve to 70 through streamlined tax systems.

Figure 2: 2030 Projections

1. Tax Revenue: TZS 40 trillion
2. FDI Inflows: USD 2.8 billion
3. Agricultural Growth: 8% annually
4. Manufacturing Growth: 7% annually
5. Policy Recommendations
   • Simplify Tax Processes: Streamline procedures for SMEs, reducing compliance costs.
   • Educate and Empower: Raise awareness about tax incentives to increase accessibility for businesses.
   • Focus on Inclusivity: Extend support to the informal economy to integrate it into the formal tax system.
   • Stabilize Regulatory Environment: Predictable policies can foster investor confidence and long-term planning.

Conclusion

Tax reforms and policy planning remain central to Tanzania’s economic trajectory. By addressing systemic barriers and promoting inclusivity, the country can unlock sustained growth across key sectors like agriculture, tourism, and manufacturing. Proactive reforms could establish Tanzania as a competitive investment destination in East Africa.

Regional and Continental Insights

Tanzania's recent activities with the International Monetary Fund (IMF) underscore its proactive approach to using external financing for economic growth and stability. As of December 25, 2024, Tanzania has a total outstanding IMF credit of $1.009 billion, with $155.99 million in new disbursements during December 2024. This positioning highlights Tanzania as a key player in East Africa, actively addressing immediate economic challenges while also setting its sights on long-term development. Below is a detailed analysis of Tanzania's performance compared to other East African and African countries, offering valuable insights into its regional and continental positioning.

Tanzania's Position in East Africa

Tanzania is performing strongly among East African nations. Here's how Tanzania compares to its neighbors:

Tanzania:

• Total Outstanding Credit (Dec 25, 2024): $1,009,260,000
• Disbursements (Dec 1–25, 2024): $155,990,000
• Repayments (Dec 1–25, 2024): $0

East African Peers:

1. Kenya:
   • Outstanding Credit: $3,022,009,900
   • Disbursements: $0
   • Repayments: $0 Kenya holds significantly higher outstanding IMF credit than Tanzania but did not receive any new disbursements in this period.
2. Uganda:
   • Outstanding Credit: $992,750,000
   • Disbursements: $0
   • Repayments: $0 Uganda’s outstanding credit is slightly lower than Tanzania's, and no disbursements or repayments occurred during the period.
3. Rwanda:
   • Outstanding Credit: $614,767,500
   • Disbursements: $138,626,360
   • Repayments: $0 Rwanda has received notable disbursements, but its total outstanding credit remains lower than Tanzania’s.
4. Burundi:
   • Outstanding Credit: $100,600,000
   • Disbursements: $0
   • Repayments: $0 Burundi’s outstanding credit is significantly lower than Tanzania's, and there has been no activity in disbursements or repayments.
5. South Sudan:
   • Outstanding Credit: $246,000,000
   • Disbursements: $0
   • Repayments: $0 South Sudan's outstanding credit is also lower than Tanzania’s.

Summary for East Africa:
Tanzania ranks second in terms of outstanding IMF credit after Kenya but leads in disbursements for the period, demonstrating an active engagement with IMF resources for economic support.

Tanzania's Position in Africa

While Tanzania’s outstanding credit is moderate compared to other African countries, it is crucial to understand its position relative to some of Africa’s larger economies.

Top African Economies:

• Egypt: $8,741,181,682
• South Africa: $1,144,200,000
• Nigeria: $613,625,000

Comparable Countries:

• Ghana: $2,514,421,000
• Mozambique: $553,800,000
• Zambia: $992,860,000

Key Figures:

• Total Outstanding Credit in Africa: At $1.009 billion, Tanzania’s total credit places it among the moderate credit borrowers in Africa.
• Disbursements: Tanzania’s $155.99 million in disbursements ranks among the highest in Africa for the period, comparable to Ghana and Rwanda.
• Repayments: Tanzania made no repayments during the period, similar to most East African countries.

Insights

1. Tanzania’s Growing Dependence on IMF Support

Tanzania's $155.99 million in new disbursements suggests an increasing reliance on IMF funding. This support is likely directed at addressing budget deficits, financing economic reforms, or driving infrastructure projects that are critical for the country’s growth. The total outstanding credit of $1.009 billion is moderate compared to larger African economies like Egypt and South Africa but indicates Tanzania’s growing dependence on external financing.

2. Regional Competitiveness (East Africa)

Tanzania ranks as the second-largest borrower in East Africa, with $1.009 billion in outstanding IMF credit, trailing behind Kenya’s $3.02 billion. However, Tanzania’s high disbursements of $155.99 million indicate a more active utilization of IMF resources compared to Kenya, which did not receive any new IMF loans during this period. This proactive financial management puts Tanzania in a strong position to leverage external resources for sustainable development.

3. Tanzania’s Position in Africa

Tanzania occupies a balanced position in Africa. Its $1.009 billion in outstanding IMF credit is far below the levels seen in Egypt and South Africa, which have more significant credit exposures. However, Tanzania’s engagement with the IMF through substantial disbursements signals a robust and strategic use of external resources to finance economic reforms and projects critical for long-term growth.

4. Economic Implications

The high disbursements Tanzania has received suggest the country is channeling IMF funds into critical sectors such as energy, agriculture, and infrastructure. While the absence of repayments indicates a focus on securing resources for immediate needs rather than servicing debt, it highlights potential financial pressure. Despite this, Tanzania’s moderate debt load compared to larger economies provides a buffer to manage repayment obligations effectively in the future.

Broader Themes for Tanzania

1. Growth Potential

Tanzania’s active engagement with the IMF and strategic borrowing position the country to drive economic growth. By utilizing IMF resources, particularly in sectors requiring external capital, Tanzania is laying the groundwork for future growth.

2. Caution on Debt Management

While Tanzania’s debt levels are moderate, its increasing reliance on external financing must be closely monitored. This trend could potentially pose risks if not managed prudently, especially in the face of global economic volatility.

3. Leadership in East Africa

Tanzania’s strategic borrowing places it in a leadership role in East Africa, using IMF resources effectively to support its development agenda. This could enhance its regional influence and attract additional international support.

Conclusion

Tanzania’s strategic use of IMF resources demonstrates its proactive approach to managing economic challenges and fostering long-term growth. While its debt levels remain manageable, continued borrowing suggests the need for careful fiscal planning to ensure sustainability and maximize the benefits of these funds. Regionally, Tanzania is emerging as a leader in leveraging IMF support, setting an example for other East African nations in utilizing international resources for national development.

Tanzania’s engagement with the IMF is not just about addressing short-term challenges—it reflects a long-term vision of economic transformation and stability. By balancing the need for external financing with fiscal responsibility, Tanzania is paving the way for a prosperous future.