The Tanzania Shilling (TZS) remained broadly stable in July 2025 despite mild depreciation pressures. The currency averaged TZS 2,666.79 per USD, a 1.34% monthly decline from June, while annual depreciation slowed to 0.11%, reflecting resilience compared to 0.21% in June. Stability was supported by higher foreign exchange market activity, with IFEM turnover rising 33.7% to USD 162.5 million, boosted by export inflows, while the Bank of Tanzania intervened by selling USD 17.5 million. Importantly, reserves strengthened to USD 6,194.4 million, covering about 5 months of imports, well above EAC (4.5 months) and SADC (3 months) benchmarks, cushioning the currency against external shocks.

1. Exchange Rate Movement
   • The Shilling traded at an average of TZS 2,666.79 per USD in July 2025, compared to TZS 2,631.56 per USD in June 2025.
   • This represents a monthly depreciation of about 1.34%.
   • On an annual basis, the Shilling depreciated at a rate of 0.11%, slightly better than the 0.21% annual depreciation recorded in June 2025.
2. Market Liquidity & Central Bank Intervention
   • Interbank Foreign Exchange Market (IFEM) turnover increased to USD 162.5 million in July 2025, up from USD 121.5 million in June 2025.
   • The Bank of Tanzania intervened by selling USD 17.5 million, compared to USD 6.3 million in the previous month.
   • Seasonal inflows from cash crops and gold exports supported liquidity and moderated depreciation pressure.
3. Reserves Buffer
   • Gross foreign exchange reserves stood at USD 6,194.4 million at the end of July 2025, compared to USD 5,292.2 million in July 2024.
   • This covers about 5 months of imports of goods and services, above both the EAC and SADC benchmarks.
   • Strong reserves have helped cushion the Shilling from sharper depreciation.

Table: Tanzania Shilling Stability (July 2025)

Economic Implications of Tanzania Shilling Stability – July 2025

1. Exchange Rate Movement

• Marginal Depreciation and Resilience: The TZS's 1.34% monthly depreciation to 2,666.79 per USD from June 2025 indicates mild pressure from import demand, yet the annual depreciation slowed to 0.11% from 0.21% in June, highlighting improved stability compared to prior periods. Economically, this controlled weakening helps maintain export competitiveness, particularly for key commodities like gold (exports up to USD 3,977.6 million annually) and cash crops, boosting foreign earnings without triggering inflationary spirals. It reflects a narrowing current account deficit to USD 2,079.2 million in the year to July 2025 (down 23.4% from 2024), driven by a 19.7% rise in goods exports to USD 9,479.4 million, as per the report's external sector data.
• Broader Implications: A stable yet slightly depreciating currency reduces the risk of capital outflows, supporting domestic investment and aligning with BOT's accommodative policy (CBR at 5.75%). However, persistent depreciation could elevate debt servicing costs for USD-denominated external debt (USD 32,955.5 million as of June 2025), though strong reserves mitigate this.

2. Market Liquidity & Central Bank Intervention

• Increased Turnover and Supportive Inflows: The Interbank Foreign Exchange Market (IFEM) turnover surged 33.7% to USD 162.5 million from USD 121.5 million in June 2025, signaling enhanced market liquidity bolstered by seasonal inflows from cash crops (e.g., cashew nuts up significantly) and gold exports. BOT's increased intervention—selling USD 17.5 million versus USD 6.3 million—helped moderate depreciation pressures, ensuring orderly market conditions.
• Economic Meaning: This liquidity boost enhances forex availability for importers, stabilizing supply chains in import-dependent sectors like manufacturing and energy (imports at USD 14,720.3 million annually). It underscores BOT's role in smoothing volatility, fostering business confidence and credit growth (15.9% annually), while aligning with global easing of trade tensions that could further support export-driven liquidity. Overall, it contributes to macroeconomic stability, potentially lowering transaction costs and encouraging foreign direct investment.

3. Reserves Buffer

• Robust Accumulation and Coverage: Gross foreign reserves rose to USD 6,194.4 million by end-July 2025, up 17% from USD 5,292.2 million in July 2024, covering 5 months of imports—exceeding EAC (4.5 months) and SADC (3 months) benchmarks. This buildup, fueled by export growth (e.g., tourism receipts up 3.8% to USD 3,871.9 million), provides a strong buffer against external shocks.
• Economic Significance: High reserves enhance currency credibility, reducing vulnerability to global risks like oil price stability (at USD 69.2 per barrel) and enabling BOT to intervene effectively. It supports fiscal flexibility for development spending (TZS 909.4 billion in June) and debt management (national debt at USD 46,586.6 million), promoting sustainable growth. In a regional context, this positions Tanzania favorably for credit ratings and inflows, aiding long-term projections of 6% GDP growth amid subdued global uncertainties.

Summary of Broader Economic Significance

The TZS's stability in July 2025 reflects a positive interplay of export strength, reserve adequacy, and policy vigilance, mitigating depreciation risks while supporting economic expansion. This fosters a conducive environment for private sector activity, with potential upsides in tourism and agriculture, though monitoring import pressures remains key to avoid imbalances. Compared to earlier depreciations (e.g., 6.1% in 2023), current trends indicate improved resilience, aligning with IMF and World Bank views on Tanzania's stable outlook.

As of June/July 2025, Tanzania’s national debt reached approximately TZS 115.0 trillion, up 1% from the previous month, with external debt (TZS 81.0 trillion, 70.7%) dominating over domestic debt (TZS 34.0 trillion, 29.3%). The bulk of external borrowing is owed by the central government (85.4%), largely to multilateral institutions (58.7%) and commercial lenders (34.8%), while domestic debt remains concentrated in Treasury bonds (79.7%) held mainly by commercial banks and pension funds. Despite rising obligations, debt levels remain manageable, supported by strong tax performance and a June fiscal surplus. On the currency front, the Tanzania Shilling averaged TZS 2,666.79 per USD in July 2025, a 1.3% monthly depreciation but only a 0.11% annual decline, underscoring relative stability. This resilience is underpinned by robust foreign reserves (USD 6.2 billion, equivalent to ~TZS 16.5 trillion, covering five months of imports), strong export inflows (gold and tourism), and timely BoT interventions, which together cushion external risks while sustaining investor confidence.

1. Tanzania National Debt (June/July 2025)

a) Total National Debt

• USD 46,586.6 million at the end of June 2025.
• Slight increase (+1%) from the previous month.
• Composition:
  • External Debt: USD 32,955.5m (70.7%)
  • Domestic Debt: TZS 35,351.4 billion (~USD 13,631m) (29.3%)

b) External Debt

• Stock: USD 32,955.5m (June 2025).
• By Borrower:
  • Central Government: USD 28,133.7m (85.4%)
  • Private Sector: USD 4,820.6m (14.6%)
  • Public Corporations: USD 1.3m (~0.0%)
• By Creditor:
  • Multilateral institutions: USD 19,328.5m (58.7%)
  • Commercial lenders: USD 11,458.3m (34.8%)
  • Bilateral lenders: USD 1,525.5m (4.6%)
  • Export credit: USD 643.3m (2.0%)

c) Domestic Debt

• Stock: TZS 35,351.4 billion (July 2025).
• By Instrument:
  • Treasury Bonds: 79.7%
  • Treasury Bills: 5.7%
  • Government Stocks: 0.4%
  • Non-securitized debt (overdrafts, others): 14.2%
• By Creditor:
  • Commercial Banks: 28.8%
  • Pension Funds: 26.4%
  • Bank of Tanzania: 19.2%
  • Other creditors (public institutions, companies, individuals): 18.3%
  • Insurance Companies: 5.1%
  • BoT Special Funds: 2.2%

Table: Tanzania National Debt (June/July 2025)

*Percentages within external debt.

2. Tanzania Shilling (TZS) – Stability and Performance

• Exchange Rate (July 2025):
  • Averaged TZS 2,666.79 per USD, compared to TZS 2,631.56 per USD in June 2025.
  • This is a monthly depreciation of about 1.3%.
• Annual Movement:
  • Shilling depreciated at an annual rate of 0.11%, compared to 0.21% in June 2025.
  • Shows relative stability year-on-year.
• Reserves:
  • FX reserves stood at USD 6,194.4m at end-July 2025, enough to cover 5 months of imports, meeting EAC and SADC benchmarks.
• Drivers of Stability:
  • Export inflows (gold, cashew, cereals, tourism).
  • BoT interventions (USD 17.5m sold in July 2025).
  • High reserves acting as a buffer against shocks.

Economic Implications of Tanzania’s National Debt and Shilling Performance – June/July 2025

1. Tanzania National Debt (June/July 2025)

• Total National Debt: Reached USD 46,586.6 million by June 2025, up 1% from the previous month, with 70.7% (USD 32,955.5 million) as external debt and 29.3% (TZS 35,351.4 billion, ~USD 13,631 million) as domestic debt.
• External Debt:
  • Stock at USD 32,955.5 million, with 85.4% owed by the central government (USD 28,133.7 million), 14.6% by the private sector (USD 4,820.6 million), and a negligible 0.0% by public corporations (USD 1.3 million).
  • Creditors include multilateral institutions (58.7%, USD 19,328.5 million), commercial lenders (34.8%, USD 11,458.3 million), bilateral lenders (4.6%, USD 1,525.5 million), and export credit (2.0%, USD 643.3 million).
• Domestic Debt: TZS 35,351.4 billion, with 79.7% in Treasury bonds, 5.7% in Treasury bills, 0.4% in government stocks, and 14.2% in non-securitized debt (e.g., overdrafts). Creditors are led by commercial banks (28.8%), pension funds (26.4%), Bank of Tanzania (19.2%), other creditors (18.3%), insurance companies (5.1%), and BoT special funds (2.2%).
• Economic Implications:
  • The 1% debt increase reflects ongoing financing needs, with external debt’s 70.7% share (USD 32,955.5 million) highlighting reliance on foreign capital, manageable at ~40% of GDP per IMF estimates. Multilateral loans (58.7%) offer concessional terms, reducing interest burdens, but commercial debt’s 34.8% share (USD 11,458.3 million) exposes Tanzania to market volatility and higher costs (e.g., global rates at 2.8% per IMF 2025 forecast).
  • Domestic debt’s stability (TZS 35,351.4 billion, down 0.4% from June) and bond dominance (79.7%) indicate strong local absorption by banks and pension funds (55.2% combined), supporting fiscal operations (TZS 403.4 billion surplus in June). However, the 14.2% non-securitized portion (overdrafts) suggests short-term liquidity pressures.
  • Risks include a moderate debt distress risk (World Bank), with 68.9% of external debt USD-denominated, amplifying costs if the shilling weakens further. Opportunities lie in leveraging multilateral support for infrastructure (e.g., SGR, USD 7.6 billion) to boost 6% GDP growth.

2. Tanzania Shilling (TZS) – Stability and Performance

• Exchange Rate: Averaged TZS 2,666.79 per USD in July 2025, a 1.3% monthly depreciation from TZS 2,631.56 in June, but an annual depreciation of just 0.11% (down from 0.21% in June), indicating year-on-year stability.
• Reserves: Foreign exchange reserves hit USD 6,194.4 million, covering 5 months of imports, exceeding EAC/SADC benchmarks (4 months).
• Drivers: Stability is fueled by export inflows (gold USD 3,977.6 million, tourism USD 3,871.9 million), BoT interventions (USD 17.5 million sold in July), and robust reserves.
• Economic Meaning:
  • The 1.3% monthly depreciation reflects seasonal import pressures (USD 17,603.1 million) and USD demand for debt servicing (USD 234.4 million in June), yet the 0.11% annual rate underscores stability, supported by a 17.7% export rise (gold +21.9%, cereals tripled). Reserves (USD 6,194.4 million) provide a strong buffer, enhancing investor confidence (Fitch B+ rating).
  • BoT’s active management (e.g., USD 62.3 million sold in March) and export growth (USD 9,479.4 million) counter depreciation, aligning with a 6% GDP projection. However, 70% USD-denominated external debt poses a risk if depreciation accelerates, potentially raising debt servicing costs by TZS 1-2 trillion annually.
  • Compared to 2023’s 8% depreciation, the current stability (0.11% annual) reflects policy success (CBR 5.75%), though import reliance and global rate hikes could challenge this if export growth slows.

Summary of Broader Economic Significance

• Debt Dynamics: The USD 46,586.6 million debt, with a balanced external-domestic mix, supports growth (6%) but requires cautious management to avoid distress, especially with commercial debt exposure (34.8%).
• Shilling Resilience: The shilling’s stability (0.11% annual depreciation) and reserves (5 months cover) bolster trade and investment, though USD debt sensitivity remains a vulnerability.
• Outlook: Sustained export growth and reserve strength could mitigate risks, but fiscal discipline and import control are key to maintaining this trajectory amid global uncertainties (e.g., oil at USD 69.2/barrel).

The Bank of Tanzania’s August 2025 review shows that government domestic debt stood at TZS 35,351.4 billion in July 2025, a slight decline of 0.4% from June’s TZS 35,502.8 billion, mainly due to reduced overdraft use. The debt structure remains dominated by Treasury bonds (79.7%), reflecting a preference for long-term financing. By creditor category, commercial banks (28.8%) and pension funds (26.4%) together held more than half of the stock, while the Bank of Tanzania accounted for 19.2%. Other contributors included public institutions, firms, and individuals (18.3%), insurance companies (5.1%), and BoT’s special funds (2.2%). This composition highlights the critical role of institutional investors in supporting government financing while aligning with fiscal consolidation efforts that produced a budget surplus of TZS 403.4 billion in June 2025.

1. Government Domestic Debt Stock (July 2025)

• Total stock: TZS 35,351.4 billion.
• Slight decline from TZS 35,502.8 billion in June 2025 (–0.4%), mainly due to reduced overdraft use.
• Debt remains dominated by Treasury bonds (79.7%) and commercial banks/pension funds as key creditors.

2. Government Domestic Debt by Creditor (July 2025)

• Commercial Banks: TZS 10,176.3 billion (28.8% of total).
• Pension Funds: TZS 9,328.8 billion (26.4%).
• Bank of Tanzania (BoT): TZS 6,799.3 billion (19.2%).
• Other Creditors (public institutions, private companies, individuals): TZS 6,461.3 billion (18.3%).
• Insurance Companies: TZS 1,808.4 billion (5.1%).
• BoT’s Special Funds: TZS 777.3 billion (2.2%).

Table: Government Domestic Debt by Creditor Category (July 2025)

Economic Implications of Government Domestic Debt – July 2025

1. Government Domestic Debt Stock (July 2025)

• Slight Decline: The total domestic debt stock fell to TZS 35,351.4 billion from TZS 35,502.8 billion in June 2025 (–0.4%), primarily due to reduced overdraft use.
• Economic Meaning: The modest decline suggests improved fiscal management, supported by the June 2025 budget surplus (TZS 403.4 billion), reducing reliance on short-term borrowing like overdrafts. The dominance of Treasury bonds (79.7%) indicates a shift toward longer-term financing, aligning with lower yields (e.g., 10-year bond yield at 13.74%) and investor preference for stability. This supports the BOT’s liquidity management (TZS 758.8 billion in reverse repos) and the government’s ability to fund development (TZS 909.4 billion) without crowding out private credit. However, the high stock (TZS 35,351.4 billion, or ~25% of GDP per IMF estimates) signals ongoing debt dependency, necessitating sustained revenue growth (tax revenue at TZS 3,108.7 billion).

2. Government Domestic Debt by Creditor (July 2025)

• Creditor Breakdown: Commercial banks hold TZS 10,176.3 billion (28.8%), pension funds TZS 9,328.8 billion (26.4%), BOT TZS 6,799.3 billion (19.2%), other creditors TZS 6,461.3 billion (18.3%), insurance companies TZS 1,808.4 billion (5.1%), and BOT’s special funds TZS 777.3 billion (2.2%).
• Economic Implications:
  • Commercial Banks and Pension Funds (55.2%): The combined 55.2% share reflects strong institutional support, providing stable, long-term funding via Treasury bonds. This supports government spending (e.g., transport at 28.6% of external debt use) but ties bank liquidity to public debt, potentially limiting private lending unless offset by BOT’s accommodative stance (CBR 5.75%).
  • BOT’s Role (19.2%): The BOT’s significant holding indicates its role in monetary financing, stabilizing markets during liquidity shortages (e.g., interbank turnover at TZS 3,746 billion). This aligns with reverse repo operations but risks inflation if overextended, though current stability (3.3%) mitigates this.
  • Other Creditors (18.3%): Growing participation from public institutions, firms, and individuals diversifies the creditor base, reducing banking sector concentration risk. This broadens domestic investment, supporting the shilling’s stability (TZS 2,666.79/USD).
  • Insurance and Special Funds (7.3%): Smaller shares suggest limited alternative funding, highlighting reliance on traditional creditors, though this could grow with financial sector deepening.

Summary of Broader Economic Significance

• Fiscal and Monetary Alignment: The slight debt reduction and surplus (TZS 403.4 billion) reflect effective fiscal consolidation, complemented by monetary easing (CBR cut), reducing domestic borrowing pressure and supporting growth (6% GDP projection). The bond dominance (79.7%) ensures predictable debt servicing, aided by stable yields (e.g., 8.13% for Treasury bills).
• Liquidity and Stability: BOT’s 19.2% holding and reverse repos (TZS 758.8 billion) enhance liquidity, while the 55.2% bank-pension share provides a stable funding base. This supports private credit expansion (15.9%) and export resilience (USD 9,479.4 million).
• Risks and Opportunities: Concentration in banks and pension funds (55.2%) poses risks if these sectors face shocks (e.g., global trade uncertainties), but diversification via other creditors (18.3%) mitigates this. The high debt stock (TZS 35,351.4 billion) requires sustained tax performance (107.8% of target) to avoid crowding out effects.
• Comparative Context: Compared to 2024 (TZS 34,890 billion), the slight decline aligns with regional trends (e.g., Kenya’s domestic debt stabilization), positioning Tanzania favorably amid global commodity stability (oil at USD 69.2/barrel).

The Bank of Tanzania’s August 2025 review shows that Tanzania’s external debt stock stood at USD 32,955.5 million in June 2025, with the central government accounting for 85.4% (USD 28,133.7 million) and the private sector holding 14.6% (USD 4,820.6 million). By sectoral use, debt was mainly channeled into transport and telecommunications (28.6%), social welfare and education (18.5%), and energy and mining (16.7%), underscoring the focus on infrastructure and human capital development. In terms of currency composition, the debt portfolio remains highly exposed to the US dollar (69.8%), followed by the euro (18.1%), with smaller shares in the yen (5.4%) and yuan (3.2%). This structure highlights Tanzania’s reliance on public borrowing to fund long-term projects while emphasizing the importance of managing currency risk in debt servicing.

1. External Debt Stock by Borrower (June 2025)

• Total external debt stock: USD 32,955.5 million.
• Public sector dominates: Central Government accounts for 85.4%, while private sector holds 14.6%.

Details:

• Central Government: USD 28,133.7m (85.4%)
• Private Sector: USD 4,820.6m (14.6%)
• Public Corporations: USD 1.3m (≈0.0%)

2. Disbursed Outstanding Debt by Use of Funds (June 2025, % Share)

• Transport & telecommunications: 28.6%
• Social welfare & education: 18.5%
• Energy & mining: 16.7%
• Agriculture: 6.4%
• Industries: 5.7%
• Other sectors (including finance, trade, etc.): 24.1%

3. Disbursed Outstanding Debt by Currency Composition (June 2025, % Share)

• US Dollar (USD): 69.8%
• Euro (EUR): 18.1%
• Japanese Yen (JPY): 5.4%
• Chinese Yuan (CNY): 3.2%
• Other currencies: 3.5%

Table 1: External Debt Stock by Borrower (June 2025)

Table 2: Disbursed Outstanding Debt by Use of Funds (%)

Table 3: External Debt by Currency Composition (%)

Economic Implications of External Debt Profile – June 2025

1. External Debt Stock by Borrower (June 2025)

• Composition: The total external debt stock is USD 32,955.5 million, with the central government holding USD 28,133.7 million (85.4%), the private sector USD 4,820.6 million (14.6%), and public corporations a negligible USD 1.3 million (0.0%).
• Economic Meaning: The heavy public sector dominance (85.4%) underscores the government's role in financing large-scale infrastructure and social projects, aligning with development goals (e.g., Vision 2050 targeting a USD 1 trillion economy). This reduces private sector borrowing pressure, supporting credit growth (15.9% annually), but increases public debt servicing risks (national debt at USD 46,586.6 million). The minimal public corporation share suggests limited state-owned enterprise reliance on external funds, potentially reflecting fiscal discipline. Compared to regional peers (e.g., Kenya’s 60% public share), Tanzania's high public borrowing may enhance state-led growth but requires robust revenue mobilization (tax revenue at TZS 3,108.7 billion) to sustain.

2. Disbursed Outstanding Debt by Use of Funds (June 2025, % Share)

• Allocation: Transport and telecommunications lead at 28.6%, followed by social welfare and education (18.5%), energy and mining (16.7%), agriculture (6.4%), industries (5.7%), and other sectors (24.1%).
• Economic Significance: The 47.1% allocation to transport/telecoms and social sectors supports long-term growth by improving connectivity (e.g., roads, digital infrastructure) and human capital (education, health), key to Tanzania’s 6% GDP growth projection. Energy and mining (16.7%) bolster resource exports (gold at USD 3,977.6 million), while the low agriculture (6.4%) and industries (5.7%) shares may hinder diversification, a noted challenge in IMF assessments. The "other" category (24.1%) likely includes trade and finance, indicating broad sectoral support. This mix reflects a development-focused strategy, but underinvestment in agriculture (despite 27% GDP contribution) could limit rural growth and food security (stocks at 485,930.4 tonnes).

3. Disbursed Outstanding Debt by Currency Composition (June 2025, % Share)

• Breakdown: USD dominates at 69.8%, followed by EUR (18.1%), JPY (5.4%), CNY (3.2%), and other currencies (3.5%).
• Economic Implications: The 69.8% USD exposure heightens vulnerability to exchange rate fluctuations, especially with the TZS depreciating 1.34% to 2,666.79/USD in July 2025. A stronger dollar (e.g., amid global trade tensions) could raise debt servicing costs, straining public finances (surplus TZS 403.4 billion in June). Diversification into EUR (18.1%) and JPY (5.4%) mitigates some risk, reflecting loans from multilateral institutions (e.g., IMF, World Bank). The low CNY share (3.2%) suggests limited Chinese financing compared to peers like Zambia, potentially reducing geopolitical debt dependency. Stable reserves (USD 6,194.4 million) provide a buffer, but currency risk remains a key concern.

Summary of Broader Economic Significance

• Growth and Development: The debt structure supports infrastructure and social investment, driving Tanzania’s 6% growth outlook and export resilience (USD 9,479.4 million in goods). Public sector dominance ensures state-led progress, but private sector growth (14.6%) needs nurturing to diversify the economy.
• Risk Management: High USD exposure (69.8%) and public debt concentration (85.4%) pose exchange rate and fiscal risks, though reserves and a fiscal surplus offer stability. This aligns with IMF’s moderate debt distress risk assessment, but prudent management is critical.
• Comparative Context: Compared to 2024 (USD 32.89 billion), the slight rise to USD 32,955.5 million reflects controlled borrowing, outperforming countries with higher debt-to-GDP ratios (e.g., Ghana at 90%). The sectoral focus mirrors successful models like Rwanda’s infrastructure drive, but agriculture underfunding lags behind peers.
• Future Outlook: Sustained tax revenue growth (107.8% of target) and export inflows (e.g., tourism at USD 3,871.9 million) could offset risks, though currency diversification and private sector debt expansion are needed for long-term sustainability.

The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.

1. Inflation in Zanzibar

• Annual headline inflation (July 2025): 4.1%, down from 5.3% in July 2024, and unchanged from June 2025.
• Food inflation: 4.3% (vs. 9.2% in July 2024).
• Non-food inflation: 3.9% (stable).
• Monthly inflation: 0.2% (down from 0.5% in June 2025).
• Decline mainly due to lower food prices (rice, sugar, wheat flour, green bananas).

2. Government Budgetary Operations

• Revenue and grants (June 2025):TZS 93.4 billion, above the monthly target of TZS 87.6 billion.
  • Own-source revenue: TZS 80.2 billion.
  • Grants: TZS 13.2 billion.
• Expenditure (June 2025):TZS 118.4 billion.
  • Recurrent: TZS 79.9 billion.
  • Development: TZS 38.5 billion.
• Fiscal balance: Deficit of TZS 25.0 billion (since spending exceeded revenue).

3. External Sector Performance

• Exports of goods & services (year ending July 2025):USD 328.2 million, up from USD 292.1 million in 2024 (+12.4%).
  • Services receipts: USD 227.4 million, driven by tourism (travel receipts).
  • Goods exports: USD 100.8 million, led by cloves and seaweed.
• Imports of goods & services (year ending July 2025):USD 470.9 million, up from USD 412.6 million in 2024 (+14.1%).
  • Increase mainly in capital and consumer goods imports.
• Trade balance: Deficit of USD 142.7 million.

Table 1: Zanzibar Inflation (July 2025)

Table 2: Zanzibar Government Budgetary Operations (June 2025, TZS Billion)

Table 3: Zanzibar External Sector Performance (USD Million)

Economic Implications of Zanzibar's Performance – July 2025

1. Inflation in Zanzibar

• Trends: Annual headline inflation dropped to 4.1% in July 2025 from 5.3% in July 2024, with food inflation falling to 4.3% from 9.2% and monthly inflation easing to 0.2% from 0.5%.
• Economic Meaning: The decline, driven by lower food prices (rice, sugar, wheat flour, green bananas), signals improved supply conditions, possibly due to the National Food Reserve Agency’s stock management (477,923 tonnes in June 2025). This boosts purchasing power and consumer confidence, supporting the 6.2% GDP growth in 2024 and a projected over 6% in 2025. The 4.1% rate remains above Mainland Tanzania’s 3.3% but aligns with regional stability (EAC/SADC targets). Risks include potential food price volatility if harvests falter, though current trends suggest resilience.

2. Government Budgetary Operations

• Revenue and Spending: Revenue and grants reached TZS 93.4 billion in June 2025 (106.6% of the TZS 87.6 billion target), with TZS 80.2 billion from own sources and TZS 13.2 billion in grants. Expenditure totaled TZS 118.4 billion (recurrent TZS 79.9 billion, development TZS 38.5 billion), resulting in a TZS 25.0 billion deficit.
• Economic Implications: Exceeding revenue targets reflects strong tax collection and grant inflows, supporting fiscal capacity amid 6.2% growth. However, the deficit, driven by 32.5% development spending (e.g., infrastructure), indicates reliance on borrowing or reserves, risking debt sustainability (41.1% GDP debt-to-GDP ratio). This aligns with fiscal prudence but highlights the need for expenditure control to match revenue, especially as tourism (12.7% growth) fuels economic activity.

3. External Sector Performance

• Trade Dynamics: Exports rose to USD 328.2 million (up 12.4% from USD 292.1 million in 2024), with services (USD 227.4 million, tourism-led) up 9.9% and goods (USD 100.8 million, cloves/seaweed) up 18.5%. Imports increased to USD 470.9 million (up 14.1% from USD 412.6 million), driven by capital and consumer goods, widening the trade deficit to USD 142.7 million from USD 120.5 million.
• Economic Significance: The 12.4% export growth, bolstered by tourism (2,662,219 arrivals in 2024) and clove/seaweed exports, strengthens foreign exchange reserves (USD 6 billion nationally), supporting the TZS stability (0.2% depreciation). However, the 14.1% import surge reflects import dependency (petroleum, industrial goods), straining the current account (surplus of USD 611.1 million in 2024/25). This could pressure reserves if export growth slows, though tourism’s momentum offers a buffer.

Summary of Broader Economic Significance

• Stability and Growth: Lower inflation (4.1%) and robust export growth (12.4%) underpin Zanzibar’s 6.2% GDP growth in 2024 and over 6% projection for 2025, driven by tourism and trade. This supports the Vision 2050 goal of diversification.
• Fiscal Challenges: Revenue outperformance (TZS 93.4 billion) aids development spending (TZS 38.5 billion), but the TZS 25.0 billion deficit signals a need for fiscal balancing to sustain debt at 41.1% of GDP.
• External Risks: Export gains are offset by faster import growth (14.1%), maintaining a trade deficit (USD 142.7 million). Tourism resilience and reserve adequacy (4.8 months of imports) mitigate risks, but import reliance remains a vulnerability.
• Outlook: Compared to 2024’s 5.8% growth, 2025’s projection reflects optimism, though managing import costs and diversifying beyond tourism (e.g., manufacturing, agriculture) are critical for long-term stability.

Tanzania’s external sector strengthened in the year ending July 2025, with the current account deficit narrowing by 23.4% to USD 2,079.2 million, compared to USD 2,713.5 million in 2024. The improvement was driven by robust growth in services exports, which rose 8% to USD 7,175.6 million, led by tourism (USD 3,871.9m, +3.8%) and transport services (USD 2,631.9m, +13.8%). At the same time, services imports surged 21.2% to USD 2,925.1 million, largely due to higher transport costs (USD 1,458.1m, +12.7%) and a sharp rise in other services payments (USD 840.2m, +106.9%), even as travel-related payments fell. This combination reflects Tanzania’s resilience in boosting exports while managing rising import pressures, ultimately reducing external imbalances and supporting foreign reserve stability at over USD 6.1 billion.

1. Current Account Balance

• Deficit: USD 2,079.2 million (year ending July 2025).
• Improved compared to USD 2,713.5 million in the same period of 2024 (23.4% narrowing).
• Improvement driven by higher exports of goods & services, outpacing import growth.

2. Exports – Services Receipts

• Total services receipts: USD 7,175.6 million (up from USD 6,643.8 million in July 2024, +8%).
• Breakdown by category (year ending July 2025):
  • Travel (Tourism): USD 3,871.9m (up from 3,730.2m in 2024, +3.8%).
  • Transport: USD 2,631.9m (up from 2,312.9m in 2024, +13.8%).
  • Other services (construction, insurance, ICT, business, etc.): USD 671.8m (up from 600.7m in 2024, +11.8%).

3. Imports – Services Payments

• Total services payments: USD 2,925.1 million (up from USD 2,414.5 million in July 2024, +21.2%).
• Breakdown by category (year ending July 2025):
  • Transport: USD 1,458.1m (up from 1,293.5m in 2024).
  • Travel: USD 626.7m (down slightly from 714.7m in 2024).
  • Other services: USD 840.2m (up from 406.3m in 2024).

Table 1: Current Account Balance (USD Million)

Table 2: Services Receipts by Category (Exports, USD Million)

Table 3: Services Payments by Category (Imports, USD Million)

Economic Implications of External Sector Performance – Year Ending July 2025

1. Current Account Balance

• Deficit and Improvement: The current account recorded a deficit of USD 2,079.2 million, a 23.4% narrowing from USD 2,713.5 million in July 2024, driven by higher exports of goods and services outpacing import growth.
• Economic Meaning: The reduced deficit reflects a strengthening external position, supported by robust export performance (e.g., gold at USD 3,977.6 million, tourism at USD 3,871.9 million) and controlled import growth. This aligns with Tanzania’s 6% GDP growth projection, enhancing foreign exchange reserves (USD 6,194.4 million), which cover 4.8 months of imports—above the national benchmark. The improvement reduces pressure on the TZS (stable at 2,666.79/USD), supporting monetary easing (CBR 5.75%). However, the persistent deficit (3.8% of GDP per IMF estimates) indicates ongoing reliance on external financing (external debt at USD 32,955.5 million), necessitating sustained export growth to achieve balance.

2. Exports – Services Receipts

• Total Growth: Services receipts rose to USD 7,175.6 million, an 8% increase from USD 6,643.8 million in July 2024.
• Breakdown:
  • Travel (Tourism): USD 3,871.9 million (+3.8% from USD 3,730.2 million), accounting for 54% of receipts.
  • Transport: USD 2,631.9 million (+13.8% from USD 2,312.9 million).
  • Other Services (construction, insurance, ICT, business): USD 671.8 million (+11.8% from USD 600.7 million).
• Economic Significance: The 54% tourism share underscores its role as a foreign exchange anchor, bolstered by 2,193,322 arrivals in June 2025 (up 10% year-on-year), reflecting global travel recovery. The 13.8% transport growth signals improved logistics (e.g., Dar es Salaam port upgrades), supporting trade (exports at USD 9,479.4 million). Other services’ 11.8% rise indicates diversification into ICT and construction, aligning with infrastructure investments (28.6% of external debt use). This growth enhances reserves and reduces current account pressure, though tourism’s dominance (54%) exposes the economy to global travel risks (e.g., pandemics).

3. Imports – Services Payments

• Total Increase: Services payments surged to USD 2,925.1 million, a 21.2% rise from USD 2,414.5 million in July 2024.
• Breakdown:
  • Transport: USD 1,458.1 million (+12.7% from USD 1,293.5 million).
  • Travel: USD 626.7 million (–12.3% from USD 714.7 million).
  • Other Services: USD 840.2 million (+106.9% from USD 406.3 million).
• Economic Implications: The 21.2% increase reflects heightened import activity, with transport growth (12.7%) tied to freight costs for goods imports (USD 17,603.1 million). The 106.9% jump in other services (e.g., business, insurance) suggests rising costs for industrial inputs and operations, linked to manufacturing and construction booms (e.g., Julius Nyerere Hydropower Plant). The 12.3% travel drop may indicate lower outbound tourism or business travel, offsetting some pressure. This rapid rise, outpacing export growth (8%), strains the current account, though reserves and export inflows mitigate immediate risks.

Summary of Broader Economic Significance

• External Resilience: The 23.4% deficit narrowing and 8% export growth signal a robust external sector, supporting Tanzania’s 6% growth trajectory and reserve adequacy (4.8 months). Tourism (54%) and transport (37%) drive receipts, aligning with Vision 2050 goals.
• Trade Dynamics: Export outperformance over imports strengthens the TZS and reduces financing needs, but the 21.2% import surge (especially other services) highlights import dependency, a challenge noted by the World Bank for structural transformation.
• Risks and Opportunities: Tourism reliance (54%) and import cost spikes (106.9% in other services) pose vulnerabilities to global shocks (e.g., oil at USD 69.2/barrel). However, reserve growth (USD 6,194.4 million) and fiscal surplus (TZS 403.4 billion) provide buffers. Compared to 2024’s 4.2% GDP deficit projection, the 3.8% estimate reflects progress, outperforming peers like Uganda (5% deficit).
• Future Outlook: Sustained tourism growth (3.8%) and logistics expansion (13.8%) could further narrow the deficit, but managing import costs (21.2%) and diversifying exports beyond services are critical for long-term stability.

As of June 2025, the Tanzania Shilling (TZS) depreciated by 9.6% year-on-year against the US dollar, from 2,345.38 (June 2024) to 2,569.46, reflecting sustained import demand, foreign currency shortages, and global USD strength. Despite this, the monthly change was only -0.2%, signaling short-term exchange rate stability. The Bureau de Change market showed a tight spread (Buy: 2,574.33 / Sell: 2,582.67), reinforcing retail-level confidence. The Shilling also weakened against other major currencies: EUR (-10.4%), GBP (-9.7%), CNY (-10.2%), and JPY (-10.3%). Meanwhile, BoT interventions (e.g., USD 7 million in January) and robust foreign reserves (USD 5.3 billion, 4.3 months import cover) helped maintain market orderliness. However, strong imports (e.g., Zanzibar: USD 459.5 million, driven by infrastructure goods) and falling exports (e.g., cloves: -27.2%) kept pressure on the TZS. To counter depreciation risks, policy must focus on export diversification, import substitution, and regional trade resilience.

1. Overview: Exchange Rate Performance (as of June 2025)

The Tanzanian Shilling’s exchange rate performance reflects its value against major currencies in the Interbank Foreign Exchange Market (IFEM) and Bureau de Change markets, influenced by domestic and global economic factors.

• Official Market (IFEM):
  • USD/TZS Rate:
    • June 2024: 2,345.38
    • May 2025: 2,565.08
    • June 2025: 2,569.46
    • 12-Month Change: -9.6% (depreciation, i.e., more TZS per USD).
  • Monthly Change: -0.2% from May 2025 (2,565.08 to 2,569.46), indicating relative short-term stability.
  • Context: The 9.6% year-on-year depreciation aligns with earlier trends, such as a 9% depreciation in 2024 and an 8% depreciation in 2023. However, the TZS showed signs of stabilization in late 2024, with a slight appreciation of 0.28% in October 2024 and a 2.6% annual appreciation by January 2025, driven by improved export inflows (e.g., gold, cashew nuts, tourism). The June 2025 depreciation reflects renewed pressures from import demand and global USD strength.
  • Drivers:
    • Strong Import Demand: Imports of goods rose to USD 459.5 million in Zanzibar alone, driven by capital goods (USD 222.5 million) for infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Mainland Tanzania’s imports also increased, with capital and intermediate goods dominating.
    • Lower-than-Expected Forex Inflows: Goods exports in Zanzibar fell to USD 150.3 million (-11.9%), particularly cloves (-27.2%). While Mainland Tanzania’s exports grew 16.8% to USD 16.7 billion by April 2025, inflows from gold (USD 3,369.7 million) and tourism (USD 6,948.2 million) were insufficient to offset import pressures.
    • Global USD Strengthening: The USD appreciated globally due to U.S. monetary tightening and demand for USD-denominated assets, impacting emerging market currencies like the TZS.
  • Stability Assessment: Despite the 9.6% depreciation, the TZS remained “orderly and market-driven,” with no sharp volatility, as noted in the BoT review. BoT interventions, such as selling USD 7 million in January 2025, and robust reserves (USD 5,307.7 million, 4.3 months of import cover) supported stability.
• Bureau de Change Market:
  • June 2025 Rates:
    • Buying Rate: 2,574.33 TZS/USD
    • Selling Rate: 2,582.67 TZS/USD
  • Context: The narrow spread (0.3%) between buying and selling rates indicates a liquid and stable retail market, consistent with earlier data (e.g., 2,454.04 TZS/USD in January 2025). The slightly higher Bureau rates compared to IFEM (2,569.46) reflect retail markups but align with market-driven pricing.
  • Implications: The stable Bureau market supports confidence in the TZS for domestic transactions, with only 3.2% of Mainland businesses and 4.5% in Zanzibar quoting in USD, indicating low dollarization.
• Interpretation:
  • The 9.6% depreciation reflects structural pressures from import reliance and global USD strength, but short-term stability (-0.2% monthly change) and BoT interventions mitigate volatility.
  • The TZS’s performance aligns with regional trends, where currencies like Kenya’s Shilling (9% depreciation in 2024) faced similar pressures, though Tanzania’s stability is notable compared to Burundi’s significant depreciation.
  • Policy measures, including export promotion and reserve management, are critical to manage depreciation pressures.

2. Other Currency Exchange Rates (June 2025)

The TZS’s performance against other major currencies provides a broader view of its depreciation trend.

• Exchange Rates (June 2025):

• Context:
  • EUR/TZS: The 10.4% depreciation is slightly higher than USD/TZS, reflecting Eurozone economic resilience and demand for EUR-denominated assets. In April 2023, EUR/TZS was 2,549.80, indicating a gradual weakening.
  • GBP/TZS: The 9.7% depreciation aligns with USD trends, with GBP/TZS at 2,876.45 in April 2023, showing consistent TZS weakening.
  • JPY/TZS: The 10.3% depreciation reflects Japan’s monetary policy shifts, with JPY/TZS not detailed in earlier reports but consistent with global trends.
  • CNY/TZS: The 10.2% depreciation aligns with China’s economic slowdown and reduced demand for TZS in bilateral trade, compared to 334.23 CNY/TZS in April 2023.
  • Estimated June 2024 Rates (based on Y-o-Y changes):
    • EUR: ~2,503 TZS (from summary table).
    • GBP: ~2,961 TZS.
    • CNY: ~320.9 TZS.
  • Regional Comparison: The TZS’s broad-based depreciation contrasts with Rwanda’s Franc appreciation and Uganda’s Shilling stability (2020–2023), highlighting Tanzania’s import-driven pressures.
• Drivers:
  • Global Currency Strength: Major currencies appreciated due to tighter monetary policies in the U.S., Eurozone, and Japan, increasing demand for USD, EUR, and GBP.
  • Trade Dynamics: Tanzania’s trade with China (6.3% of external debt in CNY) and Europe (16.1% in EUR) increased TZS demand for imports, weakening the currency.
  • Export Shortfalls: Zanzibar’s clove exports fell 27.2% to USD 66.4 million, and while Mainland exports grew, they couldn’t fully offset import costs.
• Implications:
  • The broad-based depreciation (-9.6% to -10.4%) indicates systemic pressures rather than USD-specific factors, impacting import costs (e.g., petroleum, machinery).
  • The TZS’s stability against regional currencies (e.g., Kenyan Shilling) supports Tanzania’s competitiveness in East African trade, but global depreciation raises debt servicing costs (68.1% USD-denominated debt).

3. Forex Market Activity

Forex market activity in the IFEM reflects demand and supply dynamics for foreign exchange, influencing TZS stability.

• Interbank Foreign Exchange Market (IFEM):
  • Transaction Volume (June 2025): USD 65.4 million.
  • Change: +12.6% from USD 58.1 million in May 2025.
  • Year-on-Year: Compared to USD 16.3 million in January 2025 and USD 95.7 million in December 2024, June 2025’s volume indicates seasonal peaks, likely tied to trade settlements and imports.
  • Context: Increased volume reflects heightened demand for USD, driven by:
    • Trade Settlements: Imports of capital goods (USD 222.5 million in Zanzibar) and consumer goods for Q2 2025 trade.
    • Seasonal Imports: Agricultural inputs and infrastructure-related imports (e.g., SGR, TAZARA Railway).
    • Debt Servicing: External debt servicing (USD 32,090.0 million disbursed) requires USD inflows.
  • BoT Interventions: The BoT sold USD 7 million in January 2025 to stabilize the TZS, and similar interventions likely occurred in June 2025, given the orderly market noted in the review.
• Implications:
  • The 12.6% volume increase signals robust market activity but also pressure on the TZS, as higher USD demand drives depreciation.
  • BoT’s reserve management (USD 5,307.7 million) and interventions ensure stability, but sustained import demand requires export growth to balance forex flows.
  • The liquid IFEM and Bureau markets support confidence, with no evidence of dollarization (only 0.1% of Mainland businesses prefer USD payments).

Summary Table: TZS Exchange Rate Trends

Key Insights and Policy Implications

1. Moderate Depreciation:
   • The TZS’s 9.6% depreciation against the USD and 9.7%–10.4% against other currencies reflects structural import reliance and global USD strength. However, the -0.2% monthly change from May to June 2025 indicates short-term stability, supported by BoT interventions.
   • Policy: Enhance export diversification (e.g., seafood, manufactured goods) to boost forex inflows, as per Zanzibar’s USD 2 billion plan. Leverage AfCFTA to expand markets.
2. Market Stability:
   • The orderly, market-driven TZS performance, with no sharp volatility, aligns with earlier stabilization (e.g., 0.28% appreciation in October 2024). Robust reserves (USD 5,307.7 million) and a liquid IFEM (USD 65.4 million volume) support confidence.
   • Policy: Continue BoT interventions (e.g., USD sales) and reserve accumulation to manage seasonal pressures, as seen in January 2025.
3. Import-Driven Pressures:
   • Strong import demand (USD 459.5 million in Zanzibar, Mainland capital goods) outpaced export growth, driving depreciation. Zanzibar’s 27.2% clove export drop exacerbated pressures.
   • Policy: Promote import substitution (e.g., local manufacturing) and agricultural productivity to reduce reliance on imported goods, aligning with Vision 2050.
4. Global and Regional Context:
   • The TZS’s depreciation mirrors regional trends (e.g., Kenya’s 9% depreciation in 2024), but Tanzania’s stability contrasts with Burundi’s significant depreciation. Global USD strength, driven by U.S. policy, impacts emerging markets broadly.
   • Policy: Strengthen trade ties with EAC partners (e.g., Rwanda, Uganda) to stabilize TZS against regional currencies.
5. Economic Impacts:
   • Debt Servicing: With 68.1% of external debt in USD (USD 33,905.1 million), depreciation raises servicing costs, absorbing ~40% of government expenditures.
   • Inflation: Depreciation contributed to Zanzibar’s 3.4% inflation (June 2025) and Mainland’s 3.2% (May 2025), driven by imported goods like petroleum.
   • Trade Competitiveness: Depreciation enhances export competitiveness (e.g., gold, cashew nuts), but falling clove exports limit gains.
   • Policy: Maintain the 6% Central Bank Rate to control inflation (3%–4% target in 2025) and explore debt restructuring to ease USD pressures.
6. Economic Context:
   • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6% in 2025 support export performance, driven by tourism (2.2 million arrivals) and infrastructure.
   • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against volatility, up from USD 5,323.6 million in January 2025.
   • Risks: Global commodity price volatility, USD strength, and election-related uncertainties (October 2025) pose risks to TZS stability.
   • Opportunities: Tourism receipts (USD 6,948.2 million), FDI (USD 3.7 billion in 2025), and IMF disbursements (USD 148.6 million in 2024) support forex inflows.

Tanzania’s debt development, as outlined in the April 2025 Monthly Economic Review and recent data, influences economic growth through fiscal constraints and resource allocation. Below, we analyze the debt structure, including domestic and external debt figures, percentage changes, and their implications for growth, using specific figures to illustrate impacts.

Debt Structure and Figures

Figures:

• Domestic Debt: TZS 34.26 trillion in March 2025, with 29% held by commercial banks and 26.5% by pension funds.
• External Debt: USD 34.1 billion (approximately TZS 91.29 trillion at TZS 2,677/USD, based on a 2.6% year-on-year exchange rate depreciation, Page 30), with 78.3% held by the central government and 67.7% denominated in US dollars.
• Total National Debt: TZS 91.7 trillion in 2024/25 budget context.
• Public Debt (Historical): 45.5% of GDP in 2022/23, up from 43.6% in 2021/22.
• Percentage Change: Exact year-on-year percentage changes for March 2025 debt are not provided in the document or search results. However, domestic debt uptake increased through treasury bills and bonds, and external debt grew to USD 34.1 billion (), suggesting continued borrowing. For context, public debt rose by 4.4% (45.5% - 43.6% of GDP) from 2021/22 to 2022/23.

Explanation:

• Domestic Debt: The TZS 34.26 trillion domestic debt finances fiscal deficits, with significant holdings by commercial banks (TZS 9.93 trillion, 29%) and pension funds (TZS 9.08 trillion, 26.5%). Increased borrowing indicates rising deficits, potentially driven by a 13.4% planned spending increase to TZS 57.04 trillion in FY 2025/26.
• External Debt: The USD 34.1 billion (TZS 91.29 trillion) external debt supports development projects, with 78.3% (USD 26.7 billion) held by the central government. The 67.7% USD denomination (USD 23.1 billion) exposes Tanzania to exchange rate risks, amplified by a 2.6%-shilling depreciation.
• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) indicates a moderate risk of external debt distress, with public debt at 35% of GDP in 2024, below the 55% benchmark (). Total debt service was 2.89% of GNI in 2023.

Impact on Economic Growth

Figures and Explanation:

• Fiscal Space Constraints: Limited fiscal space, noted globally, restricts Tanzania’s ability to fund growth. The FY 2024/25 budget of TZS 49.35 trillion includes TZS 29.41 trillion (59.6%) from tax revenue, leaving a deficit financed by domestic (TZS 34.26 trillion) and external (USD 34.1 billion) borrowing. A planned 13.4% spending increase to TZS 57.04 trillion in FY 2025/26 will further rely on debt, with TZS 16.07 trillion (28.2%) from borrowing.
• Debt Servicing Costs: Debt servicing absorbs significant resources. Historically, external debt servicing consumed 40% of government expenditures. In 2023, total debt service was 2.89% of GNI. For March 2025, servicing TZS 34.26 trillion domestic debt (at, e.g., 15.5% lending rates,) and USD 34.1 billion external debt (at concessional rates,) could cost TZS 5.31 trillion and USD 1-2 billion annually, diverting funds from investments. The 2.6%-shilling depreciation increases external debt costs by TZS 2.37 trillion.
• Crowding-Out Effect: Domestic borrowing of TZS 34.26 trillion (29% by banks) raises lending rates to 15.5%, crowding out private investment. Credit to the private sector weakened in Q4 2024, limiting business growth. The 6% Central Bank Rate mitigates this, but high government borrowing (TZS 4,362 billion average,) strains liquidity.
• Growth Projections: GDP growth is projected at 5.4% in 2024 and 6% in 2025, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9%). However, debt servicing and fiscal constraints could cap growth below the 6.4% potential by 2026.

Global and Domestic Economic Context

Figures and Explanation:

• Global Risks: The IMF’s global growth forecast of 2.8% for 2025 and rising interest rates increase external borrowing costs. Tanzania’s USD 34.1 billion external debt, with 67.7% in USD, faces higher servicing costs amid global tightening.
• Commodity Impacts: Declining coffee (-2%) and sugar (-1.5%) prices reduce export revenues, straining foreign exchange for debt repayment (Page 3). Gold prices at USD 2,983.25/ounce (+3%) and exports at USD 16.1 billion bolster reserves (USD 5.7 billion, 3.8 months of imports,), easing debt pressures.
• Inflation and Policy: Headline inflation at 3.3% and food inflation at 5.4% (Page 4) increase household costs, potentially slowing consumption. The 6% Central Bank Rate and 587,062-tonne food reserves (32,598 tonnes released) stabilize prices, supporting growth.

Opportunities and Mitigation

Figures and Explanation:

• Development Projects: External debt of USD 34.1 billion funds infrastructure (48% of World Bank’s USD 10 billion portfolio,), like the Standard Gauge Railway, boosting long-term growth. Projects worth TZS 14.81 trillion (30% of FY 2024/25 budget,) enhance connectivity and trade.
• Debt Management: The moderate debt distress risk and concessional financing keep debt sustainable. Revenue mobilization (TZS 2.47 trillion collected in March 2025,) and IMF’s USD 441 million ECF/RSF support () reduce reliance on costly borrowing.
• Fiscal Reforms: Plans to raise tax revenue to TZS 29.41 trillion (10% increase,) and reduce the fiscal deficit to 2.5% of GDP by 2024/25 () enhance fiscal space, freeing resources for growth.

Conclusion

Tanzania’s debt, at TZS 34.26 trillion domestic and USD 34.1 billion (TZS 91.29 trillion) external in March 2025, impacts growth by constraining fiscal space and diverting resources to servicing costs (e.g., TZS 5.31 trillion domestic, USD 1-2 billion external annually). A 2.6%-shilling depreciation and high lending rates (15.5%) exacerbate pressures, crowding out private investment. While debt fuels infrastructure (TZS 14.81 trillion in projects), declining exports (coffee -2%) and global risks (2.8% growth) challenge repayment. Prudent policy (6% CBR, USD 5.7 billion reserves) and revenue growth (TZS 29.41 trillion) mitigate risks, supporting 5.4%-6% GDP growth, but fiscal discipline is crucial.

Key Figures: Tanzania’s Debt Development and Economic Growth (March 2025)

Notes:

• Figures reflect March 2025 unless stated otherwise. TZS/USD conversion uses TZS 2,677/USD (Page 30).
• Debt servicing estimates are based on typical rates (15.5% for domestic, concessional for external).
• Percentage change for debt limited to historical data (4.4% public debt increase, 2021/22-2022/23).
• Source: “Page” refers to April 2025 Monthly Economic Review; “Web” refers to search data; “Est.” indicates estimates.
• Domestic borrowing crowds out private investment; external debt funds infrastructure (e.g., TZS 14.81 trillion).

In February 2025, the Tanzania shilling remained broadly stable against the US dollar, with only a slight depreciation from TZS 2,560/USD in January to TZS 2,566/USD, marking a modest 0.23% change. Despite this, the interbank foreign exchange market saw a significant increase in activity, with traded volumes rising by 27.4% from USD 57.2 million to USD 72.9 million. This indicates growing demand for foreign currency—likely for imports or external payments—yet the limited impact on the exchange rate reflects strong macroeconomic management, sufficient forex reserves, and sustained confidence in the Tanzanian economy.

Tanzania Monthly Economic Review – March 2025, the Tanzania shilling (TZS) remained relatively stable against the US dollar (USD) in February 2025, with only slight depreciation observed.

Tanzania Shilling Stability Against the USD – February 2025

Exchange Rate Movement:

• February 2025:
  ➤ TZS 2,566.00 per USD
• January 2025:
  ➤ TZS 2,560.00 per USD

 Change:
➤ The shilling depreciated by TZS 6.00, equivalent to 0.23% over the month.

💡Interpretation: What Does This Mean?

• The Tanzania shilling experienced only marginal depreciation, suggesting strong overall currency stability.
• The interbank foreign exchange market was active, with trading volumes increasing from:
  • USD 57.2 million (Jan 2025) to
  • USD 72.9 million (Feb 2025)
    ➤ Increase of 27.4%, indicating rising demand for USD (possibly for imports or debt servicing).

Despite increased forex demand, the shilling held relatively firm, implying:

• Sufficient foreign exchange reserves by the Bank of Tanzania
• Tight monetary and fiscal coordination
• Controlled inflation and disciplined currency management

Summary Table: Shilling vs. USD

The Tanzania shilling remains broadly stable against the US dollar, with only slight depreciation in February 2025 despite increased foreign exchange market activity. This reflects confidence in macroeconomic fundamentals and effective monetary policy management by the Bank of Tanzania.

Tanzania shilling's stability against the US dollar:

What It Tells Us:

1. The Tanzania Shilling Is Stable
   – The exchange rate changed only slightly from TZS 2,560/USD in January to TZS 2,566/USD in February 2025, a depreciation of just 0.23%.
   ➤ This signals that the shilling is not under heavy pressure and is being well-managed by the Bank of Tanzania.
2. Market Demand for USD Is Growing
   – Foreign exchange trading in the interbank market increased from USD 57.2 million to USD 72.9 million—a 27.4% increase.
   ➤ This could reflect rising imports, seasonal corporate demand, or external obligations (like debt service or payments for goods and services).
3. Despite Demand, the Currency Held Steady
   – Even with the increased demand for dollars, the shilling did not weaken significantly.
   ➤ This shows strong supply-side support, likely through foreign reserves or intervention by the central bank.
4. Investor and Market Confidence Remains High
   – A stable exchange rate in the face of higher forex demand typically means:
   • Inflation is under control
   • Interest rates are appropriate
   • The external sector is resilient

✅ Bottom Line:

The slight movement in the exchange rate tells us the Tanzania shilling is stable and well-supported, even as demand for USD rises. This reflects sound economic management, confidence in the local currency, and a resilient foreign exchange system.

Stable Growth but High External USD Exposure

Tanzania’s external debt stock stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from December 2024. The government holds 76.4% (USD 25,896.7 million) of the total debt, while the private sector’s share dropped to 23.6% (USD 8,004.7 million). Most of the debt was allocated to transport & telecommunications (21.0%), budget support (19.9%), and social welfare & education (19.9%). The US dollar remains the dominant borrowing currency (68.1%), increasing vulnerability to exchange rate fluctuations, while the Euro (16.1%) and Chinese Yuan (6.3%) provide some diversification.

1. External Debt Stock by Borrower

Total External Debt Declines Slightly

• Tanzania’s total external debt stock (public and private) 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 central government remains the largest borrower, holding 76.4% (USD 25,896.7 million) of total external debt.
• Private sector debt accounts for 23.6% (USD 8,004.7 million).
• Public corporations’ external debt remained negligible at USD 3.8 million.

Breakdown of External Debt by Borrower (January 2025)

What It Means:

✅ The government remains the largest borrower, funding major national projects.
⚠ Private sector external debt is slightly declining, indicating reduced foreign credit access.
✅ Public corporations have minimal debt exposure, reducing government liability risks.

2. Disbursed Outstanding Debt by Use of Funds (Percentage Share)

Debt Allocation Focuses on Transport, Energy, and Social Services

• The largest share of external debt (21.0%) was used for transport and telecommunications projects, reflecting investment in roads, railways, ports, and digital infrastructure.
• Social welfare and education (19.9%) and budget support (19.9%) were the next largest recipients, showing a focus on social development and government financing.
• Energy and mining received 14.3%, supporting projects like electricity generation and mineral development.
• Finance and insurance sector held 4.1%, helping stabilize the financial system.

Breakdown of External Debt by Use of Funds (January 2025, % Share)

What It Means:

✅ Heavy investment in transport and infrastructure projects, supporting economic expansion.
✅ Education and social welfare receive significant funding, showing a commitment to human capital development.
⚠ Lower funding for industries (4.0%) and tourism (1.6%) may slow manufacturing growth and tourism sector development.

3. Disbursed Outstanding Debt by Currency Composition (Percentage Share)

US Dollar Dominates External Debt Portfolio

• 68.1% of Tanzania’s external debt is in US dollars, making it the most dominant currency.
• Euro-denominated debt accounts for 16.1%, reflecting loans from European institutions.
• Chinese Yuan holds a 6.3% share, highlighting China's role in Tanzania’s financing.
• Other currencies make up 9.4%, including debt in Japanese Yen, British Pound, and Special Drawing Rights (SDRs).

Breakdown of External Debt by Currency (January 2025, % Share)

What It Means:

✅ US Dollar exposure is high (68.1%), making debt repayments vulnerable to exchange rate fluctuations.
⚠ A weaker Tanzanian Shilling could increase repayment costs, as most debt is in foreign currency.
✅ Diversified borrowing in Euros and Yuan helps reduce reliance on USD-based financing.

Summary of Key Trends

Economic Implications of Tanzania’s Debt Trends

🔹 Positive Signs:
✅ Controlled external debt (declined by 0.5%), reducing future repayment risks.
✅ Investment in infrastructure and social services supports long-term development.
✅ Diversification in borrowing currencies (Euro, Yuan) helps manage exchange rate risks.

🔸 Challenges:
⚠ High USD-denominated debt (68.1%) exposes Tanzania to exchange rate volatility.
⚠ Private sector external borrowing is declining, which may slow business expansion.
⚠ Lower funding for industries and tourism could impact long-term diversification efforts.

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

1. Government Continues to Dominate Borrowing

• 76.4% of total external debt (USD 25,896.7 million) belongs to the government, showing its continued reliance on external financing for public projects.
• Private sector debt declined to 23.6% (USD 8,004.7 million), meaning businesses are borrowing less from foreign sources.

What it Means:

✅ Government financing is focused on long-term national development projects like roads, energy, and education.
⚠ Private sector borrowing is shrinking, which may slow business expansion and foreign investment.

2. Debt is Primarily Funding Infrastructure & Social Development

• 21.0% of external debt is invested in transport & telecommunications, showing a focus on infrastructure expansion (roads, ports, railways, ICT).
• 19.9% of debt is used for budget support, meaning the government relies on external financing to cover operational expenses.
• 19.9% is allocated to social welfare & education, ensuring investment in human capital development.

What it Means:

✅ Tanzania is prioritizing economic growth by investing in transport & telecommunications.
✅ Social welfare & education funding supports long-term workforce development.
⚠ High reliance on external budget support (19.9%) could lead to fiscal risks if future financing decreases.

3. Tanzania’s Debt is Highly Exposed to US Dollar Risk

• 68.1% of total external debt is in US dollars, making Tanzania vulnerable to exchange rate fluctuations.
• 16.1% of debt is in Euros, reducing some risk from USD dependency.
• 6.3% is in Chinese Yuan, reflecting China’s growing role in Tanzania’s financial partnerships.

What it Means:

⚠ A weaker Tanzanian Shilling will increase the cost of debt repayments due to heavy USD exposure.
✅ Diversification into Euros & Yuan helps reduce reliance on the US dollar, though the impact is still small.

Overall Economic Implications

🔹 Positive Signs:
✅ Debt levels are stable, with a 0.5% decline in total external debt.
✅ Strong investment in infrastructure & education supports long-term growth.
✅ Some currency diversification helps manage exchange rate risks.

🔸 Challenges:
⚠ High reliance on USD (68.1%) makes Tanzania vulnerable to currency fluctuations.
⚠ Declining private sector borrowing may slow economic diversification and job creation.
⚠ Heavy dependence on external budget support (19.9%) could create fiscal pressures if funding is reduced.