In September 2025, Tanzania’s fiscal landscape showed a mix of resilient revenue mobilization and slower-than-planned expenditure execution, shaping an overall moderate fiscal deficit of TZS 618.5 billion. Total revenue reached TZS 2,728.1 billion—equivalent to 87.2% of the target—supported largely by tax collections amounting to TZS 2,571.4 billion. However, performance fell short due to weaker import duties, lower corporate taxes from mining companies, and delayed recruitment reducing PAYE inflows. On the expenditure side, total spending stood at TZS 3,346.6 billion, representing 71.9% of the target, with recurrent spending dominating but development spending constrained by slow disbursements and reduced donor flows. This revenue–expenditure pattern reflects a government attempting to maintain fiscal discipline amid external uncertainties and domestic structural inefficiencies, while financing the shortfall through domestic borrowing and concessional foreign loans to support ongoing economic expansion.
1. Central Government Revenues
Key Figures (September 2025)
Total domestic revenue collected: TZS 2,728.1 billion
Breakdown:
Tax revenue: TZS 2,571.4 billion
Non-tax revenue: TZS 156.7 billion
Performance Against Target:
Actual: TZS 2,728.1 billion
Target: TZS 3,126.3 billion
Performance: 87.2% of target
Reasons for Underperformance
Lower-than-expected import duty collection
Decline in corporate tax from mining firms
Lower PAYE due to delays in recruitment
Reduced revenue from oil marketing firms due to stabilized fuel prices
2. Central Government Expenditures
Key Figures (September 2025)
Total government expenditure: TZS 3,346.6 billion
Breakdown:
Recurrent expenditure: TZS 2,073.7 billion
Development expenditure: TZS 1,272.9 billion
Development Expenditure Breakdown:
Locally financed development spending: TZS 590.9 billion
Foreign financed development spending: TZS 682.0 billion
Summary Table — Central Government Revenue & Expenditure (September 2025)
Category
Actual (TZS Billion)
Target (TZS Billion)
Performance (%)
Total Revenue
2,728.1
3,126.3
87.2%
└ Tax revenue
2,571.4
—
—
└ Non-tax revenue
156.7
—
—
Total Expenditure
3,346.6
4,656.3
71.9%
└ Recurrent expenditure
2,073.7
—
—
└ Development expenditure
1,272.9
—
—
└ Local financing
590.9
—
—
└ Foreign financing
682.0
—
—
Fiscal deficit
618.5
—
—
Implications of Central Government Budgetary Operations in September 2025
The data on Tanzania's central government budgetary operations for September 2025, drawn from the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), reveals a fiscal environment characterized by resilient revenue mobilization amid execution challenges on the spending side. This occurs within a context of robust economic growth (6.3% real GDP in Q2 2025), low inflation (3.4%, within 3–5% target), and accommodative monetary policy (CBR at 5.75%, with M3 growth at 20.8% y/y driven by private credit; Section 2.3). The resulting TZS 618.5 billion fiscal deficit (financed via domestic securities and external concessional loans) underscores prudent management but highlights vulnerabilities tied to external factors like commodity prices (mixed trends, e.g., declining oil offsetting rising coffee). Below, I break down the implications across key areas, integrating broader economic ties.
1. Revenue Performance: Resilience with Structural Vulnerabilities
87.2% Achievement (TZS 2,728.1 bn vs. TZS 3,126.3 bn Target): This below-target collection still marks improvement over prior months (as noted in the Review's narrative), buoyed by strong domestic tax streams like VAT on local goods, excise duties, and direct taxes (e.g., income and corporate). Tax revenue dominated at TZS 2,571.4 bn (94% of total), reflecting effective administration and economic activity in growth drivers like agriculture and mining (contributing 1.8% and 1.5% to Q2 GDP, respectively).
Underperformance Drivers: Shortfalls in import duties (linked to stabilized global oil prices, reducing fuel import values; Chart 2.2.5 shows domestic petrol/diesel declines), mining corporate taxes (despite sector growth, possibly due to profit repatriation or lower global metal prices), PAYE (recruitment delays amid labor market tightness), and oil marketing revenues (tied to subdued demand) signal over-reliance on volatile external and commodity-linked sources. Non-tax revenue (TZS 156.7 bn) remained marginal and stable, underscoring the need for diversification (e.g., via fees from services or assets).
Broader Implications:
Positive: Bolsters fiscal sustainability, aligning with EAC/SADC criteria (deficits below thresholds). Supports exchange rate stability (shilling +9.4% y/y appreciation, aiding import competitiveness) and low inflation by avoiding excessive money printing.
Risks: Exposure to global shocks (e.g., renewed trade protectionism) could widen shortfalls, pressuring future collections. Encourages policy focus on broadening the tax base (e.g., digital economy or informal sector) to sustain 6% full-year GDP projection.
71.9% Achievement (TZS 3,346.6 bn vs. TZS 4,656.3 bn Target): Recurrent spending (TZS 2,073.7 bn) held steady, covering essentials like wages, subsidies, and operations—critical for social stability and public service delivery in a low-inflation environment (core inflation at 2.2%). Development outlays (TZS 1,272.9 bn) were robust despite shortfalls, split between local (TZS 590.9 bn) and foreign-financed (TZS 682.0 bn) projects, emphasizing infrastructure in construction (1.1% GDP contribution) and energy (reliable supply as a growth enabler).
Underperformance Drivers: Delays in project execution (procurement bottlenecks), slow fund disbursements, and reduced donor inflows (possibly due to global fiscal tightening; IMF notes widening deficits as risks) hampered full rollout. This echoes broader challenges in capital spending absorption, common in emerging economies.
Broader Implications:
Positive: Balanced composition (recurrent ~62% of total) prevents overheating while directing ~38% to growth-enhancing investments, supporting sectors like mining/quarrying (up due to exports; Section 2.8 preview). Foreign financing (51% of dev spend) leverages concessional terms, keeping debt sustainable.
Risks: Lagged infrastructure could bottleneck long-term growth (e.g., slowing construction momentum) and exacerbate regional disparities (e.g., Zanzibar's external performance). Calls for streamlined procurement and donor coordination to hit annual targets.
3. Fiscal Balance and Financing: Manageable Deficit with Borrowing Pressures
Deficit of TZS 618.5 bn (Commitment Basis): The revenue-expenditure gap reflects fiscal expansion to underpin 6% growth, but at 87.2% revenue vs. 71.9% spending utilization, it highlights absorption inefficiencies rather than profligacy.
Financing Mix: Domestic borrowing (via Treasury bonds/bills) and external concessional loans provide flexibility, avoiding high-cost commercial debt. This aligns with monetary policy's liquidity management (reverse repos absorbing surpluses), preventing spillover to inflation.
Broader Implications:
Positive: Deficit remains "manageable" (as per Review), financed sustainably to complement private credit growth (16.1% y/y). Supports external sector strength (e.g., export-led current account surplus).
Risks: Rising domestic borrowing could elevate yields, feeding into higher lending rates (overall at 15.18% in September, up 0.11 pp; prior analysis). External loans expose to currency risks, though shilling stability mitigates this. Cumulative deficits may strain debt metrics if revenues falter (e.g., from oil price volatility).
4. Macroeconomic and Policy Context from the Review
Synergies with Growth and Stability: These operations reinforce fiscal prudence alongside monetary easing, enabling 6.3% Q2 GDP (agriculture/mining-led) and food stock buildup (570,519 tonnes by NFRA), which curbs food inflation (down to 7.0%). In Zanzibar (Section 3), similar patterns likely aid tourism recovery.
Outlook: Projections for stable inflation (3–5%) and 6% growth assume improved execution. Policy recommendations: Enhance revenue forecasting (e.g., via digital tools), accelerate dev spending, and diversify exports to insulate against shocks.
Category
Actual (TZS bn)
Target (TZS bn)
% Achieved
Key Implication
Total Revenue
2,728.1
3,126.3
87.2%
Resilient tax base supports stability; diversify from commodities.
└ Tax
2,571.4
—
—
Strong VAT/excise/direct; vulnerable to mining/oil fluctuations.
└ Non-Tax
156.7
—
—
Stable but low; potential for growth via fees/dividends.
Total Expenditure
3,346.6
4,656.3
71.9%
Prioritizes recurrent needs; dev delays risk growth drag.
└ Recurrent
2,073.7
—
—
Ensures social spending amid low inflation.
└ Development
1,272.9
—
—
Infra focus aids GDP; foreign aid key but donor-dependent.
Fiscal Deficit
618.5
—
—
Manageable; monitor borrowing to avoid rate pressures.
In conclusion, September 2025's budgetary dynamics imply a fiscally disciplined stance that underpins Tanzania's growth trajectory while navigating execution and external headwinds. Revenue robustness signals economic vitality, but addressing spending delays and revenue volatility is crucial for sustaining momentum into 2026. This balanced approach—echoing the Review's emphasis on prudent policies—positions the economy resiliently against global uncertainties.
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.
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.
