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Zanzibar’s economy grew by 6.2% in 2024, up from 5.8% in 2023, driven by tourism (12.7% growth), trade (7.1% growth), and infrastructure investments. The inflation rate dropped to 3.9%, improving purchasing power, while government revenue reached TZS 1.43 trillion (+5.6%), exceeding targets. However, a budget deficit of TZS 190 billion remains, requiring better expenditure management. Exports grew by 9.8% (TZS 596.2 billion), but import dependence remained high at TZS 2.01 trillion. To sustain growth, Zanzibar must diversify its economy beyond tourism and enhance domestic production to reduce trade imbalances​.

Zanzibar’s economy showed steady growth in 2024, supported by strong tourism recovery, increased trade activities, and improved infrastructure investments. The real GDP growth rate was estimated at 6.2%, up from 5.8% in 2023, driven by expansions in tourism, construction, and agriculture​.

1. GDP Growth and Sectoral Performance

Sectoral Contributions to GDP

SectorGDP Share (%)Annual Growth (%)
Tourism (Hotels & Restaurants)29.5%+12.7%
Trade & Transport18.3%+7.1%
Agriculture, Forestry & Fishing16.8%+4.9%
Construction & Real Estate12.6%+6.2%
Manufacturing & Industry10.2%+5.5%
Public Administration & Services7.4%+3.8%
Financial Services & ICT5.2%+6.1%

Key Observations:

✅ Tourism (29.5% of GDP) remained the backbone of Zanzibar’s economy, recording a 12.7% growth, supported by 1.02 million tourist arrivals (+14.2%).
✅ Trade & transport (18.3% of GDP) benefited from increased imports and port activities.
⚠️ Agriculture (16.8% of GDP) recorded slow growth (+4.9%), affected by unpredictable weather and limited value addition.

2. Inflation and Cost of Living

Implication:
✅ Lower inflation improved purchasing power, benefiting households and businesses.
⚠️ Food price volatility remains a risk, requiring further investment in food security and agro-processing.

3. Government Revenue and Expenditure

Implication:
✅ Higher revenue collection reduces reliance on central government transfers.
⚠️ A budget deficit of TZS 190 billion remains, requiring better expenditure management.

4. Trade and Investment in Zanzibar

Implication:
✅ Higher exports and FDI indicate increased investor confidence.
⚠️ Import dependence remains high, especially in energy and industrial goods.

5. Banking and Financial Services

Implication:
✅ Lower interest rates encourage borrowing and investment.
⚠️ Credit concentration in a few sectors (real estate and trade) increases risks if economic shocks occur.

Key Takeaways

📌 Zanzibar’s economy grew by 6.2%, with tourism (12.7% growth) and trade (7.1% growth) as key drivers.
📌 Inflation remained stable at 3.9%, while government revenue (TZS 1.43 trillion) exceeded targets.
📌 Exports increased by 9.8% (TZS 596.2 billion), but import dependence remains high (TZS 2.01 trillion).
📌 The financial sector is expanding, with private sector credit growing by 10.8%.

To sustain growth, Zanzibar must diversify exports, improve agricultural productivity, attract more investment in manufacturing, and manage public spending efficiently

The economic performance of Zanzibar in December 2024 provides key insights into growth trends, sectoral contributions, fiscal management, and financial stability

1. Zanzibar’s Economy is Expanding, Led by Tourism and Trade

Implication:
✅ Zanzibar’s economy is growing steadily, driven by services and trade.
⚠️ Overreliance on tourism makes the economy vulnerable to external shocks (e.g., global crises, pandemics).

2. Inflation is Under Control, Improving Household Purchasing Power

Implication:
✅ Lower inflation supports economic stability and consumer spending.
⚠️ Food price volatility remains a risk, requiring further investment in local food production.

3. Government Revenue is Improving, but a Fiscal Deficit Remains

Implication:
✅ Improved tax collection reduces dependency on mainland Tanzania.
⚠️ The budget deficit indicates a need for better public spending control and domestic revenue mobilization.

4. Trade and FDI Are Growing, but Import Dependence is High

Implication:
✅ Rising exports and FDI show increasing investor confidence in Zanzibar.
⚠️ High import dependency, especially on petroleum and industrial goods, increases trade vulnerabilities.

5. Banking Sector is Expanding, Encouraging Private Sector Growth

Implication:
✅ More credit availability supports business growth and investments.
⚠️ High credit concentration in real estate and trade may pose risks if the market slows.

Key Takeaways and What Needs to Be Done

📌 Zanzibar’s economy is growing steadily (+6.2%), with tourism (+12.7%) and trade (+7.1%) as key drivers.
📌 Inflation is low (3.9%), supporting household purchasing power and business growth.
📌 Government revenue (TZS 1.43 trillion) is improving, but a budget deficit (TZS 190 billion) remains a challenge.
📌 Trade and FDI are increasing, but import dependence on petroleum and industrial goods is high.
📌 The financial sector is expanding, with private sector credit growing by 10.8%.

Policy Recommendations:

🔹 Diversify the economy beyond tourism by promoting manufacturing, agriculture, and ICT.
🔹 Strengthen food security to reduce reliance on imported food items.
🔹 Enhance fiscal discipline to control the budget deficit and ensure sustainable spending.
🔹 Invest in renewable energy to reduce reliance on imported petroleum.
🔹 Support financial inclusion to expand credit access beyond real estate and trade.

Zanzibar’s economic outlook remains positive, but diversification and fiscal discipline will be key to sustaining long-term growth​

Tanzania’s interest rates in October 2024 reflect a strategic approach to balancing economic growth, inflation control, and financial stability. With lending and deposit rates showing slight upward adjustments, the monetary policy focuses on managing liquidity while encouraging savings and investments. These changes highlight a dynamic financial environment shaped by rising demand for credit, competitive banking practices, and government financing needs.

1. Bank Lending Rates

Overall Lending Rate:

Negotiated Lending Rate:

2. Deposit Rates

Overall Deposit Rate:

Negotiated Deposit Rate:

Savings Deposit Rate:

3. Time Deposit Rates (TDRs)

TDRs reflect variations by term maturity:

4. Money Market Rates

Rates for short-term interbank lending:

Observation:

Rates increase with tenure, reflecting higher compensation for longer-term liquidity risks.

5. Government Securities Rates

Treasury Bills:

Treasury Bonds:

Analysis:

Long-term bonds (15–25 years) offer premium rates to compensate for inflation and credit risk.

6. Policy Rates

Key Central Bank Rates:

Role:

These rates steer monetary policy, controlling inflation and supporting financial stability.

7. Interest Rate Spread

Monetary Policy Context

  1. Economic Growth: Lending rates are kept relatively stable to support borrowing for businesses and individuals.
  2. Savings Incentives: Rising deposit rates ensure savers benefit in a tightening liquidity environment.
  3. Liquidity Management: Money market rates are calibrated to address short-term needs while ensuring interbank confidence.
  4. Government Financing: Treasury instruments provide consistent funding for public spending.
  5. Stability: Central Bank policy rates reflect a balanced approach to inflation and growth.

Overall Trend:
The upward movement in rates signals tighter liquidity in the banking system while still providing opportunities for investment and savings.

The breakdown of Tanzania's interest rates as of October 2024 provides valuable insights into the economic and monetary policy environment.

1. Tightening Liquidity Conditions

2. Balanced Monetary Policy Approach

This balance shows the central bank's dual objective: controlling inflation without stifling growth.

3. Encouragement of Savings

4. Government Borrowing Trends

5. Encouraging Short-Term Investments

6. Competitive Banking Landscape

7. Support for Economic Growth

Conclusion

The data reflects a cautious yet supportive monetary policy environment in Tanzania. The central bank is working to balance inflation, liquidity, and economic growth. Higher deposit rates, coupled with stable lending rates, aim to encourage savings, support investments, and manage liquidity. Meanwhile, the competitive banking sector and government securities market provide diverse opportunities for savers and investors alike.

The upward trend in most rates suggests careful management of tighter liquidity conditions, hinting at economic resilience and stability despite potential external pressures like global interest rate hikes or inflation risks.

Tanzania has successfully sustained inflation below the medium-term target of 5%, reflecting strong economic policies and favorable supply conditions. Headline inflation eased to 3.0% in October 2024, supported by declining energy costs, stable food prices, and prudent monetary management. This stability highlights Tanzania's resilience to global shocks and its commitment to fostering a predictable economic environment for growth and investment.

Headline Inflation

Energy and Fuel Inflation

A notable decline of 1.8 percentage points in energy and fuel inflation due to easing pump prices in the domestic market.

Core Inflation

Food Inflation

Factors Supporting Stability

1.                Improved Production:

2.                Price Trends:

3.            Global Wheat Prices:

Contributing Factors for Low Inflation

  1. Good Food Supply Conditions:
    • Favorable weather and input supply ensured adequate harvests.
  2. Moderation in Global Commodity Prices:
    • Decline in crude oil prices:
      • Brent Crude: $85/barrel (Q3 2024) vs. $90/barrel (Q2 2024).
  3. Prudent Monetary Policy:
    • Bank of Tanzania maintained a neutral stance to prevent inflationary pressures.
  4. Stable Exchange Rate Management:
    • Exchange rate stability against the USD (approximately 2,350 TZS/USD) prevented import cost escalations.

Overall Inflation Trend

Tanzania's inflation developments reveal the following insights:

1. Economic Stability and Effective Policy Management

2. Control Over Volatile Sectors

3. Underlying Inflation Pressures are Contained

4. Benefits of Global Market Dynamics

5. Favorable Domestic Conditions

6. Positive Signals for Growth

Conclusion

Tanzania's inflation trends in 2024 demonstrate a well-managed economy with robust mechanisms to ensure price stability. This reflects:

  1. Effective policy implementation.
  2. Resilience to external shocks.
  3. Sustained growth potential through stable economic conditions.

In September 2024, Tanzania's bank lending rate rose slightly to 12.92% from 12.79% in August, reflecting cautious adjustments in monetary policy. This rate, slightly below the long-term average of 13.09%, highlights the Bank of Tanzania's efforts to manage inflation and stabilize the economy while maintaining a moderately high cost of borrowing for businesses and consumers.

1. Current Trends (2024)

2. Historical Averages (2003-2024)

3. Extreme Values

4. Insights from Changes

5. Implications for Borrowers and Businesses

The bank lending rate data for Tanzania tells several important economic and monetary policy stories:

1. Monetary Policy Trends

2. Credit Environment

3. Historical Context

4. Implications for Economic Growth

5. Signals to Stakeholders

Tanzania recorded a 2.5% increase in food prices in October 2024, significantly lower than the East African average and well below high-inflation countries like Kenya (4.3%) and Burundi (22.5%). This marks a notable achievement compared to its historical average of 7.79% (2010–2024). Projections indicate further declines to 1.4% in 2025 and 1.1% in 2026, underscoring Tanzania's agricultural resilience and effective economic policies. In a continent where food inflation can reach extremes like Zimbabwe’s 105%, Tanzania stands out as a model for regional food price stability.

Position in East Africa

Among East African countries, Tanzania exhibits relatively low food inflation, significantly outperforming nations like Kenya (4.3%) and Burundi (22.5%):

Tanzania's stability in food inflation reflects effective supply chain management, moderate climate impacts, and improved food production efforts.

Position in Africa

In a broader African context, Tanzania's 2.5% food inflation is below the regional average, where some countries experience double-digit inflation:

Key Observations

Opportunities for Tanzania

Insights from Tanzania's Food Inflation and Comparative Data

  1. Economic Stability in Tanzania
    • Low food inflation (2.5%) compared to regional and continental peers indicates price stability in essential commodities.
    • Reflects resilience in food supply chains, stable production, and moderate external pressures, such as global commodity price fluctuations.
  2. East Africa Advantage
    • Tanzania outperforms key regional players like Kenya (4.3%) and Burundi (22.5%), suggesting that the country is effectively managing factors like climate risks and import dependencies.
    • The negative inflation in Rwanda (-5.8%) and Uganda (-2.1%), although better, may signify deflation or suppressed demand, which could indicate potential economic slowdowns.
  3. Africa-Wide Comparison
    • Tanzania's inflation trends align more with stable economies like Mauritania (1.6%) and Cape Verde (2.4%), rather than volatile nations like Nigeria (39.16%) or Zimbabwe (105%).
    • This positions Tanzania as a relatively stable market within the African food sector.
  4. Positive Outlook
    • Projected declines in food inflation to 1.4% (2025) and 1.1% (2026) indicate strong economic policy frameworks and growth in agricultural productivity.
    • This stability provides an opportunity for Tanzania to attract investment in agri-business and position itself as a regional food supplier.
  5. Challenges and Caution
    • While inflation is low, Tanzania must maintain focus on:
      • Weather impacts: East Africa remains prone to droughts and floods.
      • Global pressures: Rising global oil prices could indirectly affect food costs.
      • Demand management: Ensuring food inflation reflects healthy demand, not oversupply or stagnation.
  6. Broader Implications
    • For households: Low inflation means affordable food, reducing pressure on low-income families.
    • For investors: A stable inflation environment signals reduced risks for agricultural investments.
    • For policymakers: A need to ensure inflation reductions are sustainable, balancing supply and demand without undercutting farmer earnings.

Conclusion

Tanzania's food inflation trends suggest economic stability, policy effectiveness, and potential for growth in the agricultural sector. It also positions the country as a leader in regional food security, capable of influencing East Africa's economic trajectory.

Tanzania’s inflation rate of 3.0% in October 2024 highlights its remarkable economic stability, outperforming many African countries. With projections of further decline to 2.5% by 2026, Tanzania’s prudent fiscal and monetary policies position it as a competitive and attractive destination for investment and trade in East Africa and beyond.

Tanzania's Inflation Overview:

  1. Current Rate: 3.0% (October 2024), a decrease from 3.1% in September 2024.
  2. Historical Context:
    • Average (1999-2024): 6.28%.
    • Peak: 19.8% in December 2011.
    • Lowest: 3.0% in November 2018.
  3. Projections:
    • End of 2024: Expected to remain at 3.0%.
    • 2025: Projected at 2.7%.
    • 2026: Projected at 2.5%.

Comparison with East African Countries:

Comparison with African Countries:

Insights:

  1. East Africa: Tanzania maintains a stable inflation rate within the region, performing better than countries like Ethiopia and Sudan, which face double-digit inflation.
  2. Africa: Tanzania's inflation rate is among the lowest in the continent, reflecting stable monetary and fiscal policies compared to nations like Zimbabwe and Nigeria that struggle with high inflation.
  3. Global Trends: The current inflation rate in Tanzania aligns with global trends of decreasing inflation, especially in Emerging Markets and Developing Economies (EMDEs).

Strategic Outlook for Tanzania:

  1. Maintaining low inflation enhances Tanzania’s economic attractiveness for investment.
  2. Continued focus on fiscal discipline and prudent monetary policy will help Tanzania sustain inflation stability, bolstering economic growth amidst global uncertainties.

Implications of Tanzania's Inflation Trends and Comparisons

  1. Economic Stability:
    • Tanzania’s inflation rate of 3.0% reflects macroeconomic stability. It signals controlled price levels and effective management of monetary policy by the Bank of Tanzania.
  2. Regional Competitiveness:
    • In East Africa, Tanzania’s inflation is comparable to Kenya (2.7%) and Uganda (2.9%), showing it is performing well within the region.
    • This makes Tanzania attractive for investments and trade compared to neighboring countries facing higher price volatility.
  3. Low Inflation Advantages:
    • Consumers: Stable inflation preserves purchasing power, ensuring that basic goods and services remain affordable.
    • Businesses: Predictable price levels reduce uncertainty, encouraging investment and expansion.
    • Government: Low inflation helps manage public finances better as borrowing costs remain under control.
  4. Comparison to Africa:
    • Tanzania is among the low-inflation countries in Africa, significantly better than nations like Nigeria (33.88%) or Zimbabwe (57.5%).
    • This highlights Tanzania as a model for price stability in Sub-Saharan Africa, enhancing its reputation among global investors.
  5. Policy Success:
    • Sustained low inflation reflects effective fiscal policies, stable exchange rates, and good food supply management, vital for keeping inflation in check.
  6. Projection Implications:
    • Future Outlook: Inflation is projected to decrease further to 2.7% in 2025 and 2.5% in 2026, indicating continued economic resilience.
    • Lower inflation will strengthen Tanzania’s position in the global market, offering confidence to foreign investors.
  7. Risks to Watch:
    • External shocks like global oil price hikes or disruptions in food supply could increase inflation.
    • Regional instability or currency fluctuations could also affect inflation dynamics.

Conclusion

Tanzania’s controlled inflation tells a story of economic discipline, regional competitiveness, and future potential. It positions the country as a stable and attractive hub for business and investment in Africa.

Balancing Growth Amid Persistent Challenges

The October 2024 IMF report on Sub-Saharan Africa’s economic outlook reveals a steady yet cautious path forward, with growth projected at 3.6% in 2024 and inflation expected to ease from 18.1% to 12.3% by 2025. While fiscal policies have stabilized the region’s debt-to-GDP ratio at 58%, the high cost of debt servicing – consuming over 20% of revenues in many countries – limits resources for development. With rising food prices driving social unrest, and climate shocks intensifying, the report underscores the need for balanced policy adjustments. Sustained progress will depend on targeted reforms, social support mechanisms, and external funding to support economic resilience across diverse economies.

  1. Growth and Inflation:
    • Real GDP growth for the region is projected at 3.6% in 2024, with expectations to slightly rise to 4.2% in 2025. Resource-intensive countries grow slower than others, with oil exporters facing the most challenges.
    • Inflation has seen a decline due to policy tightening, with the region's headline inflation forecasted to reduce from 18.1% in 2024 to 12.3% in 2025.
    • Resource-intensive countries like Tanzania are forecasted to grow below the regional average, constrained by tight external financing conditions and structural weaknesses affecting the business environment​.
  2. Debt and Fiscal Balance:
    • The median public debt-to-GDP ratio stabilized at 58% in 2024. However, debt service burdens remain high, consuming over 20% of revenues in a quarter of the countries, leading to reduced resources for development spending.
    • For Tanzania, debt sustainability remains a concern as public debt continues to limit fiscal space for growth-stimulating investments​.
    • Fiscal consolidation has been a focus, with a reduction in the fiscal deficit by 1.3 percentage points of GDP across many countries in 2023. More countries are expected to further reduce deficits by 0.4 percentage points in 2024.
    • Tanzania is expected to see additional consolidation in 2024, focusing on expanding tax revenues and controlling expenditures to stabilize the debt level. However, tight fiscal conditions pose challenges for financing social and infrastructure projects essential for sustainable development​
  1. External Position:
    • Median current account deficit is projected to narrow by 0.7 percentage points of GDP in 2024, helped by fiscal consolidation and adjustments in exchange rates.
  2. Social and Political Pressures:
    • Social unrest is a rising concern due to high poverty, job scarcity, and inflation, especially in countries like Nigeria and Kenya. Food prices have risen sharply, with food price indexes up significantly since 2019.
    • Tanzania, like other countries, faces potential social unrest if economic conditions do not improve, particularly for unemployed youth and low-income households impacted by rising costs. Effective fiscal management and equitable resource allocation are critical to addressing these pressures​
  3. Key Risks:
    • Climate risks, social unrest, and global market volatility are major threats. Political fragility, seen in the rising number of coups and conflicts, further complicates policy implementation.
    • Tanzania faces heightened risks from climate-induced events such as droughts, affecting agriculture and food security, and contributing to inflation pressures. The IMF notes that climate adaptation will require significant resources, impacting budget allocation​
    • An IMF model suggests that a 150-basis-point rise in sovereign risk premiums could reduce growth by 0.7 percentage points in 2025–26, worsening investment and growth (AFRMOD model simulation).
    • Debt and Financing: External financing remains tight, with rising interest rates and geopolitical tensions reducing access to affordable debt. Tanzania, with moderate reserves, may experience increased borrowing costs, further stressing its fiscal space.
    • Global Market Risks: Regional exposure to global financial fluctuations adds to uncertainty, especially with tightening US monetary policy potentially increasing debt servicing costs for Tanzania. Additionally, regional conflicts and commodity price fluctuations may destabilize Tanzania's economic outlook​
  4. Policy Recommendations:
    • Tanzania’s need for continued fiscal discipline, inflation control, and resilience to social and climate-related pressures to stabilize and stimulate long-term growth in an increasingly challenging environment.
    • Policymakers are advised to focus on stabilizing prices, ensuring debt sustainability, and building social protection frameworks. Measures include broadening tax bases, improving governance, and enhancing social inclusiveness to gain public support for reforms.

These efforts aim to foster resilience and inclusive growth but require balancing economic stabilization with social acceptance amid complex challenges.

The October 2024 Regional Economic Outlook for Sub-Saharan Africa from the IMF provides a mixed view of progress and challenges for economic stability and growth across the region.

  1. Economic Progress with Persistent Vulnerabilities:
    • Growth in Sub-Saharan Africa remains steady at 3.6% but lacks momentum. Inflation is coming down in most countries due to stricter monetary policies, yet remains high in oil-dependent and resource-intensive economies.
    • Fiscal efforts have improved debt stability, with debt-to-GDP ratios holding steady around 58%. However, the debt burden still strains public finances, with high debt servicing costs cutting into funds available for development.
  2. Social and Political Pressures:
    • The region faces growing social unrest driven by high inflation, especially in food prices, job scarcity, and widespread poverty. These pressures make reform implementation difficult for policymakers, particularly in fragile countries with limited resources.
  3. Climate and Global Risks:
    • Climate change impacts, including droughts and floods, severely threaten food security and economic stability. Additionally, global financial market volatility and geopolitical tensions pose risks to financing and growth.
  4. Strategic Recommendations:
    • The IMF recommends that policymakers pursue balanced economic policies, carefully manage inflation, and focus on debt sustainability. Building stronger social safety nets and effective communication strategies are critical to maintaining public support for necessary reforms.
  5. Path Forward with IMF Support:
    • The IMF emphasizes its commitment to aiding the region through concessional financing and capacity-building initiatives. Given the tough financing environment, it highlights the importance of external support and sustainable development strategies tailored to each country’s specific needs.

In summary, while Sub-Saharan Africa shows resilience in some areas, challenges like high inflation, limited financing, climate impacts, and social unrest highlight the need for carefully coordinated reforms that balance economic stability and social needs.

In October 2024, Tanzania’s economy showcased resilience and stability, with a GDP growth rate of 5.3% for Q2, fueled by trade (19.8%), financial services (11.4%), and transport (8.6%). Inflation on the Mainland remained low at 3.1%, while Zanzibar's inflation, at 5.1%, also declined, indicating effective price control across regions. Government revenue collection was robust, reaching TZS 2,539.3 billion in August, nearly 99% of the target, though expenditure exceeded revenue, adding to a national debt of USD 45.05 billion. Exports rose by 13.4%, driven by tourism and gold, contributing to a narrower current account deficit of USD 2.36 billion and foreign reserves sufficient for 4.4 months of imports, signaling economic resilience despite external pressures.

  1. Inflation:
    • Mainland Tanzania: The 12-month headline inflation rate was 3.1% in September 2024, slightly lower than previous months, influenced by food and non-core factors.
    • Zanzibar: Headline inflation in September 2024 was 5.1%, down from 5.6% in August. Food and non-food inflation were primary contributors, with core inflation at 3.8%​.
  2. Interest Rates:
    • The overall lending rate in Tanzania increased to 15.53% in September 2024, with a negotiated lending rate at 12.92%.
    • Deposit Rates saw a rise, with the average overall deposit rate at 8.20%. Short-term lending rates narrowed to 6.49% due to banking competition​.
  3. Monetary Policy:
    • The Bank of Tanzania kept the Central Bank Rate (CBR) at 6% for Q3 2024. However, the 7-day interbank cash market rate reached 8.58%, reflecting higher seasonal cash demands​.
  4. Financial Markets:
    • Treasury Securities: The weighted average yield for Treasury bills rose to 10.85%, with government bond yields on the rise as well.
    • Foreign Exchange: The Tanzanian Shilling depreciated by 10.1% year-on-year, trading at approximately TZS 2,727 per USD​.
  5. Government Budgetary Operations:
    • Revenue: In August 2024, total government revenue reached TZS 2,539.3 billion, representing 98.8% of the target. Tax revenue amounted to TZS 2,064.8 billion.
    • Expenditure: Total spending in August was TZS 3,219.8 billion, with TZS 1,945.6 billion in recurrent expenditure​.
  6. Debt Developments:
    • Total National Debt: Stood at USD 45.05 billion in September 2024, with external debt making up 73%. The domestic debt decreased to TZS 32.6 trillion, dominated by Treasury bonds (78.9%)​.
  7. External Sector Performance:
    • The current account deficit was USD 2.36 billion in the year ending September 2024, down from USD 3.39 billion in 2023.
    • Exports: Goods and services exports totaled USD 15.35 billion, up by 13.4%, driven by increased tourism and commodity exports, notably gold​.
  8. Economic Performance of Zanzibar:
    • GDP Growth: Zanzibar’s GDP grew by 4.6% in Q2 2024, with notable growth in the trade, financial services, and construction sectors.
    • Budgetary Operations: Zanzibar’s government revenue collections reached TZS 56.2 billion in August, meeting 88.6% of its target. Tax revenues were the largest contributor at TZS 48.7 billion​.

The economic data reflects a generally stable and resilient economy but highlights areas of both strength and concern

  1. Inflation Control:
    • The controlled inflation rates in both Mainland Tanzania and Zanzibar, particularly Mainland’s low 3.1%, indicate effective management of price stability amid global inflationary pressures. Zanzibar’s slightly higher rate of 5.1% reflects regional differences but still aligns with manageable levels. This stability in prices suggests consumers are less impacted by volatile prices, particularly for essential goods.
  2. Interest Rates and Monetary Policy:
    • The increase in lending rates to 15.53% and the slight narrowing of the deposit-lending spread indicates tighter credit conditions, likely aimed at controlling inflation. The Bank of Tanzania’s cautious monetary policy with the 6% Central Bank Rate (CBR) signals an intent to stabilize liquidity in the economy, especially considering seasonal demands. Higher lending rates, however, may slightly discourage borrowing and investment, especially in small enterprises.
  3. Government Revenue and Spending:
    • The government nearly met its revenue target in August (98.8%), showing strong tax compliance and collection efficiency. However, with total spending surpassing revenue, there is a budget deficit, indicating reliance on borrowing. Prioritizing essential expenditure and fiscal consolidation efforts reflects a balanced approach to managing resources.
  4. Debt Management:
    • The national debt reaching USD 45.05 billion (with 73% as external debt) is a point of concern. While manageable in the short term, it emphasizes Tanzania’s reliance on foreign funding, which could be risky if global financing conditions worsen. However, the controlled growth in domestic debt reflects prudent management of internal resources and risk.
  5. External Sector Performance and Trade:
    • Tanzania’s current account deficit narrowed significantly, supported by a strong export performance, particularly in tourism and commodity exports (e.g., gold). The tourism sector's robust recovery and increased exports contribute positively to foreign exchange reserves, which remain above the 4-month import benchmark. This performance strengthens Tanzania’s economic resilience and external stability, though the shilling’s depreciation signals pressures on the currency.
  6. Zanzibar's Economic Health:
    • Zanzibar’s growth in sectors like trade, financial services, and construction suggests diversification and steady economic development. The revenue collection in Zanzibar reaching 88.6% of its target also reflects improved fiscal management, though budget deficits still exist. This performance points to Zanzibar’s gradual but steady economic progression in line with Mainland Tanzania, driven by tourism and trade.
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