The Tanzania shilling (TZS) demonstrated remarkable resilience throughout 2025, appreciating by 9.5% year-on-year against the USD from October 2024 to October 2025, and sustaining firmness into December amid robust foreign exchange (FX) inflows. Key drivers included record gold exports (up 38.9% YoY to USD 2.8 billion in the first 10 months), tourism receipts (USD 2.8 billion YTD, +28% arrivals), cash crop surges (cashews +15%, tobacco +12%), and proactive Bank of Tanzania (BoT) interventions via forward sales and reserve management (net FX reserves at USD 6.2 billion, covering 4.7 months of imports). As of December 13, 2025, the shilling traded at approximately TZS 2,463 per USD, reflecting a further 0.5% monthly appreciation from November's average of TZS 2,455, per recent market data. This marks a stark reversal from the 8.9% depreciation in the prior year, aligning with EAC convergence criteria and bolstering Tanzania's external position.

Economic Implications: The shilling's strength enhances import affordability, curbing imported inflation (e.g., fuel costs down 12.5%) and supporting 3.4% headline inflation in November 2025, well within the BoT's 3-5% target. This stability fosters investor confidence, evidenced by FDI inflows of USD 1.5 billion in Q3 2025 (up 10% YoY), and facilitates lower borrowing costs (Eurobond yields at 6.8%). For the broader economy, it underpins 6.2% GDP growth projections for FY2025/26 by easing production costs in manufacturing (3.5% sector expansion) and agriculture (25.6% credit growth), while amplifying export competitiveness under AfCFTA—potentially adding USD 1 billion in intra-regional trade. However, prolonged appreciation risks eroding non-gold export margins (e.g., horticulture down 5%), highlighting needs for diversification to sustain 7% medium-term growth, per IMF's 2025 Article IV. Read More: What's Next for Tanzania's Economy? Shilling Stability in 2026 Amid Post-Election Turbulence

1.1 Exchange Rate – Month-End Values

Month-end rates show consistent firmness, with a cumulative 9.0% appreciation from October 2024 through December 2025.

Source: BoT and market data (Xe.com for Dec). Trends: The shilling peaked at TZS 2,442.8 in September 2025 amid gold surges, with minor volatility in Q4 tied to seasonal imports.

1.2 Monthly Average Exchange Rate (Oct 2025)

• TZS 2,460.54 per USD (October 2025 average), appreciating 0.5% from September's TZS 2,471.69.
• Updated December 2025 (YTD average): TZS 2,480 per USD, reflecting sustained inflows (tourism +30.6% in November).

Annual Performance:

• 9.5% appreciation (October 2024 to October 2025), extending to ~9.0% through December.
• BIG reversal from 8.9% depreciation a year earlier, driven by current account surplus narrowing to 2.4% of GDP.

Economic Implications: This appreciation reduces external vulnerabilities, stabilizing reserves (up 14% YoY) and supporting monetary easing (CBR at 5.75%). It lowers input costs for 70% import-dependent industries, boosting manufacturing productivity and contributing 0.8% to GDP via cost savings, per World Bank 2025 estimates. Yet, it pressures exporters (e.g., 5% margin squeeze in cashews), potentially slowing rural incomes (agri 24% of GDP) unless offset by value addition.

2. Tanzania Inflation Performance (2024–2025)

Inflation remained anchored within the 3-5% target throughout 2025, averaging 3.3% year-to-date through November, supported by ample food stocks (NFRA maize reserves at 593,485 tonnes in October), stable global energy prices (Brent at USD 70/barrel), and the shilling's firmness curbing pass-through effects. Headline eased to 3.4% in November 2025 from 3.5% in October, with core at 2.3% (up slightly from 2.1%), reflecting domestic supply dynamics rather than external pressures. Preliminary December data suggests stability at ~3.4%, per NBS trends.

Economic Implications: Low inflation preserves purchasing power for 60 million consumers, sustaining 3.5% private consumption growth and aligning with EAC/SADC benchmarks for regional integration. It enables BoT's accommodative stance, facilitating 16.1% private credit expansion and 6% GDP momentum. Positively, it mitigates poverty risks (26.4% rate), but food volatility (7.4% in October) underscores agri-reform needs—e.g., irrigation investments could shave 1-2pp off inflation, unlocking 0.5% additional growth via stable supplies, as noted in Deloitte's 2025 Outlook.

2.1 Headline Inflation Trends

Source: NBS and BoT; November easing from food moderation.

2.2 Food & Non-Food Inflation (Oct 2025)

Updated November 2025: Food 6.6% (down from 7.4%), non-food 2.1% (slight rise to 2.1%).

Economic Implications: Food's dominance (28.2% CPI weight) amplifies rural-urban linkages, but easing to 6.6% in November supports harvest-led recovery, adding 1% to agri GDP. Non-food stability aids urban manufacturing (e.g., cheaper inputs), but persistent food pressures risk 0.5% welfare loss for low-income households (60% budget on food).

3. Tanzania Shilling vs Inflation – Combined Table

This table illustrates the symbiotic relationship: Shilling strength offsets potential inflationary spillovers.

Source: BoT/NBS; updated with November data.

Economic Implications: The inverse dynamic (appreciating TZS vs. subdued non-food CPI) shields 40% of imports from passthrough, stabilizing energy/transport costs and contributing 0.7% to GDP via lower logistics expenses. This convergence supports fiscal space (deficit at 3.5% GDP), but food-exchange disconnect highlights supply-side vulnerabilities—addressable via USD 500M agri-investments for 1pp inflation reduction.

4. How the Shilling Affected Inflation

4.1 Stronger Shilling Helped Reduce Imported Inflation

The shilling's 9.5% appreciation in 2025 made imports 8-10% cheaper in local terms, particularly fuel (down 20%), machinery (-15%), fertilizers (-10%), and transport equipment, keeping non-food inflation at ~2.4%.

Evidence: BoT notes: “The shilling appreciated … and remained firm against other currencies,” aiding energy stability. Updated: November non-food at 2.1%, per NBS.

Economic Implications: Cheaper imports lower production costs, boosting competitiveness (exports +15.2%) and manufacturing margins (5.2% credit growth). This eases 15% of CPI (energy/utilities), supporting urban consumption and 2% GDP from services, but risks Dutch disease in non-tradables.

4.2 Inflation Remained Within Target Because of Currency Stability

Headline stayed 3-5%, meeting EAC/SADC criteria, with BoT's policy anchoring expectations.

Quote: “Inflation remained stable … supported by prudent monetary policy and stable exchange rate.”

Economic Implications: Anchored expectations reduce volatility premiums, lowering lending rates (15.19%) and enabling 21.5% M3 growth. Aligns with 6% GDP, per IMF, by fostering savings (household rate +1pp) and investment.

4.3 October 2025 Inflation Rise Was Not Due to Currency Weakness

Uptick to 3.5% from food staples (maize/rice +10-15% in pockets), not FX; November eased to 3.4% with supplies.

Economic Implications: Isolates inflation to domestic factors, allowing targeted interventions (e.g., NFRA releases), preserving FX buffers for reserves (USD 6.2B). Mitigates 0.3% growth drag from food shocks, but underscores climate resilience needs (droughts cost 1% GDP annually).

5. Key Insights

(1) The shilling appreciated strongly in 2025: Helped keep inflation low (3.4% Nov) by cheapening imports. Implication: Bolsters reserves, funding infra (1.2% GDP boost from hydropower).

(2) Inflation rose slightly due to food prices—not currency weakness: 7.4% in Oct, easing to 6.6% Nov. Implication: Highlights agri-supply focus; reforms could add 0.5% growth via stability.

(3) Non-food inflation remained low because a stronger shilling reduced import costs: Fuel/construction/pharma/transport inputs down 10-20%. Implication: Enhances industrial efficiency, supporting 16.1% credit and job creation (200K in manufacturing).

(4) Monetary and fiscal coordination supported both shilling stability and low inflation: CBR 5.75% ensured liquidity/FX. Implication: Deepens integration (AfCFTA USD 1B potential), but requires diversification to counter gold dependency (50% exports).

6. Summary Narrative

The Tanzania shilling strengthened notably in 2025, appreciating by 9.5% annually through October and holding firm at ~TZS 2,463/USD in mid-December, fueled by FX inflows from gold, tourism, and crops alongside BoT interventions. This exchange rate stability was pivotal in maintaining inflation within the 3-5% target, with headline easing to 3.4% in November from October's 3.5% peak. While food inflation (6.6% in November) drove mild pressures from domestic supplies, non-food components stayed subdued (~2.1%) thanks to cheaper imports, exemplifying a favorable exchange-rate–inflation interplay. Economically, this dynamic underpins 6%+ growth by stabilizing costs, enhancing reserves, and fostering investment, though agri-diversification remains key to long-term resilience amid global uncertainties.

In October 2025, Tanzania’s government securities market demonstrated high activity and liquidity, with Treasury bills (T-bills) and Treasury bonds (T-bonds) auctions attracting strong oversubscription amid ample banking sector liquidity (M3 growth at 21.5% YoY). Total issuance reached TZS 359.4 billion (TZS 128 billion in T-bills, TZS 231.4 billion in T-bonds), financing 15% of the monthly budget deficit and supporting domestic debt at TZS 38,114.8 billion. Investor participation was led by commercial banks (35% holdings) and pension funds (16.4%), reflecting confidence in sovereign paper amid stable inflation (3.5%) and shilling appreciation (9.5% YoY). As of December 13, 2025, the market remains robust, with November auctions (e.g., T-bill No. 1188 on Nov 19 yielding ~6.35%, up slightly from October's 6.27%) continuing oversubscription trends, per BoT data. This activity aligns with the FY2025/26 issuance calendar, targeting TZS 20-25 trillion in bonds to fund infrastructure (28% budget share).

Economic Implications: The liquid market enables low-cost fiscal financing (average yields 6-12%), keeping debt service at 6.5% of budget and public debt-to-GDP at 49.6%—below EAC's 55% threshold—thus preserving space for growth-oriented spending (e.g., USD 3.5 billion hydropower adding 1.2% to GDP). Strong demand signals financial deepening (market size ~15% GDP), crowding-in private investment via benchmark yields, but heavy bank exposure (70% holdings) risks transmission of liquidity shocks to credit (16.1% YoY growth), potentially slowing SME lending and 0.5% of projected 6.2% GDP expansion if yields spike, per IMF 2025 analysis. Overall, it bolsters monetary-fiscal coordination, anchoring inflation and supporting 4.7-month reserve cover. Read More: Tanzania Liquidity Strengthens Markets

1.1 Treasury Bills (T-Bills)

Two T-bill auctions were conducted in October 2025 (Nos. 1185 and 1186 on Oct 8 and 22), with 364-day maturities dominating (70% allocation). Oversubscription reflected liquidity surplus from remittances (USD 579 million YoY) and exports.

Observation: Auctions oversubscribed by 84% (bids 1.84x offer), driven by banks seeking short-term, risk-free assets amid 7-day interbank rates at 6.28%. Yield uptick (24 bps) tied to seasonal demand, not stress.

November 2025 Update: Auctions 1187 (Nov 5) and 1188 (Nov 19) raised TZS 250 billion combined, with oversubscription at 78% and WAY at 6.35% (mild rise), per BoT results. December auction (No. 1189, Dec 3) targeted TZS 180 billion, yielding ~6.40%.

Economic Implications: T-bill liquidity (38.2% of domestic debt) facilitates short-term deficit funding (TZS 15.1 billion October gap), stabilizing reserves (USD 6.17 billion) and shilling (TZS 2,463/USD as of Dec 13). Low yields support transmission to lending rates (15.19%), boosting private credit and 1% GDP from consumption, but persistent oversubscription signals crowding-out—banks allocate 25% balance sheets to securities, limiting SME loans and risking 0.3% growth drag in manufacturing (5.2% credit), per World Bank 2025 CPF.

1.2 Treasury Bonds (T-Bonds)

Two auctions: 2-year (Oct 15, coupon 10.00%) and 10-year (Oct 1, coupon 13.5%), with re-openings emphasizing long-term funding (59.2% debt composition).

Interpretation: Bids 2.54x offer signal confidence; yields stable (10-12.55%), attracting pensions/insurers for liability matching. 2-year focus aids rollover (maturity 8.2 years).

November 2025 Update: Auctions included 15-year (No. 688, Nov 12, coupon 12.75%, raised TZS 140.7 billion at 12.80% yield) and 5-year (No. 689, Nov 26, coupon 10.75%, oversubscribed 2.1x at 10.85%). Upcoming: 20-year re-opening (Dec 17, coupon 13.00%).

Economic Implications: Bond appetite (TZS 670.5 billion bids) extends maturities, reducing refinancing risks (25% rollover in 2024) and costs (interest TZS 277.9 billion October), freeing 2% budget for social sectors (21.5% allocation). This deepens capital markets (TZS 22.5 trillion outstanding), lowering spreads (6.28 pp) and FDI (USD 1.5 billion Q3), but yield sensitivity to global rates (Fed easing) could add 0.4% to debt service if rising, constraining 6% growth—mitigable via green bonds (USD 1 billion potential), per Afreximbank.

2. Interbank Cash Market (IBCM)

The IBCM facilitates short-term liquidity among 32 banks, with October volumes at TZS 2,255.4 billion (down 31% MoM but +12% YoY), dominated by 7-day trades (75.4%). Rates eased to 6.38% overall, within CBR corridor (3.75-7.75%), aided by BoT's TZS 1.2 trillion reverse repos.

2.1 IBCM Trading Volumes

Breakdown by Tenor (October 2025):

Interpretation: Volume dip from seasonal factors (harvest remittances), but activity signals efficient redistribution; 7-day dominance reflects working capital needs.

November 2025 Update: Volumes rebounded to TZS 2,800 billion (+24% MoM), with 7-day at 76%, per preliminary BoT data amid November export peaks. Rates averaged 6.40%, slight uptick from liquidity absorption.

Economic Implications: Declining volumes indicate surplus liquidity (interbank below corridor), supporting 25.8% M2 growth and easing funding stress—key for 16.1% private credit, adding 1.5% to GDP via investment. Short-term bias aids daily operations but limits long-term allocation; rebound in November underscores resilience, but volatility could transmit to lending (15.19%), risking 0.2% drag in trade (21.8% credit growth) if tightening.

2.2 IBCM Interest Rates

Analysis: Easing (7 bps) reflects BoT operations; proximity to CBR signals policy effectiveness.

November 2025 Update: Overall at 6.40% (mild rise), 7-day stable at 6.30%, per TICGL report.

Economic Implications: Low rates (within corridor) enhance transmission, keeping inflation at 3.4% (November) and supporting consumption (3.5% contribution to growth). Adequate liquidity buffers shocks (e.g., election volatility), but easing trend risks moral hazard in lending—BoT's repos ensure stability, fostering 6.2% GDP via efficient intermediation (ROA 2.5%).

3. Summary Table – Government Securities & Interbank Market

Sources: BoT November Review; updates from TICGL and BoT auctions.

Economic Implications: Metrics highlight a resilient system, with oversubscription funding deficits without yield spikes, sustaining 3.5% inflation and 6% growth. November rebound signals post-harvest liquidity, but short-term focus (75%+) limits capex—policy shifts (e.g., longer repos) could unlock 0.5% additional GDP via deeper markets.

4. Interpretation and Insights

Government Securities Market:

• Oversubscription (84% T-bills, 154% bonds) from banks/pensions reflects confidence amid 3.4% inflation.
• Rising yields (24 bps T-bills) normalizes without stress; long-term demand (10-year at 12.55%) aids maturity extension.

Interbank Market:

• Volume drop (-31%) but rate easing (6.38%) implies surplus liquidity; BoT repos (TZS 1.2T) effective.
• 7-day dominance (75.4%) suits trade cycles.

Economic Implications: Active markets ensure fiscal-monetary synergy, financing TZS 49.2 trillion budget (65% development) at low cost, driving infra multipliers (2% GDP) and reserves (USD 6.17B). Stability anchors expectations, boosting FDI (10% YoY), but bank dominance risks crowding-out—diversifying to retail (7.7% holdings) could mobilize TZS 1T, enhancing inclusion and 7% growth potential, per Deloitte 2025 Outlook. November trends confirm momentum, positioning Tanzania resiliently amid global easing.

Tanzania's fiscal operations in October 2025 reflected disciplined execution amid a challenging global environment, with domestic revenues achieving 96.1% of target (TZS 2,328.5 billion) and total expenditures at 76.4% of target (TZS 2,343.6 billion), resulting in a modest deficit of TZS 15.1 billion. This performance marks a YoY revenue growth of 9.4%, outpacing the 6% national GDP expansion for FY2024/25, while under-execution in development spending (47.2% of target) highlights absorption challenges in project implementation. Per the Bank of Tanzania's (BoT) Monthly Economic Review for November 2025, this aligns with the FY2025/26 budget's focus on revenue mobilization (targeting 16.5% of GDP) and expenditure prioritization, supporting Vision 2050 goals of upper-middle-income status by 2050.

Economic Implications: The controlled deficit (0.2% of monthly GDP estimate) reinforces fiscal sustainability, keeping public debt at ~50% of GDP (below the 55% EAC threshold) and enabling monetary policy flexibility (CBR at 5.75%). This cushions against external shocks like oil price volatility, sustaining 3.5% inflation and 6% growth projections for 2025. However, low development absorption risks delaying infrastructure multipliers (e.g., 1.5% GDP boost from energy projects), potentially constraining private investment and job creation (youth unemployment at 13.4%). Enhanced TRA digitalization could lift tax buoyancy, adding TZS 1-2 trillion annually to fund social spending, per World Bank estimates, fostering inclusive growth and poverty reduction (from 26.4% in 2024). Read More: Tanzania Government Revenue at 87.2% of Target, Spending at 71.9%

CENTRAL GOVERNMENT REVENUES (OCTOBER 2025)

Central government revenues totaled TZS 2,328.5 billion, comprising tax (90.3%), non-tax (9.7%), and LGA own-source (2.8%) collections. This exceeded October 2024 levels by 9.4%, driven by trade recovery and administrative reforms, but missed targets due to seasonal VAT lags and LGA inefficiencies.

Revenue Performance Table

Source: BoT computations (provisional). Additional Details: Tax breakdown: Income tax +12% YoY (TZS 850B), import duties +15% (TZS 450B), fuel levies +8% (TZS 120B). Non-tax surge from regulatory fees (e.g., mining licenses up 20%). LGAs lag due to capacity gaps in 184 districts.

Economic Implications: Near-target revenues (13.1% GDP tax ratio) signal improving buoyancy from AfCFTA integration, boosting FX inflows (reserves at USD 6.2B, 4.7 months cover) and crowding-in private credit (16.1% YoY). Non-tax outperformance diversifies sources, reducing aid reliance (down to 5% of budget), but LGA shortfalls strain local services (health/education 21.5% allocation), risking inequality (Gini 40.4). IMF's 2025 Article IV praises this for fiscal consolidation, projecting 3% deficit, but urges LGA reforms to unlock TZS 500B annually, enhancing decentralization and rural growth.

Year-on-Year (YoY) Growth (Oct 2024 → Oct 2025)

Economic Implications: 9.4% growth outstrips 5.6% FY2024/25 GDP, implying revenue elasticity >1, supporting counter-cyclical spending amid 6.9% Q4 forecast. Non-tax +43.8% reflects SOE efficiency (e.g., TPDC dividends), adding fiscal buffers for climate resilience (USD 500M adaptation needs), per SECO 2025 Report. Yet, modest tax growth signals informal sector dominance (50% economy), constraining multipliers; Deloitte's 2025 Outlook recommends digital invoicing to raise yields 2%, fueling 7% medium-term growth.

Key Drivers of Revenue Performance

• Increased collections in: Income tax (formal sector expansion), import duties (trade +15%), fuel levies (consumption rebound).
• Lower performance in: PAYE (employment slowdown), excise on domestic goods (manufacturing dip), VAT on local goods (supply chain frictions).
• Non-tax exceeded target: Higher from services, fees, dividends (e.g., mining royalties up 25%).

Economic Implications: Drivers tie to export boom (gold +38.9%, tourism +28%), enhancing reserves and shilling stability (appreciation 9.5% YoY), per BoT. This mitigates import inflation (oil -12.5%), sustaining 3.5% CPI. However, VAT/excise shortfalls highlight manufacturing vulnerabilities (3.5% growth), risking 0.5% GDP drag; KPMG's Finance Act 2025 analysis notes new levies (e.g., 10% on retained earnings) could add TZS 300B, bolstering buffers for 6% growth while curbing deficits.

CENTRAL GOVERNMENT EXPENDITURES (OCTOBER 2025)

Total outlays reached TZS 2,343.6 billion (80% recurrent, 20% development), below target due to delayed external disbursements and procurement bottlenecks, but +7.2% YoY, aligning with 65% development bias in FY2025/26 budget (TZS 51.1 trillion total).

Expenditure Performance Table

Source: Ministry of Finance, BoT (provisional). Additional Details: Recurrent: Salaries TZS 1,132B (+5% YoY), interest TZS 283B (domestic 70%). Development: Infra 55% (roads/energy), social 30%.

Economic Implications: 76.4% execution preserves space for debt service (6.5% budget), keeping spreads low (6.28% lending-deposit) and supporting M3 growth (21.5%). Recurrent focus sustains consumption (3.5% private demand), but low dev. absorption delays 2% GDP from projects (e.g., rail/ports), per World Bank CPF 2025-29. IMF warns of election-year risks, but disciplined spending implies 3% deficit, freeing resources for green bonds (USD 1B potential), enhancing resilience.

Breakdown of Development Expenditure

Economic Implications: Local dominance (59.4%) reduces FX exposure (external debt 69.5%), stabilizing TZS and reserves (USD 6.2B). Funds infra multipliers (1.2% GDP from hydropower), but foreign shortfalls risk 0.8% growth shortfall; SECO recommends streamlined procurement to hit 7% absorption, unlocking AfCFTA gains (USD 1B trade).

FISCAL BALANCE

Fiscal Deficit (October 2025)

Interpretation: Small deficit due to expenditure restraint; fully domestically financed (83.6% dev. spend).

Economic Implications: Modest gap (vs. 3.5% annual) signals prudence, aligning with IMF's growth-friendly consolidation, curbing debt (49.6% GDP) and inflation pass-through. Enables 4.7-month import cover, but persistent under-spending may idle TZS 5T in unabsorbed funds, per Deloitte; policy tweaks (e.g., PPPs) could amplify 6.9% Q4 growth.

INTERPRETATION & ANALYSIS

1. Revenue Trends

Strong 96% achievement from TRA modernization (digital tracking +20% compliance) and non-tax inflows, but LGA weakness (67.4%) persists.

Economic Implications: Buoyancy supports 13.1% tax/GDP, funding 21.5% social allocation, reducing poverty 1-2pp annually (World Bank). LGA gaps strain devolution, risking service delivery; reforms could add 0.5% growth via local multipliers.

• Expenditure Trends

Below-target due to dev. delays (47.2%), recurrent high from wages/interest.

Economic Implications: Discipline aids reserves buildup (+14% YoY), but low capex hampers productivity (manufacturing 5.2%); IMF urges 70% absorption for 7% growth, leveraging FY2025/26's TZS 33T dev. envelope.

• Fiscal Position

Small TZS 15.1B deficit indicates discipline amid execution hurdles.

Economic Implications: Enhances credibility, lowering yields (10.8% bonds), crowding-in FDI (USD 1.5B Q3). Supports 6% growth, but election risks (Oct 2025) demand vigilance; SECO projects sustained momentum via infra.

SUMMARY TABLE – CENTRAL GOVERNMENT REVENUE VS EXPENDITURE

Overall Outlook: October's operations underscore resilience, positioning Tanzania for 6%+ growth amid AfCFTA, but absorption and LGA reforms are key to unlocking USD 10B potential by 2030 (World Bank).

Zanzibar's economy in 2025 has demonstrated robust resilience and growth, contributing significantly to Tanzania's overall economic development. As a semi-autonomous region within the United Republic of Tanzania, Zanzibar accounts for approximately 3-4% of the national GDP but plays a pivotal role in foreign exchange earnings through tourism and agriculture. According to the Bank of Tanzania's (BoT) Monthly Economic Review for November 2025, Zanzibar's GDP grew by 6.4% in the first quarter of 2025 (matching the previous year), with projections for full-year growth reaching 7.3%, driven by tourism, construction, and agriculture. This outperforms the mainland's 5.4% Q1 growth and aligns with Tanzania's national target of over 6% GDP expansion. Key enablers include stable inflation, fiscal discipline, and a surging external sector, bolstered by global tourism recovery and domestic reforms. However, challenges like cyclical commodity declines (e.g., cloves) and import pressures highlight the need for diversification. Below, we expand on the provided outline with detailed data from the BoT report, supplemented by contextual insights from recent analyses (e.g., IMF and World Bank projections for Tanzania-Zanzibar integration). Read More: Zanzibar Economy Strengthens

1. Inflation Developments

Zanzibar experienced significant easing of inflation in 2025, aligning with the Bank of Tanzania's 3-5% target and regional benchmarks under the East African Community (EAC) and Southern African Development Community (SADC). This stability supports household purchasing power, consumer spending, and broader economic confidence, contributing to Tanzania's anchored national inflation at 3.5% in October 2025. The decline reflects prudent monetary policy transmission from the mainland, adequate food supplies via inter-regional trade, and falling global energy prices, which reduced imported inflation.

1.1 Headline Inflation

Headline inflation moderated steadily through 2025, falling from 5.8% in October 2024 to 3.4% in October 2025—a cumulative easing of 41% year-over-year. Monthly inflation remained subdued at 0.1% in October 2025, unchanged from the prior year, indicating low near-term pressures.

Main drivers of the decline:

• Slowdown in food inflation: Eased to 6.4% in October 2025 from 8.2% in October 2024. This was supported by bumper harvests in staple crops (e.g., maize and rice imports from mainland Tanzania) and stable supply chains, mitigating weather risks. Food's high weight (41.9% in the CPI basket) makes this a key anchor; unprocessed food prices fell 1.6% month-on-month in October 2025.
• Drop in non-food inflation due to falling fuel prices: Plummeted to 1.0% from 4.1% in October 2024. Key factors include a 20-25% reduction in domestic petroleum prices (petrol at TZS 3,200/liter, diesel at TZS 3,400/liter by late 2025), driven by global crude oil averaging USD 70/barrel amid U.S. supply surges. This lowered transport and utilities costs, with housing/electricity/gas inflation turning negative at -3.3%.
• Additional context: Projections from BoT's October 2025 Monetary Policy Report indicate inflation will stay below 5% through year-end, aided by exchange rate stability (TZS/USD at ~2,700) and fiscal-monetary coordination. Compared to mainland Tanzania's 3.5% headline, Zanzibar's slightly higher rate reflects its import dependency, but both remain within EAC/SADC convergence (under 8%).

1.2 Inflation Table

The table below details year-on-year (YoY) and month-on-month changes, based on the July 2022=100 CPI basket. Food remains volatile but downward-trending, while energy-related categories (e.g., housing, transport) show sharp disinflation.

Source: Office of the Chief Government Statistician (Zanzibar), BoT computations. Insights: Negative monthly shifts in housing (-1.0%) and recreation (-0.5%) underscore energy and seasonal demand relief. YoY food inflation's persistence (7.1%) ties to Zanzibar's import reliance (70% of staples from mainland), but overall trends support 2025's low-risk outlook per IMF's 2025 Article IV consultation.

Chart Description (Annual Inflation Rates): A line chart tracks headline (blue, declining to 3.4%), food (red, easing to 6.4%), and non-food (green, dropping to 1.0%) from Oct 2024 to Oct 2025, highlighting the post-July 2025 disinflation phase amid harvest peaks.

2. Government Budgetary Operations (Zanzibar)

Zanzibar's fiscal operations in 2025 emphasize growth-oriented spending, with a Sh6.98 trillion annual budget (up 34.7% YoY) targeting infrastructure and social sectors. October 2025 data shows a deficit but strong domestic mobilization, reducing aid dependency and aligning with Tanzania's national fiscal consolidation (deficit at 3.5% of GDP). This supports Vision 2050 goals by channeling 65% of the budget to development, up from 24% five years ago.

2.1 Revenue Performance – October 2025

Total resources reached 84.8% of target, driven by tax buoyancy from tourism levies and trade. Non-tax underperformance reflects seasonal delays in fees/dividends.

Key insight: Tax collection is strong and remains the backbone of Zanzibar’s revenue (89% share), fueled by VAT/excise (TZS 44.7B), income tax (TZS 44.7B), and import duties (TZS 25.9B). Non-tax lags due to delayed port/airport fees. Annual domestic revenue has surged 278% over five years to Sh2.9T, per President Mwinyi's October 2025 remarks, enabling self-financed operations.

Chart Description (Chart 3.2.1: Government Resources): Bar chart compares 2024-2025 actuals: Tax on imports (25.9B), VAT/excise (44.7B), income tax (44.7B), other taxes (31.4B), non-tax (13.9B), grants (28.3B)—showing tax dominance.

2.2 Government Expenditure – October 2025

Expenditure prioritized development (52% share), financing key projects like education reforms (Sh864B allocation for 2025/26) and tourism infrastructure.

• % financed domestically: 83.6% (strong local borrowing/mobilization).
• Overall Fiscal Balance: –91.7 billion (deficit), fully financed via domestic borrowing (e.g., T-bills).

Interpretation:

• Development spending outpaced recurrent expenditure: Reflects strategic shift to capital projects (e.g., roads, energy), boosting productivity and aligning with Tanzania's 7% growth target.
• Heavy reliance on domestic financing: Indicates fiscal maturity, reducing external vulnerability; debt-to-GDP stable at ~40% per World Bank 2025 estimates.
• Broader context: Annual budget execution at 85% YTD, with education/health at 21.5% allocation, supporting human capital for tourism-led growth.

Chart Description (Government Expenditure): Stacked bars for 2024-2025: Wages/salaries (64.3B), other recurrent (99.1B), development (92.6B)—highlighting development surge.

3. External Sector Performance – Zanzibar

Zanzibar continues to record a strong current account surplus, bolstering Tanzania's national reserves (up 14.1% YoY to USD 15.7B). The surplus widened amid tourism boom, offsetting mainland deficits and funding imports/investments.

3.1 Current Account Balance

The surplus expanded 42.8%, driven by services (36.6% growth), with tourism contributing 80% of receipts.

Why the surplus increased:

• Higher tourism earnings: Service receipts up 34.3% to USD 1,531.9M, with average stay/spend rising 15-20% (USD 1,200/visitor).
• Rising exports of goods & services: 30.4% growth, led by services.
• Strong growth in tourist arrivals: +27.9% to 902,265 (September 2025 alone: +38.6% to 84,154).
• Moderate import growth (17%) vs. export growth (30.4%), narrowing goods deficit 25.9%.

4. Exports Performance (Zanzibar)

Exports surged, with tourism overtaking goods as the top earner (55% of services exports).

4.1 Total Exports of Goods & Services

Annual: +30.4% to USD 1,564.3M.

4.2 Tourism Performance

Tourism generated USD 3.92B nationally (year ending May 2025), with Zanzibar capturing ~30% of GDP contribution.

Tourism remains the dominant foreign exchange earner: Europeans (60% arrivals) and domestic travel up 20%; receipts USD 1.27B (year ending Aug 2025, +30.6%).

4.3 Clove Exports (Zanzibar’s Main Commodity)

Reason: Cyclical production decline (low harvest cycle); annual exports down 45.4% to USD 32.3M total goods, but offset by non-traditionals like spices/souvenirs.

5. Imports Performance

Imports increased moderately, reflecting investment needs but contained by surplus.

5.1 Imports of Goods & Services

Annual: +17.0% to USD 656.4M.

Drivers:

• Capital goods (+49.8% to USD 76.4M): Machinery/appliances for tourism infra (e.g., hotels).
• Consumer goods: Non-industrial transport (vehicles for services sector).
• Intermediate goods (fuel, machinery): Industrial supplies up 15%, tied to construction boom.

6. Summary Table – Zanzibar Economic Indicators (2025)

Overall Outlook: Zanzibar's 2025 performance enhances Tanzania's inclusive growth, per World Bank's FY2025-2029 CPF, by boosting FX (24% of national exports) and employment (1 in 5 jobs tourism-linked). Risks include commodity volatility, but 7.3% GDP projection signals sustained momentum.

Authored by Dr. Bravious Felix Kahyoza PhD, FMVA, CP3P and Amran Bhuzohera

This discussion paper explores how macroeconomic dynamics—such as GDP growth, inflation, exchange rate volatility, and fiscal policies—affect private sector resilience and competitiveness in Tanzania. Using annual and quarterly time-series data (2000–2024), the study applies ARDL and VECM econometric models to uncover both short- and long-term relationships between macroeconomic shocks and private sector performance.

Tanzania’s private sector contributes approximately 35% of GDP and employs over 80% of the national workforce, making it central to achieving the targets of Vision 2025 and AfCFTA integration. Yet, despite strong recovery momentum after COVID-19, the sector continues to face currency depreciation, inflation pressures, and investment bottlenecks that affect growth sustainability.

Key Findings

Stable but Vulnerable Growth:
Private sector contribution to GDP rose from 26% in 2000 to 43% in 2024, averaging 35.5%. However, this growth remains fragile due to inflationary shocks and foreign exchange volatility.

Exchange Rate Sensitivity:
The Tanzanian shilling depreciated by 9.6% year-on-year, increasing import costs by 12% and constraining SME margins. Despite this, depreciation stimulated limited export competitiveness—reflecting an adaptive but pressured private sector.

Long-Run Cointegration Confirmed:
The ARDL model confirms strong long-run relationships between macroeconomic variables, with a significant equilibrium adjustment rate of 4.6% per year. GDP growth showed a mild negative elasticity (–0.274), while inflation exerted a positive long-run effect (+0.255), suggesting adaptive price behavior.

Macroeconomic Influence on Private Growth:
Variance decomposition revealed that 43.7% of private sector growth was driven by GDP dynamics, 30.4% by inflation, and 20.6% by exchange rate movements—illustrating that domestic demand and stability remain the most crucial levers of resilience.

AfCFTA and Structural Transition:
Regional integration through AfCFTA could raise private sector output by up to 28% in freight and manufacturing industries by 2030. However, persistent supply shocks and fiscal deficits (3.8% of GDP on average) threaten to dilute these benefits unless supported by targeted SME financing and inflation control.

Policy Insights

The study emphasizes that macroeconomic stability is the cornerstone of private sector resilience. Persistent depreciation, inflation spikes, and limited fiscal space constrain Tanzania’s ability to maintain private-sector-led growth.

To counter these vulnerabilities, the paper proposes:

• Inflation Targeting (3–5% Band): Strengthening BoT’s inflation control and forward guidance to protect SME credit channels.
• Export Credit Guarantees: Through TanTrade, to hedge SMEs against exchange rate volatility under AfCFTA markets.
• Fiscal Incentives for SMEs: Offering tax rebates up to 30% for firms investing in manufacturing and green technologies.
• Macroeconomic Resilience Fund (MRF): A proposed TZS 1 trillion facility to buffer shocks, fund innovation, and promote climate-resilient infrastructure.

Implications for Vision 2025 and Beyond

The analysis reinforces that macroeconomic governance directly determines Tanzania’s competitiveness under AfCFTA and Vision 2050. Achieving sustained 6% GDP growth and raising private contribution to 45% of GDP by 2030 will depend on coordinated fiscal-monetary reforms, stable exchange rates, and continuous SME support.

By merging econometric evidence with policy action, this research provides actionable insights for the Bank of Tanzania, Ministry of Finance and Planning, and private sector actors striving for inclusive, shock-resistant growth.

Read the Full Paper:
“Macroeconomic Forces and Private Sector Resilience: An Econometric Analysis of Trends, Challenges, and Policy Pathways in Tanzania (2000–2024)”
Published by TICGL | Economic Research Centre

The national debt profile from the Bank of Tanzania's Monthly Economic Review (September 2025) for August 2025 reveals a manageable 2.3% monthly increase to TZS 124.8 trillion (USD 47.2 billion), with external debt comprising 70.3% (TZS 87.7 trillion) and domestic at 29.7% (TZS 37.1 trillion). This structure—government-dominated (80.8% share) and increasingly concessional—implies sustained fiscal capacity to finance growth-oriented investments like infrastructure and social programs, supporting Q3 GDP estimates above 6% and low inflation (3.4%). As of early October 2025, debt remains at moderate risk of distress, with a debt-to-GDP ratio of ~46.3% projected for the year, per recent assessments, enabling Tanzania to leverage borrowing for Vision 2050's upper-middle-income goals amid resilient exports (e.g., gold and tourism). However, heavy external reliance (81% central government) exposes to FX risks from TZS fluctuations, despite recent appreciation (6.6% in August), underscoring needs for revenue diversification to cap service costs at ~20% of revenues.

These dynamics align with IMF and World Bank evaluations affirming moderate sustainability, with economic recovery projected to drive 6.0% GDP growth in 2025. Below, implications are detailed by category, linking to development enablers like credit expansion (16.2% y-o-y) and sectoral investments.

1. Overview of Tanzania’s National Debt (as of August 2025)

• Total Public Debt (External + Domestic):
  → TZS 124.8 trillion
  (equivalent to about USD 47.2 billion)
• This represents an increase of 2.3% from TZS 122.0 trillion in July 2025.
• The rise was mainly due to new disbursements from external creditors and continued issuance of government bonds in the domestic market.

2. Composition of Public Debt

External debt continues to dominate Tanzania’s debt structure, accounting for about 70% of the total debt portfolio.

3. Composition of External Debt by Borrower

The central government is the main external borrower, holding about four-fifths (81%) of all external debt.

4. Composition of Domestic Debt by Creditor Category

The domestic debt market remains dominated by institutional investors, mainly pension funds and commercial banks, holding over 55% combined.

5. Key Ratios and Indicators

Implications for Tanzania's Economic Development

1. Overview and Composition of Public Debt: Balanced Growth for Productive Financing

• Key Observations Recap: Total TZS 124.8 trillion (+2.3% m-o-m), external TZS 87.7 trillion (70.3%), domestic TZS 37.1 trillion (29.7%); rise from external disbursements and bonds.
• Implications for Economic Development:
  • Infrastructure and Recovery Catalyst: The modest uptick funds high-return projects (e.g., transport/energy, 33.2% of external uses), aligning with July's TZS 1,634.4 billion development spending and boosting 14.8% credit to construction. This supports 6.0% growth projections, with debt-financed capex adding 1-2% to GDP via multipliers in mining (3.2% credit growth) and agriculture (30.1%).
  • Sustainability Amid Resilience: At 46.3% of GDP, the portfolio's concessional tilt (e.g., from IDA/IMF) keeps distress risk moderate, providing buffers against global uncertainties (Chart 1.1a). Domestic growth (5% m-o-m) deepens markets, reducing rollover risks and crowding-out.
  • Risks: 2.3% monthly pace could push debt-to-GDP above 50% if exports soften; President Samia's September defense highlights productive use but calls for efficiency.

2. Composition of External Debt by Borrower: Public-Led External Leverage

• Key Observations Recap: Central government TZS 70.9 trillion (80.8%), private TZS 16.8 trillion (19.2%).
• Implications for Economic Development:
  • Public Investment Multipliers: Government dominance channels funds to social/education (21.5% use) and BoP support (22.5%), enhancing human capital and stability for 5.5% unemployment reduction. This ties to 6.5% Zanzibar growth spillover, per October updates.
  • Private Sector Catalyst: 19.2% private share (up historically) reflects FDI in energy/mining (12.9% use), fostering diversification beyond gold (35.5% export rise).
  • Risks: 80.8% concentration amplifies fiscal pressures if global rates rise; IMF notes need for private borrowing caps.

3. Composition of Domestic Debt by Creditor: Institutional Deepening for Stability

• Key Observations Recap: Banks TZS 10.6 trillion (28.4%), pensions TZS 10.1 trillion (27.2%), BoT TZS 7.1 trillion (19.0%), others TZS 6.8 trillion (18.3%).
• Implications for Economic Development:
  • Market Maturation: >55% institutional hold (banks/pensions) mobilizes savings (deposits +20.2% y-o-y), funding bonds at lower yields (13.91-14.42%), which eases private credit costs (15.07% lending rate).
  • Inclusive Financing: 18.3% "others" (individuals/NBFIs) broadens participation, supporting MSME loans (36% of credit) and financial inclusion in rural areas.
  • Risks: BoT's 19% share risks quasi-fiscal expansion; Q3 report shows domestic at TZS 34.3 trillion, signaling steady but monitored growth.

4. Key Ratios and Indicators: Moderate Risk with Growth Upside

• Key Observations Recap: Government 80.8%, private 19.2%; external 70.3%, domestic 29.7%.
• Implications for Economic Development:
  • Fiscal Space Optimization: 80.8% government share ensures targeted spending (e.g., TZS 41.8 billion Zanzibar development), while 29.7% domestic reduces FX exposure, aligning with SECO's 2025 report on USD 47.66 billion stock.
  • Resilience Metrics: Moderate risk supports 3.8% SSA growth context, with debt service sustainable at 20% revenues, freeing resources for ag/tourism.
  • Risks: USD-heavy external (66.1%) vulnerable to appreciation reversals; Allianz projects 46.3% GDP stability but urges reforms.

Overall Summary and Forward Outlook

August's debt rise implies a strategic tool for Tanzania's development: sustainable levels finance 6%+ growth and inclusion, with diversification mitigating risks in a resilient SSA economy (3.8% regional projection). External dominance funds recovery, while domestic deepening enhances stability. By year-end 2025, trends could hold debt at 46% GDP, but boosting revenues (16.5% GDP target) and non-concessional shifts will unlock 7% potential amid elections (October 28).

Debt Structure, Shilling and Figures

As of May 2025, Tanzania’s national debt stood at TZS 107.70 trillion, comprising TZS 72.94 trillion in external debt and TZS 34.76 trillion in domestic debt. The external debt stock, equivalent to approximately USD 34.1 billion (using an exchange rate of TZS 2,884.42 per USD from April 2025), was primarily held by multilateral institutions and directed toward key sectors such as transportation (21.5%) and telecommunications. The central government accounted for 78.3% of external debt (USD 26.7 billion), with 67.7% of this debt denominated in US dollars (USD 23.1 billion). Domestic debt, at TZS 34.26 trillion in March 2025, was largely financed by commercial banks (29%) and pension funds (26.5%), with Treasury bonds dominating at 78.2%.

In May 2025, principal repayments on external debt amounted to USD 267 million. Debt servicing costs are significant, with historical data indicating that external debt servicing consumed up to 40% of government expenditures in earlier years. For 2023, total debt service was 2.89% of Gross National Income (GNI), and in 2025, servicing the external debt (at concessional rates) and domestic debt (at 15.5% lending rates) could cost approximately USD 1–2 billion and TZS 5.31 trillion annually, respectively. These costs divert resources from productive investments, potentially straining fiscal space.

Impact on the Tanzania Shilling

The Tanzania Shilling’s stability in May 2025 is supported by several factors related to debt management and economic performance:

• Foreign Exchange Reserves: The Bank of Tanzania (BoT) reported foreign exchange reserves of USD 5,360 million in May 2025, covering 4.2 months of imports, which exceeds the national benchmark of 4 months. By March 2025, reserves had increased to USD 5,700 million, covering 3.8 months of imports, indicating sustained adequacy. These reserves provide a buffer against external shocks, reducing pressure on the Shilling and enabling the BoT to meet external debt obligations without significant currency devaluation.
• Export Performance: Robust export growth, particularly in gold (24.5% increase) and cashew nuts (141% increase), contributed to a 16.8% rise in exports to USD 16.7 billion in the year ending April 2025. Gold prices, at USD 2,983.25 per ounce in March 2025, further bolstered foreign exchange inflows, supporting the Shilling’s stability.
• Fiscal and Monetary Policy: The BoT maintained the Central Bank Rate (CBR) at 6% in April 2025 to safeguard economic stability amid global uncertainties. Prudent fiscal policy, with a fiscal deficit trending toward 3% of GDP, and stringent monetary policy have kept inflation low at 3.2% in May 2025, below the BoT’s 5% target. Low inflation reduces pressure on the Shilling by maintaining purchasing power and stabilizing import costs.

Despite these stabilizing factors, the Shilling experienced a 3.86% annual depreciation against the USD, trading at TZS 2,884.42 per USD in April 2025. This depreciation, though improved from the previous month, reflects pressures from external debt servicing and import demands. The high USD denomination of external debt (67.7%) exacerbates these pressures, as a depreciating Shilling increases the local currency cost of debt servicing by approximately TZS 2.37 trillion for the USD 34.1 billion external debt, based on a 2.6% depreciation rate.

Foreign Exchange Interventions and Their Role

The BoT’s interventions in the Interbank Foreign Exchange Market (IFEM) have been critical to maintaining the Shilling’s stability. In January 2025, the BoT sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation amid a 1.37% month-on-month weakening of the Shilling (from TZS 2,420.84 to TZS 2,454.04 per USD). Similar interventions likely occurred in April and May 2025, as the document notes that seasonal inflows from cash crops and gold exports, combined with BoT actions, mitigated depreciation pressures. However, IFEM transactions declined significantly from USD 95.7 million in December 2024 to USD 16.3 million in January 2025, suggesting reduced market activity, possibly due to lower trade or investor participation.

These interventions, supported by adequate reserves, have ensured short-term stability, with the Shilling appreciating by 2.6% year-on-year from January 2024 to January 2025. The BoT’s ability to intervene is bolstered by improved current account performance, with the deficit narrowing by 31.1% to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings and moderate import growth.

Potential Risks to Long-Term Shilling Stability

The composition of Tanzania’s external debt and reliance on commodity-driven inflows pose several risks to the Shilling’s long-term stability:

1. High USD Denomination of External Debt: With 67.7% of the USD 34.1 billion external debt denominated in US dollars (USD 23.1 billion), the Shilling is highly exposed to exchange rate fluctuations. A further depreciation, such as the 2.6% observed in 2024, increases debt servicing costs in local currency, potentially requiring the BoT to draw down reserves or increase borrowing, both of which could weaken the Shilling.
2. Commodity Price Volatility: Tanzania’s foreign exchange inflows heavily depend on gold and agricultural exports (e.g., cashew nuts, coffee). While gold prices were strong at USD 2,983.25 per ounce in March 2025, declines in coffee (-2%) and sugar (-1.5%) prices highlight vulnerability to global commodity market fluctuations. A downturn in gold prices or reduced export demand could strain reserves and pressure the Shilling.
3. Global Economic Uncertainties: The document highlights risks from global trade tariffs and geopolitical tensions, with the IMF projecting global growth at 2.8% in 2025. Rising global interest rates could increase external borrowing costs, particularly for non-concessional loans, further straining fiscal resources and reserves needed to stabilize the Shilling.
4. Fiscal Constraints and Crowding-Out Effects: High domestic borrowing (TZS 34.26 trillion) and lending rates (15.5%) crowd out private sector investment, weakening credit growth and economic diversification. This limits the economy’s ability to generate sustainable foreign exchange inflows, increasing reliance on volatile commodity exports and BoT interventions.
5. Climate and Structural Risks: Climate change could reduce agricultural output, a key export sector, with the World Bank estimating a potential 4% GDP growth reduction by 2050 due to climate impacts. Slow structural transformation and shallow financial markets further constrain Tanzania’s ability to diversify revenue sources, heightening Shilling vulnerability.

Mitigating Factors and Policy Measures

Tanzania’s authorities are implementing measures to mitigate these risks:

• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) classifies Tanzania’s risk of external debt distress as moderate, with public debt at 35% of GDP in 2024, well below the 55% benchmark. Access to concessional financing from multilateral institutions reduces servicing costs compared to commercial loans.
• Revenue Mobilization: The government collected TZS 2,441 billion in April 2025, with tax revenue exceeding targets by 1.5% due to improved administration. The proposed TZS 56.49 trillion 2025/26 budget aims to enhance revenue through new taxes and levies, reducing reliance on borrowing.
• Export Diversification: Investments in infrastructure (48% of World Bank financing) and sectors like manufacturing and tourism (projected to drive 6% GDP growth in 2025) aim to reduce reliance on commodity exports.
• Monetary Policy: The BoT’s 6% CBR and interventions in the IFEM demonstrate proactive management of liquidity and exchange rate stability. Food reserves (587,062 tonnes, with 32,598 tonnes released) help stabilize food prices, supporting low inflation and Shilling stability.

Conclusion

In May 2025, Tanzania’s national debt developments and foreign exchange interventions have supported the Tanzania Shilling’s short-term stability, with reserves of USD 5,360 million (4.2 months of import cover) and export-driven inflows mitigating a 3.86% annual depreciation. BoT interventions in the IFEM, backed by strong gold and cashew nut exports, have prevented sharp fluctuations, maintaining the Shilling at TZS 2,884.42 per USD in April 2025. However, the high USD denomination of external debt (67.7% of USD 34.1 billion), reliance on volatile commodity exports, and global uncertainties pose risks to long-term stability. A potential further depreciation could increase debt servicing costs by TZS 2.37 trillion, straining reserves and fiscal space. Continued prudent fiscal and monetary policies, alongside diversification efforts, are critical to sustaining Shilling stability and supporting Tanzania’s projected 6% GDP growth in 2025.

Table: Key Economic Figures Impacting Tanzania Shilling Stability (May 2025)

Notes and Explanations

1. Debt Figures: The total national debt (TZS 107.70 trillion) and its breakdown into external (USD 34.1 billion) and domestic (TZS 34.26 trillion) components reflect Tanzania’s borrowing profile. The high USD denomination (67.7%) of external debt increases vulnerability to exchange rate fluctuations, as a 2.6% depreciation could raise servicing costs by approximately TZS 2.37 trillion (calculated as 2.6% of TZS 72.94 trillion).
2. Foreign Exchange Reserves: Reserves of USD 5,360 million in May 2025 and USD 5,700 million in March 2025 provide a buffer for debt servicing and exchange rate stabilization. The 4.2-month import cover exceeds the national benchmark, supporting short-term Shilling stability.
3. Exchange Rate: The Shilling’s depreciation to TZS 2,884.42 per USD reflects pressures from debt servicing and imports, mitigated by BoT interventions (e.g., USD 7 million sale in January 2025). The 2.6% appreciation from January 2024 to January 2025 indicates effective short-term management.
4. Export Performance: Strong export growth (USD 16.7 billion, up 16.8%) driven by gold and cashew nuts bolsters foreign exchange inflows, critical for reserve accumulation and Shilling stability. Gold’s high price (USD 2,983.25 per ounce) is a key factor but introduces volatility risk.
5. Current Account and Inflation: The narrowed current account deficit (USD 2,175 million) and low inflation (3.2%) reduce pressure on the Shilling, supporting its purchasing power and import affordability.
6. Debt Servicing Costs: Estimated based on historical data (2.89% of GNI in 2023) and domestic lending rates (15.5%). These costs strain fiscal resources, potentially requiring reserve drawdowns or further borrowing, which could weaken the Shilling.

This table provides a concise overview of the key figures driving the Tanzania Shilling’s stability in May 2025, highlighting the interplay between debt developments, foreign exchange interventions, and external sector performance, as well as underlying risks from debt composition and commodity reliance.

In March 2025, the Tanzania Shilling showed signs of short-term depreciation, yet maintained overall stability, supported by effective interventions from the Bank of Tanzania. The average exchange rate weakened to TZS 2,650.24 per USD from TZS 2,492.05 in February 2025, reflecting a 6.3% monthly depreciation and an annual depreciation of 3.4%. To manage this pressure, the central bank sold USD 62.3 million in the foreign exchange market, up sharply from USD 24.4 million in the previous month. Meanwhile, gross official reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports, exceeding both the national (4.0 months) and EAC (4.5 months) benchmarks. Despite currency pressures, inflation remained contained at 5.1%, staying within the national target and highlighting the strength of macroeconomic policy coordination.

Tanzania Shilling Stability: Analysis with Figures

Exchange Rate Trends

• In March 2025, the Tanzania Shilling traded at an average rate of TZS 2,650.24 per US dollar, showing a monthly depreciation from TZS 2,492.05 in February 2025.
• This represents a monthly depreciation of approximately 6.3%, and an annual depreciation of 3.4%, compared to a 2.2% appreciation in February 2024.

Foreign Exchange Market Interventions

• The Interbank Foreign Exchange Market (IFEM) experienced liquidity constraints, mainly due to seasonal declines in forex inflows from tourism and cash crop exports.
• To stabilize the shilling, the Bank of Tanzania intervened by selling USD 62.3 million in March 2025, compared to only USD 24.4 million in February 2025.
• Total IFEM transactions rose to USD 70.1 million, up from USD 24.4 million in February but down from USD 86.8 million in March 2024.

Foreign Exchange Reserves

• Gross official reserves increased to USD 5,693.2 million at the end of March 2025 from USD 5,327.1 million in March 2024.
• This level of reserves is enough to cover 4.6 months of projected imports, exceeding both the national benchmark (4.0 months) and EAC benchmark (4.5 months).

Inflation Context

• Headline inflation in March 2025 was recorded at 5.1%, slightly higher than 4.8% in February.
• Despite the currency depreciation, inflation has remained within the national and EAC target levels, indicating controlled domestic price pressures.

Interpretation

The Tanzania Shilling has experienced moderate depreciation against the US dollar, but this has been effectively managed by the Bank of Tanzania through:

• Active forex market interventions,
• Adequate reserve levels, and
• Maintaining stable inflation.

Table: Indicators of Tanzania Shilling Stability (March 2025)

*Approximate value based on annual depreciation rate.
MoM = Month-on-Month, YoY = Year-on-Year.

This table shows that despite some pressure on the shilling, monetary policy measures and foreign reserves have helped maintain its overall stability in the short term.

Key Insights

1. Moderate Depreciation, But Under Control

• The Tanzania shilling depreciated from TZS 2,492.05 to TZS 2,650.24 per USD in one month—a 6.3% fall.
• Over the past year, the currency has weakened by 3.4%.
• This depreciation was expected due to seasonal drops in foreign exchange inflows (like tourism and cash crop exports).

2. Effective Central Bank Intervention

• To limit excessive volatility, the Bank of Tanzania sold USD 62.3 million in the foreign exchange market.
• This is a significant increase from USD 24.4 million in February, showing active efforts to stabilize the shilling.

3. Strong Foreign Reserves Support Stability

• Reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports.
• This exceeds the national benchmark (4.0 months) and EAC requirement (4.5 months).
• High reserves give the central bank the power to defend the currency if needed.

4. Stable Inflation Despite FX Pressure

• Even with the depreciation, inflation stayed at 5.1%, within the national target.
• This shows that the depreciation has not triggered runaway price increases, indicating good policy coordination.

Conclusion

The Tanzania Shilling faced short-term depreciation pressures in March 2025, but remained broadly stable due to effective central bank action, healthy foreign reserves, and contained inflation. This reflects a resilient and well-managed financial system, capable of absorbing external shocks while supporting economic stability.

Macroeconomic stability is a key driver of job creation and economic growth in Tanzania. Stable economic conditions—such as low inflation, consistent GDP growth, controlled fiscal deficits, and a favorable investment climate—create an environment where businesses expand, investments increase, and employment opportunities grow. According to the 2025 Employment Study, macroeconomic conditions directly influence both formal and informal employment trends in Tanzania.

This article explores how macroeconomic stability affects job creation, using figures from the study, and highlights policy recommendations for ensuring sustainable employment growth.

Macroeconomic Indicators and Employment Trends in Tanzania

• GDP growth has steadily increased from 5.2% in 2023 to a projected 6.0% in 2025, boosting business confidence and job creation.
• Inflation has declined, improving consumer purchasing power and reducing business costs.
• Fiscal deficits are being controlled, allowing more government spending on infrastructure and job-creating sectors.
• Unemployment is decreasing, reflecting stronger macroeconomic conditions.

How Macroeconomic Stability Affects Job Creation

1. GDP Growth and Employment Expansion

A growing economy creates more jobs, especially in high-growth industries such as manufacturing, services, and ICT.

• Manufacturing employment is projected to grow by 18%, driven by industrialization and PPP investments.
• ICT and digital economy jobs are expected to increase by 22%, supported by fintech and e-commerce growth.

2. Inflation and Wage Stability

Stable inflation supports higher real wages and business expansion, improving employment conditions.

• As inflation decreases, wages increase, improving living standards.
• Lower inflation helps businesses expand, creating more job opportunities.

3. Fiscal Policies and Government Investment in Job-Creating Sectors

Government spending plays a major role in employment, especially in infrastructure, public services, and industrialization.

• 30% increase in infrastructure investment has boosted construction jobs and industrial expansion.
• 18% increase in public service jobs, including education and healthcare employment.

4. Exchange Rate Stability and Foreign Direct Investment (FDI)

A stable exchange rate makes Tanzania more attractive to investors, boosting job creation in export-driven sectors.

• A stronger exchange rate has encouraged more FDI, supporting job creation in manufacturing, tourism, and agribusiness.

Challenges to Job Creation Despite Macroeconomic Stability

• 30% of respondents identified a skills gap, meaning economic growth is not fully translating into employment.
• 25% cited slow SME growth, showing that businesses still struggle despite macroeconomic improvements.

Opportunities to Enhance Job Creation Through Macroeconomic Stability

1. Expanding Vocational Training and Skills Development

Aligning skills with market demand can reduce unemployment and improve workforce readiness.

• 40% job growth expected if digital and ICT skills training is expanded.
• 30% increase in employment projected through technical education programs.

2. Strengthening SME Growth for Job Creation

Supporting small and medium enterprises (SMEs) can expand formal employment opportunities.

• 35% increase in SME jobs expected with better access to financing.

3. Enhancing Investment in Industrialization and PPPs

Boosting Public-Private Partnerships (PPPs) and industrial growth can increase formal employment opportunities.

• 40% job growth expected in Special Economic Zones (SEZs), promoting manufacturing and trade.

Conclusion and Policy Recommendations

Macroeconomic stability has played a crucial role in Tanzania’s job creation efforts, improving GDP growth, investment inflows, and employment expansion. However, structural challenges such as skills gaps, slow SME growth, and youth unemployment still need to be addressed.

Key Policy Recommendations:

1. Invest in Workforce Skills Development – Expand vocational and digital skills training to align with market needs.
2. Support SME Growth and Entrepreneurship – Provide affordable financing, business training, and regulatory reforms.
3. Encourage Foreign Investment in Job-Creating Sectors – Strengthen FDI incentives in manufacturing, ICT, and agribusiness.
4. Expand Infrastructure and Industrialization Projects – Develop Special Economic Zones (SEZs) to create more formal jobs.
5. Ensure Policy Stability and Economic Reforms – Maintain low inflation, stable exchange rates, and fiscal discipline to support long-term job creation.

NOTE:

The research and case studies presented in this report were conducted by Tanzania Investment and Consulting Group Limited (TICGL) to analyze employment trends, macroeconomic stability, and job creation dynamics in Tanzania. The study covered a sample size of 2,500 respondents, representing diverse economic sectors and geographic regions. A mixed-methods approach was employed, integrating quantitative surveys (85%), structured interviews (10%), and focus group discussions (5%) to gather both statistical data and qualitative insights. The research was conducted across six key regions: Dar es Salaam (25% of respondents), Mwanza (18%), Arusha (15%), Dodoma (14%), Mbeya (12%), and Morogoro (16%), ensuring a balance between urban and rural employment patterns.

The findings indicate that Tanzania’s workforce is 71.8% informal (25.95 million workers) and 28.2% formal (10.17 million workers), highlighting a significant divide in job security, wages, and access to social protection. Among the 2,500 surveyed individuals, formal employment accounts for 23% (550 individuals), predominantly in government (32% of formal jobs), banking and financial services (25%), manufacturing (18%), and education and healthcare (15%). On the other hand, informal employment constitutes 49% (1,170 individuals), with key sectors including agriculture (35% of informal workers), small businesses and trade (28%), transportation (15%), and casual labor (12%). The remaining 27% (650 individuals) were unemployed, with youth unemployment (ages 18–35) reaching 33%, significantly higher than the national average of 9.2%.

Employment trends indicate that formal employment is projected to rise to 38% by 2030, driven by industrialization, digital transformation, and policy reforms. However, major barriers continue to slow the transition, including limited job availability (42%), skills mismatches (26%), and bureaucratic challenges (21%). The study also found that women make up 65% of the informal workforce, primarily due to barriers in accessing formal jobs, while 72% of youth are engaged in informal employment due to limited entry-level job opportunities.

To bridge the gap between formal and informal employment, Tanzania must focus on expanding SME growth, strengthening vocational training programs, improving access to financial services for small businesses, and reducing bureaucratic hurdles for business registration. This report emphasizes the key trends, challenges, and opportunities shaping Tanzania’s employment landscape and highlights the role of public-private partnerships, investment in digital workforce expansion, and targeted policy interventions in creating a more structured and inclusive workforce by 2030.

Tanzania's economic outlook for 2024 shows strong growth potential, with a projected GDP increase of 5.4%, significantly higher than the 3% average for Sub-Saharan Africa (SSA). As part of the East African Community (EAC), which is forecasted to grow by 4.7% in 2024, Tanzania benefits from macroeconomic stability and strategic investments in infrastructure, particularly in energy, telecommunications, and transport. These investments, combined with stable inflation, are expected to boost private consumption and investment. However, Tanzania's public debt is projected to rise from 42.5% to 48.4% of GDP, reflecting infrastructure spending, while the fiscal deficit is expected to stabilize at 3.3% of GDP. Risks remain, especially around rising debt and climate-related challenges like droughts and floods, which could impact agriculture and economic stability. Despite these risks, Tanzania's growth prospects remain robust in comparison to other SSA countries.

1. Growth Outlook

• Tanzania is expected to experience GDP growth of 5.4% in 2024, outperforming the regional average growth of 3% for SSA​.
• The East African Community (EAC), which includes Tanzania, is one of the strongest economic performers in SSA, with expected growth of 4.7% in 2024 and 5.7% by 2025–26​.

2. Growth Environment

• Tanzania benefits from macroeconomic stability and rising investments in sectors like energy, telecommunications, and transport, which help enhance productivity. The country’s inflation rate is expected to stabilize, supporting private consumption and investment​.
• Private consumption is expected to increase as inflation eases across SSA, with countries like Tanzania reaping benefits from stable inflation and favorable monetary policies, further bolstering growth​.

3. Macroeconomic Performance

• Government debt in Tanzania is estimated to rise slightly from 42.5% of GDP in 2023 to 48.4% of GDP in 2024, reflecting investments in key infrastructure projects​.
• In terms of sectoral performance, Tanzania’s growth is bolstered by services and infrastructure projects in energy and transport. Investment in these areas is critical for sustaining long-term growth​.
• Fiscal Balance: Tanzania's fiscal deficit is expected to improve slightly, with a fiscal deficit of around 3.3% of GDP in 2024​.

4. Risk Outlook

• High Debt: Public debt remains a key risk in Tanzania, as in many other SSA countries. The rising debt levels could strain fiscal resources, especially in a region where debt service obligations are already significant​.
• Climate Change and Conflict: Tanzania is exposed to climate risks and ongoing economic volatility in the region, which could affect agriculture and food security. Extreme weather events such as droughts or floods are persistent risks across the region​.

Tanzania's economic position relative to other Sub-Saharan African (SSA) countries

Tanzania's economy is performing well relative to other Sub-Saharan African countries, with solid growth prospects and important investments. However, the country must address challenges related to debt and climate change to ensure that growth is sustainable.

1. Tanzania’s Strong Growth Outlook: With a projected GDP growth of 5.4% in 2024, Tanzania is set to grow much faster than the Sub-Saharan African average of 3%. This positions Tanzania as one of the leading economies in the region, especially within the East African Community (EAC) where growth is also expected to be robust.
2. Growth Environment: Tanzania benefits from macroeconomic stability and is making significant investments in energy, transport, and telecommunications. These investments are crucial for reducing productivity bottlenecks and fostering economic expansion. Stable inflation will also boost private consumption and investment, further enhancing growth.
3. Macroeconomic Performance: Tanzania's debt level is rising but remains relatively manageable. The government is using this debt to finance critical infrastructure, which is essential for long-term economic development. The country’s fiscal deficit is also improving, suggesting prudent fiscal management.
4. Risk Outlook: Despite its positive growth outlook, Tanzania faces risks related to its rising debt levels, which could become a burden if not managed properly. Additionally, climate-related risks such as droughts and floods, which are common in SSA, pose threats to Tanzania’s agricultural sector and overall economic stability.

Source: Africa’s Pulse October 2024 report