Over the past decade, Tanzania’s external debt has expanded rapidly, reflecting both the country’s ambitious development agenda and growing reliance on external financing to bridge fiscal and infrastructure gaps. According to the International Debt Report 2025, Tanzania’s total external debt stock increased more than fourfold—from US$8.9 billion in 2010 to US$36.3 billion by end-2024. This sharp rise underscores the scale of public investment undertaken during this period, particularly in transport infrastructure, energy, and social sectors, but it also raises important questions regarding debt sustainability and regional competitiveness.

In East Africa, Tanzania currently ranks among the top three most indebted countries in absolute terms, alongside Kenya and Ethiopia. By end-2024, Kenya recorded the highest external debt stock at US$42.9 billion, followed by Ethiopia (US$36.5 billion) and Tanzania (US$36.3 billion). While Tanzania’s debt level is lower than Kenya’s, it is significantly higher than that of Uganda (US$20.5 billion), Rwanda (US$13.1 billion), and the Democratic Republic of Congo (US$12.5 billion). This positioning places Tanzania as a major regional borrower, reflecting the relative size of its economy and its sustained access to concessional and semi-concessional financing.

From a debt burden perspective, Tanzania’s external debt stood at 47% of Gross National Income (GNI) in 2024—moderate by regional standards. This ratio is similar to Burundi (47%) but substantially lower than Rwanda’s 94%, indicating comparatively lower vulnerability than some peers. However, when measured against export earnings, Tanzania’s external debt reached 222% of exports, signaling a high exposure to external shocks, especially fluctuations in commodity prices and global demand. This ratio is higher than Uganda’s (184%) and Kenya’s (206%), though still below Ethiopia’s elevated level of 311%.

Debt servicing pressures in Tanzania remain relatively manageable compared to other East African economies. In 2024, debt service payments accounted for 3% of GNI and 12% of export earnings, significantly lower than Kenya, where debt service absorbed 27% of exports, and comparable to Rwanda’s levels. This reflects Tanzania’s continued reliance on multilateral creditors, which account for approximately 64% of public and publicly guaranteed (PPG) external debt, with the World Bank alone representing nearly half of total PPG debt. Such creditor composition has helped moderate repayment pressures through longer maturities and concessional terms.

Nevertheless, Tanzania recorded the highest net external debt inflows in East Africa in 2024, at US$3.1 billion, exceeding Ethiopia (US$2.8 billion) and Rwanda (US$1.9 billion). This trend highlights ongoing financing needs and signals that debt accumulation is likely to persist in the medium term. As regional peers increasingly face tightening global financial conditions, Tanzania’s future debt trajectory will depend heavily on export performance, fiscal discipline, and the productivity of debt-financed investments.

Overall, Tanzania’s external debt position reflects a delicate balance: stronger than highly indebted peers such as Rwanda and Kenya in terms of servicing capacity, yet more exposed than Uganda and DRC when viewed through export and inflow dynamics. This evolving landscape makes continuous debt monitoring, regional benchmarking, and strategic borrowing essential for safeguarding macroeconomic stability and sustaining long-term growth. Read More of This Topic: Who Is Financing Tanzania’s Public Debt in 2024—and What Does It Mean for Sustainability?

External Debt Data for Tanzania (2010–2024)

The following table summarizes Tanzania's external debt data across key years, as extracted from the International Debt Report 2025. All figures are in US$ million unless otherwise noted.

Public and Publicly Guaranteed (PPG) Debt for Tanzania in 2024, by Creditor and Creditor Type (Including IMF Credit)

The table below focuses on PPG debt in 2024, broken down by creditor type and key creditors where specified. Note that IMF credit is reported separately in the raw data but is included here as part of overall PPG (under multilateral creditors) per the report's figure, which explicitly incorporates it. The total PPG debt (including IMF credit) is approximately $25,593 million (long-term PPG $24,277 + IMF credit $1,316). Specific creditor breakdowns (e.g., China, AfDB) are derived from the report's Figure 1, which provides a visual pie chart; percentages are approximate and may reflect rounded values.

Notes on Breakdown:

• Estimates for sub-creditors (e.g., AfDB, China) are calculated using the figure's percentages applied to the total PPG (incl. IMF). There may be slight discrepancies due to rounding in the report's visuals.
• The report's pie chart highlights major creditors: World Bank (largest share), China (significant bilateral), AfDB, IMF, and smaller shares for India, Korea, France, and others.

External Debt Comparison for East African Countries (Data from International Debt Report 2025, End-2024)

The International Debt Report 2025 provides detailed external debt statistics for low- and middle-income countries, including East African nations. Below is a comparison focusing on Tanzania and other East African countries (Burundi, Democratic Republic of the Congo (DRC), Ethiopia, Kenya, Rwanda, Somalia, and Uganda). The data is drawn from the report's country tables and snapshots. Note that some values for Ethiopia and Burundi are missing in the report (indicated as ".."), and for Somalia, I supplemented with data from the World Bank's online IDS portal as the PDF extraction for that country was incomplete. Population for Uganda is estimated based on report context (not explicitly listed in the extracted data). All figures are in US$ million unless otherwise noted.

Key Insights and Comparison with Tanzania

• Total External Debt: Kenya has the highest debt stock among the group at $42,886 million, followed by Ethiopia and Tanzania (both around $36,000 million). Burundi and Somalia have the lowest, reflecting smaller economies and recent debt relief efforts (e.g., Somalia's debt reduction to under 6% of GDP in 2023).
• Debt Burden Relative to Economy ( % GNI): Rwanda has the highest ratio at 94%, indicating high vulnerability. Tanzania's 47% is moderate, similar to Burundi, while DRC is low at 18%.
• Debt Burden Relative to Exports ( % Exports): Ethiopia tops the list at 311%, meaning its debt is over three times its export earnings, posing risks. Tanzania's 222% is high but lower than Rwanda (242%) and Kenya (206%).
• Debt Service Burden: Kenya faces the heaviest load, with debt service taking 27% of exports and 5% of GNI. Tanzania's is more manageable at 12% of exports and 3% of GNI, similar to Rwanda. DRC has the lowest at 1% for both.
• Net Debt Inflows: Tanzania saw the highest net debt inflows at $3,056 million, indicating continued borrowing. Ethiopia and Rwanda also had significant inflows ($2,817 and $1,900 million, respectively), while Burundi had minimal ($10 million).
• Overall Context: Compared to Tanzania, countries like Kenya and Rwanda have higher relative debt burdens, potentially limiting fiscal space for development. Smaller economies like Burundi and Somalia have lower absolute debt but remain fragile due to limited export bases. The regional average for Sub-Saharan Africa is total debt of $901 billion, 49% of GNI, and 164% of exports, showing East Africa aligns with or exceeds regional norms in burden indicators.

Tanzania’s economic performance in 2025 reflects a period of strong macroeconomic stability, export-led growth, and improving external resilience, underpinned by prudent monetary management by the Bank of Tanzania (BoT). As of 30 November 2025, the BoT’s financial position signals a notable strengthening of the country’s economic fundamentals, with total assets rising to TZS 29.67 trillion, equivalent to a 4.9% increase (about TZS 1.39 trillion) compared to October 2025. This expansion mirrors heightened foreign exchange inflows, record performance in the mining sector—particularly gold—and rising domestic economic activity, all of which have reinforced liquidity conditions and reserve buffers.

A defining feature of 2025 has been the rapid accumulation of gold and liquid assets. Total gold holdings (monetary and bullion combined) increased by 18.6% to TZS 4.67 trillion, driven by the BoT’s domestic gold purchase programme and Tanzania’s exceptional export performance. Gold export earnings reached an estimated USD 4.3–4.43 billion in the year ending September/October 2025, representing a 35–36% year-on-year increase and firmly establishing gold as the country’s leading foreign exchange earner. In parallel, cash and cash equivalents rose by 32.8% to TZS 4.45 trillion, reflecting strong inflows from exports and services such as tourism, as well as improved liquidity management. These trends have contributed to a more diversified and resilient reserve position.

These monetary and reserve developments are consistent with Tanzania’s broader macroeconomic outcomes in 2025. Real GDP growth is estimated at 6.0–6.3%, supported by mining, tourism (with arrivals rising by around 11%), agriculture, manufacturing, and large-scale infrastructure projects. Inflation remained subdued at about 3.4% in November 2025, comfortably within the BoT’s 3–5% target band, while foreign exchange reserves stood at around USD 6.17 billion (approximately 4.7 months of import cover) by end-October 2025, meeting regional adequacy benchmarks and enhancing exchange rate stability.

Economic Trajectory for 2026

Looking ahead, Tanzania’s macroeconomic outlook for 2026 remains broadly positive, building on the strong foundations established in 2025. Current projections from international and domestic sources point to real GDP growth of about 6.1–6.3% in 2026, indicating stable to slightly accelerating momentum. Growth is expected to continue being driven by mining (especially gold), tourism, infrastructure investments, manufacturing, and gradual expansion in private sector credit, supported by ongoing structural reforms aimed at improving the business environment.

Inflation in 2026 is projected to remain around 3.5%, still within the BoT’s policy target range, reflecting continued prudent monetary policy, stable food supply conditions, and moderated global energy prices. Foreign exchange reserves are expected to remain adequate—above 4.5–5 months of import cover, bolstered by sustained gold and tourism receipts and steady capital inflows. Gold exports are likely to remain elevated, potentially exceeding USD 4 billion, although performance will remain sensitive to global commodity prices and production dynamics.

Overall, the 2026 trajectory suggests that Tanzania is well positioned to consolidate its macroeconomic gains, strengthen external buffers, and advance toward its medium-term development goals, including upper-middle-income status. Nonetheless, risks such as commodity price volatility, climate-related shocks, and post-election policy adjustments could influence outcomes. Maintaining fiscal discipline, deepening export diversification, and sustaining prudent monetary management will be critical to preserving stability and translating growth into inclusive and resilient economic development beyond 2026. Read More: Tanzania Economic Updates December 2025

Key Changes in the BoT Balance Sheet (November vs. October 2025)

The table below highlights selected major items (in TZS '000) with significant changes, focusing on those relevant to economic development (e.g., reserves, gold, and liquidity indicators).

The most notable development is the ~18.6% increase in total gold holdings (combined monetary and bullion gold), driven by Tanzania's mining sector expansion and the BoT's policy of purchasing gold from domestic producers. This aligns with record gold export earnings of approximately USD 4.3–4.43 billion in the year ending September/October 2025, a ~35–36% surge year-on-year, fueled by high global gold prices and increased production.

Broader Tanzania Economic Indicators (2025 Context)

Tanzania's economy in 2025 demonstrates resilient growth, low inflation, and strengthening external buffers, supported by key sectors: mining (gold-led), tourism (strong recovery in arrivals), agriculture (stable output despite weather risks), and infrastructure investments. GDP growth is driven by exports and public projects, with foreign reserves providing a buffer against external shocks.

These indicators reflect sustained economic development:

• Mining boom directly contributes to the BoT's gold reserve buildup, enhancing foreign exchange reserves and fiscal revenues.
• Low inflation (around 3–3.5%) supports purchasing power and investment attractiveness.
• Adequate reserves (4.5–5 months import cover) provide stability amid global uncertainties.
• Ongoing reforms (e.g., infrastructure like ports/railways, LNG projects) and private sector lending growth signal diversification beyond traditional agriculture.

Overall, the BoT balance sheet reinforces a positive outlook for Tanzania's economy, characterized by export-led growth, macroeconomic stability, and progressive reserve accumulation in 2025.

Tanzania's Economic Trajectory for 2026

Tanzania's strong macroeconomic momentum in 2025 is expected to carry into 2026, with projections indicating continued resilient growth, low inflation, and strengthening external buffers. International and domestic forecasts highlight sustained performance in key sectors—particularly mining, tourism, infrastructure investments, and manufacturing—while ongoing reforms aim to enhance diversification and private sector participation. The Bank of Tanzania's prudent monetary management and reserve accumulation are likely to support exchange rate stability and resilience against global uncertainties. However, risks such as potential political transitions following the 2025 elections, commodity price volatility, and climate-related challenges could moderate the pace if not managed effectively.

Projected Key Economic Indicators for 2026

The table below summarizes major forecasts from reputable sources (as of late 2025 data), compared to 2025 estimates for context.

Overall, the 2026 outlook reinforces Tanzania's path toward upper-middle-income status, with export-led growth and reserve buildup (as seen in the BoT's 2025 balance sheet trends) providing a solid foundation. Successful implementation of structural reforms, climate-resilient investments, and fiscal prudence will be critical to achieving these projections and mitigating downside risks.

Conclusion

The Bank of Tanzania's November 2025 balance sheet paints an optimistic picture of the nation's macroeconomic health, with significant asset growth, diversified reserves (particularly in gold), and strengthened equity signaling enhanced resilience and capacity for development financing. Tanzania's 2025 performance—marked by record export earnings, low and stable inflation, private sector credit expansion, and GDP growth around 6%—has been anchored by effective central bank policies and sectoral strengths in mining and tourism, providing a buffer against external risks while fostering inclusive progress.

As the economy transitions into 2026, projections of 6.1–6.3% GDP growth, inflation remaining around 3.5%, and sustained reserve adequacy offer a compelling outlook for continued momentum. Key opportunities lie in advancing structural reforms, climate-resilient investments, and diversification efforts to mitigate risks such as commodity price fluctuations or global slowdowns. With the BoT's prudent stewardship and export-led drivers intact, Tanzania is well-positioned to build on its 2025 gains, driving sustainable development, job creation, and regional leadership in the years ahead.

Tanzania's government domestic debt stock reached TZS 38,114.8 billion in October 2025, marking a 1.8% increase from September 2025 (TZS 37,459 billion), according to the Bank of Tanzania's (BoT) Monthly Economic Review for November 2025. This represents approximately 17% of GDP, stabilizing from prior years and aligning with IMF projections for medium-term sustainability at around 17% of GDP. The debt is held by several domestic creditors, dominated by the banking system, reflecting a diversified yet institutionally concentrated investor base. This structure supports fiscal financing for infrastructure and social programs under the FY2025/26 budget (TZS 49.2 trillion), but raises concerns over potential crowding-out of private credit amid rising borrowing needs.

Economic Implications: The modest expansion in domestic debt underscores proactive fiscal management, funding key investments like the USD 3.5 billion Julius Nyerere Hydropower Project and road networks, which contributed 1.2% to Q3 2025 GDP growth. By relying on domestic sources (83% of development spending financed locally), Tanzania mitigates external vulnerabilities—such as USD appreciation or global rate hikes—while keeping public debt-to-GDP at a manageable 49.6% (below the 55% EAC benchmark). However, heavy financial sector exposure (over 70% held by banks, BoT, and pensions) could amplify liquidity risks during downturns, potentially transmitting fiscal pressures to monetary policy and constraining private sector lending, as evidenced by a 2025 study on crowding-out effects. Overall, this portfolio enhances debt sustainability but necessitates deeper retail participation to broaden the market and reduce systemic risks. Read More: Tanzania Domestic Debt Reaches TZS 37.46 Trillion

2. Domestic Debt by Creditor Category — Table

The breakdown highlights the financial sector's dominance, with commercial banks and the BoT as top holders. Data is from Table 2.6.6 in the BoT review, excluding liquidity papers for comparability.

Source: Ministry of Finance and Bank of Tanzania computations (provisional data). Key Trends: Commercial banks' share rose slightly from 28.7% in September 2025, driven by auctions yielding TZS 327.7 billion (TZS 179 billion in bonds, TZS 148.7 billion in bills). BoT holdings include monetary operations, while "others" encompass growing retail bonds via mobile platforms.

Economic Implications: This creditor mix ensures stable demand for government securities, with risk-free yields (10-12% on bonds) attracting liquidity amid 21.5% M3 growth. However, banks' 35% exposure ties their balance sheets to sovereign risk, potentially slowing credit to SMEs (private sector credit at 16.1% YoY but below potential). Pension and insurance holdings (23.4% combined) match long-term liabilities, supporting financial inclusion, but over-reliance could hinder diversification if yields compress under tighter BoT policy (CBR at 5.75%).

3. Interpretation of Domestic Debt Structure

The structure reveals a maturing domestic market, with institutional investors providing a reliable funding base. In October 2025, debt servicing totaled TZS 482.4 billion (TZS 204.5 billion principal, TZS 277.9 billion interest), consuming 12% of revenues but remaining below 20% threshold for sustainability.

1. Commercial Banks — Largest Holders (35%) Commercial banks hold the largest share, reflecting high investment in government securities for stable, risk-free returns (e.g., 15-year bonds at 11.5%). This surged post-September auctions, where oversubscription hit 150%. Economic Implications: Banks' preference for sovereign paper over private lending (crowding-out effect) limits SME financing, contributing to manufacturing's subdued 5.2% credit growth. Per a 2025 analysis, this dampens monetary transmission, as rising government borrowing could push lending rates 1-2% higher, constraining 6% GDP targets. Positively, it bolsters bank capital adequacy (CAR at 18.5%), enhancing systemic stability.
2. Bank of Tanzania — Nearly 30% Includes Treasury bonds for liquidity management and special facilities like overdrafts (TZS 5,493.1 billion non-securitized). BoT's role supports fiscal deficits (3.5% of GDP) without direct monetization. Economic Implications: Facilitates counter-cyclical financing, aiding post-COVID recovery (reserves at USD 6.2 billion). However, quasi-fiscal exposure risks policy independence, potentially fueling inflation if uncoordinated with fiscal tightening—though current 3.5% rate remains anchored. IMF notes this aids short-term buffers but advises phasing down to <25% for credibility.
3. Pension Funds — 16.4% Primarily long-term Treasury bonds to match actuarial needs, with allocations up 5% YoY via NSSF reforms. Economic Implications: Secures retirement savings amid 7% population aging, channeling domestic savings (household rate 12%) into productive debt. This deepens capital markets, potentially lowering yields by 50bps and funding infra (e.g., USD 1B rail upgrades), but concentration exposes pensions to interest rate volatility.
4. Insurance Companies — 7% Favor long-dated securities to hedge liabilities, with life insurers leading uptake. Economic Implications: Aligns with growing insurance penetration (2.5% of GDP), fostering risk pooling for climate/agri shocks. Supports financial deepening, but low share signals untapped potential—expanding could mobilize TZS 1 trillion more, reducing aid dependency.
5. Other Creditors — 7.7% Includes retail investors (via M-Auwal bonds) and private firms, up from 5% in 2024 due to digital platforms. Economic Implications: Boosts inclusion (1 million retail holders), democratizing finance and reducing inequality (Gini at 40.4). Encourages savings mobilization, potentially adding 0.5% to GDP via multiplier effects, though scaling needs education to hit 10% share by 2030.

4. Domestic Debt Composition — Additional Notes

The structure favors long-term instruments: Treasury Bonds (59.2%), Treasury Bills (38.2%), Other government securities (2.6%). Government raised TZS 327.7 billion in October, shifting 55% to bonds for maturity extension (average 8.2 years).

Implication: The government continues shifting toward long-term borrowing (bonds) to reduce refinancing pressure and stabilize debt servicing costs (interest at 6.5% of budget). This lowers rollover risks (from 25% in 2024), supporting fiscal space for 34% budget growth in FY2025/26, but higher bond issuance could elevate yields if private demand lags, per Afreximbank analysis.

Economic Implications: Prolongs maturity profile (up from 6.5 years), curbing liquidity squeezes and aiding 4.7-month reserve cover. Enables infra-led growth (2% GDP boost from projects), but if yields rise >12%, it could crowd out investment, slowing non-mining sectors to 5.5%.

5. Key Takeaways

• Total domestic debt: TZS 38.1 trillion, up 1.8% MoM, financing 40% of budget amid 13.1% tax-to-GDP (low vs. peers).
• Major creditors: Commercial Banks (35%), Bank of Tanzania (29.9%), Pension Funds (16.4%)—financial sector holds 81.3%.
• Domestic debt remains dominated by the financial sector: Stable but exposed; banking balance sheets 25% tied to sovereigns.

Broader Economic Implications: This composition ensures low-cost funding (average rate 10.8%), underpinning 6% GDP growth and single-digit inflation, per World Bank. It mitigates FX risks (69.5% external debt) and supports Vision 2050 via infra (roads, energy adding 1.5% growth). Yet, crowding-out risks private credit (16.1% YoY vs. 20% target), impacting jobs (youth unemployment 13.4%)—policy responses like credit guarantees could unlock TZS 2 trillion for SMEs. Sustained at 17% GDP, it signals resilience, but diversification (e.g., green bonds) is key to avoid transmission lags to lending rates.

Tanzania's external debt stock totaled USD 35,385.5 million at the end of October 2025, reflecting a modest 0.7% monthly decrease from September's USD 35,438.3 million, primarily due to net amortizations exceeding new disbursements (USD 220.5 million service vs. USD 89.9 million loans). As of December 14, 2025, this remains the latest detailed breakdown available from the Bank of Tanzania's (BoT) November 2025 Monthly Economic Review; preliminary November estimates suggest stability around USD 35,400 million (minor +0.04% from multilateral inflows), with no significant shifts reported in subsequent updates. The portfolio is predominantly concessional (average grant element ~45%, interest 3.2%), supporting moderate debt distress risk per IMF assessments.

Economic Implications: The contained stock (69.5% of total national debt, ~25% of GDP) leverages low-cost financing for productive investments, contributing 1-2% to annual GDP growth via infrastructure and social multipliers while preserving fiscal space (service at 12% of exports). Government dominance ensures public goods alignment with Vision 2050 (upper-middle-income by 2050), but private sector growth (18.3%) signals FDI maturity—potentially adding 0.5% GDP via spillovers in trade/manufacturing. Negligible public corporations share minimizes quasi-fiscal risks, enhancing stability amid 6.2% projected growth, though reliance on external funds exposes to global rate cycles (Fed policy impacts commercial 35.2%). Read More: Tanzania External Debt at USD 35.44 Billion

1.1 Table — External Debt by Borrower

Source: BoT November 2025 Review; provisional data.

Interpretation:

• The Government holds the largest portion (over 80%): Reflects strategic borrowing for budget support and projects (e.g., USD 443 million net disbursements YTD for infra/social).
• The private sector covers 18.3%: Mostly trade credits and bank loans, up ~12% YoY, tied to FDI in mining/tourism.
• Public entities account for a negligible share: Minimal parastatal borrowing post-reforms.

Economic Implications: Government skew (81.7%) channels funds to high-multiplier sectors (e.g., social services boosting human capital, +0.8% long-term GDP per World Bank models), fostering inclusive growth and poverty reduction (26.4% rate). Private rise diversifies risks, supporting non-gold exports (+15.2%) and jobs (200K in services), but concentrates fiscal contingency—revenue shortfalls (13.1% GDP tax ratio) could elevate service (USD 2.1 billion annually), crowding out 0.3-0.5% private investment if guarantees called.

2. Disbursed Outstanding Debt by User of Funds

The Disbursed Outstanding External (DOE) debt—excluding undisbursed commitments—stood at USD 31,385.5 million (88.7% of total external), allocated across sectors to prioritize development goals. This portion represents actively utilized funds, with social services leading due to multilateral priorities (e.g., IDA/World Bank health/education loans).

2.1 Table — External Debt by User of Funds

Source: BoT November 2025 Review; DOE focus.

Interpretation:

• Social services absorb the largest share (34.7%): Prioritizes human capital (e.g., water/education projects).
• Heavy investment in energy/mining (22.1%) and transport (17.8%): Supports industrialization and connectivity.
• Agriculture’s share is small (5.4%): Despite 24% GDP contribution, reflecting underinvestment relative to potential.

Economic Implications: Allocation to social (34.7%) enhances human development (HDI gains, +1-2% long-term productivity), reducing inequality (Gini 40.4) and poverty via education/health spillovers. Productive sectors (energy/mining/transport ~60%) drive multipliers: energy adds 1.2% GDP (hydropower), transport boosts trade (+15.2% exports under AfCFTA, USD 1 billion potential). Low agriculture share risks food security (inflation driver 7.4% October) and rural jobs (65% employment)—increasing to 10% could add 0.5-1% GDP via value chains, per Deloitte 2025. Overall, productive use sustains moderate distress risk, aligning with 6% growth, but sector imbalances highlight diversification needs amid climate vulnerabilities (1% GDP annual losses).

3. Currency Composition of External Debt (October 2025)

The portfolio is heavily USD-tilted, with diversification to EUR/SDR for multilateral exposure; no major shifts reported through November.

3.1 Table — External Debt by Currency

Source: BoT November 2025 Review.

Interpretation:

• USD dominance (65.7%): Ties to global markets; sensitive to USD strength.
• EUR/SDR (26.3% combined): Multilateral buffer.
• Appreciation of the Tanzanian shilling in 2025: Reduces TZS equivalent (~9.5% savings YoY).

Economic Implications: High USD exposure (65.7%) amplifies shilling gains (TZS 2,463/USD Dec 14), saving TZS 2.5-3 trillion in servicing and easing non-food inflation (2.1%). Diversification (EUR/SDR/CNY ~30%) hedges risks, supporting reserves (4.7 months) amid Fed easing. However, USD volatility could add 0.5% to CPI/debt service if reversing—BoT forwards mitigate, preserving 3.4% inflation and 6% growth, but full hedging (to 50% USD) could enhance resilience, per Afreximbank.

4. Summary of Key Insights

4.1 Debt Stock by Borrower

• Government: 81.7% (public investment focus).
• Private sector: 18.3% (FDI-linked growth).
• Public corporations: ~0% (reform success).

4.2 Debt Use by Sector

• Largest: Social services (34.7%), Energy & mining (22.1%), Transport & telecom (17.8%).
• Agri low (5.4%): Underinvestment risk.

4.3 Currency Composition

• USD two-thirds (65.7%); EUR/SDR key diversifiers (26.3%).

Overall Economic Implications: October's USD 35.4 billion external debt (stable through November) is productively allocated (social/productive ~75%), fueling human capital and infra for 6.2% growth and reserves buildup. Government/private balance supports inclusivity/FDI, while currency mix + shilling strength curbs costs/inflation—sustaining moderate risk (IMF). Yet, USD dominance and agri lag pose vulnerabilities (climate/FX shocks ~1% GDP); prioritizing agri (to 10%) and hedging could unlock 0.5-1% additional growth, aligning with AfCFTA/USD 10 billion potential by 2030 (World Bank 2025).

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