Tanzania’s current account deficit narrowed significantly to USD 2,117.6 million in the year ending June 2025, a 24.3% improvement from USD 2,797.7 million in June 2024. This USD 680.1 million reduction reflects robust growth in goods and services exports, especially from tourism and transport, which drove the net goods & services deficit down by 61.7% to USD 676.6 million. Service receipts rose to USD 7,110.4 million (+8.1%), led by travel (USD 3,934.5 million, +6.9%) and transport (USD 2,530.0 million, +9.8%), supported by a 10% increase in tourist arrivals. However, rising primary income outflows (USD 1,949.6 million, +17.9%) due to external debt servicing and a drop in remittances (USD 508.7 million, -18.1%) partially offset these gains. Meanwhile, foreign reserves stood at USD 5,307.7 million, covering 4.3 months of imports, above the national benchmark. Despite a surge in outbound travel spending (+51.4%), Tanzania’s external sector continues to show resilience, highlighting the importance of export diversification, tourism investment, and policy measures to manage foreign exchange outflows.

1. Current Account Performance

The current account balance reflects Tanzania’s trade in goods and services, primary income (e.g., interest and dividends), and secondary income (e.g., personal transfers and remittances) with the rest of the world. A deficit indicates that outflows exceed inflows, often financed by external borrowing or reserves.

Key Figures (Year Ending June 2025)

• Current Account Balance:
  • June 2025: Deficit of USD 2,117.6 million, a 24.3% improvement (USD 680.1 million reduction) from USD 2,797.7 million in June 2024.
  • Context: The narrowing deficit aligns with trends observed in earlier periods, such as a 31.1% reduction to USD 2,021.5 million in January 2025 and a 35% reduction to USD 2,025.8 million in November 2024. This improvement is driven by robust export growth (+17.7%) and better services performance, supported by global economic recovery and favorable commodity prices.
  • Drivers:
    • Goods & Services (Net): Improved by 61.7% to a deficit of USD 676.6 million from USD 1,764.7 million, reflecting strong export performance (e.g., gold, cashew nuts, tourism) and moderated import growth.
    • Primary Income (Net): Deficit widened by 17.9% to USD 1,949.6 million, driven by higher interest and dividend payments abroad, likely linked to external debt servicing (e.g., USD 32,955.5 million external debt, 67.6% USD-denominated) and foreign investments.
    • Secondary Income (Net): Surplus declined by 18.1% to USD 508.7 million, reflecting lower personal transfers (e.g., remittances), possibly due to global economic tightening or migration patterns.
  • Implications: The narrowing deficit signals improved external sector resilience, supported by tourism and commodity exports. However, persistent deficits and rising primary income outflows highlight the need for enhanced export diversification and remittance strategies. The African Development Bank projects a current account deficit of 4.2% of GDP in 2025, indicating sustained but manageable pressures.
• Foreign Exchange Reserves:
  • June 2025: USD 5,307.7 million, covering 4.3 months of projected imports, above the national benchmark of 4 months.
  • Context: Reserves increased from USD 5,056.8 million in November 2024 and USD 5,323.6 million in January 2025, reflecting improved export inflows and IMF disbursements (e.g., USD 148.6 million under the Extended Credit Facility in December 2024).
  • Implications: Adequate reserves mitigate exchange rate volatility (Tanzanian Shilling depreciated 8% in 2023), but sustained export growth is critical to maintain cover above 4 months.

2. Exports – Service Receipts by Category

Service receipts represent earnings from Tanzania’s service exports, including tourism (travel), transport, and other services (e.g., financial, insurance, ICT). These are critical to narrowing the current account deficit.

Total Service Receipts (Year Ending June 2025)

• Amount: USD 7,110.4 million
• Change: +8.1% from USD 6,578.7 million in 2024 (USD 531.7 million increase).
• Context: The growth aligns with earlier trends, such as a 14% increase to USD 6,985.9 million in November 2024 and a 7.3% increase to USD 6,940.8 million in April 2025, driven by tourism and transport earnings.

Category Breakdown

• Travel (Tourism):
  • June 2025: USD 3,934.5 million (55.3% of total service receipts).
  • Change: +6.9% from USD 3,679.7 million in 2024 (USD 254.8 million increase).
  • Tourist Arrivals: Increased by 10% to 2,193,322 in 2025 from 1,994,242 in 2024, consistent with a 20% annual increase to 2,662,219 in 2024 and 2,106,870 in November 2024.
  • Context: Tourism receipts reflect Tanzania’s growing global appeal, with awards like Africa’s Leading Destination 2025 and investments in promotion (e.g., TZS 359.9 billion tourism budget for 2025/26). Key markets include Europe, Kenya, and the U.S., with new initiatives like Marriott’s Mapito Safari Camp in Serengeti.
  • Drivers: Increased arrivals are driven by post-COVID recovery, reduced tourism license fees (up to 80% cuts), and infrastructure improvements (e.g., Dodoma Transport Project),.
  • Implications: Tourism’s 55.3% share of service receipts underscores its role as a foreign exchange earner, supporting Vision 2050’s 19.5% GDP contribution target by 2025/26. Sustained marketing and conservation investments are critical.
• Transport:
  • June 2025: USD 2,530.0 million (35.6% of total service receipts).
  • Change: +9.8% from USD 2,304.3 million in 2024 (USD 225.7 million increase).
  • Context: Growth aligns with earlier periods, such as USD 2,718.7 million in November 2024 (+15.8%) and USD 2,690.0 million in October 2024, driven by freight earnings from improved port efficiency and trade with landlocked neighbors (e.g., Zambia, Rwanda).
  • Drivers: Investments in transport infrastructure (e.g., Standard Gauge Railway, TAZARA Railway revitalization with USD 1.4 billion from China) and intra-African trade growth (24% to USD 5.18 billion in 2024) boost earnings.
  • Implications: Transport’s growth supports Tanzania’s role as a regional trade hub, but reliance on freight requires sustained infrastructure funding.
• Other Services:
  • June 2025: USD 645.9 million (9.1% of total service receipts).
  • Change: +8.6% from USD 594.6 million in 2024 (USD 51.3 million increase).
  • Context: Includes financial, insurance, and ICT services. The growth is consistent with digital payment advancements (e.g., Tanzania Instant Payment System with 453.7 million transactions in 2024) and financial inclusion efforts (87% adult target by 2030).
  • Implications: Growth in “Other Services” reflects financial sector deepening, but its small share limits its impact on the current account.

Tourism Highlight

• Arrivals: The 10% increase to 2,193,322 tourists reflects sustained recovery, with 2024 seeing 2,662,219 arrivals and November 2024 at 2,106,870. Key drivers include global promotion, reduced fees, and awards like Africa’s Leading Destination 2025.
• Implications: Tourism’s resilience supports foreign exchange inflows, but seasonality (e.g., low season pressures in Q1 2025) and global competition require ongoing investment in infrastructure and marketing.

3. Imports – Service Payments

Service payments represent Tanzania’s expenditures on imported services, such as outbound travel, freight, and other services (e.g., financial, consulting).

Total Service Payments (Year Ending June 2025)

• Amount: USD 2,894.0 million
• Change: +22.7% from USD 2,359.5 million in 2024 (USD 534.5 million increase).
• Context: The increase follows a 22.8% rise to USD 2,842.6 million in April 2025 and a 10.2% rise to USD 2,533.8 million in January 2025, driven by freight and outbound travel.

Category Breakdown

• Travel (Outbound):
  • June 2025: USD 867.9 million (30.0% of total service payments).
  • Change: +51.4% from USD 573.2 million in 2024 (USD 294.7 million increase).
  • Context: The surge aligns with increased consumer spending abroad, possibly driven by a growing middle class and business travel. Earlier data (e.g., April 2025) lacks specific outbound travel figures, but service payments rose due to freight.
  • Drivers: Increased outbound travel reflects economic growth (5.6% in 2024) and higher disposable incomes, but it strains foreign exchange reserves.
  • Implications: The sharp increase offsets export gains, requiring policies to promote domestic tourism and manage foreign exchange outflows.
• Transport:
  • June 2025: USD 1,453.2 million (50.2% of total service payments).
  • Change: Near-flat (≈ 0%) from USD 1,453.0 million in 2024.
  • Context: Stable payments reflect consistent freight costs tied to trade volumes. Earlier data shows freight accounted for 53.3% of service payments in April 2025, driven by industrial transport equipment imports.
  • Drivers: Imports of capital goods (e.g., machinery, transport equipment) for infrastructure projects (e.g., SGR, TAZARA) sustain freight costs,.
  • Implications: Stable transport payments align with trade growth but highlight reliance on imported goods, necessitating export diversification.
• Other Services:
  • June 2025: USD 573.2 million (19.8% of total service payments).
  • Change: -17.1% from USD 691.1 million in 2024 (USD 117.9 million decrease).
  • Context: The decline suggests cost efficiencies or reduced outsourcing in financial, insurance, or consulting services, aligning with digital payment growth and financial inclusion.
  • Implications: Reduced payments improve the services balance, but the small share limits its impact on the current account.

Summary Snapshot

Final Insights and Policy Implications

1. Current Account Improvement:
   • The 24.3% deficit reduction (USD 2,117.6 million) reflects strong export growth (+17.7%) and services performance, supported by tourism (2.2 million arrivals) and transport infrastructure. However, rising primary income outflows (USD 1,949.6 million) due to external debt servicing (40% of government expenditures) and declining remittances (USD 508.7 million) temper gains.
   • Policy: Diversify exports (e.g., horticulture, manufactured goods) and boost remittance inflows through diaspora engagement to further narrow the deficit.
2. Tourism’s Critical Role:
   • Tourism receipts (USD 3,934.5 million, +6.9%) are a cornerstone of service exports, driven by a 10% increase in arrivals and global recognition. Investments in infrastructure (e.g., Dodoma Transport Project, TAZARA) and promotion (TZS 359.9 billion budget) are paying off.
   • Policy: Sustain tourism growth through conservation, reduced fees, and targeting high-value markets (e.g., Europe, U.S.) while addressing seasonality risks.
3. Transport Sector Growth:
   • Transport receipts (USD 2,530.0 million, +9.8%) reflect Tanzania’s role as a regional trade hub, supported by port efficiency and intra-African trade growth (USD 5.18 billion in 2024). Projects like SGR and TAZARA enhance freight earnings.
   • Policy: Continue infrastructure investments and regional trade agreements (e.g., AfCFTA) to boost transport earnings, but monitor freight cost stability.
4. Outbound Travel Pressures:
   • The 51.4% surge in outbound travel payments (USD 867.9 million) reflects growing consumer spending abroad, straining foreign exchange reserves. Stable transport payments (USD 1,453.2 million) indicate consistent trade-related costs.
   • Policy: Promote domestic tourism and manage foreign exchange outflows through targeted incentives (e.g., tax breaks for local travel).
5. Economic Context:
   • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6.0% in 2025 support export performance, driven by agriculture, tourism, and manufacturing.
   • Monetary Policy: The BoT’s 6% Central Bank Rate and 3%–5% inflation target ensure liquidity and exchange rate stability, supporting external sector performance.
   • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against global shocks, but USD appreciation risks remain.
6. Risks and Opportunities:
   • Risks: Rising outbound travel costs, USD-denominated debt servicing (67.6% of external debt), and global commodity price volatility could widen the deficit. Climate shocks and geopolitical tensions also pose risks.
   • Opportunities: Investments in tourism, transport, and digital payments (e.g., TIPS), alongside reforms like MKUMBI II, can sustain export growth and financial inclusion