The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.
1. Inflation in Zanzibar
Annual headline inflation (July 2025):4.1%, down from 5.3% in July 2024, and unchanged from June 2025.
Food inflation: 4.3% (vs. 9.2% in July 2024).
Non-food inflation: 3.9% (stable).
Monthly inflation: 0.2% (down from 0.5% in June 2025).
Decline mainly due to lower food prices (rice, sugar, wheat flour, green bananas).
2. Government Budgetary Operations
Revenue and grants (June 2025):TZS 93.4 billion, above the monthly target of TZS 87.6 billion.
Economic Implications of Zanzibar's Performance – July 2025
1. Inflation in Zanzibar
Trends: Annual headline inflation dropped to 4.1% in July 2025 from 5.3% in July 2024, with food inflation falling to 4.3% from 9.2% and monthly inflation easing to 0.2% from 0.5%.
Economic Meaning: The decline, driven by lower food prices (rice, sugar, wheat flour, green bananas), signals improved supply conditions, possibly due to the National Food Reserve Agency’s stock management (477,923 tonnes in June 2025). This boosts purchasing power and consumer confidence, supporting the 6.2% GDP growth in 2024 and a projected over 6% in 2025. The 4.1% rate remains above Mainland Tanzania’s 3.3% but aligns with regional stability (EAC/SADC targets). Risks include potential food price volatility if harvests falter, though current trends suggest resilience.
2. Government Budgetary Operations
Revenue and Spending: Revenue and grants reached TZS 93.4 billion in June 2025 (106.6% of the TZS 87.6 billion target), with TZS 80.2 billion from own sources and TZS 13.2 billion in grants. Expenditure totaled TZS 118.4 billion (recurrent TZS 79.9 billion, development TZS 38.5 billion), resulting in a TZS 25.0 billion deficit.
Economic Implications: Exceeding revenue targets reflects strong tax collection and grant inflows, supporting fiscal capacity amid 6.2% growth. However, the deficit, driven by 32.5% development spending (e.g., infrastructure), indicates reliance on borrowing or reserves, risking debt sustainability (41.1% GDP debt-to-GDP ratio). This aligns with fiscal prudence but highlights the need for expenditure control to match revenue, especially as tourism (12.7% growth) fuels economic activity.
3. External Sector Performance
Trade Dynamics: Exports rose to USD 328.2 million (up 12.4% from USD 292.1 million in 2024), with services (USD 227.4 million, tourism-led) up 9.9% and goods (USD 100.8 million, cloves/seaweed) up 18.5%. Imports increased to USD 470.9 million (up 14.1% from USD 412.6 million), driven by capital and consumer goods, widening the trade deficit to USD 142.7 million from USD 120.5 million.
Economic Significance: The 12.4% export growth, bolstered by tourism (2,662,219 arrivals in 2024) and clove/seaweed exports, strengthens foreign exchange reserves (USD 6 billion nationally), supporting the TZS stability (0.2% depreciation). However, the 14.1% import surge reflects import dependency (petroleum, industrial goods), straining the current account (surplus of USD 611.1 million in 2024/25). This could pressure reserves if export growth slows, though tourism’s momentum offers a buffer.
Summary of Broader Economic Significance
Stability and Growth: Lower inflation (4.1%) and robust export growth (12.4%) underpin Zanzibar’s 6.2% GDP growth in 2024 and over 6% projection for 2025, driven by tourism and trade. This supports the Vision 2050 goal of diversification.
Fiscal Challenges: Revenue outperformance (TZS 93.4 billion) aids development spending (TZS 38.5 billion), but the TZS 25.0 billion deficit signals a need for fiscal balancing to sustain debt at 41.1% of GDP.
External Risks: Export gains are offset by faster import growth (14.1%), maintaining a trade deficit (USD 142.7 million). Tourism resilience and reserve adequacy (4.8 months of imports) mitigate risks, but import reliance remains a vulnerability.
Outlook: Compared to 2024’s 5.8% growth, 2025’s projection reflects optimism, though managing import costs and diversifying beyond tourism (e.g., manufacturing, agriculture) are critical for long-term stability.
Tanzania has experienced impressive growth in its local government revenue collections over the past decade, with a 769% increase from TZS 11.6 billion in 2010 to a peak of TZS 100.9 billion in 2024. This steady upward trend, especially evident between 2013-2016 when average annual growth reached 144.1%, reflects improvements in tax administration and enhanced collection mechanisms. Recent years (2021-2024) have shown consistent and more predictable revenue patterns, marking a significant achievement in the country’s fiscal decentralization efforts.
Initial Phase (2010-2012):
Starting point: Revenue began at TZS 11.6 billion in 2010.
Volatility: The collection patterns were inconsistent, marked by wide fluctuations in revenue from TZS 7.7 billion to TZS 20.0 billion.
Average collection:TZS 13.1 billion, showing limited growth with high variability.
Growth Characteristics: Early efforts were hindered by weak collection mechanisms and infrastructure, leading to a 5.3% annual growth rate.
Growth Phase (2013-2016):
Significant increase in collections: Revenue soared to an average of TZS 51.9 billion in this period.
Peak of TZS 86.0 billion reached in 2016, signaling marked improvement in local tax collection efficiency.
Average annual growth rate:144.1%, a clear indication of enhanced collection capacity, likely driven by better systems, infrastructure, and the expansion of the tax base.
Volatility: Despite the growth, there were still some year-to-year fluctuations, but the overall trend was strongly positive.
Stabilization Phase (2017-2020):
More predictable revenue: Revenue collections began to stabilize with average annual collections of TZS 78.6 billion.
Less volatility: The range between annual collections shrank to TZS 59.3 billion - 86.1 billion.
Average growth rate: This period saw a reduction in the growth rate to 3.3%, reflecting the shift from rapid expansion to more steady revenue generation.
Collection efficiency: Improved mechanisms and stronger administrative systems contributed to the stable revenue pattern.
Recent Period (2021-2024):
Consistent upward trajectory: The average revenue collected from 2021 to 2024 is TZS 84.0 billion.
Peak in 2024: The highest collection reached TZS 100.9 billion, marking a new record.
Growth rate: Although the rate of growth has slowed compared to earlier periods, the trend remains positive, with an average growth of 5.2%.
Stability: This period marks the most stable phase, with predictable year-over-year increases and reduced volatility.
Key Statistics and Trends:
Overall Growth: From TZS 11.6 billion in 2010 to TZS 100.9 billion in 2024, representing a 769% total growth.
Average annual growth: Over the entire period, the annual growth rate averages 17.8%, indicating overall strong performance.
Highest growth year: The most significant single-year increase was 457.6% in 2013, signaling the start of the growth phase.
Most stable period: From 2021-2024, revenue collection was more predictable, showing stable performance.
Notable Points:
Highest collection: In 2024, local government revenue peaked at TZS 100.9 billion.
Most volatile period: The early phase from 2010-2013 had the highest volatility, with significant year-over-year fluctuations.
Improved collection efficiency: Over time, Tanzania has made substantial strides in improving the systems for revenue collection, making them more consistent and reliable.
Growth Characteristics:
Increased Average Collections: From TZS 13.1 billion in 2010 to TZS 84.0 billion in 2024.
Volatility reduction: Over the years, collections became less volatile, with the most significant stability observed from 2017 to 2024.
Sustained upward trend: Despite lower growth rates in recent years, the overall revenue collection continues to show positive momentum, indicating effective governance and tax administration.
Key Observations:
Improved consistency: The collection patterns have moved from an early volatile stage to a more predictable and stable trajectory.
Enhanced collection mechanisms: These improvements are reflected in the increased efficiency, greater capacity for handling collections, and more robust prediction of revenue.
Tanzania's local government revenue collection has seen a substantial evolution from its early volatile phase to a period of rapid growth, and more recently to stable, consistent increases. This reflects a broader trend of improved collection mechanisms, better administration, and stronger local governance, all of which have helped increase revenue capacity at the local level.
The analysis of Tanzania's Local Government Revenue Collection trends (2010-2024) with key insights about the progress and challenges in local revenue generation:
Progressive Growth: Over the 14-year period, local government revenue has grown significantly, from TZS 11.6 billion in 2010 to TZS 100.9 billion in 2024, representing a 769% total increase. This shows that Tanzania has made notable strides in expanding its local revenue base.
Volatility and Stabilization: Initially, revenue collections were highly volatile, fluctuating between TZS 7.7 billion and TZS 20.0 billion (2010-2012). However, as the years progressed, collections became more consistent, with the most stable period occurring between 2021-2024, suggesting improvements in administrative processes and tax collection mechanisms.
Strong Growth Phase (2013-2016): During this phase, there was a remarkable surge in collections, with a peak of TZS 86 billion in 2016 and an average annual growth rate of 144.1%. This indicates significant efforts to enhance tax collection systems and improve local governance.
Efficiency and Predictability: Over time, collection systems improved, and by the 2021-2024 period, the revenue pattern became more predictable, with an average annual growth of 5.2% and the highest collection reaching TZS 100.9 billion in 2024. This shows that the local government is now better at predicting and stabilizing revenue flows.
Improved Collection Mechanisms: The trend also indicates that the local government has built more efficient systems to handle revenue collection. As a result, revenue predictions have become more reliable, and there is better performance in terms of year-over-year growth.
Conclusion:
Tanzania's local government revenue collection has evolved from an unstable and inconsistent system to a more reliable and progressively growing one. The significant increase in revenue from 2010 to 2024 reflects successful efforts to strengthen tax administration, expand the tax base, and improve efficiency, contributing to more predictable and stable local government finances.
