How Policy Reforms and Sectoral Performance Shield Tanzania's Economy in 2024/25
Strategic economic management drives resilience amid global uncertainty, delivering robust growth and macroeconomic stability
5.5%Real GDP Growth
3.1%Average Inflation
2.7%Fiscal Deficit
4.8Months Import Cover
In an era marked by global economic fragility, high interest rates, geopolitical tensions, and climate-related shocks, Tanzania demonstrated remarkable economic resilience in 2024/25. The country achieved real GDP growth of 5.5 percent, up from 5.1 percent in the previous year, while maintaining low inflation averaging 3.1 percent and improving its fiscal and external positions. This performance reflects the success of deliberate policy reforms and strong sectoral contributions across agriculture, mining, construction, and services.
Overview: Tanzania's Economic Performance in 2024/25
Tanzania outperformed several peer economies in Sub-Saharan Africa despite challenging global conditions. The economy's resilience was built on coordinated policy responses between monetary and fiscal authorities, enhanced financial sector regulation, and broad-based sectoral growth. The Bank of Tanzania maintained a balanced monetary stance with the Central Bank Rate at 6 percent, supporting private sector credit growth of 15.4 percent without triggering inflation.
Key Achievement: Tanzania successfully balanced growth acceleration with price stability, reduced fiscal imbalances, and strengthened external buffers—demonstrating that well-calibrated policies and diversified growth can shield economies from global volatility.
Five Pillars of Tanzania's Economic Resilience
1. Policy Reforms & Business Environment
Implementation of reforms enhanced the business climate through better governance, infrastructure investments, and improved policy coordination. The introduction of fintech regulatory sandboxes and financial complaints resolution systems deepened financial inclusion, with the Financial Inclusion Index rising to 0.81 from 0.72.
Impact: Sovereign credit ratings affirmed at Moody's B1 (stable) and Fitch B+ (stable), reflecting enhanced policy credibility.
2. Robust Sectoral Performance
Agriculture benefited from favorable weather and government interventions for productivity. Mining expanded with increased gold output supporting export earnings. Construction remained strong through sustained public infrastructure investment. Services, particularly tourism and digital finance, recorded significant expansion.
Impact: Tourist arrivals increased 10 percent to 2,193,322, strengthening services exports and the balance of payments.
3. Prudent Monetary & Fiscal Policy
Coordinated policies maintained low and stable inflation while the Central Bank Rate remained at 6 percent. Fiscal alignment focused on priorities and deficit reduction through improved revenue mobilization.
Impact: Tax revenue to GDP rose to 13.1 percent from 12.5 percent, while fiscal deficit narrowed to 2.7 percent from 3.1 percent of GDP.
4. Improved External Sector
Export earnings rose sharply to USD 9.9 billion, driven by gold, tourism, manufactured goods, and agricultural commodities. Imports moderated due to stable global prices, while foreign reserves strengthened significantly.
Impact: Current account deficit narrowed to 2.4 percent from 3.4 percent of GDP, with reserves providing 4.8 months of import cover.
5. Stable Financial Sector
Sound banking sector with improved asset quality, profitability, and regulatory oversight. Advancements in microfinance and digital lending expanded financial access.
Impact: Non-performing loans fell to 3.3 percent from 4.1 percent, while return on assets reached 5.4 percent and commercial banks increased to 35.
Key Economic Indicators: 2023/24 vs 2024/25
Indicator
2023/24
2024/25
Change
Real GDP Growth (Mainland)
5.1%
5.5%
+0.4 pp
Headline Inflation (annual avg)
3.1%
3.1%
Stable
Current Account Deficit (% GDP)
-3.4%
-2.4%
Improved by 1.0 pp
Fiscal Deficit (% GDP)
3.1%
2.7%
Narrowed by 0.4 pp
Foreign Reserves (USD million)
5,345.5
5,971.5
+626 million
Import Cover (months)
4.0
4.8
+0.8 months
Exchange Rate Depreciation
8.5%
4.6%
Slowed by 3.9 pp
Private Sector Credit Growth
—
15.4%
Strong expansion
Tax Revenue (% GDP)
12.5%
13.1%
+0.6 pp
External Sector Performance
Tanzania's external position improved markedly in 2024/25, reflecting both policy effectiveness and favorable sectoral dynamics. Export diversification and tourism growth contributed to a significant reduction in the current account deficit.
USD 9.9BTotal Export Earnings (up from USD 7.8B)
USD 4.0BGold Exports (up from USD 3.1B)
-2.4%Current Account Deficit to GDP (improved from -3.4%)
2.19MTourist Arrivals (10% increase)
Financial Sector Stability and Inclusion
The financial sector demonstrated resilience with improved soundness indicators. Key regulatory reforms, including fintech frameworks and consumer protection measures, enhanced market efficiency and deepened financial inclusion.
Financial Soundness Ratio
2024
2025
Benchmark
Tier 1 Capital/TRWA+OBSE
18.6%
18.8%
Well above minimum
Total Capital/TRWA+OBSE
19.3%
19.4%
Strong capitalization
Gross NPLs to Gross Loans
4.1%
3.3%
Improved asset quality
Return on Assets
5.7%
5.4%
Healthy profitability
Return on Equity
27.3%
25.0%
Strong returns
Financial Inclusion Index (TanFiX)
0.72
0.81
Significant improvement
Sectoral Contributions to Growth
Tanzania's growth was broad-based, with multiple sectors contributing to the 5.5 percent GDP expansion. Agriculture remained a primary driver benefiting from favorable weather, while mining saw increased output particularly in gold production. Construction activity was boosted by public infrastructure investments, and the services sector expanded significantly.
Tourism Highlight: The sector recorded a 10 percent increase in arrivals to 2,193,322 visitors, contributing approximately 20 percent to overall growth and significantly strengthening services exports and the balance of payments position.
Monetary and Fiscal Policy Coordination
The success of Tanzania's economic performance in 2024/25 rested heavily on effective coordination between monetary and fiscal authorities. The Bank of Tanzania maintained the Central Bank Rate at 6 percent throughout the year, supporting credit expansion while keeping inflation anchored. Meanwhile, fiscal reforms improved domestic revenue mobilization, allowing the government to fund priority spending while reducing the deficit.
Inflation Component (Annual %)
2023/24
2024/25
Headline Inflation
3.1
3.1
Core Inflation
3.1
2.7
Food Inflation
3.0
4.2
Non-food Inflation
3.2
2.7
Energy and Fuel Inflation
5.3
7.5
Policy Reforms and Their Impact
Several targeted policy reforms contributed to the improved business environment and economic resilience:
Reform Initiative
Description
Impact/Outcome
Fintech Regulatory Sandbox
Testing ground for innovative financial technologies in controlled environment
Enhanced interoperability and efficiency; contributed to TanFiX rising to 0.81 from 0.72
Financial Complaints Resolution System
System for resolving consumer complaints in financial sector
Improved affordability, price transparency, and consumer protection
Guidelines on Fees and Charges
Standardized pricing for banks and financial institutions
Promoted transparency and reduced costs for consumers
Structural Monetary Policy Reforms
Deepening financial markets and enhancing policy transparency
Supported GDP growth of 5.5%; sovereign ratings affirmed
Outlook and Implications
Tanzania's experience in 2024/25 demonstrates that developing economies can maintain resilience amid global uncertainty through well-calibrated policy reforms and diversified sectoral growth. The country's success in balancing growth acceleration with price stability, reducing fiscal imbalances, and strengthening external buffers provides a model for sustainable economic management.
Looking ahead, projections indicate continued momentum with GDP growth expected to reach 6 percent in 2025, supported by sustained policy coordination, ongoing infrastructure investments, and continued sectoral diversification. The strengthened foreign reserves position and improved current account balance provide crucial buffers against potential external shocks.
Key Takeaway: Rather than relying on a single growth driver, Tanzania leveraged coordinated policies, improved institutional frameworks, and broad-based sectoral contributions to sustain growth, maintain stability, and strengthen confidence in its economic outlook. This multi-faceted approach proved critical in navigating global headwinds while advancing domestic development priorities.
This comprehensive analysis is based on data from the Bank of Tanzania Annual Report 2024/25. For detailed insights on Tanzania's economic performance, policy frameworks, and development strategies, explore our complete research library at TICGL.
Tanzania’s economic growth faces several challenges, both domestic and global, as outlined in the April 2025 Monthly Economic Review. Below, we detail these challenges with specific figures to illustrate their impact, drawing from the document’s data on inflation, commodity markets, logistical issues, and global economic risks.
Rising Food and Energy Inflation
Challenge: Increasing food and energy prices drive headline inflation, reducing purchasing power and potentially slowing economic activity.
Figures and Explanation:
Headline Inflation: Rose to 3.3% in March 2025 from 3.0% in March 2024, largely due to food and energy price hikes.
Food Inflation: Surged to 5.4% in March 2025 from 1.4% in March 2024, driven by higher prices for maize, rice, and beans. This increase is attributed to logistical challenges in transportation caused by seasonal heavy rains, which disrupt supply chains and raise costs.
Energy, Fuel, and Utilities Inflation: Increased to 7.9% in March 2025 from 6.6% in March 2024, primarily due to rising prices of petroleum products and wood charcoal. The rise in wood charcoal prices is linked to scarcity following seasonal rains.
Impact: Higher food and energy costs strain household budgets, particularly for low-income groups, reducing consumption and potentially dampening economic growth. The document notes that unprocessed food inflation is increasingly contributing to overall inflation, highlighting its significance.
Logistical Challenges Due to Seasonal Rains
Challenge: Seasonal heavy rains disrupt transportation, increasing food prices and complicating supply chain logistics, which hinders economic efficiency.
Figures and Explanation:
Food Inflation Driver: The 5.4% food inflation in March 2025 was amplified by logistical challenges in transporting staples like maize, rice, and beans due to heavy rains (Page 4).
Food Reserves: The National Food Reserve Agency (NFRA) held 587,062 tonnes of food stocks by March 2025 and released 32,598 tonnes of maize and paddy to mitigate price pressures. Despite this, logistical bottlenecks persisted.
Impact: Disrupted transportation increases costs for producers and traders, contributing to higher food prices and inflation. This can reduce agricultural sector efficiency, a key driver of Tanzania’s economy, and limit growth in related industries like trade and processing.
Global Trade Tensions and Economic Uncertainties
Challenge: Global trade tensions and unpredictable policies create an uncertain economic environment, impacting Tanzania’s export markets and investment inflows.
Figures and Explanation:
Global Growth Forecast: The IMF revised global growth downward to 2.8% for 2025 and 3.0% for 2026, from 3.3% for both years, citing trade tensions and unpredictable policies.
Economic Outlook: The global economic outlook is tilted downward due to trade tensions, diminishing fiscal buffers, and unpredictable policies.
Impact on Tanzania: As a commodity-dependent economy, Tanzania is vulnerable to global trade disruptions. For example, declining coffee and sugar prices (down 2% and 1.5%, respectively, in March 2025) due to improved global production may reduce export revenues, limiting foreign exchange earnings and growth potential. Trade tensions could also deter foreign investment, constraining capital for development projects.
Commodity Price Volatility
Challenge: Fluctuations in global commodity prices affect Tanzania’s export earnings and import costs, creating uncertainty for economic planning.
Figures and Explanation:
Gold Prices: Rose 3% to USD 2,983.25 per ounce in March 2025, benefiting Tanzania’s gold exports.
Fertilizer Prices: Increased 2% to USD 615.13 per tonne due to supply constraints, raising agricultural input costs.
Crude Oil Prices: Fell 4% to USD 70.70 per barrel due to oversupply, reducing import costs.
Coffee and Sugar Prices: Declined 2% and 1.5%, respectively, hurting export revenues.
Palm Oil Prices: Edged up 0.2% to USD 1,069 per tonne, supporting the edible oil sector.
Impact: While lower oil prices ease import costs, higher fertilizer prices increase agricultural production costs, contributing to food inflation (5.4%). Declining coffee and sugar prices reduce export earnings, impacting the trade balance and limiting funds for growth-enhancing investments. Volatility in commodity markets complicates fiscal and monetary planning.
Climate Change and Environmental Risks
Challenge: Climate change, particularly through extreme weather events like heavy rains, disrupts agriculture and infrastructure, posing a long-term threat to growth.
Figures and Explanation:
Global Risk: The document notes climate change as a factor obscuring the medium-term global economic outlook, particularly for developing economies.
Domestic Impact: Seasonal heavy rains in March 2025 caused logistical challenges, increasing food prices (e.g., 5.4% food inflation) and wood charcoal scarcity (contributing to 7.9% energy inflation).
Impact: Climate-related disruptions, such as floods or droughts, can damage agricultural output, a cornerstone of Tanzania’s economy. The document highlights rains disrupting food transport, which raises costs and inflation. Over time, climate change could reduce agricultural productivity and infrastructure reliability, hindering sustained economic growth.
Limited Fiscal Space
Challenge: Limited fiscal space restricts Tanzania’s ability to fund development projects and respond to economic shocks, constraining growth.
Figures and Explanation:
Global Context: The IMF notes limited fiscal space as a challenge for developing economies, exacerbating medium-term economic risks.
Tanzania’s Debt: The document discusses national debt developments (Page 30) but lacks specific figures for March 2025. Public debt includes domestic (for fiscal deficits) and external components (for development projects).
Impact: Limited fiscal space, coupled with rising global interest rates, increases debt servicing costs, diverting resources from infrastructure, education, or health investments critical for growth. The document’s mention of diminishing fiscal buffers globally suggests Tanzania faces similar constraints, potentially limiting its ability to stimulate the economy during downturns.
Conclusion
Tanzania’s economic growth in March 2025 is challenged by rising food (5.4%) and energy (7.9%) inflation, logistical disruptions from seasonal rains, global trade tensions, commodity price volatility (e.g., fertilizer up 2%, coffee down 2%), climate change, and limited fiscal space. These factors increase costs, reduce export revenues, and constrain investment, posing risks to sustained growth. However, stable monetary policy (6% Central Bank Rate) and food reserves (587,062 tonnes) mitigate some pressures, providing resilience amid these challenges.
