Borrowing Costs Remain High, Savings Offer Mixed Returns

In January 2025, Tanzania's lending interest rates remained high, with the overall lending rate at 15.73%, slightly up from 15.70% in December 2024. Meanwhile, the negotiated lending rate stood at 12.80%, indicating that creditworthy borrowers could secure better terms. On the savings side, the overall deposit rate declined slightly to 8.31%, but negotiated deposit rates increased to 11.80%, encouraging large-scale deposits. The interest rate spread narrowed to 5.63 percentage points from 6.68% in January 2024, suggesting increased competition in the banking sector and potential future adjustments in lending rates.

Lending Interest Rates (January 2025)

• Overall lending rate: 15.73% (up from 15.70% in December 2024)
• Negotiated lending rate: 12.80% (slightly down from 12.83% in December 2024)
• Short-term lending rate (up to 1 year): 15.70%

Deposit Interest Rates (January 2025)

• Overall deposit rate: 8.31% (down slightly from 8.33% in December 2024)
• Negotiated deposit rate: 11.80% (up from 10.39% in December 2024)
• 12-month fixed deposit rate: 10.08% (up from 9.62% in December 2024)
• Savings deposit rate: 2.97% (up from 2.84% in December 2024)

Interest Rate Spread

• The spread between short-term lending and deposit interest rates narrowed to 5.63 percentage points, down from 6.68 percentage points recorded in January 2024.

These figures indicate that lending rates remained stable with slight upward movement, while deposit rates showed mixed trends, with an increase in negotiated deposit rates. The interest rate spread narrowing suggests banks are slightly reducing the gap between borrowing and lending costs.

The interest rate trends from the Bank of Tanzania with key insights into the current monetary environment and the cost of borrowing and saving in Tanzania

Key Takeaways:

1. Lending Rates Remain High (15.73%)
   • This suggests that borrowing remains relatively expensive for businesses and individuals.
   • High lending rates could slow down investment and economic expansion if businesses find it costly to access credit.
   • However, the slight increase in the lending rate (from 15.70% to 15.73%) is minimal, meaning borrowing costs have remained stable.
2. Negotiated Lending Rates Are Lower (12.80%)
   • Businesses and high-value borrowers with good creditworthiness can negotiate better loan terms, meaning not all borrowers face the highest lending rates.
   • This indicates that banks are willing to offer flexible rates to attract quality borrowers.
3. Deposit Rates Show Mixed Trends
   • Overall deposit rate (8.31%) is slightly lower, meaning banks are not offering much incentive for savings.
   • Negotiated deposit rate (11.80%) is higher, which suggests that large depositors (e.g., institutional investors) can get better returns on deposits.
   • 12-month fixed deposit rate (10.08%) is rising, which encourages long-term savings.
4. Narrowing Interest Rate Spread (5.63%)
   • The difference between lending and deposit rates is reducing (from 6.68% in January 2024 to 5.63% in January 2025).
   • This suggests banks are offering slightly better rates to depositors while keeping loan rates stable.
   • A smaller spread can indicate increased competition among banks or policy measures to make credit more affordable.

Implications for the Economy

• For Borrowers:
  • Businesses still face high borrowing costs, which could slow expansion.
  • However, those with strong financial records can access cheaper loans.
• For Savers:
  • Higher negotiated deposit rates encourage large-scale savings.
  • Lower overall deposit rates mean small savers might not benefit much from interest earnings.
• For the Banking Sector:
  • The narrowing spread suggests competition among banks, which may lead to lower lending rates in the future.
  • Banks may need to balance between attracting deposits and maintaining profitability.

Tax policies significantly influence Tanzania’s investment climate, affecting both local and foreign investors. While taxation is crucial for government revenue, an overly complex and high tax regime can discourage investments, limit capital inflows, and slow economic growth. This article explores how tax laws shape investment trends in Tanzania, presenting key figures, challenges, and potential solutions.

Tanzania’s Tax System and Investment Trends

1. Corporate Tax Rates and Regional Comparison

Tanzania imposes a 30% corporate tax rate on resident companies, one of the highest in East Africa. In contrast:

• Kenya: 25%
• Rwanda: 28%
• Ethiopia: 25%

The high tax rate discourages investments, as seen in 2022 when Tanzania attracted only $922 million in Foreign Direct Investment (FDI), compared to Kenya’s $2 billion and Ethiopia’s $3.1 billion.

2. Tax Compliance and Bureaucracy

Tanzania ranks 163rd out of 190 countries in the World Bank’s Ease of Doing Business Index (2020), reflecting long tax compliance procedures. Businesses spend an average of 240 hours per year filing tax documents, compared to 150 hours in Rwanda.

A survey conducted by TICGL in 2025 revealed:

• 72% of investors found Tanzania’s tax system too complex.
• 63% reported high corporate taxes as a barrier to business expansion.
• 55% believed frequent tax policy changes discouraged long-term investments.

3. Multiple Taxation and VAT Burden

Investors in Tanzania face multiple layers of taxation, including:

• Corporate tax (30%)
• Withholding tax (10-15%)
• Skills and Development Levy (4%)
• Value-Added Tax (VAT) (18%)

Tanzania’s VAT refund delays are a significant issue, with pending refunds amounting to TSh 1.4–1.5 trillion ($650 million) in 2025. Some businesses wait over 12 months for VAT refunds, severely affecting cash flow and expansion plans.

4. Case Studies: How Taxes Affect Investors

Mining Industry: Acacia Mining’s $190 Billion Tax Dispute

• In 2017, Tanzania’s Revenue Authority (TRA) imposed a $190 billion tax bill on Acacia Mining.
• The dispute lasted two years, causing a 70% stock price drop and a 30% decline in FDI in the mining sector.

Telecommunications: Vodacom Tanzania’s $2.5 Million Tax Case

• Vodacom was issued a TSh 5.8 billion ($2.5 million) tax bill in 2021, disrupting its planned 5G expansion.

Tourism Sector: Serena Hotels’ VAT Refund Issues

• Serena Hotels in Tanzania faced a two-year delay on VAT refunds worth TSh 2.1 billion ($900,000), leading to cash flow problems.

Recommendations for a Better Investment Climate

1. Lower Corporate Tax to 25%
   • Aligning with Kenya and Ethiopia could increase Tanzania’s FDI inflows.
2. Simplify Tax Compliance
   • Introduce a one-stop tax portal to reduce paperwork and compliance time.
3. Reduce VAT to 16%
   • This would enhance competitiveness and reduce operational costs for businesses.
4. Automate VAT Refund Processing
   • Ensuring refunds are processed within 30 days would improve business cash flow.
5. Introduce a 5-Year Tax Stability Framework
   • This would provide predictability and confidence for long-term investors.

Conclusion

Tanzania's current tax policies present significant barriers to investment. High corporate taxes, multiple taxation, VAT refund delays, and unpredictable policy changes discourage both local and foreign investors. If key reforms are implemented—such as lowering tax rates, simplifying compliance, and improving tax administration—Tanzania could increase FDI by 10-15% over the next five years, boosting economic growth and job creation.

The Bank of Tanzania's Statement of Financial Position as of January 2025 shows a 1.6% increase in total assets, reaching TZS 25.24 trillion from TZS 24.85 trillion in December 2024. This growth is driven by a 25.3% rise in government advances (TZS 5.67 trillion) and a 6.6% increase in foreign currency marketable securities (TZS 7.74 trillion), highlighting stronger financial buffers. However, currency in circulation declined by 6.0% (TZS 8.15 trillion), signaling possible shifts towards digital transactions or controlled liquidity. Meanwhile, foreign reserves improved, with gold holdings rising by 12.5% (TZS 82.18 billion) and Special Drawing Rights (SDRs) surging by 260% (TZS 27.48 billion), reflecting increased international financial support. Despite a 21.8% increase in equity (TZS 2.18 trillion), the central bank’s growing advances to the government raise concerns about fiscal sustainability.

Breakdown of the Bank of Tanzania Statement of Financial Position

1. Assets (Total: TZS 25.24 Trillion)

Assets grew from TZS 24.85 trillion (Dec 2024) to TZS 25.24 trillion (Jan 2025), an increase of TZS 393.5 billion.

Key Components of Assets:

• Cash and Cash Equivalent: Decreased from TZS 5.78 trillion to TZS 5.26 trillion (-8.9%).
• Holdings of Special Drawing Rights (SDRs): Increased significantly from TZS 7.64 billion to TZS 27.48 billion (+260%).
• Gold Reserves: Increased from TZS 73.08 billion to TZS 82.18 billion (+12.5%).
• IMF Quota: Grew from TZS 1.23 trillion to TZS 1.29 trillion (+4.8%).
• Foreign Currency Marketable Securities: Increased from TZS 7.26 trillion to TZS 7.74 trillion (+6.6%).
• Government Securities: Increased slightly from TZS 2.03 trillion to TZS 2.04 trillion.
• Advances to Government: Grew significantly from TZS 4.53 trillion to TZS 5.67 trillion (+25.3%).
• Loans and Receivables: Slight increase from TZS 940.37 billion to TZS 946.97 billion (+0.7%).
• Equity Investments: Increased from TZS 143.63 billion to TZS 150.39 billion (+4.7%).
• Inventories: Increased sharply from TZS 453.64 billion to TZS 561.78 billion (+23.8%).
• Deferred Currency Cost: Slight decrease from TZS 114.34 billion to TZS 112.07 billion (-2.0%).
• Other Assets: Dropped significantly from TZS 1.25 trillion to TZS 320.20 billion (-74.4%).
• Property, Plant & Equipment: Slight decrease from TZS 1.01 trillion to TZS 1.009 trillion.
• Lease & Intangible Assets: Minimal changes.

2. Liabilities (Total: TZS 23.06 Trillion)

Liabilities remained stable at TZS 23.06 trillion, with minor fluctuations.

Key Components of Liabilities:

• Currency in Circulation: Decreased from TZS 8.67 trillion to TZS 8.15 trillion (-6.0%).
• Deposits (Banks & Non-Banks): Increased from TZS 3.34 trillion to TZS 3.51 trillion (+5.1%).
• Other Deposits: Increased from TZS 2.82 trillion to TZS 3.10 trillion (+9.9%).
• Foreign Currency Financial Liabilities: Slight increase from TZS 4.51 trillion to TZS 4.56 trillion (+1.1%).
• BoT Liquidity Papers: Increased slightly from TZS 537.54 billion to TZS 547.39 billion.
• Provisions & Other Liabilities: Decreased from TZS 163.33 billion to TZS 133.64 billion (-18.2%).
• IMF Related Liabilities: Constant at TZS 1.17 trillion.
• SDR Allocations: Increased from TZS 1.77 trillion to TZS 1.86 trillion (+4.8%).

3. Equity (Total: TZS 2.18 Trillion)

Equity rose from TZS 1.79 trillion to TZS 2.18 trillion (+21.8%).

Key Components of Equity:

• Reserves: Increased significantly from TZS 1.69 trillion to TZS 2.08 trillion (+23.1%).
• Authorized & Paid-up Capital: Constant at TZS 100 billion.

Key Observations & Figures

1. Increase in Total Assets: TZS 393.5 billion (+1.6%).
2. Growth in Equity: TZS 389.9 billion (+21.8%) due to a rise in reserves.
3. Decrease in Currency in Circulation: TZS 519.2 billion (-6.0%).
4. Significant Increase in Advances to Government: TZS 1.15 trillion (+25.3%).
5. Surge in Special Drawing Rights (SDRs): TZS 19.8 billion (+260%).
6. Foreign Currency Marketable Securities Grew: TZS 480.6 billion (+6.6%).
7. Major Drop in Other Assets: TZS 931.1 billion (-74.4%).

The Bank of Tanzania's Statement of Financial Position (Jan 2025) reveals key insights into the country's monetary, fiscal, and financial stability

1. Monetary and Economic Trends

• Currency in Circulation Declined (-6.0%)
  → This could indicate reduced cash demand, possibly due to increased digital transactions, lower inflationary pressure, or economic slowdown affecting consumer spending.
• Increase in Foreign Currency Marketable Securities (+6.6%)
  → Suggests higher foreign reserves, improving exchange rate stability and economic resilience against external shocks.
• Growth in Gold Reserves (+12.5%)
  → Shows the Bank of Tanzania is strengthening its gold holdings as a hedge against currency fluctuations and inflation.
• Advances to Government Increased Sharply (+25.3%)
  → The government borrowed more from the central bank, likely for budget support, infrastructure projects, or debt servicing.
• Special Drawing Rights (SDRs) Surge (+260%)
  → The country received more IMF support, which could be used to boost reserves or finance balance-of-payments needs.

2. Financial Sector Stability

• Bank Deposits Increased (+5.1%)
  → Confidence in the banking sector is improving as financial institutions hold more deposits with the central bank.
• Reduction in Other Assets (-74.4%)
  → Suggests a shift in asset management, possibly due to debt repayments, asset reclassification, or balance sheet restructuring.
• Rise in Government Securities (+0.4%)
  → Indicates continued investment in domestic bonds, helping to finance government projects while maintaining liquidity.
• Growth in IMF-related Liabilities (+4.8%)
  → Reflects ongoing international obligations and external financing reliance.

3. Fiscal and Policy Implications

• Equity (Reserves) Increased (+23.1%)
  → The central bank is strengthening financial buffers, which enhances economic resilience.
• Foreign Currency Financial Liabilities Slightly Up (+1.1%)
  → Indicates controlled external debt exposure, ensuring manageable foreign obligations.
• Drop in Provisions & Other Liabilities (-18.2%)
  → May reflect reduced outstanding liabilities, signaling better financial discipline.

What It Means for Tanzania

1. The economy is stabilizing, but government borrowing is increasing.
   • The rise in advances to government suggests higher fiscal spending, which can stimulate economic growth but raises concerns about debt sustainability.
2. The central bank is strengthening reserves and foreign asset holdings.
   • Increased foreign securities, SDRs, and gold reserves show an effort to stabilize the Tanzanian shilling (TZS) and prepare for external shocks.
3. Monetary policies are shifting towards liquidity control and financial sector stability.
   • The reduction in currency circulation and rise in bank deposits indicate a move towards digital transactions and reduced inflationary pressure.
4. Increased IMF-related assets and liabilities show continued reliance on international financing.
   • This highlights Tanzania’s need for external support to balance fiscal and monetary policies.

Final Thought: Growth with Fiscal Caution

Tanzania’s financial position is improving, but government borrowing and external financing remain key risks. If these trends continue, careful monetary and fiscal management will be needed to sustain growth without increasing debt vulnerabilities.

Borrowing Patterns, Debt Service, and Sustainability Risks

As of December 2024, Tanzania’s total public debt stood at USD 46.6 billion, with external debt accounting for 70.7% (USD 32.9 billion). The government relied heavily on multilateral lenders (55.4%) and commercial loans (35.6%), increasing exposure to market-driven interest rates. While 21.2% of borrowed funds supported transport and telecommunications infrastructure, 19.4% was used for budget support, highlighting fiscal dependence on borrowing. With debt service payments reaching USD 185.4 million in December, managing repayment risks and prioritizing productive investments is crucial for long-term sustainability​

Debt Developments in Tanzania – December 2024

Tanzania’s total public debt stock reached USD 46,562.1 million at the end of December 2024, reflecting a 0.5% monthly increase. Of this, external debt accounted for 70.7% (USD 32,928.4 million), while domestic debt stood at TZS 32,649.3 billion. The rise in external debt was attributed to new disbursements amounting to USD 376.8 million, mainly to finance government projects and budgetary support​.

1. External Debt Stock and Composition

• Total external debt stock at the end of December 2024 was USD 32,928.4 million, reflecting a 1.8% decrease from USD 33,528.6 million in November 2024.
• The Central Government held 77.4% of the external debt (USD 25,488.3 million), while the private sector accounted for 22.6% (USD 7,436.4 million).
• The decrease in external debt was due to higher debt service payments (USD 185.4 million in December 2024), including USD 111.2 million in principal repayments​.

2. External Debt Stock by Creditor

Tanzania’s external debt is held by multilateral, bilateral, commercial, and export credit lenders. The composition as of December 2024 was as follows:

• Multilateral institutions (55.4%) remain the largest creditors, providing concessional loans with lower interest rates.
• Commercial loans (35.6%) have grown, increasing exposure to market-driven interest rates, which could raise debt service costs in the future.
• Bilateral and export credit debt (9.1%) mainly finances infrastructure projects​.

3. Disbursed Outstanding Debt by Use of Funds (Percentage Shares)

Tanzania’s external debt is allocated across various sectors, primarily transport, energy, social services, and budget support.

• The transport sector (21.2%) and energy (14.6%) received the largest funding, supporting infrastructure expansion projects.
• Social services (20.3%) include education and healthcare investments, improving human capital development.
• Budget support (19.4%) shows the government's reliance on external borrowing to cover fiscal gaps​.

Key Takeaways:

1. External debt dominates Tanzania’s public debt (70.7% of total debt).
2. Multilateral institutions are the main creditors (55.4%), but commercial loans (35.6%) are rising, increasing debt servicing risks.
3. Most funds go to transport (21.2%), social services (20.3%), and budget support (19.4%), reflecting a focus on infrastructure and fiscal stability.
4. The government must manage rising debt service payments (USD 185.4 million in December 2024) to ensure long-term sustainability.

With total public debt at USD 46.6 billion, debt sustainability remains a critical concern, requiring effective fiscal management and prioritization of productive investments​

The debt developments in Tanzania for December 2024 reveal key trends in borrowing patterns, creditor composition, and the sustainability of external debt.

These figures indicate both opportunities and risks for fiscal management and economic stability

1. External Debt Remains the Largest Share of Public Debt

• External debt accounts for 70.7% (USD 32.9 billion) of total public debt (USD 46.6 billion).
• The government is highly reliant on external borrowing, particularly from multilateral lenders (55.4%) and commercial lenders (35.6%).
• While multilateral loans are concessional (low interest, long-term), the growing share of commercial loans (USD 11.7 billion) exposes Tanzania to higher borrowing costs and foreign exchange risks.

Implication:
✅ Multilateral financing provides stable, low-cost funding.
⚠️ High commercial debt increases vulnerability to global interest rate changes, raising repayment costs.

2. Debt Service Obligations Are Increasing

• In December 2024, the government made debt service payments of USD 185.4 million, including USD 111.2 million in principal repayment.
• The growing debt requires more foreign exchange reserves for repayment, increasing exposure to shilling depreciation risks.

Implication:
⚠️ Future fiscal space may shrink as more funds are allocated for debt repayment instead of public services or development.
✅ If borrowed funds are well-invested, economic growth could offset repayment pressures.

3. Most Borrowed Funds Are Used for Infrastructure and Budget Support

• 21.2% of external debt funds are directed to transport and telecommunications, supporting infrastructure expansion (roads, railways, ports).
• 20.3% is allocated to social services (health & education), improving human capital.
• 19.4% goes to budget support, indicating the government’s reliance on borrowing to fund recurrent expenditures.

Implication:
✅ Investing in infrastructure can boost economic growth, improving debt repayment capacity.
⚠️ Using loans for budget support suggests fiscal weaknesses, as the government borrows to cover recurrent expenses instead of productive investments.

4. Debt Sustainability Risks and Management Needs

• Public debt reached USD 46.6 billion, requiring careful management to avoid over-indebtedness.
• The growing commercial loan share increases interest rate risks, requiring improved revenue mobilization to cover repayments.
• Tanzania’s debt remains below the IMF/World Bank risk threshold (55% of GDP), but a rising trend requires close monitoring.

What Needs to be Done?
🔹 Shift borrowing towards productive sectors (e.g., manufacturing, agriculture) to generate returns.
🔹 Reduce reliance on commercial loans and prioritize concessional financing.
🔹 Enhance revenue collection to reduce reliance on budget support loans.
🔹 Strengthen fiscal discipline to ensure borrowed funds are effectively utilized.

Overall Takeaway

📌 Tanzania’s external debt remains dominant (70.7%), with a shift toward commercial borrowing (35.6%).
📌 Debt service payments (USD 185.4 million) are rising, limiting future fiscal flexibility.
📌 Infrastructure investment (21.2%) supports economic growth, but reliance on budget support loans (19.4%) is a concern.
📌 Debt sustainability requires a shift to revenue-driven fiscal policies, careful borrowing, and economic diversification.

While Tanzania’s debt is still within manageable limits, a proactive approach is needed to prevent future fiscal risks​

Implications for Credit, Savings, and Economic Growth

In December 2024, Tanzania’s interest rates showed mixed movements, reflecting shifts in monetary policy and banking sector dynamics. The overall lending rate declined to 15.17% from 15.67%, making credit more affordable, while deposit rates rose to 8.33% from 8.18%, incentivizing savings. The spread between short-term lending and deposit rates narrowed to 6.12 percentage points, down from 7.02% in December 2023, signaling increased banking sector efficiency. These trends suggest a pro-growth monetary policy stance, aimed at boosting investment and economic activity while maintaining financial stability​

The interest rates in Tanzania, as reported in the Bank of Tanzania's Monthly Economic Review (January 2025), are as follows:

Lending and Deposit Interest Rates (December 2024)

1. Overall Lending Rate:
   • 15.17%, down from 15.67% in November 2024.
2. Negotiated Lending Rate:
   • 12.83%, up from 12.77% in November 2024.
3. Overall Deposit Rate:
   • 8.33%, up from 8.18% in November 2024.
4. Negotiated Deposit Rate:
   • 10.39%, up from 10.14% in November 2024.
5. Short-term Lending Rate (Up to 1 Year):
   • 15.74%, compared to 15.56% in November 2024.
6. Savings Deposit Rate:
   • 2.84%, up from 2.69% in November 2024.
7. 12-Month Time Deposit Rate:
   • 9.62%, slightly lower than 9.63% in November 2024.

Interest Rate Spread

• The spread between short-term lending and deposit rates narrowed to 6.12 percentage points from 7.02 percentage points in December 2023.

The changes in interest rates reflect key economic and monetary policy dynamics in Tanzania

1. Declining Lending Rates (15.17% from 15.67%)

• A lower lending rate means credit is becoming cheaper, making it easier for businesses and individuals to borrow.
• This suggests monetary easing, where the Bank of Tanzania (BoT) is supporting economic growth by making loans more accessible.
• The increase in negotiated lending rates (12.83%), however, indicates that some banks are charging higher rates based on risk assessment, suggesting credit risk concerns in certain sectors.

2. Rising Deposit Rates (8.33% from 8.18%)

• Higher deposit rates encourage savings, helping banks to attract more funds.
• The increase in negotiated deposit rates (10.39%) suggests that banks are competing more for deposits, possibly due to:
  • Higher demand for liquidity.
  • The need to fund loan growth.

3. Narrowing Interest Rate Spread (6.12% from 7.02%)

• A lower spread means the difference between lending and deposit rates is shrinking, which usually implies:
  • More efficiency in the banking system.
  • Increased competition among banks, forcing them to offer better rates to depositors while reducing borrowing costs.

4. Implications for the Economy

• Encourages borrowing: More businesses and individuals can take loans for investment and consumption.
• Supports economic growth: Easier access to credit can drive investments, job creation, and productivity.
• Sustains inflation stability: If lending is growing without excessive inflation, the economy can expand sustainably.
• Indicates liquidity adjustments: BoT is managing liquidity by influencing rates, ensuring banks have enough funds to lend.

Overall Takeaway

The trend suggests a pro-growth monetary policy stance, with lower borrowing costs stimulating economic activities, while banks adjust their deposit rates to maintain liquidity and profitability. However, higher negotiated lending rates in some cases suggest that banks remain cautious about credit risks in certain sectors.

The Tanzania Revenue Authority (TRA) demonstrated exceptional performance in the first half of the 2024/2025 fiscal year, consistently exceeding revenue targets with efficiency rates above 100% and achieving year-on-year growth ranging from 15% to 23.6%. With total collections peaking at TZS 3.587 trillion in December 2024, driven by strengthened economic activities and improved tax compliance, TRA's strategic initiatives have set a solid foundation for continued growth. Forecasts for January–June 2025 project sustained revenue momentum, reinforcing TRA's pivotal role in enhancing Tanzania’s fiscal stability and economic development.

1. Overview of Monthly Performance

The table shows the revenue collections compared to targets and highlights both efficiency (how much was collected compared to the target) and growth (how much collections increased compared to the previous year).

2. Key Observations

A. Efficiency (Target Achievement)

• July 2024: Revenue collection was 104.45% of the target (TZS 2.347 trillion collected against a target of TZS 2.247 trillion).
• October 2024: The highest efficiency was recorded at 107.45%, showing TRA’s strong performance in meeting and exceeding targets.
• December 2024: Efficiency was 103.52%, indicating slight overperformance relative to the target of TZS 3.465 trillion.

B. Growth (Year-on-Year Increase)

• July 2024: Revenue grew by 21.04% from TZS 1.939 trillion in July 2023/2024 to TZS 2.347 trillion in 2024/2025.
• October 2024: This month recorded the highest growth at 23.60%, a sign of increased economic activity or improved tax compliance mechanisms.
• December 2024: Growth was 17.61%, an improvement of TZS 0.537 trillion compared to December 2023/2024.

3. Breakdown of Key Drivers

1. Revenue Growth Factors
   • Improved economic activity during the year, particularly in key sectors like trade and services.
   • Strengthened tax administration and enforcement measures by TRA.
2. Efficiency in Exceeding Targets
   • Enhanced compliance through digital tax systems (e.g., EFDs).
   • Improved taxpayer education and monitoring contributed to high revenue performance.
3. Month-on-Month Trends
   • The largest revenue collection occurred in December 2024 (TZS 3.587 trillion), likely due to increased economic activity during the holiday season.
   • July 2024 saw a strong start with significant growth and efficiency, setting the pace for subsequent months.

4. Highlights and Takeaways

• Consistent Growth: Revenue growth ranged from 15% to 23.6%, demonstrating resilience in collections despite possible economic challenges.
• Exceeding Targets: TRA consistently achieved over 100% efficiency, showing effective planning and execution.
• Peak Collection: December was the strongest month in absolute collections, reflecting seasonal economic patterns.

Forecast for revenue collections by the Tanzania Revenue Authority (TRA) for the next six months (January–June 2025), based on the average growth rate observed between July and December 2024/2025:

Key Observations:

1. January 2025: Forecasted collections are TZS 3.97 trillion, an increase from December 2024 due to consistent growth momentum.
2. June 2025: Collections are projected to reach TZS 6.60 trillion, reflecting significant month-on-month growth.
3. Trend: Revenue is expected to grow steadily due to sustained improvements in tax compliance and economic activities.

Tanzania Revenue Authority (TRA) for July–December 2024/2025 and the forecast for January–June 2025 offers key insights into the efficiency, growth, and trends of revenue collections:

1. Efficiency (Target Achievement)

• TRA consistently exceeded revenue targets, achieving efficiency rates above 100% across all months, with a peak of 107.45% in October 2024.
• This indicates robust tax collection strategies, improved taxpayer compliance, and effective administrative measures.
• Even in December, where targets are typically ambitious, TRA managed to collect 3.587 trillion TZS, surpassing the target by 3.52%.

2. Growth (Year-on-Year Comparison)

• Revenue collections showed steady growth compared to the previous fiscal year, ranging from 15.01% in September to a high of 23.60% in October.
• The high growth rates suggest:
  • Strengthened economic activity, particularly in trade and services.
  • Enhanced enforcement of tax compliance and digital systems like EFDs.

3. Seasonal Trends and Peaks

• July 2024: Marked a strong start with 21.04% growth, setting a positive trajectory for subsequent months.
• December 2024: Registered the highest collections in absolute terms (3.587 trillion TZS), attributed to increased holiday-related economic activity.

4. Key Drivers Behind Performance

• Economic Growth: Expansion in key sectors such as trade and services contributed to rising tax revenues.
• Technological Integration: Use of digital tax systems and improved enforcement mechanisms enhanced compliance.
• Taxpayer Education: Increased awareness among taxpayers likely reduced evasion and improved voluntary compliance.

5. Forecast for January–June 2025

• Forecasted collections project sustained growth, with revenues rising from 3.97 trillion TZS in January to 6.60 trillion TZS in June 2025.
• The steady increase indicates momentum in tax collection strategies and economic performance.
• By June 2025, collections are expected to reflect nearly 66% growth compared to January 2025, showcasing robust monthly expansion.

6. Overall Insights

1. Consistency in Exceeding Targets: TRA’s ability to consistently exceed revenue targets demonstrates strong institutional efficiency.
2. Sustained Growth: Growth rates of 15–23.6% suggest resilience in economic activities despite potential challenges.
3. Strategic Focus: December’s peak collections and the upward forecast highlight the importance of seasonal and economic patterns in TRA’s strategies.
4. Future Prospects: The optimistic forecast for January–June 2025 underscores TRA's capability to leverage momentum and maintain revenue collection growth.

Regional and Continental Insights

Tanzania's recent activities with the International Monetary Fund (IMF) underscore its proactive approach to using external financing for economic growth and stability. As of December 25, 2024, Tanzania has a total outstanding IMF credit of $1.009 billion, with $155.99 million in new disbursements during December 2024. This positioning highlights Tanzania as a key player in East Africa, actively addressing immediate economic challenges while also setting its sights on long-term development. Below is a detailed analysis of Tanzania's performance compared to other East African and African countries, offering valuable insights into its regional and continental positioning.

Tanzania's Position in East Africa

Tanzania is performing strongly among East African nations. Here's how Tanzania compares to its neighbors:

Tanzania:

• Total Outstanding Credit (Dec 25, 2024): $1,009,260,000
• Disbursements (Dec 1–25, 2024): $155,990,000
• Repayments (Dec 1–25, 2024): $0

East African Peers:

1. Kenya:
   • Outstanding Credit: $3,022,009,900
   • Disbursements: $0
   • Repayments: $0 Kenya holds significantly higher outstanding IMF credit than Tanzania but did not receive any new disbursements in this period.
2. Uganda:
   • Outstanding Credit: $992,750,000
   • Disbursements: $0
   • Repayments: $0 Uganda’s outstanding credit is slightly lower than Tanzania's, and no disbursements or repayments occurred during the period.
3. Rwanda:
   • Outstanding Credit: $614,767,500
   • Disbursements: $138,626,360
   • Repayments: $0 Rwanda has received notable disbursements, but its total outstanding credit remains lower than Tanzania’s.
4. Burundi:
   • Outstanding Credit: $100,600,000
   • Disbursements: $0
   • Repayments: $0 Burundi’s outstanding credit is significantly lower than Tanzania's, and there has been no activity in disbursements or repayments.
5. South Sudan:
   • Outstanding Credit: $246,000,000
   • Disbursements: $0
   • Repayments: $0 South Sudan's outstanding credit is also lower than Tanzania’s.

Summary for East Africa:
Tanzania ranks second in terms of outstanding IMF credit after Kenya but leads in disbursements for the period, demonstrating an active engagement with IMF resources for economic support.

Tanzania's Position in Africa

While Tanzania’s outstanding credit is moderate compared to other African countries, it is crucial to understand its position relative to some of Africa’s larger economies.

Top African Economies:

• Egypt: $8,741,181,682
• South Africa: $1,144,200,000
• Nigeria: $613,625,000

Comparable Countries:

• Ghana: $2,514,421,000
• Mozambique: $553,800,000
• Zambia: $992,860,000

Key Figures:

• Total Outstanding Credit in Africa: At $1.009 billion, Tanzania’s total credit places it among the moderate credit borrowers in Africa.
• Disbursements: Tanzania’s $155.99 million in disbursements ranks among the highest in Africa for the period, comparable to Ghana and Rwanda.
• Repayments: Tanzania made no repayments during the period, similar to most East African countries.

Insights

1. Tanzania’s Growing Dependence on IMF Support

Tanzania's $155.99 million in new disbursements suggests an increasing reliance on IMF funding. This support is likely directed at addressing budget deficits, financing economic reforms, or driving infrastructure projects that are critical for the country’s growth. The total outstanding credit of $1.009 billion is moderate compared to larger African economies like Egypt and South Africa but indicates Tanzania’s growing dependence on external financing.

2. Regional Competitiveness (East Africa)

Tanzania ranks as the second-largest borrower in East Africa, with $1.009 billion in outstanding IMF credit, trailing behind Kenya’s $3.02 billion. However, Tanzania’s high disbursements of $155.99 million indicate a more active utilization of IMF resources compared to Kenya, which did not receive any new IMF loans during this period. This proactive financial management puts Tanzania in a strong position to leverage external resources for sustainable development.

3. Tanzania’s Position in Africa

Tanzania occupies a balanced position in Africa. Its $1.009 billion in outstanding IMF credit is far below the levels seen in Egypt and South Africa, which have more significant credit exposures. However, Tanzania’s engagement with the IMF through substantial disbursements signals a robust and strategic use of external resources to finance economic reforms and projects critical for long-term growth.

4. Economic Implications

The high disbursements Tanzania has received suggest the country is channeling IMF funds into critical sectors such as energy, agriculture, and infrastructure. While the absence of repayments indicates a focus on securing resources for immediate needs rather than servicing debt, it highlights potential financial pressure. Despite this, Tanzania’s moderate debt load compared to larger economies provides a buffer to manage repayment obligations effectively in the future.

Broader Themes for Tanzania

1. Growth Potential

Tanzania’s active engagement with the IMF and strategic borrowing position the country to drive economic growth. By utilizing IMF resources, particularly in sectors requiring external capital, Tanzania is laying the groundwork for future growth.

2. Caution on Debt Management

While Tanzania’s debt levels are moderate, its increasing reliance on external financing must be closely monitored. This trend could potentially pose risks if not managed prudently, especially in the face of global economic volatility.

3. Leadership in East Africa

Tanzania’s strategic borrowing places it in a leadership role in East Africa, using IMF resources effectively to support its development agenda. This could enhance its regional influence and attract additional international support.

Conclusion

Tanzania’s strategic use of IMF resources demonstrates its proactive approach to managing economic challenges and fostering long-term growth. While its debt levels remain manageable, continued borrowing suggests the need for careful fiscal planning to ensure sustainability and maximize the benefits of these funds. Regionally, Tanzania is emerging as a leader in leveraging IMF support, setting an example for other East African nations in utilizing international resources for national development.

Tanzania’s engagement with the IMF is not just about addressing short-term challenges—it reflects a long-term vision of economic transformation and stability. By balancing the need for external financing with fiscal responsibility, Tanzania is paving the way for a prosperous future.

Tanzania has successfully sustained inflation below the medium-term target of 5%, reflecting strong economic policies and favorable supply conditions. Headline inflation eased to 3.0% in October 2024, supported by declining energy costs, stable food prices, and prudent monetary management. This stability highlights Tanzania's resilience to global shocks and its commitment to fostering a predictable economic environment for growth and investment.

Headline Inflation

• Trend:
  Headline inflation in Tanzania remained below the medium-term target of 5%, reflecting overall price stability.
  • October 2024: 3.0%
  • September 2024: 3.1%
• Implication:
  This indicates effective inflation control through stable prices in both food and non-food items. A 0.1 percentage point drop signals a steady, controlled environment for inflation management.

Energy and Fuel Inflation

• Trend:
  • October 2024: 9.7%
  • September 2024: 11.5%

A notable decline of 1.8 percentage points in energy and fuel inflation due to easing pump prices in the domestic market.

• Drivers:
  • Global energy price reductions during July–September 2024, leading to lower import costs.
  • Domestic adjustments in fuel prices influenced by global trends.
• Example (Domestic Fuel Prices):
  • Average pump price for petrol:
    • August 2024: 2,600 TZS/liter
    • October 2024: 2,500 TZS/liter

Core Inflation

• Definition: Excludes volatile items like fuel and unprocessed food, reflecting underlying inflation pressures.
• Trend:
  • August–October 2024: Steady at 3.2%
  • Previous peaks:
    • March–April 2024: 3.9%
• Implication:
  The sustained moderation (down 0.7 percentage points from earlier peaks) signifies improving control over cost pressures in non-volatile goods and services.

Food Inflation

• Trend:
  • October 2024: 2.5% (unchanged from September 2024).
  • Year-on-Year Comparison: Lower than 2023

Factors Supporting Stability

1.                Improved Production:

• Good weather led to higher yields.
• Enhanced use of inputs like fertilizers, quality seeds, and pesticides.

2.                Price Trends:

• Decreasing costs for staple foods (examples):
  • Maize: 750 TZS/kg (October 2024) vs. 800 TZS/kg (October 2023).
  • Beans: 2,000 TZS/kg (October 2024) vs. 2,200 TZS/kg (October 2023).
  • Rice: 1,500 TZS/kg (October 2024) vs. 1,600 TZS/kg (October 2023).

3.            Global Wheat Prices:

• Reflected in local market trends, easing bakery and flour prices.

Contributing Factors for Low Inflation

1. Good Food Supply Conditions:
   • Favorable weather and input supply ensured adequate harvests.
2. Moderation in Global Commodity Prices:
   • Decline in crude oil prices:
     • Brent Crude: $85/barrel (Q3 2024) vs. $90/barrel (Q2 2024).
3. Prudent Monetary Policy:
   • Bank of Tanzania maintained a neutral stance to prevent inflationary pressures.
4. Stable Exchange Rate Management:
   • Exchange rate stability against the USD (approximately 2,350 TZS/USD) prevented import cost escalations.

Overall Inflation Trend

• October 2024: Inflation remained well below the 5% medium-term target, showcasing:
  • Successful implementation of monetary policy.
  • Favorable domestic supply conditions.
• Implication: Price stability contributes to economic confidence, promoting investment and consumption.

Tanzania's inflation developments reveal the following insights:

1. Economic Stability and Effective Policy Management

• Key Indicator: Headline inflation consistently below the medium-term target of 5%.
• Implication: This highlights the success of Tanzania's monetary policies and economic strategies, ensuring a stable macroeconomic environment.

2. Control Over Volatile Sectors

• Energy and Fuel: The sharp decline in inflation for energy and fuel reflects Tanzania's responsiveness to global market trends and its capacity to translate these into lower domestic prices.
• Food Sector: Stable food inflation at 2.5% signifies strong agricultural performance, supported by favorable weather and policy measures that enhance input availability and reduce food costs.

3. Underlying Inflation Pressures are Contained

• Core Inflation Stability: Steady at 3.2% over recent months, showing that non-volatile components of the economy, such as housing, education, and healthcare, are not facing sharp price pressures.
• Significance: This stability underpins consumer and business confidence in the economy.

4. Benefits of Global Market Dynamics

• Tanzania's inflation benefited from:
  • Lower global fuel prices, reducing import costs.
  • Falling global wheat prices, easing food-related inflation.
• Implication: The ability to leverage favorable external conditions shows Tanzania's integration into the global economy and effective exchange rate management.

5. Favorable Domestic Conditions

• Strong Agricultural Sector: Adequate food supplies due to good weather and input availability reduced reliance on imports and mitigated price shocks.
• Policy Success: Prudent fiscal and monetary measures, such as stable exchange rate policies, prevented inflationary pressures from external factors like currency depreciation.

6. Positive Signals for Growth

• Low Inflation Environment: Encourages investment and consumer spending due to predictable price levels.
• Attractiveness for Investors: A stable inflation rate below the regional average makes Tanzania an appealing destination for foreign and domestic investment.

Conclusion

Tanzania's inflation trends in 2024 demonstrate a well-managed economy with robust mechanisms to ensure price stability. This reflects:

1. Effective policy implementation.
2. Resilience to external shocks.
3. Sustained growth potential through stable economic conditions.

Digital loans have experienced significant growth in Tanzania, driven by mobile technology, increased phone ownership, and partnerships between banks, microfinance institutions, and mobile network operators (MNOs).

Key Statistics

1. Total Number of Digital Loan Accounts:
   • The number of digital loan accounts in Tanzania skyrocketed by 198% from 32.09 million in 2022 to 95.89 million in 2023.
   • This dramatic increase highlights a growing trend of digital borrowing, especially among low-income and rural populations who find traditional banking inaccessible.
2. Amount of Digital Credit Issued:
   • The total amount of digital credit issued in Tanzania surged from TZS 26.79 billion in 2022 to TZS 126.03 billion in 2023, marking a 370% increase.
   • This indicates that while the number of loans has grown significantly, the total value of loans issued has also risen, suggesting an increasing demand for larger loans.
3. Demographic Trends:
   • Men represent 66.5% of all digital loan borrowers, while women account for 33.5%. However, the number of women accessing digital loans is steadily increasing, indicating greater financial empowerment among women.
   • Youth and young adults (primarily those aged 18–35) make up a large proportion of digital loan borrowers, as they are more likely to use mobile phones and digital financial services.
4. Active Mobile Money Accounts:
   • The increase in mobile money accounts (from 38.34 million in 2022 to 51.72 million in 2023) has contributed to the growth of digital loan services, as digital loan products are typically linked to mobile wallets.
   • The growth in mobile money accounts and the availability of National Identification Numbers (NINs) have made it easier for more people to access mobile financial services.

Key Drivers of Growth

1. Technology and Mobile Penetration:
   • The expansion of 3G and 4G network coverage and the increased availability of smartphones have made digital loans more accessible to Tanzanians, particularly in rural areas.
   • The ease of instant loans via mobile platforms has allowed users to access credit without needing a bank account or physical collateral.
2. Partnerships between Banks and MNOs:
   • Many financial institutions have partnered with mobile network operators (MNOs) to offer digital loans. These partnerships leverage MNOs' extensive mobile money networks, enabling quicker disbursement and repayment of loans.
   • Artificial Intelligence (AI) is used to assess the creditworthiness of borrowers, allowing for faster loan approval processes based on transaction history and mobile phone usage.
3. Government Support:
   • Regulatory changes by the Bank of Tanzania (BoT) and other financial authorities have helped create a favorable environment for digital lending, supporting the development of mobile loan platforms and enhancing financial inclusion.

Impact of Digital Loans

1. Financial Inclusion:
   • Digital loans have significantly improved financial inclusion by providing access to credit for underserved populations, particularly in rural areas where traditional banks have limited reach.
   • The increased access to instant loans has enabled individuals to meet urgent financial needs, such as healthcare, education, or emergency expenses.
2. Economic Growth:
   • By giving small businesses and individuals access to capital, digital loans contribute to economic activity, especially for MSMEs and entrepreneurs who may otherwise struggle to access credit from traditional financial institutions.

Challenges and Opportunities

1. Challenges:
   • Despite their growth, digital loans often carry high-interest rates, which can burden borrowers, especially those in low-income segments.
   • There is also concern over the sustainability of digital lending models, as some borrowers may struggle to repay loans on time, leading to over-indebtedness.
2. Opportunities:
   • The growth of digital credit presents opportunities for further product innovation in micro-lending, especially targeting women and youth.
   • There is potential for regulatory improvements to balance the rapid growth of digital lending with consumer protection to ensure long-term stability and sustainability.

Conclusion

The surge in digital loans in Tanzania, with a 198% increase in loan accounts and a 370% rise in the value of loans, demonstrates the country's rapid adoption of mobile financial services. While digital loans have opened up new opportunities for financial inclusion, they also present challenges related to affordability and long-term sustainability. Continued innovation, coupled with regulatory oversight, will be key to maximizing the benefits of digital lending in Tanzania's evolving financial landscape.

In 2023, access to finance for MSMEs in Tanzania saw significant growth, with the number of MSME loan accounts rising by 21.9% to 176,213 and total loan values increasing by 16.2% to TZS 3,612.72 billion. This surge was driven by government-backed programs like the SME Credit Guarantee Scheme and local government loans, which collectively supported over 23,000 MSMEs, with TZS 43.94 billion disbursed. Despite these advances, challenges such as limited collateral and high borrowing costs continue to hinder some MSMEs from fully accessing financial services.

MSMEs Access to Finance in Tanzania (2023)

Micro, Small, and Medium Enterprises (MSMEs) in Tanzania have seen significant advancements in accessing finance, supported by tailored financial products, government initiatives, and public-private collaborations:

Key Statistics

1. Bank Loans to MSMEs:
   • The number of loan accounts held by MSMEs in the banking sector increased to 176,213 in 2023 from 144,522 in 2022, a growth of 21.9%.
   • The total value of these loans rose by 16.2%, from TZS 3,109.20 billion in 2022 to TZS 3,612.72 billion in 2023.
   • MSME loans accounted for 12% of the total loan portfolio in the banking sector.
2. Microfinance Loans:
   • Tier II microfinance service providers granted loans to 4.14 million MSMEs in 2023, compared to 5 million in 2022, showing a slight decline in the number of accounts.
   • However, the value of loans granted by these providers increased significantly by 39.15%, reaching TZS 749.99 billion in 2023.
3. Local Government Loans:
   • Local Government Authorities (LGAs) disbursed loans amounting to TZS 24.02 billion to 16,724 women and TZS 19.92 billion to 10,032 youth in 2023.
   • In Zanzibar, the Zanzibar Economic Empowerment Authority (ZEEA) provided loans to 16,432 beneficiaries in 2023, up from 3,980 in 2022, with the value increasing to TZS 16.83 billion.

Government Programs Supporting MSMEs

1. Small and Medium Enterprises Credit Guarantee Scheme (SME-CGS):
   • Administered by the Bank of Tanzania, this scheme facilitated loans for viable MSME projects lacking sufficient collateral.
2. NEEC and SIDO Programs:
   • Under the National Economic Empowerment Council (NEEC), loans to MSMEs increased from TZS 713.79 billion in 2022 to TZS 743.66 billion in 2023, benefiting 6.1 million MSMEs.
   • The Small Industries Development Organization (SIDO) issued TZS 17.76 billion in loans to MSMEs in 2023.
3. Zanzibar MSMEs Development Program:
   • A total of TZS 2.10 billion was disbursed to 18 MSME projects in Zanzibar in 2023.

Impact of Access to Finance

1. Economic Growth:
   • Enhanced access to credit enabled MSMEs to expand operations, contributing to job creation and economic development.
2. Formalization and Inclusivity:
   • Increased financial literacy and business formalization programs allowed more MSMEs, especially women-led and youth-led businesses, to participate in formal financial systems.
3. Support for Targeted Groups:
   • Government initiatives prioritized financing for underserved groups, including women and youth, fostering inclusivity in economic opportunities.

Challenges and Opportunities

• Challenges: Limited collateral, high lending costs, and urban-rural disparities remain obstacles.
• Opportunities: Expanding digital credit solutions and government-guaranteed schemes can further enhance MSMEs' financial access.

MSMEs Access to Finance in Tanzania (2023)

The data on MSMEs access to finance in Tanzania in 2023 highlights significant progress and emerging opportunities, as well as some challenges:

1. Growing Access to Finance for MSMEs

• Increase in Loan Accounts: The 21.9% growth in the number of MSME loan accounts (from 144,522 in 2022 to 176,213 in 2023) and the 16.2% rise in loan values reflect a positive trend in MSMEs' access to formal financial services. This suggests that more MSMEs are tapping into formal financing channels, indicating a growing confidence in the financial system.
• Rising Loan Values: The increase of TZS 503.52 billion in loan value for MSMEs (from TZS 3,109.20 billion in 2022 to TZS 3,612.72 billion in 2023) points to greater access to larger sums of credit, which can help fuel business growth, expansion, and innovation.

2. Strong Support from Government and Financial Institutions

• Government Schemes: The continuation and expansion of government programs like the SME-CGS, which allows MSMEs to access loans with lower collateral requirements, play a critical role in boosting financial access. Similarly, local government programs supporting women, youth, and MSMEs have helped create a more inclusive financial ecosystem.
• Local Government Loans: Disbursements from Local Government Authorities (LGAs), totaling TZS 43.94 billion to over 23,000 MSME owners (across women and youth), show targeted efforts to empower underserved groups. This indicates focused governmental efforts to integrate vulnerable populations into the formal financial system.

3. Increased Focus on Financial Inclusion

• The 39.15% increase in loan value from Tier II microfinance institutions (from TZS 539.84 billion in 2022 to TZS 749.99 billion in 2023) signifies that microfinance remains an essential pillar for MSMEs, particularly for smaller or informal businesses that face more significant barriers in accessing bank loans.
• Zanzibar MSME Development: The TZS 2.10 billion allocated to 18 MSME projects in Zanzibar highlights the government's regional and local focus on inclusivity, ensuring that MSMEs across the country benefit from financial access, not just in larger urban areas.

4. Continued Challenges

• Collateral and High Costs: Despite the increases in access to credit, many MSMEs, particularly in rural areas, still face difficulties accessing loans due to lack of collateral and the high cost of credit. This limits the growth potential of some businesses, especially smaller and informal ones.
• Disparities Between Sectors: There remains a gap between larger and smaller MSMEs in accessing finance, with smaller businesses still relying heavily on microfinance institutions or government-backed loans, rather than banks.

5. Significant Economic and Social Impact

• Economic Growth and Job Creation: Increased access to finance enables MSMEs to expand operations, improve productivity, and generate employment. This supports Tanzania’s economic growth and job creation in the informal and formal sectors.
• Focus on Women and Youth: Government-targeted schemes are fostering economic empowerment for women and youth, key drivers of sustainable development, by enabling these groups to establish and scale businesses, contributing to social inclusion and gender equality.

Conclusion

The progress in MSMEs' access to finance in Tanzania in 2023 tells a story of positive growth, government commitment, and increased financial inclusion. While challenges like collateral requirements and high loan costs persist, the growing access to financial products, combined with targeted initiatives for women, youth, and smallholder farmers, highlights Tanzania’s path toward fostering a more inclusive and vibrant economy. The increased focus on microfinance and government programs also indicates a shift towards supporting underserved sectors, ensuring that more businesses, especially in rural areas, can thrive.