From a negligible 0.22% of GDP in the 1970s to a strong $1.63 billion in 2023, Tanzania’s Foreign Direct Investment (FDI) story reflects over five decades of transformation and resilience. Following economic liberalization in the mid-1990s, FDI surged from near zero in 1990–1991 to over 4% of GDP by 1999, peaking at 5.66% in 2010 during Tanzania’s golden decade of investment expansion. Despite a pandemic-related dip in 2020, FDI rebounded sharply—rising from $943.8 million in 2020 to $1.63 billion in 2023, a 13.18% annual increase—demonstrating sustained investor confidence and Tanzania’s continued role as one of East Africa’s most attractive investment destinations.

Strong Recovery and Sustained Growth (2020-2023)

Tanzania's foreign direct investment (FDI) has demonstrated remarkable resilience and growth in recent years, recovering strongly from the economic disruptions of 2020. The country attracted $1.63 billion in FDI during 2023, representing a 13.18% increase from the previous year and marking three consecutive years of growth since the pandemic-induced decline.

Recent Performance Overview

The period from 2020 to 2023 tells a compelling story of economic recovery and increasing investor confidence in Tanzania's economy:

The 2020 decline of 22.47% reflects the global economic uncertainty caused by the COVID-19 pandemic. However, the subsequent recovery has been robust, with 2021 showing the strongest year-on-year growth at 26.14%, followed by steady expansion in 2022 and 2023.

FDI as a Percentage of GDP: Long-Term Perspective

Examining FDI as a proportion of GDP reveals important insights into the evolving relationship between foreign investment and Tanzania's economic development. The country experienced its peak FDI-to-GDP ratio in 2010 at 5.66%, followed by another strong period from 2012-2013 when ratios exceeded 4.5%.

Historical FDI Performance (% of GDP)

Peak Investment Years (2005-2015)

Recent Period (2016-2023)

Early Growth Period (1990-2004)

Pre-Liberalization Era (1970-1989)

Key Trends and Analysis

Economic Transformation

The data reveals Tanzania's economic transformation from a virtually closed economy in the 1980s and early 1990s to an increasingly attractive destination for foreign investors. The liberalization reforms of the mid-1990s marked a turning point, with FDI ratios climbing from 0% in 1990-1991 to over 4% by the late 1990s.

The Golden Decade (2005-2015)

The period between 2005 and 2015 represents Tanzania's most successful era for attracting FDI relative to GDP size. During this decade, the country consistently maintained FDI levels above 2% of GDP, with multiple years exceeding 4%. This period coincided with major mining investments, telecommunications sector growth, and infrastructure development projects.

Recent Moderation

Since 2016, FDI as a percentage of GDP has stabilized at a lower level, generally ranging between 1.4% and 2.1%. While this represents a moderation from the peak years, it reflects a more mature investment environment and steady, sustainable foreign capital inflows.

Post-Pandemic Recovery

The post-2020 recovery is particularly noteworthy. Not only has Tanzania regained its pre-pandemic FDI levels in absolute terms, but the country has also improved its FDI-to-GDP ratio from 1.43% in 2020 to 2.06% in 2023, surpassing even the 2019 level of 1.99%.

Outlook and Implications

Tanzania's consistent FDI growth over the past three years signals renewed international confidence in the country's economic prospects. The government's ongoing infrastructure investments, natural resource development, and efforts to improve the business environment appear to be yielding positive results.

As Tanzania continues to position itself as a key investment destination in East Africa, maintaining this growth trajectory while ensuring that foreign investments contribute to sustainable development and local economic capacity will be crucial for long-term prosperity.

Data Source: TICGL Historical FDI data from 1970 to 2023

Tanzania's National Consumer Price Index (NCPI) release for September 2025, issued by the National Bureau of Statistics on October 8, 2025, reveals a stable macroeconomic environment characterized by headline inflation holding steady at 3.4% year-over-year—the highest level since June 2023 but well within the Bank of Tanzania's (BoT) target range of 3-5%. This marks no change from August 2025, with the overall NCPI edging up slightly to 119.86 (2020=100) from 119.77, driven by modest price increases in select food and non-food items. Food and non-alcoholic beverages inflation eased to 7.0% from 7.7%, reflecting a -0.6% monthly dip in the index, while non-food inflation ticked up to 1.9% from 1.6%. Core inflation, excluding volatile items like unprocessed food and energy, rose modestly to 2.2% from 2.0%, signaling underlying price pressures remain contained.

This stability, amid robust GDP growth of 5.4% in Q1 2025, underscores Tanzania's resilient post-pandemic recovery and effective policy framework.

Tanzania Inflation Overview (September 2025)

Inflation by Main Consumption Group (September 2025)

Key Monthly Drivers (Aug–Sept 2025)

Price increases were observed in:

• Food items: sorghum flour (+3.6%), bread (+1.0%), chicken (+5.0%), sweet potatoes (+7.6%), cassava (+2.2%), cocoyams (+8.9%), fruits (+2.2%), and dried peas (+4.0%).
• Non-food items: alcoholic beverages (+0.6%), men’s garments (+0.9%), kerosene (+1.1%), and charcoal (+2.7%).

Economic Implications of Tanzania's September 2025 Inflation Data

1. Monetary Policy and Macroeconomic Stability

• Support for Accommodative Stance: The unchanged headline rate and easing food pressures reinforce the BoT's decision to hold the Central Bank Rate (CBR) at 5.75% during its October 2, 2025, Monetary Policy Committee meeting. This reflects confidence in sustained inflation within the 3-5% target, avoiding the need for tightening that could stifle growth. Prudent monetary policy has historically anchored expectations, contributing to the shilling's relative stability (projected 3.7% depreciation in 2025) and low borrowing costs, which bolster private sector credit expansion.
• Risk Mitigation: Core inflation's slight uptick suggests mild demand-pull pressures from economic expansion, but the overall trajectory—fluctuating between 3.0% and 3.4% over the past year—indicates no overheating. This reduces the likelihood of imported inflation from global commodity shocks, such as energy prices, which have eased regionally.

2. Impact on Household Consumption and Poverty

• Relief for Low-Income Households: Food items, weighting 28.2% of the NCPI basket, drove much of the monthly index increase (e.g., +8.9% for cocoyams, +7.6% for sweet potatoes), yet annual food inflation's decline to 7.0% eases cost-of-living pressures for rural and urban poor households, who spend over 50% of income on food. This could sustain consumption resilience, supporting poverty reduction efforts amid 5.4% Q1 growth.
• Mixed Non-Food Pressures: The +0.3% rise in non-food inflation, fueled by essentials like kerosene (+1.1%) and charcoal (+2.7%), may strain urban budgets amid seasonal energy demands. However, stable categories like health (0.0% monthly change) and education (+0.0%) provide buffers, potentially stabilizing real disposable incomes and consumer confidence.

3. Sectoral and Supply-Side Dynamics

• Agricultural Resilience: Despite monthly spikes in crops like sorghum flour (+3.6%) and dried peas (+4.0%), the food index's -0.6% drop points to improved harvests or supply chain efficiencies, possibly from favorable 2025 rainy seasons. This bodes well for Tanzania's agriculture sector (25% of GDP), enhancing export competitiveness in East Africa and curbing imported food inflation.
• Energy and Manufacturing Pressures: Gains in the Energy, Fuel, and Utilities Index (+0.9% monthly to 3.7% annually) highlight vulnerabilities to global oil dynamics, but contained rises (e.g., liquefied hydrocarbons +0.1%) reflect BoT's forex interventions. Non-food drivers like clothing (+0.3% monthly) suggest manufacturing cost pass-throughs, potentially pressuring small enterprises but signaling domestic production gains.
• Services Sector Boost: Stable services inflation (1.3% annually) in areas like restaurants (+1.0%) and recreation (-0.1% monthly) aligns with tourism recovery, a key growth driver projected at 6% GDP expansion for 2025.

4. Broader Growth and Investment Outlook

• Pro-Growth Environment: Stable inflation complements fiscal prudence, with the IMF endorsing Tanzania's trajectory for 6% GDP growth in 2025, driven by infrastructure and mining investments. Low inflation volatility enhances investor confidence, attracting FDI (e.g., in natural gas) and supporting the shilling's stability against regional peers like Kenya's higher inflation.
• Potential Risks: Persistent food volatility (still 7.0%) could re-emerge from climate events, while global factors like OECD-projected G20 inflation moderation to 2.9% in 2026 offer tailwinds but underscore external dependencies. If non-food trends accelerate, it might prompt BoT vigilance.

In summary, September 2025's inflation data signals a "soft landing" for Tanzania's economy—stable prices fostering inclusive growth without derailing expansion. This positions the country favorably in East Africa, where peers face higher volatility, and supports the BoT's projection of inflation averaging 3.4% for the year. Policymakers should prioritize agricultural diversification and energy security to sustain this momentum into 2026.

Authored by Dr. Bravious Felix Kahyoza PhD, FMVA, CP3P and Amran Bhuzohera

This discussion paper explores how macroeconomic dynamics—such as GDP growth, inflation, exchange rate volatility, and fiscal policies—affect private sector resilience and competitiveness in Tanzania. Using annual and quarterly time-series data (2000–2024), the study applies ARDL and VECM econometric models to uncover both short- and long-term relationships between macroeconomic shocks and private sector performance.

Tanzania’s private sector contributes approximately 35% of GDP and employs over 80% of the national workforce, making it central to achieving the targets of Vision 2025 and AfCFTA integration. Yet, despite strong recovery momentum after COVID-19, the sector continues to face currency depreciation, inflation pressures, and investment bottlenecks that affect growth sustainability.

Key Findings

Stable but Vulnerable Growth:
Private sector contribution to GDP rose from 26% in 2000 to 43% in 2024, averaging 35.5%. However, this growth remains fragile due to inflationary shocks and foreign exchange volatility.

Exchange Rate Sensitivity:
The Tanzanian shilling depreciated by 9.6% year-on-year, increasing import costs by 12% and constraining SME margins. Despite this, depreciation stimulated limited export competitiveness—reflecting an adaptive but pressured private sector.

Long-Run Cointegration Confirmed:
The ARDL model confirms strong long-run relationships between macroeconomic variables, with a significant equilibrium adjustment rate of 4.6% per year. GDP growth showed a mild negative elasticity (–0.274), while inflation exerted a positive long-run effect (+0.255), suggesting adaptive price behavior.

Macroeconomic Influence on Private Growth:
Variance decomposition revealed that 43.7% of private sector growth was driven by GDP dynamics, 30.4% by inflation, and 20.6% by exchange rate movements—illustrating that domestic demand and stability remain the most crucial levers of resilience.

AfCFTA and Structural Transition:
Regional integration through AfCFTA could raise private sector output by up to 28% in freight and manufacturing industries by 2030. However, persistent supply shocks and fiscal deficits (3.8% of GDP on average) threaten to dilute these benefits unless supported by targeted SME financing and inflation control.

Policy Insights

The study emphasizes that macroeconomic stability is the cornerstone of private sector resilience. Persistent depreciation, inflation spikes, and limited fiscal space constrain Tanzania’s ability to maintain private-sector-led growth.

To counter these vulnerabilities, the paper proposes:

• Inflation Targeting (3–5% Band): Strengthening BoT’s inflation control and forward guidance to protect SME credit channels.
• Export Credit Guarantees: Through TanTrade, to hedge SMEs against exchange rate volatility under AfCFTA markets.
• Fiscal Incentives for SMEs: Offering tax rebates up to 30% for firms investing in manufacturing and green technologies.
• Macroeconomic Resilience Fund (MRF): A proposed TZS 1 trillion facility to buffer shocks, fund innovation, and promote climate-resilient infrastructure.

Implications for Vision 2025 and Beyond

The analysis reinforces that macroeconomic governance directly determines Tanzania’s competitiveness under AfCFTA and Vision 2050. Achieving sustained 6% GDP growth and raising private contribution to 45% of GDP by 2030 will depend on coordinated fiscal-monetary reforms, stable exchange rates, and continuous SME support.

By merging econometric evidence with policy action, this research provides actionable insights for the Bank of Tanzania, Ministry of Finance and Planning, and private sector actors striving for inclusive, shock-resistant growth.

Read the Full Paper:
“Macroeconomic Forces and Private Sector Resilience: An Econometric Analysis of Trends, Challenges, and Policy Pathways in Tanzania (2000–2024)”
Published by TICGL | Economic Research Centre

The National Consumer Price Index (NCPI) for August 2025 reveals a stable yet nuanced inflationary landscape in Tanzania, with the annual headline inflation rate rising marginally to 3.4% from 3.3% in July 2025. This slight uptick, driven predominantly by a 7.7% increase in food and non-alcoholic beverage prices, underscores the significant influence of the agricultural sector, which holds a 28.2% weight in the CPI basket. Despite a minor monthly decline in the overall index from 119.85 to 119.77, reflecting seasonal price drops in staples like maize and vegetables, core inflation remained steady at 2.0%, indicating underlying price stability. These figures highlight Tanzania's balanced economic management amid a projected 6% GDP growth, though persistent food price pressures pose challenges for household affordability and rural livelihoods.

Headline Inflation

• The annual headline inflation rate (all items in the CPI basket) stood at 3.4% in August 2025, up slightly from 3.3% in July 2025.
• This means that on average, prices of goods and services were 3.4% higher in August 2025 compared to August 2024.
• The overall index rose from 115.78 in August 2024 to 119.77 in August 2025.

Food and Non-Alcoholic Beverages

• Inflation in this category was 7.7% in August 2025, compared to 7.6% in July 2025.
• This remains the biggest driver of inflation, since food carries the largest weight (28.2%) in the basket.

Non-Food Items (Excluding Food & Beverages)

• Inflation rose slightly to 1.6% in August 2025, up from 1.5% in July 2025.

Core Inflation

• Excluding volatile items (unprocessed food, energy, and utilities), core inflation was 2.0% in August 2025, compared to 1.9% in July 2025.
• This shows relatively stable underlying price trends.

Selected Groups (Year-on-Year Changes)

• Alcoholic beverages & tobacco: 2.9%
• Clothing & footwear: 1.7%
• Housing, water, electricity, gas & fuels: 2.1%
• Transport: 1.4%
• Education services: 3.0%
• Restaurants & accommodation: 0.9%
• Insurance & financial services: 0.6%

Monthly Price Movements (July → August 2025)

The CPI slightly declined from 119.85 in July 2025 to 119.77 in August 2025 (-0.1%), due to lower prices of several items:

• Food items falling in price: maize (-1.9%), maize flour (-0.3%), fresh fish (-0.3%), vegetables (-1.8%), Irish potatoes (-2.7%), sweet potatoes (-3.3%), lentils (-4.5%), beans (-2.5%), cowpeas (-3.4%).
• Non-food items falling in price: men’s garments (-0.6%), children’s garments (-0.5%), charcoal (-0.7%), firewood (-5.5%), petrol (-0.4%).

Summary:
Tanzania’s inflation in August 2025 remained stable and moderate at 3.4%, mainly driven by food prices (7.7% increase). Core inflation (2.0%) shows underlying stability, but seasonal drops in key food and fuel items slightly reduced the monthly index.

Table 1: Tanzania Overall Inflation Rates

Table 2: Core Inflation and Other Key Indices (August 2025)

Key Highlights:

• Headline inflation increased to 3.4% in August 2025 from 3.3% in July 2025
• Food inflation rose to 7.7% in August 2025 from 7.6% in July 2025
• Core inflation increased to 2.0% in August 2025 from 1.9% in July 2025
• Monthly CPI declined by 0.1% from July to August 2025
• Food and non-alcoholic beverages have the highest weight (28.2%) in the CPI basket

Overview of Tanzania's Inflation and Economic Implications

Tanzania's headline inflation rate of 3.4% in August 2025 reflects a stable macroeconomic environment, remaining within the Bank of Tanzania's (BOT) target range of 3-5%. This moderate level, up slightly from 3.3% in July, indicates controlled price pressures overall, supported by prudent monetary policies and improved supply conditions in non-food sectors. However, the data highlights persistent challenges, particularly from food price increases, which could strain household budgets and exacerbate inequality. Drawing from the attached National Bureau of Statistics (NBS) document and recent economic analyses, this inflation profile supports robust GDP growth projections while underscoring the need for targeted interventions in agriculture and food security. Below, I break down the key economic implications.

Positive Implications for Economic Stability and Growth

• Macroeconomic Resilience and Policy Effectiveness: The low headline inflation rate aligns with BOT's cautious accommodative monetary policy for 2025/26, which aims to balance inflation control with economic expansion. In July 2025, BOT reduced its central bank rate (CBR) by 25 basis points to 5.75%, marking the fifth cut in a series to stimulate lending and investment while keeping inflation anchored. This has contributed to foreign exchange reserves reaching approximately USD 6 billion by June 2025—one of the highest levels in recent years—bolstering the Tanzanian shilling's stability (USD/TZS at around 2,470 in early August 2025). Stable inflation enhances business confidence, attracts foreign direct investment (FDI), and supports Tanzania's goal of drawing USD 15 billion in investments in 2025, focusing on manufacturing, clean energy, transport, and minerals.
• Strong GDP Growth Momentum: Tanzania's economy is projected to grow by 6.0% in 2025, up from 5.5-5.6% in 2024, driven by sectors like mining (which led Q1 2025 growth at 5.4%) and services. Low core inflation (2.0% in August, excluding volatile items) signals underlying price stability, reducing risks of overheating and allowing for sustained expansion. The IMF forecasts inflation at 4.0% for the year, complementing this growth outlook. At current prices, GDP is expected to reach USD 88 billion in 2025, positioning Tanzania as one of East Africa's fastest-growing economies.
• Benefits for Non-Food Sectors: Inflation in categories like transport (1.4%), housing and utilities (2.1%), and services (0.8%) remains subdued, aided by monthly declines in energy prices (e.g., petrol -0.4%, firewood -5.5%, charcoal -0.7%). This lowers operational costs for businesses, boosts competitiveness in exports (e.g., minerals and agriculture), and supports fiscal health. The energy, fuel, and utilities index rose only 2.6% annually, reflecting easing global commodity pressures. Overall, non-food inflation at 1.6% preserves purchasing power for middle-income groups and encourages consumer spending in durable goods.

Challenges and Risks from Food-Driven Inflation

• Impact on Cost of Living and Poverty: Food and non-alcoholic beverages, weighted at 28.2% in the CPI basket, saw inflation rise to 7.7% in August from 7.6% in July, making it the primary inflation driver. This erodes real incomes, particularly for rural and low-income households where food constitutes over 50% of expenditures. Despite a monthly CPI decline of 0.1% due to seasonal drops in items like maize (-1.9%), vegetables (-1.8%), and tubers (e.g., sweet potatoes -3.3%), year-on-year food price hikes could push more people into poverty if not addressed. For context, food inflation surged from 1.4% in March 2024 to 5.4% in March 2025, driven by weather disruptions and supply chain issues. This threatens post-pandemic food security recovery, as global food prices (per FAO index) are 7.6% higher than last year.
• Broader Economic Vulnerabilities: High non-core inflation (7.3%, including volatile foods) could amplify external shocks, such as global commodity volatility or climate events affecting agriculture (which anchors 25-30% of GDP). If food prices continue rising, it might fuel wage demands, potentially spiraling into broader inflation. Additionally, the goods index (4.9% inflation) reflects import dependencies, which could worsen with shilling fluctuations.
• Inequality and Social Implications: Urban-rural divides may widen, as food inflation hits subsistence farmers hardest. While core stability benefits formal sectors, informal workers (over 80% of employment) face reduced affordability, potentially slowing consumption-led growth.

Policy Responses and Future Outlook

BOT's strategy emphasizes inflation targeting while supporting 6%+ growth, with tools like reserve requirements and open market operations to manage liquidity. Fiscal measures, including subsidies for agriculture and infrastructure investments, could mitigate food risks. The IMF's 2025 Article IV consultation notes improving conditions under prudent management, with growth expected to average 6% long-term. East Africa's regional outlook projects easing inflation (from 20.8% in 2024 to 19.1% in 2025), but Tanzania's lower rate positions it favorably.

In summary, August 2025's inflation data underscores Tanzania's resilient economy, with low overall rates fostering investment and growth amid a projected 6% GDP expansion. However, elevated food inflation poses risks to inclusive development, necessitating enhanced agricultural productivity and social safety nets for sustained stability.

The financial sector in Tanzania demonstrated significant growth in Q1 2025, as outlined in the National Bureau of Statistics report, with bank deposits rising by 18.5% to TZS 43.0 trillion from TZS 36.3 trillion in Q1 2024, reflecting enhanced savings and trust in the banking system, as noted in Figure 8. This surge, coupled with a 14.7% increase in bank loans to TZS 39.1 trillion from TZS 34.1 trillion, indicates a robust expansion in credit availability, supporting investment and consumption across key sectors like manufacturing and mining, which contributed 10.4% and 15.4% to GDP growth respectively. However, the loan-to-deposit ratio declined from 94.0% to 90.9% (-3.1 percentage points), suggesting a more cautious lending approach, potentially strengthening financial stability but possibly limiting credit flow to the private sector, as highlighted in the sector’s 15.4% growth rate and 3.5% GDP share. This cautious stance, amid a stable 5.4% GDP growth (up from 5.2% in Q1 2024 per Figure 3), positions the sector to bolster economic resilience, though it may necessitate targeted policies to ensure broader credit access, especially for SMEs, to sustain long-term growth momentum.

1. Financial Sector (TZS Trillion)

• Bank Deposits:
  • Rose from TZS 36.3 trillion (Q1 2024) to TZS 43.0 trillion (Q1 2025).
  • This is an 18.5% increase, reflecting stronger household and corporate savings.
  • Suggests financial deepening, improved trust in the banking system, and rising liquidity.
• Bank Loans:
  • Increased from TZS 34.1 trillion to TZS 39.1 trillion (+14.7%).
  • Indicates expansion in credit to businesses and households, supporting investment and consumption.
• Loan-to-Deposit Ratio:
  • Fell from 94.0% to 90.9% (-3.1 percentage points).
  • Implies that while deposits surged, lending grew slightly slower, showing more conservative lending or stricter credit assessments.
  • This can strengthen financial stability but may also slow private sector financing.

The banking system shows healthy growth in deposits and loans, but lending is becoming more cautious relative to deposits.

1. Implications of Bank Deposits Growth (18.5% to TZS 43.0 Trillion)

The 18.5% surge in bank deposits from TZS 36.3 trillion in Q1 2024 to TZS 43.0 trillion in Q1 2025 signals robust financial deepening and increased public confidence in the banking system, driven by rising household savings amid stable inflation (around 3.2% year-on-year in April 2025) and economic recovery. This liquidity boost enhances banks' capacity to fund economic activities, contributing to the financial sector's 15.4% growth rate and 12.0% share of overall GDP expansion in Q1 2025. Economically, it supports monetary policy transmission, as noted in the Bank of Tanzania's (BOT) April 2025 Monetary Policy Report, where money supply (M3) grew by 15.1%, fostering a stable environment for investment and potentially lowering borrowing costs if channeled effectively. However, uneven distribution— with personal and corporate savings concentrated in urban areas—could exacerbate regional inequalities, limiting inclusive growth in rural economies reliant on agriculture.

2. Implications of Bank Loans Expansion (14.7% to TZS 39.1 Trillion)

The 14.7% increase in bank loans to TZS 39.1 trillion from TZS 34.1 trillion indicates expanding credit access for businesses and households, bolstering investment in key sectors like manufacturing (7.2% growth) and mining (16.6% growth), which together drove much of Tanzania's 5.4% GDP rise. This credit growth, estimated at 13.2% for private sector lending in Q1 2025 per investor briefings, aligns with high demand for capital projects and consumption, potentially accelerating job creation and productivity. According to the IMF's June 2025 Staff Report, the banking sector's profitability and adequate capitalization (with non-performing loans at 3.6%, below the 5% threshold) underpin this expansion, reducing systemic risks and supporting fiscal stability. Yet, slower loan growth relative to deposits may signal selective lending, prioritizing high-return sectors and possibly constraining SMEs, which could hinder broader diversification away from resource dependence.

3. Implications of Loan-to-Deposit Ratio Decline (to 90.9%)

The drop in the loan-to-deposit ratio (LDR) from 94.0% to 90.9% (-3.1 percentage points) reflects a more conservative banking approach, where deposit inflows outpaced lending, possibly due to stricter credit assessments amid regulatory emphasis on stability post-2024 reforms. This prudence strengthens financial resilience, as highlighted in Fitch Solutions' 2025 analysis, by building buffers against shocks like global trade tensions, and maintains liquidity ratios above BOT thresholds, contributing to the sector's sound profile. Positively, it mitigates risks of over-leveraging, with personal loans comprising 37.6% of credit in early 2025, but it could slow private sector financing, particularly for infrastructure and agriculture, potentially capping GDP growth below the 6% target for FY 2025/26. In a subdued economic context, as per NCBA Group's Q1 2025 report, this caution might preserve stability but delay stimulus effects from monetary easing.

Key Takeaways and Broader Economic Implications

Tanzania's financial sector in Q1 2025 demonstrates healthy expansion, with deposits and loans fueling liquidity and credit for growth, yet the lower LDR underscores a shift toward stability over aggressive expansion, aligning with BOT's neutral monetary stance. This balance supports Tanzania's resilient 5.4% GDP trajectory amid Sub-Saharan Africa's projected 3.8% growth, attracting FDI (e.g., in banking via digital lending platforms like Weza and Mgodi, disbursing billions in Q1). However, challenges include potential credit gaps for underserved sectors, which could widen inequality if not addressed through inclusive policies like mobile money integration. Overall, a stable sector positions Tanzania for sustainable development, with projections for 13-15% credit growth in 2025, but requires vigilant oversight to avoid liquidity risks in a volatile global environment.

The United Republic of Tanzania's economic performance in the first quarter of 2025 is highlighted in the National Bureau of Statistics report, showcasing a GDP growth rate of 5.4%, a slight increase from 5.2% in Q1 2024, reflecting stability and resilience. This growth, detailed at current prices of TZS 54.2 trillion (up 8.8% from TZS 49.8 trillion) and constant 2015 prices of TZS 40.7 trillion (up 5.4% from TZS 38.6 trillion), underscores a balanced expansion driven by sectors like mining (16.6% growth), electricity (19.0%), and finance (15.4%). Regionally, Tanzania leads the SADC with a 5.4% growth rate, outperforming South Africa (0.8%), Namibia (2.7%), and Botswana (-0.1%), while ranking third in the EAC behind Uganda (8.6%) and Rwanda (7.8%), demonstrating its consistent yet competitive standing.

1. GDP Growth Rate

• Tanzania:
  • 5.4% growth in Q1 2025, up slightly from 5.2% in Q1 2024.
  • This modest increase (+0.2 percentage points) shows stability and resilience, especially compared to regional peers.
• Regional Context:
  • SADC: Tanzania outperformed all selected SADC countries:
    • South Africa: only 0.8%, despite slight recovery from 0.5%.
    • Namibia: growth fell sharply to 2.7% from 4.8%.
    • Botswana: remained negative (-0.1%), though improving from -1.9%.
  • EAC: Tanzania ranked 3rd:
    • Uganda: fastest, at 8.6%, up from 7.1%.
    • Rwanda: slowed from 9.7% to 7.8%, but still strong.

Insight: Tanzania’s growth may look modest next to Uganda and Rwanda but is the most consistent, without sharp volatility.

2. GDP at Current Prices

• Q1 2025 GDP at current prices: TZS 54.2 trillion, compared to TZS 49.8 trillion in Q1 2024.
• That’s an 8.8% nominal increase (reflecting both price changes and output growth).

3. GDP at Constant 2015 Prices (Real GDP)

• Real GDP (inflation-adjusted): TZS 40.7 trillion in Q1 2025, up from TZS 38.6 trillion in Q1 2024.
• This reflects the 5.4% actual growth in economic output.

4. Comparative Highlights

• East African Community (EAC):
  • Tanzania: 5.4% (stable, 3rd place).
  • Uganda: 8.6% (leading, driven by strong agriculture and industry).
  • Rwanda: 7.8% (still higher than Tanzania, but slowed from 9.7%).
• Southern African Development Community (SADC):
  • Tanzania: 5.4% (highest among reported peers).
  • South Africa: 0.8% (struggling with structural issues).
  • Namibia: 2.7% (sharp decline, down from 4.8%).
  • Botswana: -0.1% (still contracting, though improving).

Insight: Tanzania is emerging as a regional leader in stable growth — ahead in SADC, but slightly behind the fastest-growing EAC peers.

5. Key Takeaways

1. Tanzania’s economy is expanding steadily: 5.4% real growth, supported by strong mining (+16.6%), electricity (+19.0%), and financial services (+15.4%).
2. Regional standing:
   • Leader in SADC.
   • Middle performer in EAC, behind Uganda and Rwanda.
3. Resilience: Tanzania avoided volatility seen in Rwanda (decline) and Namibia (slowdown), showing a balanced, sustainable path.

Table 2: Key Economic Indicators and Regional Comparison

1. Implications of GDP Growth Rate (5.4% in Q1 2025)

Tanzania's Q1 2025 GDP growth of 5.4%, a modest uptick from 5.2% in Q1 2024, underscores economic resilience in a challenging global environment marked by trade tensions and a projected worldwide slowdown to 2.8%. This stability, without sharp volatility, suggests effective policy interventions, including investments in infrastructure like the Julius Nyerere Hydropower Dam, which boosted electricity growth to 19.0%. However, the rate lags behind pre-pandemic highs, implying potential vulnerabilities to external shocks such as commodity price fluctuations affecting mining (16.6% growth). Positively, it supports poverty reduction and job creation, with per capita income rising, but sustained growth above 6% is needed to meet long-term goals like a USD 1 trillion economy by 2050.

2. Implications of GDP at Current Prices (TZS 54.2 Trillion)

The 8.8% nominal GDP increase to TZS 54.2 trillion from TZS 49.8 trillion reflects both real output growth and moderate inflation (implicitly around 3.4%, derived from nominal minus real growth). This indicates controlled price pressures, aligning with national targets and regional benchmarks in the EAC and SADC. Economically, it enhances fiscal space for government spending on social services and infrastructure, potentially reducing debt burdens if revenues rise accordingly. However, if inflation accelerates due to global factors like energy costs, it could erode purchasing power, particularly for low-income households reliant on agriculture.

3. Implications of Real GDP at Constant 2015 Prices (TZS 40.7 Trillion)

The inflation-adjusted rise to TZS 40.7 trillion from TZS 38.6 trillion highlights genuine productivity gains, driven by sectors like finance (15.4% growth) and manufacturing (7.2%). This fosters investor confidence, as evidenced by projections of 5.5-6% growth for 2025 overall. Implications include improved living standards and reduced inequality if distributed equitably, but over-reliance on resource-based sectors (e.g., mining) risks "Dutch disease," where currency appreciation hampers non-mining exports. Long-term, it positions Tanzania for middle-income status, though human capital investments in education (8.6% growth) are crucial.

4. Implications of Comparative Highlights

In the EAC, Tanzania's 5.4% growth ranks third behind Uganda (8.6%) and Rwanda (7.8%), signaling competitive pressures but also opportunities for intra-regional trade, where EAC integration boosts exports by over 25%. In SADC, outperforming South Africa (0.8%), Namibia (2.7%), and Botswana (-0.1%) establishes Tanzania as a regional leader, potentially attracting FDI and aiding SADC's 4.1% projected growth for 2025. Dual membership in EAC and SADC enhances market access but poses challenges like overlapping regulations; studies show Tanzania's trade intensity is higher with EAC, suggesting prioritization for efficiency. Overall, this positioning strengthens geopolitical influence, with citizens viewing both blocs positively for economic benefits.

5. Key Takeaways and Broader Implications

Tanzania's steady expansion, supported by mining, electricity, and financial services, signals a balanced path amid global uncertainties, outperforming advanced economies like the US (1.4% projected) and EU (~1-2%). As a SADC leader and EAC mid-performer, it benefits from regional integration, but volatility in peers like Rwanda's slowdown highlights the need for diversification. Risks include geopolitical tensions affecting trade, while opportunities lie in climate-resilient reforms and private sector boosts to reach 5.9% growth in 2025/26. Policy focus on agriculture and industry could sustain momentum, fostering inclusive development.

The United Republic of Tanzania's economy showcased a steady performance in the first quarter of 2025, with GDP growth rising to 5.4% from 5.2% in the same period of 2024, as detailed in the National Bureau of Statistics report. Key insights reveal the top contributors to this growth include Mining & Quarrying (15.4%), Agriculture (14.2%), Finance & Insurance (12.0%), Construction (11.3%), Manufacturing (10.4%), and Transport & Storage (9.3%). The strongest growth rates were observed in Electricity (19.0%), Mining (16.6%), Finance & Insurance (15.4%), and Education (8.6%), highlighting robust sectoral advancements. However, weaker performers such as Construction (slowed to 4.3%), Trade (fell to 3.5%), and Information & Communication (halved from 14.6% to 7.8%) indicate areas needing attention to sustain overall economic momentum.

1. Overall GDP

• Growth: Q1 2025 GDP grew by 5.4%, slightly higher than 5.2% in Q1 2024.
• Size: At constant 2015 prices, GDP rose to TZS 40.7 trillion from TZS 38.6 trillion in Q1 2024.

2. Primary Activities (40.7% of GDP)

• Agriculture, Forestry & Fishing:
  • Growth improved from 2.5% (2024) to 3.0% (2025).
  • Key drivers:
    • Paddy production rose by 9.6% (568.9k tons → 623.3k tons).
    • Wheat output jumped 29.4% (29.6k → 38.3k tons).
    • Oil seeds +5.5%, beans +0.9%.
  • Contribution: 14.2% of total GDP growth.
  • Share in GDP: 27.2%.
• Mining & Quarrying:
  • Explosive growth: 3.5% (2024) → 16.6% (2025).
  • Production surged in key minerals:
    • Gold +16.1% (13,610 kg → 15,797 kg).
    • Coal +19.1% (745k tons → 888k tons).
    • Mica +475.6%, Iron ore +256%, Phosphate +465%.
  • Contribution: largest, at 15.4% of total GDP growth.
  • Share in GDP: 11.0%.

3. Secondary Activities (21.4% of GDP)

• Manufacturing:
  • Growth: 5.8% → 7.2%.
  • Supported by increased production of consumer and industrial goods.
  • Contribution: 10.4% of growth.
  • Share in GDP: 6.8%.
• Electricity:
  • Massive jump: 7.6% → 19.0%.
  • Boosted by Julius Nyerere Hydropower Dam coming online.
  • Share in GDP: 0.2% (small, but impactful growth driver).
• Water Supply:
  • Growth: 3.1% → 4.2%, linked to production rising to 98.9m m³ (from 94.7m).
  • Share in GDP: 0.4%.
• Construction:
  • Slowed: 6.4% → 4.3%.
  • Still important with 11.3% contribution to GDP growth.
  • Supported by cement & iron-steel output.
  • Share in GDP: 12.7%.

4. Tertiary Activities (37.9% of GDP)

• Trade & Repair:
  • Decline in growth: 5.3% → 3.5%.
  • Impacted by moderate import and agriculture trade flows.
  • Share in GDP: 8.4%.
• Transport & Storage:
  • Growth: 5.7% → 6.5%, driven by cargo tonnage and SGR rail services.
  • Contribution: 9.3% of GDP growth.
  • Share in GDP: 7.2%.
• Financial & Insurance:
  • Growth: 14.9% → 15.4%.
  • Supported by:
    • Deposits up 18.5% (TZS 36.3T → 43.0T).
    • Loans up 14.7% (TZS 34.1T → 39.1T).
  • Contribution: 12.0%.
  • Share in GDP: 3.5%.
• Information & Communication:
  • Slowed sharply: 14.6% → 7.8%.
  • Still supported by mobile money, internet expansion & broadcasting.
  • Share in GDP: 1.6%.
• Education:
  • Growth: 5.5% → 8.6%, thanks to rising student enrollments.
  • Share in GDP: 2.2%.

Table 1: Sectoral Growth Performance and Contribution Analysis

The economic implications of Tanzania's sectoral growth and contributions in Q1 2025 are multifaceted, reflecting both strengths and challenges:

Tanzania's Q1 2025 GDP growth of 5.4% at constant 2015 prices, rising from TZS 38.6 trillion in Q1 2024 to TZS 40.7 trillion, signals a resilient and accelerating economy amid a global slowdown. This performance outpaces the revised global projection of 2.8% for 2025, influenced by U.S. tariff policies and trade tensions, as well as Sub-Saharan Africa's expected 3.8% growth. It also exceeds regional peers in the SADC (e.g., South Africa's 0.8%, Namibia's 2.7%) and aligns with strong EAC growth (Uganda at 8.6%, Rwanda at 7.8%). This implies sustained macroeconomic stability, potentially boosting investor confidence and supporting Tanzania's ambition to reach a USD 1 trillion economy by 2050 through structural reforms. However, reliance on public sector-driven growth could strain fiscal balances if external shocks like commodity price volatility or climate events intensify.

The growth trajectory suggests potential for full-year 2025 GDP expansion of 5.8-6.0%, driven by infrastructure and sectoral diversification, but it highlights vulnerabilities: inflation risks from rising energy and food costs, and the need for private sector-led reforms to enhance job creation, as agriculture employs 65% of the workforce yet grows modestly. Positive spillovers include improved foreign exchange reserves from mining exports and reduced energy imports due to hydropower advancements, potentially stabilizing the Tanzanian shilling.

Primary Sector Implications (40.7% of GDP)

Agriculture, Forestry & Fishing (27.2% share, 3.0% growth, 14.2% contribution): The sector's uptick from 2.5% in Q1 2024, fueled by paddy (+9.6% to 623.3k tons) and wheat (+29.4% to 38.3k tons), implies enhanced food security and rural income growth, supporting poverty reduction in a sector employing most Tanzanians. However, modest overall growth underscores challenges like weather dependency and low productivity, potentially exacerbating inequality if not addressed through investments in irrigation and value chains. Positive linkages to manufacturing (e.g., agro-processing) could amplify multiplier effects, but slower trade flows might limit export gains.

Mining & Quarrying (11.0% share, 16.6% growth, 15.4% contribution): Explosive growth from gold (+16.1% to 15,797 kg), coal (+19.1% to 888k tons), and surges in mica (+475.6%), iron ore (+256%), and phosphate (+465%) positions mining as the top growth driver, boosting export revenues (gold alone accounts for ~50% of non-traditional exports) and government royalties. Implications include stronger fiscal space for infrastructure, but risks of Dutch disease—where resource booms crowd out other sectors—and environmental concerns from expanded operations. This could attract FDI but heighten volatility tied to global commodity prices.

Secondary Sector Implications (21.4% of GDP)

Manufacturing (6.8% share, 7.2% growth, 10.4% contribution): Acceleration from 5.8% reflects increased production of consumer and industrial goods, signaling progress in industrialization under Tanzania's FYDP III. This implies job creation in urban areas and reduced import dependence, with linkages to agriculture (e.g., food processing) and mining (e.g., metal fabrication). However, energy-intensive industries benefit from electricity growth, potentially lowering costs and enhancing competitiveness.

Electricity (0.2% share, 19.0% growth): The massive jump, driven by the Julius Nyerere Hydropower Dam's commissioning, enhances energy security, reduces reliance on costly imports, and supports industrial expansion. Implications include lower electricity tariffs (potentially curbing inflation), improved manufacturing productivity, and export potential via regional grids, but risks from hydrological variability due to climate change.

Water Supply (0.4% share, 4.2% growth): Tied to production rising to 98.9 million m³, this suggests better urban access, aiding health and sanitation. Broader implications: Supports agriculture and manufacturing, but urban-rural disparities could persist without expanded infrastructure.

Construction (12.7% share, 4.3% growth, 11.3% contribution): Slowdown from 6.4% amid cement and iron-steel output growth indicates a maturing infrastructure cycle (e.g., SGR rail). This implies sustained employment in labor-intensive projects but potential fiscal pressure if public spending tapers. Positive: Multiplier effects on transport and real estate.

Tertiary Sector Implications (37.9% of GDP)

Trade & Repair (8.4% share, 3.5% growth): Decline from 5.3% due to moderate imports and agriculture flows suggests subdued consumer demand or supply chain issues, potentially signaling inflationary pressures or weaker external trade amid global tensions. Implications: Slower retail growth could limit informal sector jobs, but ties to agriculture imply recovery with better harvests.

Transport & Storage (7.2% share, 6.5% growth, 9.3% contribution): Driven by cargo and SGR services, this enhances logistics efficiency, reducing costs for exports and imports. Implications: Boosts trade competitiveness, tourism, and regional integration (EAC), with potential for more FDI in ports/rail.

Financial & Insurance (3.5% share, 15.4% growth, 12.0% contribution): Supported by deposits (+18.5% to TZS 43.0 trillion) and loans (+14.7% to TZS 39.1 trillion), this reflects deepening financial inclusion via mobile money and credit expansion. Implications: Stimulates investment across sectors, but rapid credit growth risks non-performing loans if economic shocks hit.

Information & Communication (1.6% share, 7.8% growth): Sharp slowdown from 14.6% despite mobile/internet expansion implies saturation or competition. Implications: Digital economy growth supports fintech and e-commerce, enhancing productivity, but slower pace could hinder tech-driven diversification.

Education (2.2% share, 8.6% growth): Rising enrollments signal human capital investment, implying long-term productivity gains and reduced inequality.

Key Insights and Broader Risks

Top contributors (mining 15.4%, agriculture 14.2%, finance 12.0%) highlight a balanced yet resource-heavy growth model, with strongest rates in electricity (19.0%) and mining (16.6%) pointing to infrastructure-led momentum. Weaker areas like construction (4.3%), trade (3.5%), and ICT (7.8%) suggest external vulnerabilities. Overall, this fosters employment (especially in services/mining), fiscal revenues, and poverty alleviation, but calls for diversification to mitigate climate risks, global trade disruptions, and debt sustainability. IMF recommendations emphasize reforms for private sector growth to sustain 6%+ annual expansion.

Analyzing Government Policies for a Thriving Digital Economy

TICGL’s Economic Research Centre has published a new study authored by Amran Bhuzohera, Dr. Bravious Felix Kahyoza PhD, FMVA, CP3P (braviouskahyoza5@gmail.com), and Dr. Jasinta Msamula Kahyoza PhD, FMVA, CP3P (jmsamula@mzumbe.ac.tz), which investigates the intersection between Artificial Intelligence (AI), youth employment, and government policy frameworks within Tanzania’s evolving digital economy.

The study provides critical insights into how AI-driven transformation can be aligned with national employment strategies and policy reforms to harness the potential of Tanzania’s young workforce. With their combined expertise in economic modeling, innovation policy, and strategic development, the authors contribute to shaping a forward-looking dialogue on technology, inclusion, and sustainable economic growth.

Tanzania’s youth population—over 60% under the age of 25—represents both a demographic dividend and a pressing employment challenge. While official youth unemployment stood at 3.35% in 2024, underemployment and informality remain widespread. The research highlights that the rise of AI, if managed inclusively, could transform this landscape by creating millions of digital jobs and expanding opportunities for self-employment, freelancing, and innovation-driven entrepreneurship.

Key Insights

• AI as a job creator, not just a disruptor: Globally, AI may replace 85 million jobs but create 97 million new ones by 2025, largely in data science, creative design, and tech services. Tanzania’s youth could benefit through AI-driven platforms, digital freelancing, and agritech innovations.
• Digital economy transformation: The Tanzania Digital Economy Strategic Framework (2024–2034) and Youth Development Policy (2024) are pivotal in promoting youth digital skills, while the AI Readiness Assessment Report (2025) recognizes AI’s potential in sectors like agriculture, healthcare, and education.
• Regional and global opportunities: Africa’s digital economy could create 230 million digital jobs by 2030, with Tanzania expected to generate 5 million digital employment opportunities through AI-enabled services and start-ups.
• Private sector collaboration: Programs like the Digital Opportunity Trust (DOT) and PPP-based innovation hubs demonstrate the private sector’s role in providing digital literacy and start-up incubation for youth employment.
• Policy gap: Only 45% of Tanzanian youth have internet access, highlighting a critical need for digital inclusion policies to ensure equitable participation in the AI economy.

Policy Recommendations

To maximize AI’s potential for inclusive growth, the paper proposes the following measures:

• AI Upskilling Program: Integrate AI and digital literacy into school and vocational curricula, targeting 1 million youth by 2028 through partnerships with global e-learning platforms.
• Incentives for AI Entrepreneurship: Offer tax breaks, innovation grants, and incubation funding for 500,000 youth-led AI start-ups in agritech, fintech, and creative industries.
• PPP-Driven Digital Infrastructure: Strengthen the Digital Tanzania project to deliver affordable connectivity and AI tools, especially in rural areas, enabling 2 million indirect digital jobs.
• Ethical and Inclusive AI Governance: Adopt guidelines from the AI Readiness Report (2025) to ensure transparent, bias-free AI development across sectors.

Conclusion

AI presents a transformative opportunity to redefine youth employment and self-employment in Tanzania’s digital economy. When supported by inclusive policies, public-private partnerships, and nationwide digital literacy, AI could shift the narrative from unemployment to innovation. By 2030, Tanzania stands to achieve a digital dividend through job creation, improved productivity, and sustainable youth empowerment — positioning the country as a regional leader in AI-driven development.

📘 Read the Full Discussion Paper:
“Youth Employment in the Age of AI: Analyzing Government Policies for a Thriving Digital Economy”
Authored by Amran Bhuzohera, Dr. Bravious Felix Kahyoza PhD, FMVA, CP3P, and Dr. Jasinta Msamula Kahyoza PhD, FMVA, CP3P
Published by TICGL | Economic Research Centre
🌐 www.ticgl.com

In the Tanzania's Monthly Economic Review for August 2025, inflation remained stable at 3.3% in July 2025, within the 3-5% target, while national debt exhibited modest growth (1% increase to USD 46,586.6 million in June 2025), driven by balanced inflows and prudent management. These factors have collectively supported the stability and recent appreciation of the Tanzanian Shilling (TZS) against the US Dollar (USD). Stable inflation preserves purchasing power and enables accommodative monetary policy, reducing depreciation pressures, while controlled debt enhances fiscal credibility, attracting foreign inflows and bolstering reserves (USD 6,194.4 million in July 2025, covering 5 months of imports). This has contributed to a narrowed current account deficit (USD 2,079.2 million in the year to July 2025, down 23.4%), easing external vulnerabilities. However, broader pressures like import demands and global USD strength have led to a net annual depreciation, though recent data shows stabilization and mild appreciation by September 2025 (around TZS 2,488 per USD).

Key Impacts on TZS Value

1. Stable Inflation's Positive Influence

• Low and predictable inflation (3.3%) anchors expectations, supporting the TZS by maintaining relative purchasing power parity with trading partners. This stability allowed the Bank of Tanzania to lower the Central Bank Rate (CBR) to 5.75% in July 2025, stimulating credit growth (15.9%) and economic activity without fueling inflationary pressures that could erode currency value.
• Decelerating energy inflation (1.0% from 2.1%) and core inflation (1.9%), amid global commodity moderation (e.g., crude oil at USD 69.2 per barrel), reduced import costs, alleviating downward pressure on the TZS. This contributed to the shilling's monthly depreciation slowing to 0.11% annually in July 2025 (from 0.21% in June).
• Overall, stable inflation has fostered investor confidence, with foreign exchange reserves rising to support interventions (e.g., USD 17.5 million sold in July 2025), helping stabilize the TZS at an average of TZS 2,666.79 per USD in July.

2. Debt Developments' Stabilizing Role

• The modest debt increase (external: +0.1% to USD 32,955.5 million; domestic: -0.4% to TZS 35,351.4 billion) reflects fiscal discipline, with disbursements (USD 868.4 million) outpacing services (USD 234.4 million). This sustainability reduces risk premiums, making Tanzania more attractive for foreign investment and remittances, which bolster TZS inflows.
• A shift toward domestic financing (79.7% Treasury bonds) and concessional multilateral debt (58.7% of external) minimizes forex exposure, mitigating depreciation from debt servicing. Strong revenue (TZS 3,753.4 billion in June, +5.1% above target) further supports this, narrowing borrowing needs.
• Combined with export growth (goods and services up 14.4% to USD 16,655 million), stable debt has narrowed the current account deficit, reducing TZS sell-off pressures. However, high external debt (70.7% of total) remains a vulnerability if global rates rise.

3. Net Impact on TZS Value

• The TZS depreciated annually by about 9.6% through mid-2025 due to import surges and debt-financed infrastructure, but inflation and debt stability have driven recent appreciation (e.g., from TZS 2,666.79/USD in July to ~TZS 2,488/USD by September 6, 2025). This reflects improved external balances and policy credibility.
• Projections indicate moderate depreciation (3.7% for 2025 overall), but sustained low inflation could further strengthen the TZS if debt remains manageable. Risks include global uncertainties (e.g., trade policy index spikes) potentially reversing gains.

Key Figures

As of June/July 2025, Tanzania’s national debt reached approximately TZS 115.0 trillion, up 1% from the previous month, with external debt (TZS 81.0 trillion, 70.7%) dominating over domestic debt (TZS 34.0 trillion, 29.3%). The bulk of external borrowing is owed by the central government (85.4%), largely to multilateral institutions (58.7%) and commercial lenders (34.8%), while domestic debt remains concentrated in Treasury bonds (79.7%) held mainly by commercial banks and pension funds. Despite rising obligations, debt levels remain manageable, supported by strong tax performance and a June fiscal surplus. On the currency front, the Tanzania Shilling averaged TZS 2,666.79 per USD in July 2025, a 1.3% monthly depreciation but only a 0.11% annual decline, underscoring relative stability. This resilience is underpinned by robust foreign reserves (USD 6.2 billion, equivalent to ~TZS 16.5 trillion, covering five months of imports), strong export inflows (gold and tourism), and timely BoT interventions, which together cushion external risks while sustaining investor confidence.

1. Tanzania National Debt (June/July 2025)

a) Total National Debt

• USD 46,586.6 million at the end of June 2025.
• Slight increase (+1%) from the previous month.
• Composition:
  • External Debt: USD 32,955.5m (70.7%)
  • Domestic Debt: TZS 35,351.4 billion (~USD 13,631m) (29.3%)

b) External Debt

• Stock: USD 32,955.5m (June 2025).
• By Borrower:
  • Central Government: USD 28,133.7m (85.4%)
  • Private Sector: USD 4,820.6m (14.6%)
  • Public Corporations: USD 1.3m (~0.0%)
• By Creditor:
  • Multilateral institutions: USD 19,328.5m (58.7%)
  • Commercial lenders: USD 11,458.3m (34.8%)
  • Bilateral lenders: USD 1,525.5m (4.6%)
  • Export credit: USD 643.3m (2.0%)

c) Domestic Debt

• Stock: TZS 35,351.4 billion (July 2025).
• By Instrument:
  • Treasury Bonds: 79.7%
  • Treasury Bills: 5.7%
  • Government Stocks: 0.4%
  • Non-securitized debt (overdrafts, others): 14.2%
• By Creditor:
  • Commercial Banks: 28.8%
  • Pension Funds: 26.4%
  • Bank of Tanzania: 19.2%
  • Other creditors (public institutions, companies, individuals): 18.3%
  • Insurance Companies: 5.1%
  • BoT Special Funds: 2.2%

Table: Tanzania National Debt (June/July 2025)

*Percentages within external debt.

2. Tanzania Shilling (TZS) – Stability and Performance

• Exchange Rate (July 2025):
  • Averaged TZS 2,666.79 per USD, compared to TZS 2,631.56 per USD in June 2025.
  • This is a monthly depreciation of about 1.3%.
• Annual Movement:
  • Shilling depreciated at an annual rate of 0.11%, compared to 0.21% in June 2025.
  • Shows relative stability year-on-year.
• Reserves:
  • FX reserves stood at USD 6,194.4m at end-July 2025, enough to cover 5 months of imports, meeting EAC and SADC benchmarks.
• Drivers of Stability:
  • Export inflows (gold, cashew, cereals, tourism).
  • BoT interventions (USD 17.5m sold in July 2025).
  • High reserves acting as a buffer against shocks.

Economic Implications of Tanzania’s National Debt and Shilling Performance – June/July 2025

1. Tanzania National Debt (June/July 2025)

• Total National Debt: Reached USD 46,586.6 million by June 2025, up 1% from the previous month, with 70.7% (USD 32,955.5 million) as external debt and 29.3% (TZS 35,351.4 billion, ~USD 13,631 million) as domestic debt.
• External Debt:
  • Stock at USD 32,955.5 million, with 85.4% owed by the central government (USD 28,133.7 million), 14.6% by the private sector (USD 4,820.6 million), and a negligible 0.0% by public corporations (USD 1.3 million).
  • Creditors include multilateral institutions (58.7%, USD 19,328.5 million), commercial lenders (34.8%, USD 11,458.3 million), bilateral lenders (4.6%, USD 1,525.5 million), and export credit (2.0%, USD 643.3 million).
• Domestic Debt: TZS 35,351.4 billion, with 79.7% in Treasury bonds, 5.7% in Treasury bills, 0.4% in government stocks, and 14.2% in non-securitized debt (e.g., overdrafts). Creditors are led by commercial banks (28.8%), pension funds (26.4%), Bank of Tanzania (19.2%), other creditors (18.3%), insurance companies (5.1%), and BoT special funds (2.2%).
• Economic Implications:
  • The 1% debt increase reflects ongoing financing needs, with external debt’s 70.7% share (USD 32,955.5 million) highlighting reliance on foreign capital, manageable at ~40% of GDP per IMF estimates. Multilateral loans (58.7%) offer concessional terms, reducing interest burdens, but commercial debt’s 34.8% share (USD 11,458.3 million) exposes Tanzania to market volatility and higher costs (e.g., global rates at 2.8% per IMF 2025 forecast).
  • Domestic debt’s stability (TZS 35,351.4 billion, down 0.4% from June) and bond dominance (79.7%) indicate strong local absorption by banks and pension funds (55.2% combined), supporting fiscal operations (TZS 403.4 billion surplus in June). However, the 14.2% non-securitized portion (overdrafts) suggests short-term liquidity pressures.
  • Risks include a moderate debt distress risk (World Bank), with 68.9% of external debt USD-denominated, amplifying costs if the shilling weakens further. Opportunities lie in leveraging multilateral support for infrastructure (e.g., SGR, USD 7.6 billion) to boost 6% GDP growth.

2. Tanzania Shilling (TZS) – Stability and Performance

• Exchange Rate: Averaged TZS 2,666.79 per USD in July 2025, a 1.3% monthly depreciation from TZS 2,631.56 in June, but an annual depreciation of just 0.11% (down from 0.21% in June), indicating year-on-year stability.
• Reserves: Foreign exchange reserves hit USD 6,194.4 million, covering 5 months of imports, exceeding EAC/SADC benchmarks (4 months).
• Drivers: Stability is fueled by export inflows (gold USD 3,977.6 million, tourism USD 3,871.9 million), BoT interventions (USD 17.5 million sold in July), and robust reserves.
• Economic Meaning:
  • The 1.3% monthly depreciation reflects seasonal import pressures (USD 17,603.1 million) and USD demand for debt servicing (USD 234.4 million in June), yet the 0.11% annual rate underscores stability, supported by a 17.7% export rise (gold +21.9%, cereals tripled). Reserves (USD 6,194.4 million) provide a strong buffer, enhancing investor confidence (Fitch B+ rating).
  • BoT’s active management (e.g., USD 62.3 million sold in March) and export growth (USD 9,479.4 million) counter depreciation, aligning with a 6% GDP projection. However, 70% USD-denominated external debt poses a risk if depreciation accelerates, potentially raising debt servicing costs by TZS 1-2 trillion annually.
  • Compared to 2023’s 8% depreciation, the current stability (0.11% annual) reflects policy success (CBR 5.75%), though import reliance and global rate hikes could challenge this if export growth slows.

Summary of Broader Economic Significance

• Debt Dynamics: The USD 46,586.6 million debt, with a balanced external-domestic mix, supports growth (6%) but requires cautious management to avoid distress, especially with commercial debt exposure (34.8%).
• Shilling Resilience: The shilling’s stability (0.11% annual depreciation) and reserves (5 months cover) bolster trade and investment, though USD debt sensitivity remains a vulnerability.
• Outlook: Sustained export growth and reserve strength could mitigate risks, but fiscal discipline and import control are key to maintaining this trajectory amid global uncertainties (e.g., oil at USD 69.2/barrel).