Receipts Up 4.6% to USD 6.97bn, Payments Rise 18.6% (YE Sept 2025)

Tanzania’s external sector strengthened in the year ending September 2025, supported by solid performance in services—particularly tourism and transport—which pushed total service receipts to USD 6,973.9 million (+4.6%). Travel services dominated, rising to approximately USD 3,903.1 million on the back of an 11.9% increase in tourist arrivals, while transport receipts expanded to USD 2,535.4 million due to higher regional freight and logistics activity. Other services remained robust, reflecting steady growth in ICT, financial, and professional service demand. However, service payments grew faster at +18.6% to USD 3,089.5 million, driven by increased freight costs associated with expanding goods imports, rising demand for machinery and industrial supplies, and higher business service usage. Despite this, the net services surplus remained strong at USD 3,884.4 million—though slightly lower than the previous year (–4.4%). Overall, the external sector’s services component continues to anchor FX stability, support narrowing current account deficits, and enhance macroeconomic resilience, even as import-service demand signals rising investment intensity and structural growth across the economy.

1. Overview of External Sector Performance

Tanzania’s external sector strengthened in the year ending September 2025, mainly due to improved services performance—especially tourism and transport.

• Service receipts grew to USD 6,973.9 million, up from USD 6,667.1 million in 2024
• Service payments rose to USD 3,089.5 million, up from USD 2,604.2 million in 2024

This resulted in a positive services balance, supporting the narrowing of the current account deficit.

2. Services Export (Receipts) by Category

Total Service Receipts (Year ending September 2025)

Source: Bank of Tanzania calculations

Breakdown by Category:

Key Drivers

• Tourism sector recovery with arrivals reaching 2.3 million visitors (+11.9%)
• Transport services improved due to increased regional freight movement.
• Strong demand for business and communication services.

3. Services Import (Payments)

Total Service Payments (Year ending September 2025)

Source: Bank of Tanzania calculations

Key Drivers of Services Payments

• Higher freight costs linked to increased goods import bill.
• Strong demand for machinery, industrial supplies, and transport equipment.
• Increased financial and business services imports.

4. Current Account Services Summary Table

Source: Services account summary (Table and figures)

Even though receipts increased, payments grew faster, slightly reducing the net services surplus.

5. External Sector Service Components

Implications of External Sector Performance in the Year Ending September 2025

The external sector data for the year ending September 2025, primarily from Section 2.8 (External Sector Performance) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), highlights a services-led strengthening that narrows the current account (CA) deficit to near balance, with goods and services exports at USD 17,094.2 million nearly matching imports at USD 17,728.7 million (deficit of USD 634.5 million, down from prior years). Services receipts rose 4.6% to USD 6,973.9 million (tourism dominant at ~USD 3,903.1 million, +15.8% driven by 2.3 million arrivals, +11.9%), while payments grew faster at +18.6% to USD 3,089.5 million (freight/machinery-led), yielding a net surplus of USD 3,884.4 million (-4.4%). This builds on Q2 2025's CA surplus of USD 1,029 million (up from USD 812 million in Q1), complementing mainland GDP growth (6.3%), shilling appreciation (+9.4% y/y; Section 2.5), and reserves (USD 6,657 million, 5.8 months import cover). Below, I detail implications, focusing on services dynamics and macroeconomic ties.

1. Services Receipts: Tourism and Transport as Resilience Pillars

• +4.6% to USD 6,973.9M (Travel ~USD 3,903.1M, Transport USD 2,535.4M, Others ~USD 2,535.4M): Tourism's 56% share (up from ~50% in 2024) reflects post-recovery surge (arrivals +11.9%, earnings +15.8%), fueled by global demand (IMF 3.2% growth; Section 1.0) and Zanzibar synergies (USD 1,503.9M receipts, +36.4%). Transport growth (+11.1%) ties to regional freight (EAC trade), while "others" (ICT/finance/construction) held steady amid private credit expansion (16.1% y/y).
• Broader Implications:
  • Positive: Bolsters FX inflows (supporting BOT's USD 11M intervention), enhancing reserves and shilling stability (lowering import costs, e.g., energy inflation 3.7%). Drives services contribution to GDP (~15–20%, aligning with financial sector growth), sustaining 6% projection via tourism multipliers (jobs/investment).
  • Risks: Tourism concentration (56%) exposes to shocks (e.g., protectionism; Charts 1.1a/b or pandemics), while transport ties to commodity volatility (oil down but freight up).

2. Services Payments: Rising but Manageable Import Demand

• +18.6% to USD 3,089.5M: Freight (linked to goods imports up 12.5% to USD 10,639.2M) and business/financial services drove growth, reflecting machinery/transport equipment demand for infrastructure (development spend TZS 1,272.9B; Section 2.6) and mining/agri expansion (1.5%/1.8% GDP shares).
• Broader Implications:
  • Positive: Signals productive import use (capital goods for growth), with shilling strength (+9.4%) mitigating pass-through (e.g., fuel prices down). Faster payments growth is offset by receipts, keeping net positive.
  • Risks: If unchecked (e.g., global oil rebound), could pressure CA (national deficit narrowed but imports +12.5% y/y). Ties to fiscal revenue shortfalls (87.2% target) if import duties lag.

3. Net Services Balance and Overall Trade: Narrowing Deficits for Stability

• Net Surplus USD 3,884.4M (-4.4% from USD 4,062.9M): Despite payments outpacing receipts, surplus covers goods deficit (USD 1,029M trade surplus in Q2, but annual goods imports > exports), yielding improved CA (deficit ~1.5% GDP vs. 2.5% 2024). Goods/services balance near parity supports external sustainability.
• Broader Implications:
  • Positive: Reinforces reserves (5.8 months cover), debt service (9.8% exports; Section 2.7), and monetary policy (IBCM 6.45%). Complements Zanzibar's USD 836.6M CA surplus (+34.7%), enhancing union-wide resilience and EAC convergence.
  • Risks: Net erosion (-4.4%) from payment growth signals vulnerability if tourism slows (e.g., unemployment pressures; Section 1.0). Global trade uncertainty (elevated indices) could amplify goods imbalances.

4. Macroeconomic and Policy Context from the Review

• Synergies: Services strength fuels M3 growth (20.8% y/y;), low inflation (3.4%; via import relief), and fiscal space (deficit TZS 618.5B; Section 2.6). Tourism/transport ties to output drivers (construction/mining; Section 2.1) and Zanzibar (arrivals +28.2%).
• Outlook: Projections: CA deficit <2% GDP, sustained by 6% growth and commodity stability (gold up). Policy focus: Diversify services (e.g., ICT) to buffer risks.

In summary, the year-ending September 2025 external sector implies a services-anchored turnaround, with tourism/transport fortifying FX stability and growth amid narrowing deficits. This configuration—echoing the Review's prudent policy emphasis—bolsters inflation control and reserves, though diversifying beyond tourism is key to countering global volatilities into 2026.

Tanzania’s external sector strengthened in the year ending July 2025, with the current account deficit narrowing by 23.4% to USD 2,079.2 million, compared to USD 2,713.5 million in 2024. The improvement was driven by robust growth in services exports, which rose 8% to USD 7,175.6 million, led by tourism (USD 3,871.9m, +3.8%) and transport services (USD 2,631.9m, +13.8%). At the same time, services imports surged 21.2% to USD 2,925.1 million, largely due to higher transport costs (USD 1,458.1m, +12.7%) and a sharp rise in other services payments (USD 840.2m, +106.9%), even as travel-related payments fell. This combination reflects Tanzania’s resilience in boosting exports while managing rising import pressures, ultimately reducing external imbalances and supporting foreign reserve stability at over USD 6.1 billion.

1. Current Account Balance

• Deficit: USD 2,079.2 million (year ending July 2025).
• Improved compared to USD 2,713.5 million in the same period of 2024 (23.4% narrowing).
• Improvement driven by higher exports of goods & services, outpacing import growth.

2. Exports – Services Receipts

• Total services receipts: USD 7,175.6 million (up from USD 6,643.8 million in July 2024, +8%).
• Breakdown by category (year ending July 2025):
  • Travel (Tourism): USD 3,871.9m (up from 3,730.2m in 2024, +3.8%).
  • Transport: USD 2,631.9m (up from 2,312.9m in 2024, +13.8%).
  • Other services (construction, insurance, ICT, business, etc.): USD 671.8m (up from 600.7m in 2024, +11.8%).

3. Imports – Services Payments

• Total services payments: USD 2,925.1 million (up from USD 2,414.5 million in July 2024, +21.2%).
• Breakdown by category (year ending July 2025):
  • Transport: USD 1,458.1m (up from 1,293.5m in 2024).
  • Travel: USD 626.7m (down slightly from 714.7m in 2024).
  • Other services: USD 840.2m (up from 406.3m in 2024).

Table 1: Current Account Balance (USD Million)

Table 2: Services Receipts by Category (Exports, USD Million)

Table 3: Services Payments by Category (Imports, USD Million)

Economic Implications of External Sector Performance – Year Ending July 2025

1. Current Account Balance

• Deficit and Improvement: The current account recorded a deficit of USD 2,079.2 million, a 23.4% narrowing from USD 2,713.5 million in July 2024, driven by higher exports of goods and services outpacing import growth.
• Economic Meaning: The reduced deficit reflects a strengthening external position, supported by robust export performance (e.g., gold at USD 3,977.6 million, tourism at USD 3,871.9 million) and controlled import growth. This aligns with Tanzania’s 6% GDP growth projection, enhancing foreign exchange reserves (USD 6,194.4 million), which cover 4.8 months of imports—above the national benchmark. The improvement reduces pressure on the TZS (stable at 2,666.79/USD), supporting monetary easing (CBR 5.75%). However, the persistent deficit (3.8% of GDP per IMF estimates) indicates ongoing reliance on external financing (external debt at USD 32,955.5 million), necessitating sustained export growth to achieve balance.

2. Exports – Services Receipts

• Total Growth: Services receipts rose to USD 7,175.6 million, an 8% increase from USD 6,643.8 million in July 2024.
• Breakdown:
  • Travel (Tourism): USD 3,871.9 million (+3.8% from USD 3,730.2 million), accounting for 54% of receipts.
  • Transport: USD 2,631.9 million (+13.8% from USD 2,312.9 million).
  • Other Services (construction, insurance, ICT, business): USD 671.8 million (+11.8% from USD 600.7 million).
• Economic Significance: The 54% tourism share underscores its role as a foreign exchange anchor, bolstered by 2,193,322 arrivals in June 2025 (up 10% year-on-year), reflecting global travel recovery. The 13.8% transport growth signals improved logistics (e.g., Dar es Salaam port upgrades), supporting trade (exports at USD 9,479.4 million). Other services’ 11.8% rise indicates diversification into ICT and construction, aligning with infrastructure investments (28.6% of external debt use). This growth enhances reserves and reduces current account pressure, though tourism’s dominance (54%) exposes the economy to global travel risks (e.g., pandemics).

3. Imports – Services Payments

• Total Increase: Services payments surged to USD 2,925.1 million, a 21.2% rise from USD 2,414.5 million in July 2024.
• Breakdown:
  • Transport: USD 1,458.1 million (+12.7% from USD 1,293.5 million).
  • Travel: USD 626.7 million (–12.3% from USD 714.7 million).
  • Other Services: USD 840.2 million (+106.9% from USD 406.3 million).
• Economic Implications: The 21.2% increase reflects heightened import activity, with transport growth (12.7%) tied to freight costs for goods imports (USD 17,603.1 million). The 106.9% jump in other services (e.g., business, insurance) suggests rising costs for industrial inputs and operations, linked to manufacturing and construction booms (e.g., Julius Nyerere Hydropower Plant). The 12.3% travel drop may indicate lower outbound tourism or business travel, offsetting some pressure. This rapid rise, outpacing export growth (8%), strains the current account, though reserves and export inflows mitigate immediate risks.

Summary of Broader Economic Significance

• External Resilience: The 23.4% deficit narrowing and 8% export growth signal a robust external sector, supporting Tanzania’s 6% growth trajectory and reserve adequacy (4.8 months). Tourism (54%) and transport (37%) drive receipts, aligning with Vision 2050 goals.
• Trade Dynamics: Export outperformance over imports strengthens the TZS and reduces financing needs, but the 21.2% import surge (especially other services) highlights import dependency, a challenge noted by the World Bank for structural transformation.
• Risks and Opportunities: Tourism reliance (54%) and import cost spikes (106.9% in other services) pose vulnerabilities to global shocks (e.g., oil at USD 69.2/barrel). However, reserve growth (USD 6,194.4 million) and fiscal surplus (TZS 403.4 billion) provide buffers. Compared to 2024’s 4.2% GDP deficit projection, the 3.8% estimate reflects progress, outperforming peers like Uganda (5% deficit).
• Future Outlook: Sustained tourism growth (3.8%) and logistics expansion (13.8%) could further narrow the deficit, but managing import costs (21.2%) and diversifying exports beyond services are critical for long-term stability.