A comprehensive examination of Zanzibar's economic performance through March 2026 — covering headline inflation trends, government revenue and expenditure dynamics, tourism-powered export growth, clove price recovery, and the archipelago's strengthening current account surplus.
📅 Data: Year ending March 2026🏦 Source: Bank of Tanzania✍️ TICGL Economic Research🏝️ Section 3.0 — Zanzibar
Current Account Surplus
USD 903.6M
▲ +27.9% year-on-year
Tourist Arrivals (Year Mar-26)
942,639
▲ +22.8% vs prior year
Headline Inflation (Mar-26)
4.9%
▼ from 5.1% (Mar-25)
Clove Export Unit Price
$6,507/t
▲ +47.5% year-on-year
Headline Inflation
4.9%
▼ from 5.1% (Mar-25)
Food Inflation
10.1%
▲ Rising concern
Non-Food Inflation
0.9%
▼ from 4.1% (Mar-25)
Govt Revenue (Mar-26)
TZS 225.3B
▲ +1.4% above target
Total Exports (Year)
USD 1,633M
▲ +24.8% y/y
Services Share of Exports
95%
Tourism-dominant economy
Fiscal Deficit (Mar-26)
TZS 208.7B
Domestic-financed
📊
3.1 Inflation Developments
Headline, food, and non-food price dynamics in Zanzibar — March 2025 to March 2026
Headline Inflation Eases to 4.9% Mar 2026
Zanzibar's annual headline inflation declined to 4.9% in March 2026, from 5.1% recorded in the corresponding month of 2025, driven primarily by a significant fall in non-food price pressures.
The month-on-month headline rate edged up marginally to 0.3% in March 2026, compared to 0.2% in March 2025. The annual decrease was mainly attributable to a sharp decline in non-food inflation, which fell to 0.9% from 4.1% a year earlier, reflecting substantially lower prices in the housing, water, electricity, gas, and other fuels category.
Headline Inflation
4.9%
Annual, March 2026
▼ from 5.1% (Mar-25)
Food Inflation
10.1%
Annual, March 2026
▲ from 6.4% (Mar-25)
Non-Food Inflation
0.9%
Annual, March 2026
▼ from 4.1% (Mar-25)
MoM Headline Change
0.3%
Month-on-month, Mar-26
▲ from 0.2% (Mar-25)
⚠️ Food Inflation Alert: While headline inflation has eased, food inflation accelerated sharply to 10.1% in March 2026, from 6.4% in March 2025 and 9.3% in February 2026. Zanzibar's food basket — where food accounts for 41.9% of the consumption basket — is particularly exposed to supply chain disruptions from the Middle East crisis, higher fertiliser costs, and import price pressures on staple goods. This creates a disproportionate burden on low-income households in the archipelago.
Inflation Trend — Headline, Food & Non-Food Mar 2025 – Mar 2026
The divergence between falling non-food inflation and rising food inflation is a defining feature of Zanzibar's price environment in 2026.
Headline Inflation
Food Inflation
Non-Food Inflation
Source: Office of the Chief Government Statistician, Zanzibar; Bank of Tanzania computations.
Inflation by Expenditure Category March 2026
Full breakdown of annual and monthly price changes across all consumer expenditure categories, using July 2022 = 100 base.
Category
Weight (%)
MoM Mar-25
MoM Feb-26
MoM Mar-26
Annual Mar-25
Annual Feb-26
Annual Mar-26
All Items (Headline)
100.0
0.2%
0.5%
0.3%
5.1%
4.8%
4.9%
Food & Non-Alcoholic Beverages 🍽️
41.9
0.0%
0.0%
0.7%
7.0%
9.2%
9.9%
Alcoholic Beverages & Tobacco
0.2
-1.3%
0.0%
0.0%
-0.3%
3.1%
4.4%
Clothing & Footwear
6.3
1.7%
0.3%
0.2%
4.2%
3.1%
1.6%
Housing, Water, Electricity & Fuels 🏠
25.8
0.0%
2.0%
-0.2%
4.9%
-0.2%
-0.4%
Furnishings & Household Equip.
4.8
0.2%
0.2%
-0.4%
3.4%
2.8%
2.3%
Health
1.3
0.0%
0.0%
0.0%
-0.4%
1.4%
1.4%
Transport 🚗
9.1
0.5%
0.4%
-0.1%
1.5%
2.2%
1.7%
Information & Communication
4.2
-0.3%
0.0%
-0.3%
2.8%
-0.1%
-0.2%
Recreation, Sport & Culture
1.1
0.3%
0.0%
-0.2%
3.6%
4.1%
3.6%
Education
1.6
0.0%
0.0%
-0.3%
2.6%
1.9%
1.6%
Restaurants & Accommodation 🏨
1.4
0.0%
0.0%
-0.3%
0.6%
7.1%
6.8%
Insurance & Financial Services
0.5
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Personal Care & Misc. Goods
1.7
0.5%
0.6%
0.3%
3.6%
2.2%
2.0%
Food Sub-total
40.5
0.0%
0.0%
0.8%
6.4%
9.3%
10.1%
Non-Food Sub-total
59.5
0.3%
0.9%
-0.2%
4.1%
1.4%
0.9%
Source: Office of the Chief Government Statistician, Zanzibar. Base: July 2022 = 100.
Key Observation: The stark divergence between food inflation (10.1%) and non-food inflation (0.9%) in Zanzibar is structurally significant. The housing/utilities category turned negative (-0.4%) year-on-year, dragging down the non-food index, while restaurants and accommodation — directly linked to tourism activity — recorded a robust 6.8% increase, reflecting pricing power in Zanzibar's booming tourism-driven services sector.
Retail Pump Prices of Petroleum Products TZS per Litre
Zanzibar's fuel prices have remained elevated but relatively stable through early 2026, with the Strait of Hormuz crisis introducing upside risk going forward.
Petrol (TZS/litre)
Diesel (TZS/litre)
Kerosene (TZS/litre)
Source: Office of the Chief Government Statistician, Zanzibar; BOT computations. Chart 3.1.2.
Fuel Price Outlook: The sharp escalation in global crude oil prices — from USD 68/barrel in February 2026 to USD 95.58/barrel in March 2026 — due to the Strait of Hormuz conflict has not yet fully flowed through to Zanzibar's retail pump prices. Upward adjustments in Q2 2026 are likely, which will exert renewed pressure on transport and food inflation through higher distribution costs. Islands such as Zanzibar are particularly vulnerable given their dependence on sea and air freight for supply chains.
🏛️
3.2 Government Budgetary Operations
Revenue performance, expenditure structure, and fiscal balance — March 2026
Government Resources — March 2026 Above Target
Zanzibar's government mobilised total resources of TZS 225.3 billion in March 2026, exceeding the monthly target by 1.4%, supported by strong tax administration and enhanced taxpayer compliance.
Total Resources (Mar-26)
TZS 225.3B
Domestic revenue + grants
▲ +1.4% above target
Domestic Revenue
TZS 189.4B
95.3% of monthly target
◆ Slightly below target
Tax Revenue
TZS 175.7B
+0.4% above target
▲ All categories above target*
* All tax categories performed above target except income tax, which fell slightly short of its monthly estimate.
Revenue by Category — Actuals vs Estimates Mar 2026
Revenue Category
2025 Actuals (TZS B)
2026 Estimates (TZS B)
2026 Actuals (TZS B)
vs Estimate
Tax on Imports
27.7
30.9
32.2
▲ +4.2%
VAT & Excise Duties (Local)
40.0
51.9
56.5
▲ +8.9%
Income Tax
35.0
46.5
41.1
▼ -11.6% (below target)
Other Taxes
32.1
45.6
45.9
▲ +0.7%
Non-Tax Revenue
16.5
13.7
13.7
◆ On target
Grants
2.8
23.5
36.0
▲ +53.2%
Total Resources
154.1
222.1
225.3
▲ +1.4% above target
Source: Ministry of Finance and Planning, Zanzibar. Figures in billions of TZS.
Revenue Composition — March 2026 Actuals
Imports 32.2
VAT 56.5
Income 41.1
Other 45.9
Non-Tax 13.7
Grants 36.0
TZS Billions. Source: Ministry of Finance and Planning, Zanzibar.
Government Expenditure — March 2026 TZS 398B Total
Total government spending reached TZS 398 billion in March 2026, with development expenditure dominating at 61.8% of total spending — a signal of Zanzibar's ambition to scale infrastructure investment, with 83.9% locally financed.
Total Expenditure
TZS 398B
March 2026
▲ Higher than 2025 actuals
Recurrent Expenditure
TZS 152.1B
38.2% of total
◆ Wages + other recurrent
Development Expenditure
TZS 245.9B
61.8% of total
▲ 83.9% locally financed
Expenditure Category
2025 Actuals (TZS B)
2026 Estimates (TZS B)
2026 Actuals (TZS B)
Share of Total
Wages & Salaries
74.2
67.5
67.5
17.0%
Other Recurrent Expenditure
37.9
84.6
84.6
21.2%
Development Expenditure 🏗️
125.0
211.8
245.9
61.8%
Total Expenditure
237.1
364.0
398.0
100%
Source: Ministry of Finance and Planning, Zanzibar. Figures in billions of TZS.
Expenditure Comparison: 2025 Actuals vs 2026 Estimates vs 2026 Actuals
Source: Ministry of Finance and Planning, Zanzibar. All values in billions of TZS.
Fiscal Deficit & Financing: The overall fiscal deficit of TZS 208.7 billion in March 2026 was financed entirely through domestic borrowing. Of particular note is that development expenditure of TZS 245.9 billion exceeded its estimate of TZS 211.8 billion by 16.1%, and 83.9% of development projects were funded domestically — underlining Zanzibar's increasing reliance on internal resource mobilisation for capital investment. While commendable from a self-reliance perspective, sustained domestic borrowing to finance a structural fiscal deficit carries risks for local liquidity and the cost of credit in Zanzibar's financial system.
🌊
3.3 External Sector Performance
Current account, exports, imports, and Zanzibar's tourism-powered trade surplus — Year ending March 2026
Current Account Surplus Grows 27.9% USD 903.6M
Zanzibar's current account surplus expanded significantly to USD 903.6 million in the year ending March 2026, from USD 706.5 million in the corresponding period of 2025 — a growth of 27.9%, primarily driven by booming services receipts from tourism activities.
Current Account Surplus
903.6
USD Millions, Year to Mar-26
▲ +27.9% year-on-year
Total Exports
USD 1,633M
Year ending Mar-26
▲ +24.8% y/y
Total Imports
USD 769M
Year ending Mar-26
▲ +24.4% y/y
Services Share
95%
% of total exports
Tourism dominant
Account Component
Mar-25 (Monthly)
Feb-26 (Monthly)
Mar-26 (Monthly)
Year 2025 (USD M)
Year 2026p (USD M)
% Change
Goods Account (Net)
-43.7
-57.5
-58.5
-484.4
-569.4
▲ Wider deficit +17.5%
— Goods Exports
2.1
7.1
7.8
34.1
81.9
▲ +140%
— Goods Imports (fob)
45.8
64.6
66.3
518.4
651.3
▲ +25.6%
Services Account (Net) 🌴
92.3
134.0
96.7
1,174.5
1,434.0
▲ +22.1%
— Services Receipts
100.2
144.2
108.9
1,274.2
1,551.4
▲ +21.8%
— Services Payments
7.9
10.2
12.2
99.7
117.5
▲ +17.8%
Primary Income (Net)
0.5
1.4
1.1
14.5
34.1
▲ +135%
Secondary Income (Net)
0.1
0.3
0.2
1.8
4.9
▲ +172%
Current Account Balance
49.1
78.1
39.5
706.5
903.6
▲ +27.9%
Source: Tanzania Revenue Authority, banks, and Bank of Tanzania computations. Table 3.3.1. p = provisional data.
Tourism as the Engine: Zanzibar's services account surplus of USD 1,434 million (year to March 2026) is the cornerstone of its external position. Services receipts grew 21.8% — overwhelmingly driven by tourism. With the goods account recording a deficit of USD 569.4 million (imports significantly exceeding goods exports), Zanzibar's economic model is unambiguously tourism-and-services-led. Any disruption to international tourist arrivals — whether from geopolitical events, health crises, or aviation disruptions — would rapidly erode the current account surplus.
Tourism Performance — A Record-Breaking Year 942,639 Arrivals
Zanzibar recorded 942,639 tourist arrivals in the year ending March 2026 — an increase of 22.8% year-on-year — driven by targeted tourism investments, improved connectivity, and Zanzibar's growing profile as a premium Indian Ocean destination.
Tourist Arrivals
942,639
Year ending March 2026
▲ +22.8% year-on-year
Travel Receipts
USD 1,551M
Services account, Year to Mar-26
▲ +21.8% y/y
Services % of Exports
95%
Tourism dominant export economy
◆ Structural characteristic
Tourist Arrivals Trend (Thousands)
Estimated arrivals based on BOT MER data and OCGS Zanzibar records. Year to March 2026 figure: 942,639 (confirmed).
Exports of Goods — Cloves & Non-Traditional Exports Year Ending Mar 2026
Zanzibar's goods export performance was exceptional in the year to March 2026, driven primarily by a dramatic recovery in clove exports — both in volume and, crucially, in price, which surged 47.5% year-on-year.
🌿 Clove Export Value
USD 37.3M
Year ending Mar-26 (vs USD 3.9M in 2025)
Clove Unit Price
$6,507/t
USD per tonne, Year to Mar-26
▲ +47.5% y/y (from $4,413)
Clove Volume Exported
5,700 t
Tonnes, Year to Mar-26
▲ vs 900 tonnes (2025)
Export Category
Unit
Mar-25 (Monthly)
Feb-26 (Monthly)
Mar-26 (Monthly)
Year 2025 (USD '000)
Year 2026p (USD '000)
% Change
TRADITIONAL EXPORTS
Cloves — Value
USD '000
129.4
4,806.2
5,127.0
3,888.8
37,319.9
+859% (cyclical)
Cloves — Volume
'000 Tonnes
0.1
0.7
0.7
0.9
5.7
+533%
Cloves — Unit Price
USD/tonne
3,486
6,860
6,845
4,413
6,507
▲ +47.5%
NON-TRADITIONAL EXPORTS
Seaweeds — Value
USD '000
293.8
52.6
21.3
3,748.8
4,173.4
+11.3%
Seaweeds — Volume
'000 Tonnes
0.5
0.1
0.0
6.7
7.5
+12.1%
Manufactured Goods
USD '000
1,182.6
841.6
925.2
14,005.8
20,649.5
▲ +47.4%
Fish & Fish Products
USD '000
57.6
65.3
71.9
1,754.4
1,856.0
+5.8%
Other Exports
USD '000
388.7
1,325.9
1,663.2
10,667.4
17,886.9
▲ +67.7%
Sub-total (Non-Traditional)
USD '000
1,922.7
2,285.3
2,681.6
30,176.4
44,565.8
▲ +47.7%
Grand Total (All Goods)
USD '000
2,052.1
7,091.5
7,808.6
34,065.2
81,885.7
▲ +140%
Source: Tanzania Revenue Authority and Bank of Tanzania computations, Table 3.3.2.
Clove Cycle Explained: Zanzibar's clove export value surged from USD 3.9 million (year to March 2025) to USD 37.3 million (year to March 2026) — a more than 9× increase — reflecting a rare alignment of both a cyclical volume recovery (5,700 tonnes vs 900 tonnes) and historically high prices. Clove trees alternate between heavy-bearing and light-bearing years (biennial bearing), and 2025/26 falls in a heavy-bearing cycle. The unit price of USD 6,507/tonne (+47.5% y/y) reflects global supply tightness and strong demand from food and pharmaceutical industries. This windfall is significant for rural incomes in Zanzibar but is inherently cyclical — not structural — and should not be extrapolated as a permanent revenue stream.
Imports of Goods — Growth Driven by Capital Investment Year to Mar 2026
Total goods imports grew 25.6% to USD 651.3 million in the year to March 2026, with capital goods imports more than doubling — a positive indicator of accelerating domestic investment in Zanzibar's infrastructure and productive capacity.
Total Goods Imports
USD 651M
Year ending Mar-26 (fob)
▲ +25.6% y/y
Capital Goods Imports
USD 150M
vs USD 63.1M (2025)
▲ +138%! Strong investment
Fuel & Lubricants
USD 111M
vs USD 162.7M (2025)
▼ -32.0% (price moderation)
Import Structure by Category — Year to March 2026
🏗️ Capital Goods
USD 150M
🏭 Industrial Supplies
USD 182M
⛽ Fuel & Lubricants
USD 111M
🛒 Consumer Goods
USD 97M
🔧 Parts & Accessories
USD 30M
🌾 Food & Beverages (Industrial)
USD 67M
Scale proportional to USD 651M total. Source: Bank of Tanzania, Table 3.3.3.
Import Category
Mar-25 (Monthly)
Feb-26 (Monthly)
Mar-26 (Monthly)
Year 2025 (USD M)
Year 2026p (USD M)
% Change
Capital Goods 🏗️
2.7
19.5
22.6
63.1
150.3
▲ +138%
— Machinery & Mechanical Appliances
0.7
5.3
5.6
23.3
46.6
+99.6%
— Industrial Transport Equipment
0.8
8.0
10.3
20.8
51.9
+149.5%
Intermediate Goods
32.8
35.7
34.9
386.5
404.0
+4.5%
— Industrial Supplies
6.7
16.7
17.9
113.7
181.9
+60.0%
— Fuel & Lubricants ⛽
16.8
10.7
9.6
162.7
110.6
▼ -32.0%
Consumer Goods
5.0
9.4
8.8
68.9
96.9
+40.7%
Total Imports (fob)
40.4
64.6
66.3
518.4
651.3
▲ +25.6%
Source: Tanzania Revenue Authority and Bank of Tanzania computations, Table 3.3.3. Values in USD millions.
Investment Signal: Capital goods imports surging by +138% to USD 150.3 million — led by industrial transport equipment (+149.5%) and machinery (+99.6%) — is a strong proxy for accelerating private and public investment in Zanzibar's physical infrastructure. This is consistent with the Government's elevated development expenditure (TZS 245.9 billion in March 2026 alone). The simultaneous decline in fuel imports (-32.0% to USD 110.6 million) partly reflects the oil price moderation that characterised mid-2025, before the Strait of Hormuz crisis reversed this trend in March 2026.
Key external sector metrics across three consecutive periods to illustrate Zanzibar's improving external position.
Indicator
Year 2024 (USD M)
Year 2025 (USD M)
Year 2026p (USD M)
2025→2026
Exports of Goods & Services
1,308.3
1,308.3
1,633.3
▲ +24.8%
— Goods Exports
—
34.1
81.9
▲ +140%
— Services Receipts (Tourism)
—
1,274.2
1,551.4
▲ +21.8%
Imports of Goods & Services
618.1
618.1
768.7
▲ +24.4%
— Goods Imports (fob)
—
518.4
651.3
▲ +25.6%
Goods & Services Balance
690.1
690.1
864.6
▲ +25.3%
Primary Income (Net)
—
14.5
34.1
▲ +135%
Secondary Income (Net)
—
1.8
4.9
▲ +172%
Current Account Surplus
—
706.5
903.6
▲ +27.9%
Tourist Arrivals
—
~767,000
942,639
▲ +22.8%
Source: Tanzania Revenue Authority, banks, and Bank of Tanzania computations. Tables 3.3.1–3.3.3.
🔍
TICGL Synthesis: Zanzibar's Economic Outlook
Key strengths, risks, and forward-looking signals for investors and policymakers
Strengths, Risks & Watch Points — 2026
✅ Structural Strengths
Tourism momentum
Very High
Current account surplus
Strong
Capital investment growth
High
Tax revenue collection
Good
Clove price recovery
Exceptional
⚠️ Risks & Watch Points
Food inflation (10.1%)
High Risk
Tourism concentration risk
Very High
Fiscal deficit (domestic-financed)
Moderate
Oil price pass-through risk
Rising
Clove revenue cyclicality
Structural
TICGL Forward View: Zanzibar enters Q2 2026 in its strongest external position in years, with a current account surplus of USD 903.6 million, record tourist arrivals approaching one million, and capital goods imports surging — all signalling a confident, investment-led economic trajectory. The archipelago's near-total dependence on tourism (95% of exports) remains its defining structural vulnerability. The acceleration of food inflation to 10.1% — against a backdrop of global supply chain disruptions from the Strait of Hormuz crisis — represents the most immediate policy concern, particularly given food's 41.9% weight in the consumer basket and its disproportionate impact on lower-income residents. Near-term, oil price pass-through from the Middle East crisis, when it materialises in retail pump prices, will add further pressure. Policymakers should prioritise targeted food security measures and accelerate the diversification of Zanzibar's export base beyond tourism and cloves to build structural resilience.
Data Sources & Attribution
All data is sourced from the Bank of Tanzania Monthly Economic Review, April 2026 (Section 3.0: Economic Performance in Zanzibar, covering data through March 2026). Tables and sections referenced: Table 3.1.1 (Inflation Developments), Chart 3.1.1 (Annual Inflation Rates), Chart 3.1.2 (Retail Pump Prices), Chart 3.2.1 (Government Resources), Chart 3.2.2 (Government Expenditure), Table 3.3.1 (Current Account), Table 3.3.2 (Exports of Goods), Table 3.3.3 (Imports of Goods). Statistical data from Office of the Chief Government Statistician (OCGS), Zanzibar. Analysis and editorial commentary by TICGL Economic Research, May 2026. This page is for informational purposes only and does not constitute financial or investment advice.
Inflation Developments in Zanzibar – March 2026 | TICGL Economic Analysis
TICGL Economic Research · March 2026
Inflation Developments in Zanzibar March 2026
A data-driven analysis of Zanzibar's price trends, government budgetary operations,
external sector performance and macroeconomic outlook — sourced from the Bank of Tanzania.
📅 Published: 16 March 2026🏦 Source: Bank of Tanzania📍 Zanzibar, Tanzania🔬 TICGL Research Team
Headline Inflation
4.3%
▼ Down from 5.3% (Jan 2025)
Food Inflation
9.1%
▲ Up from 7.2% (Jan 2025)
Gov. Revenue Jan 2026
TZS 173B
77.4% of target
Fiscal Deficit
TZS 312.5B
Domestic borrowing
Current Account
+$896.6M
≈ TZS 2.33 Trillion surplus
GDP Growth 2025
6.8%
↑ vs mainland 5.9%
Overview
Zanzibar's Economy in 2026: Resilience Amid Global Uncertainty
Zanzibar, as a semi-autonomous region within Tanzania, contributes approximately
4–5% to national GDP but plays a disproportionate role in tourism and services,
generating significant foreign exchange earnings that support union-wide economic stability.
In early 2026, Zanzibar's economy demonstrates resilience with moderate inflation at 4.3%
in January — down from 5.3% in January 2025 — driven by declining non-food prices even as food inflation
climbed to 9.1%. GDP growth for Zanzibar reached 6.8% in 2025, outperforming mainland
Tanzania's 5.9%, and is projected at 7.2% for 2026, driven by tourism, construction, and manufacturing.
Visitor arrivals grew 16.2% to 736,755 in 2025, with tourism receipts reaching
USD 1,535.9 million and underpinning a current account surplus of USD 896.6 million.
The region's record TZS 8.217 trillion budget for FY2025/26 (up 17.69% year-on-year)
focuses on blue economy and tourism infrastructure, reducing external debt reliance and aligning
with national Vision 2050 goals.
Zanzibar GDP Growth vs. Mainland Tanzania (%)
Annual growth rates — Actual 2025 & Projection 2026 | Source: Bank of Tanzania
Section 1
Inflation Developments in Zanzibar
Inflation measures the general increase in prices of goods and services across the economy.
According to the Bank of Tanzania report, headline inflation in Zanzibar
decreased to 4.3% in January 2026, compared with 5.3% in January 2025, mainly due to
the sharp decline in non-food inflation from 4.2% to just 0.4%.
Inflation Trends — Key Data Table
Indicator
Jan 2025 (%)
Dec 2025 (%)
Jan 2026 (%)
Change
Notes
Headline Inflation
5.3
—
4.3
▼ −1.0pp
Decline driven by non-food drop
Food Inflation
7.2
6.2
9.1
▲ +1.9pp
Rise in food/beverages, restaurants
Non-Food Inflation
4.2
—
0.4
▼ −3.8pp
Sharp decline aids overall stability
Month-to-Month Inflation
1.9
0.8
2.3
▲ +0.4pp
Seasonal increases in transport/food
Average Inflation H1 FY2025/26: 3.7% — within national 3–5% target range
Inflation Components Trend
Jan 2025 → Dec 2025 → Jan 2026 (%)
Jan 2026 Inflation Breakdown
Headline, Food & Non-Food comparison
Key Observations
📉
Non-food inflation collapsed from 4.2% to just 0.4%, providing the primary anchor for overall price stability in Zanzibar.
🍽️
Food prices rose significantly — particularly for food and beverages, restaurants and accommodation, and transport services, reaching 9.1% by January 2026.
📊
Month-to-month inflation ticked up to 2.3% in January 2026 from 0.8% in December 2025, reflecting seasonal demand pressures in the tourism peak season.
🎯
Average H1 FY2025/26 inflation of 3.7% remains comfortably within Tanzania's national 3–5% target band, supporting economic confidence.
⚠️Risk Watch: Food inflation at 9.1% represents a persistent vulnerability. If global commodity shocks occur — particularly in fuel, imported grains or edible oils — this could spill over to headline inflation and erode purchasing power for lower-income households.
Section 2
Government Budgetary Operations in Zanzibar
Government budget operations show how the government collects revenue and spends funds
to finance development and public services. In January 2026, the Government of Zanzibar mobilized
TZS 173.0 billion in total resources, with domestic revenue accounting for
TZS 170.7 billion — representing about 77.4% of the monthly target.
Government Revenue Sources — January 2026
Revenue Source
Amount (TZS Billion)
Share of Total
Key Components
Tax Revenue
~153.9
~89%
VAT, excise duties, import taxes, income tax, tourism taxes
Non-Tax Revenue
16.8
9.8%
Fees, levies, dividends from state entities
Grants
2.3
1.3%
External development partners
Total Government Resources
173.0
100%
—
Government Expenditure — January 2026
Total government expenditure in January 2026 amounted to TZS 485.4 billion, with
development spending constituting the largest share at 65%, reflecting Zanzibar's prioritisation
of infrastructure, tourism and social services.
Expenditure Category
Amount (TZS Billion)
Share
Focus Areas
Recurrent Expenditure
167.5
34.5%
Salaries, operations, utilities
Development Expenditure
317.9
65.5%
Infrastructure, tourism development, social services
Total Expenditure
485.4
100%
—
Revenue Composition
January 2026 — TZS Billion
Expenditure vs Revenue
January 2026 — TZS Billion (showing fiscal gap)
Fiscal Balance
Because expenditure significantly exceeded revenue, Zanzibar recorded a substantial fiscal deficit.
The deficit was primarily financed through domestic borrowing via the Bank of Tanzania's
government securities market.
Indicator
Amount (TZS Billion)
Notes
Total Revenue
173.0
77.4% of monthly target
Total Expenditure
485.4
65% development-focused
Fiscal Deficit
−312.5
Financed via domestic borrowing / BoT securities market
📌FY2025/26 Annual Budget: TZS 8.217 trillion — a record-high budget representing a
17.69% increase year-on-year, with a strong focus on the blue economy and tourism infrastructure.
This aligns with Tanzania's Vision 2050 for industrialisation and sustainable development.
Section 3
External Sector Performance in Zanzibar
The external sector measures Zanzibar's trade and international transactions.
According to the Bank of Tanzania report, Zanzibar recorded a current account surplus of
USD 896.6 million in the year ending January 2026 — equivalent to approximately
TZS 2.33 trillion (at ~TZS 2,600/USD).
Current Account Components — Year Ending January 2026
Indicator
USD Million
Approx. TZS Trillion
Balance
Goods Exports
98.3
0.26
—
Goods Imports
606.6
1.58
—
Goods Trade Balance
−508.2
−1.32
Deficit
Services Receipts
1,535.9
3.99
—
Services Payments
151.4
0.39
—
Net Services Balance
1,384.6
3.60
Surplus
Current Account Balance
+896.6
+2.33
Overall Surplus ✓
External Sector — Goods vs Services Balance (USD Million)
Year ending January 2026 | Tourism-driven services surplus offsets goods trade deficit
Services Sector: The Tourism Engine
The services sector — especially tourism — is the most important driver of
Zanzibar's external sector and the island's largest foreign exchange earner.
In 2025, Zanzibar welcomed over 910,000 visitors (up 16.2% from the prior year),
generating USD 1,535.9 million in services receipts.
Indicator
USD Million
Approx. TZS Trillion
Key Drivers
Services Receipts
1,535.9
3.99
Tourism, hotels, travel, tour operators
Services Payments
151.4
0.39
Outbound travel, financial services
Net Services Balance
+1,384.6
+3.60
Tourism dominant — backbone of FX earnings
Zanzibar Trade Balance: Goods vs Services (USD Million)
How tourism surplus more than compensates for goods trade deficit
✈️
Tourism receipts of USD 1,535.9 million are the backbone of Zanzibar's foreign exchange earnings, contributing approximately 15% to national GDP indirectly.
📦
Goods imports of USD 606.6 million (machinery, consumer goods, industrial equipment) far outpace goods exports of USD 98.3 million, creating a USD 508.2 million goods trade deficit.
💹
The overall current account surplus of USD 896.6 million bolsters Tanzania's national foreign exchange reserves (USD 6.3 billion), enabling USD 15 billion FDI target for 2026 and stabilising the Tanzanian Shilling.
Section 4
Zanzibar Trade Balance
Zanzibar has a significant trade deficit in goods, meaning it imports considerably
more goods than it exports. However, this deficit is more than offset by the island's
dominant services surplus — particularly from tourism.
Indicator
USD Million
Approx. TZS Billion
Balance Type
Goods Exports
98.3
255
Inflow
Goods Imports
606.6
1,577
Outflow
Trade Balance (Goods)
−508.2
−1,322
Deficit — offset by tourism surplus
Section 5
Summary of Zanzibar Economic Performance — January 2026
Indicator
Value
Status
Inflation Rate (Jan 2026)
4.3%
Moderate ✓
Food Inflation
9.1%
Elevated ⚠
Non-Food Inflation
0.4%
Low ✓
Government Revenue
TZS 173.0 billion
77.4% of target
Government Expenditure
TZS 485.4 billion
65% development
Fiscal Deficit
TZS 312.5 billion
Domestic borrowing
FY2025/26 Annual Budget
TZS 8.217 trillion
+17.69% YoY ✓
Current Account Balance
TZS 2.33 trillion surplus
Surplus ✓
Services Surplus (Tourism)
TZS 3.60 trillion
Strong ✓
Goods Trade Balance
TZS −1.32 trillion
Deficit — offset by tourism
GDP Growth 2025
6.8%
Outpaces mainland ✓
GDP Growth Projection 2026
7.2%
Positive outlook ✓
Section 6
Key Economic Insights & Implications for Tanzania
Zanzibar's economy, heavily reliant on tourism as its major FX earner, complements mainland strengths
in mining and agriculture — enhancing national diversification and resilience. This section examines the
broader implications for Tanzania's growth trajectory.
✈️ Tourism Drives the Economy
Tourism-related services generate the largest share of FX earnings. Visitor growth of 16.2% to 736,755 in 2025 reinforces Zanzibar's position as East Africa's premier tourism destination.
📊 Inflation Remains Moderate
Headline inflation at 4.3% remains within a manageable range, aligning with Tanzania's national 3.2% average (Feb 2026). This supports consumer spending and investor confidence.
📦 Import Dependence Risk
Zanzibar imports significant volumes of machinery, consumer goods, and industrial equipment. Goods deficit of USD 508.2 million exposes the island to global supply chain and commodity shocks.
💸 Fiscal Deficit Financing
A TZS 312.5 billion deficit financed through domestic borrowing risks increasing union debt (debt/GDP ~43%), potentially crowding out private investment if yields rise significantly.
Economic Implications Matrix — Zanzibar & Tanzania
Category
Positive Impact
Potential Risk
Securities Market Link
Inflation Stability
Low 4.3% aids consumer spending; aligns with national 3.2%, supporting 6.3% GDP
Food volatility (9.1%) could spill to mainland if unaddressed
FX inflows stabilise Shilling, enhancing market confidence for bond auctions
Overall Growth
7.2% projection outperforms mainland, driving union 6.5–6.9% medium-term via tourism/mining synergy
Inequality if tourism benefits skew urban; unemployment risks
Deepens financial markets, recycling savings into national projects like Vision 2050
Comprehensive Dashboard: All Key Indicators (Jan 2026)
TZS Billion | Revenue vs Expenditure vs Current Account Surplus
Conclusion
Summary & Outlook
Data from the Bank of Tanzania confirms that Zanzibar's economy is characterised by
moderate inflation (4.3%), high development spending (65% of budget),
strong service-sector performance driven by tourism, and a current account
surplus of USD 896.6 million supported by tourism earnings.
The service sector remains the backbone of Zanzibar's economic growth and external sector
stability. With GDP growth projected at 7.2% in 2026 and tourism arrivals continuing to
climb, Zanzibar is well-positioned to enhance Tanzania's overall economic performance and contribute
to the national Vision 2050 goals of inclusive, industrialised growth.
However, integrated policy coordination through the Bank of Tanzania — including prudent management
of the fiscal deficit, investment in food security to address elevated food inflation, and
diversification beyond tourism — will be essential to sustaining this momentum and ensuring
equitable distribution of economic gains across the islands.
🔗 Related TICGL Economic Resources
Explore more research, data dashboards and investment intelligence from Tanzania's leading business consultancy
Zanzibar & Tanzania's Government Securities Market
Zanzibar's fiscal deficit is not financed in isolation. The island benefits from Tanzania's
union-wide government securities market, managed by the Bank of Tanzania (BoT),
which provides a structured and cost-effective mechanism for domestic deficit financing.
🏦 Bank of Tanzania — Securities Market Highlight
Zanzibar benefits from the union-wide market managed by the Bank of Tanzania (BoT), where recent
bond auctions have been oversubscribed by up to 34% — signalling strong investor
confidence. The 10-year bond yield stands at 11.30%, providing relatively low-cost
domestic financing for government development deficits and reducing reliance on more expensive
external borrowing.
How the Securities Market Supports Zanzibar
34%Bond Oversubscription Rate
11.30%10-Year Bond Yield
~43%Debt-to-GDP Ratio (Union)
TZS 312.5BJan 2026 Deficit Financed
USD 6.3BNational FX Reserves
USD 15BFDI Target 2026
Securities Market — Bond Auction Dynamics vs Deficit Financing
Illustrating the relationship between bond market demand and Zanzibar's fiscal gap (Jan 2026, TZS Billion)
Sectoral Link: How Tourism FX Supports the Securities Market
Tourism foreign exchange inflows — contributing approximately 15% to national GDP indirectly
— stabilise the Tanzanian Shilling. A stable Shilling, in turn, enhances investor confidence in government
bond auctions, keeping yields competitive and enabling Zanzibar to fund its development spending at lower cost.
Mechanism
Value / Rate
Risk Factor
Positive Outcome
Tourism FX receipts → Shilling stability
USD 1,535.9M (services receipts)
Import shocks (USD 508.2M goods deficit)
Stable Shilling boosts bond auction confidence
Bond auctions → Development financing
11.30% yield / 34% oversubscription
Rising yields if debt/GDP (~43%) spikes
Low-cost domestic borrowing, TZS 312.5B financed
Dev. expenditure → Tourism infrastructure
TZS 317.9B dev. spending (65%)
Fiscal deficit crowding out private sector
New ports, airports, roads boost arrivals (+16.2%)
National FX reserves → Investor confidence
USD 6.3B reserves
External grant reduction (currently 1.3% of revenue)
Supports USD 15B FDI target for 2026
This virtuous cycle — tourism → FX → Shilling stability → bond market confidence → development spending → tourism infrastructure — is the core engine of Zanzibar's economic model.
Section 8
Vision 2050, Blue Economy & FY2025/26 Budget Priorities
🌊
Blue Economy Focus — FY2025/26
Zanzibar's record TZS 8.217 trillion budget for FY2025/26 — a 17.69% increase
year-on-year — prioritises blue economy development and tourism infrastructure. This aligns directly with
Tanzania's national Vision 2050 goals of industrialisation, sustainable resource use,
and inclusive economic growth.
The blue economy encompasses Zanzibar's vast marine resources — from deep-sea fisheries and aquaculture
to maritime trade, ocean-based tourism, and sustainable coastal development. This strategic focus positions
Zanzibar not merely as a beach destination, but as a diversified maritime economy with
long-term export potential beyond the traditional tourism sector.
Budget Growth Trajectory — FY2024/25 vs FY2025/26 (TZS Trillion)
Illustrating the 17.69% year-on-year increase in Zanzibar's total budget allocation
Section 9
Key Risks & Economic Vulnerabilities
While Zanzibar's economic fundamentals are broadly positive, a clear-eyed assessment requires
acknowledgement of the structural vulnerabilities and downside risks that investors and policymakers
must monitor.
✅ Strength
Tourism FX resilience — USD 896.6M current account surplus and 16.2% visitor growth provide a durable external buffer against short-term shocks.
⚠️ Watch: Food Inflation
Food inflation at 9.1% remains elevated. If global commodity prices rise or regional droughts occur, this could spill over to headline inflation and erode household purchasing power.
🔴 Risk: Import Dependence
USD 508.2M goods trade deficit — heavy reliance on imported machinery, consumer goods and industrial equipment exposes Zanzibar to supply chain disruptions and currency depreciation risk.
🔴 Risk: Fiscal Deficit
TZS 312.5B monthly deficit financed domestically could increase union debt-to-GDP (currently ~43%). Rising yields may crowd out private investment if borrowing accelerates.
⚠️ Watch: Grant Dependency
External grants represent only 1.3% of government revenue, meaning any reduction in development partner support would have limited direct fiscal impact — but indicates limited international grant diversification.
⚠️ Watch: Inclusive Growth
7.2% GDP growth projection risks being concentrated in urban tourism centres. Unemployment risks and income inequality could deepen if growth benefits do not reach rural coastal communities.
✅ Strength: Reserve Buffer
National FX reserves of USD 6.3 billion — Tanzania's strong reserve position provides a significant macroeconomic buffer against external shocks and currency volatility.
ℹ️ Monitor: Revenue Target
Revenue collection at 77.4% of target in January 2026 signals potential gaps in tax administration and revenue mobilisation that need addressing to reduce deficit financing dependence.
Risk Radar: Zanzibar Economic Vulnerabilities (Score out of 10)
Higher score = greater risk. Assessment based on January 2026 data.
Section 10
Zanzibar vs. Mainland Tanzania — Economic Comparison
Understanding Zanzibar's economic performance requires contextualising it within Tanzania's broader
national framework. Zanzibar consistently outperforms mainland Tanzania on GDP growth
while contributing a disproportionate share of foreign exchange earnings relative to its population.
Indicator
Zanzibar
Mainland Tanzania
Tanzania Union
GDP Growth 2025 (Actual)
6.8%
5.9%
~6.0%
GDP Growth 2026 (Projected)
7.2%
~6.0%
6.3%
Headline Inflation (Jan 2026)
4.3%
~3.2% (Feb 2026)
~3.5%
Primary FX Earner
Tourism (services)
Gold, mining, agriculture
Diversified
Share of National GDP
~4–5%
~95–96%
100%
Tourism Contribution (indirect, national)
~15% of national GDP
Mining/agriculture ~30%
—
FX Reserves (National)
USD 6.3 Billion (shared/union)
USD 6.3B
Visitor Arrivals 2025
736,755 (+16.2%)
National total ~910,000+
~1.6M total
Medium-Term Growth Outlook
7.2% (2026)
~6.0%
6.5–6.9% (medium term)
Zanzibar's outperformance on GDP growth is driven by tourism recovery, construction and manufacturing. Integrated BoT policy ensures union-wide monetary and fiscal coordination.
GDP Growth Comparison (%)
Zanzibar vs Mainland vs Union — 2025 & 2026 Projection
Tourism vs Mining/Agriculture FX Share
Relative FX contribution to Tanzania's national economy
Section 11
Policy Recommendations & Strategic Priorities
Zanzibar's economic strengths position Tanzania for inclusive growth. However, integrated policy
coordination through the Bank of Tanzania is key to sustaining momentum while managing
the identified vulnerabilities.
1
Address Food Inflation Urgently. Food inflation at 9.1% risks eroding real incomes for
lower-income households. Investment in local food production, storage infrastructure and import
diversification is needed to reduce dependence on volatile global commodity markets.
2
Improve Revenue Mobilisation. Revenue collection at 77.4% of target indicates gaps
in tax administration. Strengthening digital revenue systems, broadening the tax base — particularly
in the growing tourism sector — and reducing leakages would narrow the TZS 312.5B monthly deficit.
3
Diversify Beyond Tourism. While tourism is Zanzibar's backbone, the goods trade
deficit of USD 508.2M highlights structural import dependence. Accelerating blue economy development —
fisheries, aquaculture, maritime services — would reduce this exposure and create new export revenue streams.
4
Ensure Inclusive Distribution of Growth. 7.2% GDP growth is commendable, but benefits
risk concentration in Zanzibar Town and major tourist areas. Targeted social spending, rural infrastructure
investment and SME support for coastal communities are essential for equitable growth.
5
Manage Domestic Debt Prudently. With union debt-to-GDP at ~43% and a monthly fiscal
deficit financed entirely through domestic borrowing, policymakers must monitor bond yields carefully.
A proactive debt management strategy will prevent crowding out of private sector investment.
6
Leverage BoT Coordination for Vision 2050. The Bank of Tanzania's role in overseeing
the government securities market is critical. Deepening financial markets — recycling private savings
into productive national infrastructure projects — will accelerate progress toward Tanzania's
Vision 2050 industrialisation goals.
Section 12
Investor Outlook: Zanzibar 2026
For investors considering Tanzania and Zanzibar specifically, the macroeconomic picture in
early 2026 presents a compelling combination of above-average growth, tourism-driven
stability, improving infrastructure, and a favourable policy environment.
Composite score based on growth trajectory, policy support and market size potential (scale: 1–10)
Conclusion: Zanzibar's Economic Trajectory
Data from the Bank of Tanzania confirms that Zanzibar enters 2026 from a position
of moderate inflation, high development spending, strong tourism-driven FX earnings,
and a current account surplus of USD 896.6 million. GDP growth at 6.8% in 2025 and a 7.2% projection
for 2026 places Zanzibar among the fastest-growing sub-national economies in East Africa.
The service sector — anchored by tourism — remains the backbone of Zanzibar's economic
growth and external sector stability. The island's integration into Tanzania's union-wide
monetary framework, including the BoT-managed securities market, provides crucial tools for
deficit financing and long-term development investment aligned with Vision 2050.
To sustain this trajectory, Zanzibar must address food inflation, improve revenue mobilisation,
and deepen economic diversification into the blue economy — ensuring that growth becomes genuinely
inclusive for all Zanzibaris. For investors, policymakers and researchers, the data is clear:
Zanzibar's economic moment is now.
Tourism-Led Expansion Drives 7.1% GDP Growth and Regional Leadership
7.1%
Real GDP Growth 2024
736,755
Tourist Arrivals (12 Months)
16.2%
Year-on-Year Tourism Growth
4.6%
Headline Inflation (Nov 2025)
Introduction
Zanzibar's economy demonstrated exceptional resilience and growth throughout 2025, significantly outperforming the national average and establishing itself as a crucial growth engine within the Tanzanian Union. The archipelago achieved a remarkable 7.1% real GDP growth in 2024, with projections indicating continued robust expansion into 2025.
The economic success story is anchored by a thriving tourism sector that generated 736,755 visitor arrivals in the twelve months ending November 2025, representing a substantial 16.2% year-on-year increase. This tourism boom created powerful multiplier effects across hospitality, transport, trade, and construction sectors, while generating critical foreign exchange earnings that strengthened Zanzibar's external position.
Macroeconomic stability improved alongside growth, with headline inflation moderating to 4.6% in November 2025 from 4.8% in October. Enhanced fiscal revenue collection, primarily from tourism-related levies and taxes on goods and services, provided the fiscal space for increased infrastructure and social service investments while maintaining a manageable deficit position.
Economic Growth Performance
Key Growth Drivers
Tourism: Primary engine delivering visitor spending, employment, and foreign exchange
Trade: Enhanced commercial activity linked to tourism and improved connectivity
Construction: Infrastructure expansion and private sector investment
Transport: Growing logistics and mobility services supporting economic activity
Indicator
Performance
Real GDP Growth (2024)
7.1%
Growth Outlook (2025)
Strong, tourism-led expansion
Main Growth Drivers
Tourism, trade, construction, transport
Comparative Performance
Above national average (6.0-6.5%)
Zanzibar's 7.1% growth significantly exceeded mainland Tanzania's performance, demonstrating the archipelago's unique competitive advantages in high-value tourism and services. The economic expansion translated into tangible improvements in employment opportunities and gradual poverty reduction, particularly in tourism-dependent regions.
Inflation Dynamics and Price Stability
Inflation Measure
October 2025
November 2025
Change
Headline Inflation
4.8%
4.6%
▼ -0.2pp
Food Inflation
7.2%
6.8%
▼ -0.4pp
Non-Food Inflation
3.3%
3.1%
▼ -0.2pp
Inflation trends showed encouraging moderation in November 2025, with headline inflation declining to 4.6%. The improvement reflects relatively stable non-food inflation at 3.1%, benefiting from global commodity price stability and Tanzanian shilling strength. However, food inflation remained elevated at 6.8%, driven by supply constraints, seasonal factors, and Zanzibar's significant import dependence for food staples.
The persistence of food price pressures represents the primary inflation challenge, particularly given food's substantial weight in household consumption baskets. Addressing this requires continued focus on enhancing agricultural productivity, improving supply chain efficiency, and managing import costs.
Tourism Sector: The Economic Backbone
Tourism Indicator
Performance
Tourist Arrivals (12 months to Nov 2025)
736,755
Year-on-Year Growth
+16.2%
Average Hotel Occupancy
Above 65%
Main Source Markets
Europe, Asia, Africa
Economic Impact
Employment, FX earnings, multiplier effects
Tourism solidified its position as Zanzibar's dominant economic driver, with 736,755 arrivals representing robust 16.2% year-on-year growth. The sustained hotel occupancy above 65% demonstrates strong and consistent demand across accommodation categories, from luxury resorts to boutique properties.
The tourism sector's impact extends far beyond direct visitor spending. It generates substantial employment across hospitality, transport, retail, and cultural services; produces critical foreign exchange earnings that strengthen external balances; and creates powerful linkages with agriculture, handicrafts, and construction sectors. European markets remained the primary source of arrivals, complemented by growing Asian and African visitor segments.
Tourism Sector Strengths
Consistent double-digit growth rates through post-pandemic recovery
Strong brand positioning in cultural and beach tourism niches
Significant contribution to Tanzania's services export earnings (55.8% of total)
External Sector and Trade Dynamics
External Indicator
Status
Export Performance
Improved (cloves, tourism services)
Import Demand
Rising (food, fuel, construction materials)
Trade Balance
Deficit, but narrowing
Foreign Exchange Inflows
Strong from tourism
Overall External Position
Strengthening
Zanzibar's external sector showed resilience despite persistent merchandise trade deficits. Rising import demand for food, fuel, and construction materials reflected both economic growth and supply constraints, but robust tourism receipts effectively offset these pressures.
Foreign exchange earnings from tourism proved crucial in narrowing the trade deficit and strengthening overall external balances. This performance directly contributed to Tanzania's improved national current account position and services surplus, demonstrating Zanzibar's strategic importance to the Union's external stability.
Fiscal Position and Public Finance
Fiscal Indicator
Performance
Revenue Collection
Improved
Main Revenue Sources
Taxes on goods & services, tourism-related levies
Expenditure Focus
Social services & infrastructure
Fiscal Balance
Manageable deficit
Debt Sustainability
Within prudent limits
Fiscal performance strengthened considerably, with improved domestic revenue mobilization providing essential fiscal space for development priorities. The Revolutionary Government of Zanzibar successfully enhanced tax collection efficiency, particularly on goods and services and tourism-related activities, without creating excessive economic burdens.
The additional revenues financed higher public spending on critical infrastructure projects and social services, including education, health, and public facilities. The fiscal deficit remained manageable and sustainable, indicating responsible fiscal management that balances development needs with macroeconomic stability.
Labor Market and Social Development
Social Indicator
Trend
Overall Employment
Improving
Main Job-Creating Sectors
Tourism, trade, construction
Youth Employment
Gradual improvement
Poverty Pressure
Moderating
Skills Development
Enhanced focus on hospitality training
Employment trends showed positive momentum, particularly in tourism, trade, and construction sectors. The tourism boom created diverse employment opportunities ranging from hospitality services to transport, retail, and cultural activities, with significant benefits for youth employment.
The combination of economic growth and improved employment outcomes contributed to moderating poverty pressures. However, ensuring inclusive growth that reaches all segments of society and geographic areas remains an ongoing priority for policymakers.
Challenges and Risk Factors
Key Challenges
Food Security: Persistent food inflation driven by import dependence and supply constraints
Tourism Dependency: Heavy reliance on tourism creates vulnerability to global shocks
Infrastructure Gaps: Continued need for transport, energy, and water infrastructure
Climate Vulnerability: Exposure to climate change impacts on tourism and agriculture
Diversification Needs: Limited economic diversification beyond tourism and traditional exports
While Zanzibar's economic performance was strong, several challenges require strategic attention. Food inflation and import dependence highlight the need for enhanced agricultural productivity and food security initiatives. The heavy concentration in tourism, while currently beneficial, creates vulnerability to global economic downturns, health crises, or geopolitical disruptions.
Strategic Outlook and Opportunities
Zanzibar's economic trajectory for 2025 and beyond appears highly positive, supported by sustained tourism demand, improving infrastructure, and macroeconomic stability. The archipelago's positioning as a premium tourism destination, combined with its strategic location in the Indian Ocean, provides substantial growth opportunities.
Strategic Opportunities
Expanding high-value tourism segments (luxury, eco-tourism, cultural heritage)
Enhancing agricultural productivity and food self-sufficiency
Attracting foreign direct investment in tourism infrastructure
Strengthening digital economy and technology sectors
Leveraging Zanzibar's unique cultural and natural assets
Success in capitalizing on these opportunities will require sustained policy focus on infrastructure development, human capital enhancement, economic diversification, and environmental sustainability. Maintaining macroeconomic stability while pursuing ambitious development goals remains essential.
Conclusion: A Thriving Regional Economic Leader
Zanzibar's economic performance in 2025 demonstrates the archipelago's emergence as a vital growth pole within the Tanzanian Union and broader East African region. The 7.1% GDP growth, driven by exceptional tourism performance, positions Zanzibar significantly ahead of regional peers and validates the strategic focus on high-value services sectors.
The combination of robust growth, moderating inflation, improving fiscal and external positions, and expanding employment creates a strong foundation for sustainable development. Tourism's role as the economic backbone, generating foreign exchange equivalent to more than half of Tanzania's services receipts, underscores Zanzibar's strategic economic importance.
Looking forward, maintaining this positive trajectory requires balancing tourism expansion with economic diversification, addressing food security challenges, investing in infrastructure and human capital, and ensuring growth benefits reach all segments of society. With continued sound policy management and strategic investment, Zanzibar is well-positioned to sustain its role as an economic leader and model for tourism-led development in East Africa.
The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.
1. Inflation in Zanzibar
Annual headline inflation (July 2025):4.1%, down from 5.3% in July 2024, and unchanged from June 2025.
Food inflation: 4.3% (vs. 9.2% in July 2024).
Non-food inflation: 3.9% (stable).
Monthly inflation: 0.2% (down from 0.5% in June 2025).
Decline mainly due to lower food prices (rice, sugar, wheat flour, green bananas).
2. Government Budgetary Operations
Revenue and grants (June 2025):TZS 93.4 billion, above the monthly target of TZS 87.6 billion.
Economic Implications of Zanzibar's Performance – July 2025
1. Inflation in Zanzibar
Trends: Annual headline inflation dropped to 4.1% in July 2025 from 5.3% in July 2024, with food inflation falling to 4.3% from 9.2% and monthly inflation easing to 0.2% from 0.5%.
Economic Meaning: The decline, driven by lower food prices (rice, sugar, wheat flour, green bananas), signals improved supply conditions, possibly due to the National Food Reserve Agency’s stock management (477,923 tonnes in June 2025). This boosts purchasing power and consumer confidence, supporting the 6.2% GDP growth in 2024 and a projected over 6% in 2025. The 4.1% rate remains above Mainland Tanzania’s 3.3% but aligns with regional stability (EAC/SADC targets). Risks include potential food price volatility if harvests falter, though current trends suggest resilience.
2. Government Budgetary Operations
Revenue and Spending: Revenue and grants reached TZS 93.4 billion in June 2025 (106.6% of the TZS 87.6 billion target), with TZS 80.2 billion from own sources and TZS 13.2 billion in grants. Expenditure totaled TZS 118.4 billion (recurrent TZS 79.9 billion, development TZS 38.5 billion), resulting in a TZS 25.0 billion deficit.
Economic Implications: Exceeding revenue targets reflects strong tax collection and grant inflows, supporting fiscal capacity amid 6.2% growth. However, the deficit, driven by 32.5% development spending (e.g., infrastructure), indicates reliance on borrowing or reserves, risking debt sustainability (41.1% GDP debt-to-GDP ratio). This aligns with fiscal prudence but highlights the need for expenditure control to match revenue, especially as tourism (12.7% growth) fuels economic activity.
3. External Sector Performance
Trade Dynamics: Exports rose to USD 328.2 million (up 12.4% from USD 292.1 million in 2024), with services (USD 227.4 million, tourism-led) up 9.9% and goods (USD 100.8 million, cloves/seaweed) up 18.5%. Imports increased to USD 470.9 million (up 14.1% from USD 412.6 million), driven by capital and consumer goods, widening the trade deficit to USD 142.7 million from USD 120.5 million.
Economic Significance: The 12.4% export growth, bolstered by tourism (2,662,219 arrivals in 2024) and clove/seaweed exports, strengthens foreign exchange reserves (USD 6 billion nationally), supporting the TZS stability (0.2% depreciation). However, the 14.1% import surge reflects import dependency (petroleum, industrial goods), straining the current account (surplus of USD 611.1 million in 2024/25). This could pressure reserves if export growth slows, though tourism’s momentum offers a buffer.
Summary of Broader Economic Significance
Stability and Growth: Lower inflation (4.1%) and robust export growth (12.4%) underpin Zanzibar’s 6.2% GDP growth in 2024 and over 6% projection for 2025, driven by tourism and trade. This supports the Vision 2050 goal of diversification.
Fiscal Challenges: Revenue outperformance (TZS 93.4 billion) aids development spending (TZS 38.5 billion), but the TZS 25.0 billion deficit signals a need for fiscal balancing to sustain debt at 41.1% of GDP.
External Risks: Export gains are offset by faster import growth (14.1%), maintaining a trade deficit (USD 142.7 million). Tourism resilience and reserve adequacy (4.8 months of imports) mitigate risks, but import reliance remains a vulnerability.
Outlook: Compared to 2024’s 5.8% growth, 2025’s projection reflects optimism, though managing import costs and diversifying beyond tourism (e.g., manufacturing, agriculture) are critical for long-term stability.
Strong Growth, Low Inflation, but Trade and Budget Deficits Persist
Zanzibar’s economy showed resilience in 2024, with real GDP growth rising to 6.8%, up from 5.1% in 2023, driven primarily by tourism and infrastructure investments like the SGR and port upgrades. Tourist arrivals surged to 2.2 million in 2025, supporting the services sector, while FDI jumped by 28.3% to USD 1.72 billion, fueling construction. Inflation remained stable at 3.4% in June 2025, down from 6.1% a year earlier, well within the BoT's 3–5% target. On the fiscal front, domestic revenue reached TZS 874.9 billion, covering 95.6% of public income, though a TZS 248.5 billion budget deficit persists. In trade, Zanzibar posted a goods trade deficit of USD 309.2 million, as exports fell 11.9% (led by a 27.2% decline in cloves) while imports rose 8.4%. Meanwhile, the financial sector expanded with credit to the private sector growing by 23.5% and bank deposits increasing by 12.1%, signaling deepening financial inclusion despite high lending rates (15.12%).
1. Real Sector Performance (GDP Growth)
The real sector encompasses economic activities producing goods and services, with GDP growth reflecting Zanzibar’s economic vitality.
Real GDP Growth (2024):
Value: 6.8%, up from 5.1% in 2023.
Context: This aligns with earlier reports, such as a 7% growth in January–September 2024 and 7.2% in Q4 2024, driven by tourism and trade. The African Development Bank projects Zanzibar’s growth to exceed 6% in 2025, supported by tourism, construction, and real estate.
Drivers:
Industry Sector: Construction and manufacturing led growth, fueled by infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Construction benefits from public-private partnerships (PPPs) and foreign direct investment (FDI), with Tanzania’s FDI rising 28.3% to USD 1.72 billion in 2024.
Services Sector: Accommodation and food services, tied to tourism, were major contributors. Tourist arrivals reached 2,193,322 in 2025, up 10% from 1,994,242 in 2024, boosting hospitality. The Tanzania National Business Council projects tourism’s GDP contribution to reach 19.5% by 2025/26.
Implications: The 6.8% growth reflects Zanzibar’s economic resilience, driven by tourism and infrastructure. However, reliance on tourism (10% of GDP) and construction makes the economy vulnerable to external shocks, such as global tourism fluctuations or commodity price volatility. Diversification into manufacturing and agriculture, as outlined in Zanzibar’s USD 2 billion plan, is critical.
Comparison with Mainland Tanzania:
Mainland Tanzania grew at 5.6% in 2024, projected at 6% in 2025, driven by agriculture, finance, and construction. Zanzibar’s higher growth (6.8%) reflects its tourism-led economy, but its smaller economic base (contributing ~3% to Tanzania’s GDP) limits its overall impact.
2. Inflation Trends
Inflation measures the rate of price increases, affecting purchasing power and economic stability.
Headline Inflation:
12-Month Average (June 2025): 3.5%.
June 2025 (Monthly): 3.4%, down from 6.1% in June 2024.
Context: Inflation eased from 5.1% in 2024 and 6.9% in 2023, with February 2025 at 4.8%. The National Bureau of Statistics reported 3.3% inflation in June 2025, driven by food price increases (e.g., finger millet at 7.0%). Zanzibar’s inflation remains below the 5% medium-term target set by the Bank of Tanzania (BoT) and aligns with East African Community (EAC) criteria.
Drivers:
Stabilized Food Prices: Declining food inflation (5.3% in April 2025) reflects improved agricultural output and stable global commodity prices.
Controlled Non-Food Prices: Transport costs moderated due to stable fuel prices, with energy inflation at 7.3% in April 2025, down from 9.3% in 2024.
Implications: Low inflation (3.4%) supports consumer purchasing power and aligns with the BoT’s 3%–5% target under its 2025–2030 Strategic Plan. However, food price volatility (e.g., finger millet) poses risks, particularly for low-income households, given Zanzibar’s 26.4% poverty rate. Continued monetary policy prudence (6% Central Bank Rate) is essential.
Comparison with Mainland Tanzania:
Mainland Tanzania’s inflation was 3.2% in May 2025 and 3.1% in January 2025, slightly lower than Zanzibar’s 3.4%. Zanzibar’s higher inflation reflects its reliance on imported goods and tourism-driven demand.
3. Government Budgetary Operations (July 2024 – May 2025)
The government budget reflects fiscal policy, balancing revenues, grants, and expenditures to fund public services and development.
Revenues and Grants:
Total: TZS 914.7 billion.
Domestic Revenue: TZS 874.9 billion (95.6% of total).
Tax Revenue: TZS 796.6 billion (86.9% of total).
Non-Tax Revenue: TZS 78.3 billion (8.6% of total).
Grants: TZS 39.8 billion (4.4% of total).
Context: Strong revenue performance aligns with Mainland Tanzania’s TZS 2,339.7 billion tax collection in May 2025, 4.1% above target. Zanzibar’s tax revenue reflects improved administration and compliance, supported by digital systems like the Tanzania Instant Payment System (TIPS). Grants, including TZS 185 billion from China for health and economic cooperation, bolster fiscal space.
Implications: High domestic revenue (95.6%) reduces grant dependency, but low grant inflows (4.4%) limit funding for development projects. Enhanced tax mobilization, as per MKUMBI II reforms, is critical.
Expenditures:
Total: TZS 1,123.4 billion.
Recurrent Expenditure: TZS 744.7 billion (66.3% of total).
Development Expenditure: TZS 378.7 billion (33.7% of total).
Context: Expenditure aligns with revenue, reflecting fiscal prudence, as noted in the BoT’s mid-year review. Development spending supports tourism (TZS 359.9 billion budget for 2025/26) and infrastructure (e.g., Dodoma Transport Project). Recurrent spending covers wages and public services, critical for Zanzibar’s 9.3% unemployment rate.
Implications: The high recurrent share (66.3%) limits development funding, necessitating expenditure rationalization to meet Vision 2050 goals (e.g., 90% electricity access).
Budget Deficit:
Deficit (Before Grants): TZS 248.5 billion.
Financing: Covered by domestic borrowing (e.g., TZS 625.5 billion mobilized in April 2025, including TZS 421.7 billion in Treasury bonds) and grants.
Context: Public debt remains sustainable with a moderate risk of distress, per the IMF’s 2024 Debt Sustainability Analysis. Zanzibar’s deficit aligns with Mainland Tanzania’s TZS 270.2 billion deficit in May 2025.
Implications: Domestic borrowing supports fiscal needs but increases debt servicing costs (TZS 640 billion in April 2025). Grants and FDI (USD 1.72 billion in 2024) are vital to reduce borrowing reliance.
4. Trade Performance (Goods Only)
Trade performance reflects Zanzibar’s external sector, focusing on goods exports and imports, with services (e.g., tourism) covered separately.
Total Exports (Goods):
Value: USD 150.3 million, down from USD 170.6 million in 2024 (-11.9%).
Composition:
Cloves: USD 66.4 million (44.2% of exports), down from USD 91.2 million (-27.2%).
Seafood & Other Goods: USD 60.4 million (40.2% of exports).
Manufactured Goods: USD 23.5 million (15.6% of exports).
Context: The decline in clove exports reflects global market downturns, as noted in earlier reports. Seafood and manufactured goods growth aligns with diversification efforts under Zanzibar’s USD 2 billion plan. Total Tanzania exports (including Mainland) reached USD 16.1 billion in 2024, led by gold and tourism.
Implications: The 11.9% export drop, particularly in cloves, strains foreign exchange earnings, given cloves’ 90% production on Pemba. Diversification into seafood and manufacturing is promising but requires market expansion.
Total Imports (Goods):
Value: USD 459.5 million, up from USD 423.7 million in 2024 (+8.4%).
Composition:
Capital Goods: USD 222.5 million (48.4% of imports).
Intermediate Goods: USD 141.4 million (30.8% of imports).
Consumer Goods: USD 95.6 million (20.8% of imports).
Context: Import growth reflects infrastructure projects (e.g., SGR, port expansions) and consumer demand, consistent with Mainland Tanzania’s capital goods imports. Zanzibar’s reliance on imported staples and petroleum products persists.
Implications: Rising imports, driven by capital goods, support industrialization but widen the trade deficit, straining reserves (USD 5,307.7 million, 4.3 months of import cover).
Trade Deficit:
Value: USD 309.2 million, widened from USD 253.1 million in 2024 (imports USD 423.7 million – exports USD 170.6 million).
Context: The deficit reflects falling clove exports and rising capital goods imports, consistent with Tanzania’s overall current account deficit of USD 2,117.6 million.
Implications: The widened deficit pressures the Tanzanian Shilling (8% depreciation in 2023) and reserves. Export promotion (e.g., seafood, manufactured goods) and tourism (USD 3,934.5 million in receipts) are critical to offset deficits.
5. Financial Sector Performance
The financial sector supports economic activity through credit provision and deposit mobilization, critical for private sector growth.
Credit to Private Sector (June 2025):
Value: TZS 747.7 billion, up 23.5% from June 2024.
Sectors:
Trade: 27.8% (TZS 207.9 billion).
Building & Construction: 20.2% (TZS 151.0 billion).
Personal Loans: 13.8% (TZS 103.2 billion).
Transport & Communication: 10.7% (TZS 80.0 billion).
Context: The 23.5% growth exceeds Mainland Tanzania’s 12.8% private sector credit growth in January 2025, driven by agriculture and SMEs. Zanzibar’s credit growth reflects tourism and construction demand, supported by the BoT’s 6% Central Bank Rate and TIPS (453.7 million transactions in 2024).
Implications: Robust credit growth (23.5%) supports SMEs and infrastructure, aligning with financial inclusion goals (87% adult target by 2030). However, the high trade and construction share risks overexposure if tourism slows.
Deposit Mobilization:
Value: TZS 1,185.4 billion, up 12.1% from TZS 1,057.6 billion in June 2024.
Context: Growth aligns with Tanzania’s banking sector stability, with a 3.6% non-performing loan ratio in Q1 2025, below the 5% threshold. Mobile money transactions (TZS 198,859 billion in 2024) boost deposits.
Implications: Strong deposit growth (12.1%) reflects financial deepening, but high lending rates (15.12% in January 2025) may constrain borrowing. Digital platforms like TIPS enhance inclusion, supporting Vision 2050.
Summary Table: Key Economic Indicators for Zanzibar (Year Ending June 2025)
Indicator
Value
Real GDP Growth (2024)
6.8%
Headline Inflation (June 2025)
3.4% (avg: 3.5%)
Domestic Revenue (TZS)
874.9 billion
Total Spending (TZS)
1,123.4 billion
Exports (Goods, USD)
150.3 million
Imports (Goods, USD)
459.5 million
Trade Deficit (Goods, USD)
309.2 million
Credit to Private Sector (TZS)
747.7 billion
Deposits in Banks (TZS)
1,185.4 billion
Key Takeaways and Policy Implications
Robust GDP Growth:
Zanzibar’s 6.8% growth in 2024, driven by tourism and construction, outpaces Mainland Tanzania (5.6%). Tourism (2.2 million arrivals) and infrastructure (e.g., SGR) are key drivers, but diversification into manufacturing and agriculture is needed to reduce tourism dependency (10% of GDP).
Policy: Implement Zanzibar’s USD 2 billion diversification plan to boost seafood and manufactured exports, aligning with Vision 2050.
Stable Inflation:
Inflation at 3.4% (June 2025) supports purchasing power, driven by stable food and fuel prices. However, food price volatility (e.g., 7.0% for finger millet) risks impacting the 26.4% poverty rate.
Policy: Enhance agricultural productivity and supply chain resilience to mitigate food price shocks, as per the Second Agriculture Sector Development Program.
Fiscal Prudence:
Strong domestic revenue (TZS 874.9 billion) reduces grant reliance, but the TZS 248.5 billion deficit requires sustained borrowing and grants. Development spending (33.7%) supports growth but is constrained by recurrent costs (66.3%).
Policy: Rationalize recurrent expenditure and leverage FDI (USD 1.72 billion in 2024) to fund infrastructure and tourism.
Trade Challenges:
The USD 309.2 million trade deficit, driven by a 27.2% drop in clove exports and 8.4% import rise, pressures reserves. Tourism receipts (USD 3,934.5 million) offset some losses, but goods exports need boosting.
Policy: Promote clove market recovery and expand seafood and manufacturing exports through trade agreements (e.g., AfCFTA).
Financial Sector Strength:
Credit growth (23.5%) and deposit mobilization (12.1%) reflect financial deepening, supported by digital payments (TIPS) and a stable banking sector (3.6% NPL ratio). High lending rates (15.12%) and trade/construction exposure pose risks.
Policy: Reduce lending rates and enhance SME financing, as per the BoT’s 2025–2030 plan, to sustain inclusion and growth.
Economic Context:
Regional Role: Zanzibar’s tourism and trade hub status supports growth, but its small GDP share (~3% of Tanzania’s USD 105.1 billion in 2022) limits impact.
Risks: Global commodity price volatility, tourism seasonality, and shilling depreciation (8% in 2023) pose challenges.
Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (87% target) offer pathways to a USD 1 trillion economy.
Zanzibar’s economy grew by 6.2% in 2024, up from 5.6% in 2023, driven by tourism (7.1%) and construction (5.8%), while agriculture lagged at 3.5%. However, inflation rose to 4.3% in January 2025, fueled by higher food (+5.6%) and transport costs (+4.8%). The trade deficit widened to USD 387.4 million, as imports increased to USD 521.6 million (+4.5%), outpacing exports of USD 134.2 million (+2.9%). Despite a 5.2% rise in revenue to TZS 115.6 billion, government spending exceeded collections by TZS 22.3 billion, maintaining a budget deficit.
1. Zanzibar’s GDP Growth: Strong Expansion Driven by Services and Industry
Zanzibar’s economy grew by 6.2% in 2024, up from 5.6% in 2023.
Growth was mainly driven by services (7.1%) and industry (5.8%), while agriculture expanded by 3.5%.
Sectoral Growth Breakdown (2024 GDP Growth Rates)
Sector
Growth Rate (%)
Key Contributors
Services
7.1%
Tourism, trade, transportation
Industry
5.8%
Construction, manufacturing
Agriculture
3.5%
Cloves, seaweed, fishing
Overall GDP
6.2%
Stronger than 2023 (5.6%)
What It Means:
✅ Tourism and trade are driving economic expansion, supported by increased visitor arrivals. ✅ The construction sector is growing, boosting industrial performance. ⚠ Agriculture is growing slowly (3.5%), indicating the need for modernization and investment.
2. Inflation: Slight Increase Due to Rising Food and Transport Costs
Inflation in Zanzibar stood at 4.3% in January 2025, up from 4.0% in December 2024.
The increase was mainly driven by higher food prices (+5.6%) and transport costs (+4.8%).
What It Means:
⚠ Higher food prices are putting pressure on household purchasing power. ✅ Inflation remains moderate and within the acceptable range.
3. Trade Performance: Imports Rising Faster than Exports
Exports Grew but Remain Low Compared to Imports
Total exports reached USD 134.2 million in January 2025, an increase of 2.9% from December 2024.
Clove exports (USD 46.8 million) and seaweed exports (USD 12.1 million) remained the top earners.
Imports Increased, Widening Trade Deficit
Total imports rose to USD 521.6 million (+4.5%), led by fuel and construction materials.
The trade deficit widened to USD 387.4 million, reflecting higher demand for imported goods.
What It Means:
⚠ Zanzibar remains a net importer, increasing reliance on foreign exchange inflows from tourism and remittances. ✅ Growth in clove and seaweed exports helps sustain the economy.
4. Government Revenue and Spending: Improved Collection but Budget Deficit Persists
Total revenue collection reached TZS 115.6 billion in January 2025, a 5.2% increase from December 2024.
Tax revenue accounted for 85.3% of total revenue, supported by higher VAT and import duties.
Total government expenditure stood at TZS 137.9 billion, leaving a budget deficit of TZS 22.3 billion.
What It Means:
✅ Revenue collection is improving, reducing reliance on external funding. ⚠ The government continues to spend more than it collects, increasing the need for budget control measures.
Summary of Key Trends in Zanzibar’s Economy (January 2025)
Indicator
January 2025
Comparison with December 2024
GDP Growth (2024)
6.2%
Up from 5.6% in 2023
Inflation Rate
4.3%
Up from 4.0%
Total Exports
USD 134.2 million
+2.9%
Total Imports
USD 521.6 million
+4.5%
Trade Deficit
USD 387.4 million
Widened
Revenue Collection
TZS 115.6 billion
+5.2%
Government Spending
TZS 137.9 billion
Budget deficit of TZS 22.3 billion
Economic Implications of Zanzibar’s Performance
🔹 Positive Signs: ✅ Economic growth remains strong (6.2%), driven by tourism and construction. ✅ Revenue collection is improving, reducing fiscal pressure. ✅ Clove and seaweed exports are supporting foreign exchange earnings.
🔸 Challenges: ⚠ Inflation is rising, increasing the cost of living. ⚠ Imports are growing faster than exports, widening the trade deficit. ⚠ Government spending exceeds revenue, creating a budget deficit.
Key Insights from Zanzibar’s Economic Performance (January 2025)
1. Strong Economic Growth (6.2%) Driven by Tourism and Industry
Zanzibar’s economy expanded by 6.2% in 2024, up from 5.6% in 2023.
Growth was driven by tourism (services up 7.1%) and construction (industry up 5.8%).
What It Means:
✅ Tourism recovery is fueling service sector growth, increasing employment and foreign exchange. ✅ Construction and industrial expansion indicate long-term development and infrastructure improvements. ⚠ Agriculture is growing slowly (3.5%), meaning rural incomes and food security could be affected.
2. Inflation is Rising (4.3%), Driven by Higher Food and Transport Costs
Inflation increased to 4.3% in January 2025, from 4.0% in December 2024.
Food prices (+5.6%) and transport costs (+4.8%) were the main drivers.
What It Means:
⚠ The rising cost of living could reduce household purchasing power. ✅ Inflation remains manageable but needs monitoring to prevent further increases.
3. Trade Deficit Widening as Imports Outpace Exports
Total exports reached USD 134.2 million (+2.9%), driven by clove exports (USD 46.8 million) and seaweed (USD 12.1 million).
Imports rose to USD 521.6 million (+4.5%), mainly due to higher fuel and construction material imports.
Trade deficit widened to USD 387.4 million, increasing Zanzibar’s reliance on foreign currency inflows.
What It Means:
⚠ Zanzibar depends heavily on imports, making the economy vulnerable to global price fluctuations. ✅ Growing exports of cloves and seaweed help offset some trade losses.
4. Government Revenue is Growing, But Deficit Remains
Total revenue collection rose to TZS 115.6 billion (+5.2%), supported by higher tax collection (85.3% of revenue).
Total expenditure stood at TZS 137.9 billion, leaving a budget deficit of TZS 22.3 billion.
What It Means:
✅ Tax revenues are improving, reducing reliance on external aid. ⚠ The government continues to spend more than it collects, requiring better budget management.
Overall Economic Implications
🔹 Positive Signs: ✅ Strong economic growth (6.2%) shows resilience and investment expansion. ✅ Tourism and construction remain key drivers of Zanzibar’s economy. ✅ Revenue collection is improving, supporting government operations.
🔸 Challenges: ⚠ Inflation is rising, increasing living costs for households. ⚠ Imports are outpacing exports, widening the trade deficit. ⚠ Government spending exceeds revenue, requiring fiscal adjustments.
In October 2024, Tanzania’s economy showcased resilience and stability, with a GDP growth rate of 5.3% for Q2, fueled by trade (19.8%), financial services (11.4%), and transport (8.6%). Inflation on the Mainland remained low at 3.1%, while Zanzibar's inflation, at 5.1%, also declined, indicating effective price control across regions. Government revenue collection was robust, reaching TZS 2,539.3 billion in August, nearly 99% of the target, though expenditure exceeded revenue, adding to a national debt of USD 45.05 billion. Exports rose by 13.4%, driven by tourism and gold, contributing to a narrower current account deficit of USD 2.36 billion and foreign reserves sufficient for 4.4 months of imports, signaling economic resilience despite external pressures.
Inflation:
Mainland Tanzania: The 12-month headline inflation rate was 3.1% in September 2024, slightly lower than previous months, influenced by food and non-core factors.
Zanzibar: Headline inflation in September 2024 was 5.1%, down from 5.6% in August. Food and non-food inflation were primary contributors, with core inflation at 3.8%.
Interest Rates:
The overall lending rate in Tanzania increased to 15.53% in September 2024, with a negotiated lending rate at 12.92%.
Deposit Rates saw a rise, with the average overall deposit rate at 8.20%. Short-term lending rates narrowed to 6.49% due to banking competition.
Monetary Policy:
The Bank of Tanzania kept the Central Bank Rate (CBR) at 6% for Q3 2024. However, the 7-day interbank cash market rate reached 8.58%, reflecting higher seasonal cash demands.
Financial Markets:
Treasury Securities: The weighted average yield for Treasury bills rose to 10.85%, with government bond yields on the rise as well.
Foreign Exchange: The Tanzanian Shilling depreciated by 10.1% year-on-year, trading at approximately TZS 2,727 per USD.
Government Budgetary Operations:
Revenue: In August 2024, total government revenue reached TZS 2,539.3 billion, representing 98.8% of the target. Tax revenue amounted to TZS 2,064.8 billion.
Expenditure: Total spending in August was TZS 3,219.8 billion, with TZS 1,945.6 billion in recurrent expenditure.
Debt Developments:
Total National Debt: Stood at USD 45.05 billion in September 2024, with external debt making up 73%. The domestic debt decreased to TZS 32.6 trillion, dominated by Treasury bonds (78.9%).
External Sector Performance:
The current account deficit was USD 2.36 billion in the year ending September 2024, down from USD 3.39 billion in 2023.
Exports: Goods and services exports totaled USD 15.35 billion, up by 13.4%, driven by increased tourism and commodity exports, notably gold.
Economic Performance of Zanzibar:
GDP Growth: Zanzibar’s GDP grew by 4.6% in Q2 2024, with notable growth in the trade, financial services, and construction sectors.
Budgetary Operations: Zanzibar’s government revenue collections reached TZS 56.2 billion in August, meeting 88.6% of its target. Tax revenues were the largest contributor at TZS 48.7 billion.
The economic data reflects a generally stable and resilient economy but highlights areas of both strength and concern
Inflation Control:
The controlled inflation rates in both Mainland Tanzania and Zanzibar, particularly Mainland’s low 3.1%, indicate effective management of price stability amid global inflationary pressures. Zanzibar’s slightly higher rate of 5.1% reflects regional differences but still aligns with manageable levels. This stability in prices suggests consumers are less impacted by volatile prices, particularly for essential goods.
Interest Rates and Monetary Policy:
The increase in lending rates to 15.53% and the slight narrowing of the deposit-lending spread indicates tighter credit conditions, likely aimed at controlling inflation. The Bank of Tanzania’s cautious monetary policy with the 6% Central Bank Rate (CBR) signals an intent to stabilize liquidity in the economy, especially considering seasonal demands. Higher lending rates, however, may slightly discourage borrowing and investment, especially in small enterprises.
Government Revenue and Spending:
The government nearly met its revenue target in August (98.8%), showing strong tax compliance and collection efficiency. However, with total spending surpassing revenue, there is a budget deficit, indicating reliance on borrowing. Prioritizing essential expenditure and fiscal consolidation efforts reflects a balanced approach to managing resources.
Debt Management:
The national debt reaching USD 45.05 billion (with 73% as external debt) is a point of concern. While manageable in the short term, it emphasizes Tanzania’s reliance on foreign funding, which could be risky if global financing conditions worsen. However, the controlled growth in domestic debt reflects prudent management of internal resources and risk.
External Sector Performance and Trade:
Tanzania’s current account deficit narrowed significantly, supported by a strong export performance, particularly in tourism and commodity exports (e.g., gold). The tourism sector's robust recovery and increased exports contribute positively to foreign exchange reserves, which remain above the 4-month import benchmark. This performance strengthens Tanzania’s economic resilience and external stability, though the shilling’s depreciation signals pressures on the currency.
Zanzibar's Economic Health:
Zanzibar’s growth in sectors like trade, financial services, and construction suggests diversification and steady economic development. The revenue collection in Zanzibar reaching 88.6% of its target also reflects improved fiscal management, though budget deficits still exist. This performance points to Zanzibar’s gradual but steady economic progression in line with Mainland Tanzania, driven by tourism and trade.
