Headline Inflation: The twelve-month headline inflation rate remained stable at 3.1% from April to June 2024, staying within the national target of 5% and regional benchmarks (EAC's 8% and SADC's 3-7%).
Energy and Fuel: Energy, fuel, and utility inflation rose to 13.5% in June 2024, driven by higher prices
Monetary Policy
Monetary Aggregates: The Bank of Tanzania maintained an accommodative monetary policy stance to support economic recovery. As a result, extended broad money supply (M3) grew by 10.3% in the year ending June 2024, largely driven by an increase in net domestic assets.
Interest Rates: Interest rates remained relatively stable, with the overall lending rate averaging 16.61% in June 2024. The overnight interbank cash market rate decreased slightly to 3.81% in June 2024, down from 4.91% in March 2024.
Exchange Rate and External Sector
Exchange Rate: The Tanzanian shilling (TZS) remained relatively stable against the US dollar, depreciating by only 0.2% between March and June 2024. The average exchange rate was around TZS 2,331 per USD in June 2024.
Exports: The value of goods and services exports increased by 10.2% in the year ending June 2024, largely due to improved performance in non-traditional exports, particularly gold and manufactured goods.
Imports: The value of imports of goods and services increased by 9.3% over the same period, with oil imports contributing significantly to this growth.
Current Account Deficit: The current account deficit widened to USD 1.4 billion in the year ending June 2024, primarily due to the increase in imports and a slowdown in private transfer receipts.
Fiscal Performance
Government Revenue: Government revenue was TZS 27.3 trillion in the fiscal year 2023/24, which was 94% of the target. Tax revenue accounted for the majority, with domestic revenue collection being a key contributor.
Expenditure: Government expenditure was aligned with the revenue performance, with recurrent expenditure constituting the bulk of the spending. Development expenditure was directed towards infrastructure projects, particularly in transport and energy.
Public Debt: Tanzania’s public debt stood at USD 39.1 billion as of June 2024, which is about 41.2% of GDP. The debt remains sustainable, but the government is cautious about new borrowing, particularly non-concessional loans.
Economic Growth
GDP Growth: Tanzania's economy is projected to grow by 5.2% in 2024, driven by improvements in the agriculture, manufacturing, and construction sectors. This growth is supported by government investments in infrastructure and reforms aimed at improving the business environment.
Sectoral Performance: The agriculture sector is expected to grow by 4.5%, with food crop production being a key driver. The manufacturing sector is anticipated to grow by 8.1%, bolstered by increased production of food products, beverages, and construction materials. The construction sector is projected to grow by 8.4%, driven by ongoing infrastructure projects.
Financial Sector
Banking Sector: The banking sector remains stable and adequately capitalized, with an average capital adequacy ratio of 19.3% as of June 2024, well above the regulatory minimum of 10%.
Non-Performing Loans (NPLs): The ratio of NPLs to total gross loans decreased to 6.5% in June 2024, reflecting improved credit risk management by banks.
Financial Inclusion: Financial inclusion efforts continue to make progress, with the proportion of the adult population using formal financial services increasing to 86% in 2024, up from 83% in 2022.
Implication to Tanzania's economic development
Economic Growth and Development
GDP Growth: Tanzania's economy is projected to grow by 5.2% in 2024. This growth is supported by government investments in infrastructure, particularly in the transportation and energy sectors, which are crucial for sustainable development.
Sectoral Contributions: The agriculture, manufacturing, and construction sectors are the main drivers of economic growth. The focus on these sectors reflects Tanzania's strategy to diversify its economy and reduce dependency on traditional sectors such as agriculture by strengthening manufacturing and infrastructure development.
Infrastructure Development
Transport and Energy Projects: Significant investments have been made in transport and energy infrastructure. These projects are expected to enhance connectivity and energy availability, which are vital for industrialization and overall economic development. The focus on these areas indicates the government's commitment to creating a conducive environment for economic activities.
Fiscal and Monetary Policies
Supportive Monetary Policy: The Bank of Tanzania's accommodative monetary policy is aimed at supporting economic recovery and development. By keeping interest rates stable and ensuring adequate liquidity in the financial system, the government is fostering an environment conducive to business growth and investment.
Government Revenue and Spending: Government revenue collection has been robust, with a focus on mobilizing domestic resources to fund development projects. The emphasis on infrastructure spending, particularly on transport and energy, is part of a broader strategy to stimulate economic development.
Private Sector Development
Business Environment Reforms: The government has implemented reforms to improve the business environment, encouraging both local and foreign investments. These reforms are critical for private sector development, which is seen as a key driver of economic growth and job creation.
Financial Sector Stability
Banking Sector and Financial Inclusion: A stable and well-capitalized banking sector, along with efforts to increase financial inclusion, are essential for supporting economic development. With more of the population having access to formal financial services, there is greater potential for entrepreneurial activities and investments, which contribute to overall economic growth.
Sustainable Development and Debt Management
Public Debt: While Tanzania's public debt is increasing, it remains sustainable. The government's cautious approach to new borrowing, particularly non-concessional loans, reflects a strategy to maintain fiscal stability while funding essential development projects.
Sustainable Growth Initiatives: The focus on sectors like agriculture, which employs a large portion of the population, and manufacturing, which adds value to raw materials, indicates a strategy aimed at achieving sustainable and inclusive growth.
Challenges and Outlook
Inflation and External Pressures: While inflation has been kept in check, challenges such as rising energy and fuel prices could impact economic stability. Additionally, the widening current account deficit due to increased imports highlights the need for continued efforts to boost exports and manage external pressures.
Future Prospects: The outlook for Tanzania’s economy remains positive, with ongoing projects and reforms expected to yield further growth. The emphasis on infrastructure, industrialization, and financial inclusion aligns with long-term development goals.
