Strong Revenue Growth and Controlled Deficit

Tanzania’s government revenue collection exceeded expectations, reaching TZS 3,877.4 billion in January 2025, surpassing the target by 8.6%. Tax revenue stood at TZS 3,153.0 billion, driven by strong income tax collections (TZS 1,573.8 billion) and taxes on imports (TZS 962.2 billion). Government expenditure totaled TZS 3,806.3 billion, with TZS 2,413.0 billion allocated to recurrent spending and TZS 1,393.3 billion for development projects. The budget deficit remained low at TZS 30 billion, financed through domestic borrowing, reflecting fiscal discipline and sustainable spending.

1. Central Government Revenues

Strong Revenue Collection, Surpassing Monthly Target

• Total government revenue in January 2025: TZS 3,877.4 billion, which exceeded the target by 8.6%.
• Revenue collected by the Central Government: TZS 3,755.6 billion (96.9% of total revenue).
• Tax revenue: TZS 3,153.0 billion, surpassing the target by 1.7%, driven by improvements in tax administration and compliance.

Breakdown of Major Revenue Sources (January 2025)

What It Means:

• Revenue collection is improving, supported by higher tax compliance and administrative measures.
• Tax revenue remains the dominant source, while non-tax revenue (TZS 602.6 billion) also plays a key role.
• Income tax collections were strong, reflecting business growth and improved earnings in the economy.

2. Central Government Expenditure

Spending Aligned with Revenue Growth

• Total government expenditure in January 2025: TZS 3,806.3 billion
• Recurrent expenditure: TZS 2,413.0 billion
• Development expenditure: TZS 1,393.3 billion, focused on infrastructure and social services.

Breakdown of Major Expenditures (January 2025)

What It Means:

• Recurrent spending remains high, mainly on wages and salaries (TZS 936.4 billion) and interest payments (TZS 467.2 billion).
• Development spending (TZS 1,393.3 billion) shows continued investment in infrastructure and key sectors.
• Lower interest payments suggest improved debt management or lower borrowing costs.

3. Budget Deficit and Financing

Lower Budget Deficit Reflects Fiscal Discipline

• Total budget deficit (after grants): TZS 30 billion
• Deficit financing sources: Domestic borrowing

What It Means:

• The government is keeping the budget deficit under control, avoiding excessive borrowing.
• Financing through domestic borrowing suggests reliance on Treasury bonds and bills rather than external loans.
• Lower deficit means reduced fiscal pressure, which could help stabilize debt levels.

Summary of Key Trends

Implications for Tanzania’s Economy

🔹 Positive Signs:
✅ Revenue collection exceeded targets, showing better tax compliance and economic growth.
✅ The budget deficit remains low, indicating fiscal discipline.
✅ Lower interest payments suggest improved debt management.

🔸 Challenges:
⚠ Development spending slightly declined, which could impact long-term infrastructure projects.
⚠ Continued reliance on domestic borrowing may crowd out private sector investments.

Key Insights from Tanzania’s Government Budget Performance (January 2025)

1. Strong Revenue Collection Indicates a Growing Economy

• Total revenue exceeded the target by 8.6% (TZS 3,877.4 billion), showing stronger tax compliance and improved business activity.
• Income tax (TZS 1,573.8 billion) led revenue collection, meaning companies and individuals are earning more, contributing to tax growth.
• Taxes on imports (TZS 962.2 billion) were strong, reflecting stable trade activity despite global economic challenges.

What it Means:

✅ The economy is expanding, with businesses generating higher taxable income.
✅ Tax enforcement and compliance measures are working, leading to consistent revenue growth.
⚠ However, lower taxes on local goods and services suggest weaker domestic demand.

2. Balanced Spending: Government Focuses on Wages & Development

• Total expenditure stood at TZS 3,806.3 billion, with a balance between recurrent spending (TZS 2,413.0 billion) and development projects (TZS 1,393.3 billion).
• Wages & salaries (TZS 936.4 billion) remained high, ensuring stable public sector employment.
• Development spending (TZS 1,393.3 billion) declined slightly, which may slow infrastructure growth.

What it Means:

✅ Public sector jobs are secure, maintaining government service delivery.
✅ Continued investment in infrastructure and social services, though at a slightly lower level.
⚠ Reduced development spending could slow long-term economic expansion.

3. Lower Budget Deficit Suggests Fiscal Discipline

• Budget deficit was just TZS 30 billion, much lower than in previous periods.
• The government relied on domestic borrowing, reducing dependence on external loans.

What it Means:

✅ The government is controlling borrowing, reducing fiscal pressure.
✅ Lower deficit means lower risk of inflation from excessive government spending.
⚠ Heavy reliance on domestic borrowing may reduce credit availability for businesses.

Overall Economic Implications

🔹 Positive Signs:
✅ Revenue collection is strong, reflecting economic stability and improved tax administration.
✅ The budget deficit is low, meaning less pressure on government debt.
✅ Government spending is balanced, with a focus on both wages and infrastructure.

🔸 Challenges:
⚠ Lower domestic tax collection signals weak consumer demand.
⚠ Reduced development spending could affect long-term growth.
⚠ Domestic borrowing could limit credit for private businesses.