Revenue Growth, Expenditure Trends, and Fiscal Deficit Challenges

Tanzania’s budget performance in December 2024 reflected strong revenue collection, controlled expenditure, and a widening fiscal deficit. The government collected TZS 2,737.6 billion, exceeding the target by 2.4%, driven by tax revenue (TZS 2,338.5 billion, up 4.4%). However, total government expenditure reached TZS 3,612.4 billion, with 67% allocated to recurrent costs and 33% to development projects. This resulted in a budget deficit of TZS 874.8 billion, financed through domestic and external borrowing, increasing public debt to USD 46.6 billion. While revenue mobilization improved, fiscal sustainability remains a concern, requiring diversification of income sources and better expenditure management​

Government Budgetary Operations – December 2024

Tanzania’s government budgetary operations in December 2024 reflected strong revenue collection and controlled expenditure, but the country still faced a budget deficit, requiring strategic fiscal management.

1. Central Government Revenues

• Total domestic revenue collected in December 2024 amounted to TZS 2,737.6 billion, exceeding the monthly target by 2.4%.
• Central government revenue accounted for 96% of total collections, reaching TZS 2,628.6 billion, surpassing the target by 2.5%.
• Tax revenue outperformed expectations by 4.4%, reaching TZS 2,338.5 billion, with strong contributions from:
  • Taxes on imports: TZS 940.6 billion
  • Income tax: TZS 628.8 billion
  • Taxes on local goods and services: TZS 495.9 billion
  • Non-tax revenue: TZS 290.1 billion, slightly below target​.

Implication:

✅ Higher revenue collection suggests improved tax compliance and efficient revenue mobilization.
⚠️ Non-tax revenue underperformance could indicate challenges in public sector efficiency and collection mechanisms.

2. Central Government Expenditure

• Total government spending in December 2024 was TZS 3,612.4 billion.
  • Recurrent expenditure: TZS 2,420.3 billion (for salaries, interest payments, and operational costs).
  • Development expenditure: TZS 1,192.1 billion (for infrastructure and social projects).
• Breakdown of spending categories:
  • Wages and salaries: TZS 1,105.2 billion
  • Interest payments: TZS 387.1 billion
  • Other recurrent expenditure: TZS 1,192.1 billion
  • Development expenditure: TZS 1,192.1 billion, primarily focused on public investments​.

Implication:

✅ Balanced spending on recurrent and development sectors ensures government services continue while maintaining infrastructure growth.
⚠️ High recurrent spending (~67% of total) may limit development financing, affecting long-term economic expansion.

3. Budget Deficit

• Budget deficit (before grants) stood at TZS 874.8 billion, meaning the government spent more than it collected.
• The deficit was primarily financed through borrowing, including domestic bonds and external loans.
• The public debt stock rose to USD 46,562.1 million, with 70.7% of this being external debt​.

Implication:

⚠️ A persistent budget deficit means the government relies on borrowing, increasing future debt service obligations.
✅ Managing the deficit through investment in productive sectors (infrastructure, energy, agriculture) could stimulate economic growth and future revenue.

Key Takeaways

• Revenue collection exceeded targets, with TZS 2,737.6 billion collected (+2.4% higher than planned).
• Total spending reached TZS 3,612.4 billion, with wages and salaries (TZS 1,105.2 billion) and development (TZS 1,192.1 billion) as major expenses.
• The budget deficit (TZS 874.8 billion) was mainly covered by borrowing, increasing total public debt to USD 46.6 billion.
• While strong revenue mobilization is promising, reducing reliance on borrowing is crucial for long-term fiscal sustainability​

The government budgetary operations for December 2024 reveal key insights about Tanzania’s fiscal position, revenue performance, expenditure priorities, and debt sustainability

1. Strong Revenue Performance but Dependence on Tax Revenue

• Revenue collection exceeded the target by 2.4% (TZS 2,737.6 billion), showing improved tax compliance and effective revenue mobilization.
• Tax revenue accounted for 85.4% of total revenue (TZS 2,338.5 billion), meaning the government relies heavily on taxes rather than alternative revenue sources.
• Non-tax revenue underperformed at TZS 290.1 billion, suggesting limited diversification of government income from sources like fees, dividends, and state-owned enterprises.

Implication:
✅ The government is collecting more revenue than expected, which is positive for fiscal stability.
⚠️ Heavy reliance on tax revenue means any economic slowdown could impact future revenue collection, requiring more diversification.

2. High Government Spending but Investment in Development

• Total expenditure was TZS 3,612.4 billion, with 67% going to recurrent spending (TZS 2,420.3 billion) and 33% to development (TZS 1,192.1 billion).
• High wage and salary costs (TZS 1,105.2 billion) suggest a large public sector wage bill, which limits resources for investment.
• Development spending (TZS 1,192.1 billion) was significant, meaning the government is still prioritizing infrastructure and public service improvements.

Implication:
✅ The government is maintaining investment in development projects, which can boost economic growth.
⚠️ High recurrent costs may crowd out spending on critical infrastructure and increase reliance on borrowing.

3. Budget Deficit and Rising Debt Levels

• The budget deficit stood at TZS 874.8 billion, meaning the government spent more than it collected.
• Public debt rose to USD 46.6 billion, with 70.7% being external debt.
• The government financed the deficit through domestic and external borrowing, increasing future debt servicing costs.

Implication:
⚠️ A persistent budget deficit means the government must borrow more, increasing debt obligations.
✅ If borrowing is channeled into productive sectors, it can stimulate long-term growth, making debt more sustainable.

Overall Takeaways

• Revenue collection is strong, but tax revenue dominates, posing a risk if economic conditions change.
• Government spending is high, particularly on wages and salaries, but development projects are still being prioritized.
• The budget deficit is concerning, but if borrowed funds are used effectively, they can help drive economic growth.
• Debt sustainability remains a challenge, requiring careful management to ensure Tanzania does not enter a debt crisis.

What Needs to be Done?

🔹 Diversify revenue sources beyond tax income.
🔹 Control recurrent spending, especially the public sector wage bill.
🔹 Ensure borrowed funds are invested in growth-driven sectors like infrastructure, agriculture, and energy.
🔹 Strengthen fiscal discipline to reduce reliance on debt financing