Tanzania’s current account deficit expanded to USD 4,807.9 million in January 2025, a 14.1% increase from USD 4,215.3 million in December 2024, driven by higher imports of fuel and capital goods. Total exports rose to USD 12,865.2 million (+1.7%), supported by gold exports (USD 3,147.6 million) and manufactured goods. However, imports grew faster, reaching USD 19,423.1 million (+3.8%), with oil imports surging to USD 5,603.4 million (+5.8%). The balance of payments deficit improved to USD 718.5 million, supported by FDI inflows of USD 2,643.8 million (+5.4%), while foreign exchange reserves increased to USD 5,323.6 million, covering 4.3 months of imports.

1. Current Account Deficit Expands

• Tanzania’s current account deficit widened to USD 4,807.9 million in January 2025, compared to USD 4,215.3 million in December 2024.
• This 14.1% increase was driven by higher imports of capital goods and services.

What It Means:

⚠ A rising current account deficit means more foreign exchange is leaving the country than entering, increasing pressure on the Tanzanian Shilling.
✅ Higher imports of capital goods may signal growing investment in infrastructure and production capacity.

2. Exports and Imports: Trade Deficit Widens

Exports Increased Slightly

• Total exports of goods and services reached USD 12,865.2 million in January 2025, a 1.7% increase from USD 12,653.1 million in December 2024.
• Traditional exports rose to USD 958.7 million, with coffee and cashew nuts leading the increase.
• Gold exports remained stable at USD 3,147.6 million, maintaining its position as the top foreign exchange earner.
• Non-traditional exports (manufactured goods, minerals) increased to USD 4,726.3 million, supported by higher demand in regional markets.

Imports Grew Faster than Exports

• Total imports of goods and services reached USD 19,423.1 million in January 2025, a 3.8% increase from USD 18,714.5 million in December 2024.
• Oil imports accounted for USD 5,603.4 million (28.8% of total imports), up from USD 5,298.2 million in December 2024, reflecting rising global fuel prices.
• Imports of industrial machinery and transport equipment rose to USD 3,984.5 million, indicating investment in industrial development.

What It Means:

⚠ Imports are rising faster than exports, increasing the trade deficit.
✅ Higher machinery imports indicate long-term economic investments, which could boost future production capacity.
✅ Stable gold exports support Tanzania’s foreign exchange reserves and economic stability.

3. Balance of Payments (BOP): Deficit Narrows Due to Capital Inflows

• The overall balance of payments deficit stood at USD 718.5 million in January 2025, an improvement from USD 985.2 million in December 2024.
• Foreign direct investment (FDI) inflows increased by 5.4% to USD 2,643.8 million, driven by investments in energy and mining.
• Foreign exchange reserves improved slightly to USD 5,323.6 million, covering 4.3 months of imports, up from USD 5,107.1 million in December 2024.

What It Means:

✅ Higher FDI inflows are supporting economic growth and reducing reliance on debt financing.
✅ Improved forex reserves strengthen Tanzania’s ability to manage currency fluctuations.
⚠ The balance of payments deficit remains a concern, but lower than in previous months.

Summary of Key Trends

Economic Implications of Tanzania’s External Sector Performance

🔹 Positive Signs:
✅ Exports, particularly non-traditional goods and gold, continue to provide foreign exchange.
✅ FDI inflows are growing, supporting economic expansion.
✅ Foreign exchange reserves have improved, ensuring currency stability.

🔸 Challenges:
⚠ The current account deficit is widening due to high imports, increasing forex pressure.
⚠ Rising oil imports (USD 5.6 billion) could strain foreign reserves if global prices remain high.
⚠ The trade deficit is growing as imports outpace exports, requiring long-term export diversification.

Key Insights from Tanzania’s External Sector Performance (January 2025)

1. Current Account Deficit is Growing (+14.1%)

• The current account deficit expanded to USD 4,807.9 million in January 2025, up from USD 4,215.3 million in December 2024.
• This 14.1% increase was mainly due to rising imports of capital goods, machinery, and fuel.

What It Means:

⚠ More foreign exchange is leaving Tanzania than coming in, putting pressure on the Tanzanian Shilling.
✅ Higher imports of machinery and industrial equipment suggest long-term investment in economic growth.

2. Trade Deficit is Expanding as Imports Grow Faster than Exports

• Total imports rose to USD 19,423.1 million (+3.8%), while exports increased to USD 12,865.2 million (+1.7%).
• Oil imports surged by 5.8% (USD 5,603.4 million), reflecting higher global fuel prices.
• Gold exports (USD 3,147.6 million) remained stable, providing a strong source of foreign exchange.

What It Means:

⚠ Rising oil prices are increasing Tanzania’s import bill, putting pressure on forex reserves.
✅ The stability of gold exports helps maintain foreign exchange earnings.
⚠ The trade deficit is widening, requiring stronger export growth to balance imports.

3. Balance of Payments is Improving Due to FDI Inflows

• The balance of payments deficit improved to USD 718.5 million, down from USD 985.2 million in December 2024.
• Foreign Direct Investment (FDI) increased by 5.4% to USD 2,643.8 million, mainly in energy and mining.
• Foreign exchange reserves rose to USD 5,323.6 million, covering 4.3 months of imports.

What It Means:

✅ Higher FDI inflows reduce reliance on borrowing and improve economic stability.
✅ Stronger forex reserves support exchange rate stability and import coverage.
⚠ Tanzania still faces external financing pressures due to the trade and current account deficits.

Overall Economic Implications

🔹 Positive Signs:
✅ Tanzania continues to attract FDI, especially in energy and mining.
✅ Foreign exchange reserves have strengthened, supporting currency stability.
✅ Exports, particularly gold and manufactured goods, remain strong sources of forex earnings.

🔸 Challenges:
⚠ The current account deficit is widening due to high import costs, mainly oil and capital goods.
⚠ The trade deficit is increasing, meaning more money is leaving the country than coming in.
⚠ Tanzania’s reliance on oil imports makes it vulnerable to global fuel price fluctuations.