Global Economic Situation

• Growth and Inflation: Global growth has improved, driven by better-than-expected performance in advanced and emerging economies. Inflation is declining but remains above pre-pandemic levels due to eased policy tightening by central banks and moderating energy and food prices.

Domestic Economic Performance

1. Inflation
   • Headline Inflation: Remained within the target of 5 percent, at 3.1 percent in May 2024. Core inflation was at 3.6 percent.
   • Food Inflation: Decreased to 1.6 percent from 8.5 percent a year earlier, indicating food adequacy in markets despite rising transportation costs.
   • Energy, Fuel, and Utilities: Inflation increased to 9.8 percent in May 2024 from 9.3 percent in April 2024 due to higher prices of wood charcoal, firewood, and domestic pump prices.
2. Money and Credit
   • Money Supply: Extended broad money supply (M3) grew by 12.2 percent in May 2024, driven by private sector credit.
   • Credit to Private Sector: Growth was at 16.5 percent in May 2024, with agriculture, manufacturing, and building and construction sectors showing the highest growth.
3. Interest Rates
   • Lending Rates: Overall lending rate decreased to 15.23 percent in May 2024 from 15.42 percent in April 2024. The negotiated lending rate decreased to 12.68 percent from 13.95 percent.
   • Deposit Rates: Overall deposit rate increased to 8.05 percent from 7.44 percent, indicating a narrowing interest spread.
4. Financial Markets
   • Government Securities: Treasury bills and bonds auctions were oversubscribed, with the weighted average yield for Treasury bills easing to 7.86 percent from 10.33 percent. The yield for 15-year Treasury bonds increased to 15.16 percent from 13.66 percent in February 2024.
   • Interbank Cash Market: Total value of transactions in May 2024 was TZS 1,581.2 billion, with the overall IBCM interest rate increasing to 7.34 percent from 7.02 percent.
   • Interbank Foreign Exchange Market: Improved with USD 10.3 million traded in May 2024 compared to USD 2.3 million in April 2024. The shilling depreciated by 11.6 percent annually.
5. Government Budgetary Operations
   • Revenue and Expenditure: Domestic revenue for April 2024 was TZS 2,119 billion, equivalent to 94.1 percent of the target. Government expenditure was TZS 2,480.4 billion, focusing on priority spending with TZS 1,882.8 billion for recurrent expenditure and TZS 597.5 billion for development expenditure.
6. Debt Developments
   • National Debt: Total debt stock was USD 43,119.8 million at the end of May 2024, with external debt accounting for 72.4 percent. External debt increased by 1 percent month-on-month to USD 31,212.4 million.

Economic Performance in Zanzibar

• Inflation: Inflation remained within targets.
• Government Budgetary Operations: Focused on maintaining fiscal stability.
• External Sector Performance: Continued positive trends in trade and tourism.

These key economic indicators highlight the current economic conditions and trends in Tanzania, indicating a stable inflation environment, growing money supply, improving financial market activities, and manageable debt levels. The government’s budgetary operations focus on revenue collection and expenditure control, with an emphasis on development projects and fiscal stability.

The key economic indicators from the document suggest several aspects of Tanzania's economic development

The indicators point to a generally positive trajectory for Tanzania's economic development, characterized by stable inflation, growing money supply and credit, effective fiscal management, and a manageable debt situation. The emphasis on agriculture, infrastructure development, and financial market stability aligns with sustainable economic growth and development goals. Continued focus on these areas, coupled with measures to enhance the business environment and investment climate, will be crucial for maintaining and accelerating this growth trajectory.

1. Stable Inflation Environment

• Low Inflation: The headline inflation rate is maintained within the country’s target of 5 percent, standing at 3.1 percent in May 2024. This stability indicates effective fiscal and monetary policies, ensuring price stability and protecting the purchasing power of consumers.
• Controlled Food Prices: The significant reduction in food inflation from 8.5 percent to 1.6 percent over a year reflects an adequate supply of food, suggesting improvements in agricultural productivity and distribution.

2. Positive Money and Credit Growth

• Growth in Money Supply: The 12.2 percent growth in extended broad money supply (M3) signals a healthy demand for money driven by economic activities. This growth is essential for supporting business operations and investments.
• Private Sector Credit Expansion: The 16.5 percent growth in credit to the private sector, particularly in agriculture, manufacturing, and construction, demonstrates confidence in these sectors and their potential to drive economic growth. The focus on agriculture is crucial for an agrarian economy like Tanzania.

3. Improving Financial Market Conditions

• Government Securities: Oversubscription in Treasury bills and bonds auctions indicates strong investor confidence in government securities, providing the government with necessary funds for development projects.
• Interbank Market Stability: Active interbank cash market transactions and a stable interbank interest rate suggest liquidity stability in the banking sector, fostering a reliable financial environment for businesses.

4. Government Budgetary Operations and Fiscal Management

• Revenue Collection: The government’s ability to collect 94.1 percent of its revenue target highlights effective tax policies and administrative measures. This revenue is essential for funding public services and infrastructure.
• Expenditure Control: The streamlined government expenditure, focusing on priority spending, indicates prudent fiscal management. The allocation of significant funds to development expenditure reflects a commitment to long-term economic growth.

5. Manageable Debt Levels

• Sustainable Debt Stock: The national debt stock, with a marginal increase, and external debt being managed effectively, suggests that Tanzania is maintaining debt at sustainable levels. Effective debt management is critical for avoiding fiscal crises and ensuring economic stability.

6. Sectoral Developments

• Agricultural Sector: The focus on agriculture through increased credit and improved food supply is vital for an economy where a large portion of the population depends on agriculture for livelihood.
• Tourism and Trade: Improved receipts from tourism and agricultural exports contribute positively to the external sector performance, supporting foreign exchange reserves and economic stability.