The Economy of Tanzania

Tanzania is among the fastest-growing economies in Africa and the world. According to the 2022 national census, Tanzania has a population of around 62 million, making it the most populous country located entirely south of the equator. Tanzania was formed as a sovereign state in 1964 through the union of the theretofore separate states of Tanganyika and Zanzibar. Mainland Tanganyika covers more than 99 percent of the combined territories’ total area. Mafia Island is administered from the mainland, while Zanzibar and Pemba islands have a separate government administration. Dodoma, since 1974 the designated official capital of Tanzania, is centrally located on the mainland. Dar es Salaam is the largest city and port in the country.

The Tanzanian Shilling (TZS) is the official currency for United Republic of Tanzania. The East Africa Tanzania currency has a unique design that showcases the country’s rich cultural heritage and natural beauty. The current series of banknotes features iconic Tanzanian landmarks, such as Mount Kilimanjaro, the Serengeti National Park, and the Zanzibar Archipelago. These vibrant banknotes come in denominations of 500, 1000, 2000, 5000, and 10,000 shillings, each with distinct colours and motifs that reflect Tanzania’s diverse landscapes and cultural heritage.

The livestock sector is a crucial source of employment and income in Tanzania, especially for the poorest rural households. It provides income-generating opportunities throughout the value chain, from production to processing and marketing, employing 33% of the population, or 4.6 million households. Livestock sales contribute to 13.8% of rural household incomes, with the poorest rural households obtaining nearly 20% of their income from such sales. The livestock sector also contributes considerably to national objectives such as food and nutrition security, as well as gender equality.

Tanzania’s economic development has been driven by a potential mining sector, and strong agricultural activities. Rich in mineral resources, the country exported gold valued at more than 2.7 billion U.S. dollars between April 2021 and 2022. Gold is certainly the most lucrative Tanzanian export item, while traditional exports, such as coffee, tea, sisal, and cashew nuts generated over 700 million U.S. dollars in the same period. Also, Tanzania is home to rich nature and wildlife, which attracts tourists, boosting the country’s services industry. In April 2022, tourism receipts from the previous 12 months accumulated to 1.5 billion U.S. dollars, strongly recovering compared to previous year when the travel sector felt the drastically the hit of the COVID-19 pandemic.

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According to the African Economic Outlook (AEO) 2024, real GDP growth is projected at 5.7% in 2024 and 6% 2025, driven by agriculture, manufacturing, and tourism and supported by public investments and reforms to improve the business environment. Inflation is projected to decline to 3.3% in 2024 and 3.4% in 2025, helped by stability in food and energy prices. The fiscal deficit, financed by domestic and external borrowing, is expected to decline to 2.5% of GDP in 2023/24 and stabilize at that level in 2024/25, supported by improvements in revenue performance. The current account deficit, financed by external borrowing, is projected at 4.0% of GDP in 2024 and 4.2% in 2025, supported by merchandise exports and tourism receipts. The major downside risks to the outlook include spillovers from geopolitical tensions and regional conflicts, sluggish global growth, the narrow tax base, and climate shocks.

Exports 

The top exports of Tanzania are Gold ($3.34B), Raw Copper ($1.31B), Refined Copper ($384M), Copper Ore ($288M), and Coconuts, Brazil Nuts, and Cashews ($286M), exporting mostly to India ($2.73B), United Arab Emirates ($1.07B), South Africa ($939M), Kenya ($482M), and Rwanda ($474M).

Imports 

The top imports of Tanzania are Refined Petroleum ($5.19B), Refined Copper ($1.17B), Vaccines, blood, antisera, toxins and cultures ($432M), Packaged Medicaments ($368M), and Cars ($318M), importing mostly from China ($6.54B), India ($4.05B), United Arab Emirates ($2.48B), Democratic Republic of the Congo ($1.17B), and Saudi Arabia ($548M).

Tanzania’s economy has been resilient, growing by 5.2% in 2023 compared to 4.6% in 2022. The services sector remained the main driving force behind Tanzania’s overall economic growth, expanding by 7.3%, supported by buoyant economic activities in financial and insurance, transport and storage, and trade and repair subsectors. Despite recurrent droughts and floods, the agriculture sector grew at 3.4% in 2023. While inflationary pressures continued to be moderate in Tanzania. Headline CPI inflation receded from 4.9% in January 2023 to 3.0% in January 2024 due to eased global commodity prices, moderate and timely fiscal subsidies, and tightening monetary policies. Notably, the Bank of Tanzania adopted an interest-rate-targeting monetary policy regime in January 2024 to strengthen inflation controls and anchor inflation expectations.

The government has demonstrated commitment to narrowing the fiscal deficit through enhanced tax revenue collection and restrained spending. The fiscal deficit fell from 4.6% of GDP to 3.0%, aligning well with the fiscal consolidation target of 3% for FY2023/24. Tanzania has also narrowed its current account deficit to 3.9% in 2023, helped by an uptick in tourism receipts, declining prices of commodities Tanzania imports, and an exchange rate policy aimed at accumulating foreign exchange reserves. In this context, between June and December 2023, Tanzania’s shilling depreciated by 7.8% against the US dollar, while gross reserves rose from $5.2 billion (4.8 months of imports) to $5.5 billion (4.5 months of imports). A flexible exchange rate regime and adequate external buffers, including foreign exchange reserves, will alleviate the recent forex pressures that the country has been experiencing.