TANZANIA: An Introduction

Tanzania’s Economic Activity, Trends and Other Such Developments

Background

The United Republic of Tanzania (Tanzania) targets inflation at a rate of 5% for a period of five years that culminates in 2030. This is in line with the objectives of the country’s monetary policy that is geared towards maintaining price stability aimed at a low and stable inflation rate over the time period to support economic growth.

Economic activity

The country’s economic growth is supported by agriculture, construction, improvement of transport and logistics, and stable power supply. With good harvests and increased investment in agriculture by the private sector, the resultant effect is to subdue inflation pressure through adequate food supply that will not water down purchasing power of its citizens. This, in turn, is also supported by a stable exchange rate and moderate oil prices in the world market.

Stability of the Tanzanian shilling, the country’s official currency, against major foreign currencies such as the US dollar and the British pound is also supported to a certain extent by the government’s implementation of the law which requires payments in Tanzanian shillings for domestic transactions. This is said to have contributed to reducing liquidity, appreciation of the Tanzanian shilling, and declination of the dollarisation and collapse of the foreign exchange parallel market.

All these major economic initiatives coupled with continued efforts by the government of Tanzania to rationalise expenditure to match with available resources have helped the government to contain inflation.

We have noted governments’ (Mainland Tanzania and Zanzibar) continued efforts to collect taxes in decent manners that in turn have prompted taxpayers to voluntarily comply, thus increasing revenue collection to both parts of the Union. These efforts have witnessed Mainland Tanzania’s domestic revenue collection in the second quarter of 2024/2025 that ended in December 2024 hitting a percentage of around 99.5%, said to have surpassed the target by 2.2%. For Zanzibar, the revenue collection target was surpassed by 3.9% for the same period.

Trends and other economic developments

The country has continued to create an enabling environment to support local and foreign investments. As the United Nations Conference on Trade and Development (UNCTAD) World Investment 2022 report indicates, Tanzania is one of the top ten destinations for foreign direct investment (FDI) in Africa. According to this report, the FDI inflows to Tanzania totalled USD922 million in 2022 compared with USD685 million in the 2021.

The government of Tanzania has continued to improve the investment environment that has positive impact on the manufacturing, infrastructure and energy sectors. We have witnessed huge improvements in tarred roads throughout the country, and modernisation of the railway to standard gauge (by mid-2024, the new standard gauge railway (SGR) started its operation from Dar-es-Salaam (the business city) to Dodoma (the capital city)). This has been enabled by the availability of reliable power due to huge investment from the government. Reliable power generation has also enabled the manufacturing sector to flourish and contribute to the domestic growth revenue.

The move by the government of Tanzania through the Bank of Tanzania to liberalise and introduce the auction of minerals on open markets has also contributed positively to the increase in the mineral reserve, especially gold as a strategic reserve for the country and as a defender of the parity of our currency. The move has also created more transparency in the mining sector and largely reduced criminals that used to swindle buyers of gold and other minerals on the illegal market.

The country has achieved this modest development amidst global challenges. We are aware of the hardships faced by the poorest and developing countries concerning global- and national-level policies needed to foster a more favourable environment to enhance macroeconomic stability, reduce structural constraints and the improve positive effects with respect to climate change. That is why the country has adopted a more robust macroeconomic policy stance that considers these challenges. Containing the rate of inflation and increasing revenue collection coupled with friendly environmental policies have made Tanzania more attractive to FDI and also acted as a catalyst toward domestic investment.

With the change in policy of the US under the Trump administration now in full swing, there are expected changes. But given the fact that Tanzania’s biggest trading partner is not the US, the effects of US policies will be felt on donations to various projects for which Tanzania used to get support from the US through the USAID. The Tanzanian government has already taken steps to address this policy change to reduce its negative impacts on those who would have been the ultimate beneficiaries of the grants or donations in Tanzania.