Tanzania: When Economic Progress and Social Unrest Collide

Tanzania's Development Paradox

Tanzania presents a striking paradox: while demonstrating impressive progress in multiple dimensions, the country has recently experienced significant social unrest following its October 2025 elections, with international observers and domestic stakeholders expressing serious concerns about the electoral process and its aftermath. This juxtaposition underscores a fundamental lesson in development economics—that economic dynamism and social stability are not separate trajectories but deeply intertwined forces.

An important part of Tanzania's story is captured through WorkN'Play's Economic Intelligence App and validated by the IMF's comprehensive 2025 assessment. The country has earned one of the highest overall ratings in Africa, scoring 60.98 and placing it in the "Very High" category. This positions the country second among all African nations, ahead of economic powerhouses like South Africa, Kenya, and Egypt. But what makes this achievement particularly noteworthy isn't just the rating itself—it's the velocity at which Tanzania is moving forward, consistently exceeding expectations and demonstrating what the IMF characterizes as "robust growth and macro-financial stability underpinned by prudent macroeconomic management."

Economic Intelligence: The WorkN'Play Innovation

Traditional economic analysis often provides static snapshots—where countries stand today. WorkN'Play's Economic Intelligence App takes a different approach, performing half a million mathematical transformations across 165+ metrics to measure not just current performance but rates of change through 3-year Compound Annual Growth Rates. This dual focus reveals which countries are building systematic competitive advantages through accelerating improvement.

The methodology analyzes six critical dimensions: demographics, macroeconomics, digital access, environment, governance, and supply chain management. For each metric, both the present indicator and its momentum are assessed, recognizing that a country improving rapidly from a moderate base often matters more than one standing still at a higher level. This philosophical insight transforms how we understand economic development—it's the economic equivalent of measuring both position and velocity in physics.

The IMF's rigorous program monitoring provides independent validation of these patterns through quantitative performance criteria, structural benchmarks, and reform measures across fiscal policy, monetary operations, financial sector stability, and climate resilience. The successful completion of Tanzania's Fifth ECF Review and Second RSF Review, with $448.4 million in approved disbursements, confirms that the momentum captured by WorkN'Play's methodology reflects sustainable, policy-driven change rather than temporary circumstances.

Demographic Dynamism Driving Long-Term Growth

Tanzania's population of 66.6 million is growing at 3.00% annually, outpacing the African continental average of 2.28%. More significantly, the working-age population is expanding at 3.39% per year compared to 2.79% for Africa—a 0.6 percentage point advantage that compounds annually. Over a decade, this differential translates to substantially greater human capital accumulation and workforce capacity.

Urban population growth at 5.08% annually represents a 48% faster urbanization rate than Africa's 3.43% average. This matters enormously because urbanization correlates strongly with productivity gains, industrialization, and service sector development. The urban population share itself is increasing at 2.02% annually, meaning the transformation is accelerating over time rather than proceeding linearly.

Tanzania's literacy rate of 82.59% substantially exceeds Africa's 71.06% average, and it's growing at 0.70% annually compared to 0.66% for the continent. While this differential appears marginal, sustained advantages in human capital growth rates produce exponential long-term divergence—precisely the pattern WorkN'Play's methodology is designed to detect.

The IMF assessment acknowledges both the opportunity and challenge: "Despite strong growth and ongoing progress in securing macro-financial stability, Tanzania faces daunting challenges to meet SDG targets, including education and health goals," particularly given the population is expected to double by 2050. This demographic pressure makes the positive momentum indicators even more critical—Tanzania must accelerate human capital development to convert population growth into economic advantage.

Economic Acceleration Creating Compound Effects

Real GDP growth accelerated to 5.5% in 2024, driven by strong activity in agriculture, mining, financial services, electricity production, and construction. The IMF projects growth will reach 6.0% in 2025, 6.3% in 2026, and stabilize around 6.5% over the medium term. This upward revision pattern itself demonstrates momentum—each year's forecast exceeds the previous, suggesting compounding improvements in economic fundamentals.

Tanzania's GDP has been growing at a 6.17% 3-year CAGR, with household consumption expenditure growth at 5.88% nearly matching overall GDP expansion. This indicates inclusive growth where gains are broadly distributed rather than concentrated among elites—a pattern both analytical frameworks recognize as essential for sustainable development.

Perhaps most striking is gross capital formation at $32.4 billion with an 8.19% annual growth rate, substantially exceeding both GDP growth and the continental average. This represents a leading indicator: today's investment momentum predicts tomorrow's output growth as new infrastructure and productive capacity come online. Government expense growth at 10.83% reflects Tanzania's deliberate strategy to invest in infrastructure and social services, though the IMF emphasizes the authorities' commitment to "growth-friendly fiscal consolidation" using revenue expansion rather than expenditure cuts.

The export sector demonstrates the power of analyzing momentum rather than absolute levels. Exports of services at $6.3 billion are growing at 42.23% annually—more than double the 16.26% continental average. While still relatively small compared to goods exports, a 42% growth rate means this sector doubles every two years.

Fiscal Innovation Through Revenue Transformation

Tanzania's recently approved Medium-Term Revenue Strategy represents a structural break in fiscal capacity—not linear improvement but an inflection point. The MTRS projects additional yields of 0.5% of GDP in FY2025/26 and 1.0% of GDP annually thereafter through comprehensive reforms addressing widespread tax exemptions, inefficient administration, and Tanzania's revenue performance falling "well below its potential," as the IMF assessment notes.

The strategy combines policy reforms to broaden the tax base, administrative reforms including automation and risk-based compliance management, and legal reforms to consolidate tax legislation. The Tanzania Revenue Authority's deployment of integrated digital systems—with full implementation by December 2025—represents the technological foundation for sustained revenue momentum.

The IMF's debt sustainability analysis confirms the strategy's viability: "Tanzania's external position in 2024 is assessed to have been moderately stronger than the level implied by fundamentals and medium-term desirable policies." Public debt at 49.2% of GDP remains below the 50% East African Community convergence criterion, with all external debt burden indicators staying below policy-dependent thresholds under baseline scenarios. This provides fiscal space for continued investment in human capital and infrastructure while maintaining macroeconomic stability.

Priority social spending has increased to 7.1% of GDP under the ECF program, though substantial gaps remain. The IMF estimates education spending would need to increase by an additional 4.2% of GDP and health spending by 2.1% of GDP over the next five years to meet SDG targets—critical investments given Tanzania's young, rapidly growing population. The authorities recognize these challenges, with the FY2025/26 budget maintaining priority social spending levels while creating fiscal space through revenue mobilization for future expansion.

Digital Infrastructure Building Network Effects

Tanzania's internet-using population of 19.4 million is growing at 21.33% annually—nearly double Africa's 11.11% rate. This differential means Tanzania's digital divide with continental peers is closing at 10 percentage points annually, and over a decade this transforms the economy's competitive position fundamentally. Internet penetration rate growth at 17.80% annually reveals not just faster adoption but accelerating adoption, suggesting Tanzania has achieved network effects where each new user increases the value proposition for remaining non-users.

Mobile cellular subscriptions at 70.2 million represent 105.40% penetration, growing at 11.09% annually. The above-100% penetration rate—because many citizens maintain multiple subscriptions—suggests sophisticated digital engagement rather than basic mobile phone ownership. ICT service exports at $57 million with 60.96% annual growth represent today's modest base becoming tomorrow's economic pillar: at 61% annual growth, this sector multiplies by 10x every 4.3 years.

Financial inclusion data validates the digital infrastructure impact. The Finscope survey shows formal financial inclusion reached 76% in 2023, up from 65% in 2017, driven largely by mobile money platforms. The Bank of Tanzania's initiatives—National Identification Number rollout, Tanzania Instant Payments System, Fintech Sandbox regulations—create the institutional foundation for sustained momentum. The IMF confirms: "The Bank of Tanzania's initiatives include rolling out the National Identification Number system, implementing the Tanzania Instant Payments System, and preparing regulations for Islamic Banking and Fintech Sandbox operations—all supporting deeper financial sector development."

Governance Improvements Diverging From Continental Trends

Governance momentum tells a story that static rankings miss entirely. Tanzania's Government Effectiveness Index at -0.46 appears negative in absolute terms, but the 14.14% annual improvement rate is nearly twice Africa's 7.26% average. Over five years, this differential amounts to transformative institutional strengthening. Even more striking, the Political Stability Index is growing at 44.13% annually while Africa's average declined by 8.86%—representing not just outperformance but fundamental divergence.

Specific freedom indices demonstrate positive momentum while continental trends deteriorate: Freedom of Expression Index growing at 12.38% annually versus -0.85% for Africa; Civil Liberties Index growing at 7.60% versus -0.86%; Women Civil Society Participation Index growing at 4.44% versus 0.84%. Each represents positive momentum against negative continental trends—divergence that matters far more for long-term economic prospects than absolute index levels.

The Women Political Participation Index stands at 1.00, indicating full gender parity in political engagement—a rare global achievement. The IMF validates this governance improvement: "Tanzania scores particularly well on civil liberties and democratic participation...The authorities' commitment to governance is further evidenced by mandating all state-owned enterprises to publish audited financial statements—a significant transparency measure."

The June 2025 removal from the FATF grey list after completing all 21 action plan items represents a discrete jump in governance quality. Following an April 2025 onsite visit, the FATF decided to remove Tanzania from the list of jurisdictions under increased monitoring. This achievement removes a significant constraint on international financial flows and enhances the country's reputation for sound financial governance.

However, governance is dynamic rather than linear, and recent events underscore that historical momentum indicators measure past trajectories rather than predict future outcomes with certainty. The October 2025 electoral period brought significant challenges that have drawn international attention and concern. Sustainable governance requires not only institutional capacity building but also inclusive political processes, respect for civil liberties, and peaceful resolution of disputes—elements that remain critical to Tanzania's development path.

Supply Chain Excellence Creating Regional Advantage

Tanzania's Customs Clearance Process Efficiency Index at 3.99 is growing at 5.58% annually versus 0.46% for Africa—institutional improvement at 12x the continental rate representing structural transformation of trade facilitation capacity. Lead time to import at 4 days with a 29.55% annual decline rate versus 12.99% for Africa means Tanzania's time-to-market advantage over African peers is expanding by 16+ percentage points annually. Over five years, this compounds into overwhelming competitive advantage.

Quality of Trade Infrastructures Index growth at 1.75% annually versus 0.65% for Africa reflects Tanzania's massive infrastructure investments: Standard Gauge Railway expansion, Dar es Salaam port modernization, road network upgrades. These investments typically show multi-year lags before productivity impacts appear, but momentum indicators capture the trajectory before full benefits materialize.

The IMF confirms the logistics transformation: "Lead times for both exports and imports have fallen to just 4 days, with import lead times declining at an exceptional 29.55% annual rate. These improvements reduce costs for businesses and enhance Tanzania's competitiveness as a manufacturing and transshipment location."

Environmental Stewardship Despite Growth Pressures

Tanzania's environmental performance reveals nuanced momentum dynamics. Terrestrial protected area covering 39.90% of territory is growing at 1.46% annually—demonstrating commitment to conservation even as land pressure intensifies from 3% annual population growth. Forest area at 50.58% of territory is declining at only 1.03% annually, modest considering rapid urbanization at 5.08% annually would typically drive much faster deforestation.

Water productivity at $12.39 is growing at 4.01% annually versus Africa's $45.39 and 1.07% growth—Tanzania is improving water use efficiency nearly four times faster than the continental average. This matters enormously for a country facing climate-related water stress and demonstrates deliberate strategy rather than circumstance.

CO2 emissions per capita at 0.29 metric tons with 1.82% annual growth compares to Africa's 1.20 metric tons and 0.50% growth. Emissions are rising as the economy grows, but from an extremely low base and reflecting industrialization and electrification necessary for development while maintaining emissions well below continental averages.

The IMF's Resilience and Sustainability Facility supports these efforts through comprehensive reforms: "The RSF-supported reforms include amending the Environmental Management Act to strengthen climate governance, developing common climate scenarios and vulnerability maps for planning purposes, establishing a Disaster Risk Financing Framework, and mainstreaming climate considerations into public investment appraisal." All five Reform Measures for the current review have been implemented, including climate assessments integrated into the FY2025/26 budget and natural disaster fiscal risk assessments.

Monetary Framework Modernization

The Bank of Tanzania's January 2024 launch of an interest rate-based monetary policy framework represents a discrete structural break. Inflation averaging 3.1% in 2024 and 3.2% in May 2025 within the 3-5% target range validates the framework's effectiveness, while private sector credit growth at 17.1% for the year ending May 2025 demonstrates improving monetary transmission despite the transition period.

Exchange rate flexibility increased markedly, with the de facto arrangement reclassified from "crawl-like" to "floating" in November 2024—a fundamental shift in monetary regime. The published Foreign Exchange Intervention Policy provides transparency that reduces market uncertainty and improves the business environment by reducing risk premiums. Gross international reserves at $5.7 billion covering 3.8 months of imports remain adequate, as the IMF confirms: "Tanzania's external position in 2024 is assessed to have been moderately stronger than the level implied by fundamentals and medium-term desirable policies."

The IMF assessment notes continued work needed: "Monetary operations could be strengthened by improving liquidity forecasting capacity and operation of standing facilities." These institutional capacity improvements typically show multi-year development trajectories, with compounding benefits as systems mature and market participants adapt to the new framework.

Looking Forward: Momentum as Competitive Advantage

For investors, development partners, and policymakers evaluating opportunities across Africa's 54 nations, combining momentum-based analysis with rigorous program monitoring provides a powerful framework. Traditional metrics might highlight countries with higher current GDP per capita, better infrastructure, or stronger institutions. But measuring rates of change reveals which countries are building systematic competitive advantages through accelerating improvement across multiple dimensions.

Tanzania's high momentum scores—validated by successful IMF program implementation, all quantitative performance criteria for end-December 2024 met, structural benchmarks showing steady progress, and all five RSF Reform Measures implemented—signal genuine opportunity backed by policy credibility. While significant challenges remain—particularly managing rapid urbanization, ensuring inclusive growth, scaling up social services to meet SDG targets, and navigating climate risks—the trajectory points unmistakably upward.

However, economic potential cannot be fully realized without peace, stability, and social cohesion. Recent events have underscored a fundamental truth: sustainable development requires not only sound economic policies but also inclusive governance, respect for democratic principles, and peaceful civic engagement. The disruptions following the October 2025 elections—including reported loss of life, displacement, and economic disruption—serve as sobering reminders that political stability and social harmony are prerequisites for translating economic momentum into broadly shared prosperity.

The path forward requires commitment from all stakeholders—government, civil society, private sector, and international partners—to building institutions that serve all Tanzanians, protecting fundamental rights, ensuring accountability, and creating spaces for constructive dialogue. Economic data tells an important part of Tanzania's story, but the full narrative must include the voices, aspirations, and wellbeing of its 66.6 million people. Only through combining economic dynamism with political inclusion and social stability can Tanzania realize its considerable potential as a rising force in African development.

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Jean Jacques André is Founder and CEO of WorkN'Play, developer of the Economic Intelligence App, and Director and Board Member of MauBank Holdings Ltd, overseeing a diversified financial group comprising commercial banking, investment banking, and corporate factoring operations.

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