By Business Insider Reporter
Zanzibar’s external economic position strengthened in the year ending August 2026, supported by rising tourism-related earnings and increased exports of goods and services, although higher import costs, persistent food inflation and declining exports of some manufactured products remain challenges.
The central bank’s September 2026 Monthly Economic Review (MER) shows that Zanzibar’s current account surplus widened by over 19 percent to US$953.7 million, reflecting stronger service receipts, particularly from increased visitor arrivals, and lower service payments.
The performance highlights the importance of tourism in generating foreign exchange for the spice islands, while also raising questions about the sustainability of external-sector gains as merchandise imports continue to grow faster than export earnings.
Total exports of goods and services increased by 18.8 percent to US$1.847 billion in the year ending August 2026, compared with US$1.554 billion a year earlier. The Bank of Tanzania (BoT) attributed the growth mainly to tourism-related service receipts.
Service receipts reached US$1.778 billion, up 16.8 percent from US$1.522 billion in the corresponding period of 2025. The services account recorded a surplus of US$1.707 billion, an increase of 20.2 percent.
“The current account surplus widened by 19.3 percent to US$953.7 million in the year ending August 2026, from US$799.3 million in the corresponding period of 2025. The improvement was backed by higher service receipts, which continued to benefit from increased visitor arrivals and lower service payments,” BoT notes in the new MER.
Goods exports show mixed performance
Exports of goods more than doubled to US$69.2 million from US$32.5 million in the year ending August 2025, largely supported by traditional exports, particularly cloves.
Clove exports reached US$42.5 million, compared with US$3.6 million a year earlier, according to the review. The increase reflects the importance of the crop in Zanzibar’s merchandise export earnings during the period.
Nevertheless, performance across other export categories was mixed. Exports of fish and fish products increased by 44.1 percent to US$1.05 million, while other exports rose by 62.8 percent to US$12.76 million.
In contrast, seaweed export earnings fell by 57.4 percent to US$1.31 million from US$3.08 million. Exports of manufactured goods declined by 33.2 percent to US$11.57 million from US$17.33 million.
The contrasting trends point to opportunities to improve the value and resilience of Zanzibar’s export base through stronger agricultural value chains, better processing capacity and greater competitiveness in manufactured products.
Imports grow faster than exports
Despite the stronger export performance, Zanzibar’s import bill increased considerably.
“Imports of goods and services increased by 40.4 percent to US$909.5 million in the year ending August 2026, driven mainly by capital and intermediate goods. Higher
capital goods imports were driven by imports of machinery and mechanical appliances,” reads the September 2026 MER.
“On a monthly basis, imports of goods and services rose to US$63 million in August 2026 from US$58.6 million in the corresponding month in 2025,” it adds.
Inflation remains a concern
Domestically, annual headline inflation eased to 5.6 percent in August 2026 from 6.0 percent in July, but remained above the 3.9 percent recorded in August 2025.
Food inflation stood at 9.8 percent, down from 11.1 percent in July but substantially higher than the 4.2 per cent recorded a year earlier. Non-food inflation, meanwhile, increased to 2.2 percent from 1.9 percent in July.
The review attributed the higher annual inflation rate, compared with August 2025, mainly to increased food prices, particularly Mbeya rice, sugar, fish and yellow cooking bananas, alongside higher transport costs associated with fuel prices.
Although consumer prices declined by 0.2 percent month-on-month in August, the elevated annual food inflation rate indicates continued pressure on household purchasing power.
Public spending focuses on development
Zanzibar’s government resources, comprising revenue and grants, amounted to TSh251.3 billion in August 2026, exceeding the monthly target by 10.4 per cent. The outturn was attributed to budget support from the World Bank.
Domestic revenue totalled TSh198 billion, equivalent to 92.7 percent of its monthly target. Tax revenue amounted to TSh174.5 billion, reaching 88.7 percent of the target, while non-tax revenue of TSh23.6 billion exceeded its target by 38.2 percent. Government expenditure reached TSh459 billion during the month, with 73.3 percent directed towards development projects and the remainder allocated to recurrent expenditure.
