Services earnings strengthen Z’bar external position
ZANZIBAR: ZANZIBAR’S services sector continued to provide a strong external cushion in the year ending July, with the services account surplus expanding by 23 per cent to 1.659 billion US dollars, helping offset a sharp increase in the islands’ import bill.
According to the latest Bank of Tanzania Monthly Economic Review, services receipts rose by 20.2 per cent to 1.7433 billion US dollars, up from 1.4498 billion US dollars recorded in the corresponding period last year.
The performance highlights the growing importance of services in Zanzibar’s external sector, with the sector generating substantial foreign exchange needed to finance imports and support the islands’ balance of payments.
The improvement was reinforced by a decline in services payments, which fell by 16.8 per cent to 84.3 million US dollars from 101.3 million US dollars a year earlier.
The combination of stronger receipts and lower payments significantly widened the services surplus. However, the stronger services performance was not enough to prevent a decline in Zanzibar’s overall currentaccount surplus, as imports of goods and services grew considerably faster than exports.
Goods imports surged by 79.1 per cent to 973.4 million US dollars in the year ending July 2026, compared with 543.6 million US dollars in the corresponding period of 2025. Goods exports also increased, rising to 70.6 million US dollars from 32.1 million US dollars.
Despite the substantial growth, export earnings remained far below the import bill, leaving Zanzibar with a sizeable goods trade deficit.
The sharp increase in imports points to growing demand for goods from households, businesses and investment-related activities.
While higher imports can signal stronger economic activity, their rapid growth relative to exports can also put pressure on the external position.
Overall, Zanzibar’s current-account surplus declined by 9.1 per cent to 771.1 million US dollars from 848.6 million US dollars a year earlier.
The decline came despite strong growth in exports of goods and services, which increased by 22.4 per cent to 1.8139 billion US dollars.
Imports of goods and services, however, rose much faster, increasing by 64 per cent to 1.0577 billion US dollars.
As a result, the surplus on the combined goods and services account declined by 9.7 per cent to 756.2 million US dollars from 837 million US dollars.
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The figures point to a dual dynamic in Zanzibar’s external sector. On one side, strong services earnings are increasing the islands’ capacity to generate foreign exchange.
On the other, rapidly rising imports are absorbing part of those earnings and narrowing the overall current-account surplus.
Primary income also remained positive, with the surplus increasing by 18.2 per cent to 12.3 million US dollars from 10.4 million US dollars.
Secondary income recorded a surplus of 2.6 million US dollars, supported by inflows that rose by 33.5 per cent to 3.3 million US dollars.
On a monthly basis, Zanzibar recorded a currentaccount deficit of 14.5 million US dollars in July 2026, following a deficit of 72.6 million US dollars in June.
This compares with a surplus of 128 million US dollars in July 2025. The figures underline the importance of sustaining growth in tourism and other service exports to strengthen Zanzibar’s foreign-exchange earning capacity.
At the same time, the widening goods deficit highlights the need for stronger domestic production and export capacity to complement the services sector.
Overall, Zanzibar’s external position remains supported by strong services earnings, but the rapid increase in imports is creating a growing challenge for the islands’ current-account balance.
