The semi-autonomous archipelago of Zanzibar, part of the United Republic of Tanzania, is experiencing a markedly different economic pattern from Mainland Tanzania, with inflation running higher while its external position remains in surplus, according to the Bank of Tanzania’s latest economic review.
Annual headline inflation in Zanzibar reached 6.0 percent in July 2026, up from 4.1 percent a year earlier. On the Mainland, inflation stood at 4.2 percent, up from 3.3 percent in July 2025. The 1.8 percentage point gap highlights the different price pressures facing consumers in the Isles and on the Mainland.
The clearest explanation for Zanzibar’s higher inflation is its heavier exposure to food prices. Food accounts for 40.5 percent of Zanzibar’s consumer price basket, compared with 28.2 percent on the Mainland. More significantly, food inflation in Zanzibar accelerated to 11.1 percent, compared with 4.1 percent on the Mainland.
This difference is important because food carries a much greater weight in Zanzibar’s inflation basket. The Bank of Tanzania says the increase in Zanzibar’s headline inflation was driven mainly by higher food prices, compounded by rising transport costs following an increase in fuel prices.
The Zanzibar Government, in a statement issued in the House of Representatives on Monday, September 14, 2026, also attributed the increase in prices to higher shipping costs for goods, particularly from China and India, amid ongoing conflicts in the Middle East. In response, the government announced measures to ease food import costs by reducing Value Added Tax (VAT) on sugar, rice and wheat flour from 25 percent to 6 percent.
The Mainland, by contrast, benefited from improved food availability. Annual food inflation stood at 4.1 percent, with the central bank attributing the moderation to increased supplies following the harvest and lower wholesale prices for staples such as maize, rice and beans.
The external accounts tell an almost opposite story
While Mainland Tanzania recorded a USD2.40 billion current-account deficit in the year ending July 2026, Zanzibar posted a USD771.1 million surplus. The Mainland deficit widened by 21.3 percent from USD1.98 billion a year earlier, while Zanzibar’s surplus narrowed by 9.1 percent from USD848.6 million.
The divergence is largely explained by the different composition of their external earnings and imports. Zanzibar’s exports of goods and services increased by 22.4 percent to USD1.81 billion, led by tourism receipts and higher traditional exports, particularly cloves. However, imports grew much faster, by 64.0 percent to USD1.06 billion.
Despite the surge in imports, Zanzibar retained a current-account surplus because its services account generated a net surplus of USD1.66 billion, largely supported by tourism receipts.
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On the Mainland, the scale and structure of imports were very different. Goods imports increased by USD3.02 billion, driven by investment-related and energy demand, outweighing the combined USD2.83 billion increase in goods and services exports. Refined petroleum products alone rose by 42.3 percent to USD3.30 billion.
The contrasting figures point to two economies facing different pressures. Zanzibar is more vulnerable to food and transport-price shocks because of the weight of food in its consumer basket, but it benefits from a strong tourism-led services surplus. The Mainland has a broader external trade base, but its much larger investment and energy import requirements are currently contributing to a sizeable current-account deficit.
