Prepared by TERI for research purposes only; not investment, legal or financial advice, and not the position of the Government of Tanzania or the Bank of Tanzania. All figures come from the BoT September 2026 review; derived figures are labelled as TICGL calculations.
01 - OVERVIEWExecutive Summary
The BoT describes the external sector as sustainable and reserves as adequate, yet the data show a currency and a debt stock moving in the same uncomfortable direction. The shilling lost ground steadily from TZS 2,436.8 per USD (end-November 2025) to 2,639.9 (end-August 2026), while national debt climbed from US$49.1 billion to US$52.2 billion in twelve months.
Stability is intact but increasingly bought with buffers. Reserves still exceed benchmark, the central bank sold only a net US$45.4 million in August, and interbank liquidity is orderly. But a wider current account deficit (oil imports +51.7%), falling net foreign assets (-13.9% y/y) and a debt stock that is two-thirds dollar-linked mean each further shilling slide raises the cost of servicing debt directly.
02 - CURRENCYThe Shilling: Gradual Slide, Not a Shock
The shilling averaged TZS 2,657.01 in August against 2,653.52 in July. The 6.7% annual depreciation largely reflects a base effect, since the shilling appreciated sharply in August 2025 to an average of TZS 2,490.16 from 2,666.79 in July 2025. The end-period series nonetheless shows a clear, persistent weakening since December 2025.
Shilling: End-of-Period Exchange Rate
| FX indicator | Aug-25 | Jul-26 | Aug-26 |
|---|---|---|---|
| Monthly average (TZS/USD) | 2,490.16 | 2,653.52 | 2,657.01 |
| End of period (TZS/USD) | 2,463.3 | 2,649.7 | 2,639.9 |
| IFEM transactions (US$m) | n/a | 227.1 | 190.3 |
| BoT net FX sales (US$m) | n/a | n/a | 45.4 |
Interbank FX was liquid, supported by gold and traditional export inflows and tourism; BoT intervention was aimed at smoothing volatility.
03 - DEBTNational Debt: US$52.2 Billion and Rising
The debt stock grew 1.7% in August alone. External debt was US$36,731.5 million (+0.8% m/m, 83.7% public) and domestic debt TZS 40,899.5 billion (+3.6% m/m, +9.6% y/y, driven by Treasury bond issuance). Measured in dollars, domestic debt appears flat only because the shilling has weakened.
Total Debt Stock: External vs Domestic
External Debt by Creditor
External Debt Arrears
| Debt indicator | Aug-25 | Jul-26 | Aug-26 |
|---|---|---|---|
| Total debt (US$m) | 49,086.4 | 51,350.8 | 52,224.4 |
| External debt (US$m) | 33,940.1 | 36,454.3 | 36,731.5 |
| Domestic debt (TZS bn) | 37,309.8 | 39,472.2 | 40,899.5 |
| Multilateral share of external | 59.0% | 59.6% | 59.5% |
| Commercial share of external | 34.5% | 34.3% | 34.4% |
| External arrears (US$m) | 578.9 | 984.7 | 1,040.0 |
Concessional multilateral lenders hold 59.5% of external debt; commercial lenders 34.4%, whose terms are costlier and less forgiving of currency weakness. In August, disbursements were US$160.1m against debt service of US$139.1m (principal 69.2, interest 69.9).
04 - THE LINKWhere Currency Meets Debt
Debt is owed in foreign currency but serviced from shilling revenue, so the exchange rate transmits straight into the fiscal burden.
External Debt vs Average Exchange Rate
Currency Composition of External Debt
| Illustrative sensitivity (TICGL calc.) | Value |
|---|---|
| External debt at TZS 2,639.9/USD | ≈ TZS 96,967 bn |
| Same debt at Aug-25 rate (2,463.3) | ≈ TZS 83,605 bn |
| Added shilling cost from depreciation | ≈ +16.0% |
| Cost of each further 1% depreciation | ≈ TZS 970 bn |
| Cost of a 10% depreciation | ≈ TZS 9,700 bn |
| Interest paid FY2025/26 / total revenue | 13.4% (TZS 5,605.3bn / 41,930.4bn) |
Method: US$ external debt stock multiplied by end-period rate. Illustrative only; it assumes no change in the stock and ignores hedging and concessional repayment schedules.
USD accounts for 64.9% of disbursed external debt, the euro 18.4% (up from 17.9%) and the yuan 6.7%. A weaker shilling raises debt service in shilling terms, while a stronger euro, which rose to US$6,696.7m-equivalent in the stock, adds a second channel. Foreign interest paid in FY2025/26 was TZS 1,914.7bn and domestic interest TZS 3,690.6bn.
05 - BUFFERSExternal Balance and Reserves
Higher oil and intermediate-input costs pushed imports above exports. Goods imports rose 24.1% to US$17,770.9m while goods exports rose 19.8% to US$11,960.8m, driven by gold (US$5,625.0m, from 4,321.5m), which supplied nearly two-thirds of the export gain. Net foreign assets of the banking system fell to TZS 13,575.4bn (-13.9% y/y), and commercial banks' net foreign assets turned negative (TZS -155.5bn).
Trade Flows, Year Ending August
| External indicator (year to Aug) | 2025 | 2026p | Change |
|---|---|---|---|
| Current account (US$m) | -1,700.9 | -2,481.8 | +45.9% |
| Goods account (US$m) | -4,340.3 | -5,810.2 | +33.9% |
| Petroleum imports (US$m) | 2,257.4 | 3,425.6 | +51.7% |
| Freight payments (US$m) | 1,300.4 | 1,683.4 | +29.5% |
| Travel receipts (US$m) | 4,314.7 | 4,389.7 | +1.7% |
| Gold exports (US$m) | 4,321.5 | 5,625.0 | +30.2% |
Gross official reserves stood at US$5,888.2m, equivalent to 4.2 months of projected imports (excluding FDI-related), above the national benchmark but below the 4.9 months recorded at end-2025 (US$6,329.0m).
06 - POLICYMonetary Policy and Domestic Debt
The MPC raised the Central Bank Rate to 6.25% in July 2026 to contain second-round inflation from energy, fertiliser and transport costs. Headline inflation was 4.3% (core 4.1%, energy 8.5%, transport 13.8%), within the 3-5% target. Tighter policy supports the shilling, but M3 grew 25.5% and private credit 33.0%, which sustains import demand.
Domestic Debt by Holder
| Policy & yields | Latest |
|---|---|
| Central Bank Rate | 6.25% |
| 7-day IBCM rate (Aug avg) | 6.67% |
| Policy corridor | 4.75-7.75% |
| T-bill weighted yield | 4.86% |
| 15-yr / 25-yr bond yield | 10.55% / 11.48% |
| Overall lending rate | 15.05% |
| Bond auction bid-to-cover | 3.4x |
| Domestic debt service (Aug) | TZS 633.4bn |
Government bonds make up 85.1% of domestic debt, T-bills 4.4% and the overdraft 10.2%. Strong auction demand shows investor confidence, and a deep local market is the natural hedge against dollar exposure.
Read alongside TICGL/TERI's investment climate analysis
Currency and debt pressures are central to how investors price Tanzania in 2026.
Opportunities & Risks in Tanzania, 2026 →07 - RISKSWhat Could Break Stability
- Oil and shipping: Hormuz disruption keeps crude at US$84.4/bbl (about 36% above pre-conflict), widening the import bill.
- El Niño: a strengthening event into early 2027 threatens harvests, food prices and agricultural exports.
- Dollar debt service: 64.9% USD plus 18.4% euro exposure magnifies any depreciation.
- Arrears build-up: external arrears are up nearly 80% in a year, led by commercial debt (US$417.8m principal arrears).
- Thinner buffers: reserves covered 4.2 months versus 4.9 at end-2025.
- Tax revenue ran 12.5% above target in June 2026 (TZS 3,733.2bn).
- Gold purchases and export earnings support reserve rebuilding; tourism remains resilient.
- A deep domestic bond market and a 59.5% concessional multilateral share limit refinancing stress.
Recommendations
- Prioritise export-earning and import-substituting investments (energy, agro-processing, industry) to narrow the current account.
- Clear commercial arrears and favour concessional or shilling-denominated borrowing to cut FX exposure.
- Publish annual currency-composition and sensitivity analysis alongside debt sustainability reports.
- Keep reserve cover above benchmark while using intervention only to smooth volatility.
"A currency that slides slowly is easy to ignore. But when two-thirds of the debt is in dollars, every shilling lost is a bill that arrives later. Stability is not only the exchange rate. It is whether the economy earns the dollars it owes."
- TICGL / Tanzania Economic Research Institute (TERI)08 - FAQFrequently Asked Questions
How much did the shilling depreciate in August 2026?
It averaged TZS 2,657.01 per USD (July: 2,653.52), depreciating 6.7% y/y, largely a base effect.
How large is Tanzania's national debt?
US$52,224.4 million at end-August 2026: external US$36,731.5m (70.3%) and domestic TZS 40,899.5bn.
Why does a weaker shilling matter for debt?
64.9% of external debt is in US dollars and 18.4% in euros, so depreciation raises the shilling cost of service. TICGL/TERI estimates about TZS 970bn per 1%.
Are reserves adequate?
Yes: US$5,888.2m, 4.2 months of imports, above the national benchmark, but lower than 4.9 months at end-2025.
Built from the Bank of Tanzania Monthly Economic Review, September 2026: Sections 2.2-2.7 and Tables A1, A5, A7, A10. Exchange rates for debt conversion use Table A10 end-of-period rates. "TICGL calc." figures are derived by TERI.
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✉️ economist@ticgl.com →Muhtasari kwa Kiswahili
Utulivu wa Shilingi dhidi ya Deni la Taifa - Shilingi ilikuwa wastani wa TZS 2,657.01 kwa dola Agosti 2026, ikidhoofika kwa asilimia 6.7 kwa mwaka. Deni la taifa lilifikia Dola milioni 52,224.4 (ongezeko la asilimia 6.4 kwa mwaka).
Deni la nje: Dola milioni 36,731.5 (asilimia 70.3 ya deni lote). Asilimia 64.9 ni dola za Marekani na asilimia 18.4 ni euro, kwa hiyo shilingi ikidhoofika gharama za kulipa deni huongezeka. Makadirio ya TICGL: kila asilimia 1 ya kushuka kwa shilingi huongeza takriban TZS bilioni 970.
Akiba ya fedha za kigeni: Dola milioni 5,888.2, sawa na miezi 4.2 ya uagizaji, juu ya kiwango cha taifa lakini chini ya miezi 4.9 mwishoni mwa 2025. Upungufu wa akaunti ya sasa umeongezeka hadi Dola milioni 2,481.8, ukichochewa na uagizaji wa mafuta (+51.7%).
Hatari: Malimbikizo ya madeni ya nje yamepanda hadi Dola milioni 1,040 (+79.7%), bei za mafuta, El Niño, na utegemezi wa deni la dola.
Mapendekezo: Kuongeza mauzo ya nje, kulipa malimbikizo ya madeni ya kibiashara, kupendelea mikopo nafuu au ya shilingi, na kulinda akiba ya fedha za kigeni.
- Kiwango cha Benki Kuu (CBR): asilimia 6.25
- Mfumuko wa bei: asilimia 4.3
- Deni la ndani: TZS bilioni 40,899.5
Chanzo: Benki Kuu ya Tanzania, Monthly Economic Review, Septemba 2026. Mawasiliano: economist@ticgl.com.