In September 2025, Tanzania’s macroeconomic environment remained exceptionally stable, marked by a stronger shilling and low, well-anchored inflation. The exchange rate averaged TZS 2,471.69 per USD, appreciating by 0.75% month-on-month and 9.4% year-on-year—an impressive reversal from the sharp depreciation recorded in 2024. This stability was supported by strong export inflows from gold, cereals, and cashew nuts, alongside robust tourism earnings and targeted Bank of Tanzania interventions. Inflation held steady at 3.4%, well within the 3–5% target range and aligned with regional convergence criteria. Food inflation remained elevated at 7%, but non-food (1.9%) and energy inflation (3.7%) stayed subdued, helped by lower global oil prices and a strong currency. Together, these elements created a stable price environment, improving import affordability, reducing cost pressures for households and businesses, and enhancing the effectiveness of monetary policy transmission.

1. Tanzania Shilling Stability (September 2025)

The Tanzania shilling remained relatively strong and stable in 2025.

Key Figures

• Average exchange rate: TZS 2,471.69 per USD
• Previous month (August 2025): TZS 2,490.16
• Monthly appreciation: ≈ 0.75%
• Annual appreciation: 9.4%, compared to 7.6% in August 2025
  (in contrast to 10.1% depreciation in 2024)

Drivers of Shilling Strength

• Strong export inflows (gold, cereals, cashew nuts)
• Robust tourism earnings
• BOT FX market intervention (USD 11 million net sale)
• Stabilized inflation and monetary policy

2. Tanzania Inflation Evolution (2025)

Inflation remained low, stable, and within official target range.

Inflation Figures

• Headline inflation (Sep 2025): 3.4%
• Same as August 2025: 3.4%
• Target range: 3%–5%
• EAC convergence criterion: ≤ 8%
• SADC target: 3%–7%

Components

• Food inflation: 7.0%
• Non-food inflation: 1.9%
• Core inflation: 2.2%
• Energy/fuel/utilities: 3.7% (down from 11.5% in 2024 due to falling global oil prices)

3. How Shilling Stability Relates to Inflation

When the shilling is stable/strong:

1. Imported inflation falls
   • Strong shilling lowers cost of fuel, machinery, medicine, food imports.
2. Fuel prices decline
   • Domestic petrol and diesel prices dropped in 2025
     (aligned with lower global oil prices).
3. Lower cost of tradable goods
   • Stabilizes prices in urban markets (transport, household items).
4. Reduced expectations of inflation
   • Businesses experience predictable import costs.
   • Consumers face steady price trends.
5. Monetary policy becomes more effective
   • Interbank rates (6.45%) stay within policy corridor, supporting price stability.

Summary Table: Shilling Stability vs Inflation (September 2025)

Implications of Shilling Stability and Its Link to Inflation in September 2025

The interplay between the Tanzanian shilling's strength and low inflation in September 2025, as detailed in Sections 2.5 (Financial Markets, specifically the Interbank Foreign Exchange Market) and 2.2 (Inflation Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), underscores a virtuous cycle of external resilience and price stability. The shilling appreciated 0.75% monthly (average TZS 2,471.69/USD vs. TZS 2,490.16 in August) and 9.4% annually—reversing the 10.1% depreciation seen in September 2024—amid robust export inflows (gold, cash crops, cashews), tourism earnings, and BOT's targeted intervention (net USD 11 million sale; Chart 2.5.3). This stability dovetails with headline inflation holding at 3.4% (within 3–5% target and EAC/SADC criteria), driven down by easing food (7.0%) and energy (3.7%) pressures. Below, I outline the implications, integrating broader economic dynamics like 6.3% Q2 GDP growth and accommodative policy (CBR 5.75%).

1. Shilling Appreciation: Bolstering External Buffers and Import Affordability

• Monthly/Annual Gains (0.75% and 9.4%): These reflect ample FX liquidity in the IFEM (USD 93.8 million transactions, down slightly from USD 101.5 million in August but with banks handling 88.3%), fueled by export surges in gold (elevated prices) and non-traditional items like cereals/cashews . Tourism's rebound (post-global recovery; aligned with IMF's 3.2% 2025 growth outlook) added inflows, while BOT's intervention curbed volatility without depleting reserves.
• Reversal from 2024 Depreciation: The shift from -10.1% y/y signals improved current account dynamics (e.g., trade surplus from commodities; mixed prices but oil decline aiding imports). This reduces pass-through to domestic prices, as a stronger shilling lowers USD-denominated costs (e.g., fuel imports down, mirroring global oil drop).
• Broader Implications:
  • Positive: Enhances policy space for monetary easing (interbank rate at 6.45%, within 3.75–7.75% corridor), supporting 16.1% private credit growth and 20.8% M3 expansion. Boosts investor confidence, evident in oversubscribed long-term bonds.
  • Risks: Over-reliance on gold/tourism exposes to global shocks (e.g., protectionism; Charts 1.1a/b). If exports soften (e.g., weather-hit coffee), reserves could pressure the rate, though current levels (implied adequacy) provide a buffer.

2. Inflation Stability: Reinforced by Currency Strength and Supply Factors

• Headline at 3.4% (Unchanged; Core 2.2%, Food 7.0%, Energy 3.7%): Stability stems from shilling-driven import cost relief (e.g., energy inflation halved from 11.5% y/y 2024 via cheaper oil/fuel) offsetting core upticks (household/transport). Food easing (from 7.7% in August) reflects NFRA stocks at 570,519 tonnes (up via 39,590-tonne purchases) and wholesale declines in staples (sorghum/potatoes), though rice/maize rose on regional demand.
• Non-Food at 1.9%: Highlights shilling's role in curbing imported inflation (fuel/machinery/medicine), aligning with global moderation (4.2% projected) and EAC/SADC cooling.
• Broader Implications:
  • Positive: Predictable costs foster business investment (e.g., in agriculture/mining, 1.8%/1.5% GDP contributions) and consumer confidence, aiding 6% full-year growth projection. Real rates remain positive (e.g., deposits ~6.4% real vs. 3.4% inflation), encouraging savings amid liquidity surplus.
  • Risks: Food's 7.0% (higher than headline) signals vulnerability to supply shocks (e.g., border demand or droughts). Global oil rebound could reverse energy gains, though shilling buffer mitigates.

3. Interlinkages: Shilling Strength Amplifying Monetary Effectiveness and Growth

• Reduced Imported Inflation and Expectations: Stronger shilling (9.4% y/y) directly lowers tradable goods costs (transport/utilities), stabilizing urban prices and anchoring inflation expectations—key for BOT's neutral stance. This synergy with adequate food/power supply (enabling 6.3% GDP) creates a low-volatility environment.
• Policy Transmission: Stable FX supports interbank easing (6.45% from 6.48%), with reverse repos managing liquidity, preventing spillovers to lending rates (15.18% overall; prior analysis).
• Broader Implications:
  • Positive: Aligns with fiscal prudence (August deficit financed sustainably; Section 2.6) and debt stability (total USD 50.8B, 69.8% external), enhancing external resilience (e.g., disbursements USD 443M vs. service USD 131M). In Zanzibar, similar dynamics likely aid tourism-led recovery.
  • Risks: Currency overvaluation could erode export competitiveness if sustained, though annual gains counter 2024 weakness. Monitor global uncertainties (e.g., US rate cuts weakening USD).

4. Macroeconomic and Policy Context from the Review

• Synergies Across Sections: Shilling/inflation stability complements robust output (agriculture/mining-led; Section 2.1), financial market depth (T-bill/bond oversubscription), and external debt management (multilateral dominance at 57%). Projections: Inflation 3–5%, growth 6%, with policy vigilance on commodities (oil down, gold up).
• Outlook: Continued export/tourism inflows could sustain appreciation, but diversification (e.g., manufacturing) is key. BOT's FX policy ensures balance, supporting EAC integration.

In summary, the shilling's September 2025 strength implies fortified macroeconomic stability, directly muting inflation risks and enabling growth-focused policies. This tandem—rooted in exports, interventions, and supply adequacy—positions Tanzania resiliently, though vigilance on commodity volatility and food chains is essential for 2026 continuity.