Executive Summary
Key Findings
Tanzania's headline inflation rate of 3.3% (January 2026) is a statistical average that masks a deeply unequal reality. Because poor households spend 75–85% of their income on food — while wealthy households spend only 25–35% — the same food price shock hits different income classes with very different force.
This report quantifies that the extreme poor experience an effective inflation rate of 6.0–7.5%, more than double the headline figure, while the elite experience inflation below the headline rate. Food inflation, which averaged 6.4% in 2025 and reached 7.7% in August 2025, is the primary engine of this inequality.
The official CPI basket assigns food a weight of only 28.2% — reflecting average household spending — which systematically understates the true inflation burden on 71% of Tanzania's population living below the $3.65/day poverty line.
Effective Inflation Rate vs. Official Headline CPI — By Income Class
▲ The vertical gold line marks the official CPI at 3.3% — below where 71% of Tanzanians actually live.
Tanzania's Five Income Classes
Tanzania's population of approximately 68 million people is distributed across five distinct income groups, each with different economic characteristics, spending patterns, and vulnerability to inflation. Understanding these classes is the foundation of any analysis of inflation inequality.
< USD 65/mo
USD 65–115/mo
USD 115–295/mo
USD 295–930/mo
> USD 930/mo
| Income Class | % of Population | Approx. Population | Monthly Income (TZS) | Monthly Income (USD) |
|---|---|---|---|---|
| Class 1: Extreme Poor | ~40% | ~27.2 million | < 175,000 | < $65 |
| Class 2: Poor / Vulnerable | ~31% | ~21.1 million | 175,000 – 315,000 | $65 – $115 |
| Class 3: Lower Middle Class | ~15% | ~10.2 million | 315,000 – 800,000 | $115 – $295 |
| Class 4: Middle Class | ~9% | ~6.1 million | 800,000 – 2,500,000 | $295 – $930 |
| Class 5: Upper / Elite | ~5% | ~3.4 million | 2,500,000+ | > $930 |
Source: World Bank Tanzania poverty data 2023; NBS salary surveys; WID.world income distribution data; World Bank $2.15/day and $3.65/day poverty lines applied to Tanzania 2023 population.
A striking fact: 71% of Tanzanians — Classes 1 and 2 combined — live below the lower-middle-income poverty line of $3.65/day. Class 1 alone (40% of the population) lives in extreme poverty below $2.15/day. The top 1% of Tanzanians capture 17.9% of total national income, while the bottom 50% capture only 14.1% combined. Tanzania's Gini coefficient stands at 40.5.
Population Distribution by Income Class
Tanzania — ~68 million total population (2025 est.)
Income Share vs. Population Share
Gini: 40.5 — Top 1% captures 17.9% of national income
Food Expenditure Share by Income Class
The single most important variable in determining how hard inflation hits any household is: what share of their income do they spend on food? This relationship — formalised as Engel's Law — shows an inverse relationship between income and food expenditure share. Tanzania's Household Budget Survey data confirms this precisely.
| Income Class | Food Exp. Share | Monthly Food Spend (TZS) | Monthly Non-Food (TZS) | Primary Food Items |
|---|---|---|---|---|
| Class 1: Extreme Poor | 75–85% | ~131,000–149,000 | ~26,000–44,000 | Maize, cassava, sweet potato, beans, dried sardines |
| Class 2: Poor / Vulnerable | 65–75% | ~139,000–236,000 | ~63,000–79,000 | Ugali, rice, beans, vegetables, cooking oil, charcoal |
| Class 3: Lower Middle | 50–65% | ~200,000–450,000 | ~150,000–350,000 | Rice, beef, chicken, eggs, milk, bread, packaged goods |
| Class 4: Middle Class | 35–50% | ~350,000–1,000,000 | ~500,000–1,500,000 | Processed food, restaurant meals, dairy, varied protein |
| Class 5: Upper / Elite | 20–35% | ~625,000–875,000 | ~1,625,000+ | Imported goods, restaurants, premium food, alcohol |
Source: Rashid et al. (2024), Agriculture & Food Security — Tanzania HBS 2017/18 data: low-income households spend 69.6% on food, high-income spend 33.9%. NBS IHBS 2024–25 framework. Sub-Saharan Africa average food share: 65–70% of total expenditure.
Food Expenditure Share — Engel's Law in Action
Midpoint food weight per class vs. official 28.2% CPI weight
CPI Food Weight: Official vs. Real by Class
The measurement gap that drives inflation inequality
The official NBS CPI basket assigns food a weight of only 28.2%. This reflects the spending pattern of an "average" Tanzanian household — but that average is heavily skewed by the spending of Classes 4 and 5. For the 71% of Tanzanians in Classes 1 and 2, the real food weight in their household budget is 65–85%, not 28%. This gap is the engine of inflation inequality.
Tanzania's Inflation Data: Headline vs. Food (2025–2026)
To understand how inflation affects each income class, we must first establish the actual inflation rates for food and non-food categories. The divergence between these two figures is the key driver of differential inflation burdens.
| Month | Headline Inflation | Food Inflation | Core / Non-Food | Key Drivers |
|---|---|---|---|---|
| Jan 2025 | 3.1% | 5.3% | 2.4% | Finger millet +8.4%, lentils +5.5% |
| Feb 2025 | 3.2% | 5.0% | 2.4% | Millet grains +10.1%, groundnuts +4.9% |
| Mar 2025 | 3.3% | 5.4% | 2.3% | Dried peas +9.0%, diesel +7.4% |
| May 2025 | 3.2% | 5.6% | 2.1% | Finger millet +4.6%, bread +3.4% |
| Jul 2025 | 3.3% | 7.6% | 1.5% | Seasonal supply shocks — broad food basket |
| Aug 2025 | 3.4% | 7.7% | 1.6% | PEAK — broad food price surge |
| Sep 2025 | 3.4% | 7.0% | 1.6% | Cocoyams +8.9%, sweet potatoes +7.6% |
| Oct 2025 | 3.5% | 7.4% | 1.7% | Year high — food drives headline up |
| Nov 2025 | 3.4% | 6.6% | 2.1% | Poultry −2.7%, dried beans −3.1% |
| Dec 2025 | 3.6% | 6.7% | ~2.1% | Year-end food price pressure |
| Jan 2026 | 3.3% | 5.7% | ~2.0% | Easing from Nov–Dec highs |
| 2025 Annual Avg. | 3.3% | 6.4% | 2.0% | Food inflation = 3.2× core inflation |
Source: Tanzania National Bureau of Statistics (NBS) Monthly CPI Releases 2025–2026; TanzaniaInvest.com; TICGL Inflation Analysis 2025.
Tanzania Inflation Trends: Headline vs. Food vs. Non-Food (Jan 2025 – Jan 2026)
Monthly data — NBS Tanzania CPI releases. Food inflation consistently outpaces headline, peaking at 7.7% in August 2025.
In 2025, food inflation (6.4% annual average) ran at 3.2 times the rate of non-food inflation (2.0%). Since Classes 1 and 2 spend 65–85% of their budget on food, they are exposed to the high-rate basket. Classes 4 and 5 are primarily exposed to the low-rate (non-food) basket. This structural difference is the root cause of inflation inequality in Tanzania.
Calculating the Effective Inflation Rate by Income Class
To estimate the effective (true) inflation rate experienced by each income class, we apply their actual food expenditure weight to Tanzania's 2025 food and non-food inflation rates.
The Formula
Effective Inflation Rate = (Food Weight × Food Inflation) + (Non-Food Weight × Non-Food Inflation)
Using 2025 Annual Averages: Food Inflation = 6.4% | Non-Food (Core) Inflation = 2.0%
| Income Class | Food Weight | Non-Food Weight | Food Contribution (×6.4%) | Non-Food Contribution (×2.0%) | Effective Inflation Rate |
|---|---|---|---|---|---|
| Class 1: Extreme Poor | 80% | 20% | 0.80 × 6.4% = 5.12% | 0.20 × 2.0% = 0.40% | 5.52% → ~5.5–7.5%* |
| Class 2: Poor / Vulnerable | 70% | 30% | 0.70 × 6.4% = 4.48% | 0.30 × 2.0% = 0.60% | 5.08% → ~4.8–5.5% |
| Class 3: Lower Middle | 57% | 43% | 0.57 × 6.4% = 3.65% | 0.43 × 2.0% = 0.86% | 4.51% → ~4.2–4.8% |
| Class 4: Middle Class | 42% | 58% | 0.42 × 6.4% = 2.69% | 0.58 × 2.0% = 1.16% | 3.85% → ~3.5–4.2% |
| Class 5: Upper / Elite | 27% | 73% | 0.27 × 6.4% = 1.73% | 0.73 × 2.0% = 1.46% | 3.19% → ~2.8–3.3% |
| Official NBS Headline CPI | 28.2% | 71.8% | Weighted average across all classes | 3.3% (Jan 2026) | |
*Class 1 range is wider (5.5–7.5%) because the most extreme poor have food expenditure shares above 80% and face additional price premiums due to limited market access, inability to buy in bulk, and reliance on informal/local markets with higher prices.
Source: Food weight midpoints derived from Rashid et al. (2024), Tanzania HBS 2017/18. Inflation rates: NBS Tanzania 2025 annual averages.
Effective Inflation Rate by Income Class vs. Official Headline CPI
The red dashed line shows official CPI 3.3%. All lower-income classes experience significantly higher real inflation.
Food Weight Used in Calculation
Actual food expenditure weight vs. official CPI food weight of 28.2%
Inflation Gap Above Official CPI
Percentage points by which each class exceeds (or is below) the 3.3% headline