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 $3.65/day. The top 1% 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.
| 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.
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%. For the 71% of Tanzanians in Classes 1 and 2, the real food weight 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 — the structural 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 face food expenditure shares above 80% plus additional price premiums from limited market access.
Source: 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 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
The Inflation Inequality Dashboard — Master Summary
The following table consolidates all dimensions of inflation inequality across Tanzania's five income classes, revealing the compounding disadvantages faced by the poor.
| Metric | Class 1 Extreme Poor | Class 2 Poor/Vulnerable | Class 3 Lower Middle | Class 4 Middle Class | Class 5 Upper/Elite |
|---|---|---|---|---|---|
| Population Share | ~40% | ~31% | ~15% | ~9% | ~5% |
| Monthly Income | < TZS 175K | 175K–315K | 315K–800K | 800K–2.5M | > TZS 2.5M |
| Food Expenditure Share | 75–85% | 65–75% | 50–65% | 35–50% | 20–35% |
| Effective Inflation Rate | 5.5–7.5% | 4.8–5.5% | 4.2–4.8% | 3.5–4.2% | 2.8–3.3% |
| vs. Official CPI (3.3%) | +2.2–4.2pp ABOVE | +1.5–2.2pp ABOVE | +0.9–1.5pp ABOVE | +0.2–0.9pp above | BELOW headline |
| Savings Buffer | None | Minimal | Low | Moderate | High |
| Real CPI Food Weight | ~80% | ~70% | ~57% | ~42% | ~27% |
| Official CPI Food Weight | 28.2% (UNDERSTATED) | 28.2% (UNDERSTATED) | 28.2% (understated) | 28.2% (close) | 28.2% (OVERSTATED) |
| Primary Location | 83% rural | ~70% rural | ~55% rural/peri | ~60% urban | ~85% urban |
| Occupation Profile | Subsistence farmers, agric. workers | Small farmers, informal traders | Gov. workers, small businesses | Professionals, mid-managers | Executives, owners, diaspora |
Source: Compiled from NBS CPI basket weights; Rashid et al. (2024); World Bank poverty data; TICGL 2025 inflation analysis; NBS CPI releases 2025–2026.
Vulnerability Index by Income Class
Composite of: effective inflation, food share, volatility exposure, savings buffer (inverted), rural location
Effective Inflation vs. Official CPI — All Classes
The measurement gap widens dramatically for the bottom 71% of Tanzania's population
What Inflation Inequality Means in Practice
6.1 — The Real Purchasing Power Loss
When food inflation runs at 6.4%, a Class 1 family spending 80% of TZS 150,000 on food sees their food budget lose TZS 7,680 of purchasing power in a single year — representing 5.1% of their total monthly income. For a Class 5 family, the same food inflation costs only 1.7% of monthly income.
| Income Class | Monthly Income (TZS) | Food Spend (Monthly) | Annual Food Inflation Cost (TZS) | As % of Monthly Income |
|---|---|---|---|---|
| Class 1: Extreme Poor | ~150,000 | ~120,000 | ~7,680 | 5.1% of monthly income LOST |
| Class 2: Poor / Vulnerable | ~245,000 | ~172,000 | ~11,200 | 4.6% of monthly income lost |
| Class 3: Lower Middle | ~550,000 | ~330,000 | ~22,400 | 4.1% of monthly income lost |
| Class 4: Middle Class | ~1,500,000 | ~660,000 | ~50,400 | 3.4% of monthly income lost |
| Class 5: Upper / Elite | ~3,000,000 | ~810,000 | ~51,840 | 1.7% of monthly income lost |
Annual food inflation cost = monthly food spend × 6.4% food inflation rate. The absolute TZS loss is larger for Class 5, but the proportional burden is 3× greater for Class 1.
Proportional Income Lost to Food Inflation (%)
Lower classes lose 3× more of their income to food inflation than the elite
Absolute Annual Food Inflation Cost (TZS)
Absolute cost is larger for rich households but far more devastating for the poor
In absolute TZS terms, a Class 5 household loses more money to food inflation (TZS 51,840/yr) than a Class 1 household (TZS 7,680/yr). But the Class 1 household is losing 3× more of their monthly income (5.1% vs. 1.7%). For a household at the survival threshold, this proportional loss carries no buffer.
6.2 — Volatility: The Invisible Inequality Multiplier
Food prices can swing 8–10% in a single month due to weather, harvests, and transport disruptions. This volatility is catastrophic for households with zero savings buffer.
Selected Food Price Spikes — Tanzania 2025
Items consumed primarily by Classes 1 & 2. Monthly spikes far exceed the 3.3% headline CPI.
Class 1 & 2: No Shock Absorber
- Millet grains spiked +10.1% in a single month (Feb 2025)
- Cocoyams +8.9% in September 2025
- Finger millet +8.4% in January 2025
- Sweet potatoes +7.6% in September 2025
- No ability to substitute (already at minimum nutrition)
- No savings to absorb the shock
- Cannot buy in bulk to beat price rises
Class 4 & 5: Buffered from Volatility
- Diverse food basket — one spike doesn't hit entire budget
- Savings allow delaying or substituting purchases
- Access to retail chains with more stable pricing
- Import alternatives available for staples
- Spending flexibility — can shift from food to savings
- NFRA stock releases benefit them alongside the poor
6.3 — The Rural Compounding Factor
83% of Tanzania's extreme poor live in rural areas. Rural households pay transport premiums, have fewer competing sellers, face higher price uncertainty, and are simultaneously producers whose income falls when food prices fall — a double bind unique to subsistence agriculture.
A rural Class 1 household is exposed to inflation inequality from multiple directions simultaneously: they pay more for goods they buy, earn less for food they grow, and have no access to formal financial instruments to hedge price risk. Volatility is an inequality multiplier that the average inflation rate does not capture.
Policy Implications
The findings of this analysis carry direct implications for economic policy in Tanzania. The current approach of managing a single headline inflation rate is insufficient for addressing the lived experience of the majority of Tanzanians.
| Policy Area | Current Gap | Evidence-Based Recommendation | Primary Beneficiary |
|---|---|---|---|
| CPI Measurement Reform | Single basket understates food weight for 71% of population | NBS should publish income-group-specific inflation indices alongside the headline rate | Classes 1–3 |
| Targeted Food Interventions | NFRA grain releases benefit all equally; not targeted to the poor | Target interventions to staples consumed by Classes 1 & 2: maize, cassava, beans, dried fish. Differential VAT exemptions. | Classes 1–2 |
| Social Protection Indexing | Cash transfers indexed to 3.3% headline, not 6.4% food inflation | Index transfers to food inflation for Class 1–2 beneficiaries — a ~3.1pp gap in annual real value | Class 1–2 |
| Rural Market Infrastructure | Rural price premiums add invisible inflation layer for the poor | Invest in rural storage, transport links, and market information systems to reduce price premiums and volatility | Classes 1–3 rural |
| Wage Policy | Minimum wage adjustments reference headline CPI (3.3%) not effective rate (~5%) | Reference Class 2–3 effective inflation (~4.8–5.0%) for minimum wage adjustments | Classes 2–3 |
Gap: Official 28.2% food weight vs. real 80% for extreme poor
NBS should publish income-group-specific inflation indices alongside the headline rate. Class-disaggregated CPI is standard practice in advanced economies — the UK ONS, US BLS, and Statistics South Africa all publish income-quintile price indices. A Class 1-specific CPI would reveal that the effective inflation burden is more than double the headline figure, a crucial input for policy calibration.
Context: NFRA released 47,238 tonnes in 2025 — but untargeted
Government grain release programs like the 2025 NFRA 47,238-tonne release benefit all Tanzanians equally. Programs should instead be targeted toward staple foods consumed by Class 1 and 2 households — maize, cassava, beans, dried fish. Differential VAT exemptions on these staples would directly reduce the effective inflation burden on the poor without distorting broader commodity markets. Targeted food vouchers or mobile-money-based price subsidies could complement grain releases with precision.
Gap: 3.1 percentage points annual undercompensation for beneficiaries
Cash transfer programs should be indexed to food inflation (currently 6.4%) not headline inflation (3.3%). Using the headline rate undercompensates beneficiaries by approximately 3.1 percentage points annually. Over a five-year period, this compounding gap reduces the real value of transfers by roughly 16% — silently eroding the effectiveness of Tanzania's entire social protection architecture. The Tanzania Social Action Fund (TASAF) should adopt food-inflation indexing immediately.
83% of Tanzania's extreme poor are rural; transport premiums add hidden inflation
Investing in rural storage facilities, feeder road networks, and digital market information systems would reduce price premiums paid by rural Class 1 and 2 households. A network of community grain silos in high-production regions would allow farmers to store rather than sell immediately at harvest-time lows. Digital price transparency (mobile phone-based market information) has been shown to reduce price dispersion by 10–15% in comparable Sub-Saharan African contexts.
A Class 2 worker receiving 3.3% wage rise is experiencing a real wage cut of ~1.7pp
Minimum wage adjustments should reference the effective inflation rate for Class 2 and 3 workers (~4.8–5.0%), not the headline rate of 3.3%. A worker receiving a 3.3% wage increase while experiencing 5.0% effective inflation faces a real wage cut of approximately 1.7 percentage points per year. Tanzania's triennial minimum wage review process should incorporate income-class-specific inflation data.
Policy Intervention — Population Benefiting by Recommendation
Estimated share of Tanzania's population that would benefit from each policy intervention
Conclusion
Tanzania's headline inflation rate of 3.3% is a carefully managed and genuinely impressive achievement in macroeconomic stability. But behind this headline figure lies a stark inequality.
THE INFLATION GAP — TANZANIA 2025
Class 1 — Extreme Poor
(40% of population)
~6.5%
effective inflation
Class 5 — Upper / Elite
(5% of population)
~3.0%
effective inflation
This gap compounds annually. Over 10 years it translates to a real purchasing-power divergence of approximately 40% between the richest and poorest Tanzanians.
For the 40% of Tanzanians living in extreme poverty, the effective inflation rate is 5.5–7.5% — driven by food prices that consume 75–85% of their already-minimal budget. For Tanzania's wealthiest 5%, the effective inflation rate is 2.8–3.3% — below the official headline.
This 3.5 percentage point annual gap compounds year after year. It means the poorest Tanzanians are losing purchasing power at twice the rate the official statistics suggest. It means policies calibrated to the headline rate consistently under-serve those who need help most.
Addressing inflation inequality requires not just better macroeconomic management, but a fundamental shift in how inflation is measured, communicated, and responded to — with the experience of Tanzania's poorest income classes at the centre of the analysis.
Compounding Purchasing Power Divergence Over 10 Years
Indexed to 100 at Year 0. Class 1 at 6.5% effective inflation vs. Class 5 at 3.0% — sustained annual divergence.
Addressing inflation inequality in Tanzania requires three parallel shifts: (1) Measurement — NBS publishing income-class-specific CPI indices; (2) Policy calibration — social protection, wage floors, and food interventions indexed to the real inflation experienced by beneficiaries; and (3) Structural investment — rural market infrastructure that reduces the transport premiums and price volatility that compound the disadvantage of Tanzania's poorest citizens.
Data Sources & References
This report draws on the following primary data sources, peer-reviewed research, and institutional publications.
- Tanzania National Bureau of Statistics (NBS) — Monthly CPI Releases, January 2025 – January 2026
- Tanzania National Bureau of Statistics (NBS) — Tanzania Household Budget Survey (HBS) 2017/18
- Tanzania National Bureau of Statistics (NBS) — Integrated Household Budget Survey (IHBS) 2024–25 Survey Framework
- Bank of Tanzania (BOT) — Monetary Policy Reports & Quarterly Economic Bulletins 2025–2026
- TICGL (Tanzania Investment & Consultant Group Ltd) — Comprehensive Inflation Analysis 2025 & 2026 Outlook
- TanzaniaInvest.com — Tanzania Inflation Rate Monitor 2025–2026
- Rashid, F.N., Sesabo, J.K., Lihawa, R.M. et al. (2024). "Determinants of household food expenditure in Tanzania: implications on food security." Agriculture & Food Security, 13(13). doi:10.1186/s40066-023-00462-0
- World Bank — Tanzania Poverty & Equity Data; $2.15/day and $3.65/day international poverty lines (2023)
- WID.world / World Bank — Tanzania Income Distribution & Gini Coefficient Data 2023
- IMF — Tanzania: Article IV Consultation & Regional Economic Outlook, October 2025
- FAO — Food Price Index & Sub-Saharan Africa household food expenditure shares (2023)
- USDA Economic Research Service — "Measuring Access to Food in Tanzania" (2015)