A Comprehensive Analysis of Tanzanian Shilling Performance (2021-2026)
The Tanzanian Shilling (TZS) has experienced significant shifts against the US Dollar (USD) between 2021 and 2026, with exchange rate movements closely tracking global dollar dynamics and United States monetary policy decisions. This comprehensive analysis examines how the Federal Reserve's interest rate policies, global liquidity conditions, and Tanzania's domestic economic fundamentals have interacted to shape currency performance over this critical five-year period.
The TZS remained remarkably stable during this period, with minimal annual changes of less than 1%. This coincided with accommodative global financial conditions following the COVID-19 pandemic, as the US Federal Reserve maintained near-zero interest rates and continued large-scale asset purchases.
| Year | Average Rate (1 USD = TZS) | Lowest Rate | Highest Rate | Annual Change | Key Drivers |
|---|---|---|---|---|---|
| 2021 | ~2,314 | ~2,300 | ~2,324 | -0.5% | Stable period, minimal depreciation |
| 2022 | ~2,326 | ~2,300 | ~2,342 | +0.5-1% | Mild TZS weakening begins |
| 2023 | ~2,422-2,510 | ~2,332 | ~2,519 | +7-8% | Fed aggressive rate hikes, strongest depreciation |
| 2024 | ~2,609-2,615 | ~2,352 | ~2,744 | -3-4% (from 2023 avg) | High volatility, year-end strengthening (~2,445) |
| 2025 | ~2,560-2,584 | ~2,420-2,425 | ~2,701 | +2-3% | Moderate depreciation, mid-year peak then stabilization |
The year 2023 marked the most significant depreciation episode for the Tanzanian Shilling, with the currency weakening by approximately 7-8% against the USD. This sharp movement was not coincidental but directly aligned with the US Federal Reserve's aggressive monetary tightening cycle implemented to combat persistent inflation in the United States.
Key Insight: The 2023 depreciation demonstrates how emerging market currencies like the TZS remain vulnerable to external monetary shocks, even when domestic fundamentals are sound. Tanzania maintained GDP growth averaging 5-6%, inflation within the 3-5% target range, and adequate foreign reserves covering 4-4.5 months of imports, yet could not fully insulate itself from global dollar dynamics.
The TZS/USD exchange rate exhibited unprecedented volatility in 2024, with intra-year swings ranging between TZS 2,352 and TZS 2,744 per USD—a remarkable 392 TZS range. This volatility reflected global market uncertainty surrounding the future trajectory of US monetary policy.
Despite exchange rate pressures, Tanzania has demonstrated strong macroeconomic fundamentals throughout the 2021-2025 period, positioning the country as a resilient lower-middle-income economy transitioning toward upper-middle-income status in line with Vision 2025 and 2050 goals.
| Indicator | Recent Performance | 2026 Projection | Development Impact |
|---|---|---|---|
| Real GDP Growth | ~5.3% (2023) → 5.5-6% (2024-2025) | 6.3% (IMF) | Job creation, infrastructure expansion, poverty reduction |
| Inflation Rate | ~3.3-3.8% (2023-2025) | 3.5% | Stable purchasing power, contained import costs |
| Current Account Deficit | Narrowed to ~2.6-4% of GDP | Improving | Reduced external vulnerability, sustainable financing |
| Foreign Reserves | ~4-4.5 months of imports | Stable | Buffer against shocks, policy flexibility |
| Public Debt | ~45-49% of GDP | Manageable | Fiscal sustainability, development financing capacity |
As of Mid-January 2026: The TZS/USD mid-market rate stands at approximately TZS 2,497-2,500 per USD, representing slight weakening from the 2025 year-end level of around TZS 2,460. This suggests early mild depreciation pressure in 2026, likely driven by ongoing uncertainty about US Federal Reserve policy timing and trajectory.
| Source/Analysis | Predicted Range for 2026 | Year-End Estimate | Key Assumptions |
|---|---|---|---|
| Trading Economics Models | ~2,476 (Q1) → ~2,403 (12 months) | Potential mild strengthening | Global factors favor TZS if Fed cuts materialize |
| CoinCodex / Algorithmic | ~2,464-2,704 (avg ~2,569) | Up to ~2,704 max | Gradual TZS weakening, bullish for USD |
| Gov.Capital / WalletInvestor | ~2,701 mid-year → ~2,571-2,581 | ~2,600-2,700 | Moderate depreciation (~5%) |
| Market Consensus | 2,500-2,700 | ~2,600+ | Fed cuts potentially capping USD strength |
Most analysts converge on a TZS 2,500-2,700 range for 2026, with a likely year-end position around TZS 2,600-2,700 per USD. This implies mild continued depreciation of approximately 3-8% from current levels, though significant Fed rate cuts or strong Tanzanian investment inflows could moderate or reverse this trend.
It is critical to interpret the TZS depreciation not solely as economic weakness but as a complex phenomenon reflecting Tanzania's development trajectory and position in the global financial system.
Policy Implication: The optimal approach involves allowing gradual, market-driven adjustment while using foreign reserves and monetary policy tools to prevent disorderly movements. Tanzania's maintenance of 4-4.5 months of import cover provides adequate policy space for such intervention.
The evolution of the TZS/USD exchange rate over the 2021-2025 period provides compelling evidence that global dollar dynamics and US monetary policy have been the dominant external drivers of exchange rate movements in Tanzania. While domestic fundamentals remained broadly stable—characterized by robust GDP growth averaging 5-6%, low inflation within the 3-5% target range, and adequate foreign exchange reserves—these strengths were insufficient to fully counteract the global tightening of dollar liquidity.
The most pronounced depreciation episode in 2023, when the shilling weakened by 7-8%, coincided directly with the US Federal Reserve's aggressive interest rate hikes. This underscores how shifts in US monetary policy rapidly transmit to emerging and developing economies through capital flows, trade financing costs, and investor portfolio rebalancing. Subsequent volatility in 2024 and moderate depreciation in 2025 further illustrate that expectations surrounding future US rate cuts can significantly influence exchange rate behavior even in the absence of domestic macroeconomic instability.
Importantly, Tanzania's exchange rate depreciation should not be interpreted solely as a sign of economic weakness. Rather, it reflects a combination of structural demand for foreign exchange linked to development-driven imports, the global dominance of the US dollar, and cyclical shifts in international financial conditions. Controlled and gradual depreciation has enhanced export competitiveness in sectors such as gold, tourism, and agriculture, partially offsetting external pressures.
Looking ahead to 2026, with most forecasts placing the TZS/USD rate within the 2,500-2,700 range, the outlook will remain closely tied to the trajectory of US monetary easing, global risk sentiment, and Tanzania's ability to sustain export growth and foreign inflows. Prudent exchange rate management by the Bank of Tanzania, continued inflation control, and export diversification will be essential to mitigating excessive volatility while allowing the exchange rate to adjust in line with underlying economic fundamentals.
Critical Lesson for Developing Economies: Even with sound domestic policies, exchange rate outcomes are increasingly shaped by global monetary forces, reinforcing the need for resilience, policy flexibility, and strategic integration into the global financial system.