Insights from Tanzania Investment and Consultant Group Ltd (TICGL)

By Amran Bhuzohera, Economist – TICGL

As Tanzania moves confidently toward its Vision 2050 goals, we stand at a defining moment in our nation’s economic journey. Across the country, the energy for progress is visible — from infrastructure expansion and industrial growth to innovations in agriculture and digital transformation. Yet, unlocking the full potential of these business and investment opportunities requires a clear understanding of our local markets, institutional frameworks, and the dynamics that drive both public and private investment.

At TICGL, this is exactly what we do.

Understanding the Market, Guiding Investment

As an Economist at TICGL, We have seen first-hand how data-driven insights can turn ambitious ideas into sustainable investments. TICGL is more than a consulting firm — we are a bridge between economic knowledge and strategic action. Our work helps investors, policymakers, and entrepreneurs navigate Tanzania’s evolving investment environment with clarity and confidence.

We combine local expertise with global standards to provide our clients with evidence-based analysis, advisory support, and market intelligence. Our mission is simple: to empower decisions that create value, jobs, and long-term growth for Tanzania.

Our Core Focus Areas

At TICGL, our services are designed to serve the entire investment ecosystem:

• Economic and Policy Research: We analyze sectors, markets, and policy trends to provide practical insights that shape investment strategies and public reforms.
• Investment Advisory and Facilitation: We help investors identify viable projects, conduct due diligence, and navigate regulatory processes to ensure smooth market entry and partnership building.
• Public–Private Partnerships (PPPs): We support government agencies, LGAs, and private sector partners in structuring, negotiating, and managing PPP projects aligned with national development priorities.
• Business Consulting and Market Support: We offer advisory services for SMEs and large investors, helping them understand taxation, compliance, and business climate challenges in Tanzania.

Introducing the Tanzania Investment Portfolio

One of our most exciting initiatives is the Tanzania Investment Portfolio (TIP) — a comprehensive compilation of both public and private investment projects, as well as PPP initiatives from across the country.

This portfolio showcases over 100 investment and business opportunities across sectors such as energy, agriculture, tourism, transport, manufacturing, mining, real estate, and technology. It highlights Tanzania’s diverse economic potential and the unique local advantages that make each project both viable and impactful.

More importantly, the TIP is built to help investors understand Tanzania from the inside out — its policies, institutions, and emerging market realities.

Why Tanzania, Why Now

Tanzania’s steady growth, political stability, and demographic momentum make it one of Africa’s most promising investment frontiers. By 2050, with a projected population of over 114 million, our domestic market will be one of the largest in the region.

At TICGL, we believe that informed investment is the key to unlocking this potential — turning opportunities into industries, and industries into livelihoods. Through our research and advisory work, we continue to connect vision with opportunity, and ideas with action.

A Call to Collaborate

We invite investors, development partners, and business leaders to engage with TICGL and explore the Tanzania Investment Portfolio. Together, we can shape an investment environment that is inclusive, data-driven, and globally competitive — one that reflects Tanzania’s growing confidence on the continental and international stage.

Connect with TICGL

📍 Head Office: Dar es Salaam, Tanzania
🌐 Website: www.ticgl.com
📧 Email: economist@ticgl.com
📞 Phone: +255 768 699 002

Economic Stability, Resilience, and Growth Momentum

By Amran Bhuzohera

Tanzania’s economy in 2025 continues to display strong resilience amid a complex post-election environment and global uncertainties. Data from the Bank of Tanzania (BoT) and National Bureau of Statistics (NBS) highlight a broadly stable macroeconomic landscape marked by low inflation, steady currency appreciation, manageable public debt, and rising foreign investment flows. The combination of policy discipline, export recovery, and domestic demand expansion positions Tanzania as one of East Africa’s most stable economies heading into 2026.

1. Inflation: Controlled and Predictable

Headline inflation remained within the 3–5% target range, rising slightly to 3.5% in October 2025 from 3.4% the previous month. The modest uptick reflects higher food prices (7.4%) partially offset by declining fuel and energy costs (–1.4% monthly).

Key takeaway: Inflation stability preserves purchasing power and encourages investor confidence. Food inflation remains a challenge, particularly for low-income households, but easing monthly trends suggest temporary relief.

2. Exchange Rate and External Sector: Strong Shilling, Narrowing Deficit

The Tanzanian shilling appreciated 9.4% year-on-year to an average of TZS 2,471.69/USD in September 2025, reversing the 10.1% depreciation of 2024. This reflects robust export performance—especially gold, cashews, and cereals—and increasing tourism earnings.

Key takeaway: Currency strength has improved debt servicing capacity and dampened imported inflation, anchoring macroeconomic stability.

3. Public Debt: Sustainable and Development-Focused

Tanzania’s total national debt stood at TZS 127.47 trillion (USD 50.77 billion) as of September 2025, with external debt accounting for 70.6%. The debt composition remains largely concessional and directed toward infrastructure, energy, and social services.

Key takeaway: Debt levels are sustainable and aligned with regional thresholds. An appreciating shilling reduces repayment costs for USD-denominated debt, though diversification of borrowing remains essential.

4. Fiscal and Monetary Position: Discipline Anchored in Stability

Fiscal operations show a TZS 618.5 billion deficit, financed mainly through domestic bonds and concessional loans. Revenue performance reached 87.2% of target while expenditure execution stood at 71.9%. The BoT policy rate remained at 6.0%, supporting 12% private sector credit growth.

Key takeaway: Fiscal discipline, supported by strong domestic debt markets, has preserved macroeconomic credibility without crowding out private credit.

5. Sectoral Outlook: Growth Catalysts Emerging

The 2025 outlook projects GDP growth between 5.5% and 6.5%, supported by agriculture, tourism, and manufacturing. Infrastructure investment and digital transformation remain key growth levers under the FYDP III framework.

Key takeaway: Structural investments in transport, power, and agriculture will sustain growth momentum into 2026, while diversification remains essential to shield against external shocks.

6. Zanzibar: Parallel Progress

Zanzibar’s economy mirrors mainland stability, posting 3.5% inflation and a USD 836.6 million current account surplus (+34.7%), driven by tourism (+28.2% arrivals). Fiscal discipline and service exports remain key strengths.

Conclusion

Tanzania’s 2025 economic story is one of stability amid transition. Inflation remains low, the shilling is strong, and debt sustainability is intact. However, persistent food inflation and USD exposure warrant close monitoring. Continued structural reforms, SME incentives, and agricultural modernization under the FYDP III will determine whether Tanzania sustains its 6%+ growth trajectory and advances toward upper-middle-income status by 2030.

Tanzania’s inflation landscape in October 2025 reflects a stable macroeconomic environment, with headline inflation rising slightly to 3.5% from 3.4% in September, supported by a moderate increase in the Consumer Price Index from 115.54 (Oct 2024) to 119.63 (Oct 2025). While most expenditure groups experienced mild price changes—such as housing (2.4%), furnishings (3.1%), and transport (1.7%)—food inflation remained the dominant driver at 7.4%, given its heavy 28.2% weight in the NCPI basket. Monthly price movements also showed easing pressures, with declines in key staples like dried beans (-3.1%), finger millet (-2.5%), and poultry (-2.7%) contributing to the overall -0.2% monthly inflation. Core inflation remained subdued at 2.1%, highlighting stable underlying price dynamics against a backdrop of steady energy costs, where fuel prices dropped between 1.6% and 1.9%. Overall, the October 2025 data paints a picture of controlled inflation, balancing modest price increases with short-term relief in essential goods.

Based on the National Bureau of Statistics (NBS) October 2025 CPI report, Tanzania recorded a headline inflation rate of 3.5%, slightly up from 3.4% in September 2025. This means prices increased modestly over the 12-month period ending October 2025.

1. Annual Inflation by Major Groups (October 2025)

The table below summarizes changes in the Consumer Price Index across main COICOP divisions.

Table 1: Annual and Monthly Inflation Rates by Main Groups (2020 = 100)

2. Headline Inflation Trend (Oct 2024 – Oct 2025)

The report shows the CPI and inflation rate moving in a narrow and stable range:

• CPI increased from 115.54 (Oct 2024) to 119.63 (Oct 2025).
• Inflation ranged between 3.0% and 3.5% over 12 months.

Inflation Trend Summary

Inflation remained stable and low, reflecting controlled price movements.

3. Food Inflation (October 2025)

Food is the largest contributor to inflation due to its heavy weight (28.2%).

Key findings:

• Food inflation rose to 7.4%, up from 7.0% in September 2025.
• Food remains the most influential driver of overall inflation.

Monthly food price changes

(notable declines contributing to total CPI decrease between Sept and Oct 2025)

4. Core Inflation (October 2025)

Core inflation excludes volatile items (unprocessed food, fuel, energy, utilities).

Key findings:

• Core inflation decreased slightly to 2.1% (from 2.2% in September 2025).
• Reflects stable prices in non-volatile goods and services.

Core vs Non-core Indices

Non-core includes food and energy — main inflation sources.

5. Goods vs Services Inflation

Goods prices rose significantly faster than services.

6. Energy, Fuel & Utilities

Energy-related prices showed moderate inflation:

• Energy, Fuel, Utilities Index increased by 4.0% year-on-year.
• Monthly prices dropped by 1.4%, mostly due to declines in:
  • petrol (-1.9%)
  • diesel (-1.6%)
  • charcoal (-2.9%)
  • kerosene (-1.8%)
  • These contributed to lower monthly inflation (-0.2%).

7. Monthly Inflation (Sept 2025 – Oct 2025)

• Monthly CPI change: -0.2%
• Driven by price decreases in several food and energy items.

This indicates short-term price relief.

Implications of October 2025 Inflation Data for the Tanzanian Economy

The October 2025 National Consumer Price Index (NCPI) report from the National Bureau of Statistics (NBS) indicates a headline inflation rate of 3.5%, a marginal uptick from 3.4% in September. This stability in low single-digit inflation reflects effective macroeconomic management amid global uncertainties, but it also highlights persistent pressures in food prices, which weigh heavily on household budgets. Below, I outline key economic implications, drawing from the NBS data and broader contextual insights from recent reports. These implications span short-term consumer impacts, monetary policy dynamics, growth prospects, and sectoral vulnerabilities.

1. Enhanced Macroeconomic Stability and Investor Confidence

• Positive Outlook: The headline inflation rate's narrow range (3.0%–3.5% over the past year) signals controlled price dynamics, aligning with Tanzania's target of keeping inflation below 5% as per the Bank of Tanzania (BoT) monetary policy framework. This stability preserves purchasing power for consumers and businesses, fostering a predictable environment for investment. For instance, the Consumer Price Index (CPI) rose modestly from 115.54 in October 2024 to 119.63 in October 2025, indicating gradual rather than erratic price growth.
• Broader Economic Tie-In: Tanzania's economy grew by an estimated 6.0% in real GDP terms for the first half of 2025, driven by agriculture, mining, and tourism sectors. Low inflation supports this trajectory by reducing input costs for exporters (e.g., gold and cashews) and attracting foreign direct investment (FDI), which reached $1.2 billion in the first nine months of 2025, up 15% year-on-year. Stable prices also aid fiscal planning, with the government maintaining a budget deficit below 4% of GDP.
• Risk: If food-driven pressures persist, it could erode confidence if not offset by wage growth, which averaged 5.2% in formal sectors during 2025.

2. Household Welfare and Poverty Alleviation Challenges

• Pressure from Food Inflation: With food and non-alcoholic beverages carrying 28.2% weight in the NCPI basket, the 7.4% annual rise (up from 7.0%) disproportionately affects low-income households, who allocate over 50% of budgets to food. Monthly declines in staples like maize grains (-1.3%), dried beans (-3.1%), and vegetables (-0.7%) provided temporary relief, contributing to the overall -0.2% monthly CPI drop. However, the non-core index (including food) at 7.3% underscores volatility tied to weather and supply chains.
• Implications for Poverty: About 26% of Tanzanians live below the poverty line (2024 data), and elevated food prices could slow progress toward the National Five-Year Development Plan's (FYDP III) goal of reducing extreme poverty to 10% by 2025. Rural households, reliant on subsistence farming, face compounded risks from climate events like El Niño-induced floods in early 2025, which disrupted harvests.
• Mitigation Potential: Government subsidies on fertilizers and imports (e.g., via the Strategic Grain Reserve) have helped cap food spikes, but expanding social protection programs—like cash transfers reaching 1.5 million beneficiaries in 2025—could buffer impacts.

3. Monetary Policy and Interest Rate Environment

• Accommodative Stance: Core inflation's dip to 2.1% (from 2.2%)—excluding volatile food and energy—suggests subdued underlying pressures, giving the BoT room to maintain its policy rate at 6.0% (unchanged since mid-2024). This supports credit growth, which expanded 12% in 2025, fueling private sector lending for SMEs.
• Energy and Transport Dynamics: The 4.0% rise in the Energy, Fuel, and Utilities Index (despite a -1.4% monthly drop from falling petrol and diesel prices) reflects global oil volatility, but local production from the Julius Nyerere Hydropower Project (operational since 2024) has stabilized electricity costs, aiding industrial competitiveness. Transport inflation at 1.7% benefits logistics for exports.
• Policy Signal: The BoT's latest Monetary Policy Statement (October 2025) emphasized vigilance on food supply shocks, potentially signaling targeted interventions like bond issuances to manage liquidity without tightening.

4. Sectoral Growth and Structural Vulnerabilities

• Agriculture and Goods vs. Services Divergence: Goods inflation at 5.0% (vs. 1.0% for services) highlights supply-side bottlenecks in agriculture, which employs 65% of the workforce and contributes 25% to GDP. The 7.4% food inflation stems partly from post-harvest losses and export competition, but services stability (e.g., education at 3.0%) supports human capital development under FYDP III.
• Opportunities in Diversification: Low overall inflation bolsters tourism (projected 8% growth in 2025) and manufacturing, with non-food items like furnishings (3.1%) showing moderate gains. However, housing inflation at 2.4% signals urban demand pressures amid rapid urbanization (4% annual rate).
• External Factors: Tanzania's shilling appreciated 2% against the USD in 2025, easing import costs for non-oil goods, but global commodity prices (e.g., wheat up 5% due to Black Sea tensions) could reignite food pressures.

Summary Table: Key Implications by Economic Dimension

In essence, the October 2025 data portrays a resilient Tanzanian economy with inflation well-managed at levels that promote inclusive growth. However, addressing food supply chain inefficiencies—through investments in irrigation and storage—remains critical to prevent inequality from widening. Looking ahead, the next NCPI release on December 8, 2025, will clarify if seasonal harvests ease pressures further. For deeper dives, refer to BoT's quarterly reports or NBS updates.

Tanzania’s food inflation remained a key economic pressure point in October 2025, rising to 7.4% year-on-year from 7.0% in September, far outpacing the headline inflation rate of 3.5%. The Food and Non-Alcoholic Beverages Index increased from 120.50 in October 2024 to 129.47 in October 2025, marking a 9-point jump over 12 months, cementing food as the primary driver due to its heavy 28.2% weight in the NCPI basket. Although several staple items recorded monthly price drops—including dried beans (-3.1%), dried peas (-3.1%), finger millet (-2.5%), poultry meat (-2.7%), and maize grains (-1.3%)—providing short-term relief and contributing to the -0.2% monthly CPI decline, elevated annual food inflation highlights persistent structural challenges. With food prices rising nearly four times higher than non-food inflation (1.9%), Tanzania’s price stability remains sensitive to supply disruptions, weather variability, and seasonal demand cycles, underscoring the urgency of strengthening agriculture systems and food supply chains.

The Food and Non-Alcoholic Beverages inflation rate for October 2025:

• 7.4% (Year-on-year)
• Up from 7.0% in September 2025
• This means prices for food items increased significantly compared to the same period last year and contributed strongly to overall headline inflation.

Food Inflation Index Movement (2024–2025)

The index increased from:

• 120.50 in October 2024
• To 129.47 in October 2025

This shows a clear 9-index-point rise over 12 months.

Table 1: Food Inflation Index Movement (2020 = 100)

Although the index dropped slightly from September to October (129.70 → 129.47), the annual rate still increased due to the comparison base from last year.

Contribution of Food to Headline Inflation

Food has the largest weight in the NCPI basket (28.2%), making it the primary inflation driver.

• Headline inflation: 3.5%
• Food inflation alone: 7.4%
• Food prices are rising more than twice the pace of average inflation.

Food Items with Significant Monthly Price Decline

Despite high annual inflation, between September and October 2025 many food items registered lower month-to-month prices, contributing to a -0.2% monthly CPI reduction.

Table 2: Declining Food Prices (Monthly Changes)

These reductions helped slow down short-term inflation pressure.

Why Food Inflation Is Rising

Key contributors based on index movement:

1. Weather-related seasonal effects – influencing cereal and vegetable prices.
2. Transport cost fluctuations – though fuel declined in October, earlier increases influenced food supply chains.
3. High demand during specific periods – food consumption patterns typically fluctuate seasonally.

Food Inflation vs Non-Food Inflation

Food inflation is nearly four times higher than non-food inflation.
This highlights the continued vulnerability of Tanzania’s price stability to food supply shocks.

Implications of October 2025 Food Inflation for the Tanzanian Economy

The October 2025 National Consumer Price Index (NCPI) from the National Bureau of Statistics (NBS) highlights food and non-alcoholic beverages inflation at 7.4%, up from 7.0% in September, with the index rising from 120.50 in October 2024 to 129.47. As the heaviest-weighted category (28.2%) in the NCPI basket, food inflation—nearly four times the 1.9% non-food rate—remains the dominant driver of the overall 3.5% headline inflation, exerting outsized pressure on economic stability. Monthly price declines in staples like dried beans (-3.1%), peas (-3.1%), and maize grains (-1.3%) offered short-term relief, contributing to a -0.2% overall CPI drop. However, structural vulnerabilities in agriculture, which employs 65% of the workforce and contributes 25-30% to GDP, amplify these trends. Below, I outline key implications, integrating NBS data with recent economic analyses.

1. Erosion of Household Purchasing Power and Widening Inequality

• Core Impact: High food inflation disproportionately burdens low-income households, who spend over 50% of budgets on food, reducing real disposable income and exacerbating food insecurity. With 26% of Tanzanians below the poverty line (2024 estimates), the 7.4% rise could push 1-2 million more into vulnerability, slowing progress toward the Third National Five-Year Development Plan (FYDP III) poverty reduction targets.
• Relief from Monthly Declines: Reductions in cereals (e.g., finger millet -2.5%) and proteins (poultry meat -2.7%) eased short-term pressures, potentially stabilizing urban food markets. Yet, annual trends signal persistent strain, as supply disruptions from upcountry regions have tripled some grocery prices in cities like Dar es Salaam.
• Broader Tie-In: This dynamic hampers consumption-driven growth, with private consumption accounting for 70% of GDP. Women and rural families, often subsistence farmers, face compounded effects, widening gender and urban-rural divides.

2. Strain on the Agriculture Sector and Rural Livelihoods

• Sectoral Vulnerabilities: Agriculture's 6.3% contribution to Q2 2025 GDP growth masks inflation's toll—rising input costs (e.g., transport, despite October's fuel dip) and weather shocks (El Niño floods in early 2025) inflate production expenses, squeezing smallholder margins. A recent study reveals agriculture's true revenue contribution is 20-25% higher than official figures, underscoring its underappreciated role, but food price volatility discourages investment in irrigation or storage.
• Export-Import Dynamics: Elevated domestic prices may boost farmer incomes short-term but risk export bans on staples like maize to curb local shortages, as seen in 2024. Cross-border trade reports highlight potential for 10-15% agri-export growth in 2025 if stabilized, yet inflation could deter regional partners like Kenya.
• Employment Risks: With 65% workforce engagement, persistent 7.4% inflation could lead to underemployment in rural areas, where post-harvest losses (up to 30%) already compound issues.

3. Moderation of Overall GDP Growth and Fiscal Pressures

• Growth Drag: Tanzania's economy is projected to expand 6% in 2025, with agriculture driving a quarter of this via better harvests. However, food inflation at twice the headline rate could shave 0.5-1% off growth by curbing domestic demand and raising fiscal costs for subsidies (e.g., fertilizer programs costing TZS 500 billion in FY2025/26).
• Inflation Spillover: The non-core index (26.1% weight, including food) at 7.3% annual rise indicates volatility spilling into energy and transport, indirectly hiking manufacturing costs. Yet, core inflation's stability at 2.1% suggests contained broader pressures, supporting 6%+ growth if food eases.
• Fiscal Implications: Government revenue from agri (e.g., cashew, tobacco) remains robust, but higher social spending on food aid could widen the budget deficit beyond 3.5% of GDP.

4. Monetary Policy and Supply-Side Responses

• BoT's Balancing Act: The Bank of Tanzania (BoT) views food inflation as transient, keeping the policy rate at 6% to support 12% credit growth for agri-SMEs. The October 2025 Monetary Policy Report notes easing food pressures in Zanzibar (to 4.0%), projecting national stability within 3-5% targets via improved supply chains.
• Policy Levers: Seasonal harvests (e.g., maize in Q4 2025) could further moderate prices, as monthly declines suggest. Initiatives like the Southern Agricultural Growth Corridor (SAGCOT) aim to boost productivity by 20% by 2026, addressing root causes like climate sensitivity.
• Risks: If global factors (e.g., Black Sea grain disruptions) persist, food inflation could exceed 8%, prompting tighter policy and higher borrowing costs.

5. External and Sustainability Factors

• Global Linkages: Tanzania's shilling stability (2% appreciation vs. USD in 2025) cushions import reliance for rice and wheat, but commodity price hikes (wheat +5% globally) fuel domestic inflation. Sustainable trends, like climate-resilient seeds adopted by 30% of farmers, offer long-term buffers.
• Opportunities: High food prices incentivize value addition (e.g., processing for export), potentially adding TZS 1 trillion to agri-GDP by 2026. Eco-friendly practices could attract green FDI, aligning with FYDP III's sustainability goals.

Summary Table: Key Implications of Food Inflation

In summary, while October's 7.4% food inflation underscores supply vulnerabilities threatening inclusive growth, monthly easing and policy buffers position Tanzania for resilience. Addressing structural issues—like 30% post-harvest losses—through FYDP III investments could cap food inflation below 6% in 2026, sustaining 6%+ GDP expansion. Monitor the December 8, 2025, NCPI release for harvest impacts. For more, see BoT's October Monetary Policy Report.

External Debt Dominates at 70.6% (Sept 2025)

As of September 2025, Tanzania’s total public debt stood at TZS 127,474.5 billion, with external debt accounting for 70.6% (TZS 90,015.4 billion) and domestic debt contributing 29.4% (TZS 37,459.1 billion), reflecting an externally oriented but development-focused financing structure. The external portfolio—converted from USD 35.4 billion using the average rate of TZS 2,471.69/USD—is primarily held by the central government (77.5%) and directed toward high-impact sectors such as transport and infrastructure (28%), social services (20.4%), and energy/minerals (14.3%). Domestic debt remains stable and locally absorbed, dominated by government bonds (73%) and supported by commercial banks (36.4%) and pension funds (23.9%), indicating a deep and liquid local market. This composition aligns with Tanzania’s growth trajectory, supporting infrastructure expansion and social investments while maintaining debt sustainability indicators within acceptable thresholds. However, the heavy exposure to USD (66% of external borrowing) presents FX risk, making shilling performance crucial for managing repayment costs. Overall, the debt structure balances development needs with macroeconomic stability, supported by an appreciating currency, strong reserves, and favorable financing terms from multilateral partners.

1. Tanzania National Debt Overview (September 2025)

Tanzania’s total public debt consists of external debt and domestic debt.

Summary Table — National Debt (TZS)

2. Debt Conversion Explanation

The external debt is originally reported in USD.
The report’s exchange rate is:

• TZS 2,471.69 per USD (September 2025 average)
• USD 35,438.2 million × 2,471.69 = TZS 90,015.4 billion

Domestic debt is already in TZS in the document:

• TZS 37,459.1 billion

3. Detailed Breakdown — External Debt (Converted to TZS)

3.1 External Debt Stock by Borrower

(All USD values from document summary)

3.2 External Debt by User of Funds (Converted to TZS)

✔ Converted using TZS 2,471.69/USD.

4. Detailed Breakdown — Domestic Debt (TZS)

4.1 Domestic Debt Structure by Creditor Category

4.2 Domestic Debt by Instrument Type

5. Combined National Debt Summary (in TZS)

6. Final Summary Table — Tanzania National Debt (TZS)

Implications of Tanzania's National Debt Structure in September 2025

The breakdown of Tanzania's national debt as of September 2025, detailed in Section 2.7 (Debt Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), portrays a balanced yet externally oriented portfolio totaling TZS 127,474.5 billion (equivalent to ~USD 51.6 billion at TZS 2,471.69/USD). External debt dominates at 70.6% (TZS 90,015.4 billion), funding growth-critical sectors like infrastructure (28%) and social services (20.4%), while domestic debt (29.4%, TZS 37,459.1 billion) relies on stable local institutions (e.g., banks 36.4%, pensions 23.9%). This structure—converted from USD figures using the shilling's appreciated rate—reflects prudent borrowing amid 6.3% Q2 GDP growth, low 3.4% inflation, and a TZS 618.5 billion fiscal deficit (partly debt-financed). The composition supports development but amplifies FX risks, given 66% USD-denominated external exposure. Below, I analyze implications across key dimensions, integrating economic context.

1. Debt Composition: External Dominance for Growth Financing

• External Debt (70.6%, TZS 90,015.4B): Predominantly central government (77.5%, TZS 67,854.5B), with private sector (15.1%) and guarantees (7.4%) adding diversification. Usage skews toward productive investments: transport/infrastructure (28%, TZS 24,508.1B) aligns with construction's 1.1% GDP contribution, energy/minerals (14.3%, TZS 12,506.2B) supports mining growth (1.5% GDP), and agriculture/water (14%, TZS 12,280.9B) bolsters food security (NFRA stocks at 570,519 tonnes). Concessional terms (57% multilateral) keep costs low (~1.2% interest).
• Domestic Debt (29.4%, TZS 37,459.1B): Bonds dominate (73%, TZS 27,349.1B) over T-bills (27%, TZS 10,110B), with broad creditor base (other financials 39.7%) indicating deep local markets (oversubscription in securities). This reduces FX volatility spillovers.
• Broader Implications:
  • Positive: Funds 71.9% expenditure execution (TZS 3,346.6B), enabling 6% full-year GDP projection via reliable power and exports. Shilling appreciation (+9.4% y/y) lowers TZS servicing costs (~TZS 3T saved annually on USD portion), improving debt/GDP at 40.1% (below EAC 50% threshold).
  • Risks: High external share exposes to USD swings (66% currency composition), potentially inflating service (projected USD 1,215M in 2025; 4.2% of exports). If global oil rises (easing in September), import bills could pressure reserves (5.8 months cover).

2. Sustainability and Servicing Dynamics

• Borrower and Creditor Profile: Central government's 77.5% external share ensures sovereign control, with multilaterals/bilaterals as primary creditors (low-cost, long maturity ~12.8 years). Domestic's institutional holders (pensions/banks) provide stability, absorbing via oversubscribed auctions (T-bills 2.4x).
• Fund Utilization: 82.7% external to key sectors (infra/social/energy/agri) ties debt to growth multipliers, unlike "others" (14%). This supports private credit (16.1% y/y) without crowding out.
• Broader Implications:
  • Positive: Concessional bias and domestic depth sustain ratios (external service 9.8% exports, down from 11.2% 2024). Aligns with monetary policy (CBR 5.75%), keeping real yields positive (vs. 3.4% inflation) and IBCM stable (6.45%).
  • Risks: Refinancing domestic bonds/T-bills could hike yields if liquidity tightens (e.g., from revenue shortfalls like mining taxes; 87.2% collection). Cumulative growth (+1.4% MoM total debt) demands revenue diversification beyond gold/tourism.

3. Fiscal and Macroeconomic Linkages

• Budgetary Pressures: Debt finances recurrent/development gaps (TZS 2,073.7B/1,272.9B), with servicing rising as % of spend amid delays (71.9% execution). Shilling strength mitigates, but USD exposure ties to global conditions (IMF 3.2% growth).
• Inflation and Growth Ties: Low-cost external funds curb inflationary borrowing, supporting 3–5% target (food 7.0% eased by stocks;). In Zanzibar, analogous structure aids tourism/external performance.
• Broader Implications:
  • Positive: Enhances resilience (reserves USD 6.66B), fostering M3 growth (20.8% y/y) and export surplus (USD 1.0B Q2). Positive for EAC/SADC convergence.
  • Risks: FX depreciation (reversed from 2024's -10.1%) could balloon TZS costs by 10–15%, straining deficit. Commodity volatility (oil down, coffee up) affects agri/energy repayments.

4. Policy Context from the Review

• Synergies: Debt supports fiscal-monetary prudence, with BOT interventions (USD 11M net sale) buffering risks. Projections: Debt/GDP <45% by 2026, aligned with 6% growth and stable inflation.
• Outlook: Strengthen domestic market (e.g., via green bonds) and hedge FX to counter global uncertainties (trade policy index elevated).

In conclusion, Tanzania's September 2025 debt structure implies strategic financing for development amid stability, with external resources driving growth sectors and domestic buffers mitigating risks. The 70.6% external tilt underscores FX vigilance, but concessional terms and shilling strength ensure sustainability—reinforcing the Review's narrative of prudent policies for 2026 resilience.

Stability Supports Debt Sustainability (Sept 2025)

In September 2025, Tanzania’s macro-financial position showed improved resilience, with the shilling appreciating to TZS 2,471.69 per USD—up 0.75% monthly and 9.4% annually—reversing the 10.1% depreciation recorded in 2024. This stability was supported by strong foreign exchange inflows from gold, agriculture, and tourism, supplemented by improved interbank liquidity and measured BOT intervention, including a net USD 11 million sale. At the same time, the national debt rose moderately to USD 50.77 billion (+1.4% month-on-month), with external debt accounting for 69.8% (USD 35.44 billion) and domestic debt amounting to TZS 37,459 billion (around USD 15.3 billion). The debt structure remains dominated by concessional multilateral financing (57%), though commercial lenders (35.6%) and USD exposure (66% of external debt) pose vulnerability to global currency movements. The shilling’s stability is beneficial for debt management, reducing the local currency cost of servicing USD-denominated obligations, improving sustainability ratios, attracting foreign investment into government securities, and easing inflationary pressures through cheaper imports. However, continued reliance on USD-denominated debt and exposure to external shocks underscore the importance of maintaining strong revenue performance and diversifying financing sources to preserve debt resilience going forward.

1. Tanzania Shilling Stability

Exchange Rate Movements (Annual and Monthly)

• In September 2025, the Tanzanian Shilling (TZS) strengthened against the USD:
  • TZS 2,471.69 per USD
    (vs TZS 2,490.16 per USD in August 2025)
• This represents:
  • Monthly appreciation of about 0.75%
  • Annual appreciation of 9.4%
• This is a major improvement compared to:
  • 2024, when the shilling depreciated by 10.1% over the same period.

Why the Shilling Stabilized

According to the report, stability was supported by:

• Strong inflows from gold exports, agricultural exports, and tourism
• Adequate interbank foreign exchange liquidity
• BOT participation in IFEM (Bank sold USD 11 million net)
• Improved macroeconomic environment (low inflation at 3.4%)

2. National Debt Position

Total National Debt (as at September 2025)

• Total debt: USD 50,772.4 million
  (Up 1.4% from previous month)

Breakdown:

• External debt: 69.8% = USD 35,438.2 million
• Domestic debt: 30.2% = TZS 37,459 billion
  (approximately USD 15.3 billion equivalent at prevailing rates)

Monthly Growth

• External debt increased by 1.2%
• Domestic debt increased by 0.9%

Composition of External Debt

• Multilateral lenders: 57.0%
• Commercial lenders: 35.6%
• Bilateral creditors: 4.3%
• Export credit: 3.1%

Currency Composition

• USD accounts for 66% of external debt
• Euro: 17.7%
• Chinese Yuan: 6.4%

3. Relationship Between Shilling Stability and Debt

How Shilling Stability Helps Debt Position

1. Reduces cost of servicing external debt
   • With 66% of external debt denominated in USD, shilling appreciation lowers local currency cost of interest and principal repayments.
2. Improves debt sustainability ratios
   • Debt-to-GDP ratio benefits from stable exchange rate.
   • Government debt repayments (USD-denominated) become cheaper in TZS terms.
3. Improves investor confidence
   • Stable currency encourages foreign investment in government securities (bonds and T-bills).
4. Reduces inflationary pressure
   • Strengthened shilling lowers cost of imports (fuel, machinery).

However, risks remain:

• External debt remains highly exposed to USD movements (66% share)
• If USD strengthens globally, Tanzania’s debt servicing costs increase
• Continued reliance on long-term debt instruments requires strong revenue performance

Summary Table: Tanzania Shilling vs National Debt (September 2025)

Implications of Shilling Stability and National Debt Position in September 2025

The provided data on the Tanzanian shilling's appreciation and the national debt stock as of September 2025, sourced from Sections 2.5 (Financial Markets, Interbank Foreign Exchange Market) and 2.7 (Debt Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), illustrates a reinforcing dynamic between currency resilience and fiscal sustainability. The shilling's 0.75% monthly and 9.4% annual strengthening (to TZS 2,471.69/USD) reversed 2024's 10.1% depreciation, driven by export booms (gold up 12.8% y/y, traditional crops 8.5%; Section 2.8) and tourism (earnings USD 397M in Q2), ample IFEM liquidity (USD 93.8M traded, banks 88.3% share), and BOT's net USD 11M sale. Meanwhile, total debt rose modestly to USD 50.77B (+1.4% MoM), with external comprising 69.8% (USD 35.44B, +1.2% from USD 443M disbursements > USD 131M amortization). This occurs amid 6.3% Q2 GDP growth (Section 2.1), 3.4% inflation, and a manageable fiscal deficit (TZS 618.5B). Below, TICGL detail the implications, focusing on synergies and risks.

1. Shilling Appreciation: Enhanced External Resilience and Policy Flexibility

• Monthly (0.75%) and Annual (9.4%) Gains: These reflect a current account surplus (trade balance USD 1,029M in Q2, up from USD 812M; Section 2.8), bolstered by non-gold exports (cashews/cereals) and services (tourism up 15.2% y/y). BOT's intervention smoothed volatility without eroding reserves (USD 6,657M, 5.8 months import cover), maintaining interbank stability (6.45% rate).
• Reversal from 2024 Depreciation: The turnaround signals structural improvements, like diversified inflows reducing import dependence (e.g., fuel costs down with global oil decline; Chart 1.5 and 2.2.5).
• Broader Implications:
  • Positive: Lowers imported inflation (energy at 3.7%, down from 11.5% y/y; Section 2.2), supporting 3–5% target and real GDP momentum (projected 6% for 2025). Boosts FX reserves, enabling monetary accommodation (M3 +20.8% y/y) and private credit (16.1%).
  • Risks: Potential overvaluation could pressure export competitiveness if global demand softens (e.g., protectionism risks). Sustained strength relies on commodity stability (gold up, but wheat/fertilizer down).

2. National Debt Dynamics: Moderate Expansion with Sustainable Profile

• Total Debt +1.4% to USD 50.77B: External growth (+1.2%, USD 35.44B) from concessional inflows (multilateral 57%, e.g., IMF/World Bank; Table 2.7.2) outpaced domestic (+0.9%, TZS 37,459B via bonds/T-bills). Debt/GDP held at 40.1% (down from 42.3% in 2024), below EAC 50% threshold.
• Composition Vulnerabilities: USD dominance (66%) exposes to swings, but low-cost multilateral share (57%) and long maturities (average 12.8 years) mitigate. Commercial debt (35.6%) carries higher rates (~4.5% vs. 1.2% multilateral), reflecting market access gains.
• Broader Implications:
  • Positive: Servicing costs projected at USD 1,215M for 2025 (manageable at 4.2% of exports), funding growth-enhancing projects (e.g., infrastructure in development spend TZS 1,273B). Domestic portion supports liquidity without crowding out private borrowing (lending rates stable at 15.18%).
  • Risks: Cumulative growth (external +8.2% y/y) could strain if revenues lag (87.2% target in September; Section 2.6), especially with USD exposure. Bilateral/Chinese Yuan shares (4.3%/6.4%) add geopolitical risks.

3. Interlinkages: Shilling Strength Mitigating Debt Burdens

• Debt Servicing Relief: Appreciation reduces TZS-equivalent costs for USD-denominated repayments (66% external), e.g., a 9.4% gain shaves ~TZS 3.3T off annual service (based on USD 1.2B projection). This improves sustainability (external debt service ratio 9.8% of exports, down from 11.2% in 2024).
• Investor Confidence and Financing: Stable FX encouraged oversubscription in securities (T-bills 102%, bonds 115%), easing domestic borrowing and keeping yields moderate (91-day T-bill 6.8%). Reserves buffer shocks, aligning with IMF's resilient outlook (3.2% global growth).
• Inflation and Growth Ties: Currency stability curbs import costs (fuel/machinery), complementing low inflation (3.4%) to preserve real debt burdens. In Zanzibar, similar FX dynamics support tourism debt financing.
• Broader Implications:
  • Positive: Creates fiscal space for recurrent/development spending (71.9% execution), fostering 6% growth via exports/investment. Enhances credit ratings, potentially lowering future commercial borrowing costs.
  • Risks: USD rebound (e.g., from US policy tightening) could amplify service costs by 10–15% in TZS terms. High external reliance (69.8%) demands revenue diversification beyond gold/tourism.

4. Macroeconomic and Policy Context from the Review

• Synergies: Debt-funded investments align with output drivers (agriculture/mining) and external strength (CA surplus USD 1.2B Q2). Policy mix (CBR 5.75%) ensures no inflationary debt monetization.
• Outlook: Projections: Debt/GDP <45% by 2026, inflation 3–5%, with FX interventions maintaining balance. Global risks (trade uncertainty) warrant monitoring, but reserves (5.8 months cover) provide resilience.

In conclusion, September 2025's shilling stability implies a debt-lightened fiscal posture, reducing servicing pressures and amplifying growth dividends from exports and reserves. While moderate debt expansion remains sustainable, USD exposure underscores the need for hedging and diversification to safeguard against global reversals, ensuring alignment with Tanzania's 6% growth trajectory.

Central Government Dominates 77.5%, Infrastructure Leads Fund Use (Sept 2025)

Tanzania’s external debt reached USD 35,438.2 million in September 2025, representing 69.8% of total national debt and marking a modest 1.2% month-on-month increase due to net disbursements. The debt is heavily concentrated in central government borrowing (77.5%), with private sector and government-guaranteed entities accounting for 15.1% and 7.4%, respectively. Sector-wise, infrastructure and transport dominate fund usage at 28%, followed by social welfare and education (20.4%), energy and minerals (14.3%), and agriculture and water (14%), reflecting a productive, growth-oriented allocation. Currency composition remains USD-heavy (66%), exposing Tanzania to exchange rate volatility, though partial diversification into EUR, CNY, and JPY provides some buffer. Overall, the external debt profile is concessional and long-term, supporting fiscal expansion, development projects, and macroeconomic stability, yet requires vigilant management of currency and concentration risks to safeguard debt sustainability and complement domestic financing for continued 6% GDP growth.

1. Total External Debt Stock (September 2025)

2. External Debt by Borrower (Disbursed Outstanding Debt)

The external debt consists of central government debt, government‐guaranteed debt, and private sector debt.

→ The central government remains the dominant borrower, accounting for almost 80% of all external debt.

3. External Debt by User of Funds

This represents what sectors or purposes the borrowed funds are used for.

4. External Debt by Currency Composition

→ Tanzania’s debt remains highly dollar-concentrated (66%), exposing the country to USD exchange rate risk.

5. Summary Table — External Debt Indicators (September 2025)

Implications of Tanzania's External Debt Profile in September 2025

The external debt indicators for September 2025, as detailed in Section 2.7 (Debt Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), portray a moderately expanding portfolio at USD 35,438.2 million (+1.2% MoM from disbursements exceeding amortizations by USD 443 million vs. USD 131 million), comprising 69.8% of total national debt (USD 50,772.4 million). Central government borrowing dominates (77.5%), with funds skewed toward productive uses like infrastructure (28%) and social sectors (20.4%), but heavy USD exposure (66%) amplifies currency risks amid shilling appreciation (+9.4% y/y). This structure—largely concessional (57% multilateral, average maturity 12.8 years)—supports fiscal expansion (TZS 618.5 billion deficit; Section 2.6) and 6.3% Q2 GDP growth, yet ties sustainability to export performance (service receipts +4.6% to USD 6,973.9 million; Section 2.8). Below, I break down implications by key dimensions, integrating broader context like low inflation (3.4%) and reserves (USD 6,657 million, 5.8 months import cover).

1. Borrower Composition: Public Sector Dominance Signals Fiscal Centralization

• Central Government (77.5%, USD 27,461.3M); Private (15.1%, USD 5,357M); Guaranteed (7.4%, USD 2,619.9M): Sovereign focus reflects reliance on multilateral/bilateral loans (e.g., IMF/World Bank for projects), with private share indicating emerging corporate access (e.g., mining firms). Guarantees cover state-owned enterprises (SOEs) in energy/infra.
• Broader Implications:
  • Positive: Concentrates risk management under fiscal policy, enabling concessional terms (low ~1.2% rates) to fund development (71.9% expenditure execution; Section 2.6). Private growth (15.1%) aligns with credit expansion (16.1% y/y), fostering diversification.
  • Risks: Limited private participation (15.1%) hampers market deepening, potentially crowding out FDI if guarantees strain budgets (e.g., SOE inefficiencies). High public share exposes to revenue volatility (87.2% collection).

2. User of Funds: Growth-Oriented Allocation with Multiplier Potential

• Transport/Infra (28%, USD 9,910.4M); Social/Education (20.4%, USD 7,238.1M); Energy/Minerals (14.3%, USD 5,058.7M); Agri/Water (14%, USD 4,964.3M): Over 76% targets high-impact sectors, with "others" (14%) including tourism/finance. This mirrors GDP drivers (construction 1.1%, mining 1.5%).
• Broader Implications:
  • Positive: Productive tilt boosts long-term returns (e.g., infra aiding exports USD 17,094.2 million; Section 2.8), supporting 6% full-year projection via reliable power and agri stocks (570,519 tonnes). Social focus enhances human capital, curbing unemployment risks.
  • Risks: Infra/energy concentration (42.3%) vulnerable to execution delays (national 71.9%; Section 2.6) or commodity shocks (oil down but metals volatile). Low finance/trade shares (9.3%) limit SME scaling.

3. Currency Composition: USD Heaviness Heightens Volatility Exposure

• USD (66%); EUR (17.7%); CNY (6.4%); JPY (5%); Others (4.9%): Dollar dominance ties to commercial/multilateral loans, with CNY/JPY linked to bilateral projects (e.g., Chinese infra, Japanese JICA).
• Broader Implications:
  • Positive: Shilling gains (+9.4%) reduce TZS servicing (~USD 1,215 million in 2025, 4.2% exports; Table 2.7.4), improving ratios (debt/GDP 40.1%, below EAC 50%). Diversification (EUR/CNY ~24%) buffers USD swings, aiding reserves.
  • Risks: 66% USD share amplifies costs if dollar strengthens (e.g., US policy; Section 1.0), potentially adding 10–15% to TZS burden. CNY exposure adds geopolitical ties, while global rates (commercial 35.6% debt) pressure amid inflation moderation (4.2% global).

4. Sustainability and Macroeconomic Linkages

• Overall Dynamics: +1.2% growth from net inflows sustains debt/GDP stability (external service 9.8% exports, down from 11.2% 2024), complementing domestic debt (29.4%, TZS 37,459.1 billion; prior analysis) and CA narrowing (deficit ~1.5% GDP). In Zanzibar, external surplus (USD 836.6M) offsets union risks.
• Broader Implications:
  • Positive: Concessional/long-term bias (57% multilateral) aligns with monetary easing (CBR 5.75%), preserving low inflation (3–5% target) and liquidity (IBCM 6.45%).
  • Risks: USD/commercial vulnerabilities (66%/35.6%) demand hedging/export diversification (tourism +15.8%; Section 2.8). Rising stock strains if revenues falter (mining taxes down).

5. Policy Context from the Review

• Synergies: Funds amplify output (agri/mining-led) and external strength (services surplus USD 3,884.4M). Projections: Debt/GDP <45% by 2026, with FX interventions (USD 11M sale) mitigating risks.
• Outlook: Prudent amid global uncertainties (trade index up); prioritize private borrowing and currency swaps.

In conclusion, September 2025's external debt profile implies a development-enabling yet risk-laden framework, with public/infra focus driving growth while USD concentration demands vigilant FX/debt management. This aligns with the Review's resilient outlook, but enhancing private/diversified borrowing is crucial for 2026 sustainability amid global pressures.

Banks Hold 36.4%, Bonds Dominate at 73% (Sept 2025)

Tanzania’s domestic debt stood at TZS 37,459.1 billion in September 2025, marking a modest 0.9% month-on-month increase and reflecting a stable, well-diversified financing structure. The debt composition is dominated by long-term government bonds (73%), supported by institutional investors such as pension funds and insurance companies, while Treasury bills (27%) continue to attract commercial banks for liquidity management. Creditor distribution shows other financial institutions holding the largest share at 39.7%, followed by commercial banks at 36.4% and pension funds at 23.9%, demonstrating healthy diversification and reducing concentration risk. This structure enhances fiscal stability, supports predictable borrowing costs, and aligns with long-term investment strategies, while commercial bank participation ensures liquidity depth in the T-bill market. Overall, the domestic debt profile contributes positively to financing government operations, supports monetary policy implementation, and anchors market confidence—though continued vigilance is required to prevent crowding-out pressures on private-sector credit as government borrowing expands.

1. Total Domestic Debt (September 2025)

2. Domestic Debt by Creditors Category

The domestic debt is held by three main creditor groups:

Breakdown of Creditors

• Commercial banks
• Pension funds
• Other financial institutions
  (insurance companies, BOT, and other non-bank entities)

Debt Distribution by Creditor

→ "Other financial institutions" hold the largest share at 39.7%, followed by commercial banks.

3. Additional Breakdown: Domestic Debt by Instrument

Although your question focuses on creditors, the internal structure helps interpret the creditor behaviour.

→ Pension funds favour longer-term bonds, aligning with their long-term liabilities.
→ Banks prefer T-bills due to short-term liquidity needs.

4. Summary Table — Government Domestic Debt by Creditor (September 2025)

Implications of Tanzania's Domestic Debt Composition in September 2025

The domestic debt data for September 2025, detailed in Section 2.7 (Debt Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), reveals a stable and diversified funding base totaling TZS 37,459.1 billion (+0.9% MoM), comprising 29.4% of overall public debt (TZS 127,474.5 billion; external 70.6%). Instruments are bond-heavy (73%, long-term maturities) versus T-bills (27%, short-term), held diversely by commercial banks (36.4%), pension funds (23.9%), and other financial institutions (39.7%, including BOT, insurers, and non-banks). This structure—financed via oversubscribed securities auctions (T-bills 2.4x, bonds mixed; Section 2.5)—supports fiscal needs (TZS 618.5 billion deficit) amid 6.3% Q2 GDP growth, 3.4% inflation, and shilling strength (+9.4% y/y; Section 2.5). Below, TICGL outline implications, categorized by creditor and instrument, with broader economic ties.

1. Creditor Composition: Diversification Enhances Stability

• Other Financial Institutions (39.7%): Largest holders (e.g., BOT holdings for liquidity ops; insurers/non-banks for asset matching), indicating broad market absorption and reduced concentration risks. Their dominance in bonds (long-term) provides a stable base, aligning with pension funds' 23.9% preference for duration to match liabilities.
• Commercial Banks (36.4%): Key in T-bills (short-term liquidity management), reflecting banking sector liquidity (IBCM turnover +37.4% to TZS 3,261.6 billion). Their share supports active trading but ties debt to monetary policy (CBR 5.75%).
• Pension Funds (23.9%): Steady, long-term investors favoring bonds (73% of debt), bolstering demand and infrastructure financing (e.g., development spend TZS 1,272.9 billion).
• Broader Implications:
  • Positive: Diversified base (no single group >40%) lowers rollover risks and borrowing costs (T-bill yields down to 6.03%), complementing external concessional debt (57% multilateral). Enhances fiscal space for growth (projected 6%) without FX exposure, supporting private credit (16.1% y/y; Section 2.3).
  • Risks: Bank concentration (36.4%) could amplify liquidity squeezes (e.g., if reverse repos tighten), potentially crowding out private lending (lending rates 15.18%; prior analysis). Growing stock (+0.9% MoM) strains if revenues lag (87.2% target).

2. Instrument Breakdown: Bond Dominance for Long-Term Funding

• Government Bonds (73%): Long maturities (average ~10–15 years) held by pensions/insurers, reducing refinancing frequency and aligning with sustainable debt/GDP (40.1%, below EAC 50% threshold). Oversubscription in 20/25-year bonds signals confidence.
• Treasury Bills (27%): Short-term (up to 1 year), bank-preferred for liquidity, with yields easing (6.03% from 6.83%) amid surplus funds (M3 +20.8% y/y).
• Broader Implications:
  • Positive: Bond tilt promotes duration matching, stabilizing yields (12–13% for bonds) and fiscal predictability. Supports development priorities (e.g., infra/social sectors, 48.4% external use) without short-term volatility.
  • Risks: T-bill reliance (27%) heightens rollover needs in tight liquidity (e.g., from global tightening; Section 1.0), potentially raising costs if investor appetite wanes.

3. Fiscal and Macroeconomic Linkages

• Synergies with Policy: Domestic debt finances ~29.4% total (vs. external 70.6%), with creditor diversity aiding BOT's liquidity ops (reverse repos) and external resilience (CA surplus USD 1.0 billion Q2; Section 2.8). Ties to Zanzibar's domestic-heavy financing (78.4%).
• Debt Sustainability: Servicing (~TZS 2–3 trillion annually, est.) remains manageable (4.2% exports), with low real rates (vs. 3.4% inflation) preserving affordability.
• Broader Implications:
  • Positive: Institutional depth (pensions/insurers) fosters market development, boosting financial inclusion and EAC/SADC convergence. Complements shilling stability (lowers overall service burdens).
  • Risks: Expansion (+8.5% y/y est.) may crowd out credit if banks prioritize govt securities, dampening private investment (16.1% growth at risk). Global uncertainties (trade index up) could indirectly pressure via revenue (mining taxes down).

4. Policy Context from the Review

• Alignment: Mirrors prudent mix (monetary easing, fiscal discipline), with projections: Debt/GDP <45% by 2026, stable yields via auctions. In Zanzibar, similar domestic focus aids tourism surplus.
• Outlook: Monitor bank liquidity (IBCM 6.45%) and diversify non-bank holders to counter crowding out.

In conclusion, September 2025's domestic debt composition implies a resilient, institutionally backed financing framework that underpins fiscal sustainability and growth, with diversification mitigating risks. Bond dominance and broad holders promote stability, but coordination to avoid private credit displacement is essential amid global headwinds—aligning with the Review's emphasis on prudent policies for 2026.

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.

Inflation Eases to 3.5%, Current Account Surplus Up 34.7% (September 2025)

Zanzibar’s economic performance in September 2025 reflects solid recovery momentum supported by easing inflation (down to 3.5% from 3.9%), strong revenue mobilization, and an expanded current account surplus rising to USD 836.6 million (+34.7%). The external sector continued to benefit from robust tourism activity, with travel receipts jumping by 36.4% amid increased arrivals (+28.2%). Development expenditure dominated the TZS 420.1 billion budget (60%), signaling strategic investment in infrastructure and social services, while strong domestic financing (78.4% coverage) reinforced fiscal sustainability. Exports grew significantly to USD 1,473.9 million (+27.3%), driven overwhelmingly by services, despite a sharp 76% fall in clove exports due to seasonal cycles. Imports also rose moderately (+18.9%) to USD 658.4 million, largely reflecting higher capital goods inflows (+84.7%), indicating continued investment activity. Overall, Zanzibar’s growth remains anchored in tourism, supported by stable price trends, improved fiscal discipline, and strong external sector performance—though diversification remains essential to reduce vulnerability to single-sector shocks.

1. Overview of Zanzibar Economic Performance

Zanzibar’s economy showed moderate improvement supported mainly by:

• A decline in inflation
• Stronger revenue performance
• Improved external sector (current account surplus)

2. Inflation Performance in Zanzibar

Headline Inflation (Year ending September 2025)

Source: Inflation table under Zanzibar section

Notes

• Inflation pressures eased mainly due to improved supply conditions.
• Declines were broad-based across categories such as:
  • Restaurant and Accommodation services
  • Transport
  • Education
  • Personal care and miscellaneous services

3. Government Budgetary Operations (Zanzibar)

Expenditure — September 2025

Source: Government operations chart and narrative

Interpretation

• Development spending dominates, indicating capital-focused fiscal policy.
• High reliance on domestic resources strengthens fiscal sustainability.

4. Zanzibar External Sector Performance

Key Indicators

Drivers of Improvement

Higher tourism receipts (+36.4%)
Increased arrivals (885,385 visitors, +28.2%)
Stronger exports of services

5. Detailed Breakdown — Zanzibar Exports

Exports of Goods and Services (Year ending September 2025)

* previous value referenced from narrative (crop cycle impact)

Tourism was the standout performer.

6. Imports Breakdown — Zanzibar

Imports of Goods and Services

7. Summary Table — Zanzibar Economic Indicators

Implications of Zanzibar's Economic Performance

Zanzibar's economic indicators for September 2025, as outlined in Section 3.0 (Economic Performance in Zanzibar) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), depict a resilient semi-autonomous economy buoyed by tourism recovery and fiscal discipline. Headline inflation eased to 3.5% (from 3.9% in 2024), budgetary operations showed strong development focus (TZS 250.1 billion, 60% of total TZS 420.1 billion expenditure), and the external sector expanded with a USD 836.6 million current account (CA) surplus (+34.7% y/y), driven by travel receipts (USD 1,503.9 million, +36.4%). This performance mirrors mainland trends—6.3% Q2 GDP growth, 3.4% inflation—but highlights Zanzibar's tourism dependence amid clove export declines (-76%). Below, I analyze implications across core areas, drawing synergies with national dynamics like shilling appreciation (+9.4% y/y) and accommodative policy (CBR 5.75%).

1. Inflation Developments: Broad-Based Easing Supports Household Stability

• Headline at 3.5% (Down from 3.9%; Food 4.1%, Non-Food 2.9%): The decline reflects improved supply chains (e.g., domestic agriculture aiding food moderation) and global commodity relief (oil down), with broad easing in services like restaurants/accommodation (tourism-linked), transport, education, and personal care. This aligns with mainland's 3.4% stability, within shared 3–5% target and EAC/SADC criteria.
• Broader Implications:
  • Positive: Lowers living costs, boosting disposable income for tourism-dependent households and sustaining arrivals (885,385 visitors, +28.2%). Enhances real returns on savings amid positive deposit rates (~6.4% real; prior analysis), supporting consumption-led growth.
  • Risks: Food's relative stickiness (4.1%) exposes to supply shocks (e.g., mainland rice/maize pressures), potentially spilling via inter-island trade. Non-food drop (2.9%) ties to import affordability from shilling strength, but global rebounds could reverse gains.

2. Government Budgetary Operations: Development-Led Fiscal Expansion

• Total Expenditure TZS 420.1B (Recurrent TZS 170B/40%, Development TZS 250.1B/60%): Strong domestic revenue/grants (TZS 240.2B) covered 78.4% financing, yielding a TZS 180B deficit via local borrowing (e.g., securities). Emphasis on capital outlays prioritizes infrastructure/tourism enhancements, echoing mainland's 71.9% execution.
• Broader Implications:
  • Positive: Capital bias (~60%) fosters long-term multipliers (e.g., transport/energy for visitor access), aligning with CA surplus drivers. Domestic-heavy financing reduces FX risks (vs. mainland's 70.6% external debt), enhancing sustainability amid low yields (T-bills 6.03%).
  • Risks: Deficit reliance on borrowing could pressure local rates if mainland liquidity tightens (IBCM +37.4% but short-tenor heavy). Execution delays (common nationally) might hinder tourism infra, amplifying clove-like sectoral slumps.

3. External Sector Performance: Tourism-Fueled Surplus Amid Import Pressures

• CA Surplus USD 836.6M (+34.7% from USD 621.2M); Exports USD 1,473.9M (+27.3%), Imports USD 658.4M (+18.9%): Tourism dominated (USD 1,503.9M receipts, +36.4%; arrivals +28.2%), offsetting clove drops (USD 6.3M, -76% due to crop cycles). Imports rose moderately, led by capital goods (+84.7%, USD 73.6M for non-industrial equipment) and consumer items, signaling investment.
• Broader Implications:
  • Positive: Surplus buffers reserves (national 5.8 months cover), supporting shilling stability and import cost relief (energy inflation 3.7%). Tourism synergy with mainland exports (e.g., gold/cereals) diversifies inflows, aiding 6% national growth projection.
  • Risks: Clove decline underscores commodity vulnerability (mirroring mainland food stocks buildup), while import growth (if unchecked) could erode surplus if tourism falters (e.g., global protectionism). Heavy service reliance (travel ~102% of exports) exposes to shocks like pandemics or geopolitics.

4. Interlinkages: Tourism as Growth Anchor with National Spillovers

• Synergies with Mainland: Zanzibar's inflation easing (3.5%) complements national 3.4%, via shared supply chains (e.g., NFRA aiding food) and monetary policy (interbank 6.45%; Section 2.5). Tourism inflows bolster FX (BOT USD 11M intervention), while development spend ties to national infra (e.g., energy for reliable power).
• Fiscal-External Ties: Surplus finances deficit sustainably, reducing debt reliance (national 40.1% GDP) and supporting private credit (16.1% y/y).
• Broader Implications:
  • Positive: Positions Zanzibar as a national growth pole (tourism +28.2% arrivals vs. mainland mining/agri), enhancing EAC integration (convergence met).
  • Risks: Over-dependence on tourism/cloves amplifies external shocks (e.g., oil volatility), potentially widening inter-regional disparities if mainland exports soften.

5. Macroeconomic Context from the Review

• Alignment: Mirrors resilient outlook (IMF 3.2% global growth), with tourism offsetting clove dips like mainland's mixed commodities. Projections: Stable inflation (3–5%), sustained surplus via services.
• Outlook: Favorable for 2026 if diversification advances (e.g., via capital imports), but monitor global demand.

In conclusion, September 2025's data imply a tourism-propelled Zanzibar economy with stabilizing prices and external strength, complementing national momentum for balanced union growth. While development spending and surplus signal sustainability, mitigating tourism/clove risks through diversification is vital for enduring resilience amid global headwinds.