The Bank of Tanzania’s August 2025 review highlights Zanzibar’s steady economic progress, marked by inflation easing to 4.1% in July 2025 from 5.3% a year earlier, driven by lower food prices such as rice and sugar. On the fiscal side, the government collected TZS 93.4 billion in revenues and grants, exceeding its target, though expenditures of TZS 118.4 billion resulted in a TZS 25.0 billion deficit. In the external sector, exports of goods and services rose 12.4% to USD 328.2 million, supported by tourism and clove exports, while imports grew faster at 14.1% to USD 470.9 million, widening the trade deficit to USD 142.7 million. Together, these trends reflect resilience in tourism and trade, even as fiscal and external balances remain under pressure.

1. Inflation in Zanzibar

• Annual headline inflation (July 2025): 4.1%, down from 5.3% in July 2024, and unchanged from June 2025.
• Food inflation: 4.3% (vs. 9.2% in July 2024).
• Non-food inflation: 3.9% (stable).
• Monthly inflation: 0.2% (down from 0.5% in June 2025).
• Decline mainly due to lower food prices (rice, sugar, wheat flour, green bananas).

2. Government Budgetary Operations

• Revenue and grants (June 2025):TZS 93.4 billion, above the monthly target of TZS 87.6 billion.
  • Own-source revenue: TZS 80.2 billion.
  • Grants: TZS 13.2 billion.
• Expenditure (June 2025):TZS 118.4 billion.
  • Recurrent: TZS 79.9 billion.
  • Development: TZS 38.5 billion.
• Fiscal balance: Deficit of TZS 25.0 billion (since spending exceeded revenue).

3. External Sector Performance

• Exports of goods & services (year ending July 2025):USD 328.2 million, up from USD 292.1 million in 2024 (+12.4%).
  • Services receipts: USD 227.4 million, driven by tourism (travel receipts).
  • Goods exports: USD 100.8 million, led by cloves and seaweed.
• Imports of goods & services (year ending July 2025):USD 470.9 million, up from USD 412.6 million in 2024 (+14.1%).
  • Increase mainly in capital and consumer goods imports.
• Trade balance: Deficit of USD 142.7 million.

Table 1: Zanzibar Inflation (July 2025)

Table 2: Zanzibar Government Budgetary Operations (June 2025, TZS Billion)

Table 3: Zanzibar External Sector Performance (USD Million)

Economic Implications of Zanzibar's Performance – July 2025

1. Inflation in Zanzibar

• Trends: Annual headline inflation dropped to 4.1% in July 2025 from 5.3% in July 2024, with food inflation falling to 4.3% from 9.2% and monthly inflation easing to 0.2% from 0.5%.
• Economic Meaning: The decline, driven by lower food prices (rice, sugar, wheat flour, green bananas), signals improved supply conditions, possibly due to the National Food Reserve Agency’s stock management (477,923 tonnes in June 2025). This boosts purchasing power and consumer confidence, supporting the 6.2% GDP growth in 2024 and a projected over 6% in 2025. The 4.1% rate remains above Mainland Tanzania’s 3.3% but aligns with regional stability (EAC/SADC targets). Risks include potential food price volatility if harvests falter, though current trends suggest resilience.

2. Government Budgetary Operations

• Revenue and Spending: Revenue and grants reached TZS 93.4 billion in June 2025 (106.6% of the TZS 87.6 billion target), with TZS 80.2 billion from own sources and TZS 13.2 billion in grants. Expenditure totaled TZS 118.4 billion (recurrent TZS 79.9 billion, development TZS 38.5 billion), resulting in a TZS 25.0 billion deficit.
• Economic Implications: Exceeding revenue targets reflects strong tax collection and grant inflows, supporting fiscal capacity amid 6.2% growth. However, the deficit, driven by 32.5% development spending (e.g., infrastructure), indicates reliance on borrowing or reserves, risking debt sustainability (41.1% GDP debt-to-GDP ratio). This aligns with fiscal prudence but highlights the need for expenditure control to match revenue, especially as tourism (12.7% growth) fuels economic activity.

3. External Sector Performance

• Trade Dynamics: Exports rose to USD 328.2 million (up 12.4% from USD 292.1 million in 2024), with services (USD 227.4 million, tourism-led) up 9.9% and goods (USD 100.8 million, cloves/seaweed) up 18.5%. Imports increased to USD 470.9 million (up 14.1% from USD 412.6 million), driven by capital and consumer goods, widening the trade deficit to USD 142.7 million from USD 120.5 million.
• Economic Significance: The 12.4% export growth, bolstered by tourism (2,662,219 arrivals in 2024) and clove/seaweed exports, strengthens foreign exchange reserves (USD 6 billion nationally), supporting the TZS stability (0.2% depreciation). However, the 14.1% import surge reflects import dependency (petroleum, industrial goods), straining the current account (surplus of USD 611.1 million in 2024/25). This could pressure reserves if export growth slows, though tourism’s momentum offers a buffer.

Summary of Broader Economic Significance

• Stability and Growth: Lower inflation (4.1%) and robust export growth (12.4%) underpin Zanzibar’s 6.2% GDP growth in 2024 and over 6% projection for 2025, driven by tourism and trade. This supports the Vision 2050 goal of diversification.
• Fiscal Challenges: Revenue outperformance (TZS 93.4 billion) aids development spending (TZS 38.5 billion), but the TZS 25.0 billion deficit signals a need for fiscal balancing to sustain debt at 41.1% of GDP.
• External Risks: Export gains are offset by faster import growth (14.1%), maintaining a trade deficit (USD 142.7 million). Tourism resilience and reserve adequacy (4.8 months of imports) mitigate risks, but import reliance remains a vulnerability.
• Outlook: Compared to 2024’s 5.8% growth, 2025’s projection reflects optimism, though managing import costs and diversifying beyond tourism (e.g., manufacturing, agriculture) are critical for long-term stability.

Tanzania’s external sector strengthened in the year ending July 2025, with the current account deficit narrowing by 23.4% to USD 2,079.2 million, compared to USD 2,713.5 million in 2024. The improvement was driven by robust growth in services exports, which rose 8% to USD 7,175.6 million, led by tourism (USD 3,871.9m, +3.8%) and transport services (USD 2,631.9m, +13.8%). At the same time, services imports surged 21.2% to USD 2,925.1 million, largely due to higher transport costs (USD 1,458.1m, +12.7%) and a sharp rise in other services payments (USD 840.2m, +106.9%), even as travel-related payments fell. This combination reflects Tanzania’s resilience in boosting exports while managing rising import pressures, ultimately reducing external imbalances and supporting foreign reserve stability at over USD 6.1 billion.

1. Current Account Balance

• Deficit: USD 2,079.2 million (year ending July 2025).
• Improved compared to USD 2,713.5 million in the same period of 2024 (23.4% narrowing).
• Improvement driven by higher exports of goods & services, outpacing import growth.

2. Exports – Services Receipts

• Total services receipts: USD 7,175.6 million (up from USD 6,643.8 million in July 2024, +8%).
• Breakdown by category (year ending July 2025):
  • Travel (Tourism): USD 3,871.9m (up from 3,730.2m in 2024, +3.8%).
  • Transport: USD 2,631.9m (up from 2,312.9m in 2024, +13.8%).
  • Other services (construction, insurance, ICT, business, etc.): USD 671.8m (up from 600.7m in 2024, +11.8%).

3. Imports – Services Payments

• Total services payments: USD 2,925.1 million (up from USD 2,414.5 million in July 2024, +21.2%).
• Breakdown by category (year ending July 2025):
  • Transport: USD 1,458.1m (up from 1,293.5m in 2024).
  • Travel: USD 626.7m (down slightly from 714.7m in 2024).
  • Other services: USD 840.2m (up from 406.3m in 2024).

Table 1: Current Account Balance (USD Million)

Table 2: Services Receipts by Category (Exports, USD Million)

Table 3: Services Payments by Category (Imports, USD Million)

Economic Implications of External Sector Performance – Year Ending July 2025

1. Current Account Balance

• Deficit and Improvement: The current account recorded a deficit of USD 2,079.2 million, a 23.4% narrowing from USD 2,713.5 million in July 2024, driven by higher exports of goods and services outpacing import growth.
• Economic Meaning: The reduced deficit reflects a strengthening external position, supported by robust export performance (e.g., gold at USD 3,977.6 million, tourism at USD 3,871.9 million) and controlled import growth. This aligns with Tanzania’s 6% GDP growth projection, enhancing foreign exchange reserves (USD 6,194.4 million), which cover 4.8 months of imports—above the national benchmark. The improvement reduces pressure on the TZS (stable at 2,666.79/USD), supporting monetary easing (CBR 5.75%). However, the persistent deficit (3.8% of GDP per IMF estimates) indicates ongoing reliance on external financing (external debt at USD 32,955.5 million), necessitating sustained export growth to achieve balance.

2. Exports – Services Receipts

• Total Growth: Services receipts rose to USD 7,175.6 million, an 8% increase from USD 6,643.8 million in July 2024.
• Breakdown:
  • Travel (Tourism): USD 3,871.9 million (+3.8% from USD 3,730.2 million), accounting for 54% of receipts.
  • Transport: USD 2,631.9 million (+13.8% from USD 2,312.9 million).
  • Other Services (construction, insurance, ICT, business): USD 671.8 million (+11.8% from USD 600.7 million).
• Economic Significance: The 54% tourism share underscores its role as a foreign exchange anchor, bolstered by 2,193,322 arrivals in June 2025 (up 10% year-on-year), reflecting global travel recovery. The 13.8% transport growth signals improved logistics (e.g., Dar es Salaam port upgrades), supporting trade (exports at USD 9,479.4 million). Other services’ 11.8% rise indicates diversification into ICT and construction, aligning with infrastructure investments (28.6% of external debt use). This growth enhances reserves and reduces current account pressure, though tourism’s dominance (54%) exposes the economy to global travel risks (e.g., pandemics).

3. Imports – Services Payments

• Total Increase: Services payments surged to USD 2,925.1 million, a 21.2% rise from USD 2,414.5 million in July 2024.
• Breakdown:
  • Transport: USD 1,458.1 million (+12.7% from USD 1,293.5 million).
  • Travel: USD 626.7 million (–12.3% from USD 714.7 million).
  • Other Services: USD 840.2 million (+106.9% from USD 406.3 million).
• Economic Implications: The 21.2% increase reflects heightened import activity, with transport growth (12.7%) tied to freight costs for goods imports (USD 17,603.1 million). The 106.9% jump in other services (e.g., business, insurance) suggests rising costs for industrial inputs and operations, linked to manufacturing and construction booms (e.g., Julius Nyerere Hydropower Plant). The 12.3% travel drop may indicate lower outbound tourism or business travel, offsetting some pressure. This rapid rise, outpacing export growth (8%), strains the current account, though reserves and export inflows mitigate immediate risks.

Summary of Broader Economic Significance

• External Resilience: The 23.4% deficit narrowing and 8% export growth signal a robust external sector, supporting Tanzania’s 6% growth trajectory and reserve adequacy (4.8 months). Tourism (54%) and transport (37%) drive receipts, aligning with Vision 2050 goals.
• Trade Dynamics: Export outperformance over imports strengthens the TZS and reduces financing needs, but the 21.2% import surge (especially other services) highlights import dependency, a challenge noted by the World Bank for structural transformation.
• Risks and Opportunities: Tourism reliance (54%) and import cost spikes (106.9% in other services) pose vulnerabilities to global shocks (e.g., oil at USD 69.2/barrel). However, reserve growth (USD 6,194.4 million) and fiscal surplus (TZS 403.4 billion) provide buffers. Compared to 2024’s 4.2% GDP deficit projection, the 3.8% estimate reflects progress, outperforming peers like Uganda (5% deficit).
• Future Outlook: Sustained tourism growth (3.8%) and logistics expansion (13.8%) could further narrow the deficit, but managing import costs (21.2%) and diversifying exports beyond services are critical for long-term stability.

The Bank of Tanzania’s August 2025 review highlights a strong fiscal outcome for June 2025, with total government revenues reaching TZS 3,753.4 billion, about 5.1% above target, driven by robust tax collections of TZS 3,108.7 billion (82.8% of total). Expenditures were contained at TZS 3,350.0 billion, with recurrent spending accounting for 72.9% and development spending 27.1%. This resulted in a budget surplus of TZS 403.4 billion, reflecting strengthened tax administration, cautious spending, and improved fiscal stability, thereby easing borrowing needs and supporting macroeconomic confidence.

1. Central Government Revenues (June 2025)

• Total collections: TZS 3,753.4 billion, which was 5.1% above the monthly target.
• Breakdown:
  • Central Government: TZS 3,579.2 billion (95.4% of total).
  • Tax revenue: TZS 3,108.7 billion, 7.8% above target – showing the impact of stronger tax administration.
  • Non-tax revenue: TZS 470.5 billion, short of the target (TZS 561.5 billion).

Tax revenues continue to be the dominant source, accounting for over 80% of government revenues.

2. Central Government Expenditures (June 2025)

• Total expenditure: TZS 3,350.0 billion, broadly aligned with available resources.
• Breakdown:
  • Recurrent expenditure: TZS 2,440.6 billion
  • Development expenditure: TZS 909.4 billion

Development expenditure accounted for about 27.1% of total spending, while recurrent expenditure (wages, interest, and other recurrent costs) made up 72.9%.

3. Fiscal Balance Context

• Revenues (TZS 3,753.4 billion) exceeded expenditures (TZS 3,350.0 billion) by about TZS 403.4 billion, implying a budget surplus in June 2025.
• The surplus mainly came from stronger tax performance, while expenditure remained aligned with available resources.

Table 1: Central Government Revenues (June 2025)

Table 2: Central Government Expenditures (June 2025)

Economic Implications of Central Government Finances – June 2025

1. Central Government Revenues (June 2025)

• Performance and Breakdown: Total collections of TZS 3,753.4 billion surpassed the monthly target by 5.1%, with central government revenue at TZS 3,579.2 billion (95.4%). Tax revenue hit TZS 3,108.7 billion (82.8% of total), exceeding its target by 7.8%, while non-tax revenue lagged at TZS 470.5 billion (12.6%), falling short of the TZS 561.5 billion target.
• Economic Meaning: The strong tax performance, driven by improved administration (e.g., VAT and income tax enforcement), enhances fiscal capacity, reducing reliance on external borrowing (external debt at USD 32,955.5 million). This supports infrastructure and development spending (TZS 909.4 billion), aligning with GDP growth goals. The underperformance in non-tax revenue (e.g., fees, dividends) suggests administrative delays or inefficiencies, potentially limiting supplementary funding. Over 80% tax reliance mirrors regional trends (e.g., EAC peers), but diversification could mitigate risks from economic shocks.

2. Central Government Expenditures (June 2025)

• Allocation and Balance: Total expenditure was TZS 3,350.0 billion, with recurrent expenditure at TZS 2,440.6 billion (72.9%) and development expenditure at TZS 909.4 billion (27.1%).
• Economic Significance: The high recurrent share (wages, interest, operations) ensures public sector stability and debt servicing (national debt at USD 46,586.6 million), but limits capital investment. Development spending (27.1%) supports growth in agriculture (e.g., food stocks at 485,930.4 tonnes) and infrastructure, though its share below one-third indicates a cautious approach. Alignment with available resources (revenue-driven) prevents deficit financing pressures, complementing the surplus and easing domestic borrowing needs (e.g., Treasury bill yields at 8.13%).

3. Fiscal Balance Context

• Surplus Achievement: Revenues exceeded expenditures by TZS 403.4 billion, yielding a surplus driven by tax overperformance and controlled spending.
• Economic Implications: This surplus strengthens fiscal buffers, reducing reliance on domestic securities (e.g., TZS 158.9 billion in Treasury bills accepted) and supporting the shilling's stability (TZS 2,666.79/USD). It allows debt reduction or reinvestment, enhancing credit ratings and attracting foreign inflows (e.g., tourism receipts at USD 3,871.9 million). In a global context of easing commodity prices (oil at USD 69.2/barrel), this positions Tanzania to weather external uncertainties, though sustained surpluses depend on addressing non-tax revenue gaps.

Summary of Broader Economic Significance

• Fiscal Strength and Stability: The surplus and robust tax collection signal effective fiscal management, supporting monetary easing (CBR 5.75%) and credit growth (15.9% annually). This fosters investor confidence and aligns with Tanzania's 6% growth trajectory.
• Balanced Growth: While recurrent spending ensures stability, the lower development share may constrain long-term productivity gains, requiring policy focus on capital projects.
• Comparative Context: Compared to 2024's fiscal deficits (e.g., 2.5% of GDP), the 2025 surplus reflects recovery, outperforming some EAC peers facing revenue shortfalls amid global trade tensions.
• Challenges Ahead: Non-tax revenue underperformance and high recurrent spending (72.9%) need attention to sustain surpluses and fund development, especially with external debt at USD 32,955.5 million.

The Bank of Tanzania’s August 2025 review shows that lending and deposit rates continued to adjust in response to the accommodative monetary policy stance. Lending rates eased slightly, with the overall rate at 15.16% in July 2025 (down from 15.23% in June), while short-term lending declined to 15.51% and negotiated prime customer loans to 12.56%. On the deposit side, rates for time deposits increased modestly, with the 12-month rate reaching 9.88%, while negotiated deposits for large savers fell to 10.72%. The spread between short-term lending and deposit rates narrowed to 5.63 percentage points from 6.66 points a year earlier, signaling lower borrowing costs relative to savings returns and supporting private sector credit growth of 15.9% annually.

1. Lending Interest Rates

• Overall lending rate:
  • 15.16% in July 2025, slightly lower than 15.23% in June 2025.
• Short-term lending rate (≤ 1 year):
  • 15.51% in July 2025, down from 15.69% in June 2025.
• Negotiated lending rate (prime customers):
  • 12.56% in July 2025, down from 12.68% in June 2025.
• Trend: Lending rates are easing slightly, reflecting improved liquidity and accommodative monetary policy (CBR cut to 5.75%).

2. Deposit Interest Rates

• Overall deposit rate:
  • 8.83% in July 2025, up from 8.74% in June 2025.
• 12-month deposit rate:
  • 9.88% in July 2025, up from 9.79% in June 2025.
• Negotiated deposit rate (large depositors):
  • 10.72% in July 2025, down from 11.21% in June 2025.
• Savings deposit rate:
  • 2.90%, unchanged from June 2025.
• Trend: Deposit rates have been slightly increasing for time deposits, but declining for large negotiated deposits.

3. Interest Rate Spread

• The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025, compared to 6.66 percentage points in July 2024.
• This indicates reduced borrowing costs relative to deposit returns, which can stimulate credit growth.

Table: Lending and Deposit Interest Rates (July 2025)

Economic Implications of Lending and Deposit Interest Rates – July 2025

1. Lending Interest Rates

• Slight Decline: The overall lending rate eased to 15.16% from 15.23%, short-term rates (≤ 1 year) dropped to 15.51% from 15.69%, and negotiated rates for prime customers fell to 12.56% from 12.68%.
• Economic Meaning: This modest reduction aligns with the BOT's CBR cut and improved liquidity (e.g., TZS 758.8 billion in reverse repo operations), lowering borrowing costs for businesses and households. The decline, though small, signals policy transmission, encouraging investment and consumption—key drivers of Tanzania's projected 6% GDP growth. Lower short-term rates (15.51%) support working capital needs, while the negotiated rate drop (12.56%) benefits creditworthy firms, potentially boosting sectors like agriculture and manufacturing (supported by food stock increases to 485,930.4 tonnes). However, rates remain high relative to inflation (3.3%), suggesting banks are cautious about risk, possibly due to lingering global uncertainties noted in the global section.

2. Deposit Interest Rates

• Mixed Trends: The overall deposit rate rose to 8.83% from 8.74%, with the 12-month rate increasing to 9.88% from 9.79%, while the negotiated rate for large depositors fell to 10.72% from 11.21%, and savings rates stayed at 2.90%.
• Economic Meaning: The rise in time deposit rates (e.g., 9.88% for 12 months) reflects banks' efforts to attract longer-term savings amid robust M3 growth (19.9%), ensuring liquidity for lending. This competition for funds supports financial deepening, aligning with Tanzania's goal of mobilizing domestic resources (e.g., savings up 18.7% annually). The decline in negotiated rates (10.72%) for large depositors suggests banks are adjusting terms for institutional clients, possibly to manage excess liquidity. Stable savings rates (2.90%) indicate limited incentives for short-term savings, directing funds toward higher-yield investments or consumption, which could fuel demand-led growth.

3. Interest Rate Spread

• Narrowing Gap: The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025 from 6.66 points in July 2024, reflecting a more balanced cost-benefit for borrowers.
• Economic Significance: A shrinking spread (from 6.66% to 5.63%) enhances borrowing affordability, stimulating credit demand (e.g., private sector credit at 15.9%). This supports the BOT's growth objective, as lower relative borrowing costs can spur business expansion and job creation. However, the spread remains wide compared to advanced economies (typically 2-3%), indicating banks are still prioritizing profitability, possibly due to high operational costs or non-performing loans. This could limit the pace of credit growth unless offset by further policy easing.

Summary of Broader Economic Significance

• Growth and Investment Boost: The easing lending rates and narrowing spread create a more favorable borrowing environment, supporting the BOT's credit growth target (15.9% achieved) and aligning with GDP growth projections. Rising deposit rates for time deposits enhance savings mobilization, providing a stable funding base for banks.
• Policy Effectiveness: The trends reflect successful monetary policy transmission, with the CBR cut and liquidity injections (e.g., reverse repos) influencing rates, though the high base rates suggest room for further easing to match inflation.
• Potential Challenges: High lending rates (above 15%) could deter small borrowers, while the mixed deposit rate trends might signal uneven liquidity management. In a regional context (e.g., EAC inflation within 8%), Tanzania's rate dynamics support stability but require monitoring to avoid overheating risks.
• Comparative Insight: Compared to 2024's wider spreads (6.66%), the 2025 narrowing aligns with global easing trends (e.g., stable oil at USD 69.2/barrel), positioning Tanzania favorably for investment inflows.

The Bank of Tanzania’s August 2025 Monthly Economic Review shows that the financial market remained highly liquid in July 2025, supported by the recent reduction of the Central Bank Rate (CBR) to 5.75%. Government securities were in strong demand, with Treasury bill auctions oversubscribed nearly threefold (TZS 452.1 billion bids vs. TZS 162.0 billion offered) and a decline in the weighted average yield to 8.13% from 8.89% in June. In the bond market, investor preference shifted toward longer maturities, with the 10-year bond oversubscribed at a yield of 13.74%, while shorter tenors recorded slight yield increases. Meanwhile, interbank cash market (IBCM) activity surged, with turnover rising by 30% to TZS 3,746 billion, dominated by 7-day deals, while the average rate eased to 6.62% (from 7.93%), reflecting improved banking sector liquidity and effective monetary policy transmission.

1. Government Securities Market

• In July 2025, the Bank of Tanzania conducted two Treasury bill auctions with a total offer of TZS 162.0 billion.
  • Bids received: TZS 452.1 billion
  • Successful bids: TZS 158.9 billion
  • Weighted Average Yield (WAY): 8.13% (down from 8.89% in June 2025).
• Treasury Bonds:
  • Auctions for 2-, 5-, and 10-year bonds were held.
  • Tender sizes:
    • 2-year: TZS 117.05 billion
    • 5-year: TZS 136.2 billion
    • 10-year: TZS 162.8 billion
  • Bids received: TZS 396.4 billion, of which TZS 351.9 billion were accepted.
  • Yields:
    • 2-year: 12.17% (slight increase)
    • 5-year: 13.18% (slight increase)
    • 10-year: 13.74% (slight decrease).
  • Investor trend: Preference shifted toward longer-term bonds (10-year oversubscribed, while 2- and 5-year were undersubscribed).

2. Interbank Cash Market (IBCM)

• The IBCM continued to play a role in liquidity management.
• Turnover in July 2025: TZS 3,746 billion (up from TZS 2,873.9 billion in June 2025).
• Structure of transactions:
  • 7-day deals dominated: 65.9% of total turnover.
• Interest rates:
  • Overall IBCM rate eased to 6.62% (down from 7.93% in June 2025).
  • Within the Central Bank Rate (CBR) corridor of 3.75% – 7.75%.

Table 1: Treasury Bills Auction (July 2025)

Table 2: Treasury Bonds Auctions (July 2025)

(Arrows indicate direction vs. June 2025 yields)

Table 3: Interbank Cash Market (IBCM), July 2025

Economic Implications of the Financial Market Data (Government Securities and IBCM)

1. Government Securities Market

Government securities (Treasury bills and bonds) are key tools for the BOT and government to manage liquidity, finance budgets, and signal interest rate expectations. The July 2025 data shows strong demand overall, but with nuanced shifts in investor preferences.

• Treasury Bills (Short-Term Securities):
  • Oversubscription and Yield Decline: The auctions offered TZS 162.0 billion but attracted TZS 452.1 billion in bids (nearly 2.8x oversubscribed), with only TZS 158.9 billion accepted (about 35% of bids). The weighted average yield (WAY) fell to 8.13% from 8.89% in June.
  • Economic Meaning: This indicates abundant liquidity in the banking system, as investors (primarily banks and institutional players) are eager to park excess funds in safe, short-term assets. The yield drop reflects the BOT's accommodative policy transmitting to lower short-term borrowing costs for the government. Economically, it signals:
    • Lower Government Financing Costs: Cheaper short-term debt helps ease fiscal pressure, allowing more budget allocation to growth-oriented spending (e.g., infrastructure, as noted in the document's budgetary operations section).
    • Stimulus to Credit and Growth: With yields falling, banks may redirect funds toward private sector lending, aligning with the BOT's goal of boosting credit growth (which was at 15.9% annually in July). This could support sectors like agriculture and manufacturing, contributing to GDP expansion.
    • Potential Risks: Persistent oversubscription might hint at risk aversion if investors prefer safe assets over riskier loans, though the document's strong money supply growth (19.9% for M3) suggests otherwise.
• Treasury Bonds (Medium- to Long-Term Securities):
  • Auction Details and Yield Movements: Tender sizes were TZS 117.05 billion (2-year), TZS 136.2 billion (5-year), and TZS 162.8 billion (10-year). Total bids reached TZS 396.4 billion (oversubscribed overall), with TZS 351.9 billion accepted. Yields rose slightly for 2-year (to 12.17%) and 5-year (to 13.18%) bonds but eased for 10-year (to 13.74%).
  • Investor Shift to Longer Tenors: The 10-year bond was oversubscribed, while shorter ones were undersubscribed, showing a preference for long-term instruments.
  • Economic Meaning: This points to evolving investor confidence and expectations of future rates.
    • Yield Curve Dynamics: The slight increase in short- to medium-term yields contrasted with a dip in long-term yields suggests a flattening yield curve. Investors may anticipate further policy easing (e.g., more CBR cuts) or stable inflation, making long-term bonds attractive for locking in returns. This reflects optimism about Tanzania's medium-term economic stability, supported by the document's notes on resilient global conditions and domestic inflation within the 3-5% target.
    • Confidence in Long-Term Outlook: The shift to 10-year bonds indicates reduced perceived long-term risks, possibly due to improving external factors (e.g., stable commodity prices like oil at USD 69.2/barrel) and strong export performance. It could lower the government's overall debt servicing costs over time, freeing resources for development (as seen in the document's external sector improvements).
    • Fiscal and Growth Implications: Higher acceptance rates (89% of bids) help fund budgetary operations without crowding out private credit. However, undersubscription in shorter bonds might signal caution on near-term liquidity or inflation risks from food price upticks (e.g., rice and millet, as detailed in the inflation section).

Overall, for Government Securities:

• Broad Implications: The market's robustness (high bids, easing yields) underscores effective monetary policy transmission, fostering lower interest rates economy-wide. This supports the BOT's dual mandate of price stability and growth, potentially reducing the cost of capital for businesses and households. From a macroeconomic perspective, it aligns with Tanzania's 2025 growth projections (around 6.5% per IMF estimates), driven by mining, tourism, and agriculture. However, if yields continue falling too sharply, it could encourage speculative borrowing or pressure the shilling (though it remained stable at TZS 2,666.79/USD).

2. Interbank Cash Market (IBCM)

The IBCM is a short-term lending market among banks, crucial for liquidity management and transmitting BOT policy signals. It operates within the CBR corridor (3.75%-7.75% in July).

• Increased Turnover and Easing Rates: Turnover rose ~30% to TZS 3,746 billion from TZS 2,873.9 billion in June, with 7-day deals dominating (65.9%). The overall rate eased to 6.62% from 7.93%.
• Economic Meaning: This reflects improved liquidity conditions in the banking sector, directly tied to the BOT's reverse repo operations (TZS 758.8 billion injected in July, per the document).
  • Ample Liquidity and Policy Effectiveness: Higher turnover and lower rates indicate banks have excess reserves to lend, reducing borrowing pressures. The rate staying within the corridor shows the BOT's success in steering short-term rates toward the CBR, promoting stability.
  • Boost to Banking and Credit: Easier interbank lending lowers funding costs for banks, which can pass savings to customers via cheaper loans. This complements the document's noted private sector credit growth (15.9%), potentially accelerating investment in key sectors.
  • Growth Support Amid Easing: The ~1.3% rate drop signals a loosening environment, encouraging economic activity without stoking inflation (which remained stable due to offsetting food and energy dynamics). It could help mitigate global risks like trade uncertainties (highlighted in the global section).

Summary of Broader Economic Significance

• Positive for Growth and Stability: The data portrays an easing financial environment, with lower yields and rates fostering cheaper credit, higher investment, and fiscal flexibility. This is consistent with the BOT's strategy to counter subdued global demand while maintaining inflation targets, potentially supporting Tanzania's 2025 GDP growth amid resilient exports (e.g., gold and cash crops).
• Liquidity-Driven Trends: Strong demand and easing conditions stem from policy measures like the CBR cut and reverse repos, indicating effective liquidity management. Investors' long-term preference suggests confidence in sustained recovery.
• Potential Challenges: While beneficial, excessive liquidity could lead to asset price inflation or currency depreciation if not monitored. The document's emphasis on stable commodity prices and external improvements mitigates this, but ongoing vigilance is key.
• Comparative Context: Compared to regional peers (e.g., EAC inflation within 8% benchmark), Tanzania's markets appear more liquid and investor-friendly, enhancing its attractiveness for foreign inflows.

As of June 2025, the Tanzanian Shilling (TZS) depreciated by 9.6% year-on-year against the US dollar, from 2,345.38 (June 2024) to 2,569.46, reflecting sustained import demand, foreign currency shortages, and global USD strength. Despite this, the monthly change was only -0.2%, signaling short-term exchange rate stability. The Bureau de Change market showed a tight spread (Buy: 2,574.33 / Sell: 2,582.67), reinforcing retail-level confidence. The Shilling also weakened against other major currencies: EUR (-10.4%), GBP (-9.7%), CNY (-10.2%), and JPY (-10.3%). Meanwhile, BoT interventions (e.g., USD 7 million in January) and robust foreign reserves (USD 5.3 billion, 4.3 months import cover) helped maintain market orderliness. However, strong imports (e.g., Zanzibar: USD 459.5 million, driven by infrastructure goods) and falling exports (e.g., cloves: -27.2%) kept pressure on the TZS. To counter depreciation risks, policy must focus on export diversification, import substitution, and regional trade resilience.

1. Overview: Exchange Rate Performance (as of June 2025)

The Tanzanian Shilling’s exchange rate performance reflects its value against major currencies in the Interbank Foreign Exchange Market (IFEM) and Bureau de Change markets, influenced by domestic and global economic factors.

• Official Market (IFEM):
  • USD/TZS Rate:
    • June 2024: 2,345.38
    • May 2025: 2,565.08
    • June 2025: 2,569.46
    • 12-Month Change: -9.6% (depreciation, i.e., more TZS per USD).
  • Monthly Change: -0.2% from May 2025 (2,565.08 to 2,569.46), indicating relative short-term stability.
  • Context: The 9.6% year-on-year depreciation aligns with earlier trends, such as a 9% depreciation in 2024 and an 8% depreciation in 2023. However, the TZS showed signs of stabilization in late 2024, with a slight appreciation of 0.28% in October 2024 and a 2.6% annual appreciation by January 2025, driven by improved export inflows (e.g., gold, cashew nuts, tourism). The June 2025 depreciation reflects renewed pressures from import demand and global USD strength.
  • Drivers:
    • Strong Import Demand: Imports of goods rose to USD 459.5 million in Zanzibar alone, driven by capital goods (USD 222.5 million) for infrastructure projects like the Standard Gauge Railway (SGR) and port expansions. Mainland Tanzania’s imports also increased, with capital and intermediate goods dominating.
    • Lower-than-Expected Forex Inflows: Goods exports in Zanzibar fell to USD 150.3 million (-11.9%), particularly cloves (-27.2%). While Mainland Tanzania’s exports grew 16.8% to USD 16.7 billion by April 2025, inflows from gold (USD 3,369.7 million) and tourism (USD 6,948.2 million) were insufficient to offset import pressures.
    • Global USD Strengthening: The USD appreciated globally due to U.S. monetary tightening and demand for USD-denominated assets, impacting emerging market currencies like the TZS.
  • Stability Assessment: Despite the 9.6% depreciation, the TZS remained “orderly and market-driven,” with no sharp volatility, as noted in the BoT review. BoT interventions, such as selling USD 7 million in January 2025, and robust reserves (USD 5,307.7 million, 4.3 months of import cover) supported stability.
• Bureau de Change Market:
  • June 2025 Rates:
    • Buying Rate: 2,574.33 TZS/USD
    • Selling Rate: 2,582.67 TZS/USD
  • Context: The narrow spread (0.3%) between buying and selling rates indicates a liquid and stable retail market, consistent with earlier data (e.g., 2,454.04 TZS/USD in January 2025). The slightly higher Bureau rates compared to IFEM (2,569.46) reflect retail markups but align with market-driven pricing.
  • Implications: The stable Bureau market supports confidence in the TZS for domestic transactions, with only 3.2% of Mainland businesses and 4.5% in Zanzibar quoting in USD, indicating low dollarization.
• Interpretation:
  • The 9.6% depreciation reflects structural pressures from import reliance and global USD strength, but short-term stability (-0.2% monthly change) and BoT interventions mitigate volatility.
  • The TZS’s performance aligns with regional trends, where currencies like Kenya’s Shilling (9% depreciation in 2024) faced similar pressures, though Tanzania’s stability is notable compared to Burundi’s significant depreciation.
  • Policy measures, including export promotion and reserve management, are critical to manage depreciation pressures.

2. Other Currency Exchange Rates (June 2025)

The TZS’s performance against other major currencies provides a broader view of its depreciation trend.

• Exchange Rates (June 2025):

• Context:
  • EUR/TZS: The 10.4% depreciation is slightly higher than USD/TZS, reflecting Eurozone economic resilience and demand for EUR-denominated assets. In April 2023, EUR/TZS was 2,549.80, indicating a gradual weakening.
  • GBP/TZS: The 9.7% depreciation aligns with USD trends, with GBP/TZS at 2,876.45 in April 2023, showing consistent TZS weakening.
  • JPY/TZS: The 10.3% depreciation reflects Japan’s monetary policy shifts, with JPY/TZS not detailed in earlier reports but consistent with global trends.
  • CNY/TZS: The 10.2% depreciation aligns with China’s economic slowdown and reduced demand for TZS in bilateral trade, compared to 334.23 CNY/TZS in April 2023.
  • Estimated June 2024 Rates (based on Y-o-Y changes):
    • EUR: ~2,503 TZS (from summary table).
    • GBP: ~2,961 TZS.
    • CNY: ~320.9 TZS.
  • Regional Comparison: The TZS’s broad-based depreciation contrasts with Rwanda’s Franc appreciation and Uganda’s Shilling stability (2020–2023), highlighting Tanzania’s import-driven pressures.
• Drivers:
  • Global Currency Strength: Major currencies appreciated due to tighter monetary policies in the U.S., Eurozone, and Japan, increasing demand for USD, EUR, and GBP.
  • Trade Dynamics: Tanzania’s trade with China (6.3% of external debt in CNY) and Europe (16.1% in EUR) increased TZS demand for imports, weakening the currency.
  • Export Shortfalls: Zanzibar’s clove exports fell 27.2% to USD 66.4 million, and while Mainland exports grew, they couldn’t fully offset import costs.
• Implications:
  • The broad-based depreciation (-9.6% to -10.4%) indicates systemic pressures rather than USD-specific factors, impacting import costs (e.g., petroleum, machinery).
  • The TZS’s stability against regional currencies (e.g., Kenyan Shilling) supports Tanzania’s competitiveness in East African trade, but global depreciation raises debt servicing costs (68.1% USD-denominated debt).

3. Forex Market Activity

Forex market activity in the IFEM reflects demand and supply dynamics for foreign exchange, influencing TZS stability.

• Interbank Foreign Exchange Market (IFEM):
  • Transaction Volume (June 2025): USD 65.4 million.
  • Change: +12.6% from USD 58.1 million in May 2025.
  • Year-on-Year: Compared to USD 16.3 million in January 2025 and USD 95.7 million in December 2024, June 2025’s volume indicates seasonal peaks, likely tied to trade settlements and imports.
  • Context: Increased volume reflects heightened demand for USD, driven by:
    • Trade Settlements: Imports of capital goods (USD 222.5 million in Zanzibar) and consumer goods for Q2 2025 trade.
    • Seasonal Imports: Agricultural inputs and infrastructure-related imports (e.g., SGR, TAZARA Railway).
    • Debt Servicing: External debt servicing (USD 32,090.0 million disbursed) requires USD inflows.
  • BoT Interventions: The BoT sold USD 7 million in January 2025 to stabilize the TZS, and similar interventions likely occurred in June 2025, given the orderly market noted in the review.
• Implications:
  • The 12.6% volume increase signals robust market activity but also pressure on the TZS, as higher USD demand drives depreciation.
  • BoT’s reserve management (USD 5,307.7 million) and interventions ensure stability, but sustained import demand requires export growth to balance forex flows.
  • The liquid IFEM and Bureau markets support confidence, with no evidence of dollarization (only 0.1% of Mainland businesses prefer USD payments).

Summary Table: TZS Exchange Rate Trends

Key Insights and Policy Implications

1. Moderate Depreciation:
   • The TZS’s 9.6% depreciation against the USD and 9.7%–10.4% against other currencies reflects structural import reliance and global USD strength. However, the -0.2% monthly change from May to June 2025 indicates short-term stability, supported by BoT interventions.
   • Policy: Enhance export diversification (e.g., seafood, manufactured goods) to boost forex inflows, as per Zanzibar’s USD 2 billion plan. Leverage AfCFTA to expand markets.
2. Market Stability:
   • The orderly, market-driven TZS performance, with no sharp volatility, aligns with earlier stabilization (e.g., 0.28% appreciation in October 2024). Robust reserves (USD 5,307.7 million) and a liquid IFEM (USD 65.4 million volume) support confidence.
   • Policy: Continue BoT interventions (e.g., USD sales) and reserve accumulation to manage seasonal pressures, as seen in January 2025.
3. Import-Driven Pressures:
   • Strong import demand (USD 459.5 million in Zanzibar, Mainland capital goods) outpaced export growth, driving depreciation. Zanzibar’s 27.2% clove export drop exacerbated pressures.
   • Policy: Promote import substitution (e.g., local manufacturing) and agricultural productivity to reduce reliance on imported goods, aligning with Vision 2050.
4. Global and Regional Context:
   • The TZS’s depreciation mirrors regional trends (e.g., Kenya’s 9% depreciation in 2024), but Tanzania’s stability contrasts with Burundi’s significant depreciation. Global USD strength, driven by U.S. policy, impacts emerging markets broadly.
   • Policy: Strengthen trade ties with EAC partners (e.g., Rwanda, Uganda) to stabilize TZS against regional currencies.
5. Economic Impacts:
   • Debt Servicing: With 68.1% of external debt in USD (USD 33,905.1 million), depreciation raises servicing costs, absorbing ~40% of government expenditures.
   • Inflation: Depreciation contributed to Zanzibar’s 3.4% inflation (June 2025) and Mainland’s 3.2% (May 2025), driven by imported goods like petroleum.
   • Trade Competitiveness: Depreciation enhances export competitiveness (e.g., gold, cashew nuts), but falling clove exports limit gains.
   • Policy: Maintain the 6% Central Bank Rate to control inflation (3%–4% target in 2025) and explore debt restructuring to ease USD pressures.
6. Economic Context:
   • GDP Growth: Tanzania’s 5.6% growth in 2024 and projected 6% in 2025 support export performance, driven by tourism (2.2 million arrivals) and infrastructure.
   • Reserves: USD 5,307.7 million (4.3 months of import cover) provide a buffer against volatility, up from USD 5,323.6 million in January 2025.
   • Risks: Global commodity price volatility, USD strength, and election-related uncertainties (October 2025) pose risks to TZS stability.
   • Opportunities: Tourism receipts (USD 6,948.2 million), FDI (USD 3.7 billion in 2025), and IMF disbursements (USD 148.6 million in 2024) support forex inflows.

In June 2025, Tanzania’s national debt reached TZS 116.6 trillion (USD 45.4 billion), a 13.5% increase from TZS 102.8 trillion in June 2024, driven by external borrowing (70.7% of total, TZS 82.4 trillion) for infrastructure and fiscal deficits. The Tanzania Shilling (TZS) depreciated by 9.6% year-on-year against the USD (2,569.46 TZS/USD), raising external debt servicing costs (USD 1–2 billion annually), despite robust reserves of USD 5,307.7 million (4.3 months of import cover). Supported by tourism receipts (USD 7,104 million) and a moderate debt-to-GDP ratio (~44.3%), Tanzania’s debt and TZS remain sustainable in the short term, but import reliance and USD exposure (67.6% of external debt) pose long-term challenges.

Tanzania National Debt Overview (June 2025)

Tanzania’s national debt encompasses public debt (domestic and external) and private sector external debt, critical for assessing fiscal sustainability. The attached document and provided data offer insights into debt stock, composition, and servicing, which are analyzed below.

• Total National Debt:
  • Value: TZS 116.6 trillion (USD 45.4 billion at 2,569.46 TZS/USD).
  • Annual Increase: +13.5% from TZS 102.8 trillion (USD 43.8 billion at 2,345.38 TZS/USD) in June 2024.
  • Context: The document notes the national debt stock at USD 45,586.6 million (~TZS 117.1 trillion) in June 2025, aligning closely with the provided TZS 116.6 trillion. The 13.5% increase reflects increased borrowing for infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and fiscal deficits (2.5% of GDP in 2024/25). Earlier data shows USD 48,479.9 million in April 2025 and USD 48,217.0 million in February 2025, suggesting a slight decline by June due to repayments or exchange rate effects.
  • Debt-to-GDP Ratio: Estimated at ~44.3% based on a GDP of ~USD 102.6 billion (2022 GDP of USD 105.1 billion, adjusted for 5.6% growth in 2024 and 6% in 2025). The IMF’s 2024 Debt Sustainability Analysis (DSA) reports a public debt-to-GDP ratio of 35%, below the 55% benchmark for low-income countries, indicating moderate distress risk. However, World Economics estimates a higher GDP (~USD 155.5 billion), implying a lower ratio of ~29.2%, highlighting data variability.
  • Implications: The 13.5% debt increase supports growth-enhancing projects but raises servicing costs (~40% of government expenditures, per IMF). The moderate debt-to-GDP ratio suggests sustainability, but TZS depreciation (9.6% against USD) increases external debt burdens.
• Domestic Debt:
  • Stock: TZS 35.5 trillion (USD ~13.8 billion, 29.3% of total debt).
  • Annual Increase: +11.1% from TZS 32.0 trillion in June 2024.
  • Monthly Increase: +0.9% from May 2025 (~TZS 35.2 trillion, based on April 2025’s TZS 34,759.9 billion).
  • By Instrument:

By Creditor:

• Context: The document confirms TZS 85.9 billion raised via bonds in June 2025, with TZS 93.96 billion spent on debt service (TZS 60.13 billion principal, TZS 33.83 billion interest, correcting the document’s typo of TZS 276.8 billion). The 11.1% annual growth reflects financing of fiscal deficits (e.g., TZS 270.2 billion in May 2025 for Mainland Tanzania). Treasury bonds’ 83.2% share aligns with a shift to long-term instruments, reducing refinancing risks.
• Implications: The diversified creditor base (28.6% banks, 26.1% pension funds) and long-term bond dominance enhance stability, but high borrowing rates (15.5% lending rates) crowd out private sector credit, which weakened in Q4 2024. The document’s note on retail investor participation via TIPS (18.1% “Others”) supports financial inclusion.
• External Debt:
  • Stock: TZS 82.4 trillion (USD 33.0 billion, 70.7% of total debt).
  • Annual Increase: +14.8% from TZS 71.8 trillion (USD 30.6 billion) in June 2024.
  • By Borrower:

By Use of Funds:

By Currency:

• Context: The document’s tables (e.g., Table 2.2, 2.3, 2.4) confirm the external debt stock and composition, with USD 109.9 million disbursed in April 2025 for projects like SGR and TAZARA Railway (25.4% transport). The 14.8% increase reflects concessional loans (e.g., IMF’s USD 441 million ECF/RSF, World Bank’s USD 527 million) and non-concessional borrowing (34% of external debt). The 67.6% USD share amplifies risks from the 9.6% TZS depreciation.
• Implications: The central government’s 85.4% share aligns debt with development priorities (e.g., Vision 2050), but low industry (4%) and agriculture (6.5%) allocations limit structural transformation. High USD exposure increases servicing costs (USD 80.9 million in April 2025), with external debt service at ~2.89% of GNI in 2023.
• Debt Servicing:
  • Domestic: TZS 93.96 billion in June 2025 (TZS 60.13 billion principal, TZS 33.83 billion interest), per the document. Annual servicing was TZS 890.9 billion in February 2025 (TZS 609.9 billion principal, TZS 281 billion interest).
  • External: USD 80.9 million in April 2025, with annual estimates of USD 1–2 billion, driven by USD-denominated debt (67.6%) and TZS depreciation.
  • Context: Servicing absorbs ~40% of government expenditures, per IMF, straining fiscal space. Concessional loans (e.g., World Bank, 48% of external debt) mitigate costs, but non-concessional borrowing raises concerns.
  • Implications: High servicing costs limit development spending (33.7% of Zanzibar’s budget), necessitating revenue mobilization (TZS 2,689.2 billion in May 2025, 3.1% above target) and export growth.

Tanzania Shilling (TZS) Sustainability

The TZS’s sustainability is assessed through its exchange rate stability, depreciation trends, and impact on debt servicing, drawing from the provided data and document’s external sector insights (e.g., Charts 2.7.1–2.7.3, Table 2.7.1).

• Exchange Rate Performance:
  • USD/TZS (IFEM):
    • June 2024: 2,345.38
    • May 2025: 2,565.08
    • June 2025: 2,569.46
    • Annual Depreciation: -9.6%
    • Monthly Change: -0.2% (May to June 2025)
  • Bureau de Change:
    • Buying Rate: 2,574.33 TZS/USD
    • Selling Rate: 2,582.67 TZS/USD
  • Other Currencies:

• Context: The document notes improved IFEM liquidity in June 2025, driven by seasonal cash crop exports (e.g., cashew nuts, tobacco) and gold exports (USD 3,369.7 million annually). The 9.6% depreciation aligns with earlier trends (9% in 2024, 8% in 2023), but a slight 0.28% appreciation in October 2024 and 2.6% by January 2025 indicate periods of stability. The BoT’s USD 7 million intervention in January 2025 and reserves of USD 5,307.7 million (4.3 months of import cover) support orderly markets.
• Drivers:
  • Import Demand: Goods imports rose to USD 459.5 million in Zanzibar and USD 13,040.7 million for Tanzania (Table A7), driven by capital goods (e.g., SGR, hydropower).
  • Export Shortfalls: Zanzibar’s exports fell to USD 150.3 million (-11.9%), with cloves down 27.2%. Tanzania’s goods exports grew to USD 1,036 million (Table 2.7.1), led by gold and cereals (USD 501.3 million), but were insufficient to offset imports.
  • Global USD Strength: U.S. monetary tightening increased USD demand, impacting emerging market currencies like the TZS.
• Implications: The 9.6% depreciation raises import and debt servicing costs, contributing to inflation (3.4% in Zanzibar, 3.2% in Mainland). The narrow Bureau spread (0.3%) and low dollarization (3.2% of Mainland businesses use USD) indicate market confidence, but sustained depreciation pressures reserves.
• Forex Market Activity:
  • IFEM Volume: USD 65.4 million in June 2025, +12.6% from USD 58.1 million in May 2025 (document, Page 10). This reflects trade settlements and seasonal imports, compared to USD 95.7 million in December 2024.
  • Reserves: USD 5,307.7 million (Chart 2.7.1), covering 4.3 months of imports, down slightly from USD 5,323.6 million in January 2025 but sufficient per IMF’s 4-month threshold.
  • Implications: Increased IFEM activity signals robust demand, but reserves and BoT interventions (e.g., USD sales) ensure stability. Service receipts (USD 7,104 million, driven by tourism’s 10% arrival increase to 2,333,322) bolster forex inflows.
• TZS Sustainability:
  • Stability: The TZS’s “orderly and market-driven” performance (document, Page 10) and minimal monthly depreciation (-0.2%) indicate short-term stability, supported by reserves and interventions.
  • Risks: The 9.6% annual depreciation and high USD debt exposure (67.6%) increase servicing costs, with external debt service at USD 1–2 billion annually. Import reliance (USD 13,040.7 million) and export volatility (e.g., cloves) strain reserves.
  • Mitigating Factors: Tourism receipts (USD 7,104 million), FDI (USD 3.7 billion), and concessional financing (e.g., IMF’s USD 441 million) support forex inflows. The BoT’s 6% Central Bank Rate (Page 7) controls inflation (3%–5% target), stabilizing the TZS.
  • Implications: The TZS is sustainable in the short term, but long-term pressures from depreciation and import growth require export diversification (e.g., cereals, manufactured goods) and reserve accumulation.

Debt and TZS Sustainability Metrics

Key Insights and Policy Implications

1. Debt Sustainability:
   • Status: The TZS 116.6 trillion debt (44.3% of GDP) is sustainable per the IMF’s DSA (below 55% benchmark), with moderate distress risk. External debt’s 70.7% share and 14.8% growth support infrastructure (25.4% transport) but increase servicing costs (USD 1–2 billion annually).
   • Policy: Prioritize concessional financing (e.g., World Bank’s USD 527 million) and revenue mobilization (TZS 2,339.2 billion tax revenue in May 2025, 4.1% above target) to reduce non-concessional borrowing (34% of external debt).
2. TZS Sustainability:
   • Status: The 9.6% depreciation and stable monthly performance (-0.2%) indicate short-term TZS stability, supported by reserves (USD 5,307.7 million) and tourism receipts (USD 7,104 million). However, import reliance and USD debt exposure pose long-term risks.
   • Policy: Boost exports (e.g., cereals, USD 501.3 million; manufactured goods) via AfCFTA and diversify debt currencies to mitigate USD risks (67.6% share).
3. Debt-TZS Nexus:
   • Impact: TZS depreciation increases external debt servicing costs, with USD 22.3 billion (67.6%) in USD-denominated debt. This contributes to inflation (3.4% in Zanzibar) and fiscal pressure.
   • Policy: Strengthen reserves through FDI (USD 3.7 billion) and tourism (2.3 million arrivals) to stabilize the TZS and reduce servicing costs.
4. Economic Context:
   • Growth: 5.6% GDP growth in 2024 and 6% projected for 2025 support debt absorption, driven by tourism and infrastructure.
   • Risks: TZS depreciation, global USD strength, and export volatility (e.g., cloves -27.2%) threaten sustainability. Climate shocks and election uncertainties (October 2025) add risks.
   • Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (TIPS, 453.7 million transactions) enhance fiscal and TZS resilience.

Critical Examination of the Establishment Narrative

• Debt Optimism: The BoT and IMF emphasize sustainability (35% debt-to-GDP), but the 13.5% debt increase and 9.6% TZS depreciation raise servicing concerns, especially with USD debt (67.6%). The IMF’s moderate risk rating may understate long-term vulnerabilities if exports (e.g., cloves) or tourism falter.
• TZS Stability: The BoT’s “orderly market” narrative (Page 10) is supported by reserves and interventions, but high import demand (USD 13,040.7 million) and global USD strength challenge long-term TZS sustainability. X posts on regional debt (e.g., Kenya’s unsustainable levels) suggest broader risks.
• Crowding Out: The narrative overlooks domestic borrowing’s crowding-out effect (15.5% lending rates), limiting private sector credit (12.8% growth in January 2025) and Vision 2050’s private sector-led goals.

The Tanzania Shilling's dramatic strengthening to TZS 2,631.56 per USD in June 2025 from TZS 2,698.42 in May delivered immediate and substantial fiscal relief for Tanzania's external debt management, generating savings of approximately TZS 70 billion for every USD 1 billion in debt serviced during the month. This currency appreciation, which reduced the annual depreciation rate from a concerning 12.5% in June 2024 to just 0.21% in June 2025—a remarkable 60-fold improvement—provided critical breathing room for a country carrying external debt of USD 33.9-35.0 billion representing 72.1% of its total national debt stock. The strengthening was underpinned by robust market fundamentals, including enhanced foreign exchange market liquidity with IFEM turnover rising to USD 121.50 million from USD 110.8 million in May, while Bank of Tanzania intervention needs plummeted to USD 6.3 million from USD 53 million, demonstrating market-driven stability. With 67.4% of external debt denominated in USD, this currency performance significantly reduced the local currency burden of debt service obligations, while foreign exchange reserves maintaining 4.5+ months of import coverage provided additional buffer against payment shocks, positioning Tanzania favorably for sustained debt sustainability amid its medium-term development objectives.

1. Currency Strengthening and National Debt Context

In June 2025, the Tanzania Shilling demonstrated remarkable resilience, strengthening to an average of TZS 2,631.56 per USD from TZS 2,698.42 in May, representing a significant improvement that drove the annual depreciation rate down dramatically to 0.21% from 3.82% in May and a concerning 12.5% in June 2024. This currency performance occurred within the context of Tanzania's substantial national debt profile, with external debt reaching USD 35,039.80 million in February 2025, while recent data indicates external debt stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from December 2024. The total national debt structure shows the government holding 76.4% (USD 25,896.7 million) of the total external debt, while the private sector's share dropped to 23.6% (USD 8,004.7 million).

Recent Debt Profile Analysis:

• External Debt Composition: As of November 2024, Tanzania's total external debt stock stood at USD 33,137.7 million, representing 72.1% of the country's total national debt
• Domestic Debt Position: Total Domestic Debt Stock (Sept 2024): TZS 32,615.7 billion, with Treasury Bonds comprising 78.9% – dominating domestic debt instruments, preferred for their longer maturity periods
• Currency Exposure: The debt portfolio shows significant USD exposure at 67.4%, followed by Euro at 16.6%, Chinese Yuan at 6.3%, and Other Currencies at 9.7%

2. Drivers of Currency Strengthening and Enhanced FX Market Liquidity

A. Seasonal Export Performance and FX Inflows:

Agricultural and Commodity Exports: The onset of Tanzania's cash crop export season provided substantial foreign exchange supply, with traditional exports including coffee, cashew nuts, and tobacco contributing to currency stability. Gold exports remained a critical driver, with stable growth but high USD exposure characterizing the external debt portfolio.

Tourism and Service Receipts: Strong performance in the service sector, particularly tourism, contributed significantly to foreign currency availability and supported the shilling's appreciation trajectory.

B. Interbank Foreign Exchange Market (IFEM) Development:

Enhanced Market Liquidity: The IFEM demonstrated improved functioning with turnover rising to USD 121.50 million in June from USD 110.8 million in May, indicating deeper market liquidity and more efficient price discovery mechanisms.

Reduced Central Bank Intervention: The Bank of Tanzania's intervention needs decreased dramatically to USD 6.3 million in June compared to USD 53 million in May, demonstrating market-driven stability and reduced pressure on official reserves. This aligns with the BoT Act requirement to maintain adequate official foreign exchange reserve equivalent to at least four months imports.

C. Reserve Management and Import Coverage:

Adequate Reserve Position: The Bank of Tanzania aims to strengthen the management of foreign exchange reserves, ensuring at least four months of import cover by 2029/30, while reserves declined from 4.7 months of import cover in 2022 to 4.5 months in 2023, explained by the authorities' response to the foreign exchange shortage.

3. Impact on National Debt Management and Servicing Costs

A. External Debt Servicing Benefits:

Reduced Local Currency Costs: With the majority of Tanzania's external debt denominated in USD (67.4% of external debt portfolio), the stronger shilling significantly reduced the local currency cost of debt servicing. For illustration:

• June 2025 Exchange Rate Impact: Servicing USD 1 billion of external debt in June cost approximately TZS 2.63 trillion compared to TZS 2.70 trillion in May
• Monthly Savings: This represents a nominal saving of approximately TZS 70 billion per USD 1 billion of debt serviced
• Budget Protection: The stronger currency helps shield the government budget from exchange rate-driven debt service escalations

B. Domestic Debt Market Stability:

Government Securities Performance: Currency stability supported investor confidence in government securities, helping to contain pressure on domestic interest rates. Most of the domestic debt stock is held by commercial banks with a share of 33.1 percent, followed by social security funds with holdings of 26.7 percent.

Long-term Bond Market: With Treasury Bonds comprising 78.9% of domestic debt instruments, exchange rate stability helps anchor inflation expectations, which in turn supports manageable domestic borrowing costs and maintains investor appetite for government securities.

C. Inflation and Interest Rate Dynamics:

Inflation Expectations: The stable currency contributed to controlled inflation expectations, supporting the central bank's target of maintaining inflation within the 3-5% range. The Bank of Tanzania's Strategic Plan 2025–2030 targets 3%–5% inflation.

Interest Rate Environment: The overall T-Bills interest rate rose significantly over the past 12 months from 5.8 percent in March, but currency stability helped moderate further increases in borrowing costs.

4. Debt Sustainability and Risk Assessment

A. Positive Sustainability Indicators:

Enhanced Repayment Capacity: The combination of stronger currency and improved foreign exchange inflows enhanced Tanzania's short-term capacity to meet external debt obligations without aggressive drawdown of reserves.

Reserve Buffer: With foreign exchange reserves providing adequate import coverage, Tanzania maintains a buffer against debt payment shocks and external sector volatility.

Institutional Support: The IMF and Tanzania authorities reached staff-level agreement, with Tanzania gaining access to US$441 million in financing once approved by the IMF Executive Board, providing additional financial backstop.

Economic Growth Foundation: Economic conditions have continued to improve, with robust growth and macrofinancial stability underpinned by prudent macroeconomic management. The medium-term outlook is favorable, contingent on sustained reform implementation.

B. Ongoing Risk Factors:

Debt Stock Magnitude: Despite currency improvements, the overall debt stock remains substantial, with external debt representing over 70% of total national debt, requiring sustained export growth and fiscal discipline.

Export Dependency: The heavy reliance on commodity exports (particularly gold) and tourism makes currency stability vulnerable to global price volatility and external demand shocks.

Reform Implementation: Downside risks remain, including from an uncertain external environment or reform delays. Challenges to meet SDG targets and reduce poverty are daunting, especially considering that the population size is expected to double by 2050.

Banking Sector Exposure: The banking sector, which accounts for 71% of financial assets, remained sound with the ratio of nonperforming loans to gross loans declining, but continued monitoring is essential given significant government securities holdings.

5. Strategic Debt Management Implications

A. Currency Risk Mitigation:

Natural Hedging: The strong export base in USD-earning sectors (gold, tourism, agricultural commodities) provides natural hedging against USD-denominated debt obligations.

Policy Coordination: Effective coordination between monetary policy (exchange rate management) and fiscal policy (debt issuance strategy) supports overall debt sustainability objectives.

B. Market Development Benefits:

Capital Market Deepening: Stable currency conditions support domestic capital market development, enhancing the government's ability to finance development through local currency bonds.

Investor Confidence: Reduced exchange rate volatility attracts both domestic and foreign investors to Tanzania's debt instruments, potentially lowering borrowing costs over time.

C. Fiscal Space Preservation:

Debt Service Efficiency: Lower debt servicing costs due to currency appreciation preserve fiscal space for development spending and poverty reduction programs.

Budget Predictability: Exchange rate stability enhances budget planning and execution, reducing the need for contingency allocations for currency-related debt service variations.

Summary Assessment

Strategic Recommendations

Short-term Actions:

1. Capitalize on Currency Strength: Use the favorable exchange rate environment to prepay or restructure high-cost external debt where feasible
2. Strengthen Reserve Management: Build on current reserve adequacy to enhance buffer against external shocks
3. Optimize Debt Issuance: Take advantage of stable domestic market conditions to extend debt maturity profile

Medium-term Strategies:

1. Diversify Export Base: Reduce dependency on gold and tourism through manufacturing and service sector development
2. Develop Local Currency Markets: Enhance domestic capital market depth to reduce foreign exchange exposure
3. Implement Fiscal Consolidation: Maintain debt sustainability through prudent fiscal management and revenue enhancement

Conclusion

The strengthening of the Tanzania Shilling in June 2025—driven by improved foreign exchange market liquidity, robust seasonal export inflows, and reduced central bank intervention—provided immediate and significant relief in external debt servicing costs while supporting stable domestic borrowing conditions. With external debt of approximately USD 33.9-35.0 billion representing 72.1% of total national debt, the currency appreciation delivered substantial fiscal benefits, reducing the local currency cost of USD-denominated debt service by approximately TZS 70 billion per USD 1 billion serviced.

While this performance bodes well for short-term debt sustainability and supports Tanzania's medium-term economic outlook, the long-term ability to meet debt obligations will depend on sustained reform implementation, particularly to strengthen the business environment and support a more dynamic private sector. The combination of adequate foreign exchange reserves (4.5+ months import cover), institutional support from the IMF (USD 441 million financing access), and a stable domestic debt market dominated by long-term bonds (78.9%) provides a solid foundation for debt sustainability, contingent on maintaining export competitiveness, fiscal discipline, and continued macroeconomic stability.

Key Figures – June 2025 Shilling Strength & Debt Impact

Key Drivers and Regional Alignment

In June 2025, Tanzania's headline inflation edged up slightly to 3.3% from 3.2% in May, driven primarily by a sharp rise in food and non-alcoholic beverages inflation to 7.3% (up from 5.6%), with unprocessed foods surging to 8.6% from 5.5%, as reported by the Bank of Tanzania's July 2025 Monthly Economic Review. This increase, fueled by higher prices for staples like maize flour, millet flour, beef, and fish, was partially offset by a decline in energy, fuel, and utilities inflation to 2.1% from 6.1%, reflecting softer wood charcoal and petroleum prices. Despite the uptick, the 3.3% rate remains well within Tanzania’s 3–5% national target and aligns with East African Community (EAC) and Southern African Development Community (SADC) benchmarks, supported by robust food reserves of 477,923 tonnes after a 32,414-tonne maize release by the National Food Reserve Agency.

1. Primary Drivers of the Slight Uptick in Headline Inflation to 3.3% in June 2025

Based on the Bank of Tanzania's Monthly Economic Review for July 2025, headline inflation experienced a modest increase to 3.3% in June 2025 from 3.2% in May, primarily due to upward pressures from food prices amid adequate overall supply conditions. This aligns with broader trends where food-related volatility has been a key factor in recent months. Here's a detailed breakdown:

• Food and Non-Alcoholic Beverages: This category, weighted at 28.2% in the Consumer Price Index (CPI, base 2020=100), was the main culprit behind the uptick. Annual inflation rose sharply from 5.6% in May to 7.3% in June, driven by higher prices for staple foods such as maize flour, millet flour, beef, and fish. Wholesale price data from the Ministry of Industries and Trade shows annual changes in staple food crops (e.g., maize and millet) contributing to this surge, with alternative foods like beans and sorghum also seeing price increases. To mitigate this, the National Food Reserve Agency (NFRA) released a net 32,414 tonnes of maize in June, reducing reserves from 509,990 tonnes in May to 477,923 tonnes (after a minor stock adjustment increase of 347 tonnes). Despite the drawdown, reserves remained robust—well above the 340,479 tonnes recorded in June 2024—helping to stabilize supply but not fully offsetting the price pressures.
• Unprocessed Food Prices: Inflation for non-core items (weighted at 26.1%) jumped to 7.1% in June from 5.6% in May, with unprocessed foods specifically surging to 8.6% from 5.5%. This subcategory was the primary driver of overall headline inflation, as highlighted in the contribution charts, underscoring the vulnerability of Tanzania's inflation to agricultural supply fluctuations, including seasonal factors and demand for alternatives to staples.
• Energy, Fuel & Utilities: Providing a counterbalancing effect, inflation in this category (weighted at 5.7%) decelerated significantly to 2.1% in June from 6.1% in May. The decline was mainly due to softening prices for wood charcoal and a continued downward trend in key petroleum products (petrol, diesel, and kerosene) since April 2025, mirroring global oil market developments. Domestic prices for these fuels, as tracked by the National Bureau of Statistics, have stabilized, helping to contain broader inflationary pressures.

Additional context from recent data (sourced via web searches on official sites like the Bank of Tanzania and National Bureau of Statistics as of August 2025): Tanzania's food inflation trends align with regional patterns, where rising global commodity prices (e.g., wheat up due to strong demand) have influenced imports, but domestic interventions like NFRA releases have prevented sharper spikes. Core inflation (weighted at 73.9%, excluding volatile items) eased to 1.9% from 2.1%, indicating underlying stability despite food volatility.

Overall, the slight headline uptick reflects food-driven pressures but was tempered by easing energy costs, keeping inflation low and contained.

2. Alignment with Tanzania's National Target and Regional Benchmarks

Tanzania's inflation performance in June 2025 remains strong, aligning well with both domestic and regional goals, as emphasized in the Bank of Tanzania report. This stability supports monetary policy objectives amid global uncertainties like geopolitical tensions and trade tariffs.

• Tanzania’s National Target: The medium-term inflation target is 3–5%, as outlined in the Bank's monetary policy framework. At 3.3%, June's headline rate is comfortably within this band, reflecting effective policy implementation, including maintaining the Central Bank Rate (CBR) at 6% to anchor expectations and sustain private sector credit growth. This low inflation environment also aligns with the broader goal of price stability to support economic growth, with the report noting resilience despite external headwinds.
• EAC and SADC Regional Benchmarks: Inflation trends in the East African Community (EAC) and Southern African Development Community (SADC) have generally stayed aligned with convergence criteria, though some member states faced elevated rates due to food price rises. Tanzania's 3.3% rate tracks closely with these benchmarks—the EAC macroeconomic convergence criterion targets headline inflation below 8% (with a medium-term aim around 5%), while SADC's is 3–7%. Charts in the report (e.g., Chart 1.3 for EAC and Chart 1.4 for SADC) show Tanzania's inflation below the dotted-line targets, indicating compliance. For instance, in EAC peers like Kenya and Uganda, inflation hovered around 4–6% in mid-2025 (per recent IMF and World Bank updates accessed via web search), while SADC averages were 4–5%, with outliers like Zimbabwe higher due to food issues.

Internet-sourced updates (e.g., from the EAC Secretariat and SADC websites as of August 2025) confirm Tanzania's alignment: The EAC's 2025 Monetary Affairs Committee report praises Tanzania's low inflation for aiding regional integration, and SADC's latest macroeconomic surveillance notes Tanzania's rate as a positive outlier amid global commodity volatility. This positions Tanzania favorably for regional trade and investment.

In summary, the 3.3% rate not only meets national targets but also supports EAC/SADC convergence, highlighting effective domestic policies amid contained global price pressures.

Summary Table

In Conclusion

The modest rise in Tanzania's headline inflation to 3.3% in June 2025 was predominantly fueled by escalating food prices, especially in unprocessed staples like maize and millet, despite proactive measures such as NFRA maize releases that maintained ample reserves. This was partially offset by declining energy and fuel inflation, aligning with global oil trends. Critically, the rate stays well within Tanzania's 3–5% national target and harmonizes with EAC and SADC regional benchmarks, underscoring the economy's resilience to external shocks like geopolitical tensions. Ongoing monetary policy stability and food supply interventions should continue to keep inflation contained, supporting sustained growth.

The Tanzania Shilling achieved a dramatic turnaround in June 2025, strengthening to TZS 2,631.56 per USD from TZS 2,698.42 in May, marking a remarkable shift from chronic depreciation to currency appreciation. This performance represented a stunning reversal of fortunes, with the annual depreciation rate plummeting from a concerning 12.5% in June 2024 to just 0.21% in June 2025—a 60-fold improvement that positioned the shilling among the best-performing African currencies. The stabilization was underpinned by robust seasonal foreign exchange inflows, including gold exports worth USD 3.66 billion and tourism receipts of USD 3.83 billion from 2.2 million visitors, while enhanced interbank foreign exchange market liquidity saw turnover increase to USD 121.50 million in June from USD 110.8 million in May. Critically, the Bank of Tanzania's intervention needs dropped dramatically to just USD 6.3 million in net sales compared to USD 53 million in May, demonstrating market-driven stability that coincided with inflation remaining controlled at 3.3%—well within the 3-5% target range—despite food price pressures, as the stronger currency helped offset imported inflation and contributed to energy inflation declining from 6.1% to 2.1%.

1. Tanzania Shilling Strengthening: Key Performance Indicators

In June 2025, the Tanzania Shilling (TZS) demonstrated remarkable resilience, strengthening significantly against major currencies with the exchange rate averaging TZS 2,631.56 per USD, representing a substantial improvement from TZS 2,698.42 in May 2025. This performance marked a dramatic turnaround, with the annual depreciation rate plummeting to just 0.21% from 3.82% in May and a concerning 12.5% in June 2024. Recent data indicates the shilling's continued strength, with the USD/TZS exchange rate falling to 2,470.0000 on August 7, 2025, and the Tanzania Shilling strengthening 6.44% over the past month.

Key Drivers of Currency Stabilization:

A. Seasonal Foreign Exchange Inflows:

• Cash Crop Export Surge: The onset of Tanzania's primary cash crop export season provided substantial foreign exchange supply, with traditional exports including cashew nuts, coffee, and tobacco showing robust performance
• Gold Export Earnings: Gold exports reached USD 3.66 billion, contributing significantly to foreign exchange reserves and supporting currency stability
• Agricultural Performance: Enhanced agricultural productivity supported both domestic food security and export earnings

B. Enhanced Interbank Foreign Exchange Market (IFEM) Liquidity:

• Increased Market Turnover: Foreign exchange turnover in IFEM reached USD 121.50 million in June 2025, compared to USD 110.8 million in May, indicating improved market depth and liquidity
• Reduced Central Bank Intervention: The Bank of Tanzania's intervention decreased dramatically to only USD 6.3 million in net sales during June, down from USD 53 million in May, demonstrating market-driven stability
• Market Confidence: Reduced intervention reflects improved market confidence and natural supply-demand equilibrium

C. Robust External Sector Performance:

• Export Growth: Tourism recorded significant growth, with 2.2 million tourists visiting Tanzania and injecting $3.83 billion into the economy, while overall exports reached USD 16.93 billion with a year-on-year growth of 17.7%
• Diversified Revenue Streams: Tanzania largely depends on tourism earnings and exports of gold and traditional crops for its foreign exchange earnings, providing multiple sources of foreign currency inflows
• Import Coverage: Strong foreign exchange reserves covering approximately 4.8 months of imports enhanced external sector resilience

2. Inflation Dynamics and Currency Interaction

Inflation Trends:

Marginal Inflation Increase: Headline inflation rose slightly to 3.2% in February 2025, up from 3% in the corresponding period in 2024, with June 2025 recording 3.3% compared to 3.2% in May. The increase was primarily attributed to:

• Food Price Pressures: Surging prices of staple foods including maize flour, millet flour, beef, and fish
• Unprocessed Food Inflation: Climbing to 8.6%, reflecting seasonal and supply chain factors
• Beverage Price Increases: Non-alcoholic beverage prices contributing to overall inflation pressure

Mitigating Currency Effects:

• Import Cost Reduction: The stronger shilling reduced imported inflationary pressures, particularly affecting petroleum products and manufactured goods
• Energy Sector Stabilization: Energy, fuel, and utilities inflation declined from 6.1% to 2.1%, partly due to both falling global oil prices and reduced import costs from currency appreciation
• Inflation Target Compliance: Headline inflation averaged 3.2 percent, remaining within the target of three percent to five percent and consistent with the convergence criteria for regional economic integration

3. Monetary Policy and Economic Stability Framework

Central Bank Policy Stance:

• Interest Rate Stability: The Bank of Tanzania maintained the Central Bank Rate (CBR) at 6%, providing policy anchor and supporting interbank market stability
• Prudent Monetary Management: Inflation rates remained low, a situation the central bank attributes to prudent monetary policy and a continued moderation in non-food and energy prices
• Market Confidence: Steady policy stance anchored inflation expectations and maintained financial sector stability

External Reserves and Liquidity:

• Reserve Adequacy: Foreign exchange reserves of approximately USD 5.97 billion provided coverage for 4.8 months of imports, exceeding international adequacy benchmarks
• Liquidity Management: Enhanced interbank market functioning reduced volatility and supported currency stability
• Risk Mitigation: Adequate reserves provided buffer against external shocks and supported investor confidence

4. Economic Growth and Sectoral Performance

GDP Growth Trajectory:

• Robust Economic Performance: Mainland Tanzania's GDP grew 5.6% in Jan-Sep 2024, estimated at 5.6% for the full year, with projections for continued growth
• Sectoral Drivers: Real GDP grew 5.3% in 2023, up from 4.7% in 2022, driven by agriculture, construction, and manufacturing on the supply side and private investments on the demand side
• Long-term Outlook: Tanzania is projected to grow at an average rate of around 6% over the long-term

Export Performance:

• Agricultural Exports: Tanzania's January 2025 economic review highlights a 15.1% export growth driven by gold, cashew nuts, and tourism
• Mining Sector: Gold exports registered an annual increase of 7% to USD 2,859.6 million in previous periods, with continued strong performance
• Tourism Recovery: Significant tourism revenue contribution supporting service sector growth and foreign exchange earnings

5. Implications for Overall Economic Stability

Positive Stability Indicators:

A. Price and Monetary Stability:

• Inflation Control: Headline inflation consistently maintained within the 3-5% national target range, supporting purchasing power and economic planning
• Regional Convergence: Inflation rates aligned with East African Community (EAC) and Southern African Development Community (SADC) convergence criteria
• Monetary Credibility: Consistent central bank policy enhanced institutional credibility and market confidence

B. External Sector Resilience:

• Balance of Payments: Strong export performance and tourism earnings improved current account dynamics
• Currency Stability: Reduced exchange rate volatility lowered business uncertainty and import costs
• Investment Climate: Public debt levels remain nevertheless contained at around half of GDP, supporting macroeconomic stability

C. Financial Sector Development:

• Credit Growth: Private sector credit expanded by 12.8%, supporting business investment and economic expansion
• Market Liquidity: Enhanced foreign exchange market functioning improved financial intermediation
• Banking Stability: Reduced currency risk supported banking sector performance and lending capacity

Growth Support Mechanisms:

• Business Environment: Stable exchange rates reduced uncertainty for traders, manufacturers, and investors, supporting long-term planning
• Investment Incentives: Controlled inflation and currency stability attracted both domestic and foreign investment
• Purchasing Power: Real income protection through inflation control sustained consumer demand and economic momentum

Summary Assessment

Conclusion

The stabilization of the Tanzania Shilling in June 2025 represents a confluence of positive economic fundamentals, including robust seasonal export inflows from gold and agricultural commodities, enhanced foreign exchange market liquidity, and prudent monetary policy management. The Tanzania Shilling has strengthened 6.44% over the past month, and is up by 8.34% over the last 12 months, demonstrating sustained improvement in currency performance.

This currency strength, combined with controlled inflation averaging 3.2-3.3% within the target range, has created a stable macroeconomic environment supporting Tanzania's economic growth trajectory. The reduced need for central bank intervention, strong external reserves, and diversified export base provide a solid foundation for continued currency stability and economic expansion, positioning Tanzania favorably for sustained development and regional economic integration objectives.

Key Figures Table