Prepared by TERI for research and strategic-information purposes only. It is not investment, legal, tax or financial advice and does not state the position of the Bank of Tanzania or the Government. All figures come from the Bank's September 2026 Monthly Economic Review; where TICGL/TERI derives a figure (for example percentage changes in end-period exchange rates) it is marked as such.
00 — OverviewExecutive Summary
The Bank of Tanzania describes the domestic economy as stable: inflation low and inside the 3–5% target, a liquid foreign exchange market and adequate reserves. Our reading agrees on the headline but adds three cautions.
The shilling is stable month to month (average +0.13%, and the end-of-month rate actually firmed 0.4% in August), so it is not what pushed inflation up this month. But inflation is no longer food-led: core inflation supplies 3.1 of the 4.3 percentage points. Combined with a wider current account deficit, a 51.7% jump in petroleum imports and a debt stock that is 64.9% USD-denominated, the shilling's stability is a condition to protect, not a given.
- Prices: headline 4.3%, core 4.1%, services 5.9%, energy, fuel and utilities 8.5% (highest since October 2024), food 3.7%.
- Shilling: TZS 2,657.01 per USD in August versus 2,653.52 in July; -6.7% year on year against +0.5% appreciation a month earlier, a swing the Bank attributes largely to the August 2025 base.
- Policy: the Central Bank Rate was raised to 6.25% in July; the Bank sold a net USD 45.4 million in the interbank FX market to smooth volatility.
- Liquidity: M3 growth 25.5% and private-sector credit growth 33.0% mean domestic demand is strong, which keeps pressure on prices and imports.
01 — PricesInflation: Contained, but Changing Character
Headline inflation rose to 4.3% in August 2026 from 4.2% in July and 3.4% a year earlier. The Bank attributes the uptick to lagged pass-through of earlier fuel price increases into bus, taxi and motorcycle-taxi fares. Month on month, prices rose 0.1%.
Twelve-Month Inflation by Measure
| Group (weight) | Aug-25 | Jul-26 | Aug-26 | Reading |
|---|---|---|---|---|
| Headline (100%) | 3.4 | 4.2 | 4.3 | Within 3–5% target |
| Core (73.9%) | 2.0 | 3.9 | 4.1 | Rising steadily since March |
| Food & non-alcoholic bev. (28.2%) | 7.7 | 4.1 | 3.7 | Easing on staples supply |
| Energy, fuel & utilities (5.7%) | 2.6 | 6.9 | 8.5 | Charcoal and firewood |
| Transport (14.1%) | 1.4 | 13.8 | 13.8 | Flat at high level |
| Services (37.2%) | 0.8 | 5.7 | 5.9 | Broad-based build-up |
| Goods (62.8%) | 4.9 | 3.3 | 3.5 | Edging up |
| Housing, water, electricity (15.1%) | 2.1 | 1.6 | 2.5 | Up 0.9pp in a month |
| Restaurants & accommodation (6.6%) | 0.9 | 2.7 | 3.0 | Services pressure |
| Information & communication (5.4%) | 0.4 | 0.6 | 1.5 | +0.9% m/m in August |
Source: Bank of Tanzania, Table 2.1.1 and Table A9(i)–(ii).
What Is Driving Inflation
Transport Inflation
1.1 From food-led to core-led inflation
In August 2025 unprocessed food contributed 1.8 percentage points of a 3.4% rate and core 1.5. A year later unprocessed food contributes 0.8 and core 3.1. That matters for policy: food prices follow harvests and reverse quickly, while core inflation is stickier and is the part monetary policy can influence. The Bank's tightening in July is a response to exactly this build-up.
1.2 Food looks safe, for now
Wholesale prices of maize, rice and beans are below year-earlier levels, though National Food Reserve Agency stocks were 484,332 tonnes at end-August, down from 537,571 tonnes a year earlier. The Bank flags a strengthening El Niño and above-normal Vuli rains as risks to transport, distribution and regional food demand.
Petrol and diesel prices in Dar es Salaam stayed well below June 2026 levels, but charcoal and firewood pushed energy, fuel and utilities inflation to 8.5%. Rising global refined-product prices (white products averaged USD 1,167.21 per tonne in August versus USD 628.27 in December 2025) are an upside risk to domestic energy prices.
02 — Exchange RateThe Shilling: Stable Month to Month, Weaker Over the Year
The Interbank Foreign Exchange Market remained liquid, supported by gold and traditional commodity exports and tourism. Transactions totalled USD 190.3 million in August, down from USD 227.1 million in July. The shilling averaged TZS 2,657.01 per USD, marginally weaker than July's 2,653.52.
Shilling End-of-Month Rate
2.1 Why the annual figure overstates the move
The shilling appreciated sharply in August 2025 to an average of TZS 2,490.16 per USD, from 2,666.79 in July 2025. Measured against that unusually strong base, August 2026 shows a 6.7% depreciation. A year ago the same comparison showed an appreciation of 0.5%. The Bank itself calls the swing a base effect.
| Exchange-rate measure | Value | Note |
|---|---|---|
| Average, Aug-26 | TZS 2,657.01 | Bank of Tanzania |
| Average, Jul-26 | TZS 2,653.52 | Bank of Tanzania |
| Average, Aug-25 | TZS 2,490.16 | Sharp appreciation month |
| Average, Jul-25 | TZS 2,666.79 | Base for July comparison |
| End-period, Aug-25 | TZS 2,463.3 | Table A10 |
| End-period, Dec-25 | TZS 2,447.5 | Table A10 |
| End-period, Jul-26 | TZS 2,649.7 | Table A10 |
| End-period, Aug-26 | TZS 2,639.9 | -0.4% vs July (firmer) |
| End-period change, Dec-25 to Aug-26 | +7.9% | TICGL computation |
Using end-period rates, the shilling lost roughly 7.9% between December 2025 and August 2026, most of it between January and July, and has flattened since. That is a gradual adjustment, not a disorderly one. Stability in the Bank's sense means no volatility spikes, which is what the net USD 45.4 million of sales aimed to secure.
03 — The LinkShilling vs Inflation: How Tight Is the Connection?
A weaker currency raises the local-currency price of imported fuel, fertiliser, capital goods and intermediate inputs. Tanzania imports about USD 17.8 billion of goods a year, of which petroleum products alone were USD 3,425.6 million (up 51.7%). So exchange-rate pass-through is real. The data show two parallel trends since early 2026.
Exchange Rate vs Headline and Core Inflation
Crude Oil Price (USD per barrel)
Oil Price vs Transport Inflation
3.1 What the evidence supports
- Oil is the common cause. Crude jumped from USD 68.01 (February) to 95.58 (March) and 103.91 (April). Transport inflation followed from 4.0% in February to 9.2% in April and 13.8% by July, tracking the shock with a lag.
- The shilling weakened over the same window. End-period TZS per USD moved from 2,542.5 in February to 2,649.7 in July (+4.2%), while headline rose from 3.2% to 4.2%.
- But oil is easing and the rate has flattened. Crude averaged USD 84.4 in August (still about 36% above the Q4 2025 pre-conflict level) and the end-period rate firmed slightly.
Monthly data over 13 months cannot separate exchange-rate pass-through from the oil shock, because both moved together and the shilling was already softening in January before oil spiked. TICGL/TERI therefore treats the shilling as an amplifier of imported inflation rather than its proven source. A formal pass-through estimate needs a longer series of import-price and exchange-rate data.
3.2 Why the pass-through risk is rising
| Channel | Aug-25 (year to) | Aug-26 (year to) | Change |
|---|---|---|---|
| Goods imports (USD m) | 14,321.5 | 17,770.9 | +24.1% |
| Petroleum products imports (USD m) | 2,257.4 | 3,425.6 | +51.7% |
| Freight payments (USD m) | 1,300.4 | 1,683.4 | +29.5% |
| Fertiliser imports (USD m) | 392.5 | 428.7 | +9.2% |
| Capital goods imports (USD m) | 3,030.2 | 4,099.7 | +35.3% |
Source: Bank of Tanzania, Tables 2.7.1, A7 and Chart 2.7.5; percentage changes for freight, fertiliser and capital goods are TICGL/TERI computations.
04 — PolicyMonetary Policy: A Deliberate Tightening
In July 2026 the Monetary Policy Committee raised the Central Bank Rate (CBR) to 6.25% to contain second-round inflation from higher energy, fertiliser and transport costs. Operations kept the 7-day interbank rate inside the 4.75–7.75% corridor, using full-allotment reverse repos and liquidity paper auctions.
Policy Rate, Interbank Rate and T-Bill Yield vs Inflation
Money and Credit Growth
Credit Growth by Sector, Aug-26
| Indicator | Aug-25 | Jul-26 | Aug-26 |
|---|---|---|---|
| Extended broad money, M3 (annual %) | 20.5 | 26.9 | 25.5 |
| Credit to private sector (annual %) | 16.2 | 31.2 | 33.0 |
| Reserve money, M0 (annual %) | 22.5 | 20.6 | 27.4 |
| Overall lending rate (%) | 15.07 | 15.10 | 15.05 |
| 12-month deposit rate (%) | 9.99 | 9.34 | 9.36 |
| Short-term interest spread (pp) | — | 6.20 | 5.95 |
| 25-year bond yield (%) | 14.42 | 11.89 | 11.48 |
| Net foreign assets of banking system (TZS bn) | 15,766.0 | 14,646.0 | 13,575.4 |
Source: Bank of Tanzania, Tables 2.2.1, 2.3.1, A3, A4. The 25-year bond figure for Aug-25 is the Table A4 monthly yield.
4.1 Reading the stance
- Tightening is modest. A real policy rate near 2 percentage points, with private-sector credit growing 33% and M3 at 25.5%, is not restrictive by itself. The Bank expects the stance to moderate credit gradually.
- Liquidity is strong, FX cover is thinning at the bank level. Net foreign assets of the banking system fell to TZS 13,575.4 billion, and those of other depository corporations turned negative (TZS -155.5 billion).
- Government borrowing is well absorbed. Bond auctions were oversubscribed (bid-to-cover 3.4), and the 25-year yield eased to 11.48%, signalling investor confidence.
05 — External SectorExternal Position and Debt: The Foundations of the Shilling
The Bank judges the external sector sustainable, but higher costs of petroleum and intermediate inputs pushed import growth above export growth. In the year to August 2026, exports of goods and services rose 16.4% to USD 20,216.2 million while imports rose 21.4% to USD 21,269.2 million.
Trade, Services and the Current Account
| Item (year ending Aug) | 2025 | 2026p | Change |
|---|---|---|---|
| Goods exports (USD m) | 9,981.2 | 11,960.8 | +19.8% |
| o/w Gold exports | 4,321.5 | 5,625.0 | +30.2% |
| Manufactured goods exports | 1,533.9 | 2,213.4 | +44.3% |
| Service receipts | 7,389.8 | 8,255.4 | +11.7% |
| o/w Travel | 4,314.7 | 4,389.7 | +1.7% |
| o/w Transport | 2,612.5 | 3,303.3 | +26.4% |
| Goods trade balance | -4,340.3 | -5,810.2 | +33.9% |
| Current account balance | -1,700.9 | -2,481.8 | +45.9% |
Source: Bank of Tanzania, Tables 2.7.1 and A6. Gold, manufactured goods and travel/transport changes are TICGL/TERI computations from the published values.
Gold exports added USD 1,303.5 million, nearly two-thirds of the USD 1,979.6 million rise in goods exports. This supports the shilling today but ties its stability to bullion prices (USD 4,411 per ounce in August, up from USD 4,073 in July) and to the Bank's gold purchase programme.
Currency Composition of External Debt
Total Debt Stock
| Debt and reserves, end-Aug 2026 | Value | Why it matters for the shilling |
|---|---|---|
| National debt stock | USD 52,224.4M | +1.7% in a month |
| External debt (70.3% of total) | USD 36,731.5M | Public share 83.7% |
| Share denominated in USD | 64.9% | Servicing cost rises as TZS weakens |
| External debt service (Aug) | USD 139.1M | USD 69.2M principal |
| Domestic debt | TZS 40,899.5bn | +3.6% in a month |
| Gross official reserves | USD 5,888.2M | 4.2 months of imports |
| External debt arrears | USD 1,040.0M | Up from USD 578.9M a year earlier |
Source: Bank of Tanzania, Sections 2.6, 2.7, Tables 2.6.1–2.6.6 and A10.
06 — OutlookRisks, Scenarios and Recommendations
The Bank lists prolonged Middle East conflict and a strengthening El Niño as the main downside risks. TICGL/TERI adds the domestic transmission channels that connect them to the shilling and to prices.
| Risk | Transmission to shilling and inflation | Evidence in the review |
|---|---|---|
| Renewed oil and shipping shock | Higher fuel and freight costs, wider import bill, FX demand | Crude USD 84.4 (+5.8%); petroleum imports +51.7%; freight +29.5% |
| Core and services inflation build-up | Sticky prices that outlast the oil shock | Core 4.1%, services 5.9%, rising since March |
| Widening current account | Pressure on FX supply if gold or tourism weakens | Deficit USD 2,481.8M vs 1,700.9M |
| El Niño and regional drought | Food supply and transport disruption | NFRA stocks lower than a year ago |
| USD-heavy debt | Higher local-currency service costs on depreciation | 64.9% USD share; arrears USD 1,040.0M |
| Strong credit growth | Demand-led imports and price pressure | Private credit +33.0%; transport and communication credit +77.2% |
Where Inflation Could Go: Illustrative Paths
Benign: oil eases, food stays low, core plateaus near 4%.
Base: core keeps drifting up, energy stays elevated, headline holds around the upper half of the 3–5% band.
Adverse: renewed Hormuz disruption plus a weaker shilling pushes headline toward the 5% ceiling. These paths are stylised to show sensitivity, not predictions.
Recommendations
For policy makers
- Keep the stance data-dependent, focusing on core and services inflation rather than headline.
- Maintain FX buffers and reserve accumulation through gold purchases while diversifying export earnings.
- Publish exchange-rate pass-through estimates so markets can anticipate policy responses.
- Manage the currency mix and arrears in external borrowing.
For businesses and investors
- Stress-test models for a TZS 2,750–2,850 per USD range and 5–6% inflation.
- Match currency of revenue and debt; hedge imported inputs where markets allow.
- Index contracts and tariffs to inflation or FX where regulation permits.
- Watch core inflation and the CBR, not only headline CPI, when pricing multi-year projects.
"A stable shilling and low headline inflation are the result of good management, but the ingredients of the next squeeze are visible: a core-led price build-up, a wider import bill and a debt stock priced in dollars. Stability is something to defend before it is tested."
— TICGL / Tanzania Economic Research Institute (TERI)
07 — What TICGL DoesFrom Macro Data to Bankable Decisions
Exchange-rate and inflation assumptions decide whether a project clears its return hurdle. TICGL (Tanzania Investment and Consultant Group Ltd), with its research arm TERI, combines original economic research with practical advisory outputs for investors, government institutions and development partners across Tanzania and East Africa. Three technical service lines are most directly affected by the issues in this report.
Feasibility Studies
- Pre-feasibility and full feasibility studies for PPP and private projects (markets, buildings, transport, infrastructure).
- Financial models with explicit FX and inflation escalation, TZS and USD cash flows, NPV, IRR and DSCR.
- Sensitivity and scenario analysis on tariffs, capex indexation and interest rates.
- Legal, institutional and risk-allocation review aligned to PPP requirements.
Market Entry Advisory
- Sector and location screening, demand sizing and competitor mapping.
- Pricing and margin strategy under currency and cost-pass-through scenarios.
- Entry-mode choice (import, JV, local production) and regulatory pathway including incentives.
- Partner and supplier identification, and landed-cost modelling.
Market Research
- Consumer, demographic and demand studies built on official BoT, NBS and sector data.
- Macro and sector outlooks with 3–5 year projections.
- Primary surveys, stakeholder interviews and willingness-to-pay analysis.
- Policy briefs, training materials and SEO-ready research publications.
With core inflation at 4.1%, a policy rate of 6.25% and an exchange rate near TZS 2,657 per USD, project assumptions set even a year ago may now be stale. A refresh of the macro layer in a feasibility model, pricing plan or market-entry case is a low-cost way to avoid mispriced risk.
Talk to TICGL/TERI
Request a feasibility, market-entry or market-research scoping call, or a fuller briefing on this report.
What We Do → TICGL Markets → TERI Research → ✉️ economist@ticgl.com08 — SourcesMethod & Source Note
All figures are taken from the Bank of Tanzania Monthly Economic Review, September 2026 (data to August 2026): Sections 1.0–3.0 and Statistical Tables A1–A10, which cite the National Bureau of Statistics, Ministry of Finance, Tanzania Revenue Authority, World Bank and Bank of Tanzania computations. Figures marked "TICGL calc." are percentage changes or differences computed from those published values. The scenario chart is an illustration and not a forecast. External debt arrears and exchange-rate end-period values are from Table A10; August 2026 data are provisional.
09 — Quick AnswersFrequently Asked Questions
What was Tanzania's inflation rate in August 2026?
Headline inflation was 4.3%, up from 4.2% in July and 3.4% in August 2025, inside the 3–5% target. Core inflation was 4.1%, food 3.7% and energy, fuel and utilities 8.5%.
How did the Tanzanian shilling perform in August 2026?
It averaged TZS 2,657.01 per USD versus 2,653.52 in July. The 6.7% annual depreciation largely reflects the strong August 2025 base (TZS 2,490.16 per USD).
What is the Bank of Tanzania's Central Bank Rate?
6.25%, raised in July 2026, with the 7-day interbank rate kept inside a 4.75–7.75% corridor.
Is the shilling the main driver of inflation?
Not on this evidence. Fuel, transport and services costs explain most of the rise. But a weaker shilling amplifies imported inflation, and with the current account deficit at USD 2,481.8 million it is a risk to monitor.
Are Tanzania's foreign exchange reserves adequate?
Yes. Gross official reserves were USD 5,888.2 million at end-August 2026, equal to 4.2 months of projected imports excluding FDI-related imports, above the national benchmark.
Muhtasari kwa Kiswahili
Je, Shilingi ya Tanzania Inaweza Kuhimili Mfumuko wa Bei? Kwa mujibu wa Mapitio ya Kila Mwezi ya Uchumi ya Benki Kuu ya Tanzania (Septemba 2026), mfumuko wa bei wa jumla ulifikia asilimia 4.3 Agosti 2026 (Julai 4.2%, Agosti 2025 3.4%), ukiwa ndani ya lengo la asilimia 3 hadi 5. Mfumuko wa bei wa msingi (core) ni asilimia 4.1, chakula 3.7, na nishati 8.5.
Shilingi: Wastani wa Agosti ulikuwa TZS 2,657.01 kwa USD, ikilinganishwa na 2,653.52 Julai. Kushuka kwa asilimia 6.7 kwa mwaka kunatokana zaidi na "base effect" kwa sababu shilingi iliimarika sana Agosti 2025 (TZS 2,490.16). Kwa mwezi hadi mwezi, shilingi imetulia.
Mfumuko wa bei umebadilika sura: Mwaka jana chakula kilichangia pointi 1.8 za mfumuko; sasa kinachangia 0.8, wakati mfumuko wa msingi unachangia pointi 3.1. Mfumuko wa usafiri ni asilimia 13.8 kutokana na bei za mafuta kupita hadi nauli.
Sera ya fedha: Benki Kuu iliongeza Kiwango cha Benki Kuu (CBR) hadi asilimia 6.25 Julai 2026. Mikopo kwa sekta binafsi inakua kwa asilimia 33 na M3 kwa asilimia 25.5, kuonesha mahitaji makubwa ya ndani.
Sekta ya nje: Nakisi ya akaunti ya sasa imeongezeka hadi USD milioni 2,481.8 (kutoka 1,700.9), huku uagizaji wa mafuta ukipanda asilimia 51.7 hadi USD milioni 3,425.6. Akiba ya fedha za kigeni ni USD milioni 5,888.2, sawa na miezi 4.2 ya uagizaji. Asilimia 64.9 ya deni la nje liko kwa dola ya Marekani.
Hatari na ushauri: Mgogoro wa Mashariki ya Kati, El Niño na ongezeko la mfumuko wa msingi ni hatari kuu. Wawekezaji wapime miradi kwa hali ya TZS 2,750–2,850 kwa USD na mfumuko wa asilimia 5–6. TICGL/TERI hutoa upembuzi yakinifu (feasibility), ushauri wa kuingia sokoni na utafiti wa soko.
Hitimisho: Utulivu wa shilingi na mfumuko wa chini ni mafanikio, lakini viashiria vya shinikizo lijalo vinaonekana. Utulivu unahitaji kulindwa kabla haujajaribiwa.
- Mfumuko wa jumla: 4.3% · Msingi: 4.1% · Nishati: 8.5%
- Shilingi: TZS 2,657.01 kwa USD (-6.7% kwa mwaka, base effect)
- CBR: 6.25% · Akiba: USD milioni 5,888.2 (miezi 4.2)
- Nakisi ya akaunti ya sasa: USD milioni 2,481.8
Chanzo: Benki Kuu ya Tanzania, Mapitio ya Kila Mwezi ya Uchumi, Septemba 2026. Kwa maelezo zaidi: economist@ticgl.com.