As of June 2025, the Tanzania 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 May 2025, the Tanzanian Shilling (TZS) demonstrated relative stability amid ongoing external and domestic pressures, with an annual depreciation rate of 3.82%, easing slightly from 3.86% in April. The exchange rate reached TZS 2,698.42/USD, up from TZS 2,684.41/USD in April and TZS 2,598.94/USD a year earlier. This moderate depreciation reflects a balancing act between strong foreign exchange inflows—such as USD 3.91 billion from tourism and USD 3.84 billion from gold exports—and heightened demand for imports, which grew to USD 17.69 billion. The Bank of Tanzania (BoT) intervened with USD 53 million in the Interbank Foreign Exchange Market (IFEM), which saw a liquidity surge to USD 110.8 million in May, up from just USD 12.9 million in April. Backed by USD 5.1 billion in reserves and supported by gold purchases and de-dollarization reforms, the TZS remains more resilient than many regional currencies, with depreciation kept below 5%—a testament to BoT’s measured interventions and policy coordination.

1. Exchange Rate Trends

• Overview: The Tanzania Shilling (TZS) exchange rate against the US Dollar (USD) is a critical indicator of Tanzania’s external competitiveness and macroeconomic stability. Managed under a flexible exchange rate regime, the TZS is influenced by supply and demand dynamics in the Interbank Foreign Exchange Market (IFEM), with periodic Bank of Tanzania (BoT) interventions to mitigate volatility. The BoT’s medium-term goal is to maintain stability while ensuring adequate foreign exchange reserves.
• May 2025 Performance:
  • Exchange Rate:
    • May 2024: TZS 2,598.94/USD
    • April 2025: TZS 2,684.41/USD (depreciation from May 2024)
    • May 2025: TZS 2,698.42/USD (further depreciation from April 2025)
  • Annual Depreciation Rate:
    • May 2025: 3.82% (calculated as [(2,698.42 - 2,598.94) / 2,598.94] × 100)
    • April 2025: 3.86%, indicating a slight improvement in the depreciation pace.
  • Monthly Depreciation: From April to May 2025, the TZS depreciated by 0.52% ((2,698.42 - 2,684.41) / 2,684.41 × 100), reflecting moderate pressure.
• Context and Analysis:
  • Historical Trends: The TZS has faced steady depreciation pressures, with an average rate of 2,680.62/USD in April 2025, up 3.9% from 2,579.88/USD in April 2024. By September 2024, the TZS hit a peak of 2,724.57/USD, a 12.6% annual depreciation (web:23). The May 2025 rate of 2,698.42/USD shows a stabilization compared to September 2024, aligning with earlier reports of a 2% appreciation by late 2024.
  • Seasonal Patterns: The slight depreciation in May 2025 (0.52% month-on-month) contrasts with a stronger TZS in late 2024, when it rallied 10% due to tourism and agricultural inflows. May’s depreciation reflects reduced seasonal inflows post-tourism peak (August–October) and increased import demand.
  • Regional Comparison: The TZS has been more stable than regional peers like the Kenyan Shilling (24% weaker against TZS over 2022–2023) and Burundian Franc, reflecting Tanzania’s robust reserves and export growth. However, the TZS remains sensitive to USD strength, as seen in its 3.47% appreciation from 2022 to 2023.
  • Economic Drivers:
    • Export Inflows: Gold exports (USD 3,835.5 million, +23.1% year ending April 2025) and tourism receipts (USD 3,910 million estimated, web:4) bolstered the TZS, with 2,662,219 tourist arrivals in 2024 (+20%). Cash crops like cashew nuts (+141%) and coffee (+66.3%) also supported inflows.
    • Import Pressures: Imports of goods and services rose 9.6% to USD 17,686 million (year ending May 2025), driven by capital goods and industrial inputs, increasing USD demand.
    • Global USD Strength: The USD’s global rally in 2025, driven by US Federal Reserve policies, pressured emerging market currencies, including the TZS.
  • Implications:
    • Stability: The 3.82% annual depreciation is moderate compared to 12.6% in September 2024, reflecting effective BoT interventions and reserve adequacy (USD 5,136.6 million, 4.2 months of import cover).
    • Economic Impact: Depreciation makes exports (e.g., gold, tourism) more competitive but raises import costs (e.g., fuel, USD 2,578.5 million), potentially fueling inflation (3.0% in May 2025). The shilling’s stability supports investor confidence, with USD 3.7 billion in project registrations in January–May 2025.
    • Outlook: The TZS is expected to stabilize around 2,700–2,800/USD in 2025, supported by gold purchases (976.51 kg by November 2024) and tourism growth (+20% projected). However, shilling depreciation risks persist due to import demand and global USD strength.

2. Interventions by Bank of Tanzania

• Overview: The BoT employs a flexible exchange rate policy, intervening in the IFEM to smooth excessive volatility while maintaining market-driven rates. Interventions involve buying or selling USD to balance supply and demand, supported by monetary tools like the 6% Central Bank Rate (CBR) and liquidity management. The BoT’s gold purchases and de-dollarization policies further bolster reserves and TZS stability.
• May 2025 Performance:
  • BoT Intervention: USD 53 million sold in May 2025 via the IFEM to meet import needs for critical goods (e.g., fuel, industrial inputs).
  • IFEM Market Activity:
    • May 2025: USD 110.8 million in transactions, up from USD 12.9 million in April 2025 and USD 10.8 million in May 2024.
    • Growth: The 759% month-on-month increase (April to May 2025) and 925% year-on-year increase (May 2024 to May 2025) reflect improved liquidity.
  • Key Measures:
    • USD Sales: The USD 53 million sale addressed import-driven USD demand, particularly for fuel (USD 2,578.5 million imports) and industrial equipment.
    • Gold Purchases: The BoT acquired 976.51 kg of gold by November 2024 toward a 6-tonne target by June 2025, reducing USD reliance. In 2024/25, 418 kg was purchased.
    • De-dollarization: Since March 2025, domestic transactions must use TZS, increasing USD supply (daily retail FX turnover rose from USD 40 million to USD 70 million). This aligns with May 2025’s ban on foreign currency pricing.
    • FX Regulations: BoT circulars (e.g., daily FX transaction reporting by banks) tightened oversight, reducing speculative trading and stabilizing IFEM activity.
• Context and Analysis:
  • Intervention Scale: The USD 53 million sale in May 2025 is significant compared to a net USD 2.5 million sale in July 2024 but lower than 2023’s USD 506 million annual interventions. This reflects targeted action to address seasonal import peaks.
  • IFEM Liquidity: The surge to USD 110.8 million in May 2025 transactions (from USD 12.9 million in April) align with January 2025’s USD 16.3 million, down from December 2024’s USD 95.7 million (web:4). The increase reflects gold (USD 3.1 billion in July 2024, web:23) and cash crop inflows (e.g., cashew, TZS 743 billion in October 2024).
  • Policy Effectiveness: The BoT’s interventions, combined with a 5.75% CBR cut in July 2025, stabilized the TZS at 2,698.42/USD. Reserves rose to USD 5,323.6 million in January 2025 (4.3 months of import cover), supporting intervention capacity.
  • De-dollarization Impact: The March 2025 regulations increased USD liquidity, with retail FX turnover doubling to USD 70 million daily. However, some businesses face higher costs due to mandatory TZS use.
  • Economic Drivers:
    • Gold and Tourism: Gold prices rose from USD 2,310/oz to USD 3,326/oz, boosting inflows by USD 2 billion. Tourism (2,662,219 arrivals) and agriculture (cashew, coffee) drove USD supply.
    • Monetary Policy: The CBR at 5.75% (post:1) and interbank rates at 7.98% encouraged TZS liquidity, with Interbank Cash Market (IBCM) transactions at TZS 2,245.8 billion in January 2025.
• Implications:
  • Stabilization: The USD 53 million sale and USD 110.8 million IFEM activity cushioned the TZS against import pressures, maintaining a 3.82% depreciation rate (web:24).
  • Reserve Sustainability: Reserves (USD 5,136.6 million) exceed the 4-month benchmark, but sustained interventions risk depletion if imports grow (USD 17,686 million).
  • Business Impact: De-dollarization boosts TZS demand but raises costs for import-reliant firms (e.g., double conversion losses for Yuan trades). The IMF urges market-clearing rates to avoid re-emerging FX pressures.
  • Outlook: Continued gold purchases (5,022.85 kg by July 2025) and tourism inflows (+20% projected) will support TZS stability. The BoT’s prudent interventions and FX regulations are expected to keep depreciation below 5% in 2025.

3. Key Causes of Depreciation

• Overview: The TZS’s 3.82% annual depreciation in May 2025 reflects a mix of domestic and global factors. The BoT’s flexible exchange rate policy allows market-driven adjustments, but structural trade imbalances and external pressures drive depreciation.
• Key Causes:
  1. High Demand for Imports:
     • Details: Imports of capital goods (e.g., industrial equipment) and industrial inputs rose 9.554% to USD 17,686 million (year ending May 2025, Document, 16). Imports of industrial supplies and transport equipment increased in January 2025, supporting manufacturing (9% GDP) and construction (7%).
     • Impact: High USD demand for infrastructure (e.g., SGR, Julius Nyerere Hydropower Plant, web:10) and fuel (USD 2,578.5 million) outpaced export inflows, pressuring the TZS.
  2. Global Strengthening of the USD:
     • Details: The USD strengthened globally in 2023, driven by US Federal Reserve rate hikes and safe-haven demand. Despite 2025 rate cuts, the USD remained robust, affecting emerging market currencies like the TZS.
     • Impact: The TZS’s 3.82% depreciation aligns with regional trends (e.g., Kenyan Shilling, web:4), exacerbated by Tanzania’s 67.4% USD-denominated external debt (USD 35.6 billion, provided data).
  3. Moderate Foreign Exchange Inflows:
     • Details: Gold exports (USD 3,835.5 million) and tourism receipts (USD 3,910 million estimated, web:5) mitigated depreciation, with 2,662,219 arrivals in 2024 (+20%). Cash crops (cashew, coffee, added inflows, but these were insufficient against import growth.
     • Impact: Seasonal inflows peaked in August–October 2024, declining by May 2025, reducing USD supply and contributing to the TZS’s 0.52% monthly depreciation.

• Import Dependency: Tanzania’s trade deficit (USD 1,009 million in Q3 2024, web:16) and reliance on capital goods imports (23.5% of total, web:5) drive USD demand. Manufacturing and construction growth amplify this, despite reduced petroleum imports (-7%).
• Global USD Dynamics: The USD’s strength in 2025, despite US rate cuts, reflects global economic uncertainty, impacting TZS alongside other African currencies. The TZS’s 3.82% depreciation is moderate compared to 12.6% in September 2024.
• Inflow Moderation: Gold prices rose to USD 3,326/oz, boosting inflows by USD 2 billion, but production limits (1.9 million oz) constrain gains. Tourism’s USD 4 billion contribution and agricultural exports (e.g., cashew, TZS 743 billion) are seasonal, with May 2025 inflows lower than Q3 2024 peaks.
• Economic Drivers:
  • Trade Imbalance: Exports grew 19.2% to USD 16,994.7 million (year ending May 2025, Document, Page 16), but imports (USD 17,686 million) outpaced them, widening the current account deficit to USD 2,117.5 million.
  • Policy Response: BoT’s de-dollarization (web:18) and gold purchases increased USD supply, but import demand and USD strength offset gains.
• Implications:

• Economic Costs: Depreciation raises import costs, potentially increasing inflation (projected 5% in 2025) and debt servicing (TZS 5.31 trillion for domestic debt). External debt (67.4% USD-denominated) faces higher TZS costs.
• Competitiveness: A weaker TZS boosts export competitiveness (e.g., gold, tourism), supporting 6% GDP growth in 2025. However, import reliance risks trade imbalances.
• Outlook: Enhanced export diversification (e.g., manufacturing) and import substitution can reduce USD demand. BoT’s reserve management and FX regulations will mitigate depreciation, targeting a 3–5% range.

Tanzania Shilling Stability - May 2025: Key Figures

In April 2025, the Tanzania Shilling (TZS) exhibited a moderate depreciation trend, with the average exchange rate reaching TZS 2,684.41/USD, a 3.9% annual decline from ~TZS 2,583/USD in April 2024 and a 1.3% monthly drop from TZS 2,650.24/USD in March 2025. The Interbank Foreign Exchange Market (IFEM) saw reduced activity, with transactions falling to USD 12.9 million from USD 70.1 million in March 2025, supported by a Bank of Tanzania intervention selling USD 6.25 million. Bolstered by USD 5.3 billion in reserves covering 4.3 months of imports, the TZS maintained controlled stability.

1. Exchange Rate Movement

The Tanzania Shilling (TZS) experienced a gradual depreciation against the US dollar (USD) over the past year, reflecting pressures from external and domestic factors.

Key Figures:

• April 2025 Average Exchange Rate: TZS 2,684.41/USD
• March 2025 Average Exchange Rate: TZS 2,650.24/USD
• April 2024 Average Exchange Rate: ~TZS 2,583/USD (implied from annual comparison)
• Annual Depreciation (April 2024 to April 2025): 2,684.41−2,5832,583×100%≈3.9%\frac{2,684.41 - 2,583}{2,583} \times 100\% \approx 3.9\%2,5832,684.41−2,583​×100%≈3.9%
• Monthly Depreciation (March 2025 to April 2025): 2,684.41−2,650.242,650.24×100%≈1.3%\frac{2,684.41 - 2,650.24}{2,650.24} \times 100\% \approx 1.3\%2,650.242,684.41−2,650.24​×100%≈1.3%

Analysis:

• Annual Trend: The 3.9% depreciation over the year (from ~TZS 2,583/USD to TZS 2,684.41/USD) indicates a moderate weakening of the TZS, driven by structural and seasonal factors. The Monthey Economic Review highlights global economic uncertainties, such as a 10% US tariff on imports and a projected global growth slowdown to 2.8% in 2025, which may have reduced foreign exchange inflows to Tanzania, contributing to this trend.
• Monthly Trend: The 1.3% depreciation from March to April 2025 reflects a continuation of the gradual weakening, likely due to short-term imbalances in foreign exchange supply and demand. The document’s mention of stable monetary policy (CBR at 6%) aimed at smoothing exchange rate volatility suggests that the Bank of Tanzania (BoT) is actively managing these pressures to prevent sharp declines.
• Context from Document: The document does not explicitly provide exchange rate data but notes that the BoT’s monetary policy objectives include maintaining price stability and smoothing exchange rate volatility. The moderate inflation rate of 3.2% in April 2025 suggests that the depreciation has not significantly fueled domestic price pressures, indicating effective central bank management.

Implications:

The gradual 3.9% annual depreciation suggests controlled currency instability rather than a crisis, as the TZS remains within manageable bounds. This aligns with the document’s emphasis on the BoT’s data-dependent monetary policy adjustments to support economic stability.

2. Interbank Foreign Exchange Market (IFEM)

The IFEM is where banks trade foreign currencies, and its activity provides insight into exchange rate dynamics and liquidity in the foreign exchange market.

Key Figures:

• Total IFEM Transactions in April 2025: USD 12.9 million
  • Down from USD 70.1 million in March 2025 (an 81.6% decrease, calculated as [(70.1 - 12.9) / 70.1] × 100).
  • Down from USD 72 million in April 2024 (an 82.1% decrease, calculated as [(72 - 12.9) / 72] × 100).
• BoT Intervention: Sold USD 6.25 million in April 2025 to support import demand and stabilize the TZS.

Analysis:

• Decline in Transaction Volume: The sharp drop in IFEM transactions to USD 12.9 million in April 2025 from USD 70.1 million in March 2025 and USD 72 million in April 2024 suggests reduced foreign exchange market activity. This could reflect lower foreign currency inflows, possibly due to seasonal declines in cash crop exports (noted as a driver of depreciation).
• BoT Intervention: The sale of USD 6.25 million by the BoT represents a significant portion of the April IFEM volume (48.4%, calculated as 6.25 / 12.9 × 100). This intervention aimed to meet import demand and curb TZS depreciation, aligning with the document’s mention of gross official reserves being used to regulate balance of payments imbalances through foreign exchange market interventions.
• Reserves Context: The provided information notes that Tanzania’s gross official reserves stood at USD 5.3 billion, covering 4.3 months of imports. The document defines gross official reserves as external assets available for balance of payments financing and interventions, indicating that the BoT has sufficient capacity to support the TZS, as evidenced by the USD 6.25 million sale.

Implications:

The low IFEM transaction volume suggests constrained foreign exchange liquidity, but the BoT’s intervention and healthy reserves (USD 5.3 billion) demonstrate proactive management to stabilize the TZS. The document’s reference to the BoT’s role in managing exchange rate volatility supports this, ensuring that depreciation remains gradual.

3. Drivers of Depreciation

The provided information identifies key factors contributing to the TZS’s depreciation, which can be contextualized with the document’s insights.

Key Drivers:

• Lower Seasonal Foreign Exchange Inflows: Reduced inflows from cash crop exports (e.g., coffee, tea) likely contributed to the TZS’s weakening. The document notes rising tea prices (8.2%) but declining coffee prices due to improved production forecasts, suggesting mixed export performance that may have limited foreign currency earnings.
• Higher Import Demand: Increased demand for imports, relative to foreign exchange supply, exerted pressure on the TZS. The document mentions subdued crude oil demand and a 6.7% price decrease, but high import needs for other goods (e.g., food or industrial inputs) likely outstripped supply, necessitating BoT intervention.
• Modest Central Bank Support: The BoT’s sale of USD 6.25 million in the IFEM reflects targeted intervention to balance supply and demand, consistent with the document’s description of monetary policy smoothing exchange rate volatility.

Analysis:

• Seasonal Export Trends: The document’s mention of agricultural commodity price movements and the National Food Reserve Agency’s efforts to stabilize food supply suggest that seasonal agricultural cycles impact foreign exchange inflows. Lower cash crop exports in April 2025 likely reduced USD inflows, contributing to the 3.9% annual depreciation.
• Import Pressures: The document does not provide specific import data, but the BoT’s intervention to support import demand indicates a supply-demand imbalance. The moderate inflation rate (3.2%) suggests that import-driven price pressures were contained, possibly due to BoT actions.
• BoT’s Role: The document’s monetary policy framework emphasizes maintaining a 5% inflation target and supporting growth, with the CBR at 6%. The USD 6.25 million intervention reflects a cautious approach, leveraging reserves to prevent sharp TZS declines.

4. Shilling Stability Summary

The provided summary table encapsulates the TZS’s performance:

Analysis:

• Gradual Depreciation: The 3.9% annual depreciation and 1.3% monthly depreciation indicate a controlled weakening, not a crisis, as noted in the provided conclusion. The document’s stable macroeconomic indicators (e.g., inflation at 3.2%, CBR at 6%) support this assessment.
• Reserve Support: The USD 5.3 billion in reserves covering 4.3 months of imports provides a buffer, as per the document’s definition of gross official reserves. This ensures the BoT can continue interventions like the USD 6.25 million sale to manage volatility.

Conclusion

The Tanzania Shilling experienced a moderate 3.9% depreciation against the USD from April 2024 (~TZS 2,583/USD) to April 2025 (TZS 2,684.41/USD), with a 1.3% monthly decline from March 2025 (TZS 2,650.24/USD). This trend, driven by lower seasonal export inflows and higher import demand, was mitigated by the Bank of Tanzania’s intervention (USD 6.25 million sold in the IFEM) and robust reserves (USD 5.3 billion). The sharp decline in IFEM transactions to USD 12.9 million in April 2025 reflects reduced market liquidity, but the BoT’s actions ensured stability. The following table summarizes these key figures.

The table is designed to present the data clearly and concisely, wrapped in an artifact tag as per the guidelines

In April 2025, the Tanzania Shilling (TZS) depreciated by 3.9% annually to TZS 2,684.41/USD, reflecting pressures from import demand and global economic conditions. The Bank of Tanzania’s interventions, including selling USD 6.25 million in the IFEM, and robust foreign reserves of USD 5.3 billion (4.3 months of import cover) provide critical tools to stabilize the exchange rate, enhancing trade competitiveness, particularly for agricultural exports, which benefit from 5.1% of external debt use (USD 35,505.9 million). A stable TZS supports price competitiveness for agricultural goods like cashew nuts and tobacco, which drove an 18.8% export growth to USD 16,737.6 million in February 2025. Key issues include exchange rate volatility, limited agricultural export diversification, and external pressures. Strategies such as targeted IFEM interventions, reserve management, export promotion, and agricultural investment can strengthen stability and competitiveness, supporting Tanzania’s 6% GDP growth projection for 2025.

Main Key Issues

1. Exchange Rate Volatility and BoT Interventions
   • TZS Depreciation: The TZS depreciated by 3.9% annually to TZS 2,684.41/USD in April 2025, from ~TZS 2,583.31/USD in April 2024 (calculated as 2,684.41 / 1.039). This follows a trend of short-term volatility, with monthly depreciations of 1.37% in January 2025 (TZS 2,454.04/USD from TZS 2,420.84/USD) and 1.55% in February 2025 (TZS 2,492.05/USD). TICGL note a 29% TZS weakening from 2014–2024, driven by import demand and debt servicing (67.4% of external debt in USD, previous responses).
   • BoT Interventions: The BoT sold USD 6.25 million in the IFEM in April 2025 to stabilize the TZS, aligning with prior actions (e.g., USD 7 million in January, USD 8.75 million in February). IFEM transactions in April were not specified, but February’s USD 24.4 million (up from USD 16.3 million in January) indicates active market management. These interventions reduce volatility by meeting USD demand for imports and debt payments, maintaining TZS stability.
   • Reserves Adequacy: Foreign reserves of USD 5.3 billion in April 2025 cover 4.3 months of imports, exceeding the national benchmark of 4 months. Reserves grew to USD 5,576.3 million by February 2025, from USD 4,971.5 million in February 2024, supporting intervention capacity. However, reserves declined from USD 5.7 billion in March 2025 (3.8 months cover), signaling potential pressure from intervention costs or capital outflows.
   • Impact on Trade: Depreciation makes exports cheaper but raises import costs (e.g., fuel, 21.6% of imports), affecting agricultural input prices. Volatility disrupts trade planning, as seen in corporate hesitancy during TZS appreciation phases (TZS 2,750–2,800 range in Q3 2024).
2. Agricultural Export Competitiveness
   • Export Growth: Agricultural exports, supported by 5.1% of external debt use (~USD 1,810.8 million of USD 35,505.9 million), contributed to an 18.8% rise in goods and services exports to USD 16,737.6 million in February 2025, from USD 14,094.5 million in 2024. Key commodities include cashew nuts, tobacco, coffee, and horticultural products, with goods exports reaching USD 9,144.8 million (18.8% growth). Agriculture accounts for 26% of GDP and 85% of exports.
   • Competitiveness Gains: A 3.9% TZS depreciation enhances price competitiveness, reducing export prices in USD terms. For example, a USD 1,000 cashew nut shipment cost ~TZS 2,583.31 million in April 2024 but ~TZS 2,684.41 million in April 2025, making it cheaper for buyers. TICGL note agricultural export proceeds drove TZS appreciation in Q3 2024, suggesting depreciation could amplify this effect.
   • Constraints: Limited diversification (gold dominates at 36.8% of goods exports) and low productivity (agriculture employs 65.51% of workers but contributes 25% to GDP) hinder competitiveness. External debt for agriculture (5.1%) is dwarfed by transport (21.5%) and social welfare (19.9%), limiting investment in irrigation or technology. The Monthey Economic Review highlights irrigation needs.
   • AfCFTA Potential: The African Continental Free Trade Agreement (AfCFTA, ratified 2022) offers market access, but only 8.8% of imports are food, indicating untapped potential. TZS stability is critical to maintain competitive pricing in AfCFTA markets.
3. External Pressures and Global Context
   • Import Demand: Imports rose moderately (USD 14.5 billion in 2024), driven by capital goods and fuel, increasing USD demand and pressuring the TZS. Services payments grew 22.8% to USD 2,842.6 million in April 2025, with transport (USD 1,444.2 million) reflecting freight costs. This widens the current account deficit (USD 2,224.9 million, though improved 18.6%).
   • Global Risks: Geopolitical tensions, global slowdown, and climate shocks (e.g., droughts affecting agriculture) threaten export earnings. The IMF notes downside risks from reduced foreign aid and DRC conflict, impacting reserve inflows. A stronger USD (1 USD = TZS 2,655.59 in June 2025) exacerbates depreciation pressures.
   • Debt Servicing: External debt of USD 35,505.9 million, with 67.4% in USD, requires ~USD 2.4 billion annually for servicing (assuming 6.7% average interest, estimates), straining reserves and TZS stability. Domestic debt servicing (TZS 890.9 billion in February 2025) competes for fiscal.
   • Policy Constraints: The BoT’s free-floating exchange rate system faces anecdotal claims of artificial propping, potentially undermining market confidence. New regulations criminalizing non-TZS transactions may drive liquidity offshore, complicating stability.

Strategies to Enhance Exchange Rate Stability and Trade Competitiveness

1. Targeted IFEM Interventions
   • Action: Increase IFEM sales strategically during high USD demand (e.g., import seasons), scaling up from USD 6.25 million to USD 10–15 million monthly, funded by USD 5.3 billion reserves. Coordinate with liquidity management (M3 growth 11.9% in 2024/25) to avoid inflation (3.3% in March 2025).
   • Impact: This could cap TZS depreciation at 2–3% annually, maintaining export competitiveness. For a USD 1,000 agricultural export, a stable TZS 2,684.41/USD ensures predictable pricing, boosting orders. TICGL confirm BoT interventions stabilized TZS in January (USD 7 million sold).
2. Reserve Management and Diversification
   • Action: Diversify reserves into gold (USD 3,369.7 million export earnings) or SDRs to hedge USD fluctuations, preserving USD 5.3 billion for critical interventions. Attract FDI (e.g., USD 1.4 billion China railway deal) to boost reserves to USD 6 billion, covering 5 months of imports.
   • Impact: Enhanced reserves support TZS stability, reducing volatility. A 10% reserve increase (USD 530 million) could fund interventions for 6 months at USD 10 million/month, ensuring competitive TZS pricing for agricultural exports in AfCFTA markets.
3. Export Promotion for Agriculture
   • Action: Use 5.1% of external debt (USD 1,810.8 million) to subsidize agricultural exports (e.g., cashew nuts, coffee) via tax incentives or marketing under AfCFTA. Promote value addition (e.g., coffee processing) to increase earnings by 10–15%, targeting USD 1 billion annually (10% of 2024 goods exports).
   • Impact: Higher export earnings reduce current account deficit (USD 2,224.9 million) and USD demand, stabilizing TZS. Processed coffee at USD 5/kg vs. raw at USD 2/kg could double revenue, enhancing competitiveness. The Monthey Economic Review supports export diversification.
4. Invest in Agricultural Productivity
   • Action: Allocate TZS 360 billion (as in 2022/23) from domestic revenue (TZS 2,603.3 billion tax in March 2025) to irrigation and seed innovation, targeting 50% cultivated land by 2030. Partner with UNDP to meet irrigation financing gaps (6% met by government).
   • Impact: A 10% productivity increase could boost agricultural exports by USD 914.5 million (10% of USD 9,144.8 million), reducing TZS pressure. Improved output stabilizes supply chains, supporting TZS and AfCFTA competitiveness.

Conclusion

The TZS’s 3.9% depreciation to TZS 2,684.41/USD in April 2025, managed by BoT’s USD 6.25 million IFEM sales and USD 5.3 billion reserves, offers opportunities to enhance trade competitiveness, particularly for agricultural exports (5.1% of USD 35,505.9 million external debt). Key issues include TZS volatility, limited agricultural diversification, and external pressures like import costs and debt servicing. Strategies such as targeted IFEM interventions, reserve diversification, export promotion, and agricultural investment can stabilize the TZS at ~2–3% depreciation, boosting competitiveness for cashew nuts and coffee in AfCFTA markets. These align with Tanzania’s 6% GDP growth goal and Vision 2050’s export-led growth, supported by a narrowing current account deficit (USD 2,224.9 million).

The following table summarizes these key figures.

In March 2025, the Tanzania Shilling showed signs of short-term depreciation, yet maintained overall stability, supported by effective interventions from the Bank of Tanzania. The average exchange rate weakened to TZS 2,650.24 per USD from TZS 2,492.05 in February 2025, reflecting a 6.3% monthly depreciation and an annual depreciation of 3.4%. To manage this pressure, the central bank sold USD 62.3 million in the foreign exchange market, up sharply from USD 24.4 million in the previous month. Meanwhile, gross official reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports, exceeding both the national (4.0 months) and EAC (4.5 months) benchmarks. Despite currency pressures, inflation remained contained at 5.1%, staying within the national target and highlighting the strength of macroeconomic policy coordination.

Tanzania Shilling Stability: Analysis with Figures

Exchange Rate Trends

• In March 2025, the Tanzania Shilling traded at an average rate of TZS 2,650.24 per US dollar, showing a monthly depreciation from TZS 2,492.05 in February 2025.
• This represents a monthly depreciation of approximately 6.3%, and an annual depreciation of 3.4%, compared to a 2.2% appreciation in February 2024.

Foreign Exchange Market Interventions

• The Interbank Foreign Exchange Market (IFEM) experienced liquidity constraints, mainly due to seasonal declines in forex inflows from tourism and cash crop exports.
• To stabilize the shilling, the Bank of Tanzania intervened by selling USD 62.3 million in March 2025, compared to only USD 24.4 million in February 2025.
• Total IFEM transactions rose to USD 70.1 million, up from USD 24.4 million in February but down from USD 86.8 million in March 2024.

Foreign Exchange Reserves

• Gross official reserves increased to USD 5,693.2 million at the end of March 2025 from USD 5,327.1 million in March 2024.
• This level of reserves is enough to cover 4.6 months of projected imports, exceeding both the national benchmark (4.0 months) and EAC benchmark (4.5 months).

Inflation Context

• Headline inflation in March 2025 was recorded at 5.1%, slightly higher than 4.8% in February.
• Despite the currency depreciation, inflation has remained within the national and EAC target levels, indicating controlled domestic price pressures.

Interpretation

The Tanzania Shilling has experienced moderate depreciation against the US dollar, but this has been effectively managed by the Bank of Tanzania through:

• Active forex market interventions,
• Adequate reserve levels, and
• Maintaining stable inflation.

Table: Indicators of Tanzania Shilling Stability (March 2025)

*Approximate value based on annual depreciation rate.
MoM = Month-on-Month, YoY = Year-on-Year.

This table shows that despite some pressure on the shilling, monetary policy measures and foreign reserves have helped maintain its overall stability in the short term.

Key Insights

1. Moderate Depreciation, But Under Control

• The Tanzania shilling depreciated from TZS 2,492.05 to TZS 2,650.24 per USD in one month—a 6.3% fall.
• Over the past year, the currency has weakened by 3.4%.
• This depreciation was expected due to seasonal drops in foreign exchange inflows (like tourism and cash crop exports).

2. Effective Central Bank Intervention

• To limit excessive volatility, the Bank of Tanzania sold USD 62.3 million in the foreign exchange market.
• This is a significant increase from USD 24.4 million in February, showing active efforts to stabilize the shilling.

3. Strong Foreign Reserves Support Stability

• Reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports.
• This exceeds the national benchmark (4.0 months) and EAC requirement (4.5 months).
• High reserves give the central bank the power to defend the currency if needed.

4. Stable Inflation Despite FX Pressure

• Even with the depreciation, inflation stayed at 5.1%, within the national target.
• This shows that the depreciation has not triggered runaway price increases, indicating good policy coordination.

Conclusion

The Tanzania Shilling faced short-term depreciation pressures in March 2025, but remained broadly stable due to effective central bank action, healthy foreign reserves, and contained inflation. This reflects a resilient and well-managed financial system, capable of absorbing external shocks while supporting economic stability.