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.