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