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:
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.
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).
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
