1. Macroeconomic Overview

Tanzania's economy demonstrated robust stability and resilience during October-November 2025, as highlighted in the Bank of Tanzania's November 2025 Monthly Economic Review. Key supports included prudent monetary policy anchoring inflation and liquidity, strong export performance, improved fiscal revenues, and a narrowing external imbalance.

Economic Implications

This stability fosters predictable conditions for investment and consumption, supporting poverty reduction with a target of less than 25% by 2030 and substantial job creation. The narrowing deficits bolster reserves, mitigating shocks from global commodity volatility and enabling AfCFTA integration with USD 1 billion trade potential. Positive fundamentals attracted USD 1.5 billion in FDI during Q3, representing a 10% year-on-year increase and adding approximately 1% to GDP via spillovers.

However, food-driven pressures and interest costs accounting for 6.5% of the budget risk exacerbating inequality. Targeted agricultural reforms could unlock 0.5-1% additional growth, enhancing medium-term prospects toward upper-middle-income status.

2. Inflation Developments

Headline inflation remained firmly anchored within the Bank of Tanzania's 3-5% target and EAC/SADC convergence criteria of less than 8%, despite upward pressures from food items amid seasonal supply constraints and regional harvests.

Key Inflation Indicators

November 2025 Update (Preliminary)

Headline inflation eased to 3.4%, with food inflation declining to 6.6% due to harvest relief, while core inflation remained stable at 2.1%.

Economic Implications

Anchored inflation preserves purchasing power for 60 million consumers, with 60% of budgets allocated to food, sustaining consumption-led growth at 3.5% and enabling accommodative policy with the Central Bank Rate at 5.75%. Food volatility poses risks to welfare for low-income households, potentially adding 0.3% to poverty if prolonged. NFRA interventions help mitigate these risks, supporting rural stability with agriculture contributing 24% to GDP.

Energy relief lowers production costs in manufacturing by 3.5%, aiding competitiveness. However, persistent food issues underscore the need for climate and agricultural investment, with irrigation improvements potentially reducing inflation by 1 percentage point and adding 0.5% to GDP.

3. Monetary and Credit Conditions

The Bank of Tanzania adopted an accommodative yet cautious stance, maintaining the Central Bank Rate at 5.75% to balance growth and stability, with liquidity remaining adequate as the 7-day interbank rate stood at 6.28%, within the plus or minus 2% corridor.

Monetary Policy Indicators

Credit Allocation by Fastest Growing Sectors

Economic Implications

Robust credit growth at 16.1%, exceeding the 15% target, fuels productive sectors, contributing 1.5-2% to GDP through mining and tourism multipliers and creating jobs, with 1 in 5 jobs linked to tourism. Broad money supply growth of 21.5% supports investment without overheating the economy, as evidenced by low core inflation, aligning with the 6.2% GDP growth target.

The sector focus enhances economic diversification, with gold representing 50% of exports. However, MSME dominance in credit allocation poses risks if non-performing loans rise from the current 3.2% level. Credit guarantee schemes could unlock TZS 2 trillion in additional lending, boosting inclusive growth and youth employment, which currently stands at 13.4% unemployment.

4. Interest Rates

Interest rates remained stable, with marginal easing observed in negotiated segments, providing support to borrowers.

Selected Interest Rates (%)

Economic Implications

Rate stability aids predictability in financial markets, sustaining credit demand growth at 16.1% and supporting consumption and investment growth of 3.5% from the private sector. The easing of negotiated rates to 12.40% particularly benefits large firms, potentially adding 0.5% to GDP through increased capital expenditure.

However, the high average lending rate of 15.19% constrains SME access to credit. Narrowing the interest rate spread to 5% through enhanced competition could mobilize TZS 1 trillion in additional productive lending, reducing income inequality and supporting medium-term growth targets of 7%.

5. Government Budgetary Operations

Fiscal performance strengthened considerably, with revenues remaining buoyant amid increased economic activity. The most recent detailed data available is from September 2025.

Central Government Operations (September 2025, TZS Billion)

Economic Implications

Strong revenue collection at 13.1% of GDP funds development expenditure, which has a 65% bias in the FY2025/26 budget, driving infrastructure multipliers that contribute approximately 2% to GDP. Tax buoyancy reduces aid dependency from 5%, enhancing fiscal sovereignty and policy independence.

However, expenditure under-execution at 76.4% in October delays critical projects. Improving budget absorption to 90% could add 1% to growth through enhanced job creation and productivity gains. The strong fiscal position supports development objectives while maintaining macroeconomic stability.

6. Debt Developments

National debt is being managed prudently, with external debt experiencing a slight decline due to scheduled amortizations.

National Debt Stock (End-October 2025)

External Debt Composition

Economic Implications

The sustainable debt level at 49.6% of GDP funds growth-enhancing projects without causing debt distress, with multilateral creditors providing low-cost financing that aids reserve accumulation. The decline in external debt combined with shilling strength saves approximately TZS 3 trillion year-on-year in debt servicing costs, freeing up budget resources for social spending, which accounts for 21.5% of the budget.

However, the rising share of commercial debt introduces interest rate sensitivity risks. Diversification strategies, including the potential issuance of green bonds, could lower borrowing costs by 0.5%, supporting the 6% growth objective while maintaining fiscal sustainability.

7. External Sector Performance

The external sector showed significant improvement, with a surplus in services offsetting the goods trade deficit.

Current Account Balance

Exports and Imports (Year Ending Oct 2025, USD Billion)

Economic Implications

The narrowed current account deficit at 2.4% of GDP, combined with reserve buildup, cushions the economy against external shocks while stabilizing the shilling and supporting low inflation. The export surge, with services accounting for 40% of total exports, promotes economic diversification and creates tourism-related jobs for 1 in 5 workers, contributing approximately 2% to GDP and supporting AfCFTA integration.

Moderation in the goods deficit eases the import bill burden. However, heavy reliance on gold exports introduces volatility risks. Diversification toward value-added exports could generate an additional USD 1 billion in export earnings, enhancing economic resilience and reducing dependence on commodity price fluctuations.

8. Overall Assessment and Outlook

Late 2025 economic conditions featured stable inflation, productive credit allocation, improved balance of payments, and strong foreign reserves, signaling positive medium-term growth prospects in the range of 6-7%.

Economic Implications and Forward Outlook

The robust fundamentals underpin economic resilience amid global uncertainties, fostering an attractive environment for foreign direct investment and supporting Vision 2050 objectives. Food price pressures appear temporary with harvest relief evident in November data, though rising production costs warrant continued vigilance to prevent inflation from undermining purchasing power.

Policy coordination between monetary, fiscal, and structural reforms ensures continued stability, positioning Tanzania as an economic leader in the East African Community. With accelerated agricultural reforms and improved budget execution, Tanzania has the potential to achieve upper-middle-income status by 2030.

The combination of strong export performance, prudent debt management, robust credit growth to productive sectors, and stable macroeconomic conditions creates a solid foundation for sustained inclusive growth. Continued focus on economic diversification, infrastructure development, and human capital investment will be critical to maintaining this positive trajectory and achieving long-term development goals.

In June 2025, Tanzania's headline inflation edged up slightly to 3.3% from 3.2% in May, driven primarily by a sharp rise in food and non-alcoholic beverages inflation to 7.3% (up from 5.6%), with unprocessed foods surging to 8.6% from 5.5%, as reported by the Bank of Tanzania's July 2025 Monthly Economic Review. This increase, fueled by higher prices for staples like maize flour, millet flour, beef, and fish, was partially offset by a decline in energy, fuel, and utilities inflation to 2.1% from 6.1%, reflecting softer wood charcoal and petroleum prices. Despite the uptick, the 3.3% rate remains well within Tanzania’s 3–5% national target and aligns with East African Community (EAC) and Southern African Development Community (SADC) benchmarks, supported by robust food reserves of 477,923 tonnes after a 32,414-tonne maize release by the National Food Reserve Agency.

1. Primary Drivers of the Slight Uptick in Headline Inflation to 3.3% in June 2025

Based on the Bank of Tanzania's Monthly Economic Review for July 2025, headline inflation experienced a modest increase to 3.3% in June 2025 from 3.2% in May, primarily due to upward pressures from food prices amid adequate overall supply conditions. This aligns with broader trends where food-related volatility has been a key factor in recent months. Here's a detailed breakdown:

• Food and Non-Alcoholic Beverages: This category, weighted at 28.2% in the Consumer Price Index (CPI, base 2020=100), was the main culprit behind the uptick. Annual inflation rose sharply from 5.6% in May to 7.3% in June, driven by higher prices for staple foods such as maize flour, millet flour, beef, and fish. Wholesale price data from the Ministry of Industries and Trade shows annual changes in staple food crops (e.g., maize and millet) contributing to this surge, with alternative foods like beans and sorghum also seeing price increases. To mitigate this, the National Food Reserve Agency (NFRA) released a net 32,414 tonnes of maize in June, reducing reserves from 509,990 tonnes in May to 477,923 tonnes (after a minor stock adjustment increase of 347 tonnes). Despite the drawdown, reserves remained robust—well above the 340,479 tonnes recorded in June 2024—helping to stabilize supply but not fully offsetting the price pressures.
• Unprocessed Food Prices: Inflation for non-core items (weighted at 26.1%) jumped to 7.1% in June from 5.6% in May, with unprocessed foods specifically surging to 8.6% from 5.5%. This subcategory was the primary driver of overall headline inflation, as highlighted in the contribution charts, underscoring the vulnerability of Tanzania's inflation to agricultural supply fluctuations, including seasonal factors and demand for alternatives to staples.
• Energy, Fuel & Utilities: Providing a counterbalancing effect, inflation in this category (weighted at 5.7%) decelerated significantly to 2.1% in June from 6.1% in May. The decline was mainly due to softening prices for wood charcoal and a continued downward trend in key petroleum products (petrol, diesel, and kerosene) since April 2025, mirroring global oil market developments. Domestic prices for these fuels, as tracked by the National Bureau of Statistics, have stabilized, helping to contain broader inflationary pressures.

Additional context from recent data (sourced via web searches on official sites like the Bank of Tanzania and National Bureau of Statistics as of August 2025): Tanzania's food inflation trends align with regional patterns, where rising global commodity prices (e.g., wheat up due to strong demand) have influenced imports, but domestic interventions like NFRA releases have prevented sharper spikes. Core inflation (weighted at 73.9%, excluding volatile items) eased to 1.9% from 2.1%, indicating underlying stability despite food volatility.

Overall, the slight headline uptick reflects food-driven pressures but was tempered by easing energy costs, keeping inflation low and contained.

2. Alignment with Tanzania's National Target and Regional Benchmarks

Tanzania's inflation performance in June 2025 remains strong, aligning well with both domestic and regional goals, as emphasized in the Bank of Tanzania report. This stability supports monetary policy objectives amid global uncertainties like geopolitical tensions and trade tariffs.

• Tanzania’s National Target: The medium-term inflation target is 3–5%, as outlined in the Bank's monetary policy framework. At 3.3%, June's headline rate is comfortably within this band, reflecting effective policy implementation, including maintaining the Central Bank Rate (CBR) at 6% to anchor expectations and sustain private sector credit growth. This low inflation environment also aligns with the broader goal of price stability to support economic growth, with the report noting resilience despite external headwinds.
• EAC and SADC Regional Benchmarks: Inflation trends in the East African Community (EAC) and Southern African Development Community (SADC) have generally stayed aligned with convergence criteria, though some member states faced elevated rates due to food price rises. Tanzania's 3.3% rate tracks closely with these benchmarks—the EAC macroeconomic convergence criterion targets headline inflation below 8% (with a medium-term aim around 5%), while SADC's is 3–7%. Charts in the report (e.g., Chart 1.3 for EAC and Chart 1.4 for SADC) show Tanzania's inflation below the dotted-line targets, indicating compliance. For instance, in EAC peers like Kenya and Uganda, inflation hovered around 4–6% in mid-2025 (per recent IMF and World Bank updates accessed via web search), while SADC averages were 4–5%, with outliers like Zimbabwe higher due to food issues.

Internet-sourced updates (e.g., from the EAC Secretariat and SADC websites as of August 2025) confirm Tanzania's alignment: The EAC's 2025 Monetary Affairs Committee report praises Tanzania's low inflation for aiding regional integration, and SADC's latest macroeconomic surveillance notes Tanzania's rate as a positive outlier amid global commodity volatility. This positions Tanzania favorably for regional trade and investment.

In summary, the 3.3% rate not only meets national targets but also supports EAC/SADC convergence, highlighting effective domestic policies amid contained global price pressures.

Summary Table

In Conclusion

The modest rise in Tanzania's headline inflation to 3.3% in June 2025 was predominantly fueled by escalating food prices, especially in unprocessed staples like maize and millet, despite proactive measures such as NFRA maize releases that maintained ample reserves. This was partially offset by declining energy and fuel inflation, aligning with global oil trends. Critically, the rate stays well within Tanzania's 3–5% national target and harmonizes with EAC and SADC regional benchmarks, underscoring the economy's resilience to external shocks like geopolitical tensions. Ongoing monetary policy stability and food supply interventions should continue to keep inflation contained, supporting sustained growth.

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