Debt Structure and Figures

As of May 2025, Tanzania’s national debt stood at TZS 107.70 trillion, comprising TZS 72.94 trillion in external debt and TZS 34.76 trillion in domestic debt. The external debt stock, equivalent to approximately USD 34.1 billion (using an exchange rate of TZS 2,884.42 per USD from April 2025), was primarily held by multilateral institutions and directed toward key sectors such as transportation (21.5%) and telecommunications. The central government accounted for 78.3% of external debt (USD 26.7 billion), with 67.7% of this debt denominated in US dollars (USD 23.1 billion). Domestic debt, at TZS 34.26 trillion in March 2025, was largely financed by commercial banks (29%) and pension funds (26.5%), with Treasury bonds dominating at 78.2%.

In May 2025, principal repayments on external debt amounted to USD 267 million. Debt servicing costs are significant, with historical data indicating that external debt servicing consumed up to 40% of government expenditures in earlier years. For 2023, total debt service was 2.89% of Gross National Income (GNI), and in 2025, servicing the external debt (at concessional rates) and domestic debt (at 15.5% lending rates) could cost approximately USD 1–2 billion and TZS 5.31 trillion annually, respectively. These costs divert resources from productive investments, potentially straining fiscal space.

Impact on the Tanzania Shilling

The Tanzania Shilling’s stability in May 2025 is supported by several factors related to debt management and economic performance:

• Foreign Exchange Reserves: The Bank of Tanzania (BoT) reported foreign exchange reserves of USD 5,360 million in May 2025, covering 4.2 months of imports, which exceeds the national benchmark of 4 months. By March 2025, reserves had increased to USD 5,700 million, covering 3.8 months of imports, indicating sustained adequacy. These reserves provide a buffer against external shocks, reducing pressure on the Shilling and enabling the BoT to meet external debt obligations without significant currency devaluation.
• Export Performance: Robust export growth, particularly in gold (24.5% increase) and cashew nuts (141% increase), contributed to a 16.8% rise in exports to USD 16.7 billion in the year ending April 2025. Gold prices, at USD 2,983.25 per ounce in March 2025, further bolstered foreign exchange inflows, supporting the Shilling’s stability.
• Fiscal and Monetary Policy: The BoT maintained the Central Bank Rate (CBR) at 6% in April 2025 to safeguard economic stability amid global uncertainties. Prudent fiscal policy, with a fiscal deficit trending toward 3% of GDP, and stringent monetary policy have kept inflation low at 3.2% in May 2025, below the BoT’s 5% target. Low inflation reduces pressure on the Shilling by maintaining purchasing power and stabilizing import costs.

Despite these stabilizing factors, the Shilling experienced a 3.86% annual depreciation against the USD, trading at TZS 2,884.42 per USD in April 2025. This depreciation, though improved from the previous month, reflects pressures from external debt servicing and import demands. The high USD denomination of external debt (67.7%) exacerbates these pressures, as a depreciating Shilling increases the local currency cost of debt servicing by approximately TZS 2.37 trillion for the USD 34.1 billion external debt, based on a 2.6% depreciation rate.

Foreign Exchange Interventions and Their Role

The BoT’s interventions in the Interbank Foreign Exchange Market (IFEM) have been critical to maintaining the Shilling’s stability. In January 2025, the BoT sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation amid a 1.37% month-on-month weakening of the Shilling (from TZS 2,420.84 to TZS 2,454.04 per USD). Similar interventions likely occurred in April and May 2025, as the document notes that seasonal inflows from cash crops and gold exports, combined with BoT actions, mitigated depreciation pressures. However, IFEM transactions declined significantly from USD 95.7 million in December 2024 to USD 16.3 million in January 2025, suggesting reduced market activity, possibly due to lower trade or investor participation.

These interventions, supported by adequate reserves, have ensured short-term stability, with the Shilling appreciating by 2.6% year-on-year from January 2024 to January 2025. The BoT’s ability to intervene is bolstered by improved current account performance, with the deficit narrowing by 31.1% to USD 2,021.5 million in the year ending January 2025, driven by strong export earnings and moderate import growth.

Potential Risks to Long-Term Shilling Stability

The composition of Tanzania’s external debt and reliance on commodity-driven inflows pose several risks to the Shilling’s long-term stability:

1. High USD Denomination of External Debt: With 67.7% of the USD 34.1 billion external debt denominated in US dollars (USD 23.1 billion), the Shilling is highly exposed to exchange rate fluctuations. A further depreciation, such as the 2.6% observed in 2024, increases debt servicing costs in local currency, potentially requiring the BoT to draw down reserves or increase borrowing, both of which could weaken the Shilling.
2. Commodity Price Volatility: Tanzania’s foreign exchange inflows heavily depend on gold and agricultural exports (e.g., cashew nuts, coffee). While gold prices were strong at USD 2,983.25 per ounce in March 2025, declines in coffee (-2%) and sugar (-1.5%) prices highlight vulnerability to global commodity market fluctuations. A downturn in gold prices or reduced export demand could strain reserves and pressure the Shilling.
3. Global Economic Uncertainties: The document highlights risks from global trade tariffs and geopolitical tensions, with the IMF projecting global growth at 2.8% in 2025. Rising global interest rates could increase external borrowing costs, particularly for non-concessional loans, further straining fiscal resources and reserves needed to stabilize the Shilling.
4. Fiscal Constraints and Crowding-Out Effects: High domestic borrowing (TZS 34.26 trillion) and lending rates (15.5%) crowd out private sector investment, weakening credit growth and economic diversification. This limits the economy’s ability to generate sustainable foreign exchange inflows, increasing reliance on volatile commodity exports and BoT interventions.
5. Climate and Structural Risks: Climate change could reduce agricultural output, a key export sector, with the World Bank estimating a potential 4% GDP growth reduction by 2050 due to climate impacts. Slow structural transformation and shallow financial markets further constrain Tanzania’s ability to diversify revenue sources, heightening Shilling vulnerability.

Mitigating Factors and Policy Measures

Tanzania’s authorities are implementing measures to mitigate these risks:

• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) classifies Tanzania’s risk of external debt distress as moderate, with public debt at 35% of GDP in 2024, well below the 55% benchmark. Access to concessional financing from multilateral institutions reduces servicing costs compared to commercial loans.
• Revenue Mobilization: The government collected TZS 2,441 billion in April 2025, with tax revenue exceeding targets by 1.5% due to improved administration. The proposed TZS 56.49 trillion 2025/26 budget aims to enhance revenue through new taxes and levies, reducing reliance on borrowing.
• Export Diversification: Investments in infrastructure (48% of World Bank financing) and sectors like manufacturing and tourism (projected to drive 6% GDP growth in 2025) aim to reduce reliance on commodity exports.
• Monetary Policy: The BoT’s 6% CBR and interventions in the IFEM demonstrate proactive management of liquidity and exchange rate stability. Food reserves (587,062 tonnes, with 32,598 tonnes released) help stabilize food prices, supporting low inflation and Shilling stability.

Conclusion

In May 2025, Tanzania’s national debt developments and foreign exchange interventions have supported the Tanzania Shilling’s short-term stability, with reserves of USD 5,360 million (4.2 months of import cover) and export-driven inflows mitigating a 3.86% annual depreciation. BoT interventions in the IFEM, backed by strong gold and cashew nut exports, have prevented sharp fluctuations, maintaining the Shilling at TZS 2,884.42 per USD in April 2025. However, the high USD denomination of external debt (67.7% of USD 34.1 billion), reliance on volatile commodity exports, and global uncertainties pose risks to long-term stability. A potential further depreciation could increase debt servicing costs by TZS 2.37 trillion, straining reserves and fiscal space. Continued prudent fiscal and monetary policies, alongside diversification efforts, are critical to sustaining Shilling stability and supporting Tanzania’s projected 6% GDP growth in 2025.

Table: Key Economic Figures Impacting Tanzania Shilling Stability (May 2025)

Notes and Explanations

1. Debt Figures: The total national debt (TZS 107.70 trillion) and its breakdown into external (USD 34.1 billion) and domestic (TZS 34.26 trillion) components reflect Tanzania’s borrowing profile. The high USD denomination (67.7%) of external debt increases vulnerability to exchange rate fluctuations, as a 2.6% depreciation could raise servicing costs by approximately TZS 2.37 trillion (calculated as 2.6% of TZS 72.94 trillion).
2. Foreign Exchange Reserves: Reserves of USD 5,360 million in May 2025 and USD 5,700 million in March 2025 provide a buffer for debt servicing and exchange rate stabilization. The 4.2-month import cover exceeds the national benchmark, supporting short-term Shilling stability.
3. Exchange Rate: The Shilling’s depreciation to TZS 2,884.42 per USD reflects pressures from debt servicing and imports, mitigated by BoT interventions (e.g., USD 7 million sale in January 2025). The 2.6% appreciation from January 2024 to January 2025 indicates effective short-term management.
4. Export Performance: Strong export growth (USD 16.7 billion, up 16.8%) driven by gold and cashew nuts bolsters foreign exchange inflows, critical for reserve accumulation and Shilling stability. Gold’s high price (USD 2,983.25 per ounce) is a key factor but introduces volatility risk.
5. Current Account and Inflation: The narrowed current account deficit (USD 2,175 million) and low inflation (3.2%) reduce pressure on the Shilling, supporting its purchasing power and import affordability.
6. Debt Servicing Costs: Estimated based on historical data (2.89% of GNI in 2023) and domestic lending rates (15.5%). These costs strain fiscal resources, potentially requiring reserve drawdowns or further borrowing, which could weaken the Shilling.

This table provides a concise overview of the key figures driving the Tanzania Shilling’s stability in May 2025, highlighting the interplay between debt developments, foreign exchange interventions, and external sector performance, as well as underlying risks from debt composition and commodity reliance.

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.

Macroeconomic stability is a key driver of job creation and economic growth in Tanzania. Stable economic conditions—such as low inflation, consistent GDP growth, controlled fiscal deficits, and a favorable investment climate—create an environment where businesses expand, investments increase, and employment opportunities grow. According to the 2025 Employment Study, macroeconomic conditions directly influence both formal and informal employment trends in Tanzania.

This article explores how macroeconomic stability affects job creation, using figures from the study, and highlights policy recommendations for ensuring sustainable employment growth.

Macroeconomic Indicators and Employment Trends in Tanzania

• GDP growth has steadily increased from 5.2% in 2023 to a projected 6.0% in 2025, boosting business confidence and job creation.
• Inflation has declined, improving consumer purchasing power and reducing business costs.
• Fiscal deficits are being controlled, allowing more government spending on infrastructure and job-creating sectors.
• Unemployment is decreasing, reflecting stronger macroeconomic conditions.

How Macroeconomic Stability Affects Job Creation

1. GDP Growth and Employment Expansion

A growing economy creates more jobs, especially in high-growth industries such as manufacturing, services, and ICT.

• Manufacturing employment is projected to grow by 18%, driven by industrialization and PPP investments.
• ICT and digital economy jobs are expected to increase by 22%, supported by fintech and e-commerce growth.

2. Inflation and Wage Stability

Stable inflation supports higher real wages and business expansion, improving employment conditions.

• As inflation decreases, wages increase, improving living standards.
• Lower inflation helps businesses expand, creating more job opportunities.

3. Fiscal Policies and Government Investment in Job-Creating Sectors

Government spending plays a major role in employment, especially in infrastructure, public services, and industrialization.

• 30% increase in infrastructure investment has boosted construction jobs and industrial expansion.
• 18% increase in public service jobs, including education and healthcare employment.

4. Exchange Rate Stability and Foreign Direct Investment (FDI)

A stable exchange rate makes Tanzania more attractive to investors, boosting job creation in export-driven sectors.

• A stronger exchange rate has encouraged more FDI, supporting job creation in manufacturing, tourism, and agribusiness.

Challenges to Job Creation Despite Macroeconomic Stability

• 30% of respondents identified a skills gap, meaning economic growth is not fully translating into employment.
• 25% cited slow SME growth, showing that businesses still struggle despite macroeconomic improvements.

Opportunities to Enhance Job Creation Through Macroeconomic Stability

1. Expanding Vocational Training and Skills Development

Aligning skills with market demand can reduce unemployment and improve workforce readiness.

• 40% job growth expected if digital and ICT skills training is expanded.
• 30% increase in employment projected through technical education programs.

2. Strengthening SME Growth for Job Creation

Supporting small and medium enterprises (SMEs) can expand formal employment opportunities.

• 35% increase in SME jobs expected with better access to financing.

3. Enhancing Investment in Industrialization and PPPs

Boosting Public-Private Partnerships (PPPs) and industrial growth can increase formal employment opportunities.

• 40% job growth expected in Special Economic Zones (SEZs), promoting manufacturing and trade.

Conclusion and Policy Recommendations

Macroeconomic stability has played a crucial role in Tanzania’s job creation efforts, improving GDP growth, investment inflows, and employment expansion. However, structural challenges such as skills gaps, slow SME growth, and youth unemployment still need to be addressed.

Key Policy Recommendations:

1. Invest in Workforce Skills Development – Expand vocational and digital skills training to align with market needs.
2. Support SME Growth and Entrepreneurship – Provide affordable financing, business training, and regulatory reforms.
3. Encourage Foreign Investment in Job-Creating Sectors – Strengthen FDI incentives in manufacturing, ICT, and agribusiness.
4. Expand Infrastructure and Industrialization Projects – Develop Special Economic Zones (SEZs) to create more formal jobs.
5. Ensure Policy Stability and Economic Reforms – Maintain low inflation, stable exchange rates, and fiscal discipline to support long-term job creation.

NOTE:

The research and case studies presented in this report were conducted by Tanzania Investment and Consulting Group Limited (TICGL) to analyze employment trends, macroeconomic stability, and job creation dynamics in Tanzania. The study covered a sample size of 2,500 respondents, representing diverse economic sectors and geographic regions. A mixed-methods approach was employed, integrating quantitative surveys (85%), structured interviews (10%), and focus group discussions (5%) to gather both statistical data and qualitative insights. The research was conducted across six key regions: Dar es Salaam (25% of respondents), Mwanza (18%), Arusha (15%), Dodoma (14%), Mbeya (12%), and Morogoro (16%), ensuring a balance between urban and rural employment patterns.

The findings indicate that Tanzania’s workforce is 71.8% informal (25.95 million workers) and 28.2% formal (10.17 million workers), highlighting a significant divide in job security, wages, and access to social protection. Among the 2,500 surveyed individuals, formal employment accounts for 23% (550 individuals), predominantly in government (32% of formal jobs), banking and financial services (25%), manufacturing (18%), and education and healthcare (15%). On the other hand, informal employment constitutes 49% (1,170 individuals), with key sectors including agriculture (35% of informal workers), small businesses and trade (28%), transportation (15%), and casual labor (12%). The remaining 27% (650 individuals) were unemployed, with youth unemployment (ages 18–35) reaching 33%, significantly higher than the national average of 9.2%.

Employment trends indicate that formal employment is projected to rise to 38% by 2030, driven by industrialization, digital transformation, and policy reforms. However, major barriers continue to slow the transition, including limited job availability (42%), skills mismatches (26%), and bureaucratic challenges (21%). The study also found that women make up 65% of the informal workforce, primarily due to barriers in accessing formal jobs, while 72% of youth are engaged in informal employment due to limited entry-level job opportunities.

To bridge the gap between formal and informal employment, Tanzania must focus on expanding SME growth, strengthening vocational training programs, improving access to financial services for small businesses, and reducing bureaucratic hurdles for business registration. This report emphasizes the key trends, challenges, and opportunities shaping Tanzania’s employment landscape and highlights the role of public-private partnerships, investment in digital workforce expansion, and targeted policy interventions in creating a more structured and inclusive workforce by 2030.

Tanzania's economic outlook for 2024 shows strong growth potential, with a projected GDP increase of 5.4%, significantly higher than the 3% average for Sub-Saharan Africa (SSA). As part of the East African Community (EAC), which is forecasted to grow by 4.7% in 2024, Tanzania benefits from macroeconomic stability and strategic investments in infrastructure, particularly in energy, telecommunications, and transport. These investments, combined with stable inflation, are expected to boost private consumption and investment. However, Tanzania's public debt is projected to rise from 42.5% to 48.4% of GDP, reflecting infrastructure spending, while the fiscal deficit is expected to stabilize at 3.3% of GDP. Risks remain, especially around rising debt and climate-related challenges like droughts and floods, which could impact agriculture and economic stability. Despite these risks, Tanzania's growth prospects remain robust in comparison to other SSA countries.

1. Growth Outlook

• Tanzania is expected to experience GDP growth of 5.4% in 2024, outperforming the regional average growth of 3% for SSA​.
• The East African Community (EAC), which includes Tanzania, is one of the strongest economic performers in SSA, with expected growth of 4.7% in 2024 and 5.7% by 2025–26​.

2. Growth Environment

• Tanzania benefits from macroeconomic stability and rising investments in sectors like energy, telecommunications, and transport, which help enhance productivity. The country’s inflation rate is expected to stabilize, supporting private consumption and investment​.
• Private consumption is expected to increase as inflation eases across SSA, with countries like Tanzania reaping benefits from stable inflation and favorable monetary policies, further bolstering growth​.

3. Macroeconomic Performance

• Government debt in Tanzania is estimated to rise slightly from 42.5% of GDP in 2023 to 48.4% of GDP in 2024, reflecting investments in key infrastructure projects​.
• In terms of sectoral performance, Tanzania’s growth is bolstered by services and infrastructure projects in energy and transport. Investment in these areas is critical for sustaining long-term growth​.
• Fiscal Balance: Tanzania's fiscal deficit is expected to improve slightly, with a fiscal deficit of around 3.3% of GDP in 2024​.

4. Risk Outlook

• High Debt: Public debt remains a key risk in Tanzania, as in many other SSA countries. The rising debt levels could strain fiscal resources, especially in a region where debt service obligations are already significant​.
• Climate Change and Conflict: Tanzania is exposed to climate risks and ongoing economic volatility in the region, which could affect agriculture and food security. Extreme weather events such as droughts or floods are persistent risks across the region​.

Tanzania's economic position relative to other Sub-Saharan African (SSA) countries

Tanzania's economy is performing well relative to other Sub-Saharan African countries, with solid growth prospects and important investments. However, the country must address challenges related to debt and climate change to ensure that growth is sustainable.

1. Tanzania’s Strong Growth Outlook: With a projected GDP growth of 5.4% in 2024, Tanzania is set to grow much faster than the Sub-Saharan African average of 3%. This positions Tanzania as one of the leading economies in the region, especially within the East African Community (EAC) where growth is also expected to be robust.
2. Growth Environment: Tanzania benefits from macroeconomic stability and is making significant investments in energy, transport, and telecommunications. These investments are crucial for reducing productivity bottlenecks and fostering economic expansion. Stable inflation will also boost private consumption and investment, further enhancing growth.
3. Macroeconomic Performance: Tanzania's debt level is rising but remains relatively manageable. The government is using this debt to finance critical infrastructure, which is essential for long-term economic development. The country’s fiscal deficit is also improving, suggesting prudent fiscal management.
4. Risk Outlook: Despite its positive growth outlook, Tanzania faces risks related to its rising debt levels, which could become a burden if not managed properly. Additionally, climate-related risks such as droughts and floods, which are common in SSA, pose threats to Tanzania’s agricultural sector and overall economic stability.

Source: Africa’s Pulse October 2024 report