Tanzania’s food inflation remained a key economic pressure point in October 2025, rising to 7.4% year-on-year from 7.0% in September, far outpacing the headline inflation rate of 3.5%. The Food and Non-Alcoholic Beverages Index increased from 120.50 in October 2024 to 129.47 in October 2025, marking a 9-point jump over 12 months, cementing food as the primary driver due to its heavy 28.2% weight in the NCPI basket. Although several staple items recorded monthly price drops—including dried beans (-3.1%), dried peas (-3.1%), finger millet (-2.5%), poultry meat (-2.7%), and maize grains (-1.3%)—providing short-term relief and contributing to the -0.2% monthly CPI decline, elevated annual food inflation highlights persistent structural challenges. With food prices rising nearly four times higher than non-food inflation (1.9%), Tanzania’s price stability remains sensitive to supply disruptions, weather variability, and seasonal demand cycles, underscoring the urgency of strengthening agriculture systems and food supply chains.

The Food and Non-Alcoholic Beverages inflation rate for October 2025:

• 7.4% (Year-on-year)
• Up from 7.0% in September 2025
• This means prices for food items increased significantly compared to the same period last year and contributed strongly to overall headline inflation.

Food Inflation Index Movement (2024–2025)

The index increased from:

• 120.50 in October 2024
• To 129.47 in October 2025

This shows a clear 9-index-point rise over 12 months.

Table 1: Food Inflation Index Movement (2020 = 100)

Although the index dropped slightly from September to October (129.70 → 129.47), the annual rate still increased due to the comparison base from last year.

Contribution of Food to Headline Inflation

Food has the largest weight in the NCPI basket (28.2%), making it the primary inflation driver.

• Headline inflation: 3.5%
• Food inflation alone: 7.4%
• Food prices are rising more than twice the pace of average inflation.

Food Items with Significant Monthly Price Decline

Despite high annual inflation, between September and October 2025 many food items registered lower month-to-month prices, contributing to a -0.2% monthly CPI reduction.

Table 2: Declining Food Prices (Monthly Changes)

These reductions helped slow down short-term inflation pressure.

Why Food Inflation Is Rising

Key contributors based on index movement:

1. Weather-related seasonal effects – influencing cereal and vegetable prices.
2. Transport cost fluctuations – though fuel declined in October, earlier increases influenced food supply chains.
3. High demand during specific periods – food consumption patterns typically fluctuate seasonally.

Food Inflation vs Non-Food Inflation

Food inflation is nearly four times higher than non-food inflation.
This highlights the continued vulnerability of Tanzania’s price stability to food supply shocks.

Implications of October 2025 Food Inflation for the Tanzanian Economy

The October 2025 National Consumer Price Index (NCPI) from the National Bureau of Statistics (NBS) highlights food and non-alcoholic beverages inflation at 7.4%, up from 7.0% in September, with the index rising from 120.50 in October 2024 to 129.47. As the heaviest-weighted category (28.2%) in the NCPI basket, food inflation—nearly four times the 1.9% non-food rate—remains the dominant driver of the overall 3.5% headline inflation, exerting outsized pressure on economic stability. Monthly price declines in staples like dried beans (-3.1%), peas (-3.1%), and maize grains (-1.3%) offered short-term relief, contributing to a -0.2% overall CPI drop. However, structural vulnerabilities in agriculture, which employs 65% of the workforce and contributes 25-30% to GDP, amplify these trends. Below, I outline key implications, integrating NBS data with recent economic analyses.

1. Erosion of Household Purchasing Power and Widening Inequality

• Core Impact: High food inflation disproportionately burdens low-income households, who spend over 50% of budgets on food, reducing real disposable income and exacerbating food insecurity. With 26% of Tanzanians below the poverty line (2024 estimates), the 7.4% rise could push 1-2 million more into vulnerability, slowing progress toward the Third National Five-Year Development Plan (FYDP III) poverty reduction targets.
• Relief from Monthly Declines: Reductions in cereals (e.g., finger millet -2.5%) and proteins (poultry meat -2.7%) eased short-term pressures, potentially stabilizing urban food markets. Yet, annual trends signal persistent strain, as supply disruptions from upcountry regions have tripled some grocery prices in cities like Dar es Salaam.
• Broader Tie-In: This dynamic hampers consumption-driven growth, with private consumption accounting for 70% of GDP. Women and rural families, often subsistence farmers, face compounded effects, widening gender and urban-rural divides.

2. Strain on the Agriculture Sector and Rural Livelihoods

• Sectoral Vulnerabilities: Agriculture's 6.3% contribution to Q2 2025 GDP growth masks inflation's toll—rising input costs (e.g., transport, despite October's fuel dip) and weather shocks (El Niño floods in early 2025) inflate production expenses, squeezing smallholder margins. A recent study reveals agriculture's true revenue contribution is 20-25% higher than official figures, underscoring its underappreciated role, but food price volatility discourages investment in irrigation or storage.
• Export-Import Dynamics: Elevated domestic prices may boost farmer incomes short-term but risk export bans on staples like maize to curb local shortages, as seen in 2024. Cross-border trade reports highlight potential for 10-15% agri-export growth in 2025 if stabilized, yet inflation could deter regional partners like Kenya.
• Employment Risks: With 65% workforce engagement, persistent 7.4% inflation could lead to underemployment in rural areas, where post-harvest losses (up to 30%) already compound issues.

3. Moderation of Overall GDP Growth and Fiscal Pressures

• Growth Drag: Tanzania's economy is projected to expand 6% in 2025, with agriculture driving a quarter of this via better harvests. However, food inflation at twice the headline rate could shave 0.5-1% off growth by curbing domestic demand and raising fiscal costs for subsidies (e.g., fertilizer programs costing TZS 500 billion in FY2025/26).
• Inflation Spillover: The non-core index (26.1% weight, including food) at 7.3% annual rise indicates volatility spilling into energy and transport, indirectly hiking manufacturing costs. Yet, core inflation's stability at 2.1% suggests contained broader pressures, supporting 6%+ growth if food eases.
• Fiscal Implications: Government revenue from agri (e.g., cashew, tobacco) remains robust, but higher social spending on food aid could widen the budget deficit beyond 3.5% of GDP.

4. Monetary Policy and Supply-Side Responses

• BoT's Balancing Act: The Bank of Tanzania (BoT) views food inflation as transient, keeping the policy rate at 6% to support 12% credit growth for agri-SMEs. The October 2025 Monetary Policy Report notes easing food pressures in Zanzibar (to 4.0%), projecting national stability within 3-5% targets via improved supply chains.
• Policy Levers: Seasonal harvests (e.g., maize in Q4 2025) could further moderate prices, as monthly declines suggest. Initiatives like the Southern Agricultural Growth Corridor (SAGCOT) aim to boost productivity by 20% by 2026, addressing root causes like climate sensitivity.
• Risks: If global factors (e.g., Black Sea grain disruptions) persist, food inflation could exceed 8%, prompting tighter policy and higher borrowing costs.

5. External and Sustainability Factors

• Global Linkages: Tanzania's shilling stability (2% appreciation vs. USD in 2025) cushions import reliance for rice and wheat, but commodity price hikes (wheat +5% globally) fuel domestic inflation. Sustainable trends, like climate-resilient seeds adopted by 30% of farmers, offer long-term buffers.
• Opportunities: High food prices incentivize value addition (e.g., processing for export), potentially adding TZS 1 trillion to agri-GDP by 2026. Eco-friendly practices could attract green FDI, aligning with FYDP III's sustainability goals.

Summary Table: Key Implications of Food Inflation

In summary, while October's 7.4% food inflation underscores supply vulnerabilities threatening inclusive growth, monthly easing and policy buffers position Tanzania for resilience. Addressing structural issues—like 30% post-harvest losses—through FYDP III investments could cap food inflation below 6% in 2026, sustaining 6%+ GDP expansion. Monitor the December 8, 2025, NCPI release for harvest impacts. For more, see BoT's October Monetary Policy Report.

In September 2025, Tanzania’s macroeconomic environment remained exceptionally stable, marked by a stronger shilling and low, well-anchored inflation. The exchange rate averaged TZS 2,471.69 per USD, appreciating by 0.75% month-on-month and 9.4% year-on-year—an impressive reversal from the sharp depreciation recorded in 2024. This stability was supported by strong export inflows from gold, cereals, and cashew nuts, alongside robust tourism earnings and targeted Bank of Tanzania interventions. Inflation held steady at 3.4%, well within the 3–5% target range and aligned with regional convergence criteria. Food inflation remained elevated at 7%, but non-food (1.9%) and energy inflation (3.7%) stayed subdued, helped by lower global oil prices and a strong currency. Together, these elements created a stable price environment, improving import affordability, reducing cost pressures for households and businesses, and enhancing the effectiveness of monetary policy transmission.

1. Tanzania Shilling Stability (September 2025)

The Tanzania shilling remained relatively strong and stable in 2025.

Key Figures

• Average exchange rate: TZS 2,471.69 per USD
• Previous month (August 2025): TZS 2,490.16
• Monthly appreciation: ≈ 0.75%
• Annual appreciation: 9.4%, compared to 7.6% in August 2025
  (in contrast to 10.1% depreciation in 2024)

Drivers of Shilling Strength

• Strong export inflows (gold, cereals, cashew nuts)
• Robust tourism earnings
• BOT FX market intervention (USD 11 million net sale)
• Stabilized inflation and monetary policy

2. Tanzania Inflation Evolution (2025)

Inflation remained low, stable, and within official target range.

Inflation Figures

• Headline inflation (Sep 2025): 3.4%
• Same as August 2025: 3.4%
• Target range: 3%–5%
• EAC convergence criterion: ≤ 8%
• SADC target: 3%–7%

Components

• Food inflation: 7.0%
• Non-food inflation: 1.9%
• Core inflation: 2.2%
• Energy/fuel/utilities: 3.7% (down from 11.5% in 2024 due to falling global oil prices)

3. How Shilling Stability Relates to Inflation

When the shilling is stable/strong:

1. Imported inflation falls
   • Strong shilling lowers cost of fuel, machinery, medicine, food imports.
2. Fuel prices decline
   • Domestic petrol and diesel prices dropped in 2025
     (aligned with lower global oil prices).
3. Lower cost of tradable goods
   • Stabilizes prices in urban markets (transport, household items).
4. Reduced expectations of inflation
   • Businesses experience predictable import costs.
   • Consumers face steady price trends.
5. Monetary policy becomes more effective
   • Interbank rates (6.45%) stay within policy corridor, supporting price stability.

Summary Table: Shilling Stability vs Inflation (September 2025)

Implications of Shilling Stability and Its Link to Inflation in September 2025

The interplay between the Tanzanian shilling's strength and low inflation in September 2025, as detailed in Sections 2.5 (Financial Markets, specifically the Interbank Foreign Exchange Market) and 2.2 (Inflation Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), underscores a virtuous cycle of external resilience and price stability. The shilling appreciated 0.75% monthly (average TZS 2,471.69/USD vs. TZS 2,490.16 in August) and 9.4% annually—reversing the 10.1% depreciation seen in September 2024—amid robust export inflows (gold, cash crops, cashews), tourism earnings, and BOT's targeted intervention (net USD 11 million sale; Chart 2.5.3). This stability dovetails with headline inflation holding at 3.4% (within 3–5% target and EAC/SADC criteria), driven down by easing food (7.0%) and energy (3.7%) pressures. Below, I outline the implications, integrating broader economic dynamics like 6.3% Q2 GDP growth and accommodative policy (CBR 5.75%).

1. Shilling Appreciation: Bolstering External Buffers and Import Affordability

• Monthly/Annual Gains (0.75% and 9.4%): These reflect ample FX liquidity in the IFEM (USD 93.8 million transactions, down slightly from USD 101.5 million in August but with banks handling 88.3%), fueled by export surges in gold (elevated prices) and non-traditional items like cereals/cashews . Tourism's rebound (post-global recovery; aligned with IMF's 3.2% 2025 growth outlook) added inflows, while BOT's intervention curbed volatility without depleting reserves.
• Reversal from 2024 Depreciation: The shift from -10.1% y/y signals improved current account dynamics (e.g., trade surplus from commodities; mixed prices but oil decline aiding imports). This reduces pass-through to domestic prices, as a stronger shilling lowers USD-denominated costs (e.g., fuel imports down, mirroring global oil drop).
• Broader Implications:
  • Positive: Enhances policy space for monetary easing (interbank rate at 6.45%, within 3.75–7.75% corridor), supporting 16.1% private credit growth and 20.8% M3 expansion. Boosts investor confidence, evident in oversubscribed long-term bonds.
  • Risks: Over-reliance on gold/tourism exposes to global shocks (e.g., protectionism; Charts 1.1a/b). If exports soften (e.g., weather-hit coffee), reserves could pressure the rate, though current levels (implied adequacy) provide a buffer.

2. Inflation Stability: Reinforced by Currency Strength and Supply Factors

• Headline at 3.4% (Unchanged; Core 2.2%, Food 7.0%, Energy 3.7%): Stability stems from shilling-driven import cost relief (e.g., energy inflation halved from 11.5% y/y 2024 via cheaper oil/fuel) offsetting core upticks (household/transport). Food easing (from 7.7% in August) reflects NFRA stocks at 570,519 tonnes (up via 39,590-tonne purchases) and wholesale declines in staples (sorghum/potatoes), though rice/maize rose on regional demand.
• Non-Food at 1.9%: Highlights shilling's role in curbing imported inflation (fuel/machinery/medicine), aligning with global moderation (4.2% projected) and EAC/SADC cooling.
• Broader Implications:
  • Positive: Predictable costs foster business investment (e.g., in agriculture/mining, 1.8%/1.5% GDP contributions) and consumer confidence, aiding 6% full-year growth projection. Real rates remain positive (e.g., deposits ~6.4% real vs. 3.4% inflation), encouraging savings amid liquidity surplus.
  • Risks: Food's 7.0% (higher than headline) signals vulnerability to supply shocks (e.g., border demand or droughts). Global oil rebound could reverse energy gains, though shilling buffer mitigates.

3. Interlinkages: Shilling Strength Amplifying Monetary Effectiveness and Growth

• Reduced Imported Inflation and Expectations: Stronger shilling (9.4% y/y) directly lowers tradable goods costs (transport/utilities), stabilizing urban prices and anchoring inflation expectations—key for BOT's neutral stance. This synergy with adequate food/power supply (enabling 6.3% GDP) creates a low-volatility environment.
• Policy Transmission: Stable FX supports interbank easing (6.45% from 6.48%), with reverse repos managing liquidity, preventing spillovers to lending rates (15.18% overall; prior analysis).
• Broader Implications:
  • Positive: Aligns with fiscal prudence (August deficit financed sustainably; Section 2.6) and debt stability (total USD 50.8B, 69.8% external), enhancing external resilience (e.g., disbursements USD 443M vs. service USD 131M). In Zanzibar, similar dynamics likely aid tourism-led recovery.
  • Risks: Currency overvaluation could erode export competitiveness if sustained, though annual gains counter 2024 weakness. Monitor global uncertainties (e.g., US rate cuts weakening USD).

4. Macroeconomic and Policy Context from the Review

• Synergies Across Sections: Shilling/inflation stability complements robust output (agriculture/mining-led; Section 2.1), financial market depth (T-bill/bond oversubscription), and external debt management (multilateral dominance at 57%). Projections: Inflation 3–5%, growth 6%, with policy vigilance on commodities (oil down, gold up).
• Outlook: Continued export/tourism inflows could sustain appreciation, but diversification (e.g., manufacturing) is key. BOT's FX policy ensures balance, supporting EAC integration.

In summary, the shilling's September 2025 strength implies fortified macroeconomic stability, directly muting inflation risks and enabling growth-focused policies. This tandem—rooted in exports, interventions, and supply adequacy—positions Tanzania resiliently, though vigilance on commodity volatility and food chains is essential for 2026 continuity.

Tanzania's National Consumer Price Index (NCPI) release for September 2025, issued by the National Bureau of Statistics on October 8, 2025, reveals a stable macroeconomic environment characterized by headline inflation holding steady at 3.4% year-over-year—the highest level since June 2023 but well within the Bank of Tanzania's (BoT) target range of 3-5%. This marks no change from August 2025, with the overall NCPI edging up slightly to 119.86 (2020=100) from 119.77, driven by modest price increases in select food and non-food items. Food and non-alcoholic beverages inflation eased to 7.0% from 7.7%, reflecting a -0.6% monthly dip in the index, while non-food inflation ticked up to 1.9% from 1.6%. Core inflation, excluding volatile items like unprocessed food and energy, rose modestly to 2.2% from 2.0%, signaling underlying price pressures remain contained.

This stability, amid robust GDP growth of 5.4% in Q1 2025, underscores Tanzania's resilient post-pandemic recovery and effective policy framework.

Tanzania Inflation Overview (September 2025)

Inflation by Main Consumption Group (September 2025)

Key Monthly Drivers (Aug–Sept 2025)

Price increases were observed in:

• Food items: sorghum flour (+3.6%), bread (+1.0%), chicken (+5.0%), sweet potatoes (+7.6%), cassava (+2.2%), cocoyams (+8.9%), fruits (+2.2%), and dried peas (+4.0%).
• Non-food items: alcoholic beverages (+0.6%), men’s garments (+0.9%), kerosene (+1.1%), and charcoal (+2.7%).

Economic Implications of Tanzania's September 2025 Inflation Data

1. Monetary Policy and Macroeconomic Stability

• Support for Accommodative Stance: The unchanged headline rate and easing food pressures reinforce the BoT's decision to hold the Central Bank Rate (CBR) at 5.75% during its October 2, 2025, Monetary Policy Committee meeting. This reflects confidence in sustained inflation within the 3-5% target, avoiding the need for tightening that could stifle growth. Prudent monetary policy has historically anchored expectations, contributing to the shilling's relative stability (projected 3.7% depreciation in 2025) and low borrowing costs, which bolster private sector credit expansion.
• Risk Mitigation: Core inflation's slight uptick suggests mild demand-pull pressures from economic expansion, but the overall trajectory—fluctuating between 3.0% and 3.4% over the past year—indicates no overheating. This reduces the likelihood of imported inflation from global commodity shocks, such as energy prices, which have eased regionally.

2. Impact on Household Consumption and Poverty

• Relief for Low-Income Households: Food items, weighting 28.2% of the NCPI basket, drove much of the monthly index increase (e.g., +8.9% for cocoyams, +7.6% for sweet potatoes), yet annual food inflation's decline to 7.0% eases cost-of-living pressures for rural and urban poor households, who spend over 50% of income on food. This could sustain consumption resilience, supporting poverty reduction efforts amid 5.4% Q1 growth.
• Mixed Non-Food Pressures: The +0.3% rise in non-food inflation, fueled by essentials like kerosene (+1.1%) and charcoal (+2.7%), may strain urban budgets amid seasonal energy demands. However, stable categories like health (0.0% monthly change) and education (+0.0%) provide buffers, potentially stabilizing real disposable incomes and consumer confidence.

3. Sectoral and Supply-Side Dynamics

• Agricultural Resilience: Despite monthly spikes in crops like sorghum flour (+3.6%) and dried peas (+4.0%), the food index's -0.6% drop points to improved harvests or supply chain efficiencies, possibly from favorable 2025 rainy seasons. This bodes well for Tanzania's agriculture sector (25% of GDP), enhancing export competitiveness in East Africa and curbing imported food inflation.
• Energy and Manufacturing Pressures: Gains in the Energy, Fuel, and Utilities Index (+0.9% monthly to 3.7% annually) highlight vulnerabilities to global oil dynamics, but contained rises (e.g., liquefied hydrocarbons +0.1%) reflect BoT's forex interventions. Non-food drivers like clothing (+0.3% monthly) suggest manufacturing cost pass-throughs, potentially pressuring small enterprises but signaling domestic production gains.
• Services Sector Boost: Stable services inflation (1.3% annually) in areas like restaurants (+1.0%) and recreation (-0.1% monthly) aligns with tourism recovery, a key growth driver projected at 6% GDP expansion for 2025.

4. Broader Growth and Investment Outlook

• Pro-Growth Environment: Stable inflation complements fiscal prudence, with the IMF endorsing Tanzania's trajectory for 6% GDP growth in 2025, driven by infrastructure and mining investments. Low inflation volatility enhances investor confidence, attracting FDI (e.g., in natural gas) and supporting the shilling's stability against regional peers like Kenya's higher inflation.
• Potential Risks: Persistent food volatility (still 7.0%) could re-emerge from climate events, while global factors like OECD-projected G20 inflation moderation to 2.9% in 2026 offer tailwinds but underscore external dependencies. If non-food trends accelerate, it might prompt BoT vigilance.

In summary, September 2025's inflation data signals a "soft landing" for Tanzania's economy—stable prices fostering inclusive growth without derailing expansion. This positions the country favorably in East Africa, where peers face higher volatility, and supports the BoT's projection of inflation averaging 3.4% for the year. Policymakers should prioritize agricultural diversification and energy security to sustain this momentum into 2026.

Tanzania’s food inflation is a significant component of its overall inflationary pressures, as detailed in the April 2025 Monthly Economic Review. Below, we compare food inflation with other key inflation components—headline, core, and energy, fuel, and utilities inflation—using specific figures from the document to highlight their relative levels, trends, and drivers.

Food Inflation

Figure: Food inflation was 5.4% in March 2025, up significantly from 1.4% in March 2024.

Explanation:

• Drivers: The increase was primarily due to higher prices for staple crops like maize, rice, and beans, exacerbated by logistical challenges in transportation caused by seasonal heavy rains. These disruptions increased supply chain costs, pushing food prices higher.
• Mitigation: The National Food Reserve Agency (NFRA) held 587,062 tonnes of food stocks (mainly maize and paddy) and released 32,598 tonnes to local traders by March 2025, which helped mitigate further price spikes.
• Context: Despite the rise, the overall food supply remained adequate, and food inflation’s contribution to overall inflation has grown, particularly from unprocessed food.

Headline Inflation

Figure: Headline inflation was 3.3% in March 2025, up from 3.0% in March 2024.

Explanation:

• Comparison: Food inflation (5.4%) is notably higher than headline inflation (3.3%), indicating that food prices are a major driver of overall price increases. The document notes that headline inflation’s rise was largely attributed to increases in food and energy prices.
• Context: Headline inflation includes all components of the Consumer Price Index (CPI), such as food, energy, and non-food items. Despite the uptick, it remains within national targets and regional benchmarks of the East African Community (EAC) and Southern African Development Community (SADC).
• Relative Impact: The higher food inflation rate suggests that food prices are pulling headline inflation upward, though other components moderate the overall rate.

Core Inflation

Figure: Core inflation decreased to 2.2% in March 2025 from 3.9% in March 2024.

Explanation:

• Comparison: Food inflation (5.4%) is more than double core inflation (2.2%), highlighting a stark contrast. Core inflation, which excludes volatile items like food, energy, and utilities, reflects underlying price pressures from non-food items.
• Trend: The decline in core inflation indicates reduced pressure from non-food items, such as services and goods excluding food and energy. The document notes that core inflation’s contribution to overall inflation has diminished, with unprocessed food inflation taking a larger role.
• Context: The lower core inflation rate helps keep headline inflation in check, but the high food inflation underscores the volatility of food prices compared to more stable non-food components.

Energy, Fuel, and Utilities Inflation

Figure: Energy, fuel, and utilities inflation increased to 7.9% in March 2025 from 6.6% in March 2024.

Explanation:

• Comparison: Energy, fuel, and utilities inflation (7.9%) is the highest among the components, surpassing food inflation (5.4%). This category saw the largest year-on-year increase, driven by rising prices of petroleum products and wood charcoal, the latter linked to scarcity following seasonal rains.
• Context: The document highlights that petroleum and wood charcoal price hikes were significant contributors. The weight of wood charcoal in the energy component of the CPI basket is noted but not quantified.
• Relative Impact: Energy inflation’s high rate amplifies overall price pressures more than food inflation, though both are key drivers of the 3.3% headline inflation.

Contribution to Overall Inflation

Figure: Unprocessed food inflation’s contribution to overall inflation has increased, while core inflation’s contribution has gradually diminished.

Explanation:

• Trend: The document indicates a shift in inflation dynamics, with unprocessed food (part of food inflation) becoming a more significant driver of headline inflation compared to core inflation. This is evident from food inflation’s high rate (5.4%) versus core inflation’s decline (2.2%).
• Impact: Food and energy inflation (7.9%) together exert stronger upward pressure on headline inflation (3.3%) than core inflation, reflecting the volatility of these components. The NFRA’s release of 32,598 tonnes of food stocks helped temper food inflation’s impact.
• Data Insight: The CPI weights show food and non-alcoholic beverages at 26.1% of the basket, energy, fuel, and utilities at 5.7%, and core items at 73.9%, suggesting food and energy have disproportionate impacts relative to their weights due to their volatility.

Conclusion

In March 2025, Tanzania’s food inflation (5.4%) is significantly higher than headline inflation (3.3%) and core inflation (2.2%) but lower than energy, fuel, and utilities inflation (7.9%). Food inflation, driven by maize, rice, and bean price hikes due to rain-related logistical issues, is a key contributor to overall inflation, alongside energy. Core inflation’s decline reflects easing non-food pressures, but the high food and energy rates highlight their volatility and impact on household costs. The NFRA’s 587,062-tonne food stock and 32,598-tonne release helped mitigate food inflation, keeping headline inflation within national and regional targets.

Key Figures: Tanzania’s Food Inflation vs. Other Inflation Components (March 2025)

Notes:

• All inflation figures reflect March 2025 unless stated otherwise.
• Food inflation driven by maize, rice, bean prices, and logistical issues from rains.
• Energy inflation driven by petroleum and wood charcoal price hikes.
• Source refer to the April 2025 Monthly Economic Review.

Tanzania has made significant progress in reducing inflation over the past decade. From an average annual Consumer Price Index (CPI) growth rate of 7.1% during 2010–2019, the country is projected to achieve a much lower and more stable rate of 4.0% over 2025–2027. This improvement reflects effective monetary and fiscal management, helping Tanzania transition into the group of low-inflation economies in Sub-Saharan Africa. For context, inflation is projected to remain high in countries like Nigeria (10%+), Ghana (8.0%), and Zambia (8.0%), while Tanzania outperforms even some of its regional peers, including Uganda (5.0%) and Kenya (5.5%). From 4.4% in 2022, CPI in Tanzania declined to 3.1% in 2024, and is expected to stabilize around 4.0% by 2027, underscoring its growing macroeconomic resilience and investor appeal.

Tanzania is expected to maintain low and stable inflation between 3.1% and 4.0% from 2024 to 2027, indicating macroeconomic stability and strong monetary policy performance​.

Tanzania’s Position and Implications

• Historically (2010–2019), Tanzania had moderately high inflation (7.1%).
• In the forecast period (2025–2027), inflation is projected to stabilize around 4.0%, which is well below the regional average and better than many high-inflation economies.
• Compared to regional peers:
  • Lower than Uganda (5.0%)
  • Lower than Zambia (8.0%)
  • Lower than South Africa (4.6%)
  • Comparable to Rwanda (4.3%)

Top African Countries by CPI Annual Change (Inflation Rate)

Highest Inflation Countries (2010–2019 average)

These countries faced persistent inflationary pressures over the decade:

Tanzania recorded an average annual CPI of 7.1%, slightly higher than Uganda (6.2%) and comparable to Zambia (8.8%). This places Tanzania among the moderately high-inflation economies in Sub-Saharan Africa during the 2010s.

CPI Trends and Projections (2022–2027)

Tanzania's annual CPI (inflation) showed the following trend:

Comparison with other notable countries (2027 projections)

Tanzania is transitioning from a moderately high inflation environment to a low and stable inflation economy, which enhances its macroeconomic credibility, investment attractiveness, and household purchasing power.

1. Tanzania Has Tamed Inflation Over Time

• From 2010 to 2019, Tanzania experienced moderately high inflation, averaging 7.1% annually.
• This level was higher than Uganda (6.2%) and much higher than Benin or Côte d’Ivoire (often under 3%), reflecting structural challenges like food price volatility, energy costs, and monetary expansion.

2. A Clear Downward Trend in Inflation

• Tanzania has achieved significant inflation reduction:
  • 2022: 4.4%
  • 2023: 3.8%
  • 2024e: 3.1%
  • 2025f–2027f: Stabilizing at ~4.0%
• This puts Tanzania in the low-inflation group in Sub-Saharan Africa, joining countries like Rwanda (4.3%) and Benin (1.5%).

3. Tanzania Performs Better Than Many Peers

• In 2027, Tanzania’s CPI of 4.0% will be:
  • Lower than Nigeria (10%+), Ghana (8.0%), and Zambia (8.0%)
  • Lower than regional average, with many countries still facing double-digit inflation
• This shows Tanzania’s strong monetary policy and price stability, even as others still struggle with inflationary pressures.

💡 What It Tells Us

• Tanzania has made real progress in macroeconomic management.
• It is now one of the more stable economies in East and Sub-Saharan Africa in terms of inflation, which:
  • Supports consumer purchasing power
  • Encourages investment
  • Enables predictable economic planning

In short, Tanzania has moved from a high-inflation past to a low-inflation future, showing maturity in economic policy and resilience compared to many of its African peers.

The Producer Price Index (PPI) for Tanzania recorded a modest annual increase of 0.35% from 116.03 in the fourth quarter of 2023 to 116.43 in the fourth quarter of 2024, according to the National Bureau of Statistics. Despite a quarterly decrease of -0.10% between the third and fourth quarters of 2024, the mining and quarrying sector remained stable with a marginal annual growth of +0.03%, while manufacturing recorded a slight annual growth of +0.62%. Meanwhile, the water supply sector under utilities showed a significant surge of +27.39% over the year, indicating infrastructure pressures and rising operational costs. Based on these trends, Tanzania's overall PPI is forecasted to grow slowly by around 1.0% to 2.0% in 2025, driven by stable mining activities, continued utility sector price pressures, and a slow recovery in the manufacturing sector.

1. Overall Producer Price Index (PPI)

• 2024 Q3: 116.55
• 2024 Q4: 116.43
• Change (Q4 vs Q3): -0.10% (a slight decrease)
• Change (Q4 2024 vs Q4 2023): +0.35% (marginal annual increase)

2. Sector Performances

➡️ Mining and Quarrying (Weight: 19.08%)

• Q4 2023: 128.66
• Q3 2024: 128.69
• Q4 2024: 128.69
• Change (Q4 vs Q3): 0.00% (no significant change)
• Annual Change: +0.03%

➡️ Manufacturing (Weight: 62.80%)

• Q4 2023: 115.29
• Q3 2024: 116.29
• Q4 2024: 116.01
• Change (Q4 vs Q3): -0.24%
• Annual Change: +0.62%

➡️ Utilities (Electricity, Gas, Water) (Weight: 18.12%)

• Q4 2023: 105.29
• Q3 2024: 104.70
• Q4 2024: 105.01
• Change (Q4 vs Q3): +0.30%
• Annual Change: -0.26%

Top Increases in Prices (Q4 2024 vs Q3 2024)

Top Decreases in Prices (Q4 2024 vs Q3 2024)

Annual Standout Performances (Q4 2024 vs Q4 2023)

Top 3 Annual Increases:

Top 3 Annual Decreases:

Notes on Methodology:

• Base year: 2018 Q4 = 100
• Weighting base: 2015 Annual Survey of Industrial Production (ASIP 2015).
• Classification: ISIC Rev.4
• Aggregation methods: Jevons geometric mean (elementary aggregates) and Laspeyres formula (higher aggregates).

What the Report Tells About the Main Production Sectors:

1. Manufacturing Sector (Weight: 62.80%)

• PPI fell by -0.24% from Q3 to Q4 2024.
• Annual growth is small (+0.62%).

Meaning:
The manufacturing sector is struggling to push prices up — which usually suggests either:

• Low demand for manufactured products, or
• High competition keeping prices down, or
• Input costs (raw materials, energy) might not have risen much.

Key Problem Sectors inside Manufacturing:

• Rubber and plastics: fell by -3.25%.
• Chemicals: fell by -2.90%.
• Beverages: fell by -2.07%.

These drops tell us some industries are experiencing either oversupply or lower consumer spending (e.g., beverages = people spending less?).

2. Mining and Quarrying (Weight: 19.08%)

• PPI remained stable (0.00% change).

Meaning:
The mining sector is very stable — no price pressures.

• Maybe global metal prices (e.g., gold, ores) are steady.
• Tanzanian mining outputs probably have long-term contracts protecting them from short-term fluctuations.

3. Utilities: Water, Electricity, Gas (Weight: 18.12%)

• Utilities grew +0.30% this quarter.
• Water services exploded by +27.39% year-on-year!

Meaning:
Costs in water services have skyrocketed — maybe:

• Investments in water infrastructure?
• Higher operational costs passed to producers?
• Droughts, climate impacts causing scarcity?

Electricity and gas prices are stable though.

Summary: Which sectors tell the bigger story?

Why is this happening?

My interpretation:

• Global Economic Conditions: Global slowdown → less demand for Tanzanian manufactured goods.
• Local Competition: Tanzanian manufacturers might be facing competition from cheap imports (especially plastics, chemicals).
• Utility Pressures: Essential services like water are becoming expensive, partly due to climate or infrastructure investments.

In short:
👉 Manufacturing is under pressure.
👉 Mining is stable and resilient.
👉 Water utilities are seeing huge price rises, impacting overall production costs.

Forecast for 2025 (Based on 2024 Trends)

1. Manufacturing Sector Forecast (Weight: 62.80%)

• Current trend: Decrease of -0.24% from Q3 to Q4 2024.
• Annual growth: Only +0.62% (almost flat).

2025 Forecast:

• Likely to grow slowly, around +1.0% to +2.0% for the full year, unless there is strong domestic demand or exports grow.
• Some sub-sectors like rubber and plastics, chemicals, and beverages will continue facing pressure.

Reason:

• Global slowdown still affects manufactured goods.
• Competition (local and imports) remains strong.
• Input costs (like raw materials) may stay moderate.

2. Mining and Quarrying Forecast (Weight: 19.08%)

• Current trend: Stable — 0.00% quarterly change, +0.03% annual change.

2025 Forecast:

• Stable to slight increase, around +0.5% to +1.5%.
• Especially if gold and mineral prices globally remain good.

Reason:

• Mining has long-term contracts.
• Tanzania's mining policies are supporting stability.

3. Utilities (Electricity, Water) Forecast (Weight: 18.12%)

• Water services rose sharply by +27.39% in 2024.
• Overall Utilities dropped slightly by -0.26% because electricity prices remained stable.

2025 Forecast:

• Water prices will continue to rise, but more slowly, maybe +5% to +10%.
• Electricity prices stable or slightly higher depending on fuel/import costs.

Reason:

• Water projects, climate impacts, urbanization will keep pressure high.
• Electricity needs big infrastructure investment to avoid big price jumps.

Quick Forecast Table for 2025

Overall 2025 PPI Forecast

• Overall PPI may grow slowly, around +1.0% to +2.0% in 2025.
• Strong sectors (Water supply, Mining stability) will balance weak ones (Manufacturing slow recovery).

Why?

• World economy recovering slowly → small demand growth.
• Climate change affecting water costs.
• Manufacturing needs investment and innovation to grow faster.

Tanzania's monetary policy in the fourth quarter of 2024 demonstrated a strategic approach to sustaining economic growth while maintaining price stability. The Bank of Tanzania (BoT) maintained a stable policy stance, supporting key sectors like agriculture, manufacturing, and construction through robust private sector credit growth. Effective liquidity management and moderate adjustments in interest rates highlighted the central bank’s commitment to fostering macroeconomic stability and inclusive economic activity.

Central Bank Rate (CBR) and Policy Stance

• CBR: The Bank of Tanzania (BoT) maintained the Central Bank Rate at 6%, demonstrating a stable monetary policy stance.
• 7-day Interbank Cash Market (IBCM) Rate: This rate was expected to fluctuate within ±200 basis points (bps) of the CBR, indicating the BoT's tolerance for short-term liquidity variations while ensuring stability.

Liquidity Conditions and Interbank Markets

1. Bank Liquidity

• Liquidity was tight in October 2024 due to increased demand for cash for seasonal crop purchases, especially cashew nuts.
• The 7-day IBCM rate averaged 8.48%, slightly exceeding the BoT's policy corridor, but declined from 8.58% in September 2024.

2. Monetary Injections

• To manage liquidity, the BoT scaled up injections through reverse repurchase agreements (reverse repos):
  • October 2024: TZS 2,887.9 billion,
  • September 2024: TZS 2,160 billion.
    This significant increase in reverse repos reflects the BoT’s active role in maintaining liquidity.

Monetary Aggregates Growth

1. Extended Broad Money Supply (M3)

• Growth in M3 accelerated:
  • October 2024: 14.6%,
  • September 2024: 11.4%,
  • October 2023: 12.4%.
    This rise indicates expanding financial activity, supported by robust monetary policy transmission.

2. Private Sector Credit

• Credit growth to the private sector remained strong:
  • October 2024: 17%,
  • September 2024: 17.5%,
  • October 2023: 17.9%.
    While slightly lower, this consistent growth reflects ongoing support for economic sectors.

Sectoral Credit Distribution

1. Agriculture:
   • Recorded the highest growth in credit at 44.7%, reflecting strong support for rural and agricultural activities.
2. Manufacturing:
   • Credit growth reached 18.7%, aiding industrial expansion.
3. Building and Construction:
   • Growth at 18.6%, indicative of sustained infrastructure investment.
4. Personal Loans:
   • Comprising 38.2% of the total loan portfolio, largely benefiting SMEs.
5. Trade:
   • Represented 12.7% of the loan portfolio.
6. Agriculture (overall share):
   • Accounted for 12% of total loans, emphasizing its importance in Tanzania’s economy.

Interest Rate Developments

1. Overall Lending Rate:
   • Increased to 15.67% from 15.53%, signaling slight tightening.
2. Negotiated Lending Rate:
   • Remained stable at 12.93%, aiding business planning.
3. Overall Deposit Rate:
   • Increased to 8.25% from 8.20%, enhancing savings attractiveness.
4. Negotiated Deposit Rate:
   • Rose significantly to 10.27% from 9.12%, reflecting better returns for large depositors.

Key Observations

1. Price Stability:
   • Despite tighter liquidity in October, the monetary policy maintained overall price stability.
2. Support for Growth:
   • The growth in M3 and private sector credit illustrates that monetary policy supported economic activity effectively.
3. Balanced Approach:
   • The policy successfully managed liquidity and ensured sufficient credit flow, particularly to productive sectors like agriculture and manufacturing.
4. Macroeconomic Stability:
   • BoT’s monetary policy ensured stable inflation, sustainable economic growth, and reasonable interest rates.

This multi-dimensional approach highlights the effectiveness of Tanzania’s monetary policy in fostering both macroeconomic stability and sectoral growth.

Tanzania's monetary policy in the fourth quarter of 2024 with key insights about the country's economic environment and the effectiveness of its central bank actions.

1. Policy Stability and Support for Economic Growth

• The stable Central Bank Rate (CBR) at 6% indicates a commitment to fostering economic growth while maintaining inflation within a manageable range.
• Despite seasonal liquidity tightness, the monetary policy stance was accommodative, ensuring adequate support for economic sectors.

2. Effective Liquidity Management

• Tight liquidity in October was managed through increased monetary injections (reverse repos). This intervention highlights the Bank of Tanzania's flexibility in responding to short-term economic demands (e.g., seasonal crop purchases like cashew nuts).
• The slight decline in the 7-day interbank cash market (IBCM) rate signals gradual easing of liquidity pressures.

3. Strong Credit Growth

• Robust credit growth of 17% in the private sector reflects a healthy financial sector capable of supporting businesses and households.
• Sectors like agriculture (44.7%), manufacturing (18.7%), and construction (18.6%) benefited significantly, showcasing targeted resource allocation to productive and growth-enhancing areas.

4. Interest Rate Dynamics

• The rise in lending and deposit rates indicates moderate tightening of monetary conditions, potentially to control inflation or stabilize the currency. However, negotiated rates remain competitive, supporting business borrowing and savings.
• The increase in the negotiated deposit rate (10.27%) suggests banks are competing for large deposits, possibly due to higher demand for liquidity.

5. Expansion in Monetary Aggregates

• The strong growth in the money supply (M3) to 14.6% and private sector credit underscores:
  • Economic confidence, with businesses and individuals accessing financing for growth.
  • An effective monetary transmission mechanism, where policy changes successfully impact financial flows.

6. Focus on Key Sectors

• The priority for agriculture reflects Tanzania's reliance on this sector for economic stability and employment. The highest credit growth in agriculture indicates significant support for rural economies and food security.
• The dominance of personal loans (38.2%) highlights the importance of SMEs and individual businesses in Tanzania's economic framework.

7. Macroeconomic Balance

• The policy achieved a delicate balance between:
  • Inflation control (via tight liquidity management and slightly higher rates),
  • Credit expansion (to productive sectors),
  • Economic growth support (through liquidity injections and targeted sectoral credit).

Conclusion

Tanzania's monetary policy in Q4 2024 reveals a proactive central bank addressing both short-term challenges (like seasonal liquidity tightness) and long-term goals (sectoral growth, price stability, and financial inclusion). It highlights an economy growing steadily, with sound monetary management ensuring stability and opportunity for diverse sectors.