Oversubscribed T-Bills, Strong Bond Demand, and Rising Interbank Turnover (Sept 2025)

In September 2025, Tanzania’s financial markets displayed strong liquidity and investor confidence, reflected in an oversubscribed T-bill auction (TZS 194.7 billion bids against TZS 80.7 billion tender) and a decline in average yields to 6.03% from 6.83% the previous month. Bond market activity remained solid, with long-term tenors (20- and 25-year) attracting substantial investor interest, contributing to total bids of TZS 2,271.5 billion, of which TZS 784.9 billion were accepted, and yields stabilizing between 12.48% and 13.55%. Meanwhile, the interbank cash market strengthened markedly, with transactions rising to TZS 3,261.6 billion from TZS 2,374.5 billion—an increase of TZS 887.1 billion—driven by higher commercial banking activity, stable liquidity conditions, and sustained export inflows. Interbank rates remained stable at 6.45%, comfortably within the 3.75–7.75% policy corridor, supported by the Bank of Tanzania’s active liquidity management through reverse repos. Collectively, these developments indicate a resilient and well-functioning financial ecosystem, where strong liquidity supports monetary policy transmission, reduces financing pressures, and deepens market confidence.

1. Government Securities Market

Government securities include Treasury bills (T-bills) and Treasury bonds (T-bonds). They are used for financing government operations and managing liquidity.

Key Highlights

• One Treasury bill auction was conducted in September 2025.
• Tender size: TZS 80.7 billion
• Bids received: TZS 194.7 billion
• Successful bids: TZS 80.7 billion
• Oversubscription reflects high liquidity in the market.
• Weighted average yield decreased to 6.03% (from 6.83% in August 2025)

Bond Market

The BOT conducted auctions for:

• 5-year bond — Tender TZS 136.2 billion — undersubscribed
• 20-year bond — Tender TZS 271.1 billion — oversubscribed
• 25-year bond — Tender TZS 293.7 billion — oversubscribed

Accepted Bids and Yields

• Total bids received: TZS 2,271.5 billion
• Total accepted: TZS 784.9 billion
• Weighted Average Yields:
  • 5-year: 12.48%
  • 20-year: 13.55%
  • 25-year: 13.19%

Summary Table — Government Securities Market (September 2025)

2. Interbank Cash Market (IBCM)

The IBCM allows banks to borrow and lend liquidity—crucial for monetary policy transmission.

Key Highlights

• Total IBCM transactions in September 2025:
  • TZS 3,261.6 billion
  • Up from TZS 2,374.5 billion in August 2025
• 7-day transactions had the largest share (64.6% of total)
• Rates remained stable due to adequate liquidity:
  • Overall IBCM rate: 6.45%
  • Previous month: 6.48%

Liquidity Dynamics

• Overnight rate and 7-day market rate stayed within the policy band (3.75%–7.75%).
• BOT used reverse repo operations to stabilize liquidity.
• Interbank activity increased due to:
  • Higher commercial banking activities
  • Steady credit expansion
  • Strong inflows from export sectors

Summary Table — Interbank Cash Market (September 2025)

Final Combined Overview Table

Implications of Financial Markets Developments in September 2025

The data on Tanzania's government securities and interbank cash markets (IBCM) for September 2025, extracted from Financial Markets of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), signals a liquid and confident financial system. This aligns with broader economic resilience: 6.3% Q2 GDP growth, stable 3.4% inflation, accommodative monetary policy (CBR 5.75%; Section 2.3), shilling appreciation (9.4% y/y; Section 2.5 IFEM), and a manageable fiscal deficit (TZS 618.5B financed partly via securities; Section 2.6). T-bill oversubscription (194.7B bids vs. 80.7B tender) and declining yields (6.03%) reflect surplus liquidity, while long-term bond demand (oversubscription for 20/25-year tenors) indicates investor optimism. IBCM turnover surged 37.4% MoM to TZS 3,261.6B, with rates steady at 6.45% within the 3.75–7.75% corridor, underscoring effective liquidity management amid export inflows (gold/crops/tourism). Below, I outline implications, categorized by market and linkages.

1. Government Securities Market: Investor Confidence and Liquidity Absorption

• T-Bills: Oversubscription and Yield Compression (6.03% from 6.83%): The 2.4x bid-to-cover ratio (TZS 194.7B bids for TZS 80.7B) highlights abundant short-term funds from banks and institutions, driven by private credit expansion (16.1% y/y) and fiscal needs (domestic debt TZS 37,459B, up 0.9%). Lower yields signal easing funding costs for government, reducing pressure on the deficit (financed via these instruments).
• T-Bonds: Selective Demand with Stable Yields (12.48–13.55%): Undersubscription in 5-year (TZS 136.2B tender) contrasts with oversubscription in longer tenors (20-year TZS 271.1B, 25-year TZS 293.7B; total accepted TZS 784.9B from TZS 2,271.5B bids), pointing to preference for duration amid low inflation expectations (core 2.2%). Yields held firm, reflecting risk premiums for longer horizons but attractiveness vs. inflation (real yields ~9–10%).
• Broader Implications:
  • Positive: Oversubscription eases borrowing (supports 71.9% expenditure execution) without crowding out private lending (rates at 15.18%; prior analysis). Signals macroeconomic trust, boosted by shilling strength (lowers external debt service) and global stability (IMF 3.2% growth).
  • Risks: Short-term yield drop could flatten the curve, signaling potential liquidity overhang if not mopped up (via reverse repos). Undersubscription in shorter bonds may indicate caution on near-term fiscal risks (e.g., revenue shortfalls from mining taxes).

2. Interbank Cash Market (IBCM): Enhanced Transmission and Activity

• Turnover Surge (+37.4% to TZS 3,261.6B; 64.6% 7-Day Share): Rise from August's TZS 2,374.5B reflects heightened banking operations, fueled by export FX conversions (e.g., gold inflows) and credit demand (M3 +20.8% y/y). 7-day dominance indicates preference for short-term balancing amid stable policy.
• Rate Stability (6.45% from 6.48%, Within Corridor): Anchored by BOT's reverse repo fine-tuning (absorbing surpluses), this supports monetary transmission, keeping lending viable without volatility.
• Broader Implications:
  • Positive: Boosts financial deepening, aiding growth sectors (agriculture/mining contributions 1.8%/1.5% to GDP; Chart 2.1b). Stable rates reinforce low inflation (food eased to 7.0% via NFRA stocks) and shilling (BOT USD 11M intervention).
  • Risks: Over-reliance on short tenors could amplify shocks if liquidity tightens (e.g., from global tightening). Higher activity may strain smaller banks if not matched by capital buffers.

3. Interlinkages: Liquidity Supporting Growth and Stability

• Policy Effectiveness: Declining T-bill yields and stable IBCM rates align with CBR (5.75%), enhancing transmission to real economy (e.g., easing short-term borrowing for exporters). This complements fiscal financing (securities absorbed TZS 618.5B deficit) and debt sustainability (40.1% debt/GDP).
• Investor and Sector Ties: Long-bond demand from pensions/insurers (institutional inflows) reflects confidence in 6% growth projection, while IBCM surge ties to external strength (CA surplus USD 1.2B Q2). In Zanzibar, similar liquidity likely aids tourism financing.
• Broader Implications:
  • Positive: Fosters efficient intermediation (spread ~5.7 pp; prior analysis), positive real rates (vs. 3.4% inflation), and resilience to commodities (oil down aiding energy inflation 3.7%). Supports EAC/SADC convergence.
  • Risks: Excess liquidity risks asset bubbles if credit overheats; global uncertainties (trade policy index up) could reverse yields. Monitor for spillover to inflation if unabsorbed.

4. Macroeconomic Context from the Review

• Synergies: These markets underpin monetary-fiscal coordination, with securities funding development spend (TZS 1,273B) and IBCM enabling 29.0% M1 growth. Projections: Stable yields, liquidity to sustain 6% GDP and 3–5% inflation.
• Outlook: Continued oversubscription likely if exports hold; BOT may adjust repos to prevent easing bias.

In summary, September 2025's financial market dynamics imply a robust, liquid ecosystem that reinforces Tanzania's stability and growth enablers. Oversubscription and turnover growth signal trust and efficiency, mitigating fiscal pressures while amplifying monetary impact—key for navigating global risks into late 2025.

Receipts Up 4.6% to USD 6.97bn, Payments Rise 18.6% (YE Sept 2025)

Tanzania’s external sector strengthened in the year ending September 2025, supported by solid performance in services—particularly tourism and transport—which pushed total service receipts to USD 6,973.9 million (+4.6%). Travel services dominated, rising to approximately USD 3,903.1 million on the back of an 11.9% increase in tourist arrivals, while transport receipts expanded to USD 2,535.4 million due to higher regional freight and logistics activity. Other services remained robust, reflecting steady growth in ICT, financial, and professional service demand. However, service payments grew faster at +18.6% to USD 3,089.5 million, driven by increased freight costs associated with expanding goods imports, rising demand for machinery and industrial supplies, and higher business service usage. Despite this, the net services surplus remained strong at USD 3,884.4 million—though slightly lower than the previous year (–4.4%). Overall, the external sector’s services component continues to anchor FX stability, support narrowing current account deficits, and enhance macroeconomic resilience, even as import-service demand signals rising investment intensity and structural growth across the economy.

1. Overview of External Sector Performance

Tanzania’s external sector strengthened in the year ending September 2025, mainly due to improved services performance—especially tourism and transport.

• Service receipts grew to USD 6,973.9 million, up from USD 6,667.1 million in 2024
• Service payments rose to USD 3,089.5 million, up from USD 2,604.2 million in 2024

This resulted in a positive services balance, supporting the narrowing of the current account deficit.

2. Services Export (Receipts) by Category

Total Service Receipts (Year ending September 2025)

Source: Bank of Tanzania calculations

Breakdown by Category:

Key Drivers

• Tourism sector recovery with arrivals reaching 2.3 million visitors (+11.9%)
• Transport services improved due to increased regional freight movement.
• Strong demand for business and communication services.

3. Services Import (Payments)

Total Service Payments (Year ending September 2025)

Source: Bank of Tanzania calculations

Key Drivers of Services Payments

• Higher freight costs linked to increased goods import bill.
• Strong demand for machinery, industrial supplies, and transport equipment.
• Increased financial and business services imports.

4. Current Account Services Summary Table

Source: Services account summary (Table and figures)

Even though receipts increased, payments grew faster, slightly reducing the net services surplus.

5. External Sector Service Components

Implications of External Sector Performance in the Year Ending September 2025

The external sector data for the year ending September 2025, primarily from Section 2.8 (External Sector Performance) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), highlights a services-led strengthening that narrows the current account (CA) deficit to near balance, with goods and services exports at USD 17,094.2 million nearly matching imports at USD 17,728.7 million (deficit of USD 634.5 million, down from prior years). Services receipts rose 4.6% to USD 6,973.9 million (tourism dominant at ~USD 3,903.1 million, +15.8% driven by 2.3 million arrivals, +11.9%), while payments grew faster at +18.6% to USD 3,089.5 million (freight/machinery-led), yielding a net surplus of USD 3,884.4 million (-4.4%). This builds on Q2 2025's CA surplus of USD 1,029 million (up from USD 812 million in Q1), complementing mainland GDP growth (6.3%), shilling appreciation (+9.4% y/y; Section 2.5), and reserves (USD 6,657 million, 5.8 months import cover). Below, I detail implications, focusing on services dynamics and macroeconomic ties.

1. Services Receipts: Tourism and Transport as Resilience Pillars

• +4.6% to USD 6,973.9M (Travel ~USD 3,903.1M, Transport USD 2,535.4M, Others ~USD 2,535.4M): Tourism's 56% share (up from ~50% in 2024) reflects post-recovery surge (arrivals +11.9%, earnings +15.8%), fueled by global demand (IMF 3.2% growth; Section 1.0) and Zanzibar synergies (USD 1,503.9M receipts, +36.4%). Transport growth (+11.1%) ties to regional freight (EAC trade), while "others" (ICT/finance/construction) held steady amid private credit expansion (16.1% y/y).
• Broader Implications:
  • Positive: Bolsters FX inflows (supporting BOT's USD 11M intervention), enhancing reserves and shilling stability (lowering import costs, e.g., energy inflation 3.7%). Drives services contribution to GDP (~15–20%, aligning with financial sector growth), sustaining 6% projection via tourism multipliers (jobs/investment).
  • Risks: Tourism concentration (56%) exposes to shocks (e.g., protectionism; Charts 1.1a/b or pandemics), while transport ties to commodity volatility (oil down but freight up).

2. Services Payments: Rising but Manageable Import Demand

• +18.6% to USD 3,089.5M: Freight (linked to goods imports up 12.5% to USD 10,639.2M) and business/financial services drove growth, reflecting machinery/transport equipment demand for infrastructure (development spend TZS 1,272.9B; Section 2.6) and mining/agri expansion (1.5%/1.8% GDP shares).
• Broader Implications:
  • Positive: Signals productive import use (capital goods for growth), with shilling strength (+9.4%) mitigating pass-through (e.g., fuel prices down). Faster payments growth is offset by receipts, keeping net positive.
  • Risks: If unchecked (e.g., global oil rebound), could pressure CA (national deficit narrowed but imports +12.5% y/y). Ties to fiscal revenue shortfalls (87.2% target) if import duties lag.

3. Net Services Balance and Overall Trade: Narrowing Deficits for Stability

• Net Surplus USD 3,884.4M (-4.4% from USD 4,062.9M): Despite payments outpacing receipts, surplus covers goods deficit (USD 1,029M trade surplus in Q2, but annual goods imports > exports), yielding improved CA (deficit ~1.5% GDP vs. 2.5% 2024). Goods/services balance near parity supports external sustainability.
• Broader Implications:
  • Positive: Reinforces reserves (5.8 months cover), debt service (9.8% exports; Section 2.7), and monetary policy (IBCM 6.45%). Complements Zanzibar's USD 836.6M CA surplus (+34.7%), enhancing union-wide resilience and EAC convergence.
  • Risks: Net erosion (-4.4%) from payment growth signals vulnerability if tourism slows (e.g., unemployment pressures; Section 1.0). Global trade uncertainty (elevated indices) could amplify goods imbalances.

4. Macroeconomic and Policy Context from the Review

• Synergies: Services strength fuels M3 growth (20.8% y/y;), low inflation (3.4%; via import relief), and fiscal space (deficit TZS 618.5B; Section 2.6). Tourism/transport ties to output drivers (construction/mining; Section 2.1) and Zanzibar (arrivals +28.2%).
• Outlook: Projections: CA deficit <2% GDP, sustained by 6% growth and commodity stability (gold up). Policy focus: Diversify services (e.g., ICT) to buffer risks.

In summary, the year-ending September 2025 external sector implies a services-anchored turnaround, with tourism/transport fortifying FX stability and growth amid narrowing deficits. This configuration—echoing the Review's prudent policy emphasis—bolsters inflation control and reserves, though diversifying beyond tourism is key to countering global volatilities into 2026.

The Bank of Tanzania's Monthly Economic Review for August 2025 highlights a stable national debt profile, with the total debt stock at USD 46,586.6 million as of the end of June 2025, marking a modest 1% increase from the previous month. This stability is evidenced by minimal fluctuations in both external and domestic components: external debt rose by just 0.1% to USD 32,955.5 million (70.7% of total debt), while domestic debt decreased by 0.4% to TZS 35,351.4 billion as of July 2025. The review attributes this equilibrium to prudent fiscal management, balanced debt inflows and outflows, and a focus on long-term instruments, which mitigate volatility. Supplementing this, external analyses from sources like the IMF and World Bank emphasize broader factors such as fiscal discipline and economic diversification, projecting a downward trend in public debt over the medium term.

Key Factors Contributing to Debt Stability

Several interconnected factors contribute to the stability of Tanzania's national debt, as outlined in the review and corroborated by recent economic assessments. These include controlled debt accumulation, effective revenue and expenditure management, and a strategic shift toward domestic financing, which reduces exposure to external risks like currency fluctuations.

1. Balanced Debt Inflows and Outflows

• External debt disbursements significantly outpaced service payments, supporting liquidity without excessive accumulation. In June 2025, disbursements totaled USD 868.4 million, compared to debt service payments of USD 234.4 million (including USD 173.6 million in principal repayments). This net positive inflow (USD 634.0 million in net transfers) helped maintain stability while funding development needs.
• The composition of external debt remained largely unchanged, with multilateral institutions holding 58.7% (USD 19,328.5 million), providing concessional terms that lower servicing costs and enhance sustainability.
• Domestic borrowing was managed conservatively: The government raised TZS 514.4 billion (TZS 356.8 billion via Treasury bonds and TZS 157.6 billion via bills) but serviced TZS 670.8 billion, resulting in a net reduction. This reflects a deliberate strategy to align borrowing with repayment capacity.

2. Strong Fiscal Performance and Revenue Mobilization

• Government revenue in June 2025 exceeded targets by 5.1%, reaching TZS 3,753.4 billion, driven by tax collections of TZS 3,108.7 billion (7.8% above target). This surplus enabled expenditures to stay within available resources at TZS 3,350.0 billion, reducing the need for additional borrowing.
• Non-tax revenue, while below target at TZS 470.5 billion, was offset by robust tax administration improvements, contributing to fiscal space for debt management.
• Broader fiscal discipline, including setting debt ceilings and coordinating monetary-fiscal policies, has been highlighted as a key stabilizer, preventing rapid debt growth amid spending pressures.

3. Shift Toward Domestic and Long-Term Financing

• Domestic debt's slight decline (0.4%) was primarily due to reduced overdraft usage (from TZS 5,314.0 billion in June to TZS 4,990.5 billion in July), signaling improved liquidity management. Long-term instruments like Treasury bonds dominated at 79.7% (TZS 28,189.8 billion), offering predictable servicing and reducing rollover risks.
• This domestic focus minimizes reliance on volatile external funds, as noted in analyses, where forex fluctuations (e.g., shilling depreciation) have historically driven debt increases. Commercial banks and pension funds held 28.8% and 26.4% of domestic debt, respectively, providing stable local creditor bases.

4. Economic Resilience and External Support

• Stable inflation (3.3% in July 2025) and strong GDP growth projections (around 6% for 2025) underpin debt sustainability by boosting revenue and export performance. The current account deficit narrowed to USD 2,079.2 million in the year ending July 2025 (from USD 2,713.5 million), driven by export growth, reducing external borrowing needs.
• Multilateral support and economic diversification (e.g., in mining and agriculture) further bolster stability, with Fitch affirming a 'B+' rating and stable outlook in June 2025, citing prudent policies despite wider deficits.

Key Figures Illustrating Stability

These figures demonstrate controlled growth and effective management, ensuring debt remains sustainable at around 60-65% of GDP based on recent estimates. However, risks like shilling depreciation and global uncertainties persist, underscoring the need for continued reforms.

The Tanzania Revenue Authority (TRA) achieved significant milestones in tax collection during the 2024/25 fiscal year (July 2024 – June 2025), reflecting enhanced administrative efficiency, taxpayer compliance, and technological advancements.

Key Highlights

• Total Collection: TZS 32.26 trillion, exceeding the target of TZS 31.05 trillion (103.9% performance rate).
• Annual Growth: 16.7% increase from TZS 27.64 trillion in 2023/24.
• Quarter 4 (April – June 2025): Collected TZS 8.22 trillion against a target of TZS 7.84 trillion (104.8% performance, 15.8% growth from Q4 2023/24).
• Monthly Achievements:
  • Consistently surpassed monthly targets for 12 consecutive months, a record since TRA’s establishment in 1996.
  • Average monthly collection: TZS 2.69 trillion, the highest in TRA history.
  • Peak collection: TZS 3.58 trillion in December 2024.
• Major Milestones:
  • Exceeded the annual target for the first time since 2015/16.
  • Recorded the highest single-month collection in December 2024.

Monthly Collection Breakdown (FY 2024/25)

Revenue Forecast for FY 2025/26

The TRA has set a target of TZS 36.066 trillion for the 2025/26 fiscal year, reflecting an anticipated growth of 11.8% from 2024/25. This ambitious target is supported by:

• Continued taxpayer education and compliance initiatives.
• Deployment of modern tax systems (IDRAS, TANCIS).
• Strengthened cooperation with business communities.
• Enhanced staff performance monitoring and accountability.

Projected Monthly Targets for 2025/26

Implications for Tanzania’s Economic Development (2025/26 Budget)

The TRA’s strong revenue performance in 2024/25 and the optimistic forecast for 2025/26 are critical for funding Tanzania’s TZS 56.49 trillion budget for 2025/26, which aims to achieve 6% GDP growth and aligns with the Third Five-Year National Development Plan (2021/22–2025/26) and Vision 2025. Below are the key implications for economic development:

1. Strengthened Fiscal Capacity

• Domestic Revenue Mobilization: The TRA is projected to collect TZS 36.066 trillion in 2025/26, contributing significantly to the budgeted TZS 38.9 trillion in domestic revenues (70.1% of the total budget). This reduces reliance on external financing, which is expected to contribute TZS 16.02 trillion (including grants and loans).
• Fiscal Discipline: The TRA’s consistent overperformance (103.9% in 2024/25) and a controlled budget deficit (TZS 30 billion in January 2025) reflect improved tax administration and fiscal management, enabling sustainable funding for development projects.
• Reduced External Debt Dependency: With domestic revenue covering over 70% of the budget, Tanzania is moving toward greater self-reliance, despite an external debt of $32.89 billion in September 2024.

2. Support for Flagship Infrastructure Projects

The TRA’s revenue surplus supports the completion of strategic projects outlined in the 2025/26 budget, including:

• Standard Gauge Railway (SGR): Enhancing transport infrastructure to boost trade and regional connectivity.
• Julius Nyerere Hydropower Project (2,115 MW): Increasing electricity production to support industrial growth.
• Ruhudji (358 MW) and Rumakali (222 MW) Hydropower Plants: Expanding energy access for economic activities.
• Liquefied Natural Gas (LNG) Project: Positioning Tanzania as a regional energy hub.
• John Magufuli Bridge (Kigongo-Busisi): Improving domestic and cross-border connectivity.

These projects drive industrial capacity, competitiveness, and job creation, aligning with the budget’s theme of “Inclusive Economic Transformation through Strengthening Domestic Revenue Mobilization.”

3. Economic Growth and Job Creation

• GDP Growth: The 2025/26 budget targets 6% GDP growth, building on 5.5% growth in 2024 (TZS 156.6 trillion GDP). The TRA’s revenue performance supports investments in key sectors like agriculture (26% of GDP), construction (13%), and mining (10%), which are critical for economic expansion.
• Job Creation: The budget aims to create employment opportunities, with 41,117 jobs projected from $3.7 billion in registered investment projects (January–May 2025). Strong tax revenue enables funding for human capital development, including education and health initiatives.
• Private Sector Growth: Improved tax compliance and a 20% annual increase in private sector credit indicate robust business activity, further supported by tax reforms like VAT exemptions for farmers, producers, and clean energy.

4. Social and Human Capital Development

• Health and Education: The 2025/26 budget allocates funds for training 28,000 health workers, expanding specialist services to 9 referral hospitals, and revitalizing pharmaceutical production (e.g., ARV manufacturing in Arusha). Education investments focus on skills development to support industrialization.
• Elections and Social Services: Significant allocations for the 2025 general elections and social welfare programs ensure inclusive growth, funded primarily through domestic revenue.

5. Digital and Technological Advancements

• Tax Systems: The deployment of modern systems like IDRAS and TANCIS has enhanced tax collection efficiency, contributing to the TRA’s record performance. These systems are expected to sustain revenue growth in 2025/26.
• Digital Economy: The budget supports ICT growth (projected at 13.5% by 2026), including over 400 communication towers in rural areas and the National Digital Economy Strategic Framework 2024–2034, fostering digital inclusivity and economic transformation.

6. Challenges and Risks

• Tax Base Expansion: Tanzania’s tax-to-GDP ratio (14.9% in 2024/25) remains below the Sub-Saharan Africa average (18.6%), indicating a need to broaden the tax base, particularly in agriculture and the informal economy.
• Global and Regional Risks: Potential global economic slowdown, geopolitical tensions, and the 2025 general elections may dampen investment and growth.
• Debt Management: Rising external debt ($32.89 billion) requires prudent fiscal policies to maintain creditworthiness.

Conclusion

The TRA’s exceptional performance in 2024/25, with a record-breaking TZS 32.26 trillion collected, underscores Tanzania’s progress in domestic revenue mobilization. The forecasted TZS 36.066 trillion for 2025/26 will play a pivotal role in funding the TZS 56.49 trillion budget, supporting infrastructure, industrialization, and social development. By reducing reliance on external financing and fostering inclusive growth, Tanzania is poised to achieve its 6% GDP growth target and advance toward Vision 2050. However, addressing challenges like the narrow tax base and global economic uncertainties will be critical to sustaining this trajectory.

Tanzania’s inflation in March 2025, as detailed in the April 2025 Monthly Economic Review, shows an upward trend in headline inflation, driven primarily by rising food and energy prices, while core inflation has declined. Below, we outline the current inflation trends and their drivers, using specific figures from the document to provide clarity.

Headline Inflation Trend

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

Explanation:

• Trend: The 0.3 percentage point increase indicates a moderate upward trend in overall price levels, but inflation remains within national targets and regional benchmarks of the East African Community (EAC) and Southern African Development Community (SADC).
• Drivers: The document attributes this rise primarily to increases in food and energy prices (Page 3). These components have exerted significant upward pressure on the Consumer Price Index (CPI), which is based on a 2020=100 index.
• Context: Despite the increase, headline inflation is relatively stable, supported by the Bank of Tanzania’s monetary policy, which maintains the Central Bank Rate at 6% to keep inflation expectations below the 5% medium-term target.

Food Inflation Trend

Figure: Food inflation surged to 5.4% in March 2025, up from 1.4% in March 2024.

Explanation:

• Trend: The sharp 4.0 percentage point increase reflects significant price pressures in the food sector, which has a CPI weight of 26.1%.
• Drivers: Higher prices for staple crops—maize, rice, and beans—are the primary drivers, amplified by logistical challenges in transportation due to seasonal heavy rains. These rains disrupted supply chains, increasing costs for producers and traders.
• 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. The overall food supply remained adequate, preventing even higher inflation.
• Impact: The document notes that unprocessed food inflation’s contribution to overall inflation has increased, making it a key driver of the 3.3% headline rate.

Core Inflation Trend

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

Explanation:

• Trend: The 1.7 percentage point decline indicates easing price pressures from non-food items, which constitute 73.9% of the CPI basket.
• Drivers: Core inflation excludes volatile items like food, energy, and utilities. The reduction suggests stable or declining prices for services and non-food goods, reflecting lower underlying inflationary pressures.
• Impact: The document highlights that core inflation’s contribution to overall inflation has gradually diminished, with unprocessed food inflation taking a larger role. This decline helps moderate the headline inflation rate despite food and energy spikes.

Energy, Fuel, and Utilities Inflation Trend

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

Explanation:

• Trend: The 1.3 percentage point rise makes this the highest inflation component, with a CPI weight of 5.7%.
• Drivers: The increase is primarily due to rising prices of petroleum products and wood charcoal, the latter linked to scarcity following seasonal rains (Page 5). The document notes the weight of wood charcoal in the energy component but does not quantify it.
• Impact: High energy inflation significantly contributes to the 3.3% headline rate, as energy costs affect transportation, production, and household expenses, amplifying overall price pressures.

Additional Context and Drivers

• Global Commodity Prices: Rising global fertilizer prices (up 2% to USD 615.13 per tonne) increase agricultural input costs, indirectly contributing to food inflation by raising production expenses. Conversely, a 4% drop in crude oil prices to USD 70.70 per barrel may have tempered energy inflation slightly, though domestic petroleum price hikes dominated.
• Monetary Policy: The Bank of Tanzania’s stable Central Bank Rate (6%) and adequate liquidity management (no reverse repo auctions) help anchor inflation expectations, preventing runaway price increases despite food and energy pressures.
• CPI Dynamics: The CPI weights show food (26.1%) and energy (5.7%) as smaller shares compared to core items (73.9%), but their volatility gives them outsized impacts on headline inflation. Month-on-month data shows food inflation at 2.5% and energy at 2.9% for March 2025, reinforcing their role as key drivers.

Conclusion

In March 2025, Tanzania’s headline inflation rose to 3.3% (from 3.0% in 2024), driven by surging food inflation (5.4%, up from 1.4%) and energy, fuel, and utilities inflation (7.9%, up from 6.6%). Food price increases, fueled by maize, rice, and bean costs and rain-related logistical challenges, and energy price hikes, driven by petroleum and wood charcoal, are the primary drivers. Core inflation’s decline to 2.2% (from 3.9%) moderate’s overall pressures, but unprocessed food’s growing contribution underscores its significance. The NFRA’s 587,062-tonne food stock and 32,598-tonne release helped contain food inflation, keeping headline inflation within EAC and SADC benchmarks.

Key Figures: Tanzania’s Inflation Trends and Drivers (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’s economic performance in March 2025, as detailed in the April 2025 Monthly Economic Review, shows both alignment and divergence with global economic trends. Below, we compare Tanzania’s inflation, growth outlook, and commodity market influences with global forecasts, using specific figures to illustrate the relationship.

Inflation Trends

Global Trend: The IMF forecasts global inflation at 4.3% for 2025, declining to 3.6% in 2026, reflecting a slower-than-expected easing due to trade tensions and persistent pressures in advanced economies. Inflation is decreasing but remains above pre-pandemic levels in many countries.

Tanzania’s Performance: Tanzania’s headline inflation was 3.3% in March 2025, up from 3.0% in March 2024, driven by food (5.4%) and energy, fuel, and utilities (7.9%) price increases (Pages 3, 4, 5). Core inflation, excluding volatile items, fell to 2.2% from 3.9%.

Tanzania’s inflation is lower than the global forecast of 4.3%, aligning with the global trend of declining inflation. However, its food and energy-driven inflation spike mirrors global pressures from supply constraints and trade disruptions. Tanzania’s inflation remains within national and regional (EAC and SADC) targets, indicating stronger control compared to some advanced economies facing persistent pressures.

Economic Growth Outlook

Global Trend: The IMF revised global growth downward to 2.8% for 2025 and 3.0% for 2026, from 3.3% for both years, due to trade tensions, unpredictable policies, and diminishing fiscal buffers. Risks include climate change and limited fiscal space in developing economies.

Tanzania’s Performance: The document does not provide a specific GDP growth rate for Tanzania in 2025 but notes that monetary policy supports economic growth while maintaining inflation below 5%. Domestic challenges include rising food and energy prices and logistical issues from seasonal rains.

Tanzania faces similar downside risks as the global economy, such as trade tensions and climate-related disruptions (e.g., heavy rains impacting food transport). However, its stable monetary policy (Central Bank Rate at 6%) and adequate liquidity suggest resilience compared to developing economies with limited fiscal space. Tanzania’s growth is likely moderated but supported by prudent policies, aligning with the global trend of cautious optimism.

Commodity Market Influences

Global Trend: Commodity markets show divergent trends:

• Gold prices rose 3% to USD 2,983.25 per ounce due to safe-haven demand.
• Fertilizer prices increased 2% to USD 615.13 per tonne due to supply constraints.
• Palm oil prices edged up 0.2% to USD 1,069 per tonne on Asian demand.
• Crude oil prices fell 4% to USD 70.70 per barrel due to oversupply.
• Coffee and sugar prices dropped 2% and 1.5%, respectively, due to improved production.

Tanzania’s Performance: Tanzania, a commodity-dependent economy, is impacted by these trends:

• Gold: Rising gold prices benefit Tanzania’s export revenues, as gold is a major export.
• Fertilizer: Higher fertilizer prices increase agricultural input costs, potentially raising food prices (e.g., maize, rice, beans), contributing to 5.4% food inflation.
• Palm Oil: Stable palm oil prices support Tanzania’s edible oil sector, aligning with robust Asian demand.
• Crude Oil: Lower oil prices reduce Tanzania’s import bill, easing pressure on energy inflation (7.9%) despite domestic petroleum price hikes.
• Coffee and Sugar: Declining coffee and sugar prices may reduce export earnings, impacting trade balance.

Tanzania’s economy is closely tied to global commodity price movements. Positive trends (gold, palm oil) bolster exports, while negative trends (fertilizer, coffee, sugar) pose challenges. The drop in crude oil prices provides relief, aligning with global oversupply benefits, but domestic supply chain issues amplify food price pressures, diverging from global commodity price declines in some sectors.

Policy and Structural Considerations

Global Trend: The global economic outlook is tilted downward due to trade tensions, unpredictable policies, and climate change, particularly affecting developing economies with limited fiscal buffers.

Tanzania’s Performance: Tanzania’s monetary policy remains stable, with the Bank of Tanzania maintaining the Central Bank Rate at 6% and ensuring liquidity through interbank rate management (Page 5). The National Food Reserve Agency’s release of 32,598 tonnes of maize and paddy mitigated food inflation (Page 4). However, logistical challenges and climate-related rains increase costs.

Tanzania’s proactive policies align with global efforts to stabilize economies amid uncertainties. Its food reserve strategy counters global supply chain disruptions, and monetary stability mitigates trade tension impacts. However, climate change (seasonal rains) and limited fiscal space, common in developing economies, pose shared challenges.

Conclusion

Tanzania’s economic performance in March 2025 aligns with global trends in declining inflation (3.3% vs. 4.3% globally) and cautious growth outlooks, supported by stable monetary policy and commodity export strengths (e.g., gold). However, it faces unique pressures from food (5.4%) and energy (7.9%) inflation, driven by domestic logistical issues and global commodity price hikes (e.g., fertilizer). While global risks like trade tensions and climate change affect Tanzania, its prudent policies and food reserves provide resilience, positioning it favorably among developing economies.

Key Economic Indicators: Tanzania vs. Global Trends (March 2025)

Notes:

• Tanzania’s data reflects March 2025 unless stated otherwise.
• Global figures are IMF forecasts or commodity price changes for March 2025.
• Source pages refer to the April 2025 Monthly Economic Review.