Is Tanzania's Money Supply Growing Faster Than Its Economy?
Tanzania's extended broad money supply (M3) has grown nearly four times faster than the real economy for two straight years. TICGL/TERI unpacks what is driving it, why it matters more than most headline economic indicators, and what it signals for inflation, credit and the Shilling through the rest of 2026.
📅 Published: July 2026🏦 Source: Bank of Tanzania, Monthly Economic Review, May 2026⏱ 12–14 min read
TZS 65.1tn
M3 money supply, April 2026
+22.0%
M3 growth, year-on-year
~6.0%
Real GDP growth, 2025
+23.6%
Private sector credit growth y/y
Why this matters
Tanzania's money supply is not just "growing" — it is growing at roughly four times the pace of the real economy. M3 expanded 24.7 percent in 2025 against real GDP growth of about 6.0 percent, and the gap is being driven almost entirely by domestic credit creation, not foreign currency inflows. That combination — fast credit-fuelled money growth outpacing real output — is the classic textbook precursor to inflationary pressure, and it is already visible in the data: headline inflation rose from 3.2 percent to 4.0 percent in a single month (April 2026).
1. What Is M3, and Why Should Anyone Outside a Bank Care?
A 60-second primer before the data
Extended broad money supply (M3) is the broadest official measure of "money" circulating in Tanzania's economy. It is built up in layers:
M1 — Narrow money
Cash in people's hands plus money sitting in current/cheque accounts — the most liquid, immediately spendable money. TZS 31.2 trillion in April 2026.
M2 — Broad money
M1 plus savings and time deposits in Shillings — money that's still yours, just slightly less instantly spendable. TZS 50.1 trillion.
M3 — Extended broad money
M2 plus foreign currency deposits held in Tanzanian banks. The full picture of money in the system. TZS 65.1 trillion.
Economists watch M3 growth because, over time, money supply, prices, output and the speed at which money changes hands are mathematically linked:
M × V = P × Y
Money Supply × Velocity = Price Level × Real Output
In plain terms: if the amount of money in an economy grows much faster than the amount of goods and services actually being produced (real GDP), and the speed at which money changes hands doesn't fall enough to offset it, the extra money has to show up somewhere — usually in higher prices (inflation) or a weaker currency. This is precisely the tension Tanzania's numbers now show.
2. The Numbers: How Fast Is Money Supply Actually Growing?
Source: Bank of Tanzania and banks, BOT Monthly Economic Review, May 2026, Table A3.
M3 has risen in every one of the last 13 months without a single monthly decline — from TZS 53.3 trillion in April 2025 to TZS 65.1 trillion in April 2026, an increase of nearly TZS 12 trillion in a single year. Growth has moderated slightly from its 2025 peak (23.2% in March 2026) to 22.0% in April, but it remains far above Tanzania's long-run average.
Chart 2 — Long-Term M3 Growth vs. Real GDP Growth (2018 – 2025)
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Source: Bank of Tanzania, Ministry of Finance and Planning, BOT Monthly Economic Review, May 2026, Table A1.
This chart is the single most important one in this article. From 2018 to 2024, M3 growth and GDP growth moved in a broadly reasonable relationship to each other — money supply grew faster than output, as is normal in a financially deepening economy, but not dramatically so. In 2025, that relationship broke: M3 growth more than doubled to 24.7 percent while real GDP growth edged up only modestly to around 6.0 percent.
3. What's Actually Driving the Growth
It's not foreign money flooding in — it's domestic credit creation
This is the most important, and most under-reported, detail in the entire money supply story. M3 growth can come from two very different sources, with very different implications:
Net Foreign Assets (NFA) — money entering the system via foreign currency inflows (exports, remittances, FDI, reserves). NFA actually fell 0.7 percent year-on-year to TZS 14.6 trillion in April 2026.
Net Domestic Assets (NDA) — money created domestically through bank lending to the private sector and government. NDA surged 30.7 percent year-on-year to TZS 50.5 trillion — the overwhelming driver of the entire M3 increase.
In other words: Tanzania's money supply boom is homegrown, generated almost entirely by the banking system extending credit faster than the economy is growing — not by dollars flowing in from abroad. That distinction matters because credit-driven money growth carries a more direct inflation and currency risk than reserve-backed money growth.
Chart 3 — Composition of M3 Growth: NFA vs. NDA
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Source: Bank of Tanzania, Table 2.2.1.
Table 1 — M3 and Its Main Components (TZS billions)
Component
Apr 2025
Apr 2026
Growth y/y
Net foreign assets
14,658.6
14,553.0
-0.7%
Net domestic assets
38,679.1
50,538.9
+30.7%
— of which: claims on private sector
38,755.8
47,919.3
+23.6%
Extended broad money (M3)
53,337.7
65,091.9
+22.0%
4. The Widening Money-vs-GDP Gap
Why a persistent gap of this size is the metric to watch
The gap in one line
In 2025, Tanzania's money supply grew roughly four times faster than its real economy (24.7% vs. ~6.0%). A one-off gap of this size can reflect healthy financial deepening — more people opening bank accounts, more businesses accessing formal credit for the first time. A persistent gap of this size, repeated for a second year running, is different: it means the banking system is creating purchasing power faster than the economy can produce goods and services to absorb it.
Tanzania has genuine grounds for the "financial deepening" explanation — private sector credit to GDP has climbed from just 14.3 percent in 2018 to 21.6 percent in 2025, still low by regional and global standards, meaning there is real room for credit to keep expanding as more of the economy is formally banked. But the rate of that expansion in the last 12–18 months has been unusually fast, and TICGL's view is that both explanations — genuine deepening and an overheating credit cycle — are probably true at the same time, in different parts of the economy.
Chart 4 — Private Sector Credit to GDP Ratio, Tanzania (2018–2025)
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Source: Bank of Tanzania, BOT Monthly Economic Review, May 2026, Table A1.
5. The First Warning Sign: Core Inflation Starts to Accelerate
Core inflation jumped from 2.2% to 3.1% in a single month (April 2026)
Textbook monetary theory does not predict inflation to arrive instantly or mechanically — it typically shows up with a lag, and Tanzania's April 2026 inflation figures should not be read as pure proof of a money-supply-driven price spiral (much of the April jump was explicitly attributed by the Bank of Tanzania to fuel price pass-through from the Middle East conflict). But the direction is consistent with what a persistently high M3-vs-GDP gap would predict: both headline inflation (4.0%, up from 3.2%) and, more tellingly, core inflation (3.1%, up from 2.2%) — which strips out volatile food and energy prices — rose sharply in the same month.
Core inflation is the more important of the two for this story, because it is less exposed to one-off external shocks like oil prices and more reflective of underlying domestic demand pressure — exactly the channel through which excess money supply growth would be expected to show up first.
Source: NBS & Bank of Tanzania computations, BOT Monthly Economic Review, May 2026.
TICGL read: One month of rising core inflation alongside high M3 growth is not proof of causation. But it is exactly the pattern that would justify the Monetary Policy Committee watching money supply and credit growth closely over the next two to three quarters, rather than treating April's inflation uptick as a one-off, purely fuel-driven event.
6. Impact on Credit & Financial Deepening: Not All Sectors Are Growing Equally
Trade, mining and transport are absorbing most of the new credit
The domestic credit expansion behind M3 growth is highly uneven across sectors. Private sector credit grew 23.6 percent year-on-year overall, but that average hides very different stories sector by sector:
Chart 6 — Annual Credit Growth by Economic Activity, April 2026
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Source: Banks & Bank of Tanzania, Table 2.2.2.
Trade credit grew fastest at 44.2 percent — much of this is working-capital financing for import-heavy, fast-turnover businesses, which tends to translate quickly into consumer prices if it isn't matched by proportional output growth. Manufacturing credit, by contrast, grew just 4.2 percent — meaning the credit boom is disproportionately financing trade and consumption-adjacent activity rather than the kind of productive capacity expansion (factories, processing plants) that would grow real GDP fast enough to close the money-vs-output gap discussed in Section 4.
7. Impact on the Exchange Rate
So far, the Shilling has absorbed the money growth without visible strain
A textbook concern with rapid domestic money creation is currency depreciation — more Shillings chasing the same pool of foreign currency should, all else equal, weaken the exchange rate. So far, that hasn't happened in a disorderly way: the Shilling actually appreciated 2.7 percent year-on-year against the US Dollar on the official interbank market in April 2026, helped by record gold export receipts and strong tourism inflows offsetting the domestic credit expansion (see TICGL's companion analysis, "Why TZS Still Ranks Among Africa's 'Weakest' Currencies in 2026", linked below).
This is an important nuance: fast M3 growth has not yet translated into currency weakness, precisely because export receipts (gold, tourism) have been strong enough to supply the foreign currency side of the equation even as domestic credit expanded rapidly. That balance is exactly what TICGL flags as the thing to watch — if gold prices or tourism receipts soften while domestic credit growth stays this high, the currency channel is where the pressure would most likely surface next.
8. The Fiscal Link: Government Domestic Borrowing
Overdraft utilisation is rising, a signal worth tracking
Part of domestic credit expansion also reflects government financing needs. Domestic debt reached TZS 39.3 trillion at the end of April 2026, up 2.3 percent from March — an increase the Bank of Tanzania attributed mainly to utilisation of the government's overdraft facility, which rose from 13.3 percent to 15.0 percent of the domestic debt stock in a single month. Government borrowing from the banking system is one of the channels through which net domestic assets — and therefore M3 — expand, alongside private sector lending.
TZS 39.3tn
Domestic debt stock, April 2026
15.0%
Share of domestic debt from overdraft, up from 13.3%
5.06%
Treasury bill weighted average yield, April 2026
5.75%
Central Bank Rate, held since Q1 2026
9. TICGL Risk Assessment
Rating the plausibility and severity of each transmission channel
Table 2 — Where Excess Money Growth Could Show Up Next
Channel
Current status
TICGL risk rating
Core inflation
Rose from 2.2% to 3.1% in one month (April 2026)
Watch closely
Headline inflation
4.0%, still within EAC/SADC target bands
Contained for now
Exchange rate (TZS/USD)
Appreciating 2.7% y/y, supported by gold & tourism
Trade credit growth of 44.2% vs. manufacturing at 4.2%
Watch closely
Government crowding-out via overdraft use
Overdraft share of domestic debt up from 13.3% to 15.0% in a month
Watch closely
Banking sector liquidity stress
Reverse repo demand fell to TZS 379.7bn from TZS 585.7bn (improving)
Low
10. TICGL Analytical Take
The money-vs-GDP gap is the single number to track. A widening gap between M3 growth (22-25%) and real GDP growth (~6%) sustained into 2027 would be a far more reliable early warning of future inflation than any single month's headline CPI print.
Financial deepening and overheating can — and probably do — coexist. Tanzania's private credit-to-GDP ratio (21.6%) is still low by international standards, meaning structural credit expansion is healthy and needed. But the pace of the last 18 months looks faster than the pace of genuine new-customer financial inclusion alone would explain.
Export receipts are currently masking the pressure. Gold and tourism inflows have let Tanzania run rapid domestic credit growth without currency strain so far. This is a favourable but not guaranteed condition — it depends on global gold prices and travel demand remaining strong.
Sectoral credit allocation matters as much as the aggregate number. Credit flowing disproportionately into trade rather than manufacturing or agro-processing raises the odds that new money shows up in consumer prices rather than in expanded productive capacity — a theme consistent with TICGL's broader research on Tanzania's industrialisation gap under FYDP IV.
11. Frequently Asked Questions
What is Tanzania's M3 money supply and how big is it?
M3 (extended broad money supply) is the broadest measure of money circulating in Tanzania's economy — currency plus all bank deposits, including foreign currency deposits. It reached TZS 65.1 trillion in April 2026, up 22.0 percent from a year earlier.
Why is Tanzania's M3 growing faster than GDP?
M3 grew 24.7 percent in 2025 versus real GDP growth of about 6.0 percent — a gap driven almost entirely by rapid domestic credit expansion (net domestic assets up 30.7 percent y/y) rather than foreign currency inflows (net foreign assets fell 0.7 percent).
Does fast M3 growth cause inflation in Tanzania?
It's a contributing risk factor rather than an automatic cause. Headline inflation rose to 4.0 percent in April 2026 (from 3.2 percent) and core inflation rose to 3.1 percent (from 2.2 percent) — both still within target bands, but the direction is consistent with what a persistent money-vs-GDP gap would predict.
What is driving Tanzania's rapid credit and money supply growth?
Private sector credit grew 23.6 percent year-on-year, led by trade (44.2%), mining and quarrying (39.7%), and transport and communication (39.7%). Private credit to GDP has risen from 14.3 percent in 2018 to 21.6 percent in 2025.
TERI
Tanzania Economic Research Institute (TERI) — a TICGL research initiative
Analysis prepared using data from the Bank of Tanzania Monthly Economic Review, May 2026, and Ministry of Finance and Planning.
Primary data source: Bank of Tanzania, Monthly Economic Review — May 2026 (ISSN 0856-6844), Tables 2.2.1, 2.2.2, A1 and A3. Figures are provisional (p) where noted in original BOT tables and subject to revision in subsequent BOT publications.
12. Muhtasari kwa Kiswahili
Fedha zinazozunguka nchini Tanzania (M3) ziliongezeka kwa asilimia 22 mwaka hadi mwaka, kufikia TZS trilioni 65.1 mwezi Aprili 2026 — sawa na karibu mara nne ya kasi ya ukuaji halisi wa uchumi (GDP) uliokadiriwa kufikia asilimia 6 pekee mwaka 2025. Ongezeko hili halitokani na fedha za kigeni zinazoingia nchini (mali za nje halisi (NFA) zilipungua kwa asilimia 0.7), bali linatokana kabisa na mikopo mikubwa ya ndani — hasa kwa sekta ya biashara (asilimia 44.2), uchimbaji madini na usafirishaji — wakati mikopo kwa sekta ya viwanda ikibaki chini sana (asilimia 4.2 tu).
Kutokana na nadharia ya kiuchumi ya fedha, endapo kiasi cha fedha kinachozunguka kinakua kwa kasi zaidi ya uzalishaji halisi wa bidhaa na huduma, matokeo yake huwa ni mfumuko wa bei (inflation) au udhaifu wa sarafu. Dalili za awali tayari zinaonekana: mfumuko wa bei wa msingi (core inflation) uliongezeka kutoka asilimia 2.2 hadi 3.1 kwa mwezi mmoja tu (Aprili 2026), ingawa bado uko ndani ya lengo la taifa.
Kwa sasa, Shilingi ya Tanzania imeendelea kuwa imara — hata ikiimarika kwa asilimia 2.7 dhidi ya Dola — kwa sababu mauzo ya dhahabu na utalii yamesaidia kuziba pengo hili. Hata hivyo, TICGL inashauri kufuatilia kwa karibu uwiano kati ya ukuaji wa fedha (M3) na ukuaji halisi wa uchumi (GDP), kwani endapo bei za dhahabu duniani au mapato ya utalii yatapungua huku mikopo ya ndani ikiendelea kukua kwa kasi hii, hapo ndipo hatari halisi ya mfumuko wa bei na udhaifu wa sarafu ingeweza kujitokeza.
Tanzania Shilling Stability & National Debt Analysis March 2026 | TICGL
TICGL Economic Intelligence |
ticgl.com
| March 2026 Report Series
TICGL Economic Analysis
Tanzania Shilling Stability & National Debt: A Comprehensive Analysis — March 2026
📅 Published: March 16, 2026📊 Source: Bank of Tanzania🏢 TICGL Research Unit🌍 Tanzania Economy
The Tanzania Shilling (TZS) has maintained remarkable stability in early 2026 — depreciating just 0.97% annually despite a national debt of TZS 128.6 trillion. This report examines the exchange rate trends, debt composition, creditor structure, and what all of this means for Tanzania's projected 6.0–6.3% GDP growth in 2026.
TZS 2,554
Avg Rate Mar 2026 (per USD)
▲ +1.4% from Jan 2026
0.97%
Annual TZS Depreciation
✔ Moderate — well-managed
TZS 128.6T
Total National Debt
≈ USD 51.1 billion
70%
External Debt Share
TZS 90 trillion external
3.2%
Inflation (Feb 2026)
✔ Low & controlled
6.0–6.3%
GDP Growth Forecast 2026
✔ Strong outlook
Section 01 — Currency Stability
Tanzania Shilling Exchange Rate Trends
The stability of the Tanzania Shilling is most directly measured by its exchange rate against the US dollar (USD). In early 2026, the Shilling showed moderate, well-managed depreciation — reflecting balanced monetary policy by the Bank of Tanzania (BoT) amidst global commodity price pressures and domestic liquidity dynamics.
By March 2026, the average exchange rate hovered around TZS 2,554 per USD, fluctuating in the range of TZS 2,550–2,609. The annual depreciation rate of just 0.97% is a strong signal that Tanzania's foreign exchange management remains effective.
TZS/USD Exchange Rate — Jan 2025 to Mar 2026
Source: Bank of Tanzania | Monthly Average Exchange Rates
Detailed Exchange Rate Data
Period
Exchange Rate (TZS per USD)
Monthly Change (%)
Notes
Jan 2025
2,486.6
—
Baseline stability amid low inflation
Jun 2025
2,604.6
+4.7%
Peak depreciation due to seasonal imports
Sep 2025
2,442.8
−6.2%
Recovery from export gains (gold)
Dec 2025
2,447.5
+0.2%
End-year stability
Jan 2026
2,518.1
+2.9%
Slight rise linked to debt payments
Mar 2026 (Avg)
2,554.7
+1.4%
Fluctuated TZS 2,550–2,609; moderate pressure
Key Insight: Despite seasonal peaks (Jun 2025: TZS 2,604.6/USD), the Shilling self-corrected to TZS 2,442.8 by September 2025 — underpinned by strong gold and agricultural export revenues. Reserves of USD 6.3 billion (~5 months import cover) provide a robust buffer against external shocks.
Section 02 — Debt Overview
Tanzania National Debt Overview (January 2026)
At the end of January 2026, Tanzania's total national debt stood at approximately TZS 128.6 trillion (USD 51.1 billion) — a modest 0.1% increase from the previous month. The debt is split between external obligations and domestic borrowing, with external debt accounting for 70% of the total.
National Debt Composition
External vs. Domestic — Jan 2026
Debt Stock by Category
TZS Trillion — January 2026
Debt Category
Amount (TZS)
Amount (USD)
Share of Total
External Debt
≈ TZS 90.0 trillion
≈ USD 35.8 billion
70%
Domestic Debt
TZS 38.6 trillion
≈ USD 15.3 billion
30%
Total National Debt
≈ TZS 128.6 trillion
USD 51,079.8 million
100%
Section 03 — Domestic Borrowing
Growth of Domestic Debt (2018–2026)
Domestic borrowing has grown substantially over the past eight years, driven by the government's need to finance infrastructure, energy, and budget deficits. From TZS 13,618.8 billion in 2018, domestic debt nearly tripled to TZS 38,599.6 billion by January 2026 — an increase of 183% over eight years.
The most rapid acceleration occurred between 2020 and 2023, coinciding with COVID-19 recovery spending and accelerated public infrastructure investment. In January 2026 alone, domestic debt grew by 1.9% month-on-month.
Government Domestic Debt Growth Trend (2018–2026)
TZS Billion | Source: Bank of Tanzania
Year / Period
Domestic Debt (TZS Billion)
Year-on-Year Growth (%)
Total National Debt (TZS Trillion)
2018
13,618.8
—
—
2020
14,637.8
+7.5%
—
2022
21,256.1
+45.2%
—
2023
26,494.6
+24.6%
—
2024
31,002.6
+17.0%
—
2025
37,899.0
+22.2%
—
Jan 2026
38,599.6
+1.9% (MoM)
128.6
Notable: The jump from TZS 14,637.8B (2020) to TZS 21,256.1B (2022) — a 45.2% spike — reflects significant post-pandemic fiscal stimulus. Growth has since moderated, signalling improved fiscal discipline.
Section 04 — Debt Instruments
Composition of Domestic Debt by Instrument
The majority of Tanzania's domestic debt is raised through government securities — primarily long-term Treasury Bonds, which provide stable, cost-effective financing for development projects. As of January 2026, government bonds accounted for an overwhelming 80.4% of total domestic debt.
Domestic Debt by Instrument
Percentage Share — Jan 2026
Domestic Debt by Instrument
TZS Billion Values — Jan 2026
Instrument
Amount (TZS Billion)
Share of Total
Purpose
Government Bonds
31,015.1
80.4%
Long-term development financing
Treasury Bills
1,821.4
4.7%
Short-term liquidity management
Non-securitised Debt
5,627.3
14.6%
Budget support obligations
Other Liabilities
0.1
~0%
Miscellaneous
Total Domestic Debt
38,599.6
100%
—
Why bonds dominate: Treasury Bonds provide long-dated, fixed-rate financing that matches the timeline of Tanzania's infrastructure projects (hydropower, transport, etc.) and reduce rollover risk compared to short-term Treasury Bills.
Section 05 — Creditor Base
Major Holders of Government Domestic Debt
Tanzania's domestic debt market is anchored by institutional investors — particularly commercial banks and pension funds, which together hold more than 55% of all government domestic securities. This broad-based creditor structure reduces concentration risk and reflects strong confidence in Tanzanian government paper.
Domestic Debt Holders — Share by Creditor Type
As at January 2026 | Source: Bank of Tanzania
Creditor
Amount (TZS Billion)
Share
Significance
Commercial Banks
10,902.5
28.5%
Largest single creditor group
Pension Funds
10,389.5
27.1%
Long-term domestic savings mobilised
Bank of Tanzania
7,436.0
19.4%
Monetary policy operations
Insurance Companies
2,005.0
5.2%
Asset-liability matching
Other Investors
7,128.9
18.6%
Retail & institutional diversification
Section 06 — External Obligations
External Debt Structure
Tanzania's external debt of ~TZS 90 trillion (≈ USD 35.8 billion) is predominantly owed to multilateral development institutions. Multilateral lenders — including the World Bank, African Development Bank, and IMF — account for 58.2% of external debt, offering concessional terms that reduce debt servicing pressure.
Commercial creditors hold 35.5% of external debt, signalling Tanzania's growing access to international capital markets — though this also introduces higher refinancing risk.
External Debt by Creditor Type
Percentage Share — Jan 2026
External Debt — TZS Trillion
Values by Creditor — Jan 2026
Creditor Type
Amount (TZS Trillion)
Share
Loan Terms
Multilateral Institutions
~TZS 52.0T
58.2%
Concessional (low interest, long maturity)
Commercial Creditors
~TZS 31.7T
35.5%
Market rates — higher servicing cost
Bilateral Creditors
~TZS 3.8T
4.3%
Government-to-government, mixed terms
Export Credit
~TZS 1.8T
2.0%
Tied to specific trade financing
Risk Note: The 35.5% share of commercial creditors is a key risk factor. A global interest rate spike or credit rating downgrade could significantly increase Tanzania's external debt servicing costs, putting pressure on foreign exchange reserves.
Section 07 — Macroeconomic Linkages
The Debt–Currency Relationship
There are several transmission channels through which Tanzania's debt profile affects the stability of the Shilling. Understanding these linkages is critical for investors, policymakers, and business planners operating in Tanzania.
Factor
Effect on the Shilling
Current Status
Increase in external debt
Higher demand for foreign currency to repay loans → depreciation pressure
Monitored
Debt servicing payments
Draws down foreign exchange reserves → potential weakening of TZS
Managed
Domestic borrowing via securities
Absorbs domestic liquidity → reduces inflationary pressure on TZS
Positive
Strong export revenues (gold, agriculture)
Generates USD inflows → supports TZS appreciation
Positive
USD 6.3B forex reserves (~5 months import cover)
Provides buffer against external shocks → stabilises TZS
Positive
FDI inflows (USD 11B in 2025)
Boosts FX supply → reduces depreciation pressure
Positive
The net result of these forces is that Tanzania's Shilling has remained relatively stable in early 2026 — annual depreciation of just 0.97% confirms that the positive factors (strong exports, adequate reserves, FDI inflows) are outweighing the debt-related pressures.
Key Stability Indicators at a Glance — January 2026
Composite view of Tanzania's monetary and fiscal health metrics
Section 08 — Development Impact
Economic Implications for Growth & Development
Tanzania's monetary and fiscal conditions in early 2026 present a mixed but broadly optimistic picture for economic development. Low inflation (3.2%), a stable exchange rate, and targeted public investment are driving a projected 6.0–6.3% GDP growth for 2026 — among the highest in Sub-Saharan Africa.
However, risks persist: rising external debt (70% of total) heightens foreign exchange vulnerability — a 10% TZS depreciation could raise debt servicing costs by approximately TZS 9 trillion, crowding out social spending and potentially increasing poverty rates.
Implication Category
Positive Impact on Growth
Potential Risks
Link to Securities Market
Currency Stability
Stable TZS (0.97% depreciation) aids exports (gold, agriculture up 10%), boosting 6.2% growth
External debt servicing demands USD, risking 2–5% further depreciation if reserves dip
Oversubscribed auctions (e.g., 34% for 10-year bonds) absorb liquidity, stabilising TZS without BoT intervention
Debt Sustainability
Debt-to-GDP ~40.6%, funds infrastructure (TZS 15.24 trillion planned 2026/27), driving 160,000 jobs created in 2025
Rising to 50% by 2027 could deter FDI if "debt overhang" reduces investor confidence
Domestic securities (80% bonds) cut external reliance, keeping debt service at 6.5% of budget, freeing funds for development
Macroeconomic Resilience
Low inflation (3.2%) and CBR (5.75%) support credit growth (20.3% in 2025), aiding SMEs and diversification
Global shocks (e.g., oil prices) could amplify debt pressures, slowing IMF-projected 6.3% growth
Bond yields (11.3%) benchmark private rates, enhancing financial deepening (~15% GDP market size)
High debt diverts from social services, risking unemployment (13.4%) and inequality
Institutional investors (banks/pensions hold 55%) recycle savings into growth, but crowding out could hurt SMEs if yields rise
Tanzania GDP Growth & Debt-to-GDP Outlook (2022–2027)
GDP Growth Rate (%) vs Debt-to-GDP Ratio (%) | Projections post-2025
Section 09 — Summary
Conclusion & Outlook
✅ TICGL Summary Verdict
Data from the Bank of Tanzania's March 2026 report confirms that Tanzania's national debt continues to increase — particularly through external borrowing. Despite this growth, the Tanzania Shilling remains relatively stable, with only moderate depreciation of 0.97% annually.
Tanzania's foreign exchange management is relatively effective, supported by USD 6.3 billion in reserves
External borrowing remains within manageable levels — debt-to-GDP of ~40.6% sits well below the 55% IMF threshold
Controlled inflation (3.2%), active monetary policy (CBR at 5.75%), and adequate FX market liquidity all contribute to Shilling stability
The government securities market is a key stabilising mechanism — mobilising domestic savings (80% through bonds) reduces external vulnerability
GDP growth of 6.0–6.3% projected for 2026, driven by mining, construction, agriculture, and ongoing economic reforms
With prudent revenue mobilisation, medium-term GDP growth of 6.5–6.9% is achievable
Overall, Tanzania's balanced debt management via the government securities market has kept Shilling pressures low, positioning the country for resilient and sustained economic growth. Analysts note a moderate external debt distress risk, but ongoing reforms and strong export performance provide meaningful buffers.
Investors and business operators in Tanzania should monitor Bank of Tanzania monthly reports, foreign exchange reserve levels, and auction participation rates as leading indicators of Shilling stability and fiscal health.
Related TICGL Economic Resources
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The Tanzania shilling (TZS) demonstrated remarkable resilience throughout 2025, appreciating by 9.5% year-on-year against the USD from October 2024 to October 2025, and sustaining firmness into December amid robust foreign exchange (FX) inflows. Key drivers included record gold exports (up 38.9% YoY to USD 2.8 billion in the first 10 months), tourism receipts (USD 2.8 billion YTD, +28% arrivals), cash crop surges (cashews +15%, tobacco +12%), and proactive Bank of Tanzania (BoT) interventions via forward sales and reserve management (net FX reserves at USD 6.2 billion, covering 4.7 months of imports). As of December 13, 2025, the shilling traded at approximately TZS 2,463 per USD, reflecting a further 0.5% monthly appreciation from November's average of TZS 2,455, per recent market data. This marks a stark reversal from the 8.9% depreciation in the prior year, aligning with EAC convergence criteria and bolstering Tanzania's external position.
Economic Implications: The shilling's strength enhances import affordability, curbing imported inflation (e.g., fuel costs down 12.5%) and supporting 3.4% headline inflation in November 2025, well within the BoT's 3-5% target. This stability fosters investor confidence, evidenced by FDI inflows of USD 1.5 billion in Q3 2025 (up 10% YoY), and facilitates lower borrowing costs (Eurobond yields at 6.8%). For the broader economy, it underpins 6.2% GDP growth projections for FY2025/26 by easing production costs in manufacturing (3.5% sector expansion) and agriculture (25.6% credit growth), while amplifying export competitiveness under AfCFTA—potentially adding USD 1 billion in intra-regional trade. However, prolonged appreciation risks eroding non-gold export margins (e.g., horticulture down 5%), highlighting needs for diversification to sustain 7% medium-term growth, per IMF's 2025 Article IV. Read More:What's Next for Tanzania's Economy? Shilling Stability in 2026 Amid Post-Election Turbulence
1.1 Exchange Rate – Month-End Values
Month-end rates show consistent firmness, with a cumulative 9.0% appreciation from October 2024 through December 2025.
Month
Exchange Rate (TZS/USD)
Monthly Change (%)
Oct 2024
2,693.1
—
Sep 2025
2,442.8
-1.0 (appreciation)
Oct 2025
2,451.6
+0.4 (depreciation)
Nov 2025
2,455.3
+0.15 (depreciation)
Dec 2025 (13th)
~2,463
+0.3 (depreciation)
Source: BoT and market data (Xe.com for Dec). Trends: The shilling peaked at TZS 2,442.8 in September 2025 amid gold surges, with minor volatility in Q4 tied to seasonal imports.
1.2 Monthly Average Exchange Rate (Oct 2025)
TZS 2,460.54 per USD (October 2025 average), appreciating 0.5% from September's TZS 2,471.69.
Updated December 2025 (YTD average): TZS 2,480 per USD, reflecting sustained inflows (tourism +30.6% in November).
Annual Performance:
9.5% appreciation (October 2024 to October 2025), extending to ~9.0% through December.
BIG reversal from 8.9% depreciation a year earlier, driven by current account surplus narrowing to 2.4% of GDP.
Economic Implications: This appreciation reduces external vulnerabilities, stabilizing reserves (up 14% YoY) and supporting monetary easing (CBR at 5.75%). It lowers input costs for 70% import-dependent industries, boosting manufacturing productivity and contributing 0.8% to GDP via cost savings, per World Bank 2025 estimates. Yet, it pressures exporters (e.g., 5% margin squeeze in cashews), potentially slowing rural incomes (agri 24% of GDP) unless offset by value addition.
2. Tanzania Inflation Performance (2024–2025)
Inflation remained anchored within the 3-5% target throughout 2025, averaging 3.3% year-to-date through November, supported by ample food stocks (NFRA maize reserves at 593,485 tonnes in October), stable global energy prices (Brent at USD 70/barrel), and the shilling's firmness curbing pass-through effects. Headline eased to 3.4% in November 2025 from 3.5% in October, with core at 2.3% (up slightly from 2.1%), reflecting domestic supply dynamics rather than external pressures. Preliminary December data suggests stability at ~3.4%, per NBS trends.
Economic Implications: Low inflation preserves purchasing power for 60 million consumers, sustaining 3.5% private consumption growth and aligning with EAC/SADC benchmarks for regional integration. It enables BoT's accommodative stance, facilitating 16.1% private credit expansion and 6% GDP momentum. Positively, it mitigates poverty risks (26.4% rate), but food volatility (7.4% in October) underscores agri-reform needs—e.g., irrigation investments could shave 1-2pp off inflation, unlocking 0.5% additional growth via stable supplies, as noted in Deloitte's 2025 Outlook.
2.1 Headline Inflation Trends
Month
Inflation Rate (%)
Oct 2024
3.0
Sep 2025
3.0
Oct 2025
3.5
Nov 2025
3.4
Dec 2025 (prelim)
~3.4
Source: NBS and BoT; November easing from food moderation.
2.2 Food & Non-Food Inflation (Oct 2025)
Category
Inflation (%)
Food inflation
7.4
Non-food inflation
~2.4
Updated November 2025: Food 6.6% (down from 7.4%), non-food 2.1% (slight rise to 2.1%).
Economic Implications: Food's dominance (28.2% CPI weight) amplifies rural-urban linkages, but easing to 6.6% in November supports harvest-led recovery, adding 1% to agri GDP. Non-food stability aids urban manufacturing (e.g., cheaper inputs), but persistent food pressures risk 0.5% welfare loss for low-income households (60% budget on food).
3. Tanzania Shilling vs Inflation – Combined Table
This table illustrates the symbiotic relationship: Shilling strength offsets potential inflationary spillovers.
Slight rise mainly due to food prices, not currency weakness; anchored by policy.
Food Inflation (%)
2.5
7.0
7.4
6.6
Driven by local supply—not exchange rate; NFRA stocks mitigate volatility.
Non-Food Inflation (%)
5.4
2.3
2.4
2.1
Lower because stronger shilling reduces cost of imported goods (e.g., machinery -15%).
Source: BoT/NBS; updated with November data.
Economic Implications: The inverse dynamic (appreciating TZS vs. subdued non-food CPI) shields 40% of imports from passthrough, stabilizing energy/transport costs and contributing 0.7% to GDP via lower logistics expenses. This convergence supports fiscal space (deficit at 3.5% GDP), but food-exchange disconnect highlights supply-side vulnerabilities—addressable via USD 500M agri-investments for 1pp inflation reduction.
The shilling's 9.5% appreciation in 2025 made imports 8-10% cheaper in local terms, particularly fuel (down 20%), machinery (-15%), fertilizers (-10%), and transport equipment, keeping non-food inflation at ~2.4%.
Evidence: BoT notes: “The shilling appreciated … and remained firm against other currencies,” aiding energy stability. Updated: November non-food at 2.1%, per NBS.
Economic Implications: Cheaper imports lower production costs, boosting competitiveness (exports +15.2%) and manufacturing margins (5.2% credit growth). This eases 15% of CPI (energy/utilities), supporting urban consumption and 2% GDP from services, but risks Dutch disease in non-tradables.
4.2 Inflation Remained Within Target Because of Currency Stability
Quote: “Inflation remained stable … supported by prudent monetary policy and stable exchange rate.”
Economic Implications: Anchored expectations reduce volatility premiums, lowering lending rates (15.19%) and enabling 21.5% M3 growth. Aligns with 6% GDP, per IMF, by fostering savings (household rate +1pp) and investment.
4.3 October 2025 Inflation Rise Was Not Due to Currency Weakness
Uptick to 3.5% from food staples (maize/rice +10-15% in pockets), not FX; November eased to 3.4% with supplies.
Economic Implications: Isolates inflation to domestic factors, allowing targeted interventions (e.g., NFRA releases), preserving FX buffers for reserves (USD 6.2B). Mitigates 0.3% growth drag from food shocks, but underscores climate resilience needs (droughts cost 1% GDP annually).
5. Key Insights
(1) The shilling appreciated strongly in 2025: Helped keep inflation low (3.4% Nov) by cheapening imports. Implication: Bolsters reserves, funding infra (1.2% GDP boost from hydropower).
(2) Inflation rose slightly due to food prices—not currency weakness: 7.4% in Oct, easing to 6.6% Nov. Implication: Highlights agri-supply focus; reforms could add 0.5% growth via stability.
(3) Non-food inflation remained low because a stronger shilling reduced import costs: Fuel/construction/pharma/transport inputs down 10-20%. Implication: Enhances industrial efficiency, supporting 16.1% credit and job creation (200K in manufacturing).
(4) Monetary and fiscal coordination supported both shilling stability and low inflation: CBR 5.75% ensured liquidity/FX. Implication: Deepens integration (AfCFTA USD 1B potential), but requires diversification to counter gold dependency (50% exports).
6. Summary Narrative
The Tanzania shilling strengthened notably in 2025, appreciating by 9.5% annually through October and holding firm at ~TZS 2,463/USD in mid-December, fueled by FX inflows from gold, tourism, and crops alongside BoT interventions. This exchange rate stability was pivotal in maintaining inflation within the 3-5% target, with headline easing to 3.4% in November from October's 3.5% peak. While food inflation (6.6% in November) drove mild pressures from domestic supplies, non-food components stayed subdued (~2.1%) thanks to cheaper imports, exemplifying a favorable exchange-rate–inflation interplay. Economically, this dynamic underpins 6%+ growth by stabilizing costs, enhancing reserves, and fostering investment, though agri-diversification remains key to long-term resilience amid global uncertainties.
The Tanzania Shilling (TZS) remained broadly stable in July 2025 despite mild depreciation pressures. The currency averaged TZS 2,666.79 per USD, a 1.34% monthly decline from June, while annual depreciation slowed to 0.11%, reflecting resilience compared to 0.21% in June. Stability was supported by higher foreign exchange market activity, with IFEM turnover rising 33.7% to USD 162.5 million, boosted by export inflows, while the Bank of Tanzania intervened by selling USD 17.5 million. Importantly, reserves strengthened to USD 6,194.4 million, covering about 5 months of imports, well above EAC (4.5 months) and SADC (3 months) benchmarks, cushioning the currency against external shocks.
Exchange Rate Movement
The Shilling traded at an average of TZS 2,666.79 per USD in July 2025, compared to TZS 2,631.56 per USD in June 2025.
This represents a monthly depreciation of about 1.34%.
On an annual basis, the Shilling depreciated at a rate of 0.11%, slightly better than the 0.21% annual depreciation recorded in June 2025.
Market Liquidity & Central Bank Intervention
Interbank Foreign Exchange Market (IFEM) turnover increased to USD 162.5 million in July 2025, up from USD 121.5 million in June 2025.
The Bank of Tanzania intervened by selling USD 17.5 million, compared to USD 6.3 million in the previous month.
Seasonal inflows from cash crops and gold exports supported liquidity and moderated depreciation pressure.
Reserves Buffer
Gross foreign exchange reserves stood at USD 6,194.4 million at the end of July 2025, compared to USD 5,292.2 million in July 2024.
This covers about 5 months of imports of goods and services, above both the EAC and SADC benchmarks.
Strong reserves have helped cushion the Shilling from sharper depreciation.
Table: Tanzania Shilling Stability (July 2025)
Indicator
June 2025
July 2025
Annual Comparison
Exchange Rate (TZS per USD, average)
2,631.56
2,666.79
Depreciation 0.11%
Monthly Change (%)
—
-1.34%
—
IFEM Turnover (USD Million)
121.5
162.5
+33.7%
BOT Intervention (USD Million sold)
6.3
17.5
—
Gross Reserves (USD Million)
—
6,194.4
5,292.2 (Jul 2024)
Import Cover (months)
—
5.0
>EAC: 4.5; >SADC: 3
Economic Implications of Tanzania Shilling Stability – July 2025
1. Exchange Rate Movement
Marginal Depreciation and Resilience: The TZS's 1.34% monthly depreciation to 2,666.79 per USD from June 2025 indicates mild pressure from import demand, yet the annual depreciation slowed to 0.11% from 0.21% in June, highlighting improved stability compared to prior periods. Economically, this controlled weakening helps maintain export competitiveness, particularly for key commodities like gold (exports up to USD 3,977.6 million annually) and cash crops, boosting foreign earnings without triggering inflationary spirals. It reflects a narrowing current account deficit to USD 2,079.2 million in the year to July 2025 (down 23.4% from 2024), driven by a 19.7% rise in goods exports to USD 9,479.4 million, as per the report's external sector data.
Broader Implications: A stable yet slightly depreciating currency reduces the risk of capital outflows, supporting domestic investment and aligning with BOT's accommodative policy (CBR at 5.75%). However, persistent depreciation could elevate debt servicing costs for USD-denominated external debt (USD 32,955.5 million as of June 2025), though strong reserves mitigate this.
2. Market Liquidity & Central Bank Intervention
Increased Turnover and Supportive Inflows: The Interbank Foreign Exchange Market (IFEM) turnover surged 33.7% to USD 162.5 million from USD 121.5 million in June 2025, signaling enhanced market liquidity bolstered by seasonal inflows from cash crops (e.g., cashew nuts up significantly) and gold exports. BOT's increased intervention—selling USD 17.5 million versus USD 6.3 million—helped moderate depreciation pressures, ensuring orderly market conditions.
Economic Meaning: This liquidity boost enhances forex availability for importers, stabilizing supply chains in import-dependent sectors like manufacturing and energy (imports at USD 14,720.3 million annually). It underscores BOT's role in smoothing volatility, fostering business confidence and credit growth (15.9% annually), while aligning with global easing of trade tensions that could further support export-driven liquidity. Overall, it contributes to macroeconomic stability, potentially lowering transaction costs and encouraging foreign direct investment.
3. Reserves Buffer
Robust Accumulation and Coverage: Gross foreign reserves rose to USD 6,194.4 million by end-July 2025, up 17% from USD 5,292.2 million in July 2024, covering 5 months of imports—exceeding EAC (4.5 months) and SADC (3 months) benchmarks. This buildup, fueled by export growth (e.g., tourism receipts up 3.8% to USD 3,871.9 million), provides a strong buffer against external shocks.
Economic Significance: High reserves enhance currency credibility, reducing vulnerability to global risks like oil price stability (at USD 69.2 per barrel) and enabling BOT to intervene effectively. It supports fiscal flexibility for development spending (TZS 909.4 billion in June) and debt management (national debt at USD 46,586.6 million), promoting sustainable growth. In a regional context, this positions Tanzania favorably for credit ratings and inflows, aiding long-term projections of 6% GDP growth amid subdued global uncertainties.
Summary of Broader Economic Significance
The TZS's stability in July 2025 reflects a positive interplay of export strength, reserve adequacy, and policy vigilance, mitigating depreciation risks while supporting economic expansion. This fosters a conducive environment for private sector activity, with potential upsides in tourism and agriculture, though monitoring import pressures remains key to avoid imbalances. Compared to earlier depreciations (e.g., 6.1% in 2023), current trends indicate improved resilience, aligning with IMF and World Bank views on Tanzania's stable outlook.
In June 2025, Tanzania’s national debt reached TZS 116.6 trillion (USD 45.4 billion), a 13.5% increase from TZS 102.8 trillion in June 2024, driven by external borrowing (70.7% of total, TZS 82.4 trillion) for infrastructure and fiscal deficits. The Tanzania Shilling (TZS) depreciated by 9.6% year-on-year against the USD (2,569.46 TZS/USD), raising external debt servicing costs (USD 1–2 billion annually), despite robust reserves of USD 5,307.7 million (4.3 months of import cover). Supported by tourism receipts (USD 7,104 million) and a moderate debt-to-GDP ratio (~44.3%), Tanzania’s debt and TZS remain sustainable in the short term, but import reliance and USD exposure (67.6% of external debt) pose long-term challenges.
Tanzania National Debt Overview (June 2025)
Tanzania’s national debt encompasses public debt (domestic and external) and private sector external debt, critical for assessing fiscal sustainability. The attached document and provided data offer insights into debt stock, composition, and servicing, which are analyzed below.
Total National Debt:
Value: TZS 116.6 trillion (USD 45.4 billion at 2,569.46 TZS/USD).
Annual Increase: +13.5% from TZS 102.8 trillion (USD 43.8 billion at 2,345.38 TZS/USD) in June 2024.
Context: The document notes the national debt stock at USD 45,586.6 million (~TZS 117.1 trillion) in June 2025, aligning closely with the provided TZS 116.6 trillion. The 13.5% increase reflects increased borrowing for infrastructure (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Plant) and fiscal deficits (2.5% of GDP in 2024/25). Earlier data shows USD 48,479.9 million in April 2025 and USD 48,217.0 million in February 2025, suggesting a slight decline by June due to repayments or exchange rate effects.
Debt-to-GDP Ratio: Estimated at ~44.3% based on a GDP of ~USD 102.6 billion (2022 GDP of USD 105.1 billion, adjusted for 5.6% growth in 2024 and 6% in 2025). The IMF’s 2024 Debt Sustainability Analysis (DSA) reports a public debt-to-GDP ratio of 35%, below the 55% benchmark for low-income countries, indicating moderate distress risk. However, World Economics estimates a higher GDP (~USD 155.5 billion), implying a lower ratio of ~29.2%, highlighting data variability.
Implications: The 13.5% debt increase supports growth-enhancing projects but raises servicing costs (~40% of government expenditures, per IMF). The moderate debt-to-GDP ratio suggests sustainability, but TZS depreciation (9.6% against USD) increases external debt burdens.
Domestic Debt:
Stock: TZS 35.5 trillion (USD ~13.8 billion, 29.3% of total debt).
Annual Increase: +11.1% from TZS 32.0 trillion in June 2024.
Monthly Increase: +0.9% from May 2025 (~TZS 35.2 trillion, based on April 2025’s TZS 34,759.9 billion).
By Instrument:
Instrument
TZS Trillion
% Share
Treasury Bonds (long-term)
29.5
83.2%
Treasury Bills (short-term)
6.0
16.8%
Total
35.5
100%
By Creditor:
Creditor
TZS Trillion
% Share
Commercial Banks
10.2
28.6%
Pension Funds
9.3
26.1%
Bank of Tanzania
7.2
20.2%
Others (incl. individuals, corporates)
6.4
18.1%
Insurance Companies
1.8
5.2%
BoT Special Funds
0.6
1.8%
Total
35.5
100%
Context: The document confirms TZS 85.9 billion raised via bonds in June 2025, with TZS 93.96 billion spent on debt service (TZS 60.13 billion principal, TZS 33.83 billion interest, correcting the document’s typo of TZS 276.8 billion). The 11.1% annual growth reflects financing of fiscal deficits (e.g., TZS 270.2 billion in May 2025 for Mainland Tanzania). Treasury bonds’ 83.2% share aligns with a shift to long-term instruments, reducing refinancing risks.
Implications: The diversified creditor base (28.6% banks, 26.1% pension funds) and long-term bond dominance enhance stability, but high borrowing rates (15.5% lending rates) crowd out private sector credit, which weakened in Q4 2024. The document’s note on retail investor participation via TIPS (18.1% “Others”) supports financial inclusion.
External Debt:
Stock: TZS 82.4 trillion (USD 33.0 billion, 70.7% of total debt).
Annual Increase: +14.8% from TZS 71.8 trillion (USD 30.6 billion) in June 2024.
By Borrower:
Borrower
TZS Trillion
% Share
Central Government
70.3
85.4%
Private Sector
12.1
14.6%
Public Corporations
≈ 0
Negligible
Total
82.4
100%
By Use of Funds:
Sector
% Share
Transport & Telecommunication
25.4%
Social Welfare & Education
21.3%
Energy & Mining
16.4%
Budget Support
15.2%
Agriculture
6.5%
Finance & Insurance
5.1%
Industry
4.0%
Others
6.1%
By Currency:
Currency
% Share
USD
67.6%
EUR
17.2%
JPY
4.9%
CNY
3.4%
SDR
3.0%
Others
3.9%
Context: The document’s tables (e.g., Table 2.2, 2.3, 2.4) confirm the external debt stock and composition, with USD 109.9 million disbursed in April 2025 for projects like SGR and TAZARA Railway (25.4% transport). The 14.8% increase reflects concessional loans (e.g., IMF’s USD 441 million ECF/RSF, World Bank’s USD 527 million) and non-concessional borrowing (34% of external debt). The 67.6% USD share amplifies risks from the 9.6% TZS depreciation.
Implications: The central government’s 85.4% share aligns debt with development priorities (e.g., Vision 2050), but low industry (4%) and agriculture (6.5%) allocations limit structural transformation. High USD exposure increases servicing costs (USD 80.9 million in April 2025), with external debt service at ~2.89% of GNI in 2023.
Debt Servicing:
Domestic: TZS 93.96 billion in June 2025 (TZS 60.13 billion principal, TZS 33.83 billion interest), per the document. Annual servicing was TZS 890.9 billion in February 2025 (TZS 609.9 billion principal, TZS 281 billion interest).
External: USD 80.9 million in April 2025, with annual estimates of USD 1–2 billion, driven by USD-denominated debt (67.6%) and TZS depreciation.
Context: Servicing absorbs ~40% of government expenditures, per IMF, straining fiscal space. Concessional loans (e.g., World Bank, 48% of external debt) mitigate costs, but non-concessional borrowing raises concerns.
Implications: High servicing costs limit development spending (33.7% of Zanzibar’s budget), necessitating revenue mobilization (TZS 2,689.2 billion in May 2025, 3.1% above target) and export growth.
Tanzania Shilling (TZS) Sustainability
The TZS’s sustainability is assessed through its exchange rate stability, depreciation trends, and impact on debt servicing, drawing from the provided data and document’s external sector insights (e.g., Charts 2.7.1–2.7.3, Table 2.7.1).
Exchange Rate Performance:
USD/TZS (IFEM):
June 2024: 2,345.38
May 2025: 2,565.08
June 2025: 2,569.46
Annual Depreciation: -9.6%
Monthly Change: -0.2% (May to June 2025)
Bureau de Change:
Buying Rate: 2,574.33 TZS/USD
Selling Rate: 2,582.67 TZS/USD
Other Currencies:
Currency
TZS per Unit (June 2025)
% Change (Y-o-Y)
EUR
2,763.91
-10.4%
GBP
3,248.65
-9.7%
JPY (100 units)
1,617.18
-10.3%
CNY
353.77
-10.2%
Context: The document notes improved IFEM liquidity in June 2025, driven by seasonal cash crop exports (e.g., cashew nuts, tobacco) and gold exports (USD 3,369.7 million annually). The 9.6% depreciation aligns with earlier trends (9% in 2024, 8% in 2023), but a slight 0.28% appreciation in October 2024 and 2.6% by January 2025 indicate periods of stability. The BoT’s USD 7 million intervention in January 2025 and reserves of USD 5,307.7 million (4.3 months of import cover) support orderly markets.
Drivers:
Import Demand: Goods imports rose to USD 459.5 million in Zanzibar and USD 13,040.7 million for Tanzania (Table A7), driven by capital goods (e.g., SGR, hydropower).
Export Shortfalls: Zanzibar’s exports fell to USD 150.3 million (-11.9%), with cloves down 27.2%. Tanzania’s goods exports grew to USD 1,036 million (Table 2.7.1), led by gold and cereals (USD 501.3 million), but were insufficient to offset imports.
Global USD Strength: U.S. monetary tightening increased USD demand, impacting emerging market currencies like the TZS.
Implications: The 9.6% depreciation raises import and debt servicing costs, contributing to inflation (3.4% in Zanzibar, 3.2% in Mainland). The narrow Bureau spread (0.3%) and low dollarization (3.2% of Mainland businesses use USD) indicate market confidence, but sustained depreciation pressures reserves.
Forex Market Activity:
IFEM Volume: USD 65.4 million in June 2025, +12.6% from USD 58.1 million in May 2025 (document, Page 10). This reflects trade settlements and seasonal imports, compared to USD 95.7 million in December 2024.
Reserves: USD 5,307.7 million (Chart 2.7.1), covering 4.3 months of imports, down slightly from USD 5,323.6 million in January 2025 but sufficient per IMF’s 4-month threshold.
Implications: Increased IFEM activity signals robust demand, but reserves and BoT interventions (e.g., USD sales) ensure stability. Service receipts (USD 7,104 million, driven by tourism’s 10% arrival increase to 2,333,322) bolster forex inflows.
TZS Sustainability:
Stability: The TZS’s “orderly and market-driven” performance (document, Page 10) and minimal monthly depreciation (-0.2%) indicate short-term stability, supported by reserves and interventions.
Risks: The 9.6% annual depreciation and high USD debt exposure (67.6%) increase servicing costs, with external debt service at USD 1–2 billion annually. Import reliance (USD 13,040.7 million) and export volatility (e.g., cloves) strain reserves.
Mitigating Factors: Tourism receipts (USD 7,104 million), FDI (USD 3.7 billion), and concessional financing (e.g., IMF’s USD 441 million) support forex inflows. The BoT’s 6% Central Bank Rate (Page 7) controls inflation (3%–5% target), stabilizing the TZS.
Implications: The TZS is sustainable in the short term, but long-term pressures from depreciation and import growth require export diversification (e.g., cereals, manufactured goods) and reserve accumulation.
~40% of government expenditures; USD 80.9 million in April 2025
USD/TZS Exchange Rate
2,569.46
-9.6% depreciation from June 2024; -0.2% from May 2025
Foreign Exchange Reserves
USD 5,307.7 million
4.3 months of import cover; supports TZS stability
Current Account Deficit
USD 2,117.6 million (est.)
Driven by goods imports (USD 13,040.7 million) vs. exports (USD 1,036 million)
Service Receipts
USD 7,104 million
+9.2% from USD 6,577 million; driven by tourism (2.3 million arrivals)
Key Insights and Policy Implications
Debt Sustainability:
Status: The TZS 116.6 trillion debt (44.3% of GDP) is sustainable per the IMF’s DSA (below 55% benchmark), with moderate distress risk. External debt’s 70.7% share and 14.8% growth support infrastructure (25.4% transport) but increase servicing costs (USD 1–2 billion annually).
Policy: Prioritize concessional financing (e.g., World Bank’s USD 527 million) and revenue mobilization (TZS 2,339.2 billion tax revenue in May 2025, 4.1% above target) to reduce non-concessional borrowing (34% of external debt).
TZS Sustainability:
Status: The 9.6% depreciation and stable monthly performance (-0.2%) indicate short-term TZS stability, supported by reserves (USD 5,307.7 million) and tourism receipts (USD 7,104 million). However, import reliance and USD debt exposure pose long-term risks.
Policy: Boost exports (e.g., cereals, USD 501.3 million; manufactured goods) via AfCFTA and diversify debt currencies to mitigate USD risks (67.6% share).
Debt-TZS Nexus:
Impact: TZS depreciation increases external debt servicing costs, with USD 22.3 billion (67.6%) in USD-denominated debt. This contributes to inflation (3.4% in Zanzibar) and fiscal pressure.
Policy: Strengthen reserves through FDI (USD 3.7 billion) and tourism (2.3 million arrivals) to stabilize the TZS and reduce servicing costs.
Economic Context:
Growth: 5.6% GDP growth in 2024 and 6% projected for 2025 support debt absorption, driven by tourism and infrastructure.
Risks: TZS depreciation, global USD strength, and export volatility (e.g., cloves -27.2%) threaten sustainability. Climate shocks and election uncertainties (October 2025) add risks.
Opportunities: Vision 2050, MKUMBI II reforms, and digital financial inclusion (TIPS, 453.7 million transactions) enhance fiscal and TZS resilience.
Critical Examination of the Establishment Narrative
Debt Optimism: The BoT and IMF emphasize sustainability (35% debt-to-GDP), but the 13.5% debt increase and 9.6% TZS depreciation raise servicing concerns, especially with USD debt (67.6%). The IMF’s moderate risk rating may understate long-term vulnerabilities if exports (e.g., cloves) or tourism falter.
TZS Stability: The BoT’s “orderly market” narrative (Page 10) is supported by reserves and interventions, but high import demand (USD 13,040.7 million) and global USD strength challenge long-term TZS sustainability. X posts on regional debt (e.g., Kenya’s unsustainable levels) suggest broader risks.
Crowding Out: The narrative overlooks domestic borrowing’s crowding-out effect (15.5% lending rates), limiting private sector credit (12.8% growth in January 2025) and Vision 2050’s private sector-led goals.
In February 2025, the Tanzania shilling remained broadly stable against the US dollar, with only a slight depreciation from TZS 2,560/USD in January to TZS 2,566/USD, marking a modest 0.23% change. Despite this, the interbank foreign exchange market saw a significant increase in activity, with traded volumes rising by 27.4% from USD 57.2 million to USD 72.9 million. This indicates growing demand for foreign currency—likely for imports or external payments—yet the limited impact on the exchange rate reflects strong macroeconomic management, sufficient forex reserves, and sustained confidence in the Tanzanian economy.
Tanzania Monthly Economic Review – March 2025, the Tanzania shilling (TZS) remained relatively stable against the US dollar (USD) in February 2025, with only slight depreciation observed.
Tanzania Shilling Stability Against the USD – February 2025
Exchange Rate Movement:
February 2025: ➤ TZS 2,566.00 per USD
January 2025: ➤ TZS 2,560.00 per USD
Change: ➤ The shilling depreciated by TZS 6.00, equivalent to 0.23% over the month.
💡Interpretation: What Does This Mean?
The Tanzania shilling experienced only marginal depreciation, suggesting strong overall currency stability.
The interbank foreign exchange market was active, with trading volumes increasing from:
USD 57.2 million (Jan 2025) to
USD 72.9 million (Feb 2025) ➤ Increase of 27.4%, indicating rising demand for USD (possibly for imports or debt servicing).
Despite increased forex demand, the shilling held relatively firm, implying:
Sufficient foreign exchange reserves by the Bank of Tanzania
Tight monetary and fiscal coordination
Controlled inflation and disciplined currency management
Summary Table: Shilling vs. USD
Month
TZS/USD Exchange Rate
Monthly Change
Forex Market Volume
January 2025
2,560.00
—
USD 57.2 million
February 2025
2,566.00
+0.23%
USD 72.9 million
The Tanzania shilling remains broadly stable against the US dollar, with only slight depreciation in February 2025 despite increased foreign exchange market activity. This reflects confidence in macroeconomic fundamentals and effective monetary policy management by the Bank of Tanzania.
Tanzania shilling's stability against the US dollar:
What It Tells Us:
The Tanzania Shilling Is Stable – The exchange rate changed only slightly from TZS 2,560/USD in January to TZS 2,566/USD in February 2025, a depreciation of just 0.23%. ➤ This signals that the shilling is not under heavy pressure and is being well-managed by the Bank of Tanzania.
Market Demand for USD Is Growing – Foreign exchange trading in the interbank market increased from USD 57.2 million to USD 72.9 million—a 27.4% increase. ➤ This could reflect rising imports, seasonal corporate demand, or external obligations (like debt service or payments for goods and services).
Despite Demand, the Currency Held Steady – Even with the increased demand for dollars, the shilling did not weaken significantly. ➤ This shows strong supply-side support, likely through foreign reserves or intervention by the central bank.
Investor and Market Confidence Remains High – A stable exchange rate in the face of higher forex demand typically means:
Inflation is under control
Interest rates are appropriate
The external sector is resilient
✅ Bottom Line:
The slight movement in the exchange rate tells us the Tanzania shilling is stable and well-supported, even as demand for USD rises. This reflects sound economic management, confidence in the local currency, and a resilient foreign exchange system.
The Tanzania Shilling (TZS) showed significant appreciation in December 2024, reversing the depreciation trend observed in previous months. The currency’s movement was influenced by increased foreign exchange inflows, monetary policy adjustments, and external economic conditions.
1. Exchange Rate Appreciation
The Tanzania Shilling appreciated by 9.3% in December 2024, strengthening to TZS 2,420.84 per USD from TZS 2,659.03 per USD in November 2024.
On an annual basis, the Shilling appreciated by 3.8%, compared to a 6.3% depreciation recorded in the previous month.
This appreciation was one of the largest monthly gains in recent years, signaling strong demand for the Shilling and improved foreign exchange reserves.
2. Factors Behind the Shilling’s Strengthening
The appreciation of the TZS was driven by multiple factors: ✅ Increased Foreign Exchange Inflows:
Exports of cashew nuts, tobacco, and gold surged, bringing in more US dollars.
Tourism earnings rose, contributing to a stronger balance of payments. ✅ Monetary Policy Adjustments:
The Bank of Tanzania (BoT) intervened in the market, selling USD 2 million to stabilize the exchange rate.
Interest rates in the Interbank Foreign Exchange Market (IFEM) improved, attracting more liquidity. ✅ Global Economic Conditions:
Easing US Federal Reserve interest rates reduced pressure on emerging market currencies, benefiting the Tanzanian Shilling.
3. Impact of a Stronger Shilling
🔹 Positive Effects
Lower import costs: A stronger TZS makes imported goods, fuel, and raw materials cheaper, helping to reduce inflationary pressures.
Improved investor confidence: A stable currency encourages foreign direct investment (FDI) and supports economic growth.
Stronger foreign reserves: The BoT’s foreign exchange reserves rose to USD 5,500.5 million in December 2024, covering 4.5 months of imports, aligning with EAC and SADC benchmarks.
🔹 Potential Risks
Reduced export competitiveness: A stronger TZS could make Tanzania’s exports more expensive, potentially slowing export growth.
Impact on debt servicing: If Tanzania holds foreign-denominated debt, a strengthening shilling could affect repayment costs depending on hedging strategies.
Key Takeaways:
The TZS appreciated by 9.3% in one month, reaching TZS 2,420.84 per USD, driven by strong exports, foreign exchange inflows, and monetary policy interventions.
Foreign reserves improved to USD 5,500.5 million, covering 4.5 months of imports.
While the stronger Shilling helps lower import costs and inflation, it may affect export competitiveness in the long run.
The Bank of Tanzania’s monetary policy remains crucial in balancing currency stability, inflation control, and economic growth
From 2017 to 2023, the Tanzanian shilling consistently depreciated against the US dollar, with end-of-quarter rates rising from 1,629.6 to 2,175.3 TZS/USD. This gradual depreciation reflects economic pressures, including trade imbalances and inflation, impacting currency stability. The exchange rate trends raise concerns for import costs, inflation, and foreign debt repayment, indicating the importance of strategic policies to stabilize the currency and support sustainable economic growth.
Key Figures and Averages
End of Quarter Rates:
In 2017, the exchange rate at the end of the fourth quarter was 1,629.6 TZS/USD.
By 2023, this rate reached 2,175.3 TZS/USD at the end of the fourth quarter, showing a cumulative increase over the period.
Quarterly Average Rates:
For 2017, the quarterly average exchange rate was around 1,610.3 to 1,629.6 TZS/USD.
In 2023, quarterly averages ranged from 2,177.3 to 2,172.7 TZS/USD, indicating a steady increase throughout the period.
Annual Average and Percentage Change:
From 2017 to 2023, the annual average exchange rate increased from 1,618 TZS/USD to approximately 2,175 TZS/USD, representing an average annual depreciation of the Tanzanian shilling by around 5-7%.
Breakdown of Observations
Steady Depreciation: The Tanzanian shilling has experienced consistent depreciation, likely due to inflationary pressures, trade imbalances, or other macroeconomic factors impacting foreign exchange demand and supply.
Quarterly Volatility: Within each year, there were slight quarterly fluctuations, showing minor stability challenges that can be influenced by seasonal factors, imports, and external debt obligations.
Insights
Currency Stability Concerns: The steady depreciation suggests potential challenges in currency stability, which can impact import costs, inflation, and the purchasing power of consumers.
Policy Implications: Monitoring exchange rate trends can help policymakers address the factors behind currency depreciation, such as managing inflation, promoting exports, or reducing dependency on imports.
Investor Confidence: For foreign investors, a depreciating currency can be a double-edged sword; it may lower local asset values in USD terms, but it also reduces operational costs in local currency terms.
These exchange rate trends underline the importance of economic policies to stabilize the Tanzanian shilling, as ongoing depreciation could have long-term implications on inflation and economic growth
Tanzania’s exchange rate trends reveals important insights about the country’s economic environment and the challenges it faces in terms of currency stability:
Gradual Depreciation of the Tanzanian Shilling: The consistent increase in exchange rates (depreciation of the Tanzanian shilling against the US dollar) suggests that the currency is under pressure. This depreciation may result from trade imbalances, where the demand for foreign currency to pay for imports outweighs the inflow from exports, as well as inflationary pressures within the domestic economy.
Implications for Inflation: A depreciating currency can lead to higher import costs, driving up prices of goods and services in Tanzania. This imported inflation can reduce consumers’ purchasing power, making everyday goods more expensive and potentially affecting the cost of living. Policymakers may need to manage inflation through monetary policy tools to stabilize the shilling.
Challenges for Foreign Debt Repayment: As the shilling weakens, Tanzania’s foreign debt obligations become more costly in local currency terms. This situation can strain government finances, as more Tanzanian shillings are needed to meet dollar-denominated debt repayments, potentially affecting fiscal stability.
Impact on Investment: While a depreciating currency may make Tanzania’s exports more competitive, which is favorable for the export sector, it can create uncertainty for foreign investors. Currency instability could deter long-term investments, as investors may worry about returns eroding due to exchange rate fluctuations. However, for investors with local operations, a weaker currency could mean lower operational costs in USD terms.
Need for Strategic Economic Policies: The trends suggest a need for policies aimed at stabilizing the exchange rate. Measures might include promoting exports, reducing import dependency, managing inflation, and attracting FDI to improve foreign exchange reserves. Such policies could help create a more stable economic environment and limit the negative impacts of depreciation on the broader economy.
Overall, these exchange rate trends reflect ongoing challenges in achieving currency stability, which has significant implications for inflation, debt management, consumer costs, and investment in Tanzania.
