The Tanzania Shilling's (TZS) notable appreciation in August 2025—6.6% monthly and a 7.6% year-on-year reversal from prior depreciation—underscores a robust external sector, enhancing macroeconomic stability and bolstering growth prospects. This aligns with the Bank of Tanzania's (BoT) Monthly Economic Review (September 2025), which highlights export-driven inflows amid easing global oil prices, contributing to low inflation (3.4%) and estimated Q3 GDP growth above 6%. As of early October 2025, the TZS has further strengthened to around TZS 2,456 per USD, continuing the upward trend and reflecting sustained forex reserves (over USD 6 billion). In the broader context, the IMF's 2025 outlook projects 6.0% GDP growth and 4.0% inflation for Tanzania, driven by such external resilience, while the World Bank's regional updates note Sub-Saharan Africa's momentum amid global uncertainties. These dynamics imply reduced import costs, heightened investor confidence, and a virtuous cycle for private sector expansion (e.g., 16.2% credit growth), though they risk export competitiveness if over-appreciation persists.

1. Exchange Rate Movements

• In August 2025, the Tanzanian shilling appreciated against the US dollar.
• Exchange rate:
  • August 2025: TZS 2,490.16 per USD
  • July 2025: TZS 2,666.79 per USD
    → This shows a monthly appreciation of about 6.6%.
• On a year-on-year basis:
  • August 2024: The shilling had depreciated by 10.3%.
  • August 2025: It appreciated by 7.6%, reversing the prior trend.
• Against other major currencies, the shilling remained broadly stable.

2. Interbank Foreign Exchange Market (IFEM)

• Turnover:
  • August 2025: USD 101.5 million traded.
  • July 2025: USD 162.5 million traded.
    → Lower activity compared to July.
• Bank of Tanzania intervention: Auctioned USD 19.5 million to reduce volatility.

3. Drivers of Stability

• Adequate inflows from:
  • Cash crops exports
  • Tourism earnings
  • Gold exports
• Supported further by the easing of global oil prices, which reduced pressure on the import bill.

Table: Tanzanian Shilling Exchange Rate and Movements

*approximate figure based on annual depreciation reported in 2024.

Implications for Tanzania's Economic Development

1. Exchange Rate Movements: Enhanced Purchasing Power and Inflation Anchor

• Key Observations Recap: The TZS appreciated to TZS 2,490.16 per USD in August (from TZS 2,666.79 in July), marking a 6.6% monthly gain and a 7.6% y-o-y appreciation—flipping the 10.3% depreciation seen in August 2024. Stability held against other majors (e.g., EUR, GBP).
• Implications for Economic Development:
  • Trade Balance Improvement and Import Affordability: The stronger TZS lowers costs for essential imports like fuel and machinery, easing the trade deficit (projected at 6-7% of GDP). This supports manufacturing (3.4% credit growth) and agriculture (30.1% credit rise), key to the 6%+ growth estimate. With oil prices moderating (Chart 1.5), the appreciation could shave 0.5-1% off imported inflation, per IMF models, freeing household budgets for consumption and aiding poverty reduction (targeting 20% rate by 2025).
  • Investor Confidence and Capital Inflows: The reversal from 2024's weakness signals policy credibility, attracting FDI (up 15% y-o-y in H1 2025) in mining and tourism. The World Bank notes this stability underpins Tanzania's upper-middle-income aspirations by 2030, with forex reserves covering 4.5 months of imports.
  • Risks: Prolonged appreciation (now at TZS 2,456/USD as of October 8) could erode export margins for non-gold sectors, potentially slowing diversification. BoT's vigilant monitoring mitigates this, but global USD strength (from US rate cuts) poses upside risks.

2. Interbank Foreign Exchange Market (IFEM): Deeper Market Liquidity with Managed Volatility

• Key Observations Recap: Turnover fell to USD 101.5 million (from USD 162.5 million in July), prompting BoT to auction USD 19.5 million for stability.
• Implications for Economic Development:
  • Market Maturation and Reserve Buffering: Lower turnover reflects seasonal normalization post-July peaks, but BoT's intervention (via auctions) ensures smooth liquidity, building reserves to USD 6.2 billion by September. This enhances financial deepening, with foreign currency deposits up 14.1% y-o-y (Table 2.3.1), supporting 21% M3 growth and cross-border trade.
  • Reduced Volatility for Business Planning: Targeted sales curb speculation, fostering predictability for exporters (e.g., gold firms). The African Development Bank links such stability to 10-12% annual export growth, critical for Tanzania's 14.8% total export rise to USD 16.89 billion in the year to August.
  • Risks: Declining activity could signal reduced private inflows if tourism dips seasonally; however, October data shows rebounding volumes amid sustained gold sales.

3. Drivers of Stability: Export-Led Resilience and Commodity Tailwinds

• Key Observations Recap: Appreciation fueled by cash crops, tourism earnings, and gold exports, plus lower oil import bills.
• Implications for Economic Development:
  • Diversified Revenue Streams: Gold exports hit a record USD 4.32 billion (up 35.5% y-o-y) for the year to August, comprising 25.6% of total exports, while tourism reached USD 3.92 billion (up 8%) by May. Cash crops (e.g., coffee, cotton) added seasonal USD 200-300 million inflows. This export boom (total +14.8%) narrows the current account deficit to 3.5% of GDP, per IMF estimates, funding infrastructure like Julius Nyerere Hydropower Project.
  • Inflation and Fiscal Relief: Easing oil prices (down 5-7% globally) cut import costs by USD 150 million annually, reinforcing the 3-5% inflation target and enabling fiscal space (deficit at 4.5% GDP). The World Bank's October 2025 Africa's Pulse credits such factors for Tanzania's outperformance in SSA growth.
  • Risks: Over-reliance on gold (volatile at USD 3,368/oz) and tourism (weather-sensitive) exposes to shocks; diversification into cashews/tobacco (up 10% in H2) is key.

Overall Summary and Forward Outlook

The TZS's August appreciation implies a fortified foundation for Tanzania's development: cheaper imports control inflation, export inflows drive reserves, and stability attracts investment, aligning with 6% GDP targets. This contrasts with 2024's pressures, showcasing effective BoT tools amid global trade tariffs. Into Q4 2025, continued trends (e.g., gold at record highs) could push growth to 6.2%, per IMF, but BoT may intervene if appreciation exceeds 5% quarterly to protect exporters. Structural reforms—like boosting non-traditional exports—will sustain this momentum toward 7% medium-term growth.

In March 2025, the Tanzania Shilling showed signs of short-term depreciation, yet maintained overall stability, supported by effective interventions from the Bank of Tanzania. The average exchange rate weakened to TZS 2,650.24 per USD from TZS 2,492.05 in February 2025, reflecting a 6.3% monthly depreciation and an annual depreciation of 3.4%. To manage this pressure, the central bank sold USD 62.3 million in the foreign exchange market, up sharply from USD 24.4 million in the previous month. Meanwhile, gross official reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports, exceeding both the national (4.0 months) and EAC (4.5 months) benchmarks. Despite currency pressures, inflation remained contained at 5.1%, staying within the national target and highlighting the strength of macroeconomic policy coordination.

Tanzania Shilling Stability: Analysis with Figures

Exchange Rate Trends

• In March 2025, the Tanzania Shilling traded at an average rate of TZS 2,650.24 per US dollar, showing a monthly depreciation from TZS 2,492.05 in February 2025.
• This represents a monthly depreciation of approximately 6.3%, and an annual depreciation of 3.4%, compared to a 2.2% appreciation in February 2024.

Foreign Exchange Market Interventions

• The Interbank Foreign Exchange Market (IFEM) experienced liquidity constraints, mainly due to seasonal declines in forex inflows from tourism and cash crop exports.
• To stabilize the shilling, the Bank of Tanzania intervened by selling USD 62.3 million in March 2025, compared to only USD 24.4 million in February 2025.
• Total IFEM transactions rose to USD 70.1 million, up from USD 24.4 million in February but down from USD 86.8 million in March 2024.

Foreign Exchange Reserves

• Gross official reserves increased to USD 5,693.2 million at the end of March 2025 from USD 5,327.1 million in March 2024.
• This level of reserves is enough to cover 4.6 months of projected imports, exceeding both the national benchmark (4.0 months) and EAC benchmark (4.5 months).

Inflation Context

• Headline inflation in March 2025 was recorded at 5.1%, slightly higher than 4.8% in February.
• Despite the currency depreciation, inflation has remained within the national and EAC target levels, indicating controlled domestic price pressures.

Interpretation

The Tanzania Shilling has experienced moderate depreciation against the US dollar, but this has been effectively managed by the Bank of Tanzania through:

• Active forex market interventions,
• Adequate reserve levels, and
• Maintaining stable inflation.

Table: Indicators of Tanzania Shilling Stability (March 2025)

*Approximate value based on annual depreciation rate.
MoM = Month-on-Month, YoY = Year-on-Year.

This table shows that despite some pressure on the shilling, monetary policy measures and foreign reserves have helped maintain its overall stability in the short term.

Key Insights

1. Moderate Depreciation, But Under Control

• The Tanzania shilling depreciated from TZS 2,492.05 to TZS 2,650.24 per USD in one month—a 6.3% fall.
• Over the past year, the currency has weakened by 3.4%.
• This depreciation was expected due to seasonal drops in foreign exchange inflows (like tourism and cash crop exports).

2. Effective Central Bank Intervention

• To limit excessive volatility, the Bank of Tanzania sold USD 62.3 million in the foreign exchange market.
• This is a significant increase from USD 24.4 million in February, showing active efforts to stabilize the shilling.

3. Strong Foreign Reserves Support Stability

• Reserves rose to USD 5.7 billion, enough to cover 4.6 months of imports.
• This exceeds the national benchmark (4.0 months) and EAC requirement (4.5 months).
• High reserves give the central bank the power to defend the currency if needed.

4. Stable Inflation Despite FX Pressure

• Even with the depreciation, inflation stayed at 5.1%, within the national target.
• This shows that the depreciation has not triggered runaway price increases, indicating good policy coordination.

Conclusion

The Tanzania Shilling faced short-term depreciation pressures in March 2025, but remained broadly stable due to effective central bank action, healthy foreign reserves, and contained inflation. This reflects a resilient and well-managed financial system, capable of absorbing external shocks while supporting economic stability.