December 2025 - Comprehensive Analysis
Tanzania's economy demonstrated robust stability and resilience during October-November 2025, as highlighted in the Bank of Tanzania's November 2025 Monthly Economic Review. Key supports included prudent monetary policy anchoring inflation and liquidity, strong export performance, improved fiscal revenues, and a narrowing external imbalance.
This stability fosters predictable conditions for investment and consumption, supporting poverty reduction with a target of less than 25% by 2030 and substantial job creation. The narrowing deficits bolster reserves, mitigating shocks from global commodity volatility and enabling AfCFTA integration with USD 1 billion trade potential. Positive fundamentals attracted USD 1.5 billion in FDI during Q3, representing a 10% year-on-year increase and adding approximately 1% to GDP via spillovers.
However, food-driven pressures and interest costs accounting for 6.5% of the budget risk exacerbating inequality. Targeted agricultural reforms could unlock 0.5-1% additional growth, enhancing medium-term prospects toward upper-middle-income status.
Headline inflation remained firmly anchored within the Bank of Tanzania's 3-5% target and EAC/SADC convergence criteria of less than 8%, despite upward pressures from food items amid seasonal supply constraints and regional harvests.
| Indicator | Oct 2024 (%) | Sep 2025 (%) | Oct 2025 (%) |
|---|---|---|---|
| Headline inflation | 3.0 | 3.4 | 3.5 |
| Food inflation | 2.5 | 7.0 | 7.4 |
| Core inflation | 3.2 | 2.2 | 2.1 |
| Energy, fuel & utilities | 9.7 | 3.7 | 4.0 |
Headline inflation eased to 3.4%, with food inflation declining to 6.6% due to harvest relief, while core inflation remained stable at 2.1%.
Anchored inflation preserves purchasing power for 60 million consumers, with 60% of budgets allocated to food, sustaining consumption-led growth at 3.5% and enabling accommodative policy with the Central Bank Rate at 5.75%. Food volatility poses risks to welfare for low-income households, potentially adding 0.3% to poverty if prolonged. NFRA interventions help mitigate these risks, supporting rural stability with agriculture contributing 24% to GDP.
Energy relief lowers production costs in manufacturing by 3.5%, aiding competitiveness. However, persistent food issues underscore the need for climate and agricultural investment, with irrigation improvements potentially reducing inflation by 1 percentage point and adding 0.5% to GDP.
The Bank of Tanzania adopted an accommodative yet cautious stance, maintaining the Central Bank Rate at 5.75% to balance growth and stability, with liquidity remaining adequate as the 7-day interbank rate stood at 6.28%, within the plus or minus 2% corridor.
| Indicator | Value (Oct 2025) |
|---|---|
| Central Bank Rate (CBR) | 5.75% |
| 7-day interbank rate | 6.28% |
| Broad money (M3) growth (y/y) | 21.5% |
| Private sector credit growth (y/y) | 16.1% |
| Sector | Annual Credit Growth (%) |
|---|---|
| Mining & quarrying | 29.7 |
| Agriculture | 25.6 |
| Hotels & restaurants | 23.2 |
| Trade | 21.8 |
Strong recovery observed in export-oriented and productive sectors, with personal loans, particularly to MSMEs, accounting for 36.4% share of total credit.
Robust credit growth at 16.1%, exceeding the 15% target, fuels productive sectors, contributing 1.5-2% to GDP through mining and tourism multipliers and creating jobs, with 1 in 5 jobs linked to tourism. Broad money supply growth of 21.5% supports investment without overheating the economy, as evidenced by low core inflation, aligning with the 6.2% GDP growth target.
The sector focus enhances economic diversification, with gold representing 50% of exports. However, MSME dominance in credit allocation poses risks if non-performing loans rise from the current 3.2% level. Credit guarantee schemes could unlock TZS 2 trillion in additional lending, boosting inclusive growth and youth employment, which currently stands at 13.4% unemployment.
Interest rates remained stable, with marginal easing observed in negotiated segments, providing support to borrowers.
| Rate Type | Sep 2025 | Oct 2025 |
|---|---|---|
| Average lending rate | 15.18 | 15.19 |
| Negotiated lending rate | 12.84 | 12.40 |
| Overall deposit rate | 8.50 | 8.36 |
| Interest rate spread | --- | 6.28 |
Lower negotiated rates benefit prime borrowers in sectors such as mining and tourism. The interest rate spread reflects inherent risk and operational costs in the banking sector.
Rate stability aids predictability in financial markets, sustaining credit demand growth at 16.1% and supporting consumption and investment growth of 3.5% from the private sector. The easing of negotiated rates to 12.40% particularly benefits large firms, potentially adding 0.5% to GDP through increased capital expenditure.
However, the high average lending rate of 15.19% constrains SME access to credit. Narrowing the interest rate spread to 5% through enhanced competition could mobilize TZS 1 trillion in additional productive lending, reducing income inequality and supporting medium-term growth targets of 7%.
Fiscal performance strengthened considerably, with revenues remaining buoyant amid increased economic activity. The most recent detailed data available is from September 2025.
| Item | Amount (TZS Billion) |
|---|---|
| Total revenue | 3,718.2 |
| -- Tax revenue | 3,124.1 |
| -- Non-tax revenue | 446.2 |
| Total expenditure | 4,284.2 |
| -- Recurrent | 2,508.6 |
| -- Development | 1,775.6 |
Revenue: TZS 2,328.5 billion, achieving 96.1% of the target
Deficit: Small deficit of TZS 15.1 billion recorded
Tax Performance: Tax revenue exceeded targets by 11.4%, attributed to Tanzania Revenue Authority modernization and economic rebound
Strong revenue collection at 13.1% of GDP funds development expenditure, which has a 65% bias in the FY2025/26 budget, driving infrastructure multipliers that contribute approximately 2% to GDP. Tax buoyancy reduces aid dependency from 5%, enhancing fiscal sovereignty and policy independence.
However, expenditure under-execution at 76.4% in October delays critical projects. Improving budget absorption to 90% could add 1% to growth through enhanced job creation and productivity gains. The strong fiscal position supports development objectives while maintaining macroeconomic stability.
National debt is being managed prudently, with external debt experiencing a slight decline due to scheduled amortizations.
| Debt Type | Amount |
|---|---|
| Total national debt | USD 50.9 billion |
| External debt | USD 35.4 billion (69.5%) |
| Domestic debt | TZS 38.1 trillion |
| Creditor Type | Share (%) |
|---|---|
| Multilateral | 57.4 |
| Commercial | 35.2 |
| Bilateral | 4.3 |
| Export credit | 3.1 |
External debt shows monthly decline with continued focus on concessional borrowing. The debt-to-GDP ratio stands at 49.6%, which is considered sustainable.
The sustainable debt level at 49.6% of GDP funds growth-enhancing projects without causing debt distress, with multilateral creditors providing low-cost financing that aids reserve accumulation. The decline in external debt combined with shilling strength saves approximately TZS 3 trillion year-on-year in debt servicing costs, freeing up budget resources for social spending, which accounts for 21.5% of the budget.
However, the rising share of commercial debt introduces interest rate sensitivity risks. Diversification strategies, including the potential issuance of green bonds, could lower borrowing costs by 0.5%, supporting the 6% growth objective while maintaining fiscal sustainability.
The external sector showed significant improvement, with a surplus in services offsetting the goods trade deficit.
| Indicator | 2024 (USD mn) | 2025 (USD mn) | % of GDP |
|---|---|---|---|
| Current account deficit | -2,893.3 | -2,217.8 | 2.4 |
| Item | Amount (USD Billion) |
|---|---|
| Total exports (goods & services) | 17.05 |
| -- Goods exports | 10.14 |
| -- Services receipts | 6.91 |
| Total imports (goods & services) | 17.68 |
The narrowed current account deficit at 2.4% of GDP, combined with reserve buildup, cushions the economy against external shocks while stabilizing the shilling and supporting low inflation. The export surge, with services accounting for 40% of total exports, promotes economic diversification and creates tourism-related jobs for 1 in 5 workers, contributing approximately 2% to GDP and supporting AfCFTA integration.
Moderation in the goods deficit eases the import bill burden. However, heavy reliance on gold exports introduces volatility risks. Diversification toward value-added exports could generate an additional USD 1 billion in export earnings, enhancing economic resilience and reducing dependence on commodity price fluctuations.
Late 2025 economic conditions featured stable inflation, productive credit allocation, improved balance of payments, and strong foreign reserves, signaling positive medium-term growth prospects in the range of 6-7%.
The robust fundamentals underpin economic resilience amid global uncertainties, fostering an attractive environment for foreign direct investment and supporting Vision 2050 objectives. Food price pressures appear temporary with harvest relief evident in November data, though rising production costs warrant continued vigilance to prevent inflation from undermining purchasing power.
Policy coordination between monetary, fiscal, and structural reforms ensures continued stability, positioning Tanzania as an economic leader in the East African Community. With accelerated agricultural reforms and improved budget execution, Tanzania has the potential to achieve upper-middle-income status by 2030.
The combination of strong export performance, prudent debt management, robust credit growth to productive sectors, and stable macroeconomic conditions creates a solid foundation for sustained inclusive growth. Continued focus on economic diversification, infrastructure development, and human capital investment will be critical to maintaining this positive trajectory and achieving long-term development goals.