In April 2025, the Tanzania Shilling (TZS) exhibited a moderate depreciation trend, with the average exchange rate reaching TZS 2,684.41/USD, a 3.9% annual decline from ~TZS 2,583/USD in April 2024 and a 1.3% monthly drop from TZS 2,650.24/USD in March 2025. The Interbank Foreign Exchange Market (IFEM) saw reduced activity, with transactions falling to USD 12.9 million from USD 70.1 million in March 2025, supported by a Bank of Tanzania intervention selling USD 6.25 million. Bolstered by USD 5.3 billion in reserves covering 4.3 months of imports, the TZS maintained controlled stability.

1. Exchange Rate Movement

The Tanzania Shilling (TZS) experienced a gradual depreciation against the US dollar (USD) over the past year, reflecting pressures from external and domestic factors.

Key Figures:

• April 2025 Average Exchange Rate: TZS 2,684.41/USD
• March 2025 Average Exchange Rate: TZS 2,650.24/USD
• April 2024 Average Exchange Rate: ~TZS 2,583/USD (implied from annual comparison)
• Annual Depreciation (April 2024 to April 2025): 2,684.41−2,5832,583×100%≈3.9%\frac{2,684.41 - 2,583}{2,583} \times 100\% \approx 3.9\%2,5832,684.41−2,583​×100%≈3.9%
• Monthly Depreciation (March 2025 to April 2025): 2,684.41−2,650.242,650.24×100%≈1.3%\frac{2,684.41 - 2,650.24}{2,650.24} \times 100\% \approx 1.3\%2,650.242,684.41−2,650.24​×100%≈1.3%

Analysis:

• Annual Trend: The 3.9% depreciation over the year (from ~TZS 2,583/USD to TZS 2,684.41/USD) indicates a moderate weakening of the TZS, driven by structural and seasonal factors. The Monthey Economic Review highlights global economic uncertainties, such as a 10% US tariff on imports and a projected global growth slowdown to 2.8% in 2025, which may have reduced foreign exchange inflows to Tanzania, contributing to this trend.
• Monthly Trend: The 1.3% depreciation from March to April 2025 reflects a continuation of the gradual weakening, likely due to short-term imbalances in foreign exchange supply and demand. The document’s mention of stable monetary policy (CBR at 6%) aimed at smoothing exchange rate volatility suggests that the Bank of Tanzania (BoT) is actively managing these pressures to prevent sharp declines.
• Context from Document: The document does not explicitly provide exchange rate data but notes that the BoT’s monetary policy objectives include maintaining price stability and smoothing exchange rate volatility. The moderate inflation rate of 3.2% in April 2025 suggests that the depreciation has not significantly fueled domestic price pressures, indicating effective central bank management.

Implications:

The gradual 3.9% annual depreciation suggests controlled currency instability rather than a crisis, as the TZS remains within manageable bounds. This aligns with the document’s emphasis on the BoT’s data-dependent monetary policy adjustments to support economic stability.

2. Interbank Foreign Exchange Market (IFEM)

The IFEM is where banks trade foreign currencies, and its activity provides insight into exchange rate dynamics and liquidity in the foreign exchange market.

Key Figures:

• Total IFEM Transactions in April 2025: USD 12.9 million
  • Down from USD 70.1 million in March 2025 (an 81.6% decrease, calculated as [(70.1 - 12.9) / 70.1] × 100).
  • Down from USD 72 million in April 2024 (an 82.1% decrease, calculated as [(72 - 12.9) / 72] × 100).
• BoT Intervention: Sold USD 6.25 million in April 2025 to support import demand and stabilize the TZS.

Analysis:

• Decline in Transaction Volume: The sharp drop in IFEM transactions to USD 12.9 million in April 2025 from USD 70.1 million in March 2025 and USD 72 million in April 2024 suggests reduced foreign exchange market activity. This could reflect lower foreign currency inflows, possibly due to seasonal declines in cash crop exports (noted as a driver of depreciation).
• BoT Intervention: The sale of USD 6.25 million by the BoT represents a significant portion of the April IFEM volume (48.4%, calculated as 6.25 / 12.9 × 100). This intervention aimed to meet import demand and curb TZS depreciation, aligning with the document’s mention of gross official reserves being used to regulate balance of payments imbalances through foreign exchange market interventions.
• Reserves Context: The provided information notes that Tanzania’s gross official reserves stood at USD 5.3 billion, covering 4.3 months of imports. The document defines gross official reserves as external assets available for balance of payments financing and interventions, indicating that the BoT has sufficient capacity to support the TZS, as evidenced by the USD 6.25 million sale.

Implications:

The low IFEM transaction volume suggests constrained foreign exchange liquidity, but the BoT’s intervention and healthy reserves (USD 5.3 billion) demonstrate proactive management to stabilize the TZS. The document’s reference to the BoT’s role in managing exchange rate volatility supports this, ensuring that depreciation remains gradual.

3. Drivers of Depreciation

The provided information identifies key factors contributing to the TZS’s depreciation, which can be contextualized with the document’s insights.

Key Drivers:

• Lower Seasonal Foreign Exchange Inflows: Reduced inflows from cash crop exports (e.g., coffee, tea) likely contributed to the TZS’s weakening. The document notes rising tea prices (8.2%) but declining coffee prices due to improved production forecasts, suggesting mixed export performance that may have limited foreign currency earnings.
• Higher Import Demand: Increased demand for imports, relative to foreign exchange supply, exerted pressure on the TZS. The document mentions subdued crude oil demand and a 6.7% price decrease, but high import needs for other goods (e.g., food or industrial inputs) likely outstripped supply, necessitating BoT intervention.
• Modest Central Bank Support: The BoT’s sale of USD 6.25 million in the IFEM reflects targeted intervention to balance supply and demand, consistent with the document’s description of monetary policy smoothing exchange rate volatility.

Analysis:

• Seasonal Export Trends: The document’s mention of agricultural commodity price movements and the National Food Reserve Agency’s efforts to stabilize food supply suggest that seasonal agricultural cycles impact foreign exchange inflows. Lower cash crop exports in April 2025 likely reduced USD inflows, contributing to the 3.9% annual depreciation.
• Import Pressures: The document does not provide specific import data, but the BoT’s intervention to support import demand indicates a supply-demand imbalance. The moderate inflation rate (3.2%) suggests that import-driven price pressures were contained, possibly due to BoT actions.
• BoT’s Role: The document’s monetary policy framework emphasizes maintaining a 5% inflation target and supporting growth, with the CBR at 6%. The USD 6.25 million intervention reflects a cautious approach, leveraging reserves to prevent sharp TZS declines.

4. Shilling Stability Summary

The provided summary table encapsulates the TZS’s performance:

Analysis:

• Gradual Depreciation: The 3.9% annual depreciation and 1.3% monthly depreciation indicate a controlled weakening, not a crisis, as noted in the provided conclusion. The document’s stable macroeconomic indicators (e.g., inflation at 3.2%, CBR at 6%) support this assessment.
• Reserve Support: The USD 5.3 billion in reserves covering 4.3 months of imports provides a buffer, as per the document’s definition of gross official reserves. This ensures the BoT can continue interventions like the USD 6.25 million sale to manage volatility.

Conclusion

The Tanzania Shilling experienced a moderate 3.9% depreciation against the USD from April 2024 (~TZS 2,583/USD) to April 2025 (TZS 2,684.41/USD), with a 1.3% monthly decline from March 2025 (TZS 2,650.24/USD). This trend, driven by lower seasonal export inflows and higher import demand, was mitigated by the Bank of Tanzania’s intervention (USD 6.25 million sold in the IFEM) and robust reserves (USD 5.3 billion). The sharp decline in IFEM transactions to USD 12.9 million in April 2025 reflects reduced market liquidity, but the BoT’s actions ensured stability. The following table summarizes these key figures.

The table is designed to present the data clearly and concisely, wrapped in an artifact tag as per the guidelines