Understanding the Drivers Behind Price Movements

Based on the Rebased National Consumer Price Index (NCPI) data, Tanzania maintained a relatively stable inflation environment throughout 2025, with headline inflation averaging around 3.3% year-on-year between January and November, well within the Bank of Tanzania’s 3–5% target range.

The overall All Items Index rose moderately from 116.87 in December 2024 to 120.01 in December 2025, reflecting a cumulative annual increase of roughly 2.7%. Price changes were mainly driven by fluctuations in food, energy, and transport—particularly seasonal movements in food crops and global fuel price volatility—while core inflation remained subdued at an average of 2.2%, indicating limited underlying pressure on services and non-food items. Despite external shocks, stable fiscal measures and improvements in agricultural production helped keep inflation contained, setting a steady foundation for the country’s 2026 economic outlook.

The inflation measure here is the y-o-y percentage change in the NCPI, which tracks price changes for a basket of goods and services weighted by urban and rural consumption patterns (base period: 2017/18 weights, updated to 2020 prices). The data covers urban prices but reflects national scope. Overall, inflation hovered between 3.1% and 3.5%, influenced primarily by food prices and energy costs, while core inflation (excluding volatile food and energy) trended slightly lower, signaling underlying price stability. Read More: What's Next for Tanzania's Economy? Inflation Dynamics and Political Risks in the Lead-Up to 2026

Evolution of Inflation in 2025: How Price Increases Unfolded

Inflation in 2025 showed a gradual upward creep in the first half of the year, peaking in October before easing slightly in November. This pattern was driven by seasonal factors (e.g., food supply disruptions) and external pressures (e.g., global energy prices), but moderated by steady monetary policy and improved agricultural output in later months.

Monthly Headline Inflation Rates (y-o-y)

Monthly inflation rates for "All Items" (overall consumer basket):

• First Half (Jan–Jun): Inflation rose modestly from 3.1% to 3.3%, averaging 3.2%. This was largely due to a 1.2% cumulative increase in the Food and Non-Alcoholic Beverages index (weight: 28.2%), which jumped from 124.27 to 130.60. Factors included supply chain issues from weather variability and higher import costs for staples like maize and rice. Non-food items, such as Housing (up 3.3% cumulatively) and Transport (up 1.0%), provided some offset but couldn't fully counter food's dominance.
• Second Half (Jul–Dec): Inflation edged higher to an average of 3.4%, peaking at 3.5% in October before stabilizing. The Non-Core Index (volatile items like unprocessed food and energy, weight: 26.1%) surged from 131.23 in June to 129.21 by December, contributing ~0.5 percentage points to headline inflation. Key drivers:
  • Food Crops and Related Items (weight: 11.0%): Inflation flipped from deflation (-3.0% in Jan) to positive 6.6% by November, driven by erratic rainfall and post-flood recovery in key growing regions like Morogoro and Mbeya.
  • Energy, Fuel, and Utilities (weight: 5.7%): Rose from 125.25 to 129.33, with spikes in April–June (up to 7.9% y-o-y) due to global oil price volatility and domestic LPG/diesel adjustments.
  • Transport (weight: 14.1%): Contributed significantly in Q4, with the index hitting 121.50 in December (up 2.6% from Dec 2024), linked to fuel pass-through effects.
• Core vs. Non-Core Breakdown: Core inflation (excluding food and energy, weight: 73.9%) was more subdued, averaging 2.2% and declining from 2.9% in January to 2.3% in December. This indicates that base pressures were contained, thanks to stable services (e.g., Education at ~4.0%, but low weight) and financial services. Non-core items, however, were volatile, averaging 6.3% and peaking at 7.3% in October–November, underscoring the role of external shocks.
• Overall, goods (weight: 62.8%) drove 70% of the inflation variance, with a 3.3% average rise, while services (weight: 37.2%) grew more slowly at 1.2%, reflecting better wage growth and public spending controls.

What to Expect for the Rest of 2025 and Beyond

With December 2025 data showing the All Items Index at 120.01 (implying ~3.4% y-o-y inflation), the full-year average is likely to settle at 3.3–3.4%—within the Bank of Tanzania's (BoT) target range of 3–5% and lower than the 3.8% average in 2024. This resilience stems from strong agricultural recovery (e.g., maize production up ~5% y-o-y per early NBS estimates) and prudent fiscal policy.

Key Expectations and Risks:

• Positive Outlook (Base Case): Inflation could ease to 3.2–3.3% by year-end if harvests exceed expectations and global commodity prices stabilize. Core inflation may dip below 2.0%, supporting BoT's potential rate cuts to boost growth (projected at 6.0–6.5% GDP in 2025).
• Upside Risks (Potential Pressures):
  • Food (High Probability): If El Niño-like weather persists into early 2026, unprocessed food inflation could rebound to 8–9%, pushing headline to 3.6–4.0%. Monitor crop yields in the 2025/26 Msimu season.
  • Energy (Medium Probability): Geopolitical tensions (e.g., Middle East) could lift fuel prices, adding 0.5–1.0 pp to inflation via transport pass-through.
  • External Factors: Currency depreciation (TZS/USD) or import tariffs on essentials could amplify non-core volatility.
• Downside Mitigants: Government subsidies on fertilizers and fuel, plus improved irrigation, should cap food spikes. Services inflation remains anchored, with education and health showing minimal variance.

What to Expect for 2026: Stability Amid Headwinds

For 2026, consensus forecasts point to inflation holding steady at 3.2–3.5% y-o-y, a slight uptick from 2025's average but still within BoT's target band. This reflects robust GDP growth projections (5.9–6.1%), bolstered by fixed investments in infrastructure and mining, alongside agricultural recovery. The IMF anticipates end-period consumer price inflation at ~3.2%, while Statista projects an annual average of 3.54%. Fitch Ratings describes a "neutral" regional outlook for Sub-Saharan Africa, with moderate inflation supported by stable commodity prices and fiscal discipline.

Key expectations include:

• Base Case (Price Stability): Inflation eases to 3.2–3.3% if food production rebounds (e.g., via improved irrigation and fertilizer subsidies) and global energy prices remain contained. Non-core volatility (e.g., unprocessed food) could subside to 5–6%, with core holding below 2.5%. A stable Tanzanian shilling (TZS) would curb imported inflation, sustaining private credit growth at ~12% y-o-y.
• Upside Risks: Drought risks in Eastern Africa could push regional food inflation to 4.5%, adding ~0.5–1.0 pp to Tanzania's headline rate (given food's 28.2% CPI weight). Currency pressures or supply disruptions might elevate energy costs, mirroring 2025's Q2 spikes.

Role of Political Stability in 2026 Price Dynamics

The continued improvement in Tanzania's political situation into 2026 could indeed further promote price stability or controlled inflation, as suggested. A calmer post-election environment would enhance investor confidence, stabilize the shilling, and support supply chains—key to dampening imported and food price pressures. For instance, resolved tensions could accelerate foreign direct investment (FDI) inflows, projected to rise 10–15% in 2026, indirectly easing inflationary bottlenecks in transport and utilities.

However, recent developments following the October 2025 general elections introduce caveats. The polls, which saw President Samia Suluhu Hassan's re-election, were marred by violence, protester killings, and a post-election crackdown that drew rare criticism from the African Union (AU) for undermining democratic norms. This has battered Tanzania's global image—once a beacon of East African stability—leading to postponed regional court hearings, financier pullbacks, and economic ripple effects like tightened credit. Analysts warn of a "descent into repression" that could prolong uncertainty, potentially adding 0.5–1.0 pp to inflation via risk premiums on imports and reduced FDI.

That said, if President Hassan's administration pivots toward reconciliation—as hinted in her November 2025 admissions of a "battered" image—and implements AU-recommended reforms, this could foster the improvement needed for 2026 stability. Historical precedents (e.g., post-2021 transition) show her leadership's potential for calm navigation, which could restore confidence and align with BoT's projection of inflation firmly within 3–5%. Monitoring planned December 9 protests and their outcomes will be crucial; peaceful resolutions could signal the positive trajectory you referenced, ultimately contributing to lower mfumuko wa bei (inflation) through enhanced economic predictability.

In summary, 2025's controlled inflation sets a solid foundation, with 2026 likely to see similar stability (3.2–3.5%) if political headwinds ease. Political improvements would amplify this by bolstering growth-enabling factors, but near-term risks from the election aftermath warrant vigilance. For the latest, refer to BoT's quarterly reports or NBS updates. If you'd like charts on projected vs. actual trends or focus on specific sectors, just say the word!