In December 2024, Fitch Ratings affirmed Tanzania’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook, reflecting strong GDP growth, low inflation, and moderate debt levels, supported by the country’s ongoing IMF Extended Credit Facility (ECF) programme.
Economic Growth and Stability
Tanzania’s real GDP growth is projected to accelerate to 5.4% in 2024 and 5.9% in 2025, driven by sectors such as agriculture, mining, tourism, and infrastructure projects, including the Standard Gauge Railway and the Julius Nyerere Hydropower Project. Long-term growth prospects are further bolstered by plans for offshore gas field development and LNG production.
Inflation remains under control, averaging 3.1% in Q3 2024, well below the 5% target set by the Bank of Tanzania, supported by favourable weather, low energy costs, and strong foreign exchange inflows. Fitch forecasts inflation to stay below target, at 3.1% in 2024 and 3.4% in 2025, despite potential pre-election spending pressures.
Policy Reforms and Fiscal Management
Tanzania’s reforms under the IMF’s ECF program, extended to May 2026, have strengthened its macroeconomic framework. Notable initiatives include the Bank of Tanzania’s transition to an interest-rate-based monetary policy framework and improvements in public financial management, with domestic arrears reduced to 0.6% of GDP by September 2024.
The country’s central government debt, at 48.5% of GDP in 2024, remains moderate, with 71% of external debt sourced from concessional loans. Fitch projects the debt-to-GDP ratio to decline to 47% by 2026. FX reserves are expected to rise to USD 5.6 billion by the end of 2024, equivalent to 3.6 months of current external payments.
Challenges and Risks
Revenue mobilisation remains a challenge, with non-tax revenue underperforming in the first quarter of fiscal year 2025. Fitch forecasts a budget deficit of 3.4% of GDP in FY2025, exceeding the government’s target of 2.9%. Rising interest costs, with an interest-to-revenue ratio exceeding 16%, also pose fiscal constraints.
Political risks ahead of the October 2025 general election could affect policy continuity, with recent tensions stemming from increased opposition arrests despite the ruling party’s decisive victory in local elections.
Key Drivers for Rating Changes
• Negative Rating Action: Persistent current account deficits, FX reserve depletion, or macroeconomic instability.
• Positive Rating Action: Improved revenue mobilisation, sustained fiscal consolidation, and enhanced confidence in FX frameworks.
Governance and ESG Considerations
Tanzania’s governance, ranked moderately in the World Bank Governance Indicators, remains a crucial factor influencing its rating. Despite improvements, challenges such as corruption and limited institutional capacity weigh on the country’s credit profile.
Fitch’s affirmation highlights Tanzania’s economic resilience and ongoing reforms, although structural and political challenges persist.
Further Africa
