Dar es Salaam. Fitch Ratings recently affirmed Tanzania’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook, reflecting the country’s continued solid macroeconomic performance and fiscal progress.
The rating, which remained unchanged from its previous level, underscores Tanzania’s relatively strong real GDP growth, low inflation levels, and moderate government debt—key factors contributing to a positive outlook for its economy.
This announcement by one of the “big three” global credit rating agencies, was made last Friday and shared in a press release by Tanzania’s Ministry of Finance with The BizLens on Monday.
Key rating drivers
Tanzania’s economic outlook, according to the press release, remains positive, driven primarily by its strong growth prospects and structural reforms.
Fitch expects the country’s real GDP growth to rise from 5.1 percent in 2023 to 5.4 percent in 2024 and 5.9 percent in 2025.
This anticipated growth is largely supported by key sectors such as agriculture, mining, and tourism, alongside significant infrastructure investments like the Standard Gauge Railway and the Julius Nyerere Hydropower project.
These investments not only bolster short-term growth, but also lay the groundwork for sustained economic development in the longer term, particularly with the potential development of offshore gas fields and LNG production.
The stability of Tanzania’s economy is underpinned by relatively low volatility in its growth trajectory.
This stability, however, should not be misinterpreted as a lack of underlying dynamism.
The recent tight policy stance of the Bank of Tanzania (BoT), along with favorable weather conditions and agricultural yields, has led to a favorable inflationary environment.
As a result, inflation is expected to remain manageable, with forecasts of 3.1 percent in 2024, slightly lower than 3.8 percent in 2023.
For 2025, inflation is projected to rise modestly to 3.4 percent, well below the BoT’s target, indicating the central bank’s effective control over inflationary pressures.
The role of the IMF Programme
Fitch also notes the role of Tanzania’s ongoing engagement with the International Monetary Fund (IMF), which serves as an anchor for the country’s macroeconomic and fiscal policy.
The IMF’s support enhances the credibility of Tanzania’s fiscal discipline and helps safeguard against external shocks.
The successful implementation of this programme, together with the country’s moderate debt levels, underpins the positive outlook for Tanzania’s creditworthiness.
Currency and capital flows
Tanzania’s Country Ceiling is affirmed at ‘B+’, matching the IDR.
This rating reflects a low risk of capital controls being imposed, allowing the private sector to continue to convert local currency into foreign currency and service debt obligations without significant obstacles.
This provides an added layer of confidence for foreign investors and creditors, suggesting that Tanzania is unlikely to face disruptions in its ability to access external capital markets or meet its foreign-currency obligations.
Monetary and fiscal reforms
The Bank of Tanzania’s reform efforts in transitioning to an interest-rate-based monetary policy framework are another positive aspect of the country’s economic management.
This shift is expected to enhance the effectiveness of monetary policy, allowing for more flexible and targeted responses to economic conditions.
This reform, in conjunction with a stable macroeconomic environment, bodes well for Tanzania’s ability to maintain low inflation and strong growth.
