BoT, experts upbeat as Tanzania gets new favourable credit rating

Dar es Salaam. Tanzania has received a favourable credit rating that increases the country’s ability to borrow from the international financial markets, according to economists and central bank officials.

Fitch Ratings assigned Tanzania a rating of “B+” with a stable outlook, saying it reflects the country’s “fairly strong macroeconomic performance with high real GDP growth and contained inflation, a moderate level of debt, and increased reform momentum backed by a new IMF programme.”

Fitch said it expects Tanzania’s economic growth to rise to 5.2 percent in 2023 and 6.0 percent in 2024, from 4.7 percent in 2022, adding that the trend is supported by increased mining and tourism activity as well as infrastructure investment.

“In the long term, real GDP growth will benefit from the development of offshore gas fields and LNG production during the construction phase and the first years of production. Fitch expects the LNG developments to start affecting GDP growth from 2028,” Fitch said in a statement.

The firm also foresees reduced political risks as the current stability is supported by President Samia Suluhu Hassan’s Reconciliation, Resilience, Reforms, and Rebuild agenda announced in April 2022.

The reconciliation drive led to the lifting of a ban on opposition rallies in January 2023, the issuance of new publishing licences to opposition papers, and a proposed constitutional revision process that seeks to reform the National Electoral Commission, among other key political and government institutions.

“We do not foresee any significant risk to policy continuity as the ruling party, CCM, does not face effective opposition on the mainland,” Fitch stated.

Great performance

Reached for comments yesterday, the Bank of Tanzania governor, Mr Emmanuel Tutuba, confirmed having seen the report, saying the central bank was proud of the rating, especially taking into consideration that it was the first time Tanzania was being rated with a result of B+.

“We have received a great performance, but maybe we could have gotten a rating of A if we had a bigger economy,” he said.

According to him, he’s happy with the results because this was an international institution that understood what they were looking for, and Tanzania has done well in almost all the parameters. He noted that while the rating was good, Tanzania, like the rest of the world, faced challenges from the effects of the Covid-19 pandemic, inflation, and climate change but still performed well.

In April this year, Moody’s Investors Service gave Tanzania a rating of B2 Positive, attributing the positive outlook to lessened political risks in Tanzania, the country’s engagement with the international community, and its reform agenda.

Experts react

Dr Tobias Swai, a lecturer at the University of Dar es Salaam’s Business School, said the Fitch rating was encouraging and was a good prognosis for the government’s ability to repay loans.

“We expect the second rating, which matters most, to upgrade or downgrade us, but ultimately, when we complete our strategic projects, we may be upgraded,” he said.

The fact that the government has done an excellent job of controlling inflation, the exchange rate, and maintaining the economic environment is welcome news, according to economist and trade expert Dr Donath Olomi.

“We are more trustworthy, which makes us more appealing to lenders and investors. We should further enhance transparency and the rule of law, ensure predictability of policies and laws, and overhaul the tax system,” he said.

Dr Abel Kinyondo, an economics lecturer at the University of Dar es Salaam, said the rating means Tanzania is more credit-worthy, which implies an increased ability to access loans and become an investment destination after sending positive signals to investors. “Ultimately, you want to ensure that creditworthiness and new investments help your people out of poverty.

The stronger the economy (inclusive growth), the more trustworthy you become, and the more investments will be attracted,” he said.