Fitch maintains Tanzania's rating at ‘B+ with stable outlook’

Fitch projects Tanzania’s real GDP growth to rise to 5.4 percent in 2024 and further to 5.9 percent in 2025, exceeding the ‘B’ category median of 4.7 percent.

The growth, it explained, will be driven by agriculture, mining, tourism and flagship infrastructure projects, including the Standard Gauge Railway and the Julius Nyerere Hydropower Project.

“Growth volatility is low, but this may understate macroeconomic stability risks, given the importance of the agricultural sector, which is rain-dependent and highly vulnerable to natural disasters,” Fitch warned in a statement.

Tanzania’s inflation remains well below the Bank of Tanzania (BoT)’s five percent target, with Fitch forecasting it to average 3.1 percent in 2024, down from 3.8 percent in 2023.

“This is due to the Bank of Tanzania’s tight policy stance, stronger foreign exchange inflows, lower food prices, and declining energy costs,” the report noted.

Fitch also highlighted an improvement in Tanzania’s foreign exchange reserves, which are projected to reach $5.6 billion by the end of 2024.

Foreign exchange reserves amounted to $5.4 billion at the end of October 2024, according to the BoT, sufficient to cover 4.4 months of projected imports of goods and services, while the national benchmark is four months.

“Reserve coverage will then be equivalent to 3.6 months of current external payments,” Fitch said, adding that higher export and tourism receipts, alongside greater exchange-rate flexibility, are supporting the recovery.

The agency also noted the moderate central government debt, which was at 48.5 percent of GDP in the financial year ending June 2024.

Fitch expects this figure to decline to 47 percent by 2026, supported by nominal GDP growth and the high share of concessional debt, which accounts for 71 percent of external borrowing.

“The high share of concessional debt supports debt sustainability, but the level of concessionality will gradually decline given Tanzania’s recent graduation to a lower-middle-income country,” Fitch stated.

However, the agency flagged ongoing challenges in revenue collection, projecting government revenue to reach 15.7 percent of GDP in the financial year 2024/25, compared to the ‘B’ category median of 18 percent.

“Underperformance in revenue collection continued into the first quarter of the financial year 2024/25, particularly in non-tax revenue, which we estimate at about 17 percent below target on a pro-rata basis,” Fitch said.

The fiscal deficit is forecast to widen to 3.4 percent of GDP in 2024/25, up from 3.0 percent in 2023/24, driven by higher spending and lower-than-expected revenue performance.

Additionally, Fitch warned that rising interest costs could push the government’s interest-to-revenue ratio above 16 percent, compared to nearly 14 percent at the end of 2022/23.

Political tensions

With Tanzania heading toward a general election in October 2025, Fitch noted a likely increase in political tensions but does not expect significant risks to economic stability.

“Recent arrests of some opposition members have increased tensions, but we do not anticipate widespread unrest that jeopardises economic stability,” it said.

Looking ahead, Fitch identified key factors that could influence Tanzania’s rating.

“A significant reduction in primary deficits, stronger revenue mobilisation, and improved public financial management could lead to an upgrade,” the agency stated.

Conversely, persistent external financing pressures or a weakening of macroeconomic policy could result in a downgrade.