Tanzania’s Credit Outlook Revises to Positive on Macroeconomic Progress
Fitch Ratings has revised the outlook on Tanzania’s credit rating to positive, citing strengthening external reserves and a moderate fiscal deficit, and projecting that the country’s high growth rate will support a slowdown in debt.
According to Fitch, recent institutional and operational improvements in the country’s macroeconomic policy framework could also increase its resilience to shocks, but these remain to be tested.
According to the rating note, Tanzania’s ratings reflect strong real GDP growth, low inflation, and low government debt relative to peers.
The country’s rating is constrained by weak governance and low government revenue relative to ‘B’ category peers, as well as a weak, albeit improving, macroeconomic policy framework, according to the credit report.
Fitch expects Tanzania’s international reserves to strengthen over its forecast horizon, reaching USD7.9 billion in 2028 from USD6.3 billion at end-2025, translating into coverage of current external payments of 3.3 months.
This is below the ‘B’ median of 4.2 months, but reduced distortions in the FX market and improved exchange rate flexibility somewhat mitigate near-term risks.
Fitch considers that Tanzania’s external buffers could receive a further boost from the central bank’s holdings of non-monetary gold (estimated at USD2.4 billion), which could either be sold for FX or converted into monetary gold, a process already underway.
Ratings analysts expect Tanzania’s current account deficit to widen to 3.2% of GDP in 2026 due to the impact of the war in Iran, before narrowing to 2.5% of GDP over 2027-2028, partly reflecting assumption of declining global Brent prices (to an average USD65/bbl in 2027 from USD87/bbl in 2026).
“We expect the country’s net external debt to decline to 38% of GDP in 2028, still above the projected ‘B’ median of 16%”, Fitch said.
Ratings analysts estimate a fiscal deficit of 2.8% of GDP for Tanzania in the fiscal year that ended in June 2026 (FY26), reflecting strong revenue performance and the limited impact of fuel subsidies on fiscal execution.
“We forecast the deficit will remain close to 3% of GDP through FY28, partly based on our assumption of continuous gains in revenue mobilisation (tax revenues increased by 1pp to 15.6% of GDP between FY23 and FY25) through the government’s Medium-Term Revenue Programme”.
Fitch expects Tanzania’s government debt/GDP to decrease to 46.2% of GDP in 2028, from 48.9% in 2025, driven by strong nominal GDP growth and low primary deficits. This is below the ‘B’ median figure of 55% of GDP over the same period.
Tanzania has a high share of concessional debt, but the government’s debt trajectory remains exposed to exchange-rate depreciation, given the high share of external debt (68% of the total stock).
Fitch acknowledged that the country has made progress in improving its macroeconomic policy framework since 2023, through the adoption of institutional and operational reforms that have strengthened the central bank independence, exchange-rate regime, and FX management.
However, some of these improvements remain to be tested given their relatively recent implementation. Concerns about the adequate capture of economic growth volatility by national statistics have also eased following the recent GDP rebasing exercise that concluded in June 2026.
The outlook upgrade reflects Fitch expectation that Tanzania’s economy would show resilience to the shock from the war in Iran, with real GDP growth of 5.8% in 2026, remaining well above the 3.7% anticipate for the ‘B’ median.
Ratings analysts noted material disruptions to fuel supply were prevented by authorities’ direct procurement from an energy trader, which guaranteed supply between May and July – assumes no material negative impact on the tourism sector for the full year.
Fitch forecasts Tanzania’s real GDP growth will average 6.1% in 2027-2028, supported by public investment, tourism, the country’s position as a regional logistical hub, and the nascent mining sector.
This growth outlook remains exposed to an escalation in the war in Iran, as well as the agricultural sector’s exposure to higher fertiliser prices and vulnerability to rain patterns and natural disasters.
Higher fuel prices led to an acceleration of inflation in 1H26, as authorities allowed for most of the external price shock to feed through to domestic prices. Ratings analysts forecast annual inflation to average 4.2% in 2026, up from 3.3% in 2025 but below the 5.6% projected B median.
Fitch said the authorities have taken steps to address the long-standing public financial management issues that led to an accumulation of supplier and VAT refund arrears in recent years.
By March 2026, the verified stock of these arrears had decreased to 0.2% of GDP from 1.2% in December 2022, Fitch said. Global Equities Markets Wobble as US Yields Attract Investors