Bank of Tanzania Keeps Central Bank Rate at 5.75%; Expects Stable Inflation and Strong Economic Growth of More than 6%

The Bank of Tanzania (BOT) Monetary Policy Committee (MPC) has decided to maintain the Central Bank Rate (CBR) at 5.75%.

The decision reflects the projection of stable inflation within the target range of 3–5%. The growth of the economy is also expected to remain strong.

Moody’s and Fitch Ratings have also attested the outlook of the economy to be stable, in their recent review, the former with a rating of B1 and the latter B+.

The Bank implemented monetary policy to ensure the 7-day interbank interest rate moves close to the CBR of 5.75%.

The implementation of monetary policy was successful, as liquidity in the interbank market improved significantly, and the 7-day interbank rate trended downward, oscillating close to the CBR in most of the period.

Economic Performances

The MPC also assessed domestic economic performance.

GDP

Economic activities continued to strengthen. Mainland GDP grew by 5.4% in the first quarter of 2025, up from 5.2% in the same period in 2024.

The key drivers to economic growth were mining, agriculture, financial and insurance services, construction, and manufacturing activities.

Growth of more than 6% is estimated in the second and third quarters, with similar momentum expected in the fourth quarter, supported by strong public and private investment and robust export performance.

The Zanzibar economy also grew strongly by 6.4% in the first quarter of 2025, as in the corresponding quarter last year, and was primarily driven by tourism, construction, and agricultural activities. The economy is projected to grow at 7.3% in 2025.

Inflation

In Mainland Tanzania, inflation was 3.4% in August 2025, well within the target
range of 3–5% and consistent with the EAC and SADC convergence criteria.

The Bank projects that it will remain within the target, underpinned by prudent monetary and fiscal policies, stable food supply, exchange rate stability, reliable electricity, and moderate oil prices.

In Zanzibar, inflation declined to 4.0% from 4.2%, also within target, driven mainly by lower food prices. It is projected to stay below the 5% threshold.

Money Supply

Money supply expanded by 20.4%, compared with 19.1% in the previous quarter. This was driven by private sector credit, which continued to grow strongly at around 16%, owing to an improvement in liquidity and private sector investment.

The banking sector remained stable and resilient, with adequate liquidity, strong capital, and profitability. Non-performing loans declined to 3.3% in August 2025, well within the tolerable level of not more than 5%.

Fiscal Performance

Fiscal performance was satisfactory in both Mainland Tanzania and Zanzibar. Domestic revenue exceeded targets, due to strong tax collection performance.

Expenditures were aligned with available resources, reflecting continued prudent fiscal management. Public debt remained largely unchanged from the preceding quarter, with new borrowing primarily directed toward strategic infrastructure projects.

External Sector

The current account deficit narrowed to 2.4 percent of GDP in the year ending September 2025, down from 3.8 percent in the corresponding period last year.

This was largely driven by an increase in export earnings, particularly from traditional export crops, tourism, and gold.

Meanwhile, global oil prices were moderate. In Zanzibar, the current account posted a surplus of USD 685.6 million for the year ending September 2025, up from USD 499 million in the previous year, mainly due to improved service receipts, particularly tourism.

Foreign exchange liquidity in the economy improved, and the Shilling was stable
against major currencies, appreciating by 8.4% against the US dollar, compared
with a modest appreciation of 0.7% in the preceding quarter.

Foreign exchange reserves remained high at around USD 6.7 billion at the end of September 2025, covering more than 5 months of projected imports. The import cover is consistent with the minimum requirements of 4 and 4.5 months for the country and EAC benchmarks, respectively.

Foreign exchange liquidity is expected to continue improving, supported by seasonal tourism peaks, ongoing cash crop harvests, and high gold prices.

The next MPC meeting is scheduled for 7th January 2026, and the announcement of the CBR will be made on the following day.