BOT Keeps Tanzania Central Bank Rate at 5.75% for Q2 2026; GDP Growth Reached 6.2% in Q1 2026, Driven by Construction, Agriculture, Financial Services, and Tourism

At its meeting held on 1st April 2026, the Monetary Policy Committee (MPC) of maintained the Central Bank Rate (CBR) at 5.75% for the second quarter of 2026.

The MPC decision reflects a cautious policy stance aimed at balancing the risks to inflation and economic growth outlook, in the face of the current unprecedented geopolitical tensions in the Middle East, which are undermining global trade, investment flows, and economic stability.

Additionally, to further improve the effectiveness of monetary policy in delivering low inflation and fostering economic growth, the MPC decided to narrow the CBR corridor from 200 basis points to 150 basis points, effective from April 2026.

In line with this decision, the target band for the 7-day interbank rate will be +/-150 basis points of the CBR, which is 4.25-7.25%, for the second quarter of 2026.

The Bank will therefore implement monetary policy to ensure the 7-day interbank interest rate evolves within the corridor

Economic Performances

The ongoing geopolitical tension in the Middle East has profound implications for the domestic economy.

GDP

However, thus far, the economy has demonstrated resilience, with GDP growth in the first quarter of 2026 estimated at 6.2% in Mainland Tanzania and 6.7% in Zanzibar, driven by construction, agriculture, financial and insurance services, and tourism.

Private sector credit growth has been steady at 22.8 % on the back of accommodative monetary policy and strong demand by businesses and households.

The outlook in the second quarter of 2026 also remains resilient and robust, with GDP growth projected at 6.1% in Mainland Tanzania and 6.6 % in Zanzibar.

Growth is expected to be supported by adequate rainfall, which will boost agricultural production; supportive fiscal policy; improved activity in the mining sector; a stable power supply; and strong sentiment, as indicated by the March 2026 CEOs and Market Perception.

However, a prolonged or intensification of the conflict in the Middle East could undermine the pace of growth going forward.

Inflation

Inflation remained low, averaging 3.3% in the first quarter of 2026 in Mainland Tanzania and 4.5% in Zanzibar, reinforced by prudent monetary policy and stable food and energy prices.

This implies a delayed direct (first round) impact of the recent increase in energy prices and transportation costs on inflation.

Inflation is expected to remain within the target range of 3 to 5% in the second quarter of 2026, with upward pressure from energy and transportation costs expected to be offset by low food prices and exchange rate stability.

Credit Supply

The banking sector remained stable, with strong liquidity and adequate capital buffers.

Loan portfolio continued to improve, supported by a stable business environment and prudent credit risk management.

The non-performing loans ratio recorded a recent-year low of 2.9%, significantly below the 5% tolerable threshold.

The payment and settlement systems continued to operate smoothly.

The prudent monetary policy is expected to contribute to a robust private sector credit growth above 20%, year-on-year.

External Sector

The external sector demonstrated resilience, with the current account deficit of 2.2% of GDP in the year ending March 2026, down from 2.4% in 2025, despite mounting pressures from geopolitical conflicts.

The improvement was driven by stronger export performance, particularly in gold, tourism, and agricultural products.

The Zanzibar economy continued to record a current account surplus, supported by strong tourism receipts.

Forex

The exchange rate remained broadly stable, owing to adequate level of foreign reserves exceeding USD 6.2 billion and subdued import growth.

The reserves were sufficient to cover 4.8 months of imports, consistent with the statutory threshold of at least 4 months and the EAC convergence benchmark of at least 4.5 months.

Fiscal Performance

The performance of fiscal operations was satisfactory, whereby tax revenue exceeded targets, reflecting the expansion in economic activity and continued improvements in tax administration efficiency and compliance.

Expenditure remained aligned with available resources.