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Tanzania Earns ‘B+’ Rating from Fitch, Strong Economic Growth Led by Tourism and Infrastructure

Fitch Rating Tanzania June 2023

Credit rating agency Fitch Ratings has assigned Tanzania a ‘B+’ Long-Term Foreign-Currency Issuer Default Rating (IDR) with a Stable Outlook.

The agency explains that the rating is a reflection of Tanzania’s robust macroeconomic performance, characterized by high real GDP growth, controlled inflation, and a moderate level of debt.

The country’s economic performance is further bolstered by an increased reform momentum supported by a new IMF programme.

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Tanzania’s Economic Landscape

“Tanzania’s ‘B+’ rating is a testament to its strong macroeconomic performance, which includes high real GDP growth and contained inflation.”

Fitch anticipates Tanzania’s real GDP growth to increase to 5.2% in 2023 and 6.0% in 2024, up from 4.7% in 2022.

This growth is expected to be driven by increased mining and tourism activity, as well as infrastructure investment.

Fitch is forecasting Tanzania’s inflation to be 4.6% in 2023 and 4% in 2024. However, the weak macroeconomic policy framework, including limited central bank independence and weak capacity, remains a rating constraint.

Despite a history of weak public financial management, Tanzania has shown improvements under the Extended Credit Facility (ECF) from the IMF. Outstanding supplier arrears decreased to 1.3% of GDP at the end of 2022, down from 2.6% at the end of June 2021.

Debt Situation and Fiscal Consolidation

Tanzania’s central government debt, excluding domestic expenditure and VAT refund arrears, is expected to remain stable at 41.4% at the end of June 2023, the end of the 2023 fiscal year (FY23), and after 41.5% at end-FY22. This is well below the 59% ‘B’ median, followed by a decrease to 40.5% in FY24.

Fitch expects an overall deficit of 3.3% of GDP for the fiscal year ending in June 2023 (FY23), unchanged from FY22. The deficit is forecasted to moderately decline to 3% in FY24 due to further revenue measures and the removal of fuel subsidies that were introduced in July 2022.

External Pressures and Political Stability

The current account deficit (CAD) widened to 6.9% of GDP in 2022, from 3.4% in 2021, mainly due to a rising import bill driven by high oil prices despite a rebound in tourism receipts. Fitch expects the CAD to fall to 4.7% of GDP in 2023 and 4.2% in 2024.

Political stability is supported by the Reconciliation, Resilience, Reforms, Rebuild agenda announced in April 2022. This led to the lifting of a six-year ban on opposition rallies and the issuance of new publishing licenses to opposition papers and a proposed constitutional reform aimed at allowing all National Electoral Commission decisions to be challenged in court.

About Fitch Ratings

Fitch Ratings is a leading provider of credit ratings, commentary, and research.

Fitch Ratings’ sovereign rating provides an assessment of the creditworthiness of sovereign governments, and it is valuable information for investors, economists, and policymakers. The ‘B+’ rating assigned to Tanzania is an affirmation of the country’s strong economic performance and reform momentum.

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