Rating Release
Agusto & Co. affirmed the “Bb-” rating with a stable outlook to the United Republic of Tanzania
The rating affirmation reflects the Country’s satisfactory macroeconomic fundamentals evidenced by a stable inflationary environment with an average inflation rate of 3.8% and an average real gross domestic product (GDP) growth rate of 4.9% over the past five years, supported by increased mineral production and resilient agricultural output. The rating also takes into consideration the Country’s relatively elevated debt-to-GDP ratio and debt service to revenue ratio of 40.3% and 50.9% respectively, as at the end of June 2025. Furthermore, the rating also reflects our opinion on the Country’s expanding foreign reserves and import cover which stood at USD 6.6 billion and 5 months respectively as at 31 October 2025 and projected to stay positive over the near term. The rating is however constrained by the Tanzania’s high trade deficit balance which is estimated at circa US$ 4.9 billion as at 31 December 2025 (2024: US$ 5.2 billion), continued reliance on foreign aid and grants as one of its major sources of budget funding and foreign exchange earnings, and increasing fiscal shortfall, representing 3.4% of the Country’s GDP as at June 2025.
Looking ahead, Tanzania projects to record TZS 40.5 trillion as revenue in FY 2025/26, with domestic revenue projected to rise to 16.7% of GDP, supported by tax revenue increasing to 13.3% of GDP. In our view, while external grants particularly from European partners may remain constrained in the near term due to post-election concerns, Tanzania’s domestic revenue outlook remains resilient, supported by continued tax administration reforms and compliance enhancing measures. In FY 2025/26, the Country’s total expenditure is projected at TZS 56.5 trillion, comprising TZS 39 trillion in recurrent spending and TZS 17.5 trillion in development expenditure. Agusto & Co. notes that the FY 2025/26 budget composition underscores a continued focus on growth-enhancing and productivity-driven spending, supporting improvements in human capital and infrastructure that are expected to strengthen Tanzania’s competitiveness and support sustainable economic growth over the medium term.
As at November 2025, Tanzania’s year-on-year inflation rate eased to 3.4%, marginally lower than the 3.5% recorded in October 2025, largely driven by a slowdown in food and non-alcoholic beverages inflation. We expect the average inflation rate to remain fairly low and within the Bank of Tanzania’s medium-term target of not above 5% by year-end 2026, supported by prudent monetary policy and stable domestic supply conditions.
