Moody's confirms Tanzania's B1 rating, but growth coexists with political risks

2026-02-20 23:40:20

Investing.com - Moody’s today confirmed Tanzania’s local and foreign currency long-term issuer ratings at B1, with a stable outlook. The rating reflects the country’s weak institutional framework and low income levels, but also considers strong growth momentum and the resilience supported by economic, monetary, and external policies amid a shift towards greater reliance on private sector-led investment.

Following the 2025 elections and related violence, political risks increased, but stability has since been restored. Potential social risks stemming from low income and rapid population growth have heightened the possibility of renewed instability, which could pressure investment, exports, and fiscal outcomes. Government debt is about 50% of GDP, remaining moderate but rising to fund infrastructure and social development spending.

Tanzania’s economy is expected to grow by at least 6% in the future, driven by increased investment in manufacturing, mining, and processing industries, as well as continued expansion of tourism and transportation-related services. Since 2023, authorities have addressed foreign exchange shortages through promoting the use of the local currency and improving domestic and foreign exchange markets. Reforms have strengthened economic policy effectiveness. Since 2018, the central bank has maintained inflation below 5%.

Non-grant revenue increased from 13.7% of GDP in the 2020/21 fiscal year to 15.9% in 2025/26, and is expected to exceed 17% of GDP in this fiscal year. Improvements in tax administration, digitization, compliance, and increased non-tax revenue (including higher dividend income following reforms in state-owned enterprise governance) support higher revenue generation. With channels for obtaining concessional loans becoming more limited, interest costs currently account for 16% of revenue.

Tanzania’s local currency ceiling remains at Ba1, and the foreign currency ceiling remains at Ba3. The three-notch gap between the local currency ceiling and the sovereign rating reflects the government’s high involvement in the economy, moderate external imbalances, and political and geopolitical risks, but also considers diversification of government revenue sources and improvements in policy predictability.

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