Tanzania's Economy: Growth Amid Currency Challenges
Tanzania's economy is on an upward trajectory, with projections indicating a 6% expansion this year, primarily fueled by substantial investments in infrastructure. However, this growth brings with it significant challenges, particularly for the Tanzanian shilling, which has plummeted by 8.9% in 2025, making it the worst-performing currency globally.
The decline of the shilling is largely attributed to a widening current account deficit and an escalating demand for foreign currency driven by a surge in imports coupled with rising public debt. Recent reports indicate that Tanzania's imports of goods and services have risen by 5%, reaching $16.9 billion as of January, with sectors such as manufacturing, construction, and transportation leading this demand.
Key infrastructure projects, including the ambitious $5 billion East African crude oil pipeline and a significant deep-water port in Bagamoyo, are expected to play a crucial role in driving long-term economic growth. However, these initiatives come at a cost, contributing to higher imports and an increasing national debt, which currently stands at $47.6 billion. Notably, external debt has risen by 11.5% to $33.9 billion as of January.
Despite these pressures, experts remain cautiously optimistic, suggesting that if the government manages its debt effectively, the long-term benefits of these investments could eventually strengthen the Tanzanian shilling. The current demand for U.S. dollars is particularly high in sectors such as oil and gas, construction, and manufacturing, further exacerbating the currency's struggles.
As the Tanzanian shilling trades at its weakest level since November 2023, experts predict it may fluctuate between 2,620 and 2,650 in the medium term. While Tanzania's ambitious infrastructure projects may bolster GDP growth, the short-term outlook for the shilling remains uncertain, with potential for further declines before any signs of recovery emerge.
For more in-depth analysis and updates on Tanzania’s economic landscape, stay tuned to our blog.
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