Tanzania’s commitment to reform and macroeconomic stability continues to gain traction, as reflected in the latest engagement with the International Monetary Fund (IMF). A team led by Mr. Nicolas Blancher concluded the 2025 Article IV Consultation and completed staff-level agreements on the fifth review under the Extended Credit Facility (ECF) and the second review of the Resilience and Sustainability Facility (RSF). The IMF’s backing of these reviews is a significant nod to the country’s fiscal and economic management, especially as it approaches the 2025 general elections.
Subject to approval by the IMF Executive Board, Tanzania is set to receive an additional Special Drawing Rights (SDR) 326.47 million (approximately US$440.8 million). This would bring the total support under the ECF to SDR 682.21 million (about US$907.4 million), and SDR 255.72 million (about US$343.6 million) under the RSF. This financial support not only helps shore up Tanzania’s reserves and budgetary planning but also sends a strong message of confidence to other development partners, investors, and the domestic business community.
Mr. Blancher highlighted the strength of Tanzania’s recent economic performance, pointing to real GDP growth of 5.5 percent in 2024 and a projection of 6 percent in 2025. Inflation has remained well within the Bank of Tanzania’s (BoT) target, with March 2025 year-on-year inflation recorded at 3.3 percent. While risks—both domestic and external—remain, the macroeconomic outlook remains broadly favorable.
Balancing Public Spending and Fiscal Prudence Ahead of the 2025 Elections
One of the key challenges Tanzania faces as it approaches the election year is managing political expectations while maintaining fiscal discipline. In February 2025, the government introduced a supplementary budget that increased public spending by 0.4 percent of GDP. The funds have been allocated to key areas including education, healthcare, and the clearance of domestic arrears, all of which are high-priority sectors for both the government and the citizenry.
While such pre-election spending raises concerns about possible fiscal slippage, the IMF staff report suggests that the Tanzanian authorities are keenly aware of the risks and are committed to a path of growth-friendly fiscal consolidation starting in the FY25/26 budget. The aim is to reduce the domestic primary deficit to 0.8 percent of GDP by implementing revenue measures amounting to 0.9 percent of GDP. Importantly, this is to be achieved without compromising social spending, which will be preserved at 7.1 percent of GDP.
This strategic balance between social investment and fiscal consolidation is central to Tanzania’s reform agenda. It is a demonstration of political maturity and policy discipline, particularly in the face of upcoming elections where populist pressures typically push governments toward unsustainable spending patterns. The IMF’s endorsement of this approach indicates strong alignment between the government’s fiscal strategy and the Fund’s expectations for debt sustainability and macroeconomic health.
Exchange Rate Reforms and Foreign Exchange Market Stability
Another area of reform highlighted by the IMF mission is Tanzania’s approach to exchange rate management and foreign exchange (FX) market reforms. Over the past year, the country has demonstrated greater tolerance for exchange rate flexibility, a move that has contributed to increased FX inflows into the formal market. These reforms have enhanced liquidity and reduced the parallel market premium, creating a more transparent and efficient currency market.
The Central Bank Rate (CBR) has been maintained at 6 percent—a level considered neutral or mildly stimulatory by the IMF mission. With inflation staying below the BoT’s 5 percent target, maintaining the current policy stance should help preserve price stability in the coming months. The IMF mission commended the BoT’s interventions for being consistent with its FX intervention policy and for helping stabilize the market.
Gross International reserves stood at a healthy US$5.7 billion in March 2025, equivalent to about 3.8 months of import cover. Meanwhile, the current account deficit narrowed to 2.6 percent of GDP in 2024, down from 3.8 percent in 2023. This improvement is largely attributable to strong exports of minerals and agricultural products, along with a rebound in tourism. The continued high price of gold is expected to support this trend further in 2025.
These indicators not only reflect the economy’s resilience but also reinforce the narrative that Tanzania is making the right macroeconomic policy choices—choices that are vital for long-term sustainability and for maintaining investor confidence in the Tanzanian shilling and the broader economy.
Laying the Groundwork for Long-Term Economic Transformation
While the short-term macroeconomic indicators are encouraging, the IMF also used the Article IV consultations to engage with Tanzanian authorities on long-term development challenges and opportunities. Tanzania’s Vision 2050 outlines an ambitious trajectory for structural transformation and inclusive growth. The country’s youthful and rapidly growing population presents both a challenge and an opportunity. To harness this demographic dividend, the government must continue investing in education, healthcare, and job creation.
Improving access to finance, streamlining business regulations, and strengthening anti-corruption and judicial institutions were identified as critical reform priorities. These measures are essential to improving the business climate and attracting both domestic and foreign investment. While Tanzania has made progress in simplifying its regulatory frameworks, much remains to be done to unlock the full potential of the private sector.
The government is also being encouraged to enhance public investment management to ensure efficient use of limited fiscal space. This is particularly important as the country undertakes large infrastructure projects intended to stimulate growth and regional integration. The IMF has indicated its willingness to continue providing technical assistance in these areas, alongside support from the World Bank and other development partners.
Climate Resilience and the Role of the RSF
Tanzania’s participation in the Resilience and Sustainability Facility (RSF) is a testament to its growing recognition of the role of climate change in economic development. Through the RSF, the country has already begun strengthening institutional frameworks for climate-related policies and public investment management. These steps are critical not only for mitigating the risks of climate change but also for leveraging climate financing from international partners.
The RSF provides Tanzania with both technical and financial assistance to support climate-related reforms. The second review under the RSF—endorsed by the IMF staff—demonstrates that progress is being made in this direction. As a country vulnerable to climate shocks, especially in agriculture and coastal communities, Tanzania’s ability to build resilience is central to maintaining long-term economic stability.
From enhancing data collection to mainstreaming climate risk into fiscal planning, Tanzania is positioning itself as a proactive player in the global green transition. The IMF and its partners have emphasized the importance of accelerating the implementation of RSF reforms to fully realize their impact. By embedding climate resilience into its development agenda, Tanzania not only protects its economy from external shocks but also opens up avenues for new financing and investment.
Political Stability and Reform Momentum in an Election Year
A critical concern in many low- and middle-income countries is the tendency for reform momentum to slow in the lead-up to national elections. In Tanzania’s case, however, there are strong signs that the government remains committed to its economic program despite the political pressures of an election year. This is especially important given the risks outlined by the IMF, including potential fiscal slippage and reform fatigue.
Maintaining reform momentum during this period will be essential for safeguarding the gains made under the ECF and RSF programs. The engagement between Tanzanian authorities and the IMF has been described as candid and productive, suggesting a high degree of transparency and shared commitment to reform objectives. The decision to press forward with fiscal consolidation in FY25/26, even while increasing targeted spending in FY24/25, reflects this delicate balance.
As the country moves toward the 2025 elections, it will be important for policymakers to communicate the benefits of these reforms to the public. Sustained public trust and stakeholder engagement will be crucial to ensuring continuity and broad-based support for the country’s economic transformation.
A Reform Agenda Rooted in Responsibility
Tanzania’s ability to secure continued support from the IMF under both the Extended Credit Facility and the Resilience and Sustainability Facility speaks volumes about its credibility as a reform-oriented economy. With impressive GDP growth projections, subdued inflation, a manageable current account, and improving foreign exchange market conditions, the country is setting a benchmark for responsible macroeconomic governance in the region.
However, the real test lies ahead. The 2025 elections will undoubtedly pose challenges to fiscal and reform discipline. But if the government can stay the course—prioritizing social investments, protecting fiscal space, advancing structural reforms, and embracing climate resilience—it will not only meet its immediate economic objectives but also lay a firm foundation for achieving Vision 2050.
With continued support from the IMF, the World Bank, and other development partners, Tanzania’s path to sustainable growth, resilience, and inclusive development remains within reach. What matters now is consistency, transparency, and a sustained commitment to reform—qualities that are increasingly becoming hallmarks of Tanzania’s economic story.
Ultimately, Tanzania’s reform journey is not just a story of numbers and fiscal indicators—it is a testament to visionary leadership, institutional trust, and a shared national will to break free from the limitations of past development models. As the country stands on the threshold of a pivotal election year, its ability to uphold reform commitments while responding to citizens’ needs will shape the legacy of this economic transformation—and serve as a model for other nations navigating similar crossroads.