By Business Insider Reporter
The Bank of Tanzania (BoT) has lowered its benchmark interest rate by 25 basis points to 5.75%, a move aimed at supporting credit expansion and sustaining economic growth, the central bank announced Thursday following its latest Monetary Policy Committee (MPC) meeting held on July 2.
The policy rate, also known as the central bank rate, is the key interest rate set by a country’s central bank. It determines the cost at which commercial banks borrow money from the central bank.
Changes in the policy rate directly influence the interest rates that banks charge on loans and pay on deposits.
By adjusting this rate, the central bank can help manage inflation, encourage or slow down borrowing and spending, and support overall economic stability and growth.
The new rate is the second adjustment to the Central Bank Rate (CBR) since its introduction in January 2024. The cut signals increased confidence in the country’s inflation trajectory, with headline inflation consistently hovering around 3%, well below the central bank’s 5% target.
Governor Emmanuel Tutuba said the decision reflects the Committee’s confidence in Tanzania’s macroeconomic stability and continued economic resilience.
“This decision reflects the Committee’s confidence in the inflation outlook. Inflation has consistently remained within the target band of 3–5%, and projections indicate it will remain stable within this range,” Governor Tutuba said in the official MPC statement.
BoT also committed to maintaining the 7-day interbank rate within the CBR corridor of 3.75%, signaling an accommodative stance aimed at ensuring adequate liquidity in the financial system.
The rate cut comes as Tanzania’s economy gains momentum. The MPC reported that GDP growth reached 5.8% in Q1 and 5.5% in Q2 2025, with forecasts pointing to a further rise to 6.0 and 6.9% in the third and fourth quarters, respectively.
Growth is being driven by public infrastructure investment, increased private sector activity, and improved investor confidence.
The Sixth Phase Government, under President Dr. Samia Suluhu Hassan, projects annual growth at 6% in 2025, up from 5.5% last year.
Key drivers include the start of electricity generation at the Julius Nyerere Hydropower Project (JNHPP) and the ongoing development of major infrastructure projects such as the Standard Gauge Railway (SGR) and airport upgrades, which are expected to further stimulate domestic production and connectivity.
BoT also noted improved conditions in the financial sector. Credit to the private sector grew by 16.7% in the second quarter, supported by favorable lending conditions. The banking system remains sound, with a declining Non-Performing Loan (NPL) ratio of 3.4% – well below the 5% prudential benchmark.
“The ongoing implementation of fiscal consolidation and reforms will facilitate sustainable growth and complement monetary policy in ensuring low and stable inflation,” Governor Tutuba added. The MPC is scheduled to meet again on October 1, 2025, with the next CBR announcement expected the following day.
