By Business Insider Reporter
Tanzania’s economy is showing strong momentum, according to the latest assessment by the International Monetary Fund (IMF), but it faces emerging risks that could hinder future growth.
In its latest review, the IMF reported that the economy expanded by 5.4 percent in the first quarter of 2025, while inflation remained low at 3.4 percent in August – within the Bank of Tanzania’s 3–5 percent target range.
Growth was driven by strong performance in mining, agriculture, manufacturing, and construction.
However, the IMF has warned that this positive trajectory is increasingly vulnerable to global and domestic headwinds. These include a slowing global economy, geopolitical tensions, and declining foreign aid.
“Domestically, the upcoming national elections could lead to increased fiscal pressures and a slowdown in structural reforms. In addition, climate-related risks, such as erratic rainfall, could impact agricultural output and inflation,” IMF Mission chief Nicolas Blancher noted in a presser.
The review team concluded its week-long visit on September 24, following discussions with government officials, development partners, private sector stakeholders, and civil society.
In its assessment, the IMF noted a temporary pause in fiscal consolidation during 2024/25 financial year to prioritise spending on healthcare, education and the clearance of domestic arrears.
Looking ahead, it stressed the importance of fiscal discipline in 2025/26 financial year to maintain debt sustainability while supporting social and development priorities.
Monetary policy has also been supportive of growth, with the central bank reducing its benchmark interest rate to 5.75%, down from 6%. A more flexible exchange rate and improved foreign exchange market conditions have enhanced market liquidity and narrowed the spread with parallel markets.
Tanzania’s current account deficit narrowed to 2.5 percent of GDP in 2024/25, driven by strong gold, agricultural, and tourism exports, as well as reduced oil imports. With global gold prices high and tourism rebounding, the IMF expects external earnings to remain robust.
“Gross international reserves stood at an adequate level of US$6.2 billion (about 4 months of prospective imports) in July 2025,” reads the September 24 statement.
The IMF commended the Sixth Phase Government commitment to reform but urged faster implementation, particularly to advance Vision 2050, which focuses on inclusive growth, private sector development, and job creation for a rapidly growing youth population.
It also highlighted the need to strengthen climate resilience, with support from the Resilience and Sustainability Facility and other development partners. Education, healthcare, and private sector-enabling reforms remain critical to ensuring sustainable long-term growth. “Sufficient resources must be dedicated to the health and education of Tanzania’s young population, alongside efforts to boost private sector-led job creation,” the IMF mission stated.
