By Business Insider Reporter
Financial markets in Tanzania remained broadly stable at the start of 2026, supported by adequate liquidity in the banking system and sustained investor confidence in government securities, according to the latest review by the Bank of Tanzania.
The central bank’s Monthly Economic Review for February 2026 indicates that commercial bank lending rates eased slightly in January, reflecting stable monetary conditions and improved liquidity across the financial sector.
The overall lending rate declined to an average of 15.07 percent in January 2026, down from 15.24 percent recorded in December 2025. Lending rates negotiated with prime customers also edged lower to 12.25 percent from 12.38 percent during the same period.
Meanwhile, deposit rates remained relatively stable. The overall time deposit rate fell marginally to 8.33 percent from 8.36 percent, reflecting continued liquidity in the banking system.
However, negotiated deposit rates rose slightly to 11.74 percent from 11.66 percent, suggesting competitive efforts by banks to attract large deposits.
As a result of these developments, the short-term interest rate spread – the difference between one-year lending and deposit rates – narrowed to 5.79 percentage points from 5.88 percentage points in December.
The report also highlights strong activity in Tanzania’s government securities market. During January 2026, the central bank conducted two Treasury bill auctions worth a combined TSh 390.9 billion, partly to finance government operations and support monetary policy implementation.
Demand for the securities remained strong, with bids reaching TSh 514.2 billion, indicating sustained investor confidence in Tanzania’s domestic debt instruments. Out of the total bids, TSh 342.2 billion were accepted.
Despite the strong demand, the weighted average yield on Treasury bills remained broadly stable at 5.89 percent, almost unchanged from 5.87 percent in December 2025.
The central bank also conducted a 10-year Treasury bond auction valued at TSh 144.6 billion, which was similarly oversubscribed. The auction attracted bids worth TSh 194.1 billion, of which TSh 118.9 billion were successful. Yields on the bond eased slightly to 11.30 percent, signalling favourable borrowing conditions.
Activity in the interbank cash market, where banks lend to each other to manage liquidity, also remained active. Total transactions reached TSh 2.87 trillion, with the seven-day tenor dominating the market and accounting for more than 73 percent of total activity.
The interbank cash market rate rose slightly to 6.40 percent, up from 6.29 percent in December 2025.
In the foreign exchange market, transactions in the Interbank Foreign Exchange Market declined to US$ 88.2 million, partly due to seasonal fluctuations in foreign exchange flows. During the same period, the Tanzanian shilling depreciated modestly to TSh 2,477.94 per US dollar, compared with TSh 2,452.76 in December. Overall, the central bank says the financial sector continues to demonstrate resilience, supported by prudent monetary policy and stable macroeconomic fundamentals.
