By Business Insider Reporter
The Monetary Policy Committee (MPC) of the Bank of Tanzania (BoT) has kept the benchmark Central Bank Rate (CBR) unchanged at 5.75 percent for the second quarter of 2026, extending its steady policy stance into the new period.
The decision reflects the central bank’s continued focus on anchoring inflation expectations while preserving room for economic expansion. By maintaining the rate, the central bank is signalling confidence that current monetary conditions are broadly appropriate to support growth without triggering price instability.
At the same time, the move underscores a cautious approach in the face of heightened global uncertainties, including volatile commodity prices, shifting financial conditions, and external demand pressures.
Analysts say the stance suggests the central bank is prioritising macroeconomic stability, ensuring that domestic credit conditions remain conducive to investment and business activity while safeguarding price stability.
Announcing the decision last week, the MPC said the move reflects the need to navigate heightened geopolitical tensions in the Middle East, which have disrupted global supply chains and triggered volatility in commodity prices, particularly oil.
“The MPC decision reflects a cautious policy stance aimed at balancing the risks to inflation and economic growth outlook, in the face of the current unprecedented geopolitical tensions in the Middle East, which is
undermining global trade, investment flows, and economic stability,” BoT Governor Emmanuel Tutuba noted in presser.
The committee also reduced the CBR corridor from 200 basis points to 150 basis points in a bid to improve the transmission of monetary policy, effectively narrowing the band within which short-term interest rates are expected to fluctuate.
Despite external pressures, the domestic economy has demonstrated resilience. Growth in the first quarter of 2026 was estimated at 6.2 percent in Mainland Tanzania and 6.7 percent in Zanzibar, driven by strong performance in construction, agriculture, financial services, and tourism.
The outlook remains broadly positive, with growth projections of 6.1 percent and 6.6 percent for Mainland Tanzania and Zanzibar respectively in the second quarter.
Inflation has remained within the central bank’s target range of 3 to 5 percent, averaging 3.3 percent on the Mainland and 4.5 percent in Zanzibar. The MPC attributed this stability to prudent monetary policy, stable food prices, and exchange rate stability. However, it warned that rising global energy and transport costs could exert upward pressure on prices in the coming months, although these are expected to be offset by favorable domestic conditions.
The banking sector continues to show strong fundamentals, with adequate capital buffers and liquidity levels. Non-performing loans have declined to 2.9 percent, well below the five percent threshold, indicating improved credit quality and prudent risk management.
At the same time, private sector credit growth remains robust at 22.8 percent, reflecting sustained demand from businesses and households.
On the external front, Tanzania’s position has strengthened, with the current account deficit narrowing to 2.2 percent of GDP from 2.4 percent previously. This improvement has been supported by increased export earnings from gold, tourism, and agricultural products. Foreign exchange reserves remain healthy at over US$ 6.2 billion, sufficient to cover approximately 4.8 months of imports, providing a buffer against external shocks.
The MPC noted that while the domestic economy remains resilient, prolonged geopolitical tensions could dampen growth prospects and increase inflationary risks. It urged continued vigilance and monitoring of global developments to ensure macroeconomic stability is maintained. The next MPC meeting is scheduled for July 2026, where policymakers will reassess economic conditions and adjust their stance as necessary.
