Fitch raises Tanzania outlook to positive on stronger reserves

TANZANIA: FITCH Ratings has raised Tanzania’s credit outlook to positive from stable, citing stronger foreign-exchange reserves, contained fiscal deficits and robust economic growth that should help put government debt on a downward trajectory.

The ratings agency affirmed Tanzania’s longterm foreign- and localcurrency issuer default ratings at B+, according to its latest assessment.

Fitch forecasts Tanzania’s real Gross Domestic Product (GDP) growth at 5.8 per cent in 2026 and an average of 6.1 per cent in 2027-28, supported by public investment, tourism, the country’s role as a regional logistics hub and growth in mining.

It expects international reserves to rise to 7.9 billion US dollars in 2028 from 6.3 billion dollars at the end of 2025, equivalent to 3.3 months of current external payments. Fitch estimates Tanzania’s fiscal deficit at 2.8 per cent of GDP for the financial year ended June 2026 and forecasts, it will remain close to three per cent through 2028, partly reflecting continued gains in domestic revenue mobilisation.

Tax revenue rose by one percentage point to 15.6 per cent of GDP between fiscal 2023 and 2025 under the government’s Medium-Term Revenue Programme, the agency said.

Fitch expects government debt to decline to 46.2 per cent of GDP in 2028 from 48.9 per cent in 2025, driven by strong nominal GDP growth and low primary deficits.

The projected debt ratio would remain below the 55 per cent median for ‘B’-rated countries.

The agency also acknowledged improvements in Tanzania’s macroeconomic policy framework since 2023, including institutional and operational reforms aimed at strengthening central bank independence, exchange-rate flexibility and foreign-exchange management.

However, Fitch said some of the reforms remain relatively new and have yet to be tested through a full range of economic shocks.

Tanzania’s rating remains constrained by weak governance, low government revenue compared with ‘B’-rated peers and a macroeconomic policy framework that, despite recent improvements, remains relatively weak.

The agency expects the current-account deficit to widen to 3.2 per cent of GDP in 2026 before narrowing to 2.5 per cent in 2027-28, partly reflecting an expected decline in global oil prices.

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Fitch also expects Tanzania’s net external debt to fall to 38 per cent of GDP in 2028, although that would remain above the projected ‘B’ median of 16 per cent.

The agency said Tanzania’s economy had shown resilience to external shocks, forecasting growth of 5.8 per cent this year despite disruptions linked to the war in Iran.

It expects growth to accelerate to an average of 6.1 per cent in 2027-28. The outlook remains vulnerable to an escalation of geopolitical tensions, higher fertiliser prices and weather-related shocks affecting agriculture.

Fitch expects inflation to average 4.2 per cent in 2026, up from 3.3 per cent in 2025 but below the 5.6 per cent projected median for ‘B’-rated countries.