Fitch affirms Tanzania at ‘B+’ with stable outlook

USA: FITCH Ratings has recently affirmed Tanzania’s LongTerm Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a stable outlook.

Fitch said in a statement over the weekend that Tanzania’s rating reflects its relatively strong real GDP growth, low inflation and a moderate level of government debt.

The country’s IMF programme supports its macroeconomic and fiscal performance.

However, the rating is constrained by weak governance indicators relative to peers, revenue underperformance and a weak macroeconomic policy framework compared with ‘B’ category peers that make the country more vulnerable to foreign exchange (FX) liquidity pressures.

Fitch said it expects Tanzania’s real GDP growth to rise to 5.4 per cent in 2024 and 5.9 per cent in 2025 (above our projected ‘B’ median of 4.7 per cent), from 5.1 per cent last year driven by increased agriculture, mining and tourism activity as well as infrastructure investment including flagship projects such as the Standard Gauge Railway and the Julius Nyerere Hydropower project.

In the longer term, real GDP growth could benefit from the development of offshore gas fields and LNG production. Growth volatility is low, but this may understate macroeconomic stability risks, given the importance of the agricultural sector, which is rain-dependent and highly vulnerable to natural disasters.

According to Mr Beatus Mlingi, a Research Analytics Manager from Vertex International Securities, Tanzania’s Fitch rating of ‘B+’ with a stable outlook carries important implications for its economic prospects and highlights areas requiring attention to enhance its financial standing.

“While not investmentgrade, the rating reflects moderate credit risk and serves as a signal to investors seeking opportunities in emerging markets,” he said.

He said this level of rating can attract investors who are willing to take on higher risks in exchange for potentially greater returns, especially in a market that offers untapped potential. However, Tanzania’s borrowing costs remain relatively high due to the perceived risks associated with the rating.

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“When the country seeks international loans or issues bonds, it may face elevated interest rates compared to nations with higher credit ratings, which could constrain fiscal flexibility,” he noted.

He said the rating also shapes the global perception of Tanzania’s economic and financial health. It sends a mixed signal to foreign direct investors and portfolio investors who weigh the country’s stability and potential returns against its vulnerabilities.

The rating positions Tanzania as a stable but speculative market, requiring deliberate actions to improve its creditworthiness and attract sustained capital inflows.

Mr Mlingi said further that to improve its rating, such as ‘BB’ or above, which would lower borrowing costs, attract more FDI, and improve Tanzania’s reputation as a stable investment destination, Tanzania must focus on key economic reforms aimed at achieving macroeconomic stability.

This includes maintaining low inflation rates, enhancing revenue collection, and ensuring efficient public expenditure.

“Strengthened debt management is equally critical, particularly by prioritising concessional loans and increasing transparency in borrowing practices to build confidence among creditors and investors,” he stated.

He said structural reforms targeting infrastructure, energy, and industrial sectors would diversify the economy, reduce dependency on agriculture and natural resources and make the economy more resilient to shocks.

He said food governance is vital to this transformation. By implementing anti-corruption measures, improving regulatory frameworks, and enhancing institutional efficiency, Tanzania can create an environment conducive to both local and foreign investment.

Export diversification should also be prioritised to reduce reliance on volatile commodity prices and improve the balance of payments. He added that by expanding export markets and investing in value addition can help stabilise foreign exchange reserves and strengthen the country’s economic resilience.

“These measures, collectively, will not only improve Tanzania’s credit rating but also pave the way for sustainable growth, lower borrowing costs and increased global confidence in its financial stability,” he said.