DAR ES SALAAM: TANZANIA’s ‘B+’ Fitch rating with a stable outlook reflects strong macroeconomic fundamentals and government reforms that strengthen the domestic business environment, analysts say.
Recently, Fitch Ratings affirmed Tanzania’s long-term foreign-currency Issuer Default Rating (IDR) at ‘B+’ with a stable outlook.
According to Fitch, Tanzania’s rating reflects its relatively strong real GDP growth, low inflation and a moderate level of government debt. Alpha Capital Head of Research and Financial Analytics, Mr Iman Muhingo , said on Wednesday that Fitch forecasts sustained strong economic growth, low inflation and increasing foreign reserves.
“This rating signals confidence in Tanzania’s economic stability and growth potential, making it an attractive destination for investors,” he stated.
Further he said, the rating reflects the government’s efforts to improve fiscal discipline, strengthen key sectors and enhance the overall business climate, which are crucial for long-term sustainable development and economic resilience.
Mr Muhingo noted that the report commends the government for the clear- ance of domestic arrears from 1.5 per cent of GDP end of 2022 to 0.6 per cent as of September this year.
He said however that the report highlights some vulnerabilities particularly foreign exchange pressures. from external shocks.
According to Fitch, the rating is constrained by weak governance indicators relative to peers, revenue underper- formance and a weak macro- economic policy framework compared with ‘B’ category peers that make the country more vulnerable to foreign- exchange (FX) liquidity pressures.
On his part, Economist and investment banker, Dr Hildebrand Shayo, said Tanzania attaining Fitch’s B+ rating implies that the country is deemed to be somewhat hazardous and has a higher than normal default probability.
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“In fact it indicates that with such rating it is challenging to fulfill own financial commitments.
Thus a Fitch B+ indicates a relative risk and a country has higher than average chance of default,” he said.
According to this rat- ing, he said, Tanzania is very susceptible to unfavourable economic conditions and has a little margin of safety for fulfilling its financial obligations.
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 non-investment- grade, the rating reflects moderate credit risk and serves as a signal to investors seeking opportunities in emerging markets,” he stated.
This level of rating can attract investors who are willing to take 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.
When the country seeks international loans or issues bonds, it may face elevated interest rates compared to na- tions with higher credit ratings, which could constrain fiscal flexibility.
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 vul- nerabilities.
The rating positions Tanzania as a stable but speculative market, requiring deliberate actions to improve its creditworthiness and attract sustained capital inflows.
To improve its rating, such as ‘BB’ or above, which would lower borrowing costs, attract more FDIs 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.
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.
