Fitch keeps Tanzania at ‘B+’, outlook stable

DAR ES SALAAM: FITCH Ratings has reaffirmed Tanzania’s long-term foreign-currency issuer default rating at ‘B+’ with a stable outlook, citing the nation’s robust growth trajectory and fiscal resilience following the 2025 General Election.

The affirmation follows a similar move by Moody’s Ratings in February, which held Tanzania at ‘B1’ with a stable outlook, effectively signaling a consensus among global credit sentinels that East Africa’s second-largest economy is holding its course.

The rating agencies highlight a projected real GDP growth of 6 per cent for 2026, significantly outpacing the ‘B’ rated median of 4.5 per cent.

This expansion is being fueled by a surge in infrastructure investment, most notably the Standard Gauge Railway (SGR) and the East African Crude Oil Pipeline (EACOP), alongside a recovery in the tourism sector and strong performance in gold mining.

While the outlook remains steady, both agencies noted that Tanzania’s credit profile remains “constrained.”

Fitch pointed to structural weaknesses in the foreign exchange (FX) market and a revenue-to-GDP ratio that, while improving, remains below regional peers.

Together, the ratings signal cautious confidence in a steady macroeconomic performance, even as the nation navigates persistent vulnerabilities tied to debt dynamics and external shocks.

“The rating reflects sustained economic momentum and access to concessional financing under the IMF’s Extended Credit Facility,” Fitch stated in its Friday’s release.

“However, weak governance indicators and vulnerability to external shocks, specifically geopolitical tensions affecting fuel and fertiliser imports, remain key risks.”

Tanzania’s debt-to-GDP ratio is projected to decline to 47 per cent by 2027, down from 50 per cent in 2025.

This puts the country in a more favorable position than many of its neighbours, as the ‘B’ median for government debt currently sits at 54 per cent.

Fitch said Tanzania’s growth outlook is highly sensitive to the duration of the conflict in Iran. A substantial share of the country’s fuel imports (about 62 per cent) and fertiliser supplies (around 40 per cent) is sourced from Gulf Cooperation Council (GCC) countries, leaving it exposed to disruptions in the region.

The key tourism sector is also vulnerable, with a significant proportion of arrivals transiting through GCC hubs.

Any escalation or prolongation of the conflict beyond Fitch Ratings current one-month assumption could trigger a sharp shock to inflation, erode external reserves and weigh on economic growth, it noted.

Fitch Ratings said Tanzania’s current account deficit is projected to widen to 3.5 per cent of GDP in 2026, driven by the fallout from the conflict in Iran, which is expected to push up fuel import costs and weigh on tourism inflows.

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Travel exports amounted to 4.4 billion US dollars in 2025, accounting for about 25 per cent of total exports of goods and services, underscoring the sector’s vulnerability to disruptions.

This is expected to be partly offset by robust gold exports, which reached 4.7 billion US dollars, or 27 per cent of total exports, providing a buffer against external pressures.

Fitch’s baseline scenario sees international reserves covering 2.5 months of current external payments over 2026–2027, well below the ‘B’ median of 4.8 months.

A prolonged conflict beyond the agency’s base case would likely widen the current account gap further, as higher global Brent crude prices above its 70 US dollars per barrel assumption for 2026 and weaker tourism receipts erode reserve buffers.

On the fiscal side, Fitch expects the deficit to remain contained at around 3 per cent of GDP in the fiscal years ending June 2026 and 2027.

Increased spending tied to the election cycle in FY26 is projected to be offset by stronger-than-expected tax revenue performance, supported by first-half fiscal data.

Revenue collection has improved steadily, rising from 14.2 per cent of GDP in FY21 to 15.9 per cent in FY25, with further gains anticipated under the government’s Medium-Term Revenue Strategy to fund higher outlays in healthcare, education and infrastructure.

Government debt is forecast to decline gradually to 47 per cent of GDP by FY27, from 50 per cent in FY25, supported by modest fiscal deficits and solid nominal growth.

This would keep Tanzania below the projected ‘B’ median of 54 per cent, with a high share of concessional borrowing continuing to underpin debt sustainability.

However, Fitch cautioned that the debt trajectory remains vulnerable to exchange-rate depreciation, given that external obligations account for about 68 per cent of total debt.