Tanzania excels in Africa financial market 2024 index

DAR ES SALAAM: TANZANIA has made notable strides in the 2024 Absa Africa Financial Market Index, excelling in the Macroeconomic Environment and Transparency category with a third-place ranking in Africa, its highest across all pillars.

The achievement reflects significant progress, as the country’s score rose from 80 in 2023 to 85 in 2024.

This improvement is attributed to increased transparency, including publicly available Monetary Policy Committee (MPC) meeting schedules, consistently low headline inflation and a healthier non-performing loan (NPL) ratio.

Tanzania’s Pillar 5 ranking places it behind only Botswana (88), the continental leader in the category and Uganda (87), which ranks the second.

The Absa index shows that Tanzania’s strong performance in Pillar 5 underscores the country’s sound macroeconomic policies and transparent economic data and policy decisions. These factors are crucial for fostering investor confidence and promoting financial market development.

Specifically, Tanzania achieved a strong score of 81 in non-performing loans (NPLs) management and performed well in macro data standards, MPC transparency, and budget releases, with scores above 80, in some cases nearing 100.

These achievements demonstrate a commitment to data availability, transparent monetary policy and open budget processes, all vital for good governance and investor confidence, the report says.

The Bank of Tanzania’s introduction of a new code of conduct for the interbank foreign exchange market further bolstered transparency and ethical conduct, it notes.

While the index identifies external debt (69) as a potential area of concern, it also notes Tanzania’s moderate inflation rate of 3.8 per cent as a positive indicator, emphasizing the importance of inflation control for economic stability and investment attraction.

Overall, the index suggests that Tanzania has a reasonably well-developed financial market compared to other African nations but still has room for improvement to catch up with the leaders.

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Tanzania has enjoyed robust economic growth for over two decades, placing the country among economies with strong growth in Africa.

The African Development Bank (AfDB) projects Tanzania’s real GDP growth at 5.7 per cent in 2024 and 6 per cent in 2025. This growth is expected to be driven by agriculture, manufacturing and tourism, further supported by public investments and reforms aimed at improving the business environment.

In 2023, Tanzania’s real GDP grew by 5.3 per cent, up from 4.7 per cent in 2022. This growth was fueled by agriculture, construction and manufacturing on the supply side, and private investments on the demand side. Tight monetary policy, coupled with moderating food and energy prices, contributed to a reduction in inflation from 4.3 per cent in 2022 to 3.8 per cent in 2023.

Inflation is projected to continue its downward trend, reaching 3.3 per cent in 2024 and 3.4 per cent in 2025, supported by stable food and energy prices.

Tanzania also performed well in Pillars 1 (Market Depth), 2 (Access to Foreign Exchange), and 3 (Market Transparency, Tax, and Regulatory Environment).

In the Market Depth pillar, it ranks seventh with a score of 49, trailing South Africa, Morocco, Nigeria, Mauritius, Botswana, and Egypt.

Under this pillar, Tanzania’s strongest category is “Product Diversity,” with a score of 79, the index shows suggesting a relatively good range of financial products available in the market.

The country also performed reasonably well in “Depth,” with a score of 70, indicating a decent level of market activity and participation. However, it scores 55 in the “Primary Dealer System” category, which, while not a top score, is better than several other countries listed.

Tanzania’s lowest score is in “Size of Markets,” with a score of only 26, indicating that the overall size of its financial markets is relatively small compared to other countries in the index. It also scores low in “Liquidity,” with a score of just 16, suggesting potential challenges in quick and easy buying or selling financial assets in the market.

Overall, Tanzania ranks 12^th in Africa in the index for 2024, unchanged from 2023.

The Director of Global Markets for Absa Bank Tanzania, Irene Rwegalulira, told the Daily News that the strong performance can be attributed to enhanced transparency, notably through publicly available Monetary Policy Committee (MPC) meeting schedules, sustained low headline inflation and an improved non-performing loan (NPL) ratio.

She, however, highlighted that Pension Fund Development and Legal Standards and Enforceability are two areas requiring further development. According to her, Tanzania’s pension fund assets per capita remain low at 118 US dollars, significantly below the index average of 820 US dollars.

“Expanding financial inclusion and increasing retail access to financial markets through mobile applications and other digital solutions could drive higher participation,” she said. “A critical question remains: How can we incentivize greater pension fund contributions to ensure long-term financial security for retirees while simultaneously unlocking local funding for infrastructure and development projects?”

Ms. Rwegalulira added that strengthening Tanzania’s legal and regulatory framework is essential, noting that introducing close-out netting legislation and securing clean legal opinions from international bodies would enhance investor confidence and market efficiency.

“The Bank of Tanzania (BoT) is actively collaborating with FrontClear to amend existing regulations, marking a crucial step towards improving Tanzania’s standing in this pillar,” she said.