TZ strong GDP growth to create wealth, reduce poverty – AfDB

DAR ES SALAAM: TANZANIA’S strong economic growth has the potential to create wealth and reduce poverty, with real Gross Domestic Product (GDP) expanding by 6.0 per cent in 2025 from 5.5 per cent in 2024, according to the African Development Bank Group (AfDB).

The AfDB Country Focus Report 2026 said the positive relationship between overall economic growth and GDP per capita growth showed that sustained expansion of the economy could improve people’s incomes and contribute to poverty reduction.

“Real GDP growth per capita was 3.1 per cent in 2025, up from 2.5 per cent in 2024. The positive correlation between GDP growth and GDP per capita growth reflects the potential of strong GDP growth to create wealth and reduce poverty,” the report said.

According to the report, Tanzania’s economic performance was driven mainly by agriculture, mining, construction and financial services on the supply side, while investment and consumption were the main drivers on the demand side.

The AfDB said the growth trajectory remained positive despite a challenging global environment, projecting the economy to expand by 5.4 per cent in 2026 before recovering to 6.1 per cent in 2027.

It, however, warned that the outlook remained exposed to downside risks, including the ongoing conflict in the Middle East and global trade tensions, which could affect economic activity, investment, commodity prices and external trade.

The report said maintaining strong and inclusive economic growth would be critical for Tanzania to translate macroeconomic gains into improved livelihoods.

It called for continued reforms aimed at strengthening the foundations of economic growth, particularly in areas that can expand investment, create employment and improve people’s access to economic opportunities.

The AfDB said Tanzania’s macroeconomic fundamentals remained stable, with inflation staying within the Bank of Tanzania’s (BoT) target range of 3 to 5 per cent.

ALSO READ: Tanzania, Germany in talks to enable health, energy, natural resources projects deliver direct benefits to citizens

Inflation increased only marginally from 3.1 per cent in 2024 to 3.3 per cent in 2025, supported by prudent monetary policies and favourable global economic conditions.

The relative stability in prices also contributed to improved foreign exchange market conditions, with the Tanzanian shilling depreciating by only 1.3 per cent in 2025 compared with 6.3 per cent in 2024.

The report said the BoT maintained its interest-rate-based monetary policy framework to strengthen the effectiveness of monetary policy in maintaining price stability and limiting the impact of exchange rate movements on domestic prices.

The report also noted that credit to the private sector increased by 20.3 per cent in 2025, up from 17.1 per cent in 2024, supported by a largely accommodative monetary policy stance.

It said a stronger and more integrated financial system would help channel domestic and foreign capital into productive investments, thereby supporting job creation, business expansion and wealth generation.

On fiscal performance, the report said fiscal consolidation had helped contain the deficit while creating space for development spending.

However, the fiscal deficit widened slightly from 3.2 per cent of GDP in 2024 to 3.4 per cent in 2025, mainly due to increased election-related and infrastructure spending.

Revenue mobilisation remained a challenge, with government revenue standing at 16.1 per cent of GDP in 2024/25, including tax revenue equivalent to 13.1 per cent of GDP.

The AfDB said strengthening domestic resource mobilisation was necessary to reduce dependence on borrowing and create greater fiscal space for investments that can support long-term growth and poverty reduction.

Tanzania’s development financing needs were estimated at 8.7 per cent of GDP in 2024/25 and are expected to decline and stabilise at around 6.3 per cent over the medium term.

The report identified weak domestic resource mobilisation, a shallow financial system and limited access to long-term financing among the key challenges facing the country as it seeks to accelerate economic transformation.

To address the financing gap, the AfDB called for greater use of public-private partnerships (PPPs), stronger participation of private capital and improved mechanisms for reducing investment risks.

It also urged development partners to support Tanzania in mobilising long-term capital and strengthening project preparation to ensure more development projects reach financial close.

The report said stronger investment in strategic infrastructure, particularly connectivity and energy access, would be essential for sustaining economic growth and expanding opportunities for businesses and households.

Human capital development was also identified as a priority, with investment in skills and education expected to strengthen productivity and help ensure that economic growth benefits a wider section of the population.

The AfDB further called for improvements in public financial management, revenue forecasting and mobilisation, as well as stronger governance of natural resources.

ALSO READ: Tanzania cherishes  peace and stability as pillars of its progress in investment, tourism, trade, social services

With GDP growth projected to rebound to 6.1 per cent in 2027, the report said Tanzania had an opportunity to build on its strong economic performance by pursuing policies that promote inclusive growth, create jobs and expand wealth creation.

The AfDB stressed that sustained economic growth alone would not be sufficient unless supported by reforms that strengthen investment, improve productivity and ensure wider participation in economic activity.