The Monetary Policy Committee (MPC) of the Bank of Tanzania has decided to maintain the Central Bank Rate (CBR) at 6 percent for the first quarter of 2025, in a move aimed at sustaining economic stability and growth. This decision was made during the MPC’s quarterly meeting held on January 7, 2025, following a comprehensive assessment of global and domestic economic conditions.
The MPC’s rationale for holding the CBR steady for the fourth successive quarter is aimed at ensuring adequate liquidity within the economy, keep inflation expectations below the target of 5 percent, and support a projected economic growth rate of approximately 5.7 percent in the first quarter. Furthermore, this move is expected to mitigate exchange rate pressures, curb inflationary risks, and reduce the incentive to transact in foreign currency.
Positive Global Economic Outlook
The MPC acknowledged an improved global economic environment as a significant contributor to Tanzania’s economic prospects. Reports from the International Monetary Fund (IMF) and World Bank highlighted global growth stability in 2024, with notable improvements in the last quarter. Declining inflation, easing financial conditions, and moderated commodity prices—particularly crude oil—have collectively benefited Tanzania’s economy.
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This positive global outlook is expected to persist into 2025, driven by increased household consumption, supportive fiscal policies, and favorable financial conditions. Despite moderate risks from geopolitical tensions and trade conflicts, global inflation is anticipated to decline further due to stable commodity prices.
Tanzania’s Strong Economic Performance
The Tanzanian economy performed commendably in 2024, bolstered by supportive global conditions, prudent fiscal and monetary policies, and ongoing economic reforms. The country’s macroeconomic stability was affirmed by Fitch Ratings in December 2024, which maintained Tanzania’s B+ rating with a stable outlook. Additionally, the IMF’s approval of key financial programs underlined confidence in Tanzania’s economic trajectory.
Key highlights from 2024 include low inflation rates, which averaged around 3 percent in the fourth quarter, driven by adequate food supplies and stable global commodity prices. Zanzibar recorded a slightly higher inflation rate of 4.5 percent, attributed to decreased food and non-food prices. Inflation is projected to remain low in early 2025, at approximately 3.1 percent to 4 percent, supported by sufficient food availability, stable exchange rates, and reliable power supply.
Monetary and Fiscal Indicators
Tanzania experienced significant growth in money supply and private sector credit in 2024. Money supply grew by an average of 12.5 percent, while private sector credit expanded by 16.9 percent, reflecting strong demand for new loans. The decline in non-performing loans to 3.6 percent from 4.2 percent in 2023 further highlighted improved credit quality.
Foreign exchange liquidity also improved markedly, driven by increased earnings from tourism, gold, and key exports like cashew nuts and tobacco. The easing of monetary policies in advanced economies further contributed to exchange rate appreciation, reducing speculative tendencies and stabilizing the market.
The Bank of Tanzania projects exchange rate stability to persist in early 2025, aided by strong foreign exchange reserves exceeding USD 5.5 billion and policies encouraging the use of the Tanzanian shilling for domestic transactions.
The next MPC meeting is scheduled for April 2025, where the committee will reassess economic conditions and determine the policy rate for the second quarter.