Fitch Turns Positive on Tanzania as Reserves and Economic Growth Strengthen
Fitch Ratings has revised Tanzania’s sovereign credit outlook from stable to positive, citing stronger foreign exchange reserves, sustained economic expansion and improving fiscal conditions that could place the country’s public debt on a declining path.
The international rating agency, however, retained Tanzania’s long-term foreign- and local-currency issuer default ratings at B+, indicating that while the country’s economic fundamentals are improving, significant structural weaknesses remain.
Fitch’s positive outlook reflects expectations that Tanzania’s growing external financial buffers and expanding economy will strengthen its capacity to manage government debt in the coming years.
Economic growth outlook strengthens
Tanzania’s economy is projected to grow by 5.8 percent in 2026, according to Fitch, before accelerating to an average of 6.1 percent in 2027 and 2028.
The agency expects public investment, a recovery in tourism, increased mining activity and Tanzania’s expanding role as a regional logistics and transportation hub to support growth.
The projected expansion is significantly above the median growth rate expected for sovereigns rated in the B category, highlighting Tanzania’s relatively strong growth prospects among similarly rated economies.
Foreign reserves provide stronger buffer
One of the key factors behind Fitch’s decision is the expected improvement in Tanzania’s external financial position.
The agency forecasts the country’s international reserves will increase from $6.3 billion at the end of 2025 to $7.9 billion by 2028. That would provide approximately 3.3 months of coverage for current external payments.
Fitch also highlighted Tanzania’s holdings of non-monetary gold, valued at about $2.4 billion, which could provide an additional source of external liquidity if converted into foreign currency or monetary gold when required.
The stronger reserve position could provide greater protection against external shocks while improving confidence in Tanzania’s ability to meet international payment obligations.
Fiscal position continues to improve
Tanzania’s fiscal performance has also contributed to the improved outlook.
Fitch estimates that the fiscal deficit stood at 2.8 percent of GDP for the financial year ended June 2026 and expects the deficit to remain around 3 percent of GDP through 2028.
Improved domestic revenue mobilisation has supported the fiscal position. Tax revenue increased by one percentage point to 15.6 percent of GDP between 2023 and 2025, following measures implemented under the government’s Medium Term Revenue Programme.
The rating agency consequently expects Tanzania’s government debt-to-GDP ratio to decline from 48.9 percent in 2025 to 46.2 percent by 2028.
The projected debt level would remain below the 55 percent median for sovereigns rated in the B category, providing further support for the country’s improved credit outlook.
Reforms support investor confidence
Fitch also acknowledged improvements in Tanzania’s macroeconomic policy framework since 2023.
These include efforts to strengthen central bank independence, increase exchange-rate flexibility and improve foreign exchange management.
The government has also made progress in clearing verified supplier and value-added tax refund arrears. Fitch estimates that these arrears declined from about 1.2 percent of GDP in late 2022 to 0.2 percent by March 2026.
The reforms are viewed as strengthening Tanzania’s macroeconomic management and helping to improve the resilience of the economy.
Structural challenges remain
Despite the positive outlook, Fitch cautioned that Tanzania continues to face several weaknesses that constrain its credit profile.
These include weak governance, relatively low government revenue, limited institutional capacity and low income per capita compared with peers.
The agency also noted that some of the country’s recent policy reforms are still relatively new and have yet to be tested against a major external shock.
Inflation is expected to average 4.2 percent in 2026, up from 3.3 percent in 2025 but still below the 5.6 percent median for B-rated sovereigns.
Meanwhile, Fitch forecasts Tanzania’s current account deficit will widen to 3.2 percent of GDP in 2026, before narrowing to 2.5 percent in 2027 and 2028.
Outlook points to possible future upgrade
Fitch’s move to a positive outlook signals that Tanzania could receive a ratings upgrade if the country continues to strengthen its external reserves, maintain fiscal discipline and sustain its current economic growth trajectory.
However, the agency warned that Tanzania remains exposed to external risks, including geopolitical tensions, higher fertiliser prices and weather-related shocks that could affect agricultural output.
For investors, the revised outlook represents a positive signal about Tanzania’s economic direction, although the country’s B+ rating indicates that substantial institutional and structural challenges remain.
The combination of stronger reserves, declining debt levels and robust growth projections could provide Tanzania with greater room to withstand external pressures and improve its credit standing over the medium term.
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