Fitch upgrades Tanzania’s economic outlook to positive, keeps B+ rating

Dar es Salaam. Tanzania’s economic prospects have improved, with global credit rating agency Fitch Ratings revising the country’s outlook to positive from stable while affirming its long-term issuer default rating at ‘B+’.

The revision, announced on Friday August 21, 2026, reflects expectations of stronger international reserves, moderate fiscal deficits and continued economic growth, which Fitch said would support a downward trajectory in government debt.

The agency also acknowledged improvements in Tanzania’s macroeconomic policy framework, including institutional and operational reforms that have strengthened central bank independence, exchange-rate management and foreign exchange (FX) operations.

“Recent institutional and operational improvements in the country’s macroeconomic policy framework could also increase its resilience to shocks, but these remain to be tested,” Fitch said.

The positive outlook signals the potential for an upgrade if the improvements in economic management continue to strengthen the country’s resilience to external shocks.

Fitch expects Tanzania’s international reserves to rise to $7.9 billion by 2028, from $6.3 billion at the end of 2025.

The projected reserves would provide coverage equivalent to 3.3 months of current external payments, although this remains below the 4.2-month median for countries in the ‘B’ rating category.

Fitch said reduced distortions in the foreign exchange market and greater exchange-rate flexibility would help mitigate near-term external risks.

The country’s external buffers could also receive a boost from the Bank of Tanzania’s holdings of non-monetary gold, estimated by Fitch at $2.4 billion.

The agency said the gold could either be sold for foreign exchange or converted into monetary gold, with the process already under way.

Debt trajectory improves

Fitch expects Tanzania’s government debt-to-GDP ratio to decline to 46.2 percent in 2028, from 48.9 percent in 2025.

The decline is expected to be driven by strong nominal economic growth and low primary deficits. The projected ratio would remain below the 55 percent median for countries rated in the ‘B’ category.

The agency estimates Tanzania’s fiscal deficit at 2.8 percent of GDP for the financial year ended June 2026 and forecasts it will remain close to 3 percent of GDP through 2028.

Fitch attributed the FY2026 performance partly to strong revenue collection and the limited impact of fuel subsidies on fiscal execution.

It also noted that tax revenues increased by one percentage point to 15.6 percent of GDP between FY2023 and FY2025, reflecting gains in revenue mobilisation under the government’s Medium-Term Revenue Programme.

However, the agency warned that Tanzania’s debt position remains exposed to exchange-rate depreciation because external debt accounts for 68 percent of total government debt.

Fitch expects Tanzania’s real GDP growth to reach 5.8 percent in 2026, significantly above the 3.7 percent projected median for countries in the ‘B’ category.

The agency expects growth to average 6.1 percent in 2027 and 2028, supported by public investment, tourism, Tanzania’s position as a regional logistics hub and the emerging mining sector.

“Material disruptions to fuel supply were prevented by authorities' direct procurement from an energy trader, which guaranteed supply between May and July. Fitch assumes no material negative impact on the tourism sector for the full yearThe agency assumed there would be no material negative impact on tourism for the full year,” its report read in part.

Fitch forecasts average annual inflation of 4.2 percent in 2026, up from 3.3 percent in 2025 but below the 5.6 percent median projected for ‘B’-rated countries.

The agency also highlighted improvements in public financial management.

By March 2026, the verified stock of supplier and VAT refund arrears had fallen to 0.2 percent of GDP, from 1.2 percent in December 2022.

Fitch identified continued strengthening of foreign exchange reserves, further improvements in revenue mobilisation and expenditure controls, and greater confidence in Tanzania’s macroeconomic policy framework as factors that could lead to a positive rating action.

The agency, however, maintained that some of the recent policy reforms remain relatively new and therefore need to be tested over time.