Mapping economic landscape: Tanzania’s investment outlook for 2026
By Theophil Christian Malundi
In February 2026, the Bank of Tanzania (BoT) released its Mid-Year Monetary Policy Statement, offering a detailed assessment of the economy’s performance and policy direction.
For investors and businesses, the document provides more than statistics; it sets the tone for capital allocation decisions in the months ahead.
The broad message is one of stability underpinned by cautious optimism. Inflation remains contained at around 3.5 percent, comfortably within the government’s target range. Price stability at this level safeguards the purchasing power of the shilling and provides a predictable environment for investment planning.
Economic growth has also held firm. Mainland Tanzania is estimated to have expanded by 5.9 percent in 2025, while Zanzibar recorded growth of 6.8 percent. Expansion has been broad-based, with agriculture, construction, mining and tourism all contributing meaningfully. Such diversification reduces vulnerability to sector-specific shocks and strengthens macroeconomic resilience.
The central bank’s policy stance reinforces this environment. The Central Bank Rate (CBR) stands at 5.75 percent, unchanged following a modest reduction last year. By maintaining an accommodative posture, the BoT is signalling support for credit expansion and private sector activity while inflation remains subdued. In practical terms, this means borrowing conditions are intended to remain supportive of business growth.
Currency performance has been particularly notable. During the first half of the fiscal year, the Tanzanian shilling appreciated by roughly 5.5 percent against the US dollar, reversing previous depreciation trends. A firmer currency lowers the cost of imported machinery, fuel and intermediate goods, easing pressure on manufacturers and construction firms. It also cushions consumers against imported inflation, particularly in sectors such as pharmaceuticals and electronics.
Foreign exchange earnings have increasingly been driven by gold and tourism. Elevated global gold prices have boosted export receipts, while tourism continues to perform strongly. This shift in the composition of foreign currency inflows enhances external sector stability and reduces dependence on traditional commodity cycles. For investors, it highlights opportunities along the mining supply chain, hospitality, transport and ancillary tourism services.
The banking sector remains sound. Profitability is robust and the ratio of non-performing loans has declined to 2.8 percent, well below prudential thresholds. Private sector credit growth, at approximately 17.6 percent, signals renewed confidence in lending activity. Liquidity conditions appear supportive, suggesting that viable enterprises with credible business models should encounter fewer financing constraints than in recent years.
The BoT has also emphasised payment system modernisation and the expansion of digital financial services. The rapid growth of mobile money and electronic transactions is deepening financial inclusion and formalising commercial activity. For businesses, digital integration improves record-keeping and strengthens creditworthiness assessments, potentially widening access to formal finance. The transition towards a cash-lite economy is gathering pace and reshaping commercial practice.
From a strategic perspective, the current environment presents measured opportunity. A relatively strong shilling creates favourable conditions for capital expenditure reliant on imported inputs. Agriculture, which has received policy attention including dedicated credit facilities, remains central to inclusive growth and warrants close engagement with financial institutions.
For savers, real returns remain positive. With inflation at 3.5 percent and deposit rates averaging around nine percent, savings instruments are generating gains in real terms. Fixed-income securities also continue to offer attractive yields. Ten-year government bond rates, at about 12.45 percent, remain compelling in a context of currency stability and moderated inflation expectations.
Construction, particularly in Zanzibar, merits attention. With projected growth of 7.2 percent, partly linked to infrastructure development and preparations for the 2027 Africa Cup of Nations, the sector is likely to sustain momentum. Exposure to building materials, property development and related services could benefit from this pipeline of activity.
Nonetheless, risks persist. Tanzania’s external position remains sensitive to commodity price fluctuations. A significant correction in global gold prices would test foreign exchange earnings and potentially exert pressure on the shilling. Food price dynamics also warrant vigilance. Although headline inflation is subdued, adverse weather or supply disruptions could lift food inflation and constrain policy flexibility. Geopolitical tensions and global trade frictions remain additional external variables capable of disrupting supply chains and influencing import costs.
Theophil Christian Malundi is an investment analyst based in Scotland, United Kingdom.
