DAR ES SALAAM – Investor confidence in Tanzania remains firm after Moody’s Investors Service reaffirmed the country’s sovereign credit rating at B1 with a stable outlook, signaling steady borrowing costs despite domestic challenges experienced last year.
The latest assessment indicates that while Tanzania’s economy remains in the speculative category, it is broadly creditworthy and capable of meeting its financial obligations.
What the B1 Rating Means
A B1 rating is considered speculative, meaning it carries some investment risk. However, it also signals that:
- The country can meet its debt obligations.
- It remains more vulnerable than higher-rated economies to shocks such as slower growth, rising inflation, or global crises.
- Borrowing costs are expected to remain stable in the near term.
The stable outlook suggests that the rating is unlikely to change over the next 12–18 months unless significant unexpected events occur.
Stanbic Bank CEO: “Fiscal Credibility Remains Stable”
The Chief Executive Officer of Stanbic Bank Tanzania, Mr Manzi Rwegasira, welcomed the reaffirmation, describing it as particularly positive amid recent public concerns about investor sentiment.
“In simple terms: International creditors have assessed that Tanzania’s fiscal credibility and situation remains stable and broadly positive.”
He added:
“This speaks to the country’s finances and economic outlook. The cost of borrowing from abroad should remain constant — it is not rising.”
Economic Resilience Highlighted
Economic and investment expert Hildebrand Shayo told Daily News that the reaffirmation reflects both continuity and resilience in the country’s macroeconomic performance.
According to Dr Shayo:
- Economic growth remains robust.
- Inflation is controlled.
- Fiscal reforms are yielding higher revenue.
“The reaffirmation of B1 today reflects both continuity and resilience. Economic growth remains robust, inflation is controlled and fiscal reforms are yielding higher revenue.”
Tanzania’s economy is projected to grow at or above 6 percent annually, supported by:
- Mining
- Manufacturing
- Tourism
- Transport
Inflation has remained below 5 percent in recent years, while public debt stands at approximately 50 percent of GDP.
A Look Back: From B2 to B1
Moody’s previously downgraded Tanzania to B2 in August 2020, citing weak governance and policy unpredictability.
The rating was later upgraded to B1 in March 2024, following improvements in:
- Shock-absorption capacity
- Macroeconomic stability
- Policy effectiveness
Currently, the country sits two notches below investment grade.
Revenue Reforms Strengthen Fiscal Position
One of the strongest positives in the latest assessment is improved domestic revenue mobilisation.
Non-grant revenue has increased from:
- 13.7% of GDP in 2020/21
- To nearly 16% of GDP in 2025/26
Reforms in tax administration and enhanced policy effectiveness — including greater exchange-rate flexibility and improved foreign exchange market functioning — have reduced vulnerability to external shocks.
Structural Challenges Remain
Despite progress, structural challenges continue to limit a move to investment-grade status.
Dr Shayo pointed to:
- Low per-capita income
- Institutional capacity constraints
- Social pressures
- Political risks surrounding last year’s general election
Although political stability has largely returned, Moody’s noted that rapid population growth and limited access to basic services could weigh on investor confidence if not addressed.
What It Will Take to Secure an Upgrade
According to Dr Shayo, Moody’s guidance for a potential upgrade is clear:
- Broaden the tax base
- Improve tax compliance
- Sustain non-grant revenue growth
- Reduce reliance on non-concessional debt
- Strengthen institutional capacity
- Expand inclusive economic growth
“Sustainable revenue growth will lower debt burdens, reduce interest costs and strengthen fiscal sustainability,” he explained.
The Bottom Line
The reaffirmation of Tanzania’s B1 rating with a stable outlook sends a strong signal to international investors: the country’s economic fundamentals remain steady, and borrowing costs are unlikely to rise in the near term.
While structural reforms remain critical for an upgrade to investment grade, the current rating underscores growing fiscal discipline, improving macroeconomic management and sustained economic resilience.
Source: Daily News
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