The Bank of Tanzania (BoT) increased its Central Bank Rate (CBR) to 6.25 per cent from 5.75 per cent for the third quarter ending September, citing higher global energy, fertiliser and transport costs triggered by the ongoing conflict in the Middle East and its impact on international supply chains.
The decision was announced following a meeting of the Bank's Monetary Policy Committee (MPC), which concluded that tighter monetary policy is necessary to keep inflation within Tanzania's medium-term target range of 3 to 5 per cent, while maintaining momentum in one of East Africa's fastest-growing economies.
BoT Governor Emmanuel Tutuba said the latest adjustment is intended to contain imported inflation without significantly slowing domestic economic activity.
"The policy rate adjustment is expected to moderate inflationary pressures while preserving economic growth," Mr Tutuba said. He added that adequate domestic food supplies from the 2025/26 harvest are expected to keep food inflation subdued, while strong foreign exchange earnings from gold, tourism and agricultural exports should limit the impact of currency movements on consumer prices.
The rate increase comes as central banks across emerging markets continue to balance inflation control with economic growth amid heightened geopolitical uncertainty and persistent volatility in global commodity markets.
According to the MPC, the conflict in the Middle East has disrupted key energy supply routes and international shipping corridors, driving up crude oil prices, fertiliser costs, freight charges and insurance premiums worldwide. These developments have contributed to inflationary pressures in many import-dependent economies, including those in Sub-Saharan Africa.
Despite the challenging global environment, Tanzania's economy has remained resilient.
Mainland Tanzania is estimated to have expanded by approximately 6 per cent during the first half of the year, supported by strong performance in agriculture, construction, mining, financial services and transport. Zanzibar recorded an estimated 6.6 per cent growth, largely driven by tourism and construction.
Inflation on the mainland increased to 4.2 per cent in May from 3.2 per cent in March, primarily reflecting higher fuel and transport costs. However, it remained within the central bank's target range. Temporary government fuel subsidies introduced during May and June helped cushion consumers against the full impact of rising global oil prices.
Inflation in Zanzibar rose to 5.5 per cent from 4.9 per cent, slightly exceeding the target range, although the central bank expects price pressures to ease in the coming months.
The MPC said domestic financial conditions remain supportive of economic activity. Private sector credit expanded by an average of 24 per cent during the second quarter, indicating robust demand for business financing, while the banking sector continued to demonstrate strong resilience. Non-performing loans stood at 2.9 per cent in May, comfortably below the regulatory ceiling of 5 per cent.
Although higher import costs contributed to a modest widening of the current account deficit to 2.4 per cent of GDP in the year ending June, Tanzania's external position remained relatively strong. Foreign exchange reserves stood at approximately US$6 billion, providing around 4.3 months of import cover.
Governor Tutuba said reserve levels are expected to strengthen further, supported by rising export revenues and continued accumulation of gold under the country's domestic gold purchase programme.
The central bank also highlighted improving fiscal fundamentals. Domestic revenue is projected to increase to 16.8 per cent of GDP in the 2025/26 fiscal year, up from 15.6 per cent a year earlier, reflecting stronger tax collection and prudent fiscal management.
Economists say the latest rate increase signals Tanzania's determination to safeguard macroeconomic stability while preserving investor confidence as global markets navigate elevated geopolitical risks, volatile commodity prices and an increasingly uncertain economic outlook.
Notes to Editors
– The Bank of Tanzania raised its Central Bank Rate (CBR) to 6.25 per cent from 5.75 per cent for the third quarter ending September 2026.
– This marks the second consecutive quarterly increase, signalling a more cautious monetary policy stance amid rising external risks.
– The central bank cited escalating geopolitical tensions in the Middle East as a key driver of higher global energy prices, fertiliser costs, freight charges and insurance premiums.
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