The Bank of Tanzania (BoT) has kept its benchmark lending rate unchanged at 5.75% for the first quarter of 2026, as policymakers seek to support economic growth amid subdued inflation and improving macroeconomic conditions.
The decision was announced after the central bank’s first Monetary Policy Committee (MPC) meeting of the year. It marks the second consecutive rate hold, following a cut in July 2025 that represented the first reduction in borrowing costs in two years.
In a statement issued on Thursday, the BoT said inflation remained well contained and is expected to stay within its 3% to 5% target range through the year, giving more room to prioritise growth-supportive policies.
“The MPC expects economic conditions to be favourable, and therefore, keeping the CBR unchanged would support robust economic growth,” the central bank said.
Headline inflation has hovered around 3% for much of the past two years, remaining close to the lower end of the target band. In November, inflation eased to 3.4% year-on-year, slightly below the 3.5% recorded in October.
In line with its inflation and growth outlook, the BoT said it would continue to implement monetary policy to ensure the seven-day interbank rate evolves within a corridor of 3.75% to 7.75% during the quarter.
Stable shilling and rising reserves support rate hold
The policy decision also comes against the backdrop of a stable currency and stronger external buffers.
The Tanzanian shilling recorded a modest 0.8% appreciation against the US dollar by the end of the Q4 2025, whole foreign reserves stood at more than $6.3 billion, equivalent to 4.9 months of import cover, comfortably above the statutory minimum of four months.
“The reserves are expected to remain adequate in the first quarter of 2026, supported mainly by strong export performance and moderate oil prices,” the BoT said.
Credit growth accelerates as banks expand lending
Low and stable interest rates continued to support credit expansion. According to the BoT, private sector credit growth rose by 20.3% in 2025, driven by ample liquidity, adequate capital buffers and relatively low borrowing costs compared with other major East African economies.
Banks expanded their loan and advances portfolios during the year, while credit risk remained contained at 3.1%, well below the central bank’s tolerable threshold of 5%.
Growth strengthens, external and debt metrics improve
Strong credit growth helped to underpin domestic activity, with gross domestic product (GDP) expanding by about 5.9% in 2025, broadly in line with the government’s 6% projection, supported by agriculture, mining and construction.
The external sector also improved, with the current account deficit narrowing to a five-year low of 2.2% of GDP, reflecting stronger exports of gold, agricultural products, tourism and transport services, as well as lower global oil prices.
Public debt increased moderately but remained sustainable. A debt sustainability analysis for 2024/25 showed the net present value of public debt easing to 40.6% of GDP, from 41.1% a year earlier, well below the 55% risk threshold.
The next MPC meeting is scheduled for 2 April 2026, with the policy decision for the second quarter due the following day. Policymakers will continue to closely monitor inflation trends, credit conditions and global developments ahead of the meeting.
