Tanzania is projecting a stable economic outlook, with GDP expected to expand by 6.1% in the second quarter, slightly down from 6.2% recorded in the first quarter, amid moderate spillovers from global economic challenges.
According to the Bank of Tanzania monetary policy statement for April, the projected growth will be supported by adequate rainfall boosting agricultural production, a supportive fiscal stance, improved performance in the mining sector, stable power supply and positive business sentiment reflected in the March 2026 CEOs and market perception survey.
In addition, prudent monetary policy implemented by the central bank is expected to sustain robust private sector credit growth of above 20% year-on-year.
“The domestic growth projection is conditional on the global economic outlook as well as domestic economic factors,” the report stated.
“The impact of ongoing global developments on the domestic economy is expected to remain moderate, supported by the diversified structure of the economy.”
Based on the assumptions, Zanzibar’s economy is projected to grow by 6.6% in the second quarter of 2026.
The inflation outlook remains dependent on both global and domestic dynamics. Globally, inflation risks have heightened after the outbreak of conflict in the Middle East.
However, domestically, sufficient food supply driven by favourable rainfall, alongside exchange rate stability, supported by adequate foreign reserves, is expected to ease inflationary pressures.
Consequently, inflation in mainland Tanzania is forecast at 3.4% in the second quarter of 2026, remaining within the medium-term target range of 3% to 5%. In Zanzibar, headline inflation is projected to average about 5.4%.
Against this backdrop, the Bank of Tanzania’s monetary policy committee (MPC) resolved to maintain the central bank rate at 5.75% for the quarter ending June 2026, noting that the stance appropriately balanced risks to both inflation and economic growth.
The MPC adopted a cautious “wait-and-see’ approach”, aimed at containing potential inflationary pressures while allowing time to assess the full impact of evolving geopolitical tension on both inflation and output.
Additionally, the committee narrowed the policy corridor from ±200 to ±150 basis points around the central bank rate to strengthen monetary policy transmission and align the seven-day interbank cash market (IBCM) rate more closely with the policy rate.
The adjustment marks a measured step towards enhancing the effectiveness of the monetary policy framework, building on recent success in stabilising interbank interest rates. It also underscores the central bank’s commitment to orderly interest rate movements and strengthened policy credibility.
Accordingly, monetary policy operations will aim to keep the seven-day IBCM rate within a range of 4.25% to 7.25% around the central bank rate.
Inflation in mainland Tanzania is expected to remain within the 3% to 5% target range, supported by stable food supply and exchange rate stability
