If we examine the Tanzanian Shilling, there’s good reason to be quite optimistic about the state of the economy. Following some fairly unprecedented appreciation 12 months ago from 2650 to 2350 over a matter of days before climbing back up to 2700, we’ve seen a steady, seemingly steady appreciation of the Shilling back to 2450 levels over the last six months. With local bond yields still showing north of 12% and auctions gathering a strong 4.5x bid-to-cover ratio, the future appears bright for the economy.
A turbulent political landscap
However, over the past few weeks, this optimism has been far out-weighed by the political landscape. Following President Samia Suluhu Hassan’s successful re-election, unrest erupted on the streets. The 98% vote count in favour of President Hassan was driven principally by the forced withdrawal of the main opposition party, and protests led to over 1,000 deaths with strict curfews and curtailed internet access being enforced nationwide. Criticisms over the lack of democratic procedures was widespread, including the African Union who condemned vote manipulation at polling stations.
The economic aftermath of the election results may take time to appear, but the damage has certainly been done. Both the US and Europe have urged tourists to reconsider travel to Tanzania for the foreseeable future. Copper exports have also been heavily disrupted due to delayed shipments needed for critical foreign inflows from the likes of China. These are crucial elements of Tanzania’s trade balance that could take significant time to recover.
The Tanzanian shilling future remains uncertain
With inflation holding around 3.5% as of the last print and GDP growth climbing to 6.3% YoY in Q2-25, the positive real interest environment and stronger shilling will help weather the storm from the election fallout. However, with little support from Foreign Portfolio Investors, Tanzania can ill-afford in the short-term to suffer a potential drop in tourism and commodity inflows. In 2026, there may be further investment from China into pan-Africa railway networks, some of which will be disbursed into Tanzania that should help soften any blow to USD coming in country.
So where would that leave TZS? Day-to-day markets continue to be driven by the availability of USD at local banks. Incredibly, there was little panic bid when local banks were temporarily offline during the election unrest and are now back up and running. While we may not see another reversal to the 2700 highs, it’s a challenging environment to forecast any further appreciation from the current sub-2400 levels into year-end, particularly as we move past seasonal periods of USD inflows from crop exports. The Bank of Tanzania will likely look to intervene against any shock depreciation, but given the stability seen through to the wake of the recent elections, this seems to be very much a tail risk for the remainder of 2025.
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