STABLE RATING
๐๐ถ๐๐ฐ๐ต ๐ฎ๐ณ๐ณ๐ถ๐ฟ๐บ๐ ๐ง๐ฎ๐ป๐๐ฎ๐ป๐ถ๐ฎ’๐ ๐+ ๐ฐ๐ฟ๐ฒ๐ฑ๐ถ๐ ๐ฟ๐ฎ๐๐ถ๐ป๐ด, ๐ฐ๐ถ๐๐ฒ๐ ๐๐๐ฟ๐ผ๐ป๐ด ๐บ๐ฎ๐ฐ๐ฟ๐ผ๐ฒ๐ฐ๐ผ๐ป๐ผ๐บ๐ถ๐ฐ ๐ฝ๐ฒ๐ฟ๐ณ๐ผ๐ฟ๐บ๐ฎ๐ป๐ฐ๐ฒ
* Tanzania has one of the highest credit ratings in East Africa
* A high credit rating can give a country access to cheaper loans, more FDI inflows
* Fitch expects $40bn LNG project to boost Tanzania’s GDP after next 5 years
December 19, 2023
๐ฉ๐ ๐ป๐ฉ๐ฐ ๐น๐๐๐๐๐๐๐
Dar es Salaam
Fitch ratings has affirmed Tanzania’s B+ sovereign credit rating and stable outlook, saying the country’s macroeconomic performance remains strong but cautioned against the widening current account deficit.
“Tanzania’s rating reflects its relatively strong macroeconomic performance with high real GDP growth, low inflation, and a moderate level of debt, underpinned by increased reform momentum backed by an IMF programme,” the ratings agency said in a statement.
Fitch expects Tanzania’s real gross domestic product (GDP) growth to rise to 5.0% in 2023 and 5.5% in 2024, from 4.7% in 2022, supported by increased agriculture, mining and tourism activity, as well as infrastructure investment.
In the long term, real GDP growth will benefit from the development of offshore gas fields and liquefied natural gas (LNG) production, it said.
Fitch expects developments in Tanzania’s $40 billion LNG project to start contributing to GDP from 2029.
It noted that external pressures increased in the first half of 2023 driven by a reduced level of foreign exchange (FX) inflows, higher import bill, debt repayments and a tightly managed exchange rate, resulting in FX shortages, and a premium above 10% of the official exchange rate.
“The Bank of Tanzania (BoT) has taken significant steps to address this problem, including ramping up sales of FX to boost FX liquidity, while allowing for greater flexibility of the exchange rate,” Fitch said.
The Tanzanian shilling has depreciated nearly 7% against the U.S. dollar since July 2023, compared with 0.8% in the first half of this year, it said.
Tanzania has one of the highest credit ratings in East Africa, reflecting it’s solid macroeconomic fundamentals.
Fitch downgraded Ethiopia’s credit rating last week to junk status and warned that it may also downgrade Kenya, which has a credit rating of B with a negative outlook.
Uganda has a credit rating of B+ with a negative outlook.
A country with a high credit rating can access funds easily from the international bond market and also secure foreign direct investment (FDI) inflows.
A low sovereign credit rating means that a country faces a high risk of default and may experience difficulties in paying back debts.
Fitch said factors that could lead to a rating downgrade for Tanzania in the future include large and persistent current account deficits that are not financed by FDI, which place sustained downward pressure on foreign currency reserves or cause marked exchange rate depreciation, contributing to higher government debt to GDP ratio.
A weakening trend of growth or a sustained shock that significantly undermines fiscal consolidation efforts and raises socioeconomic pressures could also cause a downgrade.
On the other hand, factors that could lead to a credit rating upgrade for Tanzania include higher domestic revenue mobilisation, greater transparency and confidence in the exchange-rate regime and greater central bank independence.
https://x.com/TanzaniaInsight/status/1737011736908103877?t=vB–7FMxeM4MECr6x59NaA&s=08
