Tanzania is set to become the largest economy in East Africa in the next 10 years, according to the International Monetary Fund (IMF). Factors that favor the country include its mining prospects with the 57.54 trillion cubic feet of natural gas discovered so far and overall the country’s receptiveness to foreign direct investment.

Not immune to the global effects putting pressure on its economy, Tanzania is considering introducing its own CBDC (Central Bank Digital Currency). The nation, which had issued a warning over cryptocurrency in 2019, aims to use the digital currency to spur growth in the financial sector.

According to Triple-A data, Tanzania has 1.58 million cryptocurrency users out of a population of 67.4 million, recording an adoption rate of 2.34%.

Here are some notable developments in Tanzania’s financial and business sectors:

*(The city of Dar es Salaam, Tanzania / Unsplash)*

January – Longer Wait for CBDC Implementation

The African Development Bank (AfDB) offered a mixed bag in Tanzania’s economic outlook. GDP growth is projected at 5.6% in 2023, due to improved performance in tourism, and the reopening of trade corridors. Inflation is projected to increase to 3.8% in 2023 due to higher energy prices because of the Russia–Ukraine conflict, the AfDB said.
The Bank of Tanzania has announced that it had adopted a phased, cautious and risk-based approach to the adoption of CBDC. It states that it is still studying the opportunities and risks presented by the centralized digital currencies to inform the course of action.

February – Controversy Over Pipeline Project

Tanzania gave the go-ahead to implement the 1,443 km East Africa Crude Oil Pipeline (Eacop), which has elicited protests from climate campaigners. The government committed $3.5 billion for the $5 billion project that will be jointly completed by the Government of Uganda.

March – De-Dollarizing Trade Amid US Charm Offensive

Tanzania and India agreed that they will no longer use the US dollar in trade between the countries. The bilateral trade settlement arrangement allows Tanzania and India to use their currencies – the Tanzanian shilling and Indian rupee – in transactions. India’s exports to Tanzania stood at $2.3 billion while imports from Tanzania to India were $2.2 billion between April 2021 and March 2022.
Tanzania completed negotiations with Norway’s Equinor and Britain’s Shell to develop a $30 billion liquefied natural gas (LNG) terminal, according to Reuters.
U.S. Vice President Kamala Harris made her maiden trip to Tanzania and met with President Samia Suluhu Hassan. In their discussions, VP Harris said that the U.S. will provide $560 million in bilateral assistance to Tanzania next fiscal year.

April – Steady Economy

Reuters reported that Finance Minister Mwigulu Nchemba said Tanzania’s economy was expected to grow faster this year compared with a year earlier, but performance could be dampened by the effects of the war in Ukraine.
Tanzania’s annual inflation rate edged down to 4.3% in April 2023 from 4.7% in the previous month, according to Trade Economics data. It was the lowest reading since May 2022, due to a slowdown in prices of food & non-alcoholic beverages (9.1% vs 9.7% in March), transport (4.3% vs 5.7%) and housing & utilities (0.3% vs 1.1%).

May – Recalculating Cost of Gas Mining

The Tanzania government said that the cost of implementing its liquefied natural gas (LNG) project stands at $42 billion after a recent technical analysis. This is a higher amount than was quoted in Mar 2023 when it closed a deal with Shell and Equinor.

June – Feeling the Pinch of the Scarce Dollar

Pressure is mounting on the Tanzanian Shilling after the country began feeling the effects of the dollar shortage. The Bank of Tanzania (BoT) issued a directive requiring that all forex transactions exceeding $1 million in the retail market be traded within the interbank foreign exchange market at the prevailing rate.

-Edited by Faustine Ngila, Shigeru Sato
-Top Photo: Dar es Salaam city, Tanzania/ Unsplash