London, May 03, 2021 --

• Tanzania's stable outlook reflects its favourable growth prospects but weak institutional strength
• Slow average income growth and weak fiscal strength remain key challenges for the country's creditworthiness

A relatively large, diversified economy and current government debt burden level support Tanzania's credit profile, but its very low income levels and a weak institutional framework are exerting pressure on financial stability, says Moody's Investors Service in its annual report published today.

Despite elevated growth rates historically, Tanzania's income levels remain very low on a global scale and lower than the median for B-rated sovereigns, limiting the country's shock absorption capacity. Without a credible improvement in revenue generation, the government's weak fiscal strength will remain a credit constraint. Tanzania's vulnerability to currency volatility because of its high share of foreign-currency-denominated debt is also credit negative.

"We would consider upgrading Tanzania's rating if it is more likely that the government's revenue-mobilisation capacity was improving enough to support fiscal consolidation," says Kelvin Dalrymple, a VP-Sr Credit Officer at Moody's and the author of the report. "This could result from a significant improvement in both the efficiency of revenue administration as well as in the business and regulatory environment that encourages private-sector development and higher levels of foreign direct investment."

Tanzania's management of its public finances has improved, though it still suffers from low budget credibility because of persistent underperformance on revenue and expenditure plans and weak policy implementation.