The Tanzanian shilling has been ranked as the world’s worst-performing currency in 2025 after losing 8.9% of its value despite the country’s economic expansion.
Although Tanzania’s economy was projected to grow by 6% in 2024, the local currency has continued to weaken under pressure from rising imports and growing government debt tied to infrastructure projects.
The depreciation has been driven by increasing demand for foreign exchange, particularly in key sectors such as oil and gas, manufacturing, and construction, which rely heavily on dollar transactions.
Analysts caution that short-term liquidity constraints and a widening current account deficit could push the shilling even lower before signs of stability emerge.
Infrastructure Investments Fuel Growth but Weigh on the Currency
Tanzania has embarked on ambitious infrastructure projects aimed at strengthening its position as a regional trade and energy hub.
Among these is the $5 billion East African Crude Oil Pipeline, which will transport crude from Uganda to Tanzania’s port of Tanga.
Another major project is the Bagamoyo deep-water port, which India’s Adani Ports is set to operate. These initiatives, along with expansions in the energy and logistics sectors, are expected to support long-term economic growth.
However, the short-term impact has been an increase in import costs, particularly for industrial supplies, machinery, and construction materials.
Recent data from the Bank of Tanzania shows that the value of imported goods and services rose by 5% year-on-year further straining foreign exchange reserves and weakening the shilling.
Debt Levels on the Rise Amid Currency Challenges
Tanzania’s external debt has grown by 11.5% over the past year, reaching $33.9 billion. The government has maintained that its borrowing levels remain sustainable and below the International Monetary Fund’s 50% of GDP risk threshold, but market analysts warn that continued borrowing could place additional strain on the shilling.
“The depreciation of the shilling is largely linked to Tanzania’s aggressive infrastructure drive,” said Shani Smit-Lengton, senior economist at Oxford Economics Africa. “If these projects are well-executed and debt remains under control, the long-term benefits will outweigh the current currency challenges.”
On Wednesday, the Tanzanian shilling closed at 2,641.23 per dollar, its weakest level in months. Analysts predict continued exchange rate volatility with expectations that the currency will trade within the 2,620 to 2,650 range in the near term.
What Lies Ahead?
Despite ongoing currency depreciation, Tanzania’s economic trajectory remains strong. The country is making significant investments in its natural gas sector, with plans for a $42 billion liquefied natural gas (LNG) facility.
These developments are expected to attract foreign investment and increase foreign exchange earnings in the long run, potentially stabilizing the shilling.
However, for businesses and consumers, the immediate impact of the weakening currency is higher import costs and inflationary pressures.
Economic policymakers will be closely monitoring developments to ensure that Tanzania’s long-term growth is not overshadowed by short-term financial instability.
