Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Rich in mineral resources (gold, copper)
  • Gas potential: offshore reserves discovered in 2010
  • Tourism attractions (national parks, coastline)
  • Regional cooperation strategy
  • International support in the form of concessional loans
  • Development of monetary policy instruments


  • Heavily reliant on the price of gold
  • Dependent on the agricultural sector (29% of GDP and 65% of employment) and weather conditions
  • Inadequate infrastructure, especially in terms of power generation and transport networks
  • Inconsistent industrial policy and business climate shortcomings
  • Religious tensions between Zanzibar and the mainland

Current Trends

Public works to boost the recovery

In 2020, the impact of the COVID-19 pandemic on tourism and external demand led to a significant slowdown in activity, but as the country did not impose a strict lockdown, domestic demand resisted. In 2021, growth is expected to increase, lifted by the recovery in tourism revenues, which will support export revenues despite continuing to be constrained by uncertainty surrounding the future spread of the pandemic. Export revenues will likewise be boosted by international gold prices, which are likely to remain high. Following the victory of John Magufuli and Chama Cha Mapinduzi (CCM) in the October elections, public investment in flagship projects, such as the Rujifi dam and hydroelectric power station, as well as continued work on the railway network, should accelerate, affirming its place as one of the engines of recovery. Work on the oil pipeline linking Uganda's future oil production to the Tanzanian port of Tanga could also begin in 2021 after the two countries signed a deal in September 2020. Conversely, in the wake of the pandemic, investment in the expansion of Air Tanzania, the national airline, is likely to be hampered by the bleak prospects for tourism and air transport. Private investment is also expected to contribute to growth but will be constrained by the uncertain international environment and the unattractive business climate, particularly in the mining sector. Despite the resolution of the well-publicised dispute with Acacia Mining at the end of 2019, investor confidence has been undermined by reforms to the mining legal framework in 2017, which included increased royalty rates, a compulsory state interest of 16% and a ban on international arbitration for foreign companies. Consumption will benefit from the easing of social distancing measures and from inflation, which is expected to remain relatively benign.


Twin deficits keep pressure on the shilling

Despite the impact of the decline in tax revenues following the pandemic, the budget deficit narrowed in 2019/20, thanks to improved tax collection prior to the shock. In 2020/21, tax revenues are expected to continue to fall, contributing to a widening of the deficit. Moreover, as this is the last fiscal year of the five-year development plan, capital investment spending on infrastructure projects remains a priority. Health expenditure is also increasing amid the pandemic. Although Tanzania is benefiting from debt service relief initiatives (IMF and G20), debt service will continue to dominate current expenditure alongside the state wage bill. External (including concessional loans) and domestic borrowing will finance the small deficit. The increase in debt, almost three-quarters of which is external, is expected to be limited, but the growing share of non-concessional loans (over 40% of external debt) could prove problematic if borrowing costs rise.

In 2021, the current account deficit is expected to increase. While the lower imports of capital goods contributed to a reduction in 2020, their likely growth in 2021 will cause the trade deficit to swell. Meanwhile, the improvement in the services surplus, which will depend on tourism revenues, is expected to be held back by uncertainty surrounding the sector. Moreover, while the income deficit will benefit from the relief in external debt service payments, on the one hand, it will be fuelled by repatriation of profits by foreign investors, on the other. Finally, in a crisis setting, current international cooperation should support the transferred surplus, but expatriate remittances are likely to be hurt by the deteriorating global economic situation. FDI, mainly FDI linked to infrastructure projects, and external borrowing are financing the current account deficit. Given the financing needs, the Tanzanian shilling is expected to continue gradually depreciating, but the measured current account deficit and foreign exchange reserves, which cover about six months of imports, should prevent a sharp movement.


The “Bulldozer” and CCM crush competition in 2020 elections

In October 2020, President John Magufuli, nicknamed Tingatinga ("Bulldozer" in Swahili) since his time in the Ministry of Public Works, was elected for a second term, obtaining nearly 85% of the vote, much more than in 2015 (58.5%). His party, the CCM, which has been in power since 1977, increased its majority in the assembly by winning seats in almost all constituencies. With the government's authoritarian shift and the sense that the regime is tightening its grip on freedom of expression, which is receiving widespread criticism both inside and outside the country, the main opposition parties (Chadema and ACT Wazendo) rejected the election results. The few international observers, including U.S. observers, also reported interference in the election process. Tundu Lissu (Chadema), the runner-up in the presidential election, was arrested prior to a demonstration protesting the election results, signalling the authorities' limited tolerance for perceived threats to social stability. Upon his release, he fled to Belgium, saying that he had received death threats. President Magufuli’s governance, the decisions unfavourable to foreign investors taken by his government and indications that the regime is increasingly clamping down on freedom of expression all contribute to the perception of a poor business climate. In foreign policy, efforts to position the country as a regional trade hub, such as the joint oil pipeline project with Uganda, could strengthen ties with neighbouring countries. Meanwhile, the October 2020 attack on the village of Kitaya, near the border with Mozambique, signalled that the country is exposed to insecurity linked to the Islamist insurgency in its neighbour


Coface (01/2020)