DAR ES SALAAM: TANZANIA has diverged sharply from its neighbours, with experts saying its low policy rate signals a deliberate growth-first strategy rather than regional monetary restraint.
The country stands out in the East African bloc with the lowest central bank policy rate, offering a clear signal of its growth-focused economic strategy.
At 5.75 per cent, the benchmark rate set by the Bank of Tanzania (BoT) provides businesses with relatively cheap access to capital, supporting sectors such as manufacturing, agribusiness and trade.
Across the region, however, monetary strategies differ sharply. Uganda maintains a policy rate of around 9.75 per cent, while Kenya stands at about 8.75 per cent, as both countries prioritise containing inflation and protecting their currencies, even at the cost of tighter lending conditions.
Further up the spectrum, Burundi (12 per cent), South Sudan (13 per cent) and the Democratic Republic of the Congo (14–15 per cent) rely on double-digit rates as defensive tools, placing monetary stability above rapid growth.
Finance and economics analyst Kelvin Msangi told the Daily News that Tanzania’s “cheap money” strategy is already delivering results.
Private sector credit grew by 23.5 per cent, with borrowing in the mining sector surging by 91 per cent.
“While Kenya and Uganda are using high rates as a defensive shield to attract short-term capital and protect their currencies, Tanzania is playing the long game,” Mr Msangi said.
“Right now, Tanzania is essentially playing a different game from its neighbours.”
By maintaining its policy rate at 5.75 per cent through early 2026, the BoT has positioned the country as a regional growth engine.
Analysts note that the move is supported by relatively low inflation of about 3.4 per cent, creating room to stimulate credit and investment.
However, they caution that the strategy is not without risks. A global shock, fuel price spikes or sudden capital outflows could force the central bank to tighten policy.
Capital Markets Manager at Vertex Securities International Advisory Mr Ahmed Nganya said Tanzania’s lower rate aims to expand private-sector lending and attract long-term foreign direct investment, which typically favours predictable inflation and affordable financing costs.
“Kenya and Uganda’s policies focus more on stabilising inflation and their currencies,” Mr Nganya said.
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“If the interest rate gap widens significantly, however, the shilling could face pressure from capital outflows.”
Economist and investment banker Dr Hildebrand Shayo said Tanzania remains attractive to longterm investors seeking stable, low interest financing.
“This rate promotes private sector credit expansion, which in turn supports employment and GDP growth,” Dr Shayo said.
He warned, however, that lower rates compared to neighboring countries could discourage short term portfolio inflows chasing higher yields, potentially exerting mild pressure on the exchange rate if not carefully managed.
Dr Shayo also noted that a low policy rate supports fiscal sustainability by reducing domestic borrowing costs and freeing resources for development spending. He cited Tanzania’s Moody’s B1 credit rating as evidence of improving macroeconomic management.
The broader regional picture reveals a clear economic gradient: low rates signal expansion, while high rates indicate caution and risk containment. Rwanda occupies a middle ground, with its policy rate in the low-to-mid 7 per cent range, balancing inflation control with moderate credit growth.
In Kenya, the central bank has gradually eased rates to just below 9 per cent in a bid to revive lending and consumer demand, though commercial banks remain cautious.
Uganda maintains a near-10 per cent stance to safeguard inflation credibility, slowing credit growth for households and small firms.
In contrast, Burundi, South Sudan and the Democratic Republic of the Congo face structural inflation, fiscal imbalances and currency instability, forcing their central banks to maintain high interest rates.
Mr Msangi said these economies are effectively in “survival mode,” using doubledigit rates to defend their currencies and rein in inflation, often at a steep cost to businesses.
“When central bank rates reach 14 or 15 per cent, commercial lending rates can climb to 25 per cent or more,” he said.
“For small businesses, that makes expansion nearly impossible.”
In such environments, companies often shift from longterm investment to short-term trading simply to survive.
For Tanzania, the advantage of its low-rate policy is clear: cheaper borrowing, easier refinancing and greater confidence in planning expansion.
The risk, however, is reduced room to manoeuvre if inflation accelerates or external shocks hit the economy. For now, Tanzania is betting that stability will hold long enough for growth to deepen