Moody's upgrades Tanzania's rating to B1 from B2

Tanzania has received a significant boost as credit rating agency Moody's upgraded its long-term issuer ratings from B2 to B1 and changed the outlook to stable from positive. This positive development has sparked discussions on the sustainability of this upgrade and the measures the Tanzanian government is implementing to maintain this newfound credit worthiness. Imani Muhingo, Head of Research & Financial Analytics at Alpha Capital, joined CNBC Africa from Dar es Salaam to shed light on the specific factors contributing to Tanzania's improved credit standing. Imani highlighted the structural reforms undertaken by the current government as a major factor in the credit rating upgrade. Tanzania has been focused on enhancing the business environment in the country, with key initiatives such as enacting a new investment act to replace the outdated 1997 act. The new act includes incentives to attract both domestic and foreign investors, showcasing the government's commitment to fostering a conducive investment climate. Moreover, amendments to the Public-Private Partnership Act aim to further encourage investments in Tanzania. The Tanzania Investment Centre has played a vital role by establishing a one-stop center that simplifies the process of obtaining permits and other necessary approvals, thus streamlining investment procedures. Furthermore, Tanzania's diversified economy has contributed to its resilience, as seen during the COVID-19 pandemic. While tourism suffered a decline, the rise in gold prices partially offset the losses, demonstrating the country's ability to adapt to challenging circumstances. Additionally, Tanzania's prudent macroeconomic policies, including a manageable debt burden and stable inflation rates, have bolstered its economic stability. Despite the positive outlook, challenges remain for Tanzania's economy. Imani pointed out the persistent foreign exchange shortage as a pressing issue, particularly affecting developing economies like Tanzania. The global focus on potential rate cuts in the United States could offer some relief by attracting foreign direct investments. By aligning government efforts to improve the business environment with favorable global monetary policies, Tanzania may experience increased foreign inflows. Imani also emphasized the importance of fiscal discipline and anti-corruption measures in managing Tanzania's debt burden effectively. The government's commitment to widening the tax base, although initially met with resistance, has been instrumental in keeping the country's debt levels in check. Initiatives such as introducing charges on electronic money transfers, aimed at expanding the tax base, reflect the government's proactive approach to financial management. In conclusion, Moody's credit rating upgrade signifies Tanzania's progress in strengthening its economy through structural reforms and sound macroeconomic policies. While challenges persist, the government's strategic measures and commitment to enhancing the business environment position Tanzania for continued economic growth and stability.