Moody’s Investors Service (“Moody’s”) has downgraded the foreign and local currency issuer ratings of the Government of Tanzania to B2 from B1 and changed the outlook to stable from negative.
The downgrade to B2 reflects Moody’s view that governance remains very weak, raising risks to Tanzania’s credit profile. In particular, policy unpredictability has not materially diminished and is likely to weigh on foreign investment, growth potential and the government’s fiscal strength and liquidity risks.
The stable outlook balances Tanzania’s relatively large and diversified economy against institutional weaknesses which undermine fiscal strength. The outlook is underpinned by a moderate debt burden that is broadly stable and below the B2 median. The economy is relatively diversified which helps to mitigate the impact of shocks. Some other areas of relative strengths include adherence to fiscal consolidation objectives, and a track record of relatively low and stable inflation. These credit supports are balanced by particularly weak revenue mobilization capacity and weak fiscal policy credibility, evidenced by persistent underexecution of budget targets as well as an elevated level of budget arrears.
Concurrently, the long-term local currency bond and bank deposit ceilings were revised down to Ba3 from Ba2. Tanzania’s long-term foreign currency bond ceiling was lowered to B1 from Ba3 and the long-term foreign currency bank deposit ceiling was lowered to B3 from B2.