STRONG performance by local financial markets is visible in the Africa Financial Markets Index (AFMI), reflecting improvements in macroeconomic stability, transparency and policy consistency, the Bank of Tanzania (BoT) has stated.

Emmanuel Akaro, the BoT director of financial markets, made this observation at the launch of AFMI 2025 in Dar es Salaam yesterday, that Tanzania scored 73 out of 100 in overall financial market development.

Tanzania’s gains were underpinned by sustained low inflation, rising exports, narrowing interest rate spreads, expanded private sector credit and reduced non-performing loans (NPLs), he said, asserting that these initiatives have contributed significantly to strengthening Tanzania’s macroeconomic fundamentals.

Despite this positive outlook, the country scored 58 percent in foreign investment aspect, indicating the need to improve the ease with which international investors can deploy and repatriate capital, the report noted.

The index also highlights areas requiring further reform, including deepening local investor participation, pension fund development along with strengthening legal and institutional frameworks, the director affirmed.

The government remains committed to reforms aimed at expanding market depth, diversifying financial instruments and aligning the financial system with international best practices, for instance by introducing a bond benchmark programme, he said.

It is expected to enhance price transparency, improve valuation consistency and support a more active secondary market, while market access demands strengthening the central bank’s capacity to manage volatility from foreign capital flows.

The index shows a three-point decline in transparency score, particularly in tax and regulatory frameworks and integration of environmental, social and governance (ESG) criteria, he said.

Market depth remains constrained with a 50 percent score, while pension fund development remains weak at 22 percent of its potential, on account of limited capacity of institutional investors to drive capital market growth, the report shows.

Tanzania also underperformed on the enforceability of international financial agreements, scoring 25 percent, with weaknesses noted in netting and collateral enforceability, the director said, pointing at efforts to improve transparency, regulatory clarity and predictable policy communication.

This remains critical to sustaining the growth and resilience of the country’s financial markets, he stated, while Obedi Laiser, Absa Bank (T) CEO, underscored the role of robust financial markets in supporting sustainable economic growth.

The Africa Financial Markets Index provides an objective, evidence-based assessment of how African financial markets are evolving, as deep, transparent and well-functioning markets are essential for mobilising capital, supporting businesses and enabling long-term development, he said.

The AFMI 2025, which covers 29 African countries, indicates that while progress has been made across the continent, stronger collaboration among governments, regulators, financial institutions and the private sector are essential to close gaps and build more inclusive financial markets.

African financial markets show gradual but uneven progress as economies across the continent pursue reforms intended to deepen capital markets, improving transparency and attracting long-term investment, he declared.

While macroeconomic stability has improved in several countries, market development remains constrained by shallow liquidity, limited investor participation and regulatory gaps, he said.

Most African markets are still bank-dominated, with capital markets playing a relatively small role in financing economic activity, while government securities remain the most developed instruments while corporate bond markets, equity listings and derivatives remain limited in size and depth, he added.