DAR ES SALAAM, Tanzania — Policy experts in Tanzania are urging the government to avoid broad, long-term fuel subsidies despite sharp increases in energy prices linked to the ongoing Gulf conflict, recommending instead targeted and temporary support measures aimed at protecting vulnerable households and key sectors of the economy.
The recommendation was made in a joint assessment by Tanzania’s National Planning Commission and the United Nations Development Programme (UNDP), which warned that rising global oil prices are beginning to place pressure on transport, agriculture, manufacturing and household welfare in the East African nation.
The report, titled Assessment of Economic Impacts on Tanzania Arising from the Gulf Crisis, identifies diesel and kerosene as the main transmission channels through which the external shock is affecting the domestic economy.
“Left unchecked, rising fuel costs threaten to increase production and transport costs, reduce household purchasing power and slow economic growth,” the report said.
The warning comes as Tanzania experiences one of its steepest fuel price increases in recent years following disruptions in global energy markets linked to the 2026 Gulf conflict.
According to notices issued by the Energy and Water Utilities Regulatory Authority (EWURA), retail fuel prices in Tanzania rose sharply between January and May 2026 amid attacks on oil infrastructure in the Gulf region, closure of the Strait of Hormuz, rising freight costs and higher cargo insurance premiums.
In the commercial capital Dar es Salaam, the retail cap price for petrol increased from 2,778 Tanzanian shillings per litre in January to 4,115 shillings in May. Diesel prices climbed from 2,726 shillings to 4,248 shillings per litre, while kerosene rose from 2,763 shillings to 4,677 shillings over the same period.
The increases represent price jumps of 48.1 percent for petrol, 55.8 percent for diesel and 69.3 percent for kerosene.
Analysts say the surge poses broader risks to inflation and economic activity because diesel remains critical to freight transport, public transportation, construction, manufacturing and agricultural supply chains, while kerosene and liquefied petroleum gas (LPG) are closely linked to household cooking and energy affordability.
The report noted that the diesel subsidy of 259 shillings per litre introduced by the government in May 2026 provides a model for targeted intervention, but cautioned that fiscal risks associated with such measures should be monitored closely.
“The immediate policy priority is to protect the most exposed households and essential economic activity without undermining macroeconomic stability,” the report stated.
The assessment recommends a three-pronged response focused on protecting vulnerable groups, stabilising productive sectors and positioning Tanzania to benefit from medium-term economic opportunities emerging from shifts in global energy and trade markets.
Under the proposed approach, authorities are encouraged to protect households and essential services through targeted affordability measures, stabilise productive sectors through fuel-stock management, fertiliser access, market monitoring and fiscal coordination, and accelerate investment in strategic sectors including domestic gas, compressed natural gas (CNG), liquefied natural gas (LNG), logistics, ports, tourism and critical minerals.
The report also warned that rising fuel prices could undermine Tanzania’s clean cooking transition if households revert to charcoal and firewood because of increasing LPG and kerosene costs.
“Kerosene is critical for low-income household energy access, while LPG should also be monitored because it is linked to clean cooking and household welfare,” the report noted.
Policy experts further advised the government to consider establishing a temporary Gulf Crisis Economic Coordination and Monitoring Framework to strengthen coordination among institutions responding to the evolving external shock.
The economic pressure facing Tanzania reflects wider disruptions in global energy markets following the outbreak of the 2026 Gulf conflict, which began on February 28 when a US-Israeli coalition launched large-scale airstrikes against Iran.
The Strait of Hormuz, a narrow waterway connecting the Persian Gulf to global shipping routes, has since become central to international diplomatic efforts aimed at restoring stability to oil and gas supplies.
Roughly one-fifth of global petroleum consumption and a significant share of liquefied natural gas exports pass through the strait from major producers including Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, Qatar and Iran, making disruptions there a major concern for energy-importing economies worldwide.