Tanzania’s decision to make no repayments to the International Monetary Fund (IMF) during July 2025, while receiving TZS 0.58 trillion (USD 213.1 million) in disbursements, contributed to a 18.98% increase in its IMF credit outstanding, from TZS 3.07 trillion to TZS 3.65 trillion (based on an exchange rate of approximately TZS 2,735 per USD, sourced from recent web data). This strategy, part of Tanzania’s engagement with the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF), reflects a focus on maximizing liquidity to address immediate fiscal and developmental needs. However, the absence of repayments raises questions about the long-term sustainability of Tanzania’s debt, particularly given its public debt level of approximately 50% of GDP in 2024 and a moderate risk of debt distress, as assessed by the IMF and World Bank. This analysis explores the implications of Tanzania’s zero repayments for its long-term debt sustainability, drawing on IMF data and broader economic insights.

Key Figures

The table below summarizes Tanzania’s key IMF financing and debt metrics as of July 25, 2025, highlighting the context of its zero repayments:

Implications for Long-Term Debt Sustainability

Increased Debt Burden and Future Repayment Pressure

Tanzania’s zero repayments in July 2025, coupled with TZS 0.58 trillion in new IMF disbursements, increase its external debt stock, which stood at USD 33.91 billion (TZS 92.74 trillion) in January 2025. The IMF’s concessional financing, with low or zero interest rates and extended repayment periods (e.g., 5½-year grace period for ECF loans), mitigates immediate servicing costs. However, the absence of repayments during this period defers obligations, potentially creating a future repayment bulge. The IMF’s 2025 Article IV consultation projects that fiscal consolidation will resume in FY25/26 to maintain debt sustainability, but accumulating debt without repayments could strain Tanzania’s capacity if economic conditions deteriorate. With 68.1% of external debt denominated in USD, a weaker Tanzania Shilling (depreciated 8% in 2023) could further inflate repayment costs, threatening long-term sustainability.

Fiscal Space for Development vs. Sustainability Trade-Off

The zero-repayment strategy maximizes fiscal space, allowing Tanzania to allocate the TZS 0.58 trillion disbursement to priority sectors like transport (21% of external debt allocation), social welfare, and education (19.9% each). The ECF supports these investments, aligning with Vision 2025 goals for infrastructure and human capital development. For example, the World Bank’s Sustainable Rural Water Supply and Sanitation Program, concluding in 2025, has improved water access for 7.92 million people, demonstrating the developmental impact of such financing. However, this approach risks prioritizing short-term gains over long-term sustainability. The IMF warns that pausing fiscal consolidation in FY24/25, with a 0.4% GDP increase in public spending, could undermine debt sustainability if not paired with revenue reforms. Tanzania’s low tax-to-GDP ratio (13% in 2024) limits its ability to service future debts without continued external support, posing a sustainability challenge.

Dependence on Concessional Financing

Tanzania’s zero repayments reflect its reliance on concessional IMF financing, which constitutes a significant portion of its external debt (71.7% from multilateral and bilateral creditors in FY2021/22). The IMF’s Debt Sustainability Analysis (DSA) indicates that Tanzania’s public debt-to-GDP ratio (45.7% in FY2022/23) remains below the 55% benchmark for its debt-carrying capacity, suggesting moderate risk. However, the DSA emphasizes the importance of maintaining concessional terms to avoid unsustainable borrowing. Without repayments, Tanzania’s debt stock grows, and any shift to non-concessional borrowing (e.g., commercial loans at higher rates) could elevate debt distress risks, especially given rising domestic interest rates (T-Bill rates rose from 5.8% to 11.7% by March 2024). Sustained access to concessional financing is critical, but over-reliance without repayment progress could signal fiscal vulnerabilities to creditors.

Risks from External and Domestic Vulnerabilities

The absence of repayments amplifies Tanzania’s exposure to external and domestic risks. Externally, the IMF highlights risks from global economic slowdown, geoeconomic fragmentation, and reduced donor support, which could limit future financing. Domestically, the 2025 national elections may delay reforms, increasing fiscal pressures. A 2019 study notes that external debt significantly impacts private investment in Tanzania, and failure to monitor debt closely could crowd out private sector growth, undermining economic resilience. The high USD exposure (68.1% of external debt) exacerbates risks from exchange rate fluctuations, potentially increasing future repayment costs. Without repayments, Tanzania’s ability to build fiscal buffers is limited, reducing its capacity to absorb shocks and threatening long-term debt sustainability.

Opportunities for Strategic Debt Management

Tanzania’s zero repayments provide an opportunity to strategically manage its debt portfolio. The IMF and World Bank recommend prioritizing projects with high socioeconomic returns, such as infrastructure and human capital investments, to maximize the benefits of borrowed funds. The ECF’s focus on revenue mobilization, including a medium-term revenue strategy, aims to increase the tax-to-GDP ratio, reducing reliance on external debt. Additionally, diversifying debt currencies (e.g., 16.1% Euro, 6.3% Chinese Yuan) helps mitigate USD exposure risks. By implementing governance reforms, such as transparent debt management and anti-corruption measures, Tanzania can enhance creditor confidence and ensure sustainable debt levels, as emphasized in the IMF’s 2025 consultation.

Key Considerations for Tanzania

• Revenue Mobilization: Increasing the tax-to-GDP ratio from 13% to closer to the Sub-Saharan African average (16%) through digital tax systems and broader tax bases is essential to reduce debt dependency.
• Project Selection: Prioritizing high-return investments in transport, energy, and education, as seen in current debt allocations, can drive sustainable growth.
• Debt Monitoring: Close monitoring of external debt, particularly USD-denominated loans, is critical to manage exchange rate risks.
• Fiscal Consolidation: Resuming fiscal consolidation in FY25/26, as planned, will help rebuild fiscal buffers and ensure debt sustainability.
• Climate Resilience: RSF-supported climate adaptation measures can protect key sectors like agriculture, reducing debt distress risks from climate shocks.

Conclusion

Tanzania’s zero repayments to the IMF in July 2025, alongside TZS 0.58 trillion in disbursements, enhance short-term fiscal space for critical investments in infrastructure and social services, aligning with Vision 2025. However, this strategy increases the debt burden, with external debt at USD 33.91 billion (TZS 92.74 trillion) and public debt at 50% of GDP, raising concerns about long-term sustainability. While concessional IMF financing mitigates immediate risks, deferred repayments could create future repayment pressures, particularly with high USD exposure and low domestic revenue (13% of GDP). External risks, such as global economic slowdown, and domestic challenges, like election-related reform delays, further complicate sustainability. By prioritizing revenue mobilization, high-return projects, and governance reforms, Tanzania can leverage IMF financing to support development while safeguarding long-term debt sustainability.