Central Government Dominates 77.5%, Infrastructure Leads Fund Use (Sept 2025)

Tanzania’s external debt reached USD 35,438.2 million in September 2025, representing 69.8% of total national debt and marking a modest 1.2% month-on-month increase due to net disbursements. The debt is heavily concentrated in central government borrowing (77.5%), with private sector and government-guaranteed entities accounting for 15.1% and 7.4%, respectively. Sector-wise, infrastructure and transport dominate fund usage at 28%, followed by social welfare and education (20.4%), energy and minerals (14.3%), and agriculture and water (14%), reflecting a productive, growth-oriented allocation. Currency composition remains USD-heavy (66%), exposing Tanzania to exchange rate volatility, though partial diversification into EUR, CNY, and JPY provides some buffer. Overall, the external debt profile is concessional and long-term, supporting fiscal expansion, development projects, and macroeconomic stability, yet requires vigilant management of currency and concentration risks to safeguard debt sustainability and complement domestic financing for continued 6% GDP growth.

1. Total External Debt Stock (September 2025)

2. External Debt by Borrower (Disbursed Outstanding Debt)

The external debt consists of central government debt, government‐guaranteed debt, and private sector debt.

→ The central government remains the dominant borrower, accounting for almost 80% of all external debt.

3. External Debt by User of Funds

This represents what sectors or purposes the borrowed funds are used for.

4. External Debt by Currency Composition

→ Tanzania’s debt remains highly dollar-concentrated (66%), exposing the country to USD exchange rate risk.

5. Summary Table — External Debt Indicators (September 2025)

Implications of Tanzania's External Debt Profile in September 2025

The external debt indicators for September 2025, as detailed in Section 2.7 (Debt Developments) of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), portray a moderately expanding portfolio at USD 35,438.2 million (+1.2% MoM from disbursements exceeding amortizations by USD 443 million vs. USD 131 million), comprising 69.8% of total national debt (USD 50,772.4 million). Central government borrowing dominates (77.5%), with funds skewed toward productive uses like infrastructure (28%) and social sectors (20.4%), but heavy USD exposure (66%) amplifies currency risks amid shilling appreciation (+9.4% y/y). This structure—largely concessional (57% multilateral, average maturity 12.8 years)—supports fiscal expansion (TZS 618.5 billion deficit; Section 2.6) and 6.3% Q2 GDP growth, yet ties sustainability to export performance (service receipts +4.6% to USD 6,973.9 million; Section 2.8). Below, I break down implications by key dimensions, integrating broader context like low inflation (3.4%) and reserves (USD 6,657 million, 5.8 months import cover).

1. Borrower Composition: Public Sector Dominance Signals Fiscal Centralization

• Central Government (77.5%, USD 27,461.3M); Private (15.1%, USD 5,357M); Guaranteed (7.4%, USD 2,619.9M): Sovereign focus reflects reliance on multilateral/bilateral loans (e.g., IMF/World Bank for projects), with private share indicating emerging corporate access (e.g., mining firms). Guarantees cover state-owned enterprises (SOEs) in energy/infra.
• Broader Implications:
  • Positive: Concentrates risk management under fiscal policy, enabling concessional terms (low ~1.2% rates) to fund development (71.9% expenditure execution; Section 2.6). Private growth (15.1%) aligns with credit expansion (16.1% y/y), fostering diversification.
  • Risks: Limited private participation (15.1%) hampers market deepening, potentially crowding out FDI if guarantees strain budgets (e.g., SOE inefficiencies). High public share exposes to revenue volatility (87.2% collection).

2. User of Funds: Growth-Oriented Allocation with Multiplier Potential

• Transport/Infra (28%, USD 9,910.4M); Social/Education (20.4%, USD 7,238.1M); Energy/Minerals (14.3%, USD 5,058.7M); Agri/Water (14%, USD 4,964.3M): Over 76% targets high-impact sectors, with "others" (14%) including tourism/finance. This mirrors GDP drivers (construction 1.1%, mining 1.5%).
• Broader Implications:
  • Positive: Productive tilt boosts long-term returns (e.g., infra aiding exports USD 17,094.2 million; Section 2.8), supporting 6% full-year projection via reliable power and agri stocks (570,519 tonnes). Social focus enhances human capital, curbing unemployment risks.
  • Risks: Infra/energy concentration (42.3%) vulnerable to execution delays (national 71.9%; Section 2.6) or commodity shocks (oil down but metals volatile). Low finance/trade shares (9.3%) limit SME scaling.

3. Currency Composition: USD Heaviness Heightens Volatility Exposure

• USD (66%); EUR (17.7%); CNY (6.4%); JPY (5%); Others (4.9%): Dollar dominance ties to commercial/multilateral loans, with CNY/JPY linked to bilateral projects (e.g., Chinese infra, Japanese JICA).
• Broader Implications:
  • Positive: Shilling gains (+9.4%) reduce TZS servicing (~USD 1,215 million in 2025, 4.2% exports; Table 2.7.4), improving ratios (debt/GDP 40.1%, below EAC 50%). Diversification (EUR/CNY ~24%) buffers USD swings, aiding reserves.
  • Risks: 66% USD share amplifies costs if dollar strengthens (e.g., US policy; Section 1.0), potentially adding 10–15% to TZS burden. CNY exposure adds geopolitical ties, while global rates (commercial 35.6% debt) pressure amid inflation moderation (4.2% global).

4. Sustainability and Macroeconomic Linkages

• Overall Dynamics: +1.2% growth from net inflows sustains debt/GDP stability (external service 9.8% exports, down from 11.2% 2024), complementing domestic debt (29.4%, TZS 37,459.1 billion; prior analysis) and CA narrowing (deficit ~1.5% GDP). In Zanzibar, external surplus (USD 836.6M) offsets union risks.
• Broader Implications:
  • Positive: Concessional/long-term bias (57% multilateral) aligns with monetary easing (CBR 5.75%), preserving low inflation (3–5% target) and liquidity (IBCM 6.45%).
  • Risks: USD/commercial vulnerabilities (66%/35.6%) demand hedging/export diversification (tourism +15.8%; Section 2.8). Rising stock strains if revenues falter (mining taxes down).

5. Policy Context from the Review

• Synergies: Funds amplify output (agri/mining-led) and external strength (services surplus USD 3,884.4M). Projections: Debt/GDP <45% by 2026, with FX interventions (USD 11M sale) mitigating risks.
• Outlook: Prudent amid global uncertainties (trade index up); prioritize private borrowing and currency swaps.

In conclusion, September 2025's external debt profile implies a development-enabling yet risk-laden framework, with public/infra focus driving growth while USD concentration demands vigilant FX/debt management. This aligns with the Review's resilient outlook, but enhancing private/diversified borrowing is crucial for 2026 sustainability amid global pressures.