An Assessment Based on Revenue-Expenditure Trends (2000–2025)

Analysis of fiscal data from 2000 to 2025 reveals that Tanzania cannot yet fully self-finance its development agenda without external support. Despite significant improvements in domestic revenue mobilization, persistent structural deficits indicate continued dependence on donor financing and concessional loans to bridge the gap between revenues and expenditures.

Persistent Fiscal Deficits

Tanzania has recorded fiscal deficits in 24 out of 26 years between 2000 and 2025, demonstrating that domestic revenues have consistently fallen short of total government expenditure. In the early 2000s, revenues covered only 58–70% of expenditure, creating financing gaps of 30–40% that required external grants, concessional loans, and domestic borrowing. For instance, in 2000, the government collected TZS 859 billion against expenditure of TZS 1,283 billion, resulting in a deficit of TZS 424 billion.

Although revenue performance has improved substantially over the past two decades, the structural imbalance persists. By 2024, total revenue had increased to TZS 33.9 trillion, yet expenditure expanded even faster to TZS 39.9 trillion, producing a record deficit of TZS 6.1 trillion. In recent years, revenues have covered only 84–87% of expenditure on average, meaning that 13–16% of government spending remains unfunded by domestic resources.

The 2018 Anomaly

The only year in which Tanzania achieved full fiscal self-sufficiency was 2018, when a surplus of TZS 853 billion was recorded and revenue coverage reached 105%. However, this outcome proved temporary and non-recurring. Deficits re-emerged immediately afterward due to renewed spending pressures and external shocks, including the COVID-19 pandemic period, demonstrating that the surplus was not indicative of a sustainable structural shift.

2025 Outlook

Preliminary data for January–September 2025 reinforces the conclusion of continued fiscal dependence. Within nine months, the government recorded revenue of TZS 26.3 trillion against expenditure of TZS 31.3 trillion, generating a deficit of TZS 5.0 trillion. Annualized projections indicate that Tanzania will continue to rely on external financing and borrowing to sustain both development projects and recurrent obligations.

Based on current revenue and expenditure dynamics, Tanzania cannot yet fully operate and implement large-scale development projects without external donor support. While domestic revenues—largely driven by tax collections—have grown impressively and now finance the majority of government spending, they remain insufficient to close the fiscal gap consistently. Donor financing, concessional loans, and external support continue to play a critical complementary role, particularly in infrastructure, social services, and development financing.

Tanzania is moving toward greater fiscal self-reliance, but achieving full independence from donor funding will require further expansion of the tax base, improved revenue administration efficiency, tighter expenditure prioritization, and sustained economic growth. Until these structural reforms fully materialize, external support will remain an integral component of financing Tanzania's development agenda. Read More: Overview of Government Budgetary Operations (October 2025)

Historical Analysis of Tanzania's Government Budgetary Operations (2000–2025)

The attached document provides calendar-year data on Tanzania's central government finances (in billions TZS), with deficit/surplus calculated as Total Revenue minus Total Expenditure (before grants and financing). Note that the "Total Expenditure" column shows negative values, so actual expenditure is the absolute value (e.g., -17,037 in 2018 means expenditure of 17,037 billion TZS).

Key trends:

• Persistent Budget Deficits: In 24 out of 26 years (2000–2025), revenues fell short of expenditures, resulting in deficits. The only surplus occurred in 2018 (+853 billion TZS). Deficits indicate reliance on external grants, domestic borrowing, or foreign loans to bridge the gap.
• Revenue Coverage of Expenditure (Revenue as % of Expenditure): This measures how well revenues "closed the budget gap."
  • Early 2000s: Low coverage, often 60–70% (e.g., 2000: 66.9%; 2004: 58.1%).
  • Mid-2000s to early 2010s: Remained low, dipping to ~62% in 2010.
  • Improvement from mid-2010s: Rose to 80–90% range.
    • 2017: 91.2%
    • 2018: 105% (surplus)
    • 2020: 91.7% (strong during early COVID period)
    • Recent years: Stabilized at ~84–87% (2021–2024 average ~85.7%)
    • 2025 (Jan–Sep only, partial year): ~84.1% (revenue 26,332 / expenditure 31,323)
• Absolute Deficit Growth: Deficits widened over time due to expanding government spending on infrastructure, education, and social programs.
  • 2000: -424 billion TZS
  • 2010: -3,162 billion
  • 2024 peak: -6,053 billion
  • 2025 partial: -4,991 billion (likely higher if annualized)
• Revenue Growth: Strong in many years (average ~18% in high-growth periods like 2006–2007), driven largely by tax revenue (typically 80–90% of total revenue). However, expenditure often grew faster, widening gaps.
• Overall Insight: Revenues have progressively covered a larger share of expenditures (from ~60% average in 2000–2010 to ~85–90% in 2020–2024), reflecting improved tax collection and economic growth. However, full coverage remains elusive except in 2018, creating a structural fiscal gap of 10–40% historically (narrower recently).

This gap represents the unfunded portion of the budget, typically financed through debt, leading to rising public debt obligations over time.

Addressing the Budget Gap: Recommended Actions

The persistent deficit is a common challenge in developing economies like Tanzania, driven by ambitious development spending outpacing revenue growth. If left unaddressed, it risks higher debt servicing costs, inflation, or reduced fiscal space for emergencies.

Key recommendations to close the gap:

1. Boost Domestic Revenue Mobilization:
   • Strengthen tax administration (e.g., via Tanzania Revenue Authority digitalization, reducing evasion, and broadening the tax base).
   • Minimize tax exemptions and incentives that erode collections.
   • Introduce fair, progressive reforms (e.g., property taxes, digital economy taxation) without stifling growth.
   • Target: Raise tax-to-GDP ratio (historically ~11–13%) toward 15%+ as seen in peer economies.
2. Improve Expenditure Efficiency:
   • Prioritize high-impact development projects (infrastructure, education, health) over lower-priority recurrent spending.
   • Conduct regular audits to curb waste, corruption, and leakage.
   • Shift toward performance-based budgeting.
3. Promote Economic Growth and Diversification:
   • Attract private investment (FDI) in sectors like mining, tourism, manufacturing, and agriculture to expand the taxable base.
   • Support SME growth and formalization.
4. Prudent Debt Management:
   • Favor concessional borrowing and limit commercial debt.
   • Build fiscal buffers during good years.
5. Institutional Reforms:
   • Enhance transparency and public participation in budgeting.
   • Align with medium-term fiscal frameworks (as Tanzania has done in recent plans).

These steps, if implemented consistently, could achieve sustained surpluses or near-balance, as briefly seen in 2018.

Outlook for 2026 Amid Current Political Situation

Tanzania's fiscal year runs July–June, so calendar 2026 spans the second half of FY 2025/26 and the first half of FY 2026/27.

• Approved FY 2025/26 Budget (presented June 2025, ~56.5–57 trillion TZS total):
  • Targets revenue growth and expenditure control.
  • Aims to reduce fiscal deficit to ~3.0% of GDP (from 3.4% in 2024/25), with tax revenue rising to 13.3% of GDP.
  • Supported by projected 6%+ economic growth and macro stability (per IMF and government projections).
• Positive Factors for 2026:
  • Continued infrastructure push and reforms could support revenue if growth holds.
  • IMF forecasts contained deficits (~2.8–3.0% of GDP) into 2026–2027.

However, the current political situation (as of December 2025) poses significant risks:

• The October 2025 general election saw President Samia Suluhu Hassan (CCM) re-elected with ~97–98% of votes, but results were widely disputed.
• Opposition candidates faced exclusions, leading to post-election protests and a severe government crackdown (reports of hundreds killed, widespread arrests).
• Ongoing tensions include banned protests, heavy security deployments, internet restrictions, and international criticism (UN, Human Rights Watch, Amnesty, potential aid reviews by US/West).
• This instability could:
  • Deter investors and tourism.
  • Disrupt economic activity.
  • Lead to aid/grant suspensions.
  • Increase security-related spending.
  • Cause revenue shortfalls if growth slows.

Expectation for 2026: Official targets suggest a continued narrowing of the deficit (toward 2–3% of GDP) if stability returns and reforms proceed. However, prolonged political turbulence risks higher deficits (potentially wider gaps), slower growth, and strained financing. Much depends on de-escalation and inclusive dialogue in early 2026. Monitoring sources like the Ministry of Finance, Bank of Tanzania, and IMF updates will be key.

Financial data from 2000 to 2025 (in billions TZS)

Note: All values in billions TZS. 2025 data includes Jan-Sep only (9 months). Deficit/Surplus = Revenue - Expenditure (before grants and financing).