By Dr. Bravious Kahyoza, PhD, Senior Economist at TICGL

As Tanzania’s national debt continues to climb, there has been increasing debate about the sustainability of our borrowing practices and their potential long-term effects on the economy.

The recent figures from the Controller and Auditor General (CAG), which show a significant increase in national debt—from Sh82.25 trillion in 2022/23 to Sh97.35 trillion in 2023/24—are a cause for concern.

However, while these numbers are alarming, the debate should focus not just on the figures themselves, but on sustainable solutions that will address the challenges of financing Tanzania’s development ambitions. One such solution lies in expanding and optimizing public-private partnerships (PPPs).

As the Economist, I have long advocated for the power of strategic partnerships between the public and private sectors as a viable alternative to heavy borrowing.

While Tanzania’s debt remains manageable in comparison to some of our East African neighbors, it is essential to explore ways to reduce our reliance on borrowing, especially for large-scale infrastructure projects.

Public-private partnerships offer a way to share the financial burden and bring in private sector expertise, technology, and efficiency.

This is a path that not only reduces the strain on public finances but also spurs economic growth in a sustainable manner.

Public-Private Partnerships as a Solution

Increasing capital through well-coordinated public-private partnerships can significantly enhance Tanzania's tax capacity, as many of these projects generate revenue.

Take, for example, the Kibaha-Chalinze road project, worth US$340 million, or the US$1 billion ring road construction project currently under way.

These initiatives, which fall under the PPPC’s oversight, demonstrate the power of combining public ambition with private sector efficiency.

By leveraging private sector resources and expertise, we can achieve faster, more cost-effective project delivery and ensure that critical infrastructure is built without overburdening the national treasury.

The fundamental strength of PPPs lies in their ability to mobilize private capital for public goods. When the private sector invests in infrastructure, it helps reduce government expenditure while also improving service delivery.

Projects are completed more efficiently and in shorter timelines, and, crucially, these projects generate ongoing revenue, which in turn supports economic growth.

As we look to the future, Tanzania’s goal of growing its economy from US$85 billion to US$700 billion is ambitious. Achieving this leap requires not just strategic borrowing and taxation but, more importantly, greater involvement of the private sector.

PPPs are the way forward if we are to meet our economic aspirations without falling into the trap of unsustainable borrowing.

The Case for Local Companies in PPPs

One of the key components of a successful PPP framework is the involvement of local companies. While foreign investment is crucial, it is important to prioritize local businesses in these partnerships.

This isn’t just a matter of political favoritism; it’s an economic strategy that benefits Tanzania as a whole. When local businesses are involved, the capital invested circulates within the country, generating a multiplier effect in our economy.

Unlike foreign investors, who often repatriate a significant portion of their earnings, domestic investors reinvest their profits locally, fostering job creation, innovation, and economic resilience.

The government has taken steps to ensure that local companies are given priority in PPP projects, particularly when competing with foreign firms. According to the law, local companies are given preference during project evaluations, not just for political reasons, but because they contribute to building a sustainable economy. When the economy is strengthened by domestic partnerships, we can reduce our dependence on external borrowing and create a more self-sufficient and resilient economy.

Anti-Corruption Measures for Greater Efficiency

A key factor in the success of public-private partnerships is transparency and accountability, which are critical in ensuring that projects are delivered on time, within budget, and without corruption. The fight against corruption is crucial to enhancing efficiency within government institutions.

Recent reports by CAG Charles Kichere highlighted the staggering inefficiencies in some of Tanzania’s parastatals, with a waste of Sh371.42 billion due to poor management and corruption. These losses undermine the effectiveness of our national budget and hamper our ability to invest in critical projects.

The government’s commitment to fighting corruption and improving efficiency will save valuable resources that can be redirected toward funding development initiatives, reducing our reliance on borrowing.

By implementing robust anti-corruption measures, we can ensure that Tanzania’s resources are used more effectively, which, in turn, will increase our capacity to finance projects through public-private partnerships and domestic revenue generation

Tanzania’s national debt is a significant challenge, but it is not an insurmountable one. By tapping into the potential of public-private partnerships, we can unlock new sources of funding, bring in private sector expertise, and build a stronger, more sustainable economy.

However, this must go hand in hand with efforts to combat corruption, prioritize local participation, and ensure that projects are efficiently managed. In this way, we can reduce our reliance on borrowing, build critical infrastructure, and pave the way for a prosperous future.