Evidence from 2010–2025

Fiscal decentralization in Tanzania, pursued through the policy of Decentralization by Devolution (D by D), aims to empower Local Government Authorities (LGAs) with greater financial autonomy to fund and manage local development effectively. A key measure of success is the extent to which LGAs can rely on own-source revenue—locally generated through property rates, fees, licenses, and service levies—rather than central government transfers. The core question is whether this policy has meaningfully improved the financial sustainability of LGAs, enabling them to independently finance the bulk of grassroots projects such as roads, schools, health centers, water supply, and sanitation.

Evidence from LGA revenue data spanning 2010 to 2025 indicates that fiscal decentralization has not significantly enhanced financial sustainability. While own-source revenue has grown substantially in absolute terms—from TZS 13.9 billion in 2010 to TZS 147.8 billion in 2025 (a more than tenfold increase)—this has failed to reduce heavy dependence on central transfers. The own-source share of total LGA revenue averaged only 2.8% over the period (excluding the anomalous 0.5% in 2016), ranging from a low of 1.9% in 2012 to a high of 4.1% in 2025. In recent years, despite own-source collections reaching TZS 121.9 billion in 2024 and TZS 147.8 billion in 2025, the share remained modest at 3–4%. This means central government transfers continued to account for 96–98% of total LGA revenue, which expanded from TZS 609.7 billion in 2010 to TZS 3,570.4 billion in 2025.

This persistently low own-source contribution highlights limited progress toward true fiscal autonomy. LGAs, despite implementing most development projects critical to national goals like the Five-Year Development Plans and Sustainable Development Goals, lack the financial independence needed for proactive, timely, and locally prioritized planning. Delays in project execution and resource inefficiencies often result from this dependency.

Several structural challenges explain the stagnation:

• Inconsistent revenue collection: Sharp fluctuations—such as drops to TZS 17.2 billion in 2012 and TZS 69.1 billion in 2022—reveal weaknesses in administrative systems and enforcement.
• Inadequate tracking and transparency: Incomplete data records, particularly pre-2010 and in certain years, signal systemic monitoring gaps that hinder accountability and mobilization.
• Constrained revenue bases: Outdated property valuations, underutilized levies, and leakages from manual processes limit potential yields.
• Disincentives from transfer reliance: Predetermined central allocations reduce motivation for local revenue innovation.

Recent trends offer cautious optimism, with own-source growth accelerating in 2023–2025 and the share reaching 4.1% in 2025—the highest in the period. However, this remains far below levels needed for genuine sustainability.

To achieve meaningful enhancement through fiscal decentralization, targeted reforms are required. Priorities include digitalizing revenue administration (e.g., electronic billing and mobile payments), conducting regular property revaluations, building staff capacity, and introducing incentives for high-performing LGAs, such as greater autonomy or matching grants. Linking revenue strategies to local economic drivers—like agriculture, tourism, and small industries—could further boost collections organically. A medium-term target of 10–15% own-source share would better align resources with community needs, foster decentralized development, and build resilience against fiscal shocks.

In summary, while absolute own-source revenue has risen impressively, the low and stagnant share over 2010–2025 demonstrates that fiscal decentralization has yet to deliver substantial financial sustainability for Tanzania’s LGAs. Sustained, bold reforms are essential to realize the full potential of devolution.

Note: The 2016 data point shows Own Sources as 0.0B (likely a recording error or missing data, as noted in the document's limitations). It is treated as anomalous in trend calculations. The "Non-Tax Revenue" column does not factor into the LGA Share % and appears unrelated to the core self-reliance metric (possibly national non-tax figures or a separate category). Read More: Local Government Revenue Collections in Tanzania

Data Table (in billions TZS)

Key Trends and Insights

• Absolute Growth in Own Sources — Own-source revenue grew strongly from 13.9B TZS in 2010 to 147.8B TZS in 2025 (over 10x increase). Compound Annual Growth Rate (CAGR, excluding 2016): 18.4%.
• Growth in Total Revenue — Total LGA revenue (largely driven by central transfers) rose from 609.7B to 3,570.4B TZS (about 6x increase). CAGR: 13.5%.
• LGA Share % (Self-Reliance Indicator):
  • Average (2010–2025, excluding 2016): 2.8%.
  • Range: Low of 1.9% (2012) to high of 4.1% (2025).
  • Trend: Mild upward linear trend (+0.08 percentage points per year), explaining about 43% of variation (moderate positive progress).
  • Recent years (2020–2025) show volatility but improvement: Peak at 3.7% (2020), dip to 2.2% (2022), then recovery to 4.1% (2025) — driven by strong own-source growth (+46% in 2023, +21% in 2024–2025) while total revenue slowed or declined in 2025.

Implications for LGA Economic Self-Reliance

The revenue data from 2010 to 2025 clearly illustrates that Tanzania's Local Government Authorities (LGAs) remain heavily dependent on central government transfers, which consistently account for 95–98% of total revenue. Even at the highest point in the period—4.1% own-source share in 2025 (TZS 147.8 billion out of TZS 3,570.4 billion total)—locally generated funds cover only a marginal fraction of budgetary needs. This structural dependency severely constrains fiscal autonomy at the local level, where the majority of development projects are executed, including critical infrastructure such as roads, schools, health centers, and water supply systems.

Positive Developments

Despite the overall low share, several encouraging trends emerge:

• Own-source revenue has grown substantially faster than total revenue, increasing more than tenfold from TZS 13.9 billion in 2010 to TZS 147.8 billion in 2025, compared to total revenue rising approximately sixfold over the same period.
• A notable acceleration in recent years (2023–2025), with own-source collections rising from TZS 100.8 billion (3.2% share) in 2023 to TZS 121.9 billion (3.1%) in 2024 and TZS 147.8 billion (4.1%) in 2025, marking the strongest upward momentum in the dataset.

These gains suggest that, with continued effort, higher levels of self-reliance are achievable.

Persistent Challenges

The data also exposes significant obstacles that hinder progress:

• Volatility in collections: Sharp declines, such as own-source revenue falling to TZS 17.2 billion (1.9% share) in 2012 and TZS 69.1 billion (2.2%) in 2022, indicate inconsistent enforcement and administrative weaknesses.
• Systemic deficiencies in tracking: As highlighted in the dataset limitations, incomplete records and poor monitoring mechanisms undermine accountability and effective revenue mobilization, creating a self-reinforcing barrier to improvement.

Pathways to Greater Economic Self-Reliance

To build on recent progress and reduce reliance on central transfers, LGAs must pursue targeted, sustained reforms that address both administrative and structural constraints:

1. Strengthen Revenue Collection Systems Invest in digital tools—such as electronic billing, mobile money integration, and automated tracking—and provide staff training to minimize leakages and enhance efficiency, directly tackling the poor tracking mechanisms noted in the data.
2. Broaden and Enforce Revenue Bases Prioritize high-yield sources including property rates, business licenses, service levies, and market fees. Implementing regular property revaluations, especially in rapidly growing urban and peri-urban areas, could support sustained annual growth of 15–20% in own-source revenue.
3. Enhance Capacity Building and Incentives Offer targeted technical and financial support to underperforming LGAs while introducing performance-based incentives—such as increased autonomy or matching grants—for those demonstrating strong collection improvements.
4. Link Revenue to Local Economic Growth Promote investments in sector-specific opportunities (e.g., agriculture processing, tourism, and small-scale industries) to organically expand the taxable base and generate higher local returns.
5. Establish Clear Policy Targets Set ambitious yet realistic medium-term goals, such as progressively raising the own-source share to 10–15%, to provide a measurable roadmap for shifting project financing toward locally determined priorities.

In conclusion, while absolute own-source revenue has shown impressive growth and recent trends are promising, true economic self-reliance demands accelerating the own-source share well beyond the current low single digits. Without comprehensive reforms to address volatility, administrative gaps, and narrow revenue bases, LGAs will continue to face limited fiscal space. The upward trajectory since 2020 demonstrates potential, but only deliberate policy action will close the gap and enable LGAs to finance local development more independently and effectively.