External Debt

In May 2021, Tanzania's external debt stood at 75,367,435.00 million TZS. By April 2023, this figure increased to 81,239,648.00 million TZS, marking significant growth over nearly two years. However, by May 2024, external debt slightly decreased to 78,967,372.00 million TZS, reflecting a 3% decline over the past month but a 5% increase over the previous year.

• May 2021: 75,367,435.00 million TZS
• April 2023: 81,239,648.00 million TZS
• May 2024: 78,967,372.00 million TZS
  • 1 Month Change: -3% (decrease from April 2023 to May 2024)
  • 1 Year Change: +5% (increase from May 2023 to May 2024)

Domestic Debt

On the domestic debt front, the figures also show growth over time but at a more modest pace. In May 2021, domestic debt was recorded at 28,339,200.00 million TZS. By April 2023, it had risen to 31,339,300.00 million TZS, and by May 2024, it slightly decreased to 30,969,400.00 million TZS. This represents a 1% decrease over the past month but a notable 9% increase over the past year.

• May 2021: 28,339,200.00 million TZS
• April 2023: 31,339,300.00 million TZS
• May 2024: 30,969,400.00 million TZS
  • 1 Month Change: -1% (decrease from April 2023 to May 2024)
  • 1 Year Change: +9% (increase from May 2023 to May 2024)

Total Debts

When combining both external and domestic debts, the total debts for Tanzania have been substantial. In May 2021, the total debts amounted to 103,706,635.00 million TZS. This figure increased to 112,578,948.00 million TZS by April 2023. By May 2024, the total debts had slightly decreased to 109,936,772.00 million TZS, indicating a 2% decline over the last month but a 6% increase compared to the previous year.

• May 2021: 103,706,635.00 million TZS
• April 2023: 112,578,948.00 million TZS
• May 2024: 109,936,772.00 million TZS
  • 1 Month Change: -2% (decrease from April 2023 to May 2024)
  • 1 Year Change: +6% (increase from May 2023 to May 2024)

Key Observations

• External debt shows a slight decline over the past month but has increased over the year.
• Domestic debt has slightly decreased in the past month but shows significant growth over the year.
• Total debts have decreased slightly in the last month but have increased overall over the past year.

Tanzania's debts over the specified periods

Tanzania is experiencing a gradual increase in its debt levels over the years, with short-term measures in place to manage or reduce debts temporarily. The overall trend of increasing debt highlights the importance of sustainable debt management strategies to ensure economic stability and growth.

1. Overall Debt Increase: The total debt of Tanzania has generally increased from May 2021 to May 2024. Despite slight monthly fluctuations, the overall trend shows a significant rise in debt levels over the three-year period.
2. Monthly Changes:
   • In the last month (from April 2023 to May 2024), there is a slight decrease in both external and domestic debts, resulting in a 2% reduction in total debts. This suggests some short-term measures might have been taken to reduce the debt or perhaps there was a payoff or restructuring of existing debts.
3. Annual Changes:
   • Over the last year (from May 2023 to May 2024), both external and domestic debts have increased. External debt rose by 5%, while domestic debt saw a more substantial increase of 9%. This indicates ongoing borrowing or accumulation of debt, possibly to finance projects or manage economic challenges.
4. Comparative Analysis:
   • External debt saw a slight decrease in the last month (-3%), indicating a potential focus on managing or reducing foreign obligations.
   • Domestic debt also showed a minor decrease (-1%) over the last month, which might reflect efforts to manage internal borrowing.
5. Debt Management:
   • The data reflects that while there are efforts to manage debt in the short term (as seen by the monthly decreases), the long-term trend indicates growing debt. This could be due to various factors such as financing for development projects, budget deficits, or economic adjustments.
6. Economic Implications:
   • The increase in debt over the year might imply that Tanzania is investing in long-term growth initiatives or facing fiscal pressures that necessitate borrowing.
   • The management of debt (both reductions and increases) indicates a balancing act between addressing immediate financial needs and managing long-term financial health.

Impact on the Economy and the Average Citizen:

The continued increase in national debt can significantly harm the economy and the average citizen by increasing taxes, reducing public services, causing inflation, crowding out private investment, and putting pressure on the exchange rate. Effective debt management and prudent fiscal policies are essential to mitigate these risks and ensure sustainable economic development that benefits all citizens.

1. Higher Taxes and Reduced Public Spending:
   • Debt Servicing Costs: As national debt increases, the government must allocate a larger portion of its budget to service the debt (interest payments and principal repayments). This can lead to higher taxes or reduced spending on essential public services such as healthcare, education, and infrastructure, directly affecting the quality of life of the average citizen.
   • Example: If a significant portion of the 6% annual increase in total debt is financed by domestic borrowing, the government might need to increase taxes to meet its debt obligations, reducing disposable income for households.
2. Inflation and Cost of Living:
   • Monetary Policy: To manage rising debt levels, the government may resort to printing more money, leading to inflation. Increased inflation reduces the purchasing power of the currency, making goods and services more expensive for the average citizen.
   • Example: If the government increases the money supply to manage the 9% annual rise in domestic debt, it could lead to inflation, increasing the cost of living.
3. Crowding Out Private Investment:
   • Interest Rates: High levels of domestic borrowing can lead to higher interest rates as the government competes with the private sector for available funds. Higher interest rates can deter private investment and borrowing, stifling economic growth and job creation.
   • Example: The 1% monthly decrease in domestic debt suggests a temporary relief, but the 9% annual increase implies a longer-term trend of crowding out private investment, affecting business growth and employment opportunities.
4. Exchange Rate Pressure:
   • External Debt Repayments: Increased external debt requires repayment in foreign currencies. This can put pressure on the country’s foreign exchange reserves, potentially leading to a depreciation of the local currency. A weaker currency increases the cost of imports, contributing to higher inflation.
   • Example: The 5% annual increase in external debt indicates rising foreign obligations, which can strain Tanzania’s foreign exchange reserves and depreciate the TZS, making imported goods more expensive for citizens.
5. Reduced Social Services and Development Projects:
   • Budget Constraints: Increased debt servicing limits the government’s ability to fund social services and development projects, which are crucial for improving living standards and reducing poverty.
   • Example: With a 6% annual increase in total debt, the government may cut funding for social programs, affecting access to education, healthcare, and social security for the average citizen.

Economic Implications and Analysis

Tanzania's debt development indicates a balanced approach to leveraging debt for economic development while taking short-term steps to manage debt levels. The investments supported by this borrowing are likely aimed at fostering long-term growth, improving infrastructure, and enhancing public services. However, maintaining debt sustainability through effective fiscal policies and strategic investments remains critical to ensuring that the economic benefits of borrowing are realized without compromising future financial stability.

1. Economic Growth and Development:
   • Rising Debt Levels: The overall increase in debt from May 2021 to May 2024 indicates significant borrowing, which can be associated with efforts to finance large-scale infrastructure projects, enhance public services, and stimulate economic growth. Such investments are crucial for long-term development but need to be managed prudently to avoid unsustainable debt levels.
   • Infrastructure and Services: Increased borrowing might be directed toward developing critical infrastructure like roads, bridges, energy projects, and improving healthcare and education. These investments can boost productivity, attract foreign investments, and improve living standards.
2. Short-Term Debt Management:
   • Monthly Decrease: The 1-month decline in both external (-3%) and domestic debt (-1%) suggests short-term measures to reduce debt levels. This could involve paying off or restructuring existing loans, reflecting a focus on maintaining fiscal stability and avoiding excessive debt accumulation.
3. Long-Term Fiscal Strategy:
   • Annual Increase: The annual rise in both external (+5%) and domestic (+9%) debt indicates ongoing borrowing to support economic activities. While this supports growth, it also highlights the need for a robust fiscal strategy to ensure that debt levels remain sustainable and do not burden future economic development.
4. Domestic vs. External Debt:
   • Domestic Debt Increase: The higher percentage increase in domestic debt (9% over the year) compared to external debt (5% over the year) suggests a strategy to rely more on internal sources of financing. This can reduce dependency on foreign loans and mitigate exposure to exchange rate risks and international market fluctuations.
   • External Debt Management: The slight decrease in external debt over the last month indicates efforts to manage foreign obligations, potentially through negotiations for better terms or prioritizing repayments.
5. Economic Stability and Risks:
   • Debt Servicing: Increased debt levels imply higher future debt servicing costs. Effective management of these costs is essential to avoid diverting funds from essential services and development projects.
   • Sustainability: The 6% annual increase in total debt underscores the importance of monitoring debt sustainability. It is crucial to ensure that the borrowed funds are used efficiently to generate economic returns that can support repayment and further growth.