Barriers and Opportunities

Tanzania's workforce is predominantly informal, with 71.8% of workers engaged in unregulated jobs such as small businesses, street vending, and casual labor. Despite government efforts to formalize employment, only 28.2% of workers are formally employed. Transitioning from informal to formal employment remains a major challenge due to financial, regulatory, and skills-related barriers. This article explores the barriers preventing formalization and the opportunities that can facilitate the transition, using figures from the 2025 Employment Study.

Employment Structure in Tanzania

• 49% of the workforce is informally employed, with most working in agriculture, retail, and transportation.
• Only 23% of respondents have formal jobs, highlighting the difficulty in transitioning from informal work.
• 27% remain unemployed, signaling a gap in job creation.

Transitioning from informal to formal employment requires addressing key challenges such as business registration costs, financial access, and skill mismatches.

Barriers to Transitioning to Formal Employment

1. High Cost of Business Registration

Many informal businesses struggle with registration fees, taxation, and compliance costs.

• 21% of respondents cited business registration costs as a major obstacle.
• 16% identified high taxation, making it expensive for small businesses to formalize.
• 10% noted complex legal procedures, delaying the transition process.

2. Limited Financial Access

Small businesses and informal workers lack access to credit and financial support.

• 28% of respondents said lack of credit prevents them from formalizing.
• 20% lack collateral, making it difficult to secure business loans.

Without affordable financial services, many small businesses stay informal to avoid financial risks.

3. Skills and Education Gaps

Workers with low education levels struggle to find formal employment.

• 83% of formal workers have at least a bachelor’s degree, compared to 10% in informal jobs.
• 50% of informal workers only have a secondary education, limiting their transition options.
• Without vocational training and skills development, informal workers remain excluded from formal jobs.

4. Lack of Awareness of Formalization Benefits

Many informal workers do not understand the advantages of transitioning to formal employment.

• 54% of respondents are unaware of social security and tax incentives for formal workers.
• 35% prefer informal jobs due to their flexibility and independence.

Opportunities for Transitioning to Formal Employment

1. Government Incentives for SMEs

The government is introducing programs to support small businesses and ease registration.

• 38% of respondents support tax reductions for small businesses to encourage formalization.
• 31% want simplified business registration to reduce bureaucracy.
• 25% believe SME-friendly loan programs can help businesses transition.

2. Expansion of Vocational and Technical Training

Providing skills training can help workers qualify for higher-paying, formal jobs.

• 35% of respondents want digital skills training, which aligns with new job trends.
• 29% support entrepreneurship programs, helping small business owners formalize.

3. Digital Platforms for Business Formalization

E-commerce and digital banking allow small businesses to register and operate legally online.

• 38% of respondents believe that online registration makes formalization easier.
• 35% say mobile banking allows informal businesses to accept digital payments.

Conclusion and Policy Recommendations

Tanzania's informal sector remains dominant, but financial constraints, skill gaps, and regulatory burdens make formalization difficult. Addressing these barriers can unlock new job opportunities and improve economic stability.

Policy Recommendations:

1. Reduce Business Registration Costs – Introduce low-cost registration for SMEs.
2. Expand Access to Microfinance – Offer low-interest loans for informal businesses.
3. Strengthen Vocational Training Programs – Equip workers with formal job skills.
4. Promote Digital Tax and Registration Systems – Simplify online business formalization.
5. Raise Awareness on Formalization Benefits – Educate workers on social security and tax incentives.

NOTE:

The research and case studies presented in this report were conducted by Tanzania Investment and Consulting Group Limited (TICGL) to analyze employment trends, macroeconomic stability, and job creation dynamics in Tanzania. The study covered a sample size of 2,500 respondents, representing diverse economic sectors and geographic regions. A mixed-methods approach was employed, integrating quantitative surveys (85%), structured interviews (10%), and focus group discussions (5%) to gather both statistical data and qualitative insights. The research was conducted across six key regions: Dar es Salaam (25% of respondents), Mwanza (18%), Arusha (15%), Dodoma (14%), Mbeya (12%), and Morogoro (16%), ensuring a balance between urban and rural employment patterns.

The findings indicate that Tanzania’s workforce is 71.8% informal (25.95 million workers) and 28.2% formal (10.17 million workers), highlighting a significant divide in job security, wages, and access to social protection. Among the 2,500 surveyed individuals, formal employment accounts for 23% (550 individuals), predominantly in government (32% of formal jobs), banking and financial services (25%), manufacturing (18%), and education and healthcare (15%). On the other hand, informal employment constitutes 49% (1,170 individuals), with key sectors including agriculture (35% of informal workers), small businesses and trade (28%), transportation (15%), and casual labor (12%). The remaining 27% (650 individuals) were unemployed, with youth unemployment (ages 18–35) reaching 33%, significantly higher than the national average of 9.2%.

Employment trends indicate that formal employment is projected to rise to 38% by 2030, driven by industrialization, digital transformation, and policy reforms. However, major barriers continue to slow the transition, including limited job availability (42%), skills mismatches (26%), and bureaucratic challenges (21%). The study also found that women make up 65% of the informal workforce, primarily due to barriers in accessing formal jobs, while 72% of youth are engaged in informal employment due to limited entry-level job opportunities.

To bridge the gap between formal and informal employment, Tanzania must focus on expanding SME growth, strengthening vocational training programs, improving access to financial services for small businesses, and reducing bureaucratic hurdles for business registration. This report emphasizes the key trends, challenges, and opportunities shaping Tanzania’s employment landscape and highlights the role of public-private partnerships, investment in digital workforce expansion, and targeted policy interventions in creating a more structured and inclusive workforce by 2030.

A Formal vs. Informal Perspective

Tanzania’s labor market is split between formal and informal employment, with the informal sector accounting for 71.8% of the workforce. The 2025 Employment Study found that employment choices are influenced by factors such as education, work experience, financial barriers, and job security. This article presents key statistical insights into why workers choose either formal or informal employment.

Current Employment Distribution in Tanzania

A survey of 2,500 respondents revealed the following employment status:

The informal sector dominates because it offers low entry barriers and greater flexibility, while the formal sector is more structured and provides benefits like job security and social protection.

Key Factors Influencing Employment Choices

1. Education and Employment Type

Education is a major factor in determining employment choices. The study found that:

• 83% of formal employees have at least a bachelor’s degree, making higher education a strong requirement for formal jobs.
• 50% of informal workers only have secondary education, which limits their ability to access formal jobs.
• 35% of informal workers have primary-level education, often working in agriculture or small businesses.

2. Work Experience and Employment Type

Experience plays a crucial role in employment stability:

• 60% of informal workers have between 2–5 years of experience, suggesting they take temporary jobs before seeking formal employment.
• 45% of formal employees have 6–10 years of experience, showing that experience improves access to structured jobs.
• 35% of informal workers have less than one year of experience, reflecting high participation of young workers in casual labor.

3. Barriers to Formal Employment

Workers and small businesses face challenges transitioning into the formal sector:

• 42% of respondents cited limited job availability as the biggest challenge in finding formal employment.
• 26% identified skills mismatches, meaning available jobs don’t match their qualifications.
• 21% mentioned bureaucracy as a major hurdle, especially for small businesses trying to formalize.

4. Financial and Economic Factors

Many Tanzanians choose informal employment due to low capital requirements and business flexibility:

• 44% of informal workers are self-employed in small businesses, as formal employment requires more capital and regulatory compliance.
• 26% work in retail and street vending, which provides daily income without business registration costs.
• 8% are in transportation, such as bodaboda (motorcycle taxis), which requires minimal startup investment.

5. Job Security and Social Protection

Formal jobs offer social security benefits and stable wages, attracting workers seeking long-term financial security.

• 50% of respondents stated that access to social security, pensions, and health insurance was the primary motivation to seek formal jobs.
• 20% preferred formal jobs due to higher wages and stable income, compared to unpredictable informal earnings.
• 16% would transition to formal employment if business registration processes were simplified.

Conclusion and Policy Recommendations

The study reveals that education, work experience, financial barriers, and job security concerns are key factors influencing employment choices in Tanzania. While formal jobs offer stability, many workers prefer informal employment due to financial independence, ease of entry, and fewer regulatory burdens.

Policy Recommendations:

1. Expand Vocational Training – Equip workers with skills that match industry needs.
2. Simplify Business Registration – Reduce bureaucracy to encourage small businesses to formalize.
3. Improve SME Financing – Provide low-interest loans to informal entrepreneurs.
4. Raise Awareness on Social Protection – Promote pension and health insurance benefits for informal workers.

NOTE:

The research and case studies presented in this report were conducted by Tanzania Investment and Consulting Group Limited (TICGL) to analyze employment trends, macroeconomic stability, and job creation dynamics in Tanzania. The study covered a sample size of 2,500 respondents, representing diverse economic sectors and geographic regions. A mixed-methods approach was employed, integrating quantitative surveys (85%), structured interviews (10%), and focus group discussions (5%) to gather both statistical data and qualitative insights. The research was conducted across six key regions: Dar es Salaam (25% of respondents), Mwanza (18%), Arusha (15%), Dodoma (14%), Mbeya (12%), and Morogoro (16%), ensuring a balance between urban and rural employment patterns.

The findings indicate that Tanzania’s workforce is 71.8% informal (25.95 million workers) and 28.2% formal (10.17 million workers), highlighting a significant divide in job security, wages, and access to social protection. Among the 2,500 surveyed individuals, formal employment accounts for 23% (550 individuals), predominantly in government (32% of formal jobs), banking and financial services (25%), manufacturing (18%), and education and healthcare (15%). On the other hand, informal employment constitutes 49% (1,170 individuals), with key sectors including agriculture (35% of informal workers), small businesses and trade (28%), transportation (15%), and casual labor (12%). The remaining 27% (650 individuals) were unemployed, with youth unemployment (ages 18–35) reaching 33%, significantly higher than the national average of 9.2%.

Employment trends indicate that formal employment is projected to rise to 38% by 2030, driven by industrialization, digital transformation, and policy reforms. However, major barriers continue to slow the transition, including limited job availability (42%), skills mismatches (26%), and bureaucratic challenges (21%). The study also found that women make up 65% of the informal workforce, primarily due to barriers in accessing formal jobs, while 72% of youth are engaged in informal employment due to limited entry-level job opportunities.

To bridge the gap between formal and informal employment, Tanzania must focus on expanding SME growth, strengthening vocational training programs, improving access to financial services for small businesses, and reducing bureaucratic hurdles for business registration. This report emphasizes the key trends, challenges, and opportunities shaping Tanzania’s employment landscape and highlights the role of public-private partnerships, investment in digital workforce expansion, and targeted policy interventions in creating a more structured and inclusive workforce by 2030.

Tanzania’s Economic Growth Strengthens with Rising Credit and Financial Stability

Tanzania's economy has shown strong growth from 2021 to 2024, driven by rising domestic credit, expanding private sector lending, and increasing money supply. Domestic credit grew from 27.37 trillion TZS in 2021 to 46.82 trillion TZS in 2024 (+71%), while private sector lending increased by 72% over the same period, boosting investments and job creation. Additionally, broad money (M3) rose by 47%, and foreign currency deposits surged by 57%, reflecting greater financial confidence and economic resilience. These trends highlight Tanzania’s robust economic expansion and a strengthening financial sector.

Tanzania’s economic performance from 2021 to 2024/2025 has shown positive growth trends, primarily driven by increased credit availability, expanding money supply, and strong private sector growth. The following key indicators explain why Tanzania’s economy is performing well:

1. Strong Growth in Domestic Credit – Economic Expansion

• Domestic credit rose from 27.37 trillion TZS in 2021 to 46.82 trillion TZS in 2024, a 71% increase over four years.
• This growth suggests higher business investments, household consumption, and overall economic expansion.

2. Increased Private Sector Lending – Business Growth

• Claims on the private sector increased from 19.64 trillion TZS in 2021 to 33.76 trillion TZS in 2024, a 72% rise.
• This reflects higher business confidence, increased production, and job creation, all contributing to economic growth.

3. Rising Money Supply – Expanding Financial Sector

• Reserve Money (M0) increased from 7.91 trillion TZS in 2021 to 11.04 trillion TZS in 2024 (40% increase), ensuring liquidity in the banking sector.
• Broad Money (M2) expanded from 24.77 trillion TZS to 35.50 trillion TZS, showing more cash circulation and financial inclusion.
• Extended Broad Money (M3) grew from 32.12 trillion TZS to 47.09 trillion TZS, supporting increased lending and economic transactions.

4. Foreign Currency Deposits (FCD) Growth – Investor Confidence

• Foreign currency deposits rose from 7.35 trillion TZS in 2021 to 11.58 trillion TZS in 2024, indicating a growing trust in the banking sector.
• In 2024, foreign deposits reached 4.35 billion USD, reflecting an increase in foreign investment and trade activity.

5. Recovery of Foreign Financial Assets – Improved External Stability

• While foreign financial assets declined from 12.24 trillion TZS in 2021 to 9.66 trillion TZS in 2023, they recovered to 12.09 trillion TZS in 2024.
• This recovery suggests improved foreign exchange reserves, better trade balance management, and reduced external vulnerabilities.

6. Increased Government Borrowing for Development

• Government net claims increased from 6.50 trillion TZS in 2021 to 11.57 trillion TZS in 2024, indicating more public investment in infrastructure, education, and healthcare.
• While borrowing increased, if well-managed, it supports economic growth through capital projects that drive long-term productivity.

Conclusion – Tanzania’s Economic Strength

From 2021 to 2024, Tanzania has demonstrated consistent economic growth, supported by:
✅ 71% growth in domestic credit, fueling business expansion.
✅ 72% rise in private sector lending, boosting investments and job creation.
✅ Strong money supply growth, ensuring liquidity and financial inclusion.
✅ Increasing foreign currency deposits, reflecting confidence in the banking system.
✅ Recovery of foreign financial assets, improving economic resilience.

Table summary of Tanzania’s economic performance indicators from 2021 to 2024, showing why the economy is performing well:

Key Takeaways from the Table

✅ 71% growth in domestic credit – More loans for businesses and households, leading to higher economic activity.
✅ 72% increase in private sector lending – Boosts business expansion, investment, and job creation.
✅ Broad money (M2 & M3) increased by 43%-47% – Showing higher liquidity and financial inclusion.
✅ Foreign deposits (FCD) rose by 57%, indicating growing investor confidence in Tanzania’s economy.
✅ Foreign financial assets recovered in 2024, improving external stability.
✅ Government credit rose by 78%, signaling investment in infrastructure and development projects.

Tanzania’s financial sector has experienced steady expansion from 2021 to 2024, with domestic credit growing from 27.37 trillion TZS in 2021 to 46.82 trillion TZS in 2024, reflecting increased economic activity. Private sector lending also rose significantly, from 19.64 trillion TZS to 33.76 trillion TZS, showing business growth. Meanwhile, foreign financial assets fluctuated, declining from 12.24 trillion TZS in 2021 to 9.66 trillion TZS in 2023, before recovering to 12.09 trillion TZS in 2024. The money supply (M3) expanded from 32.12 trillion TZS in 2021 to 47.09 trillion TZS in 2024, indicating increased liquidity and banking activity. These trends highlight Tanzania’s growing financial sector, with expanding credit and liquidity supporting economic growth.

Analyzing Tanzania's monetary and financial data from January 2021 to February 2025 reveals key trends across various financial indicators:

1. Foreign Financial Assets (Net)

• 2021 average: 12,240,636 million TZS​
• 2022 average: 10,571,449 million TZS​
• 2023 average: 9,663,721 million TZS​
• 2024 average: 12,099,428 million TZS​

Trend Analysis: There was a decline in net foreign financial assets from 2021 to 2023, followed by a recovery in 2024. This fluctuation may reflect changes in foreign exchange reserves and international investment positions.​

2. Domestic Credit

• 2021 average: 27,371,154 million TZS​
• 2022 average: 34,595,463 million TZS​
• 2023 average: 41,047,502 million TZS​
• 2024 average: 46,824,755 million TZS​

Trend Analysis: Domestic credit exhibited consistent growth over the period, indicating an expansion in lending activities within the economy.​

3. Government Claims (Net)

• 2021 average: 6,501,863 million TZS​
• 2022 average: 9,562,896 million TZS​
• 2023 average: 11,603,732 million TZS​
• 2024 average: 11,576,752 million TZS​

Trend Analysis: Net claims on the government increased from 2021 to 2023, stabilizing in 2024. This suggests increased government borrowing during the initial years, possibly for developmental projects or budgetary support, followed by stabilization.​

4. Claims on Private Sector

• 2021 average: 19,643,860 million TZS​
• 2022 average: 23,815,125 million TZS​
• 2023 average: 28,528,613 million TZS​
• 2024 average: 33,759,428 million TZS​

Trend Analysis: There was a steady increase in claims on the private sector, reflecting robust credit growth. Notably, private sector credit expanded by approximately 22% in both July and August 2023, before moderating to 19.5% in September 2023, surpassing the initial projection of 16.4% for December 2023. This growth is attributed to an improved business environment and supportive monetary policies. ​

5. Reserve Money (M0)

• 2021 average: 7,913,564 million TZS​
• 2022 average: 9,103,874 million TZS​
• 2023 average: 9,922,327 million TZS​
• 2024 average: 11,049,539 million TZS​

Trend Analysis: Reserve money showed consistent growth, indicating an increase in the central bank's monetary base.​

6. Extended Broad Money (M3)

• 2021 average: 32,127,715 million TZS​
• 2022 average: 36,201,424 million TZS​
• 2023 average: 41,107,812 million TZS​
• 2024 average: 47,090,824 million TZS​

Trend Analysis: M3, which includes M2 plus foreign currency deposits, grew steadily, reflecting an overall increase in the money supply.​

7. Broad Money (M2)

• 2021 average: 24,773,941 million TZS​
• 2022 average: 28,296,534 million TZS​
• 2023 average: 32,083,035 million TZS​
• 2024 average: 35,505,154 million TZS​

Trend Analysis: M2, comprising currency in circulation and local currency deposits, also exhibited consistent growth, indicating increased liquidity in the economy.​

8. Foreign Currency Deposits (FCD)

• 2021 average: 7,353,728 million TZS​
• 2022 average: 7,904,890 million TZS​
• 2023 average: 9,024,777 million TZS​
• 2024 average: 11,585,670 million TZS​
• FCD in USD (2024 average): 4,355 million USD​

Trend Analysis: Foreign currency deposits increased annually, both in TZS and USD terms, suggesting growing confidence in foreign currency holdings.​

Key Observations:

• Consistent Growth in Domestic Credit: The steady rise in domestic credit indicates an expanding lending environment, supporting economic activities.​
• Fluctuations in Foreign Financial Assets: The decline followed by a recovery in net foreign financial assets may reflect changes in foreign exchange reserves and international investment positions.​
• Robust Private Sector Credit Expansion: The private sector experienced significant credit growth, with rates reaching approximately 22% in mid-2023, surpassing initial projections. This surge is linked to supportive monetary policies and an improved business environment. ​
• Expansion of Monetary Aggregates: The consistent growth in monetary aggregates (M0, M2, M3) indicates an increasing money supply, aligning with economic expansion.

The monetary and financial data for Tanzania from 2021 to 2024 in millions of TZS:

Tanzania's monetary and financial trends from 2021 to 2024, showing overall economic expansion with a few notable trends:

1. Domestic Credit Growth (↑)

• Domestic credit has increased consistently from 27.37 trillion TZS in 2021 to 46.82 trillion TZS in 2024.
• This suggests expanding economic activity, higher lending to businesses and households, and greater access to financial resources.

2. Foreign Financial Assets (Fluctuations)

• Declined from 12.24 trillion TZS in 2021 to 9.66 trillion TZS in 2023, before recovering to 12.09 trillion TZS in 2024.
• This suggests a temporary reduction in foreign reserves, possibly due to trade imbalances or forex interventions, followed by recovery.

3. Increased Government Borrowing (↑)

• Government net claims grew from 6.50 trillion TZS in 2021 to 11.57 trillion TZS in 2024.
• Indicates rising government debt and reliance on credit, which could be used for infrastructure projects or fiscal deficit financing.

4. Private Sector Credit Expansion (↑)

• Increased from 19.64 trillion TZS in 2021 to 33.76 trillion TZS in 2024.
• This suggests improved business confidence and investment, with private sector borrowing more to expand operations.

5. Money Supply Growth (M0, M2, M3) (↑)

• Reserve Money (M0) increased from 7.91 trillion TZS in 2021 to 11.04 trillion TZS in 2024.
• Broad Money (M2) grew from 24.77 trillion TZS in 2021 to 35.50 trillion TZS in 2024.
• Extended Broad Money (M3) increased from 32.12 trillion TZS in 2021 to 47.09 trillion TZS in 2024.
• A growing money supply indicates strong economic expansion, rising liquidity, and higher banking activities.

6. Rising Foreign Currency Deposits (FCD)

• Increased from 7.35 trillion TZS in 2021 to 11.58 trillion TZS in 2024.
• Foreign deposits in USD reached 4.35 billion in 2024, showing growing confidence in Tanzania’s financial sector from international investors.

Key Takeaways:

✅ Tanzania's economy is expanding, with increased money supply, credit, and financial activity.
✅ Private sector growth is strong, showing businesses are investing and borrowing more.
✅ Government borrowing has increased, which could either boost development or create fiscal risks.
✅ Foreign reserves saw fluctuations, indicating external financial pressures but a recovery in 2024.
✅ Liquidity is improving, supporting higher economic participation.

As of February 28, 2025, the Bank of Tanzania’s total assets grew by 3.18%, reaching TZS 26.05 trillion, up from TZS 25.24 trillion in January. This growth was driven by a 15% increase in cash reserves (TZS 6.05 trillion) and a 10.2% rise in foreign currency marketable securities (TZS 8.53 trillion). Meanwhile, equity surged by 15.3%, supported by a 16% rise in reserves (TZS 2.41 trillion). However, advances to the government declined by 17.1%, reflecting tighter monetary policy, while currency in circulation fell by 1.4%, signaling a possible shift towards digital transactions or inflation control measures.

1. Total Assets:

• Total: TZS 26.05 trillion (increased from TZS 25.24 trillion in January 2025, a 3.18% increase).
• Main Asset Components:
  • Cash & Cash Equivalent: TZS 6.05 trillion (+15% from January's TZS 5.26 trillion).
  • Foreign Currency Marketable Securities: TZS 8.53 trillion (up from TZS 7.74 trillion, +10.2%).
  • Advances to Governments: TZS 4.70 trillion (declined from TZS 5.68 trillion, -17.1%).
  • Gold Holdings: TZS 87.12 billion (up from TZS 82.18 billion, +6%).
  • Quota in IMF: TZS 1.35 trillion (increased from TZS 1.29 trillion, +4.7%).
  • Government Securities: TZS 2.00 trillion (slight decrease from TZS 2.04 trillion, -1.7%).
  • Loans & Receivables: TZS 1.01 trillion (+6.8% from TZS 946.97 billion).

2. Total Liabilities:

• Total: TZS 23.53 trillion (up from TZS 23.06 trillion, +2%).
• Major Liabilities:
  • Currency in Circulation: TZS 8.04 trillion (slight decrease from TZS 8.15 trillion, -1.4%).
  • Deposits (Banks & Non-Bank Financial Institutions): TZS 4.04 trillion (up from TZS 3.51 trillion, +14.8%).
  • Deposits (Others): TZS 2.95 trillion (down from TZS 3.10 trillion, -4.8%).
  • Foreign Currency Financial Liabilities: TZS 4.61 trillion (+1.1% from TZS 4.56 trillion).
  • IMF-related Liabilities: TZS 1.17 trillion (no change).
  • Special Drawing Rights (SDRs) Allocation: TZS 1.94 trillion (up from TZS 1.86 trillion, +4.7%).

3. Equity:

• Total: TZS 2.51 trillion (up from TZS 2.18 trillion, +15.3%).
• Breakdown:
  • Paid-up Capital: TZS 100 billion (unchanged).
  • Reserves: TZS 2.41 trillion (up from TZS 2.08 trillion, +16%).

Key Takeaways:

✅ Increase in Assets (+3.18%), driven by growth in foreign marketable securities, loans, and cash reserves.
✅ Increase in Liabilities (+2%), with a rise in bank deposits and foreign currency liabilities.
✅ Growth in Equity (+15.3%), mainly due to an increase in reserves.
⚠️ Decline in Advances to Government (-17.1%), indicating reduced central bank lending to the government.
⚠️ Slight decrease in Currency Circulation (-1.4%), potentially reflecting economic factors like lower cash demand.

Analysis of the Bank of Tanzania's Financial Position (As of 28 February 2025)

The financial statement shows key trends in Tanzania’s monetary system and economic conditions.

1. Financial Stability and Growth

✅ Total Assets Increased (+3.18%)

• The growth in total assets to TZS 26.05 trillion suggests a stronger financial position for the central bank.
• The rise in foreign currency marketable securities (+10.2%) indicates increased foreign reserves, which enhances Tanzania’s ability to manage external shocks.
• Higher cash reserves (+15%) signal stronger liquidity and better financial sector stability.

✅ Increase in Equity (+15.3%)

• A rise in reserves (+16%) suggests that the central bank has improved its capital buffer, making it more resilient against financial risks.

2. Monetary Policy Implications

⚠️ Decline in Advances to Government (-17.1%)

• A reduction in lending to the government means the Bank of Tanzania is possibly tightening its monetary policy, aiming to control inflation or reduce fiscal dependency on central bank funding.

⚠️ Decrease in Currency Circulation (-1.4%)

• A drop in money circulation could suggest:
  • Lower cash demand, possibly due to increased digital transactions.
  • Slower economic activity, as businesses and individuals hold less cash.
  • Efforts to control inflation by reducing excess liquidity in the economy.

✅ Increase in Bank Deposits (+14.8%)

• This indicates stronger banking sector liquidity, suggesting that banks have more funds available for lending to businesses and individuals, which can drive economic growth.

3. External Sector and IMF Involvement

✅ Increase in IMF Quota & Special Drawing Rights (SDRs) (+4.7%)

• Tanzania’s higher quota and SDRs mean increased access to IMF financial support if needed, enhancing the country’s external financial stability.

✅ Increase in Foreign Currency Liabilities (+1.1%)

• This could indicate external borrowing or obligations, possibly linked to foreign exchange market interventions or debt management.

4. Potential Risks & Considerations

⚠️ Reduction in Government Securities (-1.7%)

• This could signal lower investment in domestic government debt, potentially affecting fiscal financing.

⚠️ Deposits from Other Sources Dropped (-4.8%)

• A decrease in non-bank deposits might indicate lower private sector liquidity or withdrawals from certain institutional accounts.

Conclusion

✅ The Bank of Tanzania’s financial position is strong, with rising reserves, improved liquidity, and controlled government lending.
⚠️ However, the decline in cash circulation and advances to the government may indicate monetary tightening and a possible slowdown in cash-based economic activities.
💡 Recommendation: Monitor government borrowing and liquidity trends to ensure balanced growth without excessive tightening.

Tanzania’s National Development Plan for 2025/26 outlines strategic priorities to sustain economic growth, enhance infrastructure, and improve social services. With a projected GDP growth of 6.0%, the plan emphasizes industrialization, investment, agriculture, and public-private partnerships (PPP) to drive development. Key focus areas include energy expansion, transport modernization, job creation, and food security, ensuring a resilient and self-sufficient economy while preparing for Vision 2050.

Key Highlights and Figures:

1. Economic Performance (2024/2025)

• Global Economy: Growth was 3.2% in 2024 and is projected to be 3.3% in 2025. Growth is slowing due to aging populations, reduced productivity in developed countries, and geopolitical tensions.
• Regional Economy:
  • SADC: Growth declined from 5.2% in 2023 to 5.1% in 2024, expected to reach 4.1% in 2025.
  • EAC: Growth slowed from 3.9% in 2023 to 3.4% in 2024, projected to recover to 5.7% in 2025.
• Tanzania’s GDP Growth:
  • Grew by 5.6% in 2024 (Jan-Sept) vs. 5.1% in 2023.
  • Expected to grow 6.0% in 2025 and 6.1% in 2026.
• Inflation:
  • Fell to 3.1% in 2024 (vs. 3.8% in 2023).
  • Tanzania’s inflation target is 3.0%-5.0%, within EAC limits (below 8%).

2. Development Achievements (2019/20 – 2024/25)

3. Budget for 2025/26

• Total Budget: TZS 57.04 trillion
• Development Budget: TZS 19.47 trillion (34.1% of total budget)
• Sources:
  • Domestic funds: TZS 13.32 trillion
  • External funding: TZS 6.15 trillion
• Private Sector Role: Emphasizing Public-Private Partnerships (PPP) to fund development projects.

4. Key Priority Areas for 2025/26

1. Competitive and Inclusive Economy – Infrastructure (transport, ICT, energy), improving business environment.
2. Manufacturing and Services – Boosting industrial productivity.
3. Investment and Trade – Improving regulatory frameworks, tax policies.
4. Human Development – Education, health, water, land planning, youth skill development.
5. Human Capital Development – Strengthening technical and vocational training.

5. Major Government Plans

• Malaria Eradication Campaign: Government to intensify control using locally produced chemicals.
• Reduced Foreign Aid Dependence: Strengthening AIDS Trust Fund, leveraging PPP models for funding.

The plan aligns with Tanzania’s Vision 2025 and is part of the Third Five-Year National Development Plan (2021/22 – 2025/26). The government aims to complete ongoing projects while preparing for Vision 2050. The focus remains on sustaining economic growth, improving social services, and enhancing private sector involvement.

Tanzania’s National Development Plan for 2025/26, outlining the country’s economic performance, achievements, budget allocations, and strategic priorities.

1. Economic Growth & Stability

• Tanzania’s economy is growing steadily, with GDP increasing from 5.1% in 2023 to 5.6% in 2024, and projected at 6.0% in 2025.
• Inflation has remained low and stable at 3.1%, which is within the government’s target range of 3.0% - 5.0%.
• The East African Community (EAC) and SADC economies are slowing due to inflation, global debt, and geopolitical instability, but Tanzania is expected to maintain growth.

2. Development Achievements (2019 – 2024/25)

The government has made significant progress in infrastructure, energy, agriculture, health, and education:

• Electricity production increased from 1,602 MW to 3,077 MW.
• Villages connected to electricity: 8,587 → 12,318 (100% target met).
• Food security remains strong (114% in 2019 → 128% in 2024).
• Tourism has recovered, with tourist numbers growing from 1.03 million (2019) to 4.24 million (2024), boosting foreign exchange earnings.
• Irrigated agriculture expanded to 983,466 hectares, supporting food production.

3. Budget Priorities for 2025/26

• The total budget is TZS 57.04 trillion, with 34.1% (TZS 19.47 trillion) dedicated to development projects.
• Funding sources:
  • TZS 13.32 trillion from domestic revenue.
  • TZS 6.15 trillion from external financing.
• Public-Private Partnerships (PPP) will be expanded to reduce dependence on foreign aid.

4. Key Priorities for 2025/26

• Infrastructure Development: Completion of SGR railway, road networks, ports, and energy projects.
• Agriculture & Food Security: Expanding irrigation, mechanization, and agribusiness investment.
• Industrialization & Investment: Encouraging local and foreign investment in manufacturing and services.
• Health & Education:
  • Expanding public health services and strengthening malaria eradication programs.
  • Enhancing vocational and technical training to improve youth employment.

5. Future Outlook

• Tanzania is on track to maintain strong economic growth and complete Vision 2025 goals before transitioning to Vision 2050.
• Self-sufficiency in key sectors like food, energy, and healthcare will be prioritized.
• Private sector involvement will be key to funding national projects through PPPs.

Overall Message

• Tanzania is making solid progress toward economic transformation and social development.
• The government is reducing dependency on foreign aid while boosting domestic investment.
• Key focus areas in 2025/26: Economic growth, infrastructure, agriculture, manufacturing, education, and healthcare.

In January 2025, the Tanzanian Shilling traded at an average of TZS 2,454.04 per USD, reflecting a 1.37% depreciation from TZS 2,420.84 in December 2024. However, on an annual basis, the Shilling appreciated by 2.6%, showing long-term stability. Foreign exchange market activity declined, with transactions dropping from USD 95.7 million in December 2024 to USD 16.3 million, while the Bank of Tanzania intervened by selling USD 7 million to stabilize the currency. Despite short-term pressures, foreign exchange reserves rose to USD 5,323.6 million, covering 4.3 months of imports, ensuring continued exchange rate stability.

1. Exchange Rate Movement: Slight Depreciation in January 2025

• In January 2025, the Tanzanian Shilling traded at an average of TZS 2,454.04 per USD, compared to TZS 2,420.84 per USD in December 2024.
• This reflects a monthly depreciation of approximately 1.37%, meaning the Shilling weakened slightly against the US dollar.
• However, on an annual basis, the Shilling appreciated by 2.6% compared to January 2024.

What It Means:

✅ The Shilling remains relatively stable, with only a minor depreciation (1.37%) month-over-month.
✅ Annual appreciation (2.6%) suggests a stronger Shilling compared to early 2024, reflecting better forex reserves and trade performance.
⚠ The slight monthly depreciation indicates short-term pressures, possibly due to increased import demand or external debt repayments.

2. Foreign Exchange Market Activity: Declining Transactions

• Total forex market transactions dropped to USD 16.3 million in January 2025, from USD 95.7 million in December 2024.
• The Bank of Tanzania intervened by selling USD 7 million to stabilize the market and prevent excessive depreciation.

What It Means:

✅ Lower forex market activity suggests reduced speculative trading, contributing to exchange rate stability.
✅ Bank of Tanzania’s intervention helped control excessive depreciation, ensuring Shilling stability.
⚠ A decline in foreign exchange market transactions could indicate lower foreign investment or trade activity.

3. Foreign Exchange Reserves Support Stability

• Foreign exchange reserves stood at USD 5,323.6 million in January 2025, compared to USD 5,107.1 million in January 2024.
• These reserves are sufficient to cover 4.3 months of imports, exceeding the national benchmark of 4 months.

What It Means:

✅ Stronger forex reserves contribute to Shilling stability by ensuring the country can meet external obligations.
✅ Sufficient reserves reduce pressure on the Shilling, helping manage exchange rate fluctuations.

Summary of Key Trends

Economic Implications of Shilling Stability

🔹 Positive Signs:
✅ Annual appreciation (+2.6%) shows long-term strength of the Shilling.
✅ Sufficient foreign exchange reserves (USD 5.3 billion) provide stability.
✅ Bank of Tanzania’s intervention controlled excessive depreciation.

🔸 Challenges:
⚠ Short-term depreciation (-1.37%) suggests forex market pressure.
⚠ Declining forex market activity may indicate lower trade or investor participation.
⚠ Heavy reliance on USD (68.1% of external debt) increases exchange rate risks.

Key Insights from Tanzania’s Shilling Stability (January 2025)

1. The Shilling Depreciated Slightly in the Short Term (-1.37%)

• The exchange rate moved from TZS 2,420.84 per USD in December 2024 to TZS 2,454.04 per USD in January 2025, showing a 1.37% depreciation.
• This suggests increased demand for USD, possibly for imports, debt servicing, or foreign investment repatriation.
• The Bank of Tanzania sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation.

What it Means:

✅ The depreciation is minimal, meaning the Shilling remains largely stable.
⚠ Increased USD demand could signal rising import costs or capital outflows.
✅ Central Bank intervention helped prevent sharp currency fluctuations.

2. Long-Term Strength: The Shilling Appreciated by 2.6% Year-on-Year

• Compared to January 2024, the Shilling strengthened by 2.6%, meaning it performed better than the previous year.
• This suggests stronger forex reserves, improved exports, or controlled inflation.

What it Means:

✅ Tanzania’s economy is stable enough to maintain long-term Shilling strength.
✅ A stronger Shilling benefits businesses by reducing the cost of imported goods and debt repayments.

3. Forex Market Activity Dropped Significantly

• Forex market transactions declined from USD 95.7 million in December 2024 to USD 16.3 million in January 2025.
• Lower trading volume suggests reduced foreign exchange demand from businesses and investors.

What it Means:

⚠ Reduced forex transactions could indicate lower trade activity or reduced foreign investment inflows.
✅ Lower speculation in the forex market contributes to exchange rate stability.

4. Strong Forex Reserves Support Stability

• Foreign exchange reserves stood at USD 5,323.6 million, enough to cover 4.3 months of imports, above the national target of 4 months.

What it Means:

✅ Sufficient reserves reduce exchange rate risks, ensuring the government can manage forex fluctuations.
✅ The Shilling has a strong backup, reducing the likelihood of a major devaluation.

Overall Economic Implications

🔹 Positive Signs:
✅ The Shilling remains stable overall, with only minor fluctuations.
✅ Long-term appreciation (+2.6%) shows economic resilience.
✅ Strong forex reserves (USD 5.3 billion) help maintain stability.

🔸 Challenges:
⚠ Short-term depreciation (-1.37%) could indicate temporary pressure on the currency.
⚠ Declining forex market transactions suggest lower trade or investor activity.
⚠ High USD-denominated debt (68.1%) makes the economy vulnerable to exchange rate fluctuations.

Tanzania’s government domestic debt grew by 4.6%, reaching TZS 34,154.9 billion in January 2025, up from TZS 32,649.3 billion in December 2024. Commercial banks remained the largest creditors, holding TZS 9,816.6 billion (28.7%), followed by pension funds at TZS 9,094.6 billion (26.6%). The Bank of Tanzania’s share increased to 20.8% (TZS 7,112.3 billion), reflecting its role in liquidity management. However, insurance companies reduced their holdings to 5.5% (TZS 1,872.6 billion), down by 1.3%, indicating a shift in investment strategies.

1. Tanzania’s Total Government Domestic Debt Increased

• Total domestic debt stock reached TZS 34,154.9 billion in January 2025, up from TZS 32,649.3 billion in December 2024.
• This reflects an increase of TZS 1,505.6 billion (4.6%) in just one month.

What It Means:

✅ The government is increasing domestic borrowing, possibly to finance budget deficits or infrastructure projects.
✅ Higher domestic debt means banks and financial institutions are lending more to the government, which can impact private sector credit availability.

2. Government Domestic Debt by Creditor Category

The main creditors holding Tanzania’s domestic debt are commercial banks, pension funds, the Bank of Tanzania, and insurance companies.

Breakdown of Government Domestic Debt by Creditor (January 2025, TZS Billion)

3. Key Observations on Creditors

Commercial Banks Hold the Largest Share (28.7%)

• Banks remain the biggest lenders to the government, holding TZS 9,816.6 billion (28.7% of total domestic debt).
• This suggests that banks are prioritizing government securities over private sector loans, which could limit access to credit for businesses and households.

Pension Funds Are the Second Largest Holders (26.6%)

• Pension funds hold TZS 9,094.6 billion (26.6%), a 1.2% increase from December 2024.
• This reflects a stable investment strategy, as pension funds prefer long-term government securities for steady returns.

The Bank of Tanzania’s Holdings Increased (20.8%)

• The Bank of Tanzania (BOT) now holds TZS 7,112.3 billion (20.8%), marking a 2.6% rise from December 2024.
• This increase suggests the BOT is helping manage liquidity by holding more government securities.

Insurance Companies and Other Creditors Play a Smaller Role

• Insurance companies’ share declined slightly to 5.5% (TZS 1,872.6 billion), possibly shifting investments to other financial instruments.
• Other creditors, including public institutions, private companies, and individuals, increased their holdings by 3.4%, reaching 16.9% of total debt (TZS 5,782.6 billion).

Summary of Key Trends

Economic Implications of Domestic Debt Trends

🔹 Positive Signs:
✅ Banks, pension funds, and BOT remain reliable sources of government financing, ensuring economic stability.
✅ Higher BOT holdings suggest improved liquidity management, preventing excessive inflation risks.
✅ Pension funds benefit from stable government bond returns, supporting retirees' long-term savings.

🔸 Challenges:
⚠ Banks are prioritizing lending to the government, which could reduce loan availability for businesses.
⚠ Rising domestic debt may lead to higher interest payments, increasing the government’s fiscal burden.
⚠ Lower insurance sector participation suggests shifting investment strategies, which could affect financial market stability.

Key Insights from Tanzania’s Domestic Debt Trends (January 2025)

1. Government is Increasing Domestic Borrowing (+4.6%)

• Total domestic debt increased to TZS 34,154.9 billion, a 4.6% rise from December 2024.
• This means the government is relying more on domestic borrowing, possibly to cover budget deficits and finance public projects.

What It Means:

✅ Government securities remain attractive to investors, ensuring steady domestic financing.
⚠ Higher domestic borrowing could crowd out private sector credit, making loans expensive for businesses.

2. Banks and Pension Funds Are the Biggest Lenders

• Commercial banks hold 28.7% (TZS 9,816.6 billion) of domestic debt, making them the largest government creditors.
• Pension funds hold 26.6% (TZS 9,094.6 billion), a 1.2% increase from December 2024.

What It Means:

✅ Banks prefer lending to the government rather than businesses, as government bonds are safer investments.
✅ Pension funds are increasing investment in government securities, ensuring long-term financial security for retirees.
⚠ Less bank lending to the private sector could slow business expansion and economic diversification.

3. The Bank of Tanzania’s Debt Holdings Have Increased

• The BOT’s holdings increased by 2.6%, reaching 20.8% (TZS 7,112.3 billion).
• This suggests the BOT is helping stabilize the financial system by holding more government securities.

What It Means:

✅ Government borrowing is well-managed with central bank support, avoiding excessive market disruptions.
⚠ Higher BOT debt holdings could mean tighter monetary policy, which may impact interest rates and inflation control.

4. Insurance Companies Reduced Their Holdings

• Insurance companies' share of domestic debt dropped by 1.3% to 5.5% (TZS 1,872.6 billion).
• This could mean they are shifting to other investment opportunities like corporate bonds or equities.

What It Means:

⚠ A decline in insurance sector investment in government debt may indicate concerns over returns or market conditions.
✅ Diversification into other financial assets can help develop broader financial markets.

Overall Economic Implications

🔹 Positive Signs:
✅ Government has access to stable domestic financing, reducing reliance on external debt.
✅ Pension funds and banks continue to invest in government bonds, ensuring financial stability.
✅ BOT intervention helps regulate liquidity, preventing excessive inflation or credit shortages.

🔸 Challenges:
⚠ Heavy government borrowing from banks could reduce private sector lending, slowing economic growth.
⚠ Rising domestic debt means higher future interest payments, increasing fiscal pressure.
⚠ Reduced insurance sector participation suggests changing investment dynamics, which could impact financial market liquidity.

Stable Growth but High USD Exposure

Tanzania’s external debt stock stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from December 2024. The government holds 76.4% (USD 25,896.7 million) of the total debt, while the private sector’s share dropped to 23.6% (USD 8,004.7 million). Most of the debt was allocated to transport & telecommunications (21.0%), budget support (19.9%), and social welfare & education (19.9%). The US dollar remains the dominant borrowing currency (68.1%), increasing vulnerability to exchange rate fluctuations, while the Euro (16.1%) and Chinese Yuan (6.3%) provide some diversification.

1. External Debt Stock by Borrower

Total External Debt Declines Slightly

• Tanzania’s total external debt stock (public and private) stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024.
• The central government remains the largest borrower, holding 76.4% (USD 25,896.7 million) of total external debt.
• Private sector debt accounts for 23.6% (USD 8,004.7 million).
• Public corporations’ external debt remained negligible at USD 3.8 million.

Breakdown of External Debt by Borrower (January 2025)

What It Means:

✅ The government remains the largest borrower, funding major national projects.
⚠ Private sector external debt is slightly declining, indicating reduced foreign credit access.
✅ Public corporations have minimal debt exposure, reducing government liability risks.

2. Disbursed Outstanding Debt by Use of Funds (Percentage Share)

Debt Allocation Focuses on Transport, Energy, and Social Services

• The largest share of external debt (21.0%) was used for transport and telecommunications projects, reflecting investment in roads, railways, ports, and digital infrastructure.
• Social welfare and education (19.9%) and budget support (19.9%) were the next largest recipients, showing a focus on social development and government financing.
• Energy and mining received 14.3%, supporting projects like electricity generation and mineral development.
• Finance and insurance sector held 4.1%, helping stabilize the financial system.

Breakdown of External Debt by Use of Funds (January 2025, % Share)

What It Means:

✅ Heavy investment in transport and infrastructure projects, supporting economic expansion.
✅ Education and social welfare receive significant funding, showing a commitment to human capital development.
⚠ Lower funding for industries (4.0%) and tourism (1.6%) may slow manufacturing growth and tourism sector development.

3. Disbursed Outstanding Debt by Currency Composition (Percentage Share)

US Dollar Dominates External Debt Portfolio

• 68.1% of Tanzania’s external debt is in US dollars, making it the most dominant currency.
• Euro-denominated debt accounts for 16.1%, reflecting loans from European institutions.
• Chinese Yuan holds a 6.3% share, highlighting China's role in Tanzania’s financing.
• Other currencies make up 9.4%, including debt in Japanese Yen, British Pound, and Special Drawing Rights (SDRs).

Breakdown of External Debt by Currency (January 2025, % Share)

What It Means:

✅ US Dollar exposure is high (68.1%), making debt repayments vulnerable to exchange rate fluctuations.
⚠ A weaker Tanzanian Shilling could increase repayment costs, as most debt is in foreign currency.
✅ Diversified borrowing in Euros and Yuan helps reduce reliance on USD-based financing.

Summary of Key Trends

Economic Implications of Tanzania’s Debt Trends

🔹 Positive Signs:
✅ Controlled external debt (declined by 0.5%), reducing future repayment risks.
✅ Investment in infrastructure and social services supports long-term development.
✅ Diversification in borrowing currencies (Euro, Yuan) helps manage exchange rate risks.

🔸 Challenges:
⚠ High USD-denominated debt (68.1%) exposes Tanzania to exchange rate volatility.
⚠ Private sector external borrowing is declining, which may slow business expansion.
⚠ Lower funding for industries and tourism could impact long-term diversification efforts.

Key Insights from Tanzania’s Debt Developments (January 2025)

1. Government Continues to Dominate Borrowing

• 76.4% of total external debt (USD 25,896.7 million) belongs to the government, showing its continued reliance on external financing for public projects.
• Private sector debt declined to 23.6% (USD 8,004.7 million), meaning businesses are borrowing less from foreign sources.

What it Means:

✅ Government financing is focused on long-term national development projects like roads, energy, and education.
⚠ Private sector borrowing is shrinking, which may slow business expansion and foreign investment.

2. Debt is Primarily Funding Infrastructure & Social Development

• 21.0% of external debt is invested in transport & telecommunications, showing a focus on infrastructure expansion (roads, ports, railways, ICT).
• 19.9% of debt is used for budget support, meaning the government relies on external financing to cover operational expenses.
• 19.9% is allocated to social welfare & education, ensuring investment in human capital development.

What it Means:

✅ Tanzania is prioritizing economic growth by investing in transport & telecommunications.
✅ Social welfare & education funding supports long-term workforce development.
⚠ High reliance on external budget support (19.9%) could lead to fiscal risks if future financing decreases.

3. Tanzania’s Debt is Highly Exposed to US Dollar Risk

• 68.1% of total external debt is in US dollars, making Tanzania vulnerable to exchange rate fluctuations.
• 16.1% of debt is in Euros, reducing some risk from USD dependency.
• 6.3% is in Chinese Yuan, reflecting China’s growing role in Tanzania’s financial partnerships.

What it Means:

⚠ A weaker Tanzanian Shilling will increase the cost of debt repayments due to heavy USD exposure.
✅ Diversification into Euros & Yuan helps reduce reliance on the US dollar, though the impact is still small.

Overall Economic Implications

🔹 Positive Signs:
✅ Debt levels are stable, with a 0.5% decline in total external debt.
✅ Strong investment in infrastructure & education supports long-term growth.
✅ Some currency diversification helps manage exchange rate risks.

🔸 Challenges:
⚠ High reliance on USD (68.1%) makes Tanzania vulnerable to currency fluctuations.
⚠ Declining private sector borrowing may slow economic diversification and job creation.
⚠ Heavy dependence on external budget support (19.9%) could create fiscal pressures if funding is reduced.

Tanzania’s total external debt stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024 due to ongoing repayments. The government accounted for 76.4% (USD 25,896.7 million) of total external debt, while the private sector held 23.6% (USD 8,004.7 million), down by 1.8%. The decline in private sector borrowing may indicate reduced access to foreign credit, while high government debt levels raise concerns about future repayment obligations.

1. Total External Debt Stock Slightly Declined

• Tanzania’s total external debt stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024.
• The decrease was mainly due to repayments made by both the government and private institutions.

2. Government vs. Private Sector Borrowing

• Government external debt accounted for 76.4% (USD 25,896.7 million) of total external debt.
• Private sector external debt accounted for 23.6% (USD 8,004.7 million).

Comparison of Government and Private Sector External Debt (January 2025)

3. Implications of External Debt Trends

✅ The government remains the largest borrower (76.4%), indicating reliance on external financing for major projects.
✅ The private sector's external debt share (23.6%) shows businesses are accessing foreign funding but at a declining rate (-1.8%).
⚠ The reduction in private sector borrowing may limit business expansion and foreign investment in Tanzania.
⚠ Debt repayments are helping reduce total debt, but the government still holds a significant portion of external liabilities.

Key Insights from Tanzania’s External Debt (January 2025)

1. The Government Remains the Biggest Borrower (76.4%)

• The government’s external debt stood at USD 25,896.7 million, accounting for 76.4% of total external debt.
• This suggests that public projects such as infrastructure, energy, and social services are heavily financed by external loans.

What It Means:

✅ Government borrowing supports long-term development, ensuring investments in key sectors like transport and energy.
⚠ A high share of external debt means future repayments could put pressure on national finances, especially if revenue growth is slow.

2. Private Sector Borrowing is Declining (-1.8%)

• Private sector external debt dropped to USD 8,004.7 million (23.6%), a 1.8% decline from December 2024.
• This indicates reduced access to foreign credit by businesses or lower demand for external financing.

What It Means:

⚠ Private companies may be facing challenges in securing international loans, which could slow business expansion.
✅ A reduction in private sector borrowing could signal that companies are focusing on local financing options.

3. Total External Debt is Declining (-0.5%)

• The total external debt declined slightly by 0.5%, showing that both the government and private sector are repaying some of their loans.

What It Means:

✅ Debt repayments are ongoing, helping to manage overall debt levels.
⚠ Despite repayments, the government still holds a significant portion of external debt, meaning fiscal risks remain.

Overall Economic Implications

🔹 Positive Signs:
✅ Government borrowing is supporting infrastructure and public services.
✅ Debt repayments are reducing total external liabilities.
✅ Private sector reliance on foreign debt is decreasing, possibly indicating local financing alternatives.

🔸 Challenges:
⚠ A high government share (76.4%) means future debt servicing costs could strain national finances.
⚠ A decline in private sector borrowing could slow economic expansion and private investment.
⚠ Continued reliance on external debt means Tanzania remains exposed to exchange rate fluctuations and global credit conditions.