The Bank of Tanzania’s August 2025 review highlights a strong fiscal outcome for June 2025, with total government revenues reaching TZS 3,753.4 billion, about 5.1% above target, driven by robust tax collections of TZS 3,108.7 billion (82.8% of total). Expenditures were contained at TZS 3,350.0 billion, with recurrent spending accounting for 72.9% and development spending 27.1%. This resulted in a budget surplus of TZS 403.4 billion, reflecting strengthened tax administration, cautious spending, and improved fiscal stability, thereby easing borrowing needs and supporting macroeconomic confidence.

1. Central Government Revenues (June 2025)

• Total collections: TZS 3,753.4 billion, which was 5.1% above the monthly target.
• Breakdown:
  • Central Government: TZS 3,579.2 billion (95.4% of total).
  • Tax revenue: TZS 3,108.7 billion, 7.8% above target – showing the impact of stronger tax administration.
  • Non-tax revenue: TZS 470.5 billion, short of the target (TZS 561.5 billion).

Tax revenues continue to be the dominant source, accounting for over 80% of government revenues.

2. Central Government Expenditures (June 2025)

• Total expenditure: TZS 3,350.0 billion, broadly aligned with available resources.
• Breakdown:
  • Recurrent expenditure: TZS 2,440.6 billion
  • Development expenditure: TZS 909.4 billion

Development expenditure accounted for about 27.1% of total spending, while recurrent expenditure (wages, interest, and other recurrent costs) made up 72.9%.

3. Fiscal Balance Context

• Revenues (TZS 3,753.4 billion) exceeded expenditures (TZS 3,350.0 billion) by about TZS 403.4 billion, implying a budget surplus in June 2025.
• The surplus mainly came from stronger tax performance, while expenditure remained aligned with available resources.

Table 1: Central Government Revenues (June 2025)

Table 2: Central Government Expenditures (June 2025)

Economic Implications of Central Government Finances – June 2025

1. Central Government Revenues (June 2025)

• Performance and Breakdown: Total collections of TZS 3,753.4 billion surpassed the monthly target by 5.1%, with central government revenue at TZS 3,579.2 billion (95.4%). Tax revenue hit TZS 3,108.7 billion (82.8% of total), exceeding its target by 7.8%, while non-tax revenue lagged at TZS 470.5 billion (12.6%), falling short of the TZS 561.5 billion target.
• Economic Meaning: The strong tax performance, driven by improved administration (e.g., VAT and income tax enforcement), enhances fiscal capacity, reducing reliance on external borrowing (external debt at USD 32,955.5 million). This supports infrastructure and development spending (TZS 909.4 billion), aligning with GDP growth goals. The underperformance in non-tax revenue (e.g., fees, dividends) suggests administrative delays or inefficiencies, potentially limiting supplementary funding. Over 80% tax reliance mirrors regional trends (e.g., EAC peers), but diversification could mitigate risks from economic shocks.

2. Central Government Expenditures (June 2025)

• Allocation and Balance: Total expenditure was TZS 3,350.0 billion, with recurrent expenditure at TZS 2,440.6 billion (72.9%) and development expenditure at TZS 909.4 billion (27.1%).
• Economic Significance: The high recurrent share (wages, interest, operations) ensures public sector stability and debt servicing (national debt at USD 46,586.6 million), but limits capital investment. Development spending (27.1%) supports growth in agriculture (e.g., food stocks at 485,930.4 tonnes) and infrastructure, though its share below one-third indicates a cautious approach. Alignment with available resources (revenue-driven) prevents deficit financing pressures, complementing the surplus and easing domestic borrowing needs (e.g., Treasury bill yields at 8.13%).

3. Fiscal Balance Context

• Surplus Achievement: Revenues exceeded expenditures by TZS 403.4 billion, yielding a surplus driven by tax overperformance and controlled spending.
• Economic Implications: This surplus strengthens fiscal buffers, reducing reliance on domestic securities (e.g., TZS 158.9 billion in Treasury bills accepted) and supporting the shilling's stability (TZS 2,666.79/USD). It allows debt reduction or reinvestment, enhancing credit ratings and attracting foreign inflows (e.g., tourism receipts at USD 3,871.9 million). In a global context of easing commodity prices (oil at USD 69.2/barrel), this positions Tanzania to weather external uncertainties, though sustained surpluses depend on addressing non-tax revenue gaps.

Summary of Broader Economic Significance

• Fiscal Strength and Stability: The surplus and robust tax collection signal effective fiscal management, supporting monetary easing (CBR 5.75%) and credit growth (15.9% annually). This fosters investor confidence and aligns with Tanzania's 6% growth trajectory.
• Balanced Growth: While recurrent spending ensures stability, the lower development share may constrain long-term productivity gains, requiring policy focus on capital projects.
• Comparative Context: Compared to 2024's fiscal deficits (e.g., 2.5% of GDP), the 2025 surplus reflects recovery, outperforming some EAC peers facing revenue shortfalls amid global trade tensions.
• Challenges Ahead: Non-tax revenue underperformance and high recurrent spending (72.9%) need attention to sustain surpluses and fund development, especially with external debt at USD 32,955.5 million.

Central Government Dominates Borrowing as USD Exposure Heightens Currency Risks

As of June 2025, Tanzania’s external debt stock stood at USD 32,955.5 million (approximately TZS 82.4 trillion, assuming an exchange rate of TZS 2,500/USD), reflecting a marginal increase of 0.1% from the previous month. This external debt comprises about 70.7% of the total national debt, highlighting the country's continued reliance on foreign financing. The central government remains the primary borrower, holding 85.4% of the external debt (USD 28.1 billion), followed by the private sector with 14.6% (USD 4.8 billion), while public corporations account for a negligible share. Most of the disbursed debt is allocated to priority sectors such as transport & telecommunications (25.4%), social welfare & education (21.3%), and energy & mining (16.4%). However, 67.6% of the debt is denominated in USD, exposing the country to significant exchange rate risks amid recent currency depreciation. Despite prudent debt servicing—interest arrears are relatively low—the narrow fiscal space underscores the need for careful management and stronger domestic revenue mobilization.

1. External Debt Stock by Borrower – June 2025

The external debt stock represents the total outstanding debt owed to foreign creditors, including principal and interest arrears. As of June 2025, Tanzania’s external debt stock stood at USD 32,955.5 million (approximately TZS 82.4 trillion, assuming an exchange rate of ~TZS 2,500/USD, consistent with recent BoT reports). This reflects a marginal monthly increase of 0.1% from May 2025 and accounts for approximately 70.7% of Tanzania’s total national debt (external and domestic combined).

Total External Debt

• Amount: USD 32,955.5 million
• Monthly Increase: +0.1% (approximately USD 32.9 million, assuming May 2025 debt was ~USD 32,922.6 million).
• Share of Total National Debt: ~70.7%, indicating a significant reliance on external financing compared to domestic debt (e.g., TZS 32,615.7 billion in September 2024, per TICGL).
• Context: The slight increase aligns with trends observed in earlier months, such as a 0.5% decline from December 2024 to January 2025 (USD 33,905.1 million to USD 33,137.7 million), followed by an increase to USD 35,039.8 million by February 2025, reflecting fluctuations due to new disbursements and debt servicing. The African Development Bank notes that Tanzania’s fiscal deficit, projected at 2.5% of GDP in FY 2024/25, is partly financed by external borrowing, supporting this trend.

Breakdown by Borrower

The following table summarizes the external debt stock by borrower category for June 2025:

• Central Government:
  • Amount: USD 28,133.7 million (85.4% of total external debt).
  • Disbursed Outstanding Debt (DOD): USD 28,055.0 million, indicating that nearly all central government debt is disbursed and actively financing projects.
  • Interest Arrears: USD 78.7 million, a minor portion (0.28% of central government debt), suggesting effective debt servicing for public debt.
  • Context: The central government’s dominance (85.4%) is consistent with historical trends, with shares of 76.8% in November 2024 and 78.1% in September 2024. This reflects the government’s role in funding major infrastructure projects (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Project) and social services, as noted in the FY 2024/25 budget allocating TZS 14.08 trillion for development expenditure.
  • Implications: The high share underscores the public sector’s reliance on external financing for development goals, placing a significant repayment burden on public finances. The low interest arrears indicate prudent debt management, supported by multilateral concessional loans (54.5% of external debt in November 2024).
• Private Sector:
  • Amount: USD 4,820.6 million (14.6% of total external debt).
  • DOD: USD 4,630.7 million, with interest arrears of USD 189.9 million (3.9% of private sector debt).
  • Context: The private sector’s share has declined slightly from 23.6% in January 2025 (USD 8,004.7 million) and 21% in December 2019, reflecting reduced access to foreign credit, possibly due to tighter global lending conditions or currency risks. The World Bank notes that private sector borrowing constraints may hinder economic diversification.
  • Implications: The higher interest arrears (relative to the central government) suggest challenges in private sector debt servicing, potentially due to exchange rate fluctuations (67.6% USD-denominated debt) or weaker cash flows in sectors like agriculture and industry.
• Public Corporations:
  • Amount: USD 1.3 million (negligible share).
  • Context: Public corporations (e.g., TANESCO, Tanzania Ports Authority) have minimal external debt exposure, consistent with January 2025 (USD 3.8 million). This reduces government liability risks from state-owned enterprises.
  • Implications: The negligible share reflects a deliberate strategy to limit public corporation borrowing, aligning with fiscal reforms to improve state-owned enterprise performance, as evidenced by TZS 1.028 trillion in dividends collected in FY 2024/25.

Key Takeaway

• The central government’s 85.4% share of external debt highlights its role in driving debt-financed development, particularly in infrastructure and social services. The private sector’s reduced share and higher arrears indicate challenges in accessing and servicing foreign credit. The negligible debt of public corporations minimizes fiscal risks but limits their role in external financing.

2. Disbursed Outstanding Debt (DOD) by Use of Funds – % Share

The DOD represents the portion of external debt that has been disbursed and is actively funding projects or sectors. The allocation of DOD reflects Tanzania’s development priorities under Vision 2050 and the Third Five-Year Development Plan (FYDP III).

Breakdown by Use of Funds

The following table summarizes the percentage share of DOD by sector for June 2025:

• Transport & Telecommunication (25.4%):
  • Context: This sector receives the largest share, consistent with historical trends (21.4% in November 2024, 21.5% in September 2024). Key projects include the Standard Gauge Railway (SGR), port expansions, and ICT infrastructure, aligning with Tanzania’s goal to enhance connectivity and trade under FYDP III.
  • Implications: Investments in transport (e.g., SGR, Dar es Salaam port) and telecommunications (e.g., 5G networks) support economic growth by improving logistics and digital access. However, the high allocation may crowd out funding for other sectors like agriculture.
• Social Welfare & Education (21.3%):
  • Context: This sector’s significant share (20.4% in November 2024, 20.8% in September 2024) reflects investments in human capital, such as free education programs and healthcare infrastructure. The World Bank’s USD 227 million financing for climate and marine conservation in June 2025 also supports social welfare.
  • Implications: Funding education and social welfare enhances workforce development and poverty reduction, critical for long-term growth. However, recurrent costs (e.g., teacher salaries) may compete with capital investments.
• Energy & Mining (16.4%):
  • Context: Investments in energy (e.g., Julius Nyerere Hydropower Plant) and mining (e.g., gold, critical minerals) align with Tanzania’s energy access goals and export growth (gold exports up 24.5% in April 2025). The sector’s share is slightly higher than November 2024 (15%).
  • Implications: Energy investments address power shortages, supporting industrial growth, while mining boosts export revenues. However, environmental and governance risks in mining require careful management.
• Budget Support (15.2%):
  • Context: This share (19.9% in January 2025) reflects external loans used to finance recurrent expenditures, such as salaries and debt servicing. The African Development Bank notes that reliance on budget support poses fiscal risks if external financing decreases.
  • Implications: High budget support allocation indicates fiscal pressures, as seen in the TZS 270.2 billion deficit in May 2025. Reducing reliance on external budget support through domestic revenue mobilization (e.g., TZS 2,880.2 billion in May 2025) is critical.
• Agriculture (6.5%):
  • Context: The low share (5.1% in September 2024) is surprising given agriculture’s role in Tanzania’s economy (25% of GDP, 65% of employment). Investments support irrigation and agribusiness but are limited compared to infrastructure.
  • Implications: Underfunding agriculture may constrain rural development and food security, despite export growth in cashew nuts (141% in April 2025).
• Finance & Insurance (5.1%) and Industry (4.0%):
  • Context: These sectors receive minimal allocations (4.0% for industry in January 2025), reflecting limited focus on manufacturing and financial sector development. The World Bank highlights declining industrial productivity as a constraint on economic diversification.
  • Implications: Low funding may hinder Tanzania’s industrialization goals under Vision 2050, limiting job creation and export diversification.
• Others (6.1%):
  • Context: Includes water, balance of payments support, and miscellaneous projects. The World Bank’s USD 300 million financing for disaster preparedness in June 2025 may contribute to this category.
  • Implications: Diverse allocations support resilience but dilute focus on priority sectors.

Key Takeaway

• The focus on Transport & Telecommunication (25.4%) and Social Welfare & Education (21.3%) reflects Tanzania’s commitment to infrastructure-driven growth and human capital development. However, the low shares for agriculture (6.5%) and industry (4.0%) may limit inclusive growth, given their economic significance.

3. DOD by Currency Composition – % Share

The currency composition of DOD indicates the foreign currencies in which Tanzania’s external debt is denominated, exposing the country to exchange rate risks.

Breakdown by Currency

The following table summarizes the percentage share of DOD by currency for June 2025:

• US Dollar (USD) (67.6%):
  • Context: The USD’s dominance is consistent with historical trends (67.4% in September 2024, 68.1% in January 2025). This reflects borrowing from multilateral institutions (e.g., World Bank, IMF) and commercial creditors, often denominated in USD.
  • Implications: High USD exposure makes Tanzania vulnerable to exchange rate fluctuations. The Tanzanian Shilling depreciated by 8% in 2023, increasing debt servicing costs. A stronger USD in 2025 could further strain public finances, as noted by The Citizen.
• Euro (EUR) (17.2%):
  • Context: Euro-denominated debt (16.1% in January 2025) reflects loans from European institutions (e.g., European Investment Bank). The slight increase may indicate new Euro-based financing.
  • Implications: Diversification into Euros reduces USD reliance but exposes Tanzania to Eurozone economic conditions.
• Japanese Yen (JPY) (4.9%) and Chinese Yuan (CNY) (3.4%):
  • Context: JPY and CNY shares align with bilateral loans from Japan and China, supporting infrastructure projects like the SGR. The CNY share is lower than in January 2025 (6.3%), possibly due to reduced Chinese lending.
  • Implications: These currencies provide some diversification, but their small shares limit risk mitigation.
• Special Drawing Rights (SDR) (3.0%) and Others (3.9%):
  • Context: SDRs are used by multilateral institutions like the IMF, while “Others” include British Pound and minor currencies. The low SDR share reflects limited IMF financing in June 2025.
  • Implications: Diversified borrowing in SDRs and other currencies offers some stability but is insufficient to offset USD risks.

Key Takeaway

• The 67.6% USD share exposes Tanzania to significant exchange rate risks, particularly with Shilling depreciation. Diversification into Euros, JPY, and CNY helps but is limited by their smaller shares. Prudent debt management and revenue mobilization are critical to mitigate currency risks.

The following table consolidates the key figures for June 2025:

Policy Implications and Insights

1. Central Government Borrowing:
   • The central government’s 85.4% share of external debt aligns with its role in funding infrastructure and social services, as seen in the TZS 937.3 billion development expenditure in May 2025. However, this concentrates repayment risks on public finances, requiring robust revenue mobilization (e.g., TZS 2,880.2 billion in May 2025).
   • The low interest arrears (USD 78.7 million) indicate effective debt management, supported by concessional loans from multilateral creditors (54.5% of debt).
2. Private Sector Constraints:
   • The private sector’s 14.6% share and higher arrears (USD 189.9 million) suggest challenges in accessing and servicing foreign credit, potentially due to USD appreciation or global tightening. This aligns with TICGL’s observation of declining private sector borrowing slowing economic diversification.
3. Sectoral Allocation:
   • The focus on Transport & Telecommunication (25.4%) and Social Welfare & Education (21.3%) supports Tanzania’s Vision 2050 goals of connectivity and human capital development. However, the low shares for agriculture (6.5%) and industry (4.0%) may hinder inclusive growth, given agriculture’s role in employment and GDP.
4. Currency Risks:
   • The 67.6% USD share exposes Tanzania to exchange rate risks, as noted by The Citizen, with Shilling depreciation increasing debt servicing costs. The African Development Bank emphasizes the need for domestic revenue mobilization to mitigate these risks.
   • Diversification into Euros (17.2%) and other currencies is positive but insufficient to offset USD dominance.
5. Debt Sustainability:
   • The IMF’s 2024 Debt Sustainability Analysis (DSA) indicates a moderate risk of external debt distress, with public debt at 45.5% of GDP in 2022/23, well below the 55% benchmark. The slight debt increase in June 2025 suggests controlled borrowing, but monitoring debt servicing capacity is critical, given annual costs absorb ~40% of expenditures.

Strong tax revenue performance (TZS 2,339.7 billion in May 2025, 4.1% above target) supports debt servicing but requires sustained efforts to reduce reliance on budget support loans (15.2%)

Pension Funds, Banks, and Retail Investors Drive Diversification

As of June 2025, Tanzania’s domestic debt stock (excluding liquidity papers) rose to TZS 35,502.8 billion, marking a monthly increase of 0.9% (TZS 301.7 billion) and an annual growth of 11.1% (TZS 3,551.6 billion) from June 2024. This expansion aligns with the government's fiscal strategy to fund the 2.5% of GDP budget deficit, primarily through long-term Treasury bonds. Notably, no Treasury bills were auctioned in June, emphasizing the shift toward longer-term instruments. Domestic debt now accounts for approximately 29.3% of the total national debt (estimated at TZS 121.2 trillion), reflecting a balanced mix of domestic and external financing. The creditor landscape has evolved, with commercial banks holding 28.6%, pension funds 26.1%, and a rapidly expanding “Others” category (18.1%), highlighting increased participation from retail and non-traditional investors. This diversification reduces concentration risks and demonstrates growing confidence in government securities amid stable macroeconomic conditions.

Government Domestic Debt – Overview

The domestic debt stock, excluding liquidity papers (e.g., short-term instruments used for monetary policy), represents funds borrowed by the Tanzanian government from domestic creditors, primarily through Treasury bonds and bills. As of June 2025, the total domestic debt stock was TZS 35,502.8 billion, reflecting steady growth and a diversified creditor base.

• Total Domestic Debt Stock:
  • June 2025: TZS 35,502.8 billion
  • Monthly Increase: +0.9% from TZS 35,201.1 billion in May 2025 (an increase of TZS 301.7 billion).
  • Year-on-Year Increase: +11.1% from TZS 31,951.2 billion in June 2024 (an increase of TZS 3,551.6 billion).
  • Context: The year-on-year growth aligns with Tanzania’s fiscal strategy to finance the FY 2024/25 budget deficit (projected at 2.5% of GDP, per the African Development Bank) through domestic borrowing, particularly Treasury bonds. The absence of Treasury bill auctions in June 2025 (as noted in your earlier query) suggests a focus on long-term borrowing, contributing to the debt stock increase.
• Share of National Debt: Domestic debt constitutes approximately 29.3% of Tanzania’s total national debt (assuming total debt is ~TZS 121.2 trillion, combining domestic debt of TZS 35,502.8 billion and external debt of ~TZS 82.4 trillion or USD 32,955.5 million from June 2025). This reflects a balanced reliance on domestic and external financing.

Government Domestic Debt by Creditor Category

The domestic debt is distributed across various creditor categories, including commercial banks, the Bank of Tanzania (BoT), pension funds, insurance companies, BoT special funds, and others (e.g., public institutions, private companies, individuals). The following table summarizes the debt stock by creditor for June 2024, May 2025, and June 2025, with shares for June 2025:

Detailed Analysis by Creditor

1. Commercial Banks:
   • June 2025: TZS 10,161.5 billion (28.6% share).
   • Change:
     • Monthly: +0.2% from TZS 10,138.2 billion in May 2025 (TZS 23.3 billion increase).
     • Year-on-Year: +1.7% from TZS 9,996.1 billion in June 2024 (TZS 165.4 billion increase).
   • Share Trend: Declined from 31.3% in June 2024 to 28.6% in June 2025, indicating a reduced relative reliance on banks.
   • Context: Commercial banks are major holders of Treasury bonds (e.g., TZS 322.4 billion accepted in June 2025 auctions), reflecting their role as key financiers of government borrowing. The modest monthly growth suggests banks maintained stable investments, possibly due to high yields (14.50% for 20-year bonds, 14.80% for 25-year bonds). The year-on-year decline in share may reflect banks’ diversification into private sector lending or liquidity constraints, as noted in the interbank cash market’s TZS 2,873.9 billion turnover in June 2025.
   • Implications: Banks’ significant share (28.6%) underscores their systemic importance, but the declining share suggests a broadening creditor base, reducing concentration risks.
2. Bank of Tanzania (BoT):
   • June 2025: TZS 7,174.1 billion (20.2% share).
   • Change:
     • Monthly: +0.2% from TZS 7,158.2 billion in May 2025 (TZS 15.9 billion increase).
     • Year-on-Year: +8.2% from TZS 6,626.2 billion in June 2024 (TZS 547.9 billion increase).
   • Share Trend: Slightly increased from 20.7% in June 2024 to 20.2% in June 2025, reflecting steady BoT participation.
   • Context: The BoT’s holdings include government securities used for monetary policy operations or direct financing (e.g., overdraft facilities). The significant year-on-year increase aligns with the BoT’s role in supporting fiscal deficits, as seen in the TZS 270.2 billion deficit in May 2025. The BoT’s February 2025 report noted a TZS 140.8 billion reduction in domestic debt due to lower overdraft use, suggesting cautious central bank lending.
   • Implications: Rising BoT holdings indicate central bank support for liquidity management, but excessive reliance could blur fiscal-monetary boundaries, potentially affecting monetary policy credibility.
3. Pension Funds:
   • June 2025: TZS 9,265.7 billion (26.1% share).
   • Change:
     • Monthly: +0.7% from TZS 9,203.9 billion in May 2025 (TZS 61.8 billion increase).
     • Year-on-Year: +6.0% from TZS 8,744.9 billion in June 2024 (TZS 520.8 billion increase).
   • Share Trend: Increased from 27.4% in June 2024 to 26.1% in June 2025, remaining a major creditor.
   • Context: Pension funds (e.g., NSSF, PSSSF) are key investors in Treasury bonds due to their long-term investment horizons and need for stable returns. The oversubscription of June 2025 bond auctions (TZS 1,232.9 billion in tenders vs. TZS 638.7 billion offered) reflects strong pension fund demand. The World Bank notes pension funds’ growing role in domestic debt markets as a sign of financial deepening.
   • Implications: The steady share (26.1%) supports fiscal financing but ties pension fund liquidity to government debt, posing risks if debt servicing pressures arise.
4. Insurance Companies:
   • June 2025: TZS 1,843.0 billion (5.2% share).
   • Change:
     • Monthly: +0.2% from TZS 1,840.0 billion in May 2025 (TZS 3.0 billion increase).
     • Year-on-Year: +1.5% from TZS 1,815.7 billion in June 2024 (TZS 27.3 billion increase).
   • Share Trend: Stable at 5.7% in June 2024 to 5.2% in June 2025.
   • Context: Insurance companies invest in government securities for stable returns, but their small share reflects limited market participation compared to banks and pension funds. The stable share aligns with their conservative investment strategies.
   • Implications: The modest role of insurance companies limits their exposure to government debt risks but also restricts their contribution to fiscal financing.
5. BoT Special Funds:
   • June 2025: TZS 638.1 billion (1.8% share).
   • Change:
     • Monthly: +3.5% from TZS 616.3 billion in May 2025 (TZS 21.8 billion increase).
     • Year-on-Year: +98.7% from TZS 321.2 billion in June 2024 (TZS 316.9 billion increase).
   • Share Trend: Increased significantly from 1.0% in June 2024 to 1.8% in June 2025.
   • Context: BoT special funds (e.g., for specific development or liquidity purposes) have a small but growing role, possibly reflecting targeted government borrowing for priority projects. The sharp year-on-year increase suggests new fund allocations or reclassification of debt holdings.
   • Implications: The small share minimizes fiscal risks, but the rapid growth warrants monitoring to ensure alignment with fiscal objectives.
6. Others:
   • June 2025: TZS 6,420.4 billion (18.1% share).
   • Change:
     • Monthly: +2.8% from TZS 6,244.5 billion in May 2025 (TZS 175.9 billion increase).
     • Year-on-Year: +44.3% from TZS 4,447.2 billion in June 2024 (TZS 1,973.2 billion increase).
   • Share Trend: Increased significantly from 13.9% in June 2024 to 18.1% in June 2025.
   • Context: The “Others” category includes public institutions, private companies, and individuals, reflecting growing retail and non-traditional investor participation in government securities. The BoT’s efforts to deepen the domestic debt market, including retail bond issuance, likely drove this growth. The oversubscription of June 2025 bond auctions indicates strong demand from diverse investors.
   • Implications: The rising share signals increased domestic investor confidence and financial inclusion, but the heterogeneous nature of this category requires monitoring for credit quality and liquidity risks.

Observations and Trends

1. Commercial Banks’ Declining Share:
   • The share dropped from 31.3% in June 2024 to 28.6% in June 2025, despite a slight absolute increase (TZS 10,161.5 billion). This reflects banks’ cautious approach amid high lending rates (15.23% overall in June 2025) and competition from other creditors like pension funds and the “Others” category.
   • Implication: Reduced bank reliance diversifies the creditor base but may strain bank liquidity if government borrowing competes with private sector lending.
2. Pension Funds’ Steady Role:
   • The steady 26.1% share (TZS 9,265.7 billion) underscores pension funds’ critical role in financing long-term government borrowing, driven by high bond yields (14.50%–14.80%). The 6.0% year-on-year growth reflects their growing asset base and demand for secure investments.
   • Implication: Pension funds’ exposure to government debt links retiree savings to fiscal health, requiring robust debt servicing capacity.
3. BoT’s Growing Holdings:
   • The BoT’s 20.2% share (TZS 7,174.1 billion) and 8.2% year-on-year growth suggest active central bank support for fiscal deficits, possibly through bond purchases or liquidity facilities. The stable monthly growth (+0.2%) indicates controlled intervention.
   • Implication: Increased BoT holdings could support liquidity but risk monetary policy credibility if perceived as fiscal financing.
4. Rise of “Others” Category:
   • The 44.3% year-on-year increase (TZS 6,420.4 billion, 18.1% share) reflects growing participation from public institutions, private firms, and retail investors, likely driven by accessible bond markets and high yields.
   • Implication: This diversification enhances fiscal resilience but requires regulatory oversight to manage retail investor risks.
5. Stable Minor Creditors:
   • Insurance companies (5.2%) and BoT special funds (1.8%) maintain small, stable shares, reflecting limited but consistent participation.
   • Implication: Their minor roles limit systemic risks but also constrain their contribution to debt financing.

Insights and Implications

1. Diversified Creditor Base:
   • The spread across commercial banks (28.6%), pension funds (26.1%), BoT (20.2%), and others (18.1%) indicates a diversified domestic debt market, reducing reliance on any single creditor group. The rising “Others” share (18.1%) reflects financial deepening, as retail and non-traditional investors participate more actively.
   • Implication: Diversification enhances fiscal resilience but requires robust market infrastructure to manage retail investor risks and ensure liquidity.
2. Systemic Interconnectedness:
   • The significant shares held by commercial banks and pension funds (54.7% combined) tie the financial sector’s stability to government debt. A fiscal shock (e.g., delayed debt servicing) could impact bank liquidity and pension fund returns, as noted by the World Bank’s concerns about financial sector exposure.
   • Implication: Strong revenue performance (e.g., TZS 2,880.2 billion in May 2025, 3.1% above target) and prudent debt management are critical to mitigate systemic risks.
3. BoT’s Role in Financing:
   • The BoT’s growing holdings (TZS 7,174.1 billion, +8.2% year-on-year) suggest active support for fiscal deficits, possibly through bond purchases or liquidity facilities. This aligns with the absence of Treasury bill auctions in June 2025, indicating reliance on longer-term financing.
   • Implication: While supporting liquidity, excessive BoT involvement could raise concerns about monetary-fiscal coordination, potentially affecting inflation (3.2% in May 2025, within the 3%–5% target).
4. Growing Retail Participation:
   • The “Others” category’s 44.3% year-on-year growth reflects increased retail and institutional investor appetite, driven by high bond yields (14.50%–14.80%) and BoT efforts to promote bond market access. This aligns with the oversubscription of June 2025 bond auctions.
   • Implication: Expanding retail participation supports financial inclusion but requires investor education and market stability to prevent volatility.
5. Fiscal Sustainability:
   • The 11.1% year-on-year debt increase (TZS 35,502.8 billion) is moderate compared to the fiscal deficit (TZS 270.2 billion in May 2025). The IMF’s 2024 Debt Sustainability Analysis indicates a moderate risk of debt distress, with public debt at 45.5% of GDP in 2022/23, below the 55% benchmark.
   • Implication: Strong tax revenue (TZS 2,339.7 billion in May 2025, 4.1% above target) and controlled borrowing support sustainability, but rising debt requires careful servicing management, given external debt servicing absorbs ~40% of expenditures.
6. Economic Context:
   • GDP Growth: Tanzania’s 6.0% projected growth in 2025, driven by agriculture, manufacturing, and tourism, supports debt servicing capacity through revenue growth.
   • Monetary Policy: The BoT’s 6% Central Bank Rate in Q2 2025 and stable interbank rates (7.93% in June 2025) ensure liquidity, facilitating domestic borrowing.
   • External Debt Complement: Domestic debt (29.3% of total debt) complements external debt (70.7%, USD 32,955.5 million), balancing currency risks with local financing.

1. Central Government Revenues

• Overview: Central government revenues in Tanzania include tax revenue (e.g., income tax, VAT, import duties) and non-tax revenue (e.g., dividends, fees, fines). These funds finance recurrent and development expenditures, with a focus on achieving fiscal targets outlined in the 2024/25 budget of TZS 49.35 trillion (USD 18.85 billion). The Tanzania Revenue Authority (TRA) and other agencies collect these revenues, aiming for 15.8% of GDP in 2024/25.
• April 2025 Performance:
  • Total Revenue: TZS 2,544.1 billion, achieving 99.6% of the monthly target (a shortfall of 0.4% or approximately TZS 10.2 billion, based on an inferred target of TZS 2,554.3 billion).
  • Revenue Breakdown:
    • Central Government Revenue: TZS 2,432.0 billion (95.6% of total revenue, implying local government collections of TZS 112.1 billion).
    • Tax Revenue: TZS 2,105.3 billion, exceeding the target by 1.5% (target approximately TZS 2,073.9 billion).
    • Non-Tax Revenue: TZS 326.6 billion, underperforming at 86.5% of the target (target of TZS 377.8 billion).
• Context and Analysis:
  • Strong Tax Performance: The 101.5% achievement in tax revenue reflects robust tax administration, driven by TRA’s digitalization efforts (e.g., e-filing, fiscalized receipts) and economic growth (5.5% GDP growth in 2024, projected 6.0% in 2025,). Key contributors include income tax (TZS 1,573.8 billion in January 2025) and import taxes (TZS 962.2 billion in January 2025), supported by export growth (16.8% in April 2025) and business activity in sectors like agriculture and manufacturing.
  • Non-Tax Revenue Shortfall: The 86.5% performance (TZS 326.6 billion vs. TZS 377.8 billion target) indicates challenges in collecting dividends, fees, and fines, possibly due to lower-than-expected returns from public enterprises or administrative inefficiencies. Non-tax revenue (TZS 602.6 billion in January 2025,) is critical for diversifying revenue but remains volatile compared to tax collections.
  • Economic Drivers: The marginal shortfall (0.4%) in total revenue aligns with earlier trends, as January 2025 collections reached TZS 3,877.4 billion, surpassing targets by 8.6% (). The strong tax performance reflects improved compliance and economic resilience, despite global challenges (e.g., geopolitical tensions). However, weaker domestic demand (noted by lower taxes on local goods,) may have contributed to the non-tax shortfall.
  • Implications: The robust tax revenue (101.5% of target) supports fiscal stability, aligning with the 2024/25 goal of raising TZS 34.61 trillion in domestic revenues (70.1% of the budget,). The non-tax shortfall (13.5% below target) highlights the need for stronger collection mechanisms, such as improving public enterprise efficiency or expanding fee-based services. Sustained revenue growth is critical to finance the TZS 56.49 trillion 2025/26 budget, which aims for 6% GDP growth.

2. Central Government Expenditures

• Overview: Central government expenditures in Tanzania are divided into recurrent (e.g., wages, interest, goods/services) and development (e.g., infrastructure, social projects) spending. The 2024/25 budget allocates TZS 49.35 trillion, with 59.6% for recurrent expenditure and 40.4% for development. Expenditures support flagship projects like the Julius Nyerere Hydropower Plant and Standard Gauge Railway (SGR).
• April 2025 Performance:
  • Total Expenditure: TZS 3,287.3 billion.
  • Expenditure Composition:
    • Recurrent Expenditure: TZS 2,005.6 billion (~61% of total).
      • Wages & Salaries: TZS 958.8 billion.
      • Interest Costs: TZS 172.0 billion.
      • Other Recurrent Expenses: TZS 874.8 billion.
    • Development Expenditure: TZS 1,281.6 billion (~39% of total).
• Context and Analysis:
  • Recurrent Expenditure Dominance: Recurrent spending (TZS 2,005.6 billion, ~61%) reflects high fixed costs, with wages and salaries (TZS 958.8 billion) as the largest component, supporting public sector employment (e.g., 28,000 health workers trained in 2025/26,). Interest costs (TZS 172.0 billion) indicate rising debt obligations, with domestic debt at TZS 34.26 trillion and external debt at USD 34.1 billion in March 2025. Other recurrent expenses (TZS 874.8 billion) cover goods, services, and subsidies, including local government elections and 2025 election preparations.
  • Development Expenditure: Development spending (TZS 1,281.6 billion, ~39%) aligns with January 2025 trends (TZS 1,393.3 billion,), focusing on infrastructure (e.g., SGR, Julius Nyerere Hydropower Plant) and social services (e.g., education, health). The 2024/25 budget prioritizes energy and transport projects, but a slight decline from January 2025 suggests potential reprioritization or funding constraints.
  • Economic Drivers: High recurrent spending (61%) reflects commitments to public sector stability and debt servicing, with interest payments absorbing significant resources (TZS 467.2 billion in January 2025,). Development spending (39%) supports growth targets (6% GDP in 2025,), driven by projects like the John Magufuli Bridge and Bagamoyo Special Economic Zone. However, the 2.6% shilling depreciation and high lending rates (15.18% in May 2025, Document, Page 7) increase debt servicing costs, limiting fiscal space.
  • Implications: The high share of development spending (39%) supports long-term growth through infrastructure and social investments, but recurrent costs (61%) strain fiscal resources. Interest costs (TZS 172.0 billion) highlight the burden of domestic debt (TZS 34.26 trillion, 29% held by banks,), potentially crowding out private sector credit. The 2025/26 budget’s planned 13.4% spending increase to TZS 56.49 trillion will require sustained revenue growth and prudent debt management to avoid widening deficits.

3. Key Observations

• Revenue-Expenditure Gap: The gap between revenue (TZS 2,544.1 billion) and expenditure (TZS 3,287.3 billion) in April 2025 resulted in a fiscal deficit of TZS 743.2 billion. This aligns with January 2025 data showing a low deficit of TZS 30 billion, financed through domestic borrowing (e.g., T-Bills at 8.89% yield, T-Bonds at 15.29%, Document, Page 8). The 2024/25 budget targets a deficit below 3% of GDP, achieved through fiscal discipline.
• Strong Tax Performance: Tax revenue exceeding targets (101.5%) reflects effective tax administration and economic resilience, supported by export growth (16.8% in April 2025, Document, Page 14) and private sector activity. However, the non-tax shortfall (86.5%) underscores the need for diversified revenue sources, as non-tax collections (TZS 6.48 trillion projected for 2025/26,) remain volatile.
• Fiscal Challenges: High spending (TZS 3,287.3 billion) and rising interest costs (TZS 172.0 billion) indicate growing debt obligations, with domestic debt servicing potentially costing TZS 5.31 trillion annually at 15.5% rates. The 2025/26 budget’s focus on revenue mobilization (TZS 40.47 trillion,) and deficit reduction (3.0% of GDP,) aims to address these challenges.
• Economic Context: Tanzania’s fiscal operations align with the Third Five-Year National Development Plan (2021/22–2025/26), emphasizing industrialization and human development (). The April 2025 deficit reflects continued reliance on domestic borrowing (TZS 6.27 trillion projected for 2025/26,), but foreign exchange reserves (USD 5.7 billion, covering 4 months of imports,) and IMF support (USD 441 million,) mitigate external risks.
• Implications: The fiscal deficit (TZS 743.2 billion) underscores the need for enhanced non-tax revenue and expenditure controls to maintain fiscal sustainability. Strong tax performance supports growth targets, but high recurrent spending (61%) and debt servicing costs could limit development investments. The 2025/26 budget’s reforms, including VAT exemptions and mining regulations, aim to boost revenue and investment, but global risks (e.g., sluggish growth,) and domestic demand weakness require vigilant fiscal management.

Summary Table – April 2025

Additional Insights and Outlook

• Fiscal Discipline: The low deficit (TZS 743.2 billion, ~2.5% of monthly GDP based on 2024 GDP of TZS 156.6 trillion,) and strong tax performance align with the 2024/25 target of a 3% GDP deficit. Domestic borrowing (TZS 34.26 trillion debt stock,) finances deficits, but high interest costs (TZS 172.0 billion) highlight the need for concessional loans.
• Revenue Mobilization: The 2025/26 budget’s target of TZS 40.47 trillion in domestic revenue and tax reforms (e.g., VAT exemptions,) aim to reduce reliance on borrowing. Non-tax revenue improvement is critical to address the 13.5% shortfall.
• Risks: High recurrent spending (61%) and debt servicing costs could crowd out private investment, given high lending rates (15.18%). Global risks (e.g., geopolitical tensions,) and shilling depreciation (2.6%,) may increase external debt costs (USD 34.1 billion).
• Outlook: Continued revenue growth (TZS 22.38 trillion by February 2025,) and fiscal reforms will support the TZS 56.49 trillion 2025/26 budget. Investments in infrastructure (TZS 7.72 trillion for capital payments,) and social services will drive 6% GDP growth, provided deficits remain controlled.

Tanzania Government Budget Operations - April 2025: Key Figures

Tanzania’s external debt has surged from 2,469.7 USD Million in December 2011 to 34,056 USD Million in March 2025, representing a 13.8-fold increase over 14 years, or an average annual growth rate of approximately 20.8%. This dramatic rise reflects a combination of economic, infrastructural, and policy drivers that have fueled borrowing to support Tanzania’s development ambitions. Below, I outline the key factors driving this growth, supported by figures and data from available sources, including the Bank of Tanzania and other economic analyses.

1. Economic Drivers

Tanzania’s economic growth and structural transformation goals have necessitated significant external borrowing to bridge fiscal deficits and finance development projects. Key economic factors include:

• Fiscal Deficits and Revenue Shortfalls: Tanzania’s fiscal deficit has consistently required external financing, as tax revenues (e.g., 13% of GDP in 2024) remain low compared to regional peers. The fiscal deficit was 3.8% of GDP in 2022/23, up from 3.4% in 2021/22, driven by increased public spending. To cover this, external debt rose to USD 34.1 billion (TZS 91.29 trillion at TZS 2,677/USD) by March 2025, with 78.3% held by the central government.
• Foreign Exchange Needs: A 2.6% shilling depreciation in 2024/25 and an 8% depreciation in 2023 increased the cost of servicing USD-denominated debt (67.7% of external debt, or USD 23.1 billion). Declining export revenues from commodities like coffee (-2%) and sugar (-1.5%) strained foreign exchange reserves, necessitating borrowing to maintain import cover (e.g., USD 5.7 billion, 3.8 months of imports in 2025).
• Economic Growth Ambitions: Tanzania’s GDP grew from USD 33.2 billion in 2011 to USD 75.5 billion in 2022, with projections of 5.6% growth in 2024 and 6% in 2025. This growth, driven by agriculture, manufacturing, and tourism, required external financing to sustain investments in productive sectors. For example, foreign direct investment (FDI) rose to USD 922 million in 2021, supporting projects like the Kabanga Nickel Project, which increased borrowing needs.

2. Infrastructural Drivers

Tanzania’s ambitious infrastructure agenda has been a primary driver of external debt growth, with significant borrowing to fund transformative projects in transport, energy, and urban development. Key projects include:

• Standard Gauge Railway (SGR): The SGR, a flagship project to connect Dar es Salaam to inland regions and neighboring countries, has been a major contributor to debt growth. The project’s cost, estimated at USD 7.6 billion for multiple phases, has been largely financed through external loans, particularly from China and multilateral institutions.
• Energy Infrastructure: Investments in energy, such as the 532 km gas pipeline from Mnazi Bay to Dar es Salaam (completed in 2015, costing USD 1.2 billion) and plans to increase electricity capacity to 10,000 MW by 2025, have driven borrowing. In 2013, 49.7% of electricity came from natural gas, and projects like the Ntorya gas field (projected to produce 40 million cubic feet/day by 2025) required external financing.
• Port and Transport Upgrades: The modernization of Dar es Salaam Port, including a USD 250 million investment by DP World (UAE) in 2023, and the East African Crude Oil Pipeline (EACOP, USD 5 billion), have increased external debt. These projects aim to position Tanzania as a regional trade hub.
• World Bank Financing: As of March 2025, 48% of the World Bank’s USD 10 billion portfolio in Tanzania supports infrastructure, including roads, railways, and power projects, significantly contributing to the external debt stock.

3. Policy Drivers

Government policies aimed at economic diversification, poverty reduction, and structural reforms have shaped borrowing patterns, with a focus on concessional and non-concessional loans. Key policy drivers include:

• Concessional Borrowing from Multilateral Institutions: Multilateral creditors account for 53.9% of external debt (USD 18.3 billion) as of January 2025, with the World Bank, IMF, and African Development Bank providing concessional loans. In 2021, the IMF provided USD 567.25 million in emergency assistance for COVID-19 recovery, and the 2022–2025 Extended Credit Facility (ECF) program unlocked USD 150 million in 2025 to support fiscal sustainability.
• Non-Concessional Borrowing: External non-concessional borrowing has risen to finance infrastructure, accounting for 36.3% of external debt (USD 12.4 billion) in January 2025. Commercial creditors, including Chinese loans for projects like the SGR, have driven debt growth, increasing exposure to higher interest rates.
• Vision 2025 and Development Goals: Tanzania’s Vision 2025 aims for a GDP growth rate of 8% annually, requiring investments in infrastructure, education, and health. The FY 2024/25 budget of TZS 49.35 trillion (USD 18.4 billion) included TZS 29.41 trillion (59.6%) from tax revenue, with the deficit financed by external borrowing. The planned 13.4% spending increase to TZS 57.04 trillion in FY 2025/26 further drives borrowing.
• Business Environment Reforms: Policies to improve the investment climate, such as tax code revisions and the creation of the Tanzania Investment Centre, have attracted FDI but also increased borrowing for co-financed projects. For example, Chinese investments in the Mchuchuma coal and Liganga iron ore projects (USD 3 billion) in 2011 required complementary government borrowing.

Quantitative Insights

• Debt Growth Trajectory:
  • 2011: USD 2,469.7 million (Bank of Tanzania).
  • 2019: USD 22.4 billion (40% of GDP, 6% YoY increase from 2018).
  • 2023: USD 32,090 million (disbursed, January 2025).
  • March 2025: USD 34,056 million, a 6.1% increase from January 2025 (USD 32,090 million).

• Debt-to-GDP Ratio: Rose from 32.68% in 2013 to 46.87% in 2023 (total public debt), with external debt at ~32-35% of GDP in 2025, assuming a GDP of ~USD 100 billion.
• Debt Composition (January 2025):
  • Multilateral: 53.9% (USD 18.3 billion).
  • Commercial: 36.3% (USD 12.4 billion).
  • Bilateral: 4.2% (USD 1.4 billion).
  • Export Credit: 5.6% (USD 1.9 billion).
• Debt Servicing: Absorbs ~40% of government expenditures, with external debt service estimated at USD 1-2 billion annually and domestic at TZS 5.31 trillion in 2025.

Challenges and Risks

• Exchange Rate Risks: With 67.7% of external debt in USD, the 2.6% shilling depreciation in 2024/25 increases servicing costs by approximately TZS 2.38 trillion for the USD-denominated portion.
• Global Economic Pressures: The IMF’s global growth forecast of 2.8% for 2025 and rising interest rates elevate borrowing costs, particularly for non-concessional loans.
• Fiscal Space Constraints: High debt servicing limits investments in social sectors, with 3% of GDP spent on debt servicing in 2024.
• COVID-19 Impact: Emergency borrowing, including USD 567.25 million from the IMF in 2021, contributed to debt spikes to address health and economic costs.

Conclusion

The 13.8-fold increase in Tanzania’s external debt from 2,469.7 USD Million in 2011 to 34,056 USD Million in March 2025 is driven by economic needs (fiscal deficits, foreign exchange shortages), major infrastructure projects (SGR, energy, ports), and policy choices favoring concessional and non-concessional borrowing to achieve Vision 2025 goals. While debt remains sustainable (moderate risk per IMF DSA), with a debt-to-GDP ratio of ~32-35%, challenges like shilling depreciation and high debt servicing costs underscore the need for prudent fiscal management and revenue mobilization.

This table consolidates the key figures driving Tanzania’s external debt growth, highlighting economic factors (fiscal deficits, GDP growth), infrastructure projects (SGR, energy, ports), and policy decisions (concessional and non-concessional borrowing). The 13.8-fold increase reflects Tanzania’s development ambitions, balanced by a sustainable debt-to-GDP ratio of ~32-35% in 2025.

Notes:

• Debt Growth: From 2,469.7 USD Million (2011) to 34,056 USD Million (Mar 2025), driven by fiscal deficits, infrastructure, and policy goals.
• Infrastructure Costs: SGR (USD 7.6 billion), gas pipeline (USD 1.2 billion), and port upgrades (USD 250 million) are major contributors.
• Debt Composition: Multilateral (53.9%, USD 18.3 billion), commercial (36.3%, USD 12.4 billion), bilateral (4.2%, USD 1.4 billion), export credit (5.6%, USD 1.9 billion) as of Jan 2025.
• Economic Context: GDP growth from USD 33.2 billion (2011) to ~USD 100 billion (2025) supports debt sustainability, but shilling depreciation (8% in 2023, 2.6% in 2024/25) increases servicing costs.
• Policy Impact: Vision 2025 and FY 2024/25 budget (TZS 49.35 trillion, USD 18.4 billion) drive borrowing, with 59.6% funded by taxes and the rest by loans.

Tanzania’s external debt has shown a significant upward trend, reaching 35,039.8 USD Million in February 2025, up from 34,551.4 USD Million in January 2025, according to the Bank of Tanzania. This marks a month-on-month increase of approximately 488.4 USD Million or 1.41%. The external debt has grown steadily, averaging 20,062.78 USD Million from 2011 to 2025, with a record high of 34,936.5 USD Million in February 2025 and a low of 2,469.7 USD Million in December 2011. This reflects a substantial increase over the years, driven by investments in infrastructure, energy, and other development projects.

Tanzania’s External Debt in Context

Tanzania’s external debt is a critical indicator of its economic position within Africa and East Africa. To provide a comprehensive understanding, let’s compare Tanzania’s external debt to other African and East African countries, analyze its debt-to-GDP ratio, and explore the factors contributing to its debt profile.

Comparison with African Countries

The provided data lists external debt for several African countries, with figures converted to USD Million where necessary for comparison. Using the most recent data from the table and supplementing with additional context:

• South Africa: 168,379 USD Million (Dec 2024) – The highest external debt in the dataset, reflecting South Africa’s position as one of Africa’s largest economies.
• Egypt: 155,204 USD Million (Sep 2024) – Another major economy with significant external borrowing, driven by infrastructure and energy projects.
• Angola: 50,260 USD Million (Dec 2023) – High debt due to oil-related investments and reliance on external financing.
• Nigeria: 42,900 USD Million (Sep 2024) – A major oil-producing nation with considerable external debt, though lower than Tanzania’s relative to GDP.
• Tanzania: 34,056 USD Million (Mar 2025) – Ranks among the top tier of African countries in terms of external debt, reflecting its ambitious development agenda.
• Ghana: 28,300 USD Million (Dec 2024) – Lower than Tanzania, but Ghana faces higher debt distress risks due to a higher debt-to-GDP ratio.
• Rwanda: 7,916 USD Million (Dec 2023) – An East African neighbor with significantly lower external debt than Tanzania.
• Kenya: 5,057 KES Billion (approx. 37,173 USD Million at an exchange rate of 1 KES = 0.00735 USD, Dec 2024) – Comparable to Tanzania, but slightly higher, reflecting Kenya’s larger economy.
• Burundi: 1,873,263 BIF Million (approx. 650 USD Million at an exchange rate of 1 BIF = 0.000347 USD, Dec 2024) – Significantly lower, reflecting Burundi’s smaller economy.

Tanzania’s external debt of 34,056 USD Million (Mar 2025) places it among the top 10 African countries for external debt, behind economic giants like South Africa, Egypt, and Nigeria, but ahead of smaller economies like Rwanda and Burundi. This reflects Tanzania’s growing economic ambitions but also its increasing reliance on external financing.

Comparison with East African Community (EAC) Countries

Within East Africa, Tanzania’s external debt is significant but not the highest. Key EAC countries include:

• Kenya: Approximately 37,173 USD Million (Dec 2024) – Slightly higher than Tanzania, driven by large infrastructure projects like the Standard Gauge Railway (SGR).
• Tanzania: 34,056 USD Million (Mar 2025) – A close second, with debt growth tied to infrastructure, energy, and mining investments.
• Rwanda: 7,916 USD Million (Dec 2023) – Much lower, reflecting Rwanda’s smaller economy and more cautious borrowing.
• Uganda: Data not provided, but recent estimates suggest around 20,000 USD Million (2023), lower than Tanzania due to a less diversified economy.
• Burundi: 650 USD Million (Dec 2024) – Minimal debt, constrained by its small economy and political instability.

Tanzania’s external debt is comparable to Kenya’s, positioning it as a major borrower in the EAC. However, its debt-to-GDP ratio and risk profile are more favorable than some peers, as discussed below.

Debt-to-GDP Ratio and Sustainability

Tanzania’s external debt-to-GDP ratio provides insight into its debt sustainability. In 2023, Tanzania’s public debt (including external and domestic) was 46.87% of GDP, with external debt accounting for approximately 70.4% of total public debt (2023 data). Assuming a nominal GDP of 78 USD Billion in 2023 (projected to grow to 105.1 USD Billion in 2022, adjusting for inflation and growth), the external debt of 34,056 USD Million in March 2025 translates to roughly 32-35% of GDP, depending on GDP estimates for 2025.

• Comparison with African Peers:
  • South Africa: External debt at 168,379 USD Million with a GDP of approximately 405 USD Billion (2023) yields a debt-to-GDP ratio of ~41.6%, higher than Tanzania.
  • Egypt: 155,204 USD Million with a GDP of 393 USD Billion (2023) results in a ratio of ~39.5%, also higher.
  • Nigeria: 42,900 USD Million with a GDP of 362 USD Billion (2023) gives a ratio of ~11.8%, significantly lower due to Nigeria’s larger economy.
  • Ghana: 28,300 USD Million with a GDP of 76 USD Billion (2023) results in a ratio of ~37.2%, indicating higher distress risk.
  • Rwanda: 7,916 USD Million with a GDP of 14 USD Billion (2023) yields a ratio of ~56.5%, much higher than Tanzania, indicating greater vulnerability.
• East African Context:
  • Kenya: 37,173 USD Million with a GDP of 112 USD Billion (2023) results in a ratio of ~33.2%, similar to Tanzania.
  • Rwanda: As noted, ~56.5%, significantly higher.
  • Burundi: 650 USD Million with a GDP of 2.6 USD Billion (2023) yields a ratio of ~25%, lower but less relevant due to its small economy.

Tanzania’s external debt-to-GDP ratio of ~32-35% is moderate compared to peers, and its public debt-to-GDP ratio of 46.87% (2023) is below the regional benchmark of 55% for low-income countries, indicating sustainable debt levels. The IMF’s 2024 Debt Sustainability Analysis (DSA) classifies Tanzania’s risk of external debt distress as low, supported by prudent fiscal policies and concessional borrowing.

Composition of Tanzania’s External Debt

As of December 2019, Tanzania’s external debt was USD 22.4 Billion (40% of GDP), with the central government holding 78%, the private sector 21%, and public corporations 0.4%. The debt is primarily owed to:

• Multilateral institutions: 46% (e.g., World Bank, IMF, African Development Bank)
• Commercial sources: 34%
• Export credit: 11%
• Bilateral institutions: 9% (e.g., China, India).

By currency, 68.9% of external debt is denominated in USD, followed by the Euro, which reduces exposure to currency fluctuations but increases repayment burdens when the Tanzanian shilling depreciates (8% depreciation in 2023).

Drivers of External Debt

Tanzania’s external debt growth is driven by:

1. Infrastructure Investments: Large-scale projects like the Standard Gauge Railway (SGR), Dar es Salaam Port expansion, and energy projects (e.g., gas pipeline from Mnazi Bay to Dar es Salaam) require significant borrowing.
2. Economic Diversification: Investments in mining (gold, nickel, graphite), manufacturing, and tourism to reduce reliance on agriculture.
3. COVID-19 Response: Non-concessional borrowing during the pandemic to support the economy, increasing debt levels.
4. Foreign Direct Investment (FDI): FDI rose to USD 922 Million in 2021, with projects like the Kabanga Nickel Project requiring external financing.

Risks and Challenges

• Foreign Exchange Shortages: The Tanzanian shilling’s 8% depreciation in 2023 and 0.5% in 2022 increased debt servicing costs in local currency.
• Election-Related Pressures: The 2025 elections may increase fiscal spending, potentially pausing fiscal consolidation efforts.
• Global Economic Slowdown: Reduced tourism receipts and export demand could strain debt repayment capacity.
• Debt Service Burden: Debt service absorbs ~40% of government expenditures, limiting fiscal space for social spending.

Position in Africa and East Africa

• Africa: Tanzania ranks among the top 10 African countries for external debt, behind South Africa, Egypt, and Nigeria, but its moderate debt-to-GDP ratio and low distress risk make it a relatively stable borrower. Its diversified economy (agriculture, mining, tourism) and stable political environment enhance its attractiveness for FDI, unlike higher-risk countries like Ghana or Zambia.
• East Africa: Tanzania is a close second to Kenya in external debt, with a stronger growth outlook (6% projected GDP growth in 2025 vs. Kenya’s 5%). Its lower debt-to-GDP ratio compared to Rwanda and stable macroeconomic policies position it as a regional economic powerhouse, though Kenya’s larger economy gives it a slight edge.

Conclusion

Tanzania’s external debt of 34,056 USD Million in March 2025 reflects its ambitious development agenda but remains sustainable, with a debt-to-GDP ratio of ~32-35% and low distress risk. Compared to African peers, Tanzania’s debt is moderate, and within East Africa, it competes closely with Kenya while outperforming smaller economies like Rwanda and Burundi. Continued fiscal discipline, concessional borrowing, and economic diversification will be key to maintaining debt sustainability.

This table highlights Tanzania’s external debt of 34,056 USD Million (Mar 2025) as moderate within Africa, comparable to Kenya in East Africa, and sustainable relative to its GDP. Its debt-to-GDP ratio of ~32-35% is lower than peers like Rwanda (56.5%) and Angola (59.1%), positioning Tanzania favorably in terms of debt sustainability.

Notes:

• Tanzania: External debt increased from 34,551.4 USD Million (Jan 2025) to 35,039.8 USD Million (Feb 2025), with 34,056 USD Million reported for Mar 2025. Debt-to-GDP ratio estimated at 32-35% based on projected GDP growth to ~100 USD Billion by 2025.
• Kenya: Converted from 5,057 KES Billion using 1 KES = 0.00735 USD (Dec 2024).
• Burundi: Converted from 1,873,263 BIF Million using 1 BIF = 0.000347 USD (Dec 2024).
• GDP Estimates: Sourced from IMF/World Bank 2023 data, adjusted for inflation/growth where necessary.
• Debt-to-GDP Ratio: Calculated as (External Debt / GDP) * 100. Ratios are approximate due to varying reference dates and GDP projections.

Tanzania's external debt reached USD 33.91 billion in January 2025, placing it among the top 10 most indebted African countries. This marks a significant rise from USD 2.47 billion in 2011, reflecting increased borrowing for infrastructure and economic development. The central government holds 77.4% of the debt, with USD 185.4 million paid for debt servicing in December 2024. Despite this, Tanzania’s debt-to-GDP ratio remains at 47.2%, below the IMF’s 55% risk threshold. However, careful debt management is crucial to ensure economic stability and sustainable growth.

​As of January 2025, Tanzania's external debt stood at approximately USD 33,905.10 million, a slight decrease from USD 34,075.50 million in December 2024. This positions Tanzania among the top ten African countries with substantial external debt.​

Historical Context: Over the years, Tanzania's external debt has exhibited significant growth:​

• December 2011: USD 2,469.70 million​
• December 2023: USD 29,541.7 million ​
• November 2024: USD 33,137.7 million ​
• December 2024: USD 34,075.50 million​
• January 2025: USD 33,905.10 million​

Composition of External Debt: The central government holds the majority of this debt, accounting for approximately 77.4% as of December 2024. The remaining portion is attributed to the private sector. ​

Debt Service and Disbursements: In December 2024, Tanzania received external loan disbursements totaling USD 376.8 million, primarily allocated to the central government. During the same period, the country serviced its external debt with payments amounting to USD 185.4 million, which included USD 111.2 million in principal repayments and USD 74.2 million in interest payments. ​

Public Debt Relative to GDP: As of November 2024, Tanzania's total public debt, encompassing both external and domestic obligations, was USD 38,243.5 million. This figure represents approximately 47.2% of the nation's Gross Domestic Product (GDP). ​

International Financial Support: In December 2024, the International Monetary Fund (IMF) completed a review under the Extended Credit Facility arrangement with Tanzania, resulting in an immediate disbursement of about USD 148.6 million. Additionally, the IMF approved a disbursement of approximately USD 55.9 million under the Resilience and Sustainability Facility, totaling USD 204.5 million in financial support. ​

These figures underscore Tanzania's significant external debt position within Africa, highlighting the importance of ongoing fiscal management and international financial collaborations.

Top ten African countries with high external debt based on 2025 data:

1. South Africa – USD 176,314 million (Sep 2024)
2. Egypt – USD 155,204 million (Sep 2024)
3. Tunisia – TND 128,856 million (Sep 2024)
4. Mauritius – MUR 96,713 million (Dec 2024)
5. Angola – USD 50,260 million (Dec 2023)
6. Nigeria – USD 42,900 million (Sep 2024)
7. Namibia – NAD 36,036 million (Jun 2024)
8. Tanzania – USD 33,905 million (Jan 2025)
9. Malawi – MWK 5,887,049 million (Dec 2023)
10. Burundi – BIF 1,873,263 million (Dec 2024)

Tanzania’s external debt and its position among African countries with significant debt levels:

1. Tanzania’s Debt Growth is Significant

• Tanzania's external debt has increased dramatically from USD 2.47 billion in 2011 to USD 33.91 billion in January 2025.
• This consistent rise reflects increased borrowing for infrastructure, public services, and economic projects but also raises concerns about debt sustainability.

2. Tanzania is Among Africa’s Top 10 Most Indebted Countries

• At USD 33.91 billion, Tanzania ranks 8th in Africa for external debt.
• While this debt level is high, it is still lower than economies like South Africa (USD 176.3B), Egypt (USD 155.2B), and Nigeria (USD 42.9B).

3. Most of Tanzania’s Debt is Public

• 77.4% of Tanzania’s external debt is held by the central government, meaning the government is the primary borrower.
• This suggests reliance on international loans for development, infrastructure, and fiscal needs.

4. Debt Servicing is a Major Challenge

• In December 2024, Tanzania borrowed USD 376.8M but also had to repay USD 185.4M (including interest payments).
• This means that a significant portion of revenues is spent on debt servicing, which could limit spending on public services.

5. IMF and International Financial Support Play a Key Role

• The IMF provided USD 204.5M in December 2024 to support Tanzania’s financial stability.
• This suggests Tanzania relies on international financial institutions to manage its debt obligations and sustain economic programs.

6. Tanzania’s Debt-to-GDP Ratio is Still Manageable

• Tanzania’s total public debt (domestic + external) was USD 38.24 billion, accounting for 47.2% of GDP in November 2024.
• While below the IMF’s 55% risk threshold, continued borrowing without sufficient economic growth could lead to debt distress.

7. Comparison with Other African Countries

• South Africa and Egypt have the highest external debts, but their economies are larger and more diversified.
• Nigeria has slightly higher debt than Tanzania, but its economy benefits from oil revenues.
• Tanzania’s debt is higher than Malawi, Burundi, and Namibia, suggesting it is borrowing at a faster rate.

Final Conclusion

Tanzania's rising external debt reflects ambitious economic growth plans but also poses risks of debt distress if borrowing continues at this rate without sufficient revenue growth. Proper debt management, economic diversification, and increased exports are crucial to ensuring sustainability.

Stable Growth but High External 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.

Strategic Investments and Fiscal Challenges

Tanzania’s external debt, totaling USD 33.1 billion in November 2024, highlights a focus on infrastructure, social services, and energy projects, with the central government holding 76.8% of the debt. Multilateral creditors account for the majority, offering favorable terms, while commercial borrowing poses higher costs. Despite aligning debt use with development goals, currency risks and rising debt servicing obligations underscore the importance of prudent debt management and sustainable financing strategies.

1. External Debt Overview

As of November 2024, Tanzania's total external debt stock stood at USD 33,137.7 million, representing 72.1% of the country’s total national debt. This reflects a slight decrease of 0.6% compared to October 2024 due to debt service payments exceeding new disbursements.

2. External Debt Stock by Borrower

The distribution of external debt stock by borrower categories highlights the dominance of central government borrowing:

• Central Government: USD 25,433.6 million (76.8% of external debt).
• Private Sector: USD 7,700.3 million (23.2% of external debt).
• Public Corporations: USD 3.8 million (negligible share).

3. Distributed Outstanding Debt by Use of Funds

The allocation of external debt shows how the borrowed funds are utilized across various sectors:

• Transportation and Telecommunications: 21.4% (key investments in infrastructure).
• Social Welfare and Education: 20.4% (focus on improving public services).
• Energy and Mining: 15.0% (supporting energy production and mining activities).
• Balance of Payments (BoP) and Budget Support: 18.4%.
• Other sectors include:
  • Agriculture: 5.2%.
  • Finance and Insurance: 4.1%.
  • Real Estate and Construction: 4.7%.

4. Distributed Outstanding Debt by Creditor Composition

The distribution of external debt by creditor category as of November 2024 is as follows:

• Multilateral Institutions: USD 18,055.7 million (54.5%) – These include international financial institutions such as the World Bank and IMF.
• Commercial Creditors: USD 11,854.9 million (35.8%).
• Export Credit Agencies: USD 1,799.1 million (5.4%).
• Bilateral Creditors: USD 1,428.0 million (4.3%).

5. Currency Composition of External Debt

Tanzania’s external debt is mainly denominated in the following currencies:

• United States Dollar (USD): 68.2%.
• Euro: 16.2%.
• Chinese Yuan: 6.1%.
• Others: 9.6%.

Summary of Key Figures:

These figures reflect Tanzania’s strategy to invest heavily in infrastructure and social services while maintaining reliance on multilateral and commercial creditors for financial support​

The analysis of Tanzania's external debt and its distribution with important insights into the country's borrowing strategies and development priorities

1. High Reliance on Central Government Borrowing

• The central government accounts for the majority (76.8%) of external debt, indicating that the government is the primary entity responsible for securing and utilizing external financing.
• This reliance reflects the government’s role in funding large-scale projects, particularly in infrastructure and social development, which are critical for long-term growth.

Implication: The burden of repayment largely falls on public finances, emphasizing the need for sound debt management and productive use of borrowed funds.

2. Sectoral Distribution Aligns with Development Goals

• Significant portions of the debt are allocated to:
  • Transportation and Telecommunications (21.4%) to improve connectivity and trade.
  • Social Welfare and Education (20.4%) to enhance human capital.
  • Energy and Mining (15%) to address energy needs and exploit natural resources.
• The allocation highlights the government’s focus on infrastructure-driven growth and poverty reduction through investments in public services.

Implication: The focus on infrastructure and social services suggests a long-term strategy to stimulate economic growth and improve the standard of living.

3. Dominance of Multilateral Creditors

• With 54.5% of external debt owed to multilateral institutions, Tanzania benefits from concessional loans, which typically have lower interest rates and longer repayment periods.
• The reliance on commercial creditors (35.8%), however, reflects a shift toward costlier financing, possibly due to limited access to concessional funding.

Implication: While multilateral debt offers favorable terms, increasing commercial debt could raise debt servicing costs, adding pressure on public finances.

4. Currency Composition Risks

• The dominance of the US dollar (68.2%) in the debt portfolio exposes Tanzania to exchange rate risks. A depreciation of the Tanzanian shilling against the dollar could significantly increase repayment costs.
• Diversification into other currencies like the Euro and Chinese Yuan mitigates this risk to some extent but remains insufficient.

Implication: Exchange rate volatility poses a challenge, requiring careful monitoring and hedging strategies.

5. Debt Management and Sustainability Concerns

• Although the funds are directed toward productive sectors, the growing stock of external debt demands effective management to ensure it does not surpass sustainable levels.
• Increasing reliance on debt-financed projects must yield returns sufficient to cover repayment obligations.

Conclusion:
Tanzania’s external debt strategy reflects a focus on long-term development, prioritizing infrastructure, social services, and energy projects. However, the reliance on central government borrowing and commercial creditors, coupled with exchange rate risks, underscores the need for prudent debt management, enhanced domestic revenue mobilization, and productive utilization of borrowed funds.

As of September 2024, Tanzania's total external debt reached USD 32.89 billion, accounting for 73% of the country’s total national debt. The central government held the largest share of external debt at USD 25.43 billion (78.1%), with funds directed toward critical sectors like transport (21.5%) and social welfare (20.8%). Domestically, the government owed TZS 32.62 trillion, with Treasury bonds dominating at 78.9%. Despite strategic investments, reliance on the USD (67.4% of external debt) and limited funding for agriculture (5.1%) and tourism (1.6%) pose challenges to debt sustainability and inclusive economic growth.

1. External Debt

Key Figures

• Total External Debt Stock (Sept 2024): USD 32,890.0 million.
• Proportion of National Debt: 73%.
• Main Components:
  • Disbursed Outstanding Debt: USD 31,425.6 million.
  • Undisbursed Debt: USD 5,042.7 million.

Debt Stock by Borrowers

• Central Government: USD 25,428.6 million (78.1% of external debt).
• Private Sector: USD 5,993.2 million (21.9% of external debt).
• Public Corporations: USD 3.8 million (negligible share).

Use of Funds (Disbursed Outstanding Debt)

• Transport and Telecommunications: 21.5% – Largest allocation, highlighting the government's priority on improving connectivity and mobility.
• Social Welfare and Education: 20.8% – Significant focus on human capital development.
• Balance of Payments Support: 17.9% – Indicates reliance on external financing for stabilizing the country's foreign exchange reserves.
• Energy and Mining: 14.8% – Focus on infrastructure for energy and resource exploitation.
• Agriculture: 5.1% – Low share considering Tanzania's agriculture-driven economy.
• Industries: 3.7%.
• Finance and Insurance: 4.0%.
• Tourism: 1.6% – Surprisingly low given its economic importance.
• Real Estate and Construction: 4.8%.
• Other Uses: 5.8%.

Currency Composition

• US Dollar: 67.4% – Reflects high exposure to exchange rate fluctuations against the USD.
• Euro: 16.6%.
• Chinese Yuan: 6.3%.
• Other Currencies: 9.7%.

2. Internal (Domestic) Debt

Key Figures

• Total Domestic Debt Stock (Sept 2024): TZS 32,615.7 billion.
• Month-on-Month Change: Decreased by TZS 144.5 billion.
• Main Instruments:
  • Treasury Bonds: 78.9% – Dominates domestic debt instruments, preferred for their longer maturity periods.

Domestic Debt by Creditor

• Commercial Banks: 29.7% (TZS 9,678.8 billion) – Largest creditors, showing banking sector's key role in funding government activities.
• Bank of Tanzania: 20.5% (TZS 6,696.3 billion) – Central bank’s significant share indicates monetary policy alignment.
• Pension Funds: 27.6% (TZS 8,991.4 billion) – Reflects government reliance on long-term funds.
• Insurance Companies: 5.8% (TZS 1,904.2 billion).
• BOT’s Special Funds: 1.2% (TZS 389.0 billion).
• Others: 15.2% (TZS 4,956.0 billion) – Includes various smaller creditors.

Insights

1. Debt Composition: External debt forms a significant majority (73%), exposing the economy to foreign exchange risks, especially given the dominance of USD (67.4%).
2. Focus Areas of Debt Use: Prioritization of transport, telecommunications, social services, and energy aligns with Tanzania's development goals, though agriculture and tourism receive relatively smaller allocations.
3. Domestic Financing: Treasury bonds dominate, with commercial banks and pension funds as major participants, reflecting a stable domestic borrowing market.

The key insights into Tanzania's fiscal and economic dynamics:

1. Heavy Reliance on External Debt

• External Borrowing: Makes up 73% of total debt, indicating significant dependency on international sources for financing development projects and budgetary needs.
• Risks: High exposure to currency exchange rate fluctuations, especially with 67.4% of external debt denominated in USD. Any depreciation of the Tanzanian shilling could increase the cost of servicing the debt.

2. Focused Use of Funds

• Priority Sectors:
  • Transport, telecommunications, and social welfare (education and health) receive a combined 42.3% of external debt funding. This reflects strategic efforts to improve infrastructure and human capital.
  • Energy and mining account for 14.8%, essential for supporting industrialization and reducing power shortages.
• Underfunded Areas:
  • Agriculture (5.1%) and tourism (1.6%) receive smaller shares, despite their significance in Tanzania's GDP and employment. This could suggest underprioritization of these critical sectors or reliance on other forms of financing for them.

3. Dominance of Treasury Bonds in Domestic Debt

• Treasury bonds constitute 78.9% of domestic debt, reflecting:
  • A preference for long-term instruments that reduce refinancing risks.
  • A relatively well-developed domestic bond market to absorb government debt.
• Impact: Stable borrowing through domestic sources reduces reliance on volatile external sources but concentrates risk within the local financial system.

4. Key Domestic Creditors

• Commercial Banks and Pension Funds: Together hold over 57% of domestic debt, showing reliance on institutional investors for funding.
• Central Bank Role: The Bank of Tanzania (20.5%) plays a critical role in supporting government borrowing, reflecting alignment with monetary policy goals.

5. Debt Sustainability and Macro Risks

• Short-Term Indicators: While the focus on productive sectors like transport and energy could boost long-term growth, the high proportion of debt (external and domestic) demands careful management to avoid repayment challenges.
• Diversification Needs: The small allocation to tourism and agriculture may limit potential contributions from these sectors, which are key to inclusive growth and export earnings.
• Debt Service Pressures: Heavy USD dependency can amplify costs if global financial conditions tighten (e.g., rising interest rates or strengthening dollar).

Key Messages

• Opportunities: Investment in infrastructure, energy, and education positions Tanzania for future economic growth.
• Challenges: Managing debt sustainability, diversifying financing sources, and balancing sectoral priorities remain crucial to minimize risks and maximize development impact.