Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

Tanzania's external debt has grown significantly in recent years, reaching USD 32,675.10 million in August 2024. This is a major increase compared to its record low of USD 2,469.70 million in December 2011, and an average of USD 19,468.10 million over the period from 2011 to 2024. The month-on-month increase from USD 31,993.90 million in July to USD 32,675.10 million in August 2024 reflects the country's continued reliance on external financing for development projects and public expenditure.

Key Points:

Tanzania's Position in East Africa and Africa

East Africa: Tanzania is one of the largest economies in East Africa, with a growing external debt that reflects significant investments in infrastructure, energy, and industrialization. The rise in debt is partly due to the country’s need for financing large-scale projects like ports, railways, and energy plants. Among East African countries, Tanzania has one of the highest external debts, but Kenya's debt is also notable, with KES 5.151 trillion (approximately USD 34.5 billion) as of June 2024.

Comparison with East African Countries (Debt in USD):

  1. Kenya: $51.51 billion USD (June 2024)
  2. Tanzania: $32.68 billion USD (August 2024)
  3. Rwanda: $6.26 billion USD (Dec 2022)
  4. Burundi: BIF 1,857.79 billion (~USD equivalent lower than Rwanda)

Africa: On the broader African continent, Tanzania's external debt is lower than that of major economies like South Africa and Egypt but higher than many smaller economies. For instance, South Africa had an external debt of USD 163,852 million as of June 2024, while Egypt had USD 160,607 million in March 2024.

Top 10 African Countries with High External Debt (as per recent data)

Here is a list of the top African countries with high external debt (figures are based on the latest available data):

  1. South Africa: USD 163,852 million (June 2024)
  2. Egypt: USD 160,607 million (March 2024)
  3. Nigeria: USD 42,120 million (March 2024)
  4. Kenya: KES 5.151 trillion (~USD 34.5 billion) (June 2024)
  5. Tanzania: USD 32,675 million (August 2024)
  6. Ghana: USD 31,024 million (June 2024)
  7. Angola: USD 50,260 million (December 2023)
  8. Zambia: USD 8,024 million (December 2023)
  9. Zimbabwe: USD 13,325 million (December 2020)
  10. Morocco: MAD 676,819 million (~USD 66.7 billion) (December 2022)

Economic Implications for Tanzania

Tanzania’s growing debt is a reflection of its ambitious development agenda, which requires substantial capital. While this external financing is important for infrastructure development and economic growth, managing the debt levels will be crucial to avoid excessive debt servicing costs that could limit fiscal space for other development needs. Tanzania's current external debt positions it among the highly indebted nations in East Africa but is still lower than larger economies like South Africa and Egypt.

Tanzania’s debt management will likely involve focusing on maintaining sustainable debt levels while ensuring that borrowed funds are used productively to generate economic returns. As part of East Africa, Tanzania is competing with countries like Kenya in terms of infrastructure and economic development, which may drive further borrowing for development projects.

Tanzania's external debt highlights key insights about the country’s economic development, debt reliance, and its position within East Africa and the broader African continent:

1. Tanzania’s External Debt Growth

2. Tanzania’s Position in East Africa

3. Tanzania’s Position in Africa

4. Implications for Tanzania

Conclusion

Tanzania’s external debt reflects its ambitious development plans, but the significant increase in borrowing raises concerns about debt sustainability. As one of the largest economies in East Africa, Tanzania is making important strides in infrastructure and industrialization but must balance borrowing with the productive use of funds to ensure long-term fiscal stability. Compared to other African nations, Tanzania’s debt is significant but still more manageable than the continent’s largest economies like South Africa and Egypt. However, careful debt management will be crucial as the country continues its development journey.

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