Tanzania’s debt servicing costs relative to GDP have evolved significantly from 2013 to 2024, reflecting the country’s growing debt burden and economic dynamics. Over this period, debt servicing costs rose from an estimated USD 1.36 billion (TZS 3.71 trillion, 3.09% of GDP) in 2013 to USD 2.52 billion (TZS 6.87 trillion, 2.99% of GDP) in 2024, with a peak of USD 3.33 billion (TZS 9.09 trillion, 4.39% of GDP) in 2022. This evolution, driven by a 184% increase in national debt (USD 14.93 billion to USD 42.36 billion), TZS depreciation (8% in 2023/24), and shifts toward higher-cost commercial loans, underscores the fiscal challenges Tanzania faces in balancing debt repayment with economic growth.

Explanation of Figures:

• 2013: Debt servicing cost of USD 1.36 billion (TZS 3.71 trillion) was 3.09% of GDP (USD 44 billion), estimated using 2.5–3.5% of GNI (mid-point).
• 2022: Actual cost of USD 3.33 billion (TZS 9.09 trillion, The Citizen) was 4.39% of GDP (USD 75.94 billion), reflecting a spike due to principal repayments and TZS depreciation.
• 2024: Estimated cost of USD 2.52 billion (TZS 6.87 trillion) was 2.99% of GDP (USD 84.40 billion), showing stabilization with GDP growth.
• Debt Growth: National debt increased from USD 14.93 billion (2013) to USD 42.36 billion (2024), per Statista.
• TZS Depreciation: 8% in 2023/24 (BoT), increasing external debt servicing costs.
• Exchange Rate: 1 TZS = 0.000366972502112619 USD (Statista, October 2024).

Debt Servicing Costs

From the previous analysis, A compiled debt servicing costs for 2013–2021 and 2023–2024, with 2022 as a confirmed data point (TZS 9.09 trillion, USD 3.33 billion). Other years rely on estimates using a debt service-to-GNI ratio of 2.5–3.5% (based on TICGL’s 2.89% for 2023 and IMF’s 5–7% of GDP range). Below are the figures:

Notes:

• 2022 is actual (The Citizen). Others are estimated using 2.5–3.5% of GNI, adjusted to align with 2023’s 2.89% GNI ratio.
• TZS converted using 1 USD = 2,725.3 TZS.

Debt Servicing Cost as % of GDP

Evolution of Debt Service-to-GDP Ratio

• 2013–2021: The ratio remained stable at ~3.0–3.1%, fluctuating slightly due to steady GDP growth (4–6%) and moderate debt service growth (from USD 1.36 billion to USD 2.08 billion). The consistency reflects Tanzania’s reliance on concessional loans with low interest rates (1–2%).
• 2022 Spike: The ratio jumped to 4.39% (USD 3.33 billion ÷ USD 75.94 billion), driven by a significant increase in debt servicing costs (TZS 9.09 trillion). This spike likely reflects principal repayments on maturing loans or higher commercial loan costs (6–7% rates).
• 2023–2024 Decline: The ratio fell to 2.89% (2023) and ~2.99% (2024), aligning with TICGL’s 2.89% GNI ratio and suggesting a return to lower servicing costs, possibly due to debt restructuring or slower principal repayments.

Trend Summary

• Overall Trend: The debt service-to-GDP ratio increased slightly from 3.09% (2013) to 2.99% (2024), with a notable peak at 4.39% in 2022.
• Annual Average: ~3.15% over the period, within IMF’s 5–7% of GDP range for sustainable debt service.

Drivers of Changes in the Ratio

1. Debt Stock Growth:
   • Total national debt grew 184% from USD 14.93 billion (2013) to USD 42.36 billion (2024), per Statista. This increased servicing obligations, especially for external debt (71.3% of total in 2023/24).
   • Impact: Higher debt stock raised absolute servicing costs (e.g., USD 1.36 billion in 2013 to USD 2.52 billion in 2024), but the ratio remained stable due to proportional GDP growth.
2. GDP Growth:
   • GDP grew from USD 44 billion (2013) to USD 84.40 billion (2024), a 92% increase (4–6% annually). Strong GDP growth offset rising debt service costs, keeping the ratio stable except in 2022.
   • Impact: GDP growth of 5–6% annually (IMF) outpaced debt service growth (~4–5% annually, except 2022), stabilizing the ratio around 3%.
3. TZS Depreciation:
   • The TZS depreciated by 8% in 2023/24 and 0.5% in 2023 (per BoT and Statista). This increased the cost of servicing USD-denominated external debt (71.3% of total).
   • Impact: Depreciation likely contributed to the 2022 spike (USD 3.33 billion), as TZS costs for external debt payments rose, pushing the ratio to 4.39%.
4. Debt Composition:
   • External debt (71.3%) includes concessional loans (1–2% rates) and commercial loans (6–7%). Domestic debt (28.7%) carries higher rates (15–19%, per BoT).
   • Impact: The 2022 spike may reflect increased commercial borrowing or principal repayments on post-2015 infrastructure loans (e.g., SGR). The decline in 2023–2024 suggests a shift back to concessional financing.
5. Principal Repayments:
   • The 2022 spike (TZS 9.09 trillion) likely includes significant principal repayments on maturing loans from the mid-2010s infrastructure boom.
   • Impact: Principal repayments temporarily inflated the ratio in 2022, unlike the stable interest-driven costs in other years.
6. Interest Rate Changes:
   • Domestic T-bill rates rose from 5.8% to 11.7% by March 2024 (per X posts). Commercial external loans (6–7%) also increased costs compared to concessional loans.
   • Impact: Higher rates on domestic and commercial debt likely contributed to the 2022 peak and sustained higher costs in 2024.

Explanation with Figures

• Stable Period (2013–2021): The ratio hovered around 3.0–3.1% (e.g., USD 1.36 billion ÷ USD 44 billion = 3.09% in 2013; USD 2.08 billion ÷ USD 69.24 billion = 3.00% in 2021). This stability reflects balanced growth in debt service (USD 1.36 billion to USD 2.08 billion, ~52% increase) and GDP (USD 44 billion to USD 69.24 billion, ~57% increase).
• 2022 Peak: The ratio spiked to 4.39% (USD 3.33 billion ÷ USD 75.94 billion), driven by a 60% jump in servicing costs from 2021’s estimated USD 2.08 billion. TZS 9.09 trillion consumed ~30% of recurrent expenditure (TZS 30.31 trillion, BoT), likely due to principal repayments and TZS depreciation (0.5–8%).
• 2023–2024 Decline: The ratio dropped to 2.89% (USD 2.31 billion ÷ USD 80 billion) in 2023 and ~2.99% (USD 2.52 billion ÷ USD 84.40 billion) in 2024, reflecting lower servicing costs (possibly due to fewer principal repayments) and continued GDP growth (5.5%).
• Key Driver Example: In 2022, external debt (~USD 23.7 billion, 71.3% of USD 33.27 billion) at ~3% average rate cost ~USD 0.71 billion, while domestic debt (~USD 9.5 billion) at ~17% cost ~USD 1.62 billion. TZS depreciation and principal repayments likely added ~USD 1 billion, explaining the spike.

Summary

The proportion of debt servicing costs to GDP in Tanzania evolved from 3.09% in 2013 to 2.99% in 2024, with a peak of 4.39% in 2022. The ratio remained stable at ~3.0–3.1% from 2013–2021 due to balanced GDP and debt service growth, spiked in 2022 due to principal repayments and TZS depreciation, and declined to ~2.9–3.0% in 2023–2024 with GDP growth and fewer repayments. Key drivers include:

• Debt Stock Growth: 184% increase (USD 14.93 billion to USD 42.36 billion).
• TZS Depreciation: 8% in 2023/24, inflating external debt costs.
• Debt Composition: Shift to commercial loans and high domestic rates (15–19%) in 2022.
• GDP Growth: 92% increase (USD 44 billion to USD 84.4 billion), stabilizing the ratio.

Tanzania’s debt development, as outlined in the April 2025 Monthly Economic Review and recent data, influences economic growth through fiscal constraints and resource allocation. Below, we analyze the debt structure, including domestic and external debt figures, percentage changes, and their implications for growth, using specific figures to illustrate impacts.

Debt Structure and Figures

Figures:

• Domestic Debt: TZS 34.26 trillion in March 2025, with 29% held by commercial banks and 26.5% by pension funds.
• External Debt: USD 34.1 billion (approximately TZS 91.29 trillion at TZS 2,677/USD, based on a 2.6% year-on-year exchange rate depreciation, Page 30), with 78.3% held by the central government and 67.7% denominated in US dollars.
• Total National Debt: TZS 91.7 trillion in 2024/25 budget context.
• Public Debt (Historical): 45.5% of GDP in 2022/23, up from 43.6% in 2021/22.
• Percentage Change: Exact year-on-year percentage changes for March 2025 debt are not provided in the document or search results. However, domestic debt uptake increased through treasury bills and bonds, and external debt grew to USD 34.1 billion (), suggesting continued borrowing. For context, public debt rose by 4.4% (45.5% - 43.6% of GDP) from 2021/22 to 2022/23.

Explanation:

• Domestic Debt: The TZS 34.26 trillion domestic debt finances fiscal deficits, with significant holdings by commercial banks (TZS 9.93 trillion, 29%) and pension funds (TZS 9.08 trillion, 26.5%). Increased borrowing indicates rising deficits, potentially driven by a 13.4% planned spending increase to TZS 57.04 trillion in FY 2025/26.
• External Debt: The USD 34.1 billion (TZS 91.29 trillion) external debt supports development projects, with 78.3% (USD 26.7 billion) held by the central government. The 67.7% USD denomination (USD 23.1 billion) exposes Tanzania to exchange rate risks, amplified by a 2.6%-shilling depreciation.
• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) indicates a moderate risk of external debt distress, with public debt at 35% of GDP in 2024, below the 55% benchmark (). Total debt service was 2.89% of GNI in 2023.

Impact on Economic Growth

Figures and Explanation:

• Fiscal Space Constraints: Limited fiscal space, noted globally, restricts Tanzania’s ability to fund growth. The FY 2024/25 budget of TZS 49.35 trillion includes TZS 29.41 trillion (59.6%) from tax revenue, leaving a deficit financed by domestic (TZS 34.26 trillion) and external (USD 34.1 billion) borrowing. A planned 13.4% spending increase to TZS 57.04 trillion in FY 2025/26 will further rely on debt, with TZS 16.07 trillion (28.2%) from borrowing.
• Debt Servicing Costs: Debt servicing absorbs significant resources. Historically, external debt servicing consumed 40% of government expenditures. In 2023, total debt service was 2.89% of GNI. For March 2025, servicing TZS 34.26 trillion domestic debt (at, e.g., 15.5% lending rates,) and USD 34.1 billion external debt (at concessional rates,) could cost TZS 5.31 trillion and USD 1-2 billion annually, diverting funds from investments. The 2.6%-shilling depreciation increases external debt costs by TZS 2.37 trillion.
• Crowding-Out Effect: Domestic borrowing of TZS 34.26 trillion (29% by banks) raises lending rates to 15.5%, crowding out private investment. Credit to the private sector weakened in Q4 2024, limiting business growth. The 6% Central Bank Rate mitigates this, but high government borrowing (TZS 4,362 billion average,) strains liquidity.
• Growth Projections: GDP growth is projected at 5.4% in 2024 and 6% in 2025, driven by agriculture (26.5% of GDP), construction (13.2%), and mining (9%). However, debt servicing and fiscal constraints could cap growth below the 6.4% potential by 2026.

Global and Domestic Economic Context

Figures and Explanation:

• Global Risks: The IMF’s global growth forecast of 2.8% for 2025 and rising interest rates increase external borrowing costs. Tanzania’s USD 34.1 billion external debt, with 67.7% in USD, faces higher servicing costs amid global tightening.
• Commodity Impacts: Declining coffee (-2%) and sugar (-1.5%) prices reduce export revenues, straining foreign exchange for debt repayment (Page 3). Gold prices at USD 2,983.25/ounce (+3%) and exports at USD 16.1 billion bolster reserves (USD 5.7 billion, 3.8 months of imports,), easing debt pressures.
• Inflation and Policy: Headline inflation at 3.3% and food inflation at 5.4% (Page 4) increase household costs, potentially slowing consumption. The 6% Central Bank Rate and 587,062-tonne food reserves (32,598 tonnes released) stabilize prices, supporting growth.

Opportunities and Mitigation

Figures and Explanation:

• Development Projects: External debt of USD 34.1 billion funds infrastructure (48% of World Bank’s USD 10 billion portfolio,), like the Standard Gauge Railway, boosting long-term growth. Projects worth TZS 14.81 trillion (30% of FY 2024/25 budget,) enhance connectivity and trade.
• Debt Management: The moderate debt distress risk and concessional financing keep debt sustainable. Revenue mobilization (TZS 2.47 trillion collected in March 2025,) and IMF’s USD 441 million ECF/RSF support () reduce reliance on costly borrowing.
• Fiscal Reforms: Plans to raise tax revenue to TZS 29.41 trillion (10% increase,) and reduce the fiscal deficit to 2.5% of GDP by 2024/25 () enhance fiscal space, freeing resources for growth.

Conclusion

Tanzania’s debt, at TZS 34.26 trillion domestic and USD 34.1 billion (TZS 91.29 trillion) external in March 2025, impacts growth by constraining fiscal space and diverting resources to servicing costs (e.g., TZS 5.31 trillion domestic, USD 1-2 billion external annually). A 2.6%-shilling depreciation and high lending rates (15.5%) exacerbate pressures, crowding out private investment. While debt fuels infrastructure (TZS 14.81 trillion in projects), declining exports (coffee -2%) and global risks (2.8% growth) challenge repayment. Prudent policy (6% CBR, USD 5.7 billion reserves) and revenue growth (TZS 29.41 trillion) mitigate risks, supporting 5.4%-6% GDP growth, but fiscal discipline is crucial.

Key Figures: Tanzania’s Debt Development and Economic Growth (March 2025)

Notes:

• Figures reflect March 2025 unless stated otherwise. TZS/USD conversion uses TZS 2,677/USD (Page 30).
• Debt servicing estimates are based on typical rates (15.5% for domestic, concessional for external).
• Percentage change for debt limited to historical data (4.4% public debt increase, 2021/22-2022/23).
• Source: “Page” refers to April 2025 Monthly Economic Review; “Web” refers to search data; “Est.” indicates estimates.
• Domestic borrowing crowds out private investment; external debt funds infrastructure (e.g., TZS 14.81 trillion).