As of December 2024, Tanzania’s domestic debt stood at TZS 32.65 trillion, reflecting a decline of TZS 919.9 billion from the previous month, signaling improved revenue collection and reduced short-term borrowing needs. Commercial banks (30%) and pension funds (27.5%) hold the largest share of government debt, indicating significant financial sector exposure. Meanwhile, state-owned enterprises (SOEs) such as DAWASA (66.7%) and Tanzania Fertilizer Company (27.5%) accounted for TZS 74.1 billion in domestic debt, showing reliance on borrowing for infrastructure and operational financing. While the reduction in government borrowing is a positive sign, high financial sector exposure to government securities underscores the need for balanced fiscal policies and debt diversification​

Tanzania’s domestic debt stock stood at TZS 32.65 trillion at the end of December 2024, reflecting a decrease of TZS 919.9 billion from the previous month. The decline was primarily due to reduced government overdrafts from the Bank of Tanzania (BoT) as revenue collection improved​.

1. Government Domestic Debt by Creditor Category

Tanzania’s domestic debt is held by commercial banks, pension funds, the Bank of Tanzania, insurance companies, and other financial institutions.

Key Observations:

✅ Commercial banks are the largest holders of domestic debt (30%), meaning government borrowing has a direct impact on banking sector liquidity.
✅ Pension funds hold 27.5%, indicating a strong link between government debt and social security investments.
⚠️ The Bank of Tanzania (18.2%) has reduced its exposure, reflecting improved revenue collection, reducing the need for government overdrafts.

2. Selected State-Owned Enterprises (SOEs) Domestic Debt Stock

In addition to central government borrowing, state-owned enterprises (SOEs) also accumulate domestic debt. As of December 2024, SOEs' total domestic debt stood at TZS 74.1 billion, a slight decrease from TZS 75.3 billion in November 2024​.

Key Observations:

✅ DAWASA (66.7%) and Tanzania Fertilizer Company (27.5%) are the largest SOE borrowers, likely financing infrastructure and supply chain improvements.
⚠️ TANESCO, TPA, and ATCL have no reported domestic debt, suggesting they rely more on external borrowing or government subsidies.
✅ SOE debt declined slightly, indicating possible repayments or reduced borrowing needs.

Key Takeaways

📌 Tanzania’s total domestic debt stands at TZS 32.65 trillion, with commercial banks (30%) and pension funds (27.5%) as the main creditors.
📌 SOEs hold TZS 74.1 billion in domestic debt, with DAWASA (66.7%) and Tanzania Fertilizer Company (27.5%) as the largest borrowers.
📌 The decline in domestic debt suggests better government revenue collection, reducing dependence on short-term borrowing from the central bank.

To ensure long-term sustainability, the government must balance domestic borrowing with fiscal discipline, ensuring SOEs operate efficiently and do not rely excessively on public debt

The domestic debt structure of Tanzania provides important insights into government borrowing patterns, financial sector stability, and fiscal sustainability

1. Government Domestic Debt is Declining – A Positive Fiscal Sign

• The total domestic debt stock stood at TZS 32.65 trillion in December 2024, down by TZS 919.9 billion from the previous month.
• This decline suggests improved revenue collection, reducing the need for short-term domestic borrowing to finance budget deficits.
• The Bank of Tanzania’s share of government debt fell to 18.2%, indicating reduced reliance on direct central bank financing.

Implication:
✅ A decline in domestic borrowing reduces debt service costs, freeing up resources for development projects.
⚠️ If revenue collection slows, the government may return to domestic borrowing, increasing financial sector risks.

2. Financial Sector Exposure to Government Debt is High

• Commercial banks hold 30% (TZS 9.78 trillion) of domestic debt, meaning that government borrowing influences banking sector liquidity.
• Pension funds hold 27.5% (TZS 8.99 trillion), making them highly dependent on government repayment capacity.
• If the government delays payments or restructures debt, banks and pension funds could face liquidity challenges.

Implication:
⚠️ High exposure of banks and pension funds to government debt means fiscal instability could weaken the financial system.
✅ If the government continues to reduce borrowing, it may free up liquidity for private sector lending, supporting economic growth.

3. State-Owned Enterprises (SOEs) Rely on Domestic Debt for Operations

• DAWASA (Water Supply) accounts for 66.7% (TZS 49.4 billion) of SOE domestic debt, likely for infrastructure projects.
• Tanzania Fertilizer Company holds 27.5% (TZS 20.4 billion), indicating dependency on government support for agricultural input financing.
• TANESCO, ATCL, and TPA reported no domestic debt, suggesting they rely on external loans or government subsidies.

Implication:
⚠️ SOEs with high debt burdens may struggle with repayments, increasing risks of contingent liabilities for the government.
✅ Reducing reliance on domestic borrowing could improve SOE financial health, ensuring long-term sustainability.

4. Key Risks and Policy Recommendations

📌 Risk: High domestic debt could crowd out private sector lending if commercial banks prefer risk-free government securities over business loans.
📌 Risk: Pension funds are heavily exposed to government debt, meaning fiscal instability could impact retirees’ savings.
📌 Opportunity: Lower government borrowing could lead to lower interest rates, increasing private sector access to credit.

What Needs to Be Done?
🔹 Enhance domestic revenue collection to reduce borrowing needs.
🔹 Diversify pension fund investments beyond government securities.
🔹 Improve SOE financial management to reduce reliance on domestic debt.
🔹 Promote private sector growth by ensuring bank liquidity is used for business financing, not just government lending.

Final Takeaway

📌 The government is reducing its domestic debt reliance, a positive fiscal sign.
📌 However, banks and pension funds still hold significant government debt, making them vulnerable to fiscal shocks.
📌 SOEs like DAWASA and Tanzania Fertilizer Company depend on domestic debt, highlighting the need for financial discipline.

To ensure long-term stability, Tanzania must balance domestic borrowing with efficient revenue collection and responsible debt management​

Borrowing Patterns, Debt Service, and Sustainability Risks

As of December 2024, Tanzania’s total public debt stood at USD 46.6 billion, with external debt accounting for 70.7% (USD 32.9 billion). The government relied heavily on multilateral lenders (55.4%) and commercial loans (35.6%), increasing exposure to market-driven interest rates. While 21.2% of borrowed funds supported transport and telecommunications infrastructure, 19.4% was used for budget support, highlighting fiscal dependence on borrowing. With debt service payments reaching USD 185.4 million in December, managing repayment risks and prioritizing productive investments is crucial for long-term sustainability​

Debt Developments in Tanzania – December 2024

Tanzania’s total public debt stock reached USD 46,562.1 million at the end of December 2024, reflecting a 0.5% monthly increase. Of this, external debt accounted for 70.7% (USD 32,928.4 million), while domestic debt stood at TZS 32,649.3 billion. The rise in external debt was attributed to new disbursements amounting to USD 376.8 million, mainly to finance government projects and budgetary support​.

1. External Debt Stock and Composition

• Total external debt stock at the end of December 2024 was USD 32,928.4 million, reflecting a 1.8% decrease from USD 33,528.6 million in November 2024.
• The Central Government held 77.4% of the external debt (USD 25,488.3 million), while the private sector accounted for 22.6% (USD 7,436.4 million).
• The decrease in external debt was due to higher debt service payments (USD 185.4 million in December 2024), including USD 111.2 million in principal repayments​.

2. External Debt Stock by Creditor

Tanzania’s external debt is held by multilateral, bilateral, commercial, and export credit lenders. The composition as of December 2024 was as follows:

• Multilateral institutions (55.4%) remain the largest creditors, providing concessional loans with lower interest rates.
• Commercial loans (35.6%) have grown, increasing exposure to market-driven interest rates, which could raise debt service costs in the future.
• Bilateral and export credit debt (9.1%) mainly finances infrastructure projects​.

3. Disbursed Outstanding Debt by Use of Funds (Percentage Shares)

Tanzania’s external debt is allocated across various sectors, primarily transport, energy, social services, and budget support.

• The transport sector (21.2%) and energy (14.6%) received the largest funding, supporting infrastructure expansion projects.
• Social services (20.3%) include education and healthcare investments, improving human capital development.
• Budget support (19.4%) shows the government's reliance on external borrowing to cover fiscal gaps​.

Key Takeaways:

1. External debt dominates Tanzania’s public debt (70.7% of total debt).
2. Multilateral institutions are the main creditors (55.4%), but commercial loans (35.6%) are rising, increasing debt servicing risks.
3. Most funds go to transport (21.2%), social services (20.3%), and budget support (19.4%), reflecting a focus on infrastructure and fiscal stability.
4. The government must manage rising debt service payments (USD 185.4 million in December 2024) to ensure long-term sustainability.

With total public debt at USD 46.6 billion, debt sustainability remains a critical concern, requiring effective fiscal management and prioritization of productive investments​

The debt developments in Tanzania for December 2024 reveal key trends in borrowing patterns, creditor composition, and the sustainability of external debt.

These figures indicate both opportunities and risks for fiscal management and economic stability

1. External Debt Remains the Largest Share of Public Debt

• External debt accounts for 70.7% (USD 32.9 billion) of total public debt (USD 46.6 billion).
• The government is highly reliant on external borrowing, particularly from multilateral lenders (55.4%) and commercial lenders (35.6%).
• While multilateral loans are concessional (low interest, long-term), the growing share of commercial loans (USD 11.7 billion) exposes Tanzania to higher borrowing costs and foreign exchange risks.

Implication:
✅ Multilateral financing provides stable, low-cost funding.
⚠️ High commercial debt increases vulnerability to global interest rate changes, raising repayment costs.

2. Debt Service Obligations Are Increasing

• In December 2024, the government made debt service payments of USD 185.4 million, including USD 111.2 million in principal repayment.
• The growing debt requires more foreign exchange reserves for repayment, increasing exposure to shilling depreciation risks.

Implication:
⚠️ Future fiscal space may shrink as more funds are allocated for debt repayment instead of public services or development.
✅ If borrowed funds are well-invested, economic growth could offset repayment pressures.

3. Most Borrowed Funds Are Used for Infrastructure and Budget Support

• 21.2% of external debt funds are directed to transport and telecommunications, supporting infrastructure expansion (roads, railways, ports).
• 20.3% is allocated to social services (health & education), improving human capital.
• 19.4% goes to budget support, indicating the government’s reliance on borrowing to fund recurrent expenditures.

Implication:
✅ Investing in infrastructure can boost economic growth, improving debt repayment capacity.
⚠️ Using loans for budget support suggests fiscal weaknesses, as the government borrows to cover recurrent expenses instead of productive investments.

4. Debt Sustainability Risks and Management Needs

• Public debt reached USD 46.6 billion, requiring careful management to avoid over-indebtedness.
• The growing commercial loan share increases interest rate risks, requiring improved revenue mobilization to cover repayments.
• Tanzania’s debt remains below the IMF/World Bank risk threshold (55% of GDP), but a rising trend requires close monitoring.

What Needs to be Done?
🔹 Shift borrowing towards productive sectors (e.g., manufacturing, agriculture) to generate returns.
🔹 Reduce reliance on commercial loans and prioritize concessional financing.
🔹 Enhance revenue collection to reduce reliance on budget support loans.
🔹 Strengthen fiscal discipline to ensure borrowed funds are effectively utilized.

Overall Takeaway

📌 Tanzania’s external debt remains dominant (70.7%), with a shift toward commercial borrowing (35.6%).
📌 Debt service payments (USD 185.4 million) are rising, limiting future fiscal flexibility.
📌 Infrastructure investment (21.2%) supports economic growth, but reliance on budget support loans (19.4%) is a concern.
📌 Debt sustainability requires a shift to revenue-driven fiscal policies, careful borrowing, and economic diversification.

While Tanzania’s debt is still within manageable limits, a proactive approach is needed to prevent future fiscal risks​

As of December 2024, Tanzania’s external debt stood at TZS 79.72 trillion (USD 32.93 billion), with 67.8% (TZS 54.10 trillion) denominated in US dollars (USD). The Euro accounted for 16.2% (TZS 12.92 trillion), while the Chinese Yuan made up 6.4% (TZS 5.10 trillion). This heavy reliance on USD borrowing exposes Tanzania to exchange rate risks, where a 10% depreciation of the Tanzania Shilling (TZS) could increase debt servicing costs by TZS 5.41 trillion. To mitigate this risk, Tanzania must enhance foreign reserves, diversify its export earnings, and negotiate more concessional loans to maintain long-term debt sustainability​

Tanzania’s external debt is held in multiple currencies, exposing the country to foreign exchange risks depending on fluctuations in the global market. As of December 2024, the total external debt stock stood at TZS 79.72 trillion (USD 32.93 billion), with the majority denominated in US dollars​.

1. Currency Composition of External Debt (Percentage Share & TZS Value)

2. Key Observations & Implications

✅ US Dollar Dominance (67.8%)

• The majority of Tanzania’s external debt is in USD (TZS 54.10 trillion), making the country highly sensitive to exchange rate fluctuations.
• If the Tanzania Shilling depreciates, debt servicing costs in TZS will increase, putting pressure on government finances.

✅ Euro Loans (16.2%) Provide Some Diversification

• TZS 12.92 trillion is denominated in Euros, offering some protection from USD volatility.
• However, if the Euro strengthens, Tanzania will need more TZS to repay Euro-denominated loans.

✅ Chinese Yuan Exposure (6.4%) Reflects Infrastructure Financing Ties

• TZS 5.10 trillion of Tanzania’s external debt is in CNY, largely financing transport, energy, and telecommunications projects.
• The yuan’s stability reduces risks, but any CNY appreciation will raise repayment costs in TZS.

✅ Other Currencies (9.5%) Reflect a Diverse Creditor Base

• TZS 7.60 trillion is spread across other currencies (GBP, JPY, etc.), limiting reliance on a single currency.
• This reduces overall currency risk but makes debt servicing more complex due to multiple exchange rate fluctuations.

3. Exchange Rate Risks & Debt Management Strategy

⚠️ Tanzania is vulnerable to exchange rate movements, particularly in the USD-TZS exchange rate.
⚠️ If the Tanzania Shilling depreciates against the US dollar, debt servicing costs will increase, reducing fiscal space.
✅ Diversification into Euros and Chinese Yuan helps, but debt repayment strategies should factor in exchange rate risks.

Key Takeaways

📌 67.8% of Tanzania’s external debt (TZS 54.10 trillion) is in US dollars, making debt service costs dependent on USD-TZS fluctuations.
📌 Euro-denominated debt (16.2% or TZS 12.92 trillion) offers some diversification, while CNY exposure (6.4% or TZS 5.10 trillion) reflects infrastructure financing links with China.
📌 Government debt management strategies should focus on reducing currency risks by increasing TZS-denominated borrowing and hedging against USD volatility.

To maintain debt sustainability, Tanzania must closely monitor exchange rate movements, diversify borrowing sources, and prioritize revenue generation to offset repayment risks​

The currency breakdown of Tanzania’s external debt reveals key insights into the country’s financial exposure, exchange rate risks, and debt sustainability

1. Heavy Dependence on the US Dollar (67.8%) Increases Exchange Rate Risk

• USD 54.10 trillion (TZS) of Tanzania’s external debt is in US dollars, meaning any depreciation of the Tanzania Shilling (TZS) against the USD will increase repayment costs.
• If the TZS weakens by just 10%, the government will need an extra TZS 5.41 trillion to service USD-denominated debt.
• Since global interest rates and US monetary policy influence the USD, Tanzania’s debt costs could rise unexpectedly if the USD strengthens.

Implication:
⚠️ Tanzania is highly vulnerable to USD fluctuations, which could increase debt servicing costs and fiscal pressure.
✅ If the Shilling remains stable or strengthens, repayment costs will be lower.

2. Euro (16.2%) and Chinese Yuan (6.4%) Help Reduce USD Dependence

• TZS 12.92 trillion in Euro debt provides some diversification, but the Euro is still volatile against the Shilling.
• TZS 5.10 trillion in Chinese Yuan (CNY) debt reflects Tanzania’s strong infrastructure financing ties with China.
• The CNY is more stable than the USD, but if China tightens monetary policy, Tanzania’s loan repayment costs in TZS could rise.

Implication:
✅ Having some debt in Euros and Yuan reduces USD reliance.
⚠️ However, fluctuations in these currencies could still affect repayment costs.

3. Exchange Rate Movements Can Impact Tanzania’s Fiscal Position

• A weaker TZS will make debt servicing more expensive, reducing funds available for public services and development.
• If the TZS depreciates by 5-10%, the government may need to allocate an extra TZS 4-8 trillion annually for debt repayment.
• Foreign reserves (USD 5.5 billion) cover 4.5 months of imports, but if debt repayments rise, reserves could deplete faster.

Implication:
⚠️ Tanzania must generate more export revenue in USD, EUR, and CNY to ease repayment pressures.
✅ Stable foreign exchange reserves help offset currency risks, ensuring the country meets its obligations.

4. Policy Actions Needed to Reduce Exchange Rate Risks

✅ Increase Local Currency Borrowing: More TZS-denominated debt would protect Tanzania from forex fluctuations.
✅ Enhance Foreign Currency Reserves: A stronger reserve position would act as a buffer against currency swings.
✅ Diversify Export Earnings: More revenue from gold, tourism, and agriculture will help Tanzania repay debts in USD, EUR, and CNY without depleting reserves.
✅ Negotiate for More Concessional Loans: More multilateral funding in low-interest, long-term debt can reduce reliance on expensive commercial borrowing.

Final Takeaway

📌 67.8% of external debt is in USD (TZS 54.10 trillion), making Tanzania vulnerable to currency depreciation risks.
📌 Euro (16.2%) and Chinese Yuan (6.4%) provide diversification, but they also come with their own exchange rate risks.
📌 The government must carefully manage forex reserves and export revenue to avoid debt distress.

While Tanzania’s debt remains manageable, exchange rate volatility could create future repayment challenges if not addressed through strong fiscal management and export-driven economic growth

A Strategic Approach to Fiscal Stability

Tanzania’s domestic debt, totaling TZS 33.6 trillion in November 2024, reflects a strategic focus on long-term financing through Treasury Bonds, which account for 78.2% of the debt portfolio. With a diverse creditor base led by commercial banks (28.8%), pension funds (26.9%), and the Bank of Tanzania (21%), the government balances long-term commitments with short-term liquidity needs. This approach minimizes exchange rate risks and supports fiscal stability, underscoring the importance of sustainable debt management for economic growth.

1. Overview of Domestic Debt

As of November 2024, Tanzania’s domestic debt stock amounted to TZS 33,569.2 billion, reflecting an increase of TZS 546 billion from the previous month. This growth was primarily driven by the issuance of new Treasury bonds and bills.

2. Government Domestic Debt by Borrowing Instruments

The distribution of government domestic debt by instruments in November 2024 is as follows:

Key Observations:

• Treasury Bonds (78.2%) dominate the debt portfolio, reflecting a preference for long-term financing.
• Non-securitized debt, mainly overdraft facilities (15.2%), complements government borrowing for short-term needs.

3. Government Domestic Debt by Creditor Category

The breakdown of creditors for domestic debt as of November 2024 is as follows:

Key Observations:

• Commercial Banks (28.8%) are the largest creditors, reflecting their significant role in financing government operations.
• Pension Funds (26.9%) and Bank of Tanzania (21.0%) also play major roles in providing stable financing to the government.

4. Summary of Figures

Insights:

1. Long-Term Borrowing: The dominance of Treasury Bonds reflects a strategy to stabilize financing over longer horizons.
2. Creditor Diversification: The government relies on a balanced mix of creditors, led by commercial banks and pension funds, ensuring stable domestic funding.
3. Short-Term Financing Needs: Overdrafts and Treasury Bills address immediate liquidity needs, complementing long-term instruments.

Tanzania’s domestic debt portfolio appears strategically managed, emphasizing long-term stability while maintaining access to short-term funds​

The details about Tanzania's domestic debt provide valuable insights into the government’s fiscal strategy and borrowing practices

1. Reliance on Long-Term Borrowing Instruments

• The dominance of Treasury Bonds (78.2%) shows the government’s preference for long-term financing, which spreads repayment obligations over an extended period and minimizes refinancing risks.
• The smaller share of Treasury Bills (6.0%) indicates limited use of short-term borrowing, reducing the pressure of frequent rollovers.

Implication: This strategy reflects a focus on financial stability and sustainable debt management, avoiding excessive short-term debt accumulation.

2. Diverse Creditor Base

• Commercial Banks (28.8%) are the largest creditors, demonstrating the banking sector’s significant role in government financing.
• Pension Funds (26.9%) and the Bank of Tanzania (21.0%) also contribute substantially, providing stable, long-term financing.
• The involvement of insurance companies and special funds (7.1%), along with others (16.2%), indicates broader participation, reducing dependency on any single creditor group.

Implication: A diversified creditor base enhances resilience to shocks, ensuring continued access to domestic financing even during economic uncertainties.

3. Use of Non-Securitized Debt

• Non-securitized debt, primarily overdraft facilities (15.2%), supports the government’s short-term liquidity needs. These facilities complement long-term instruments like Treasury Bonds, ensuring flexibility in managing cash flows.

Implication: The government balances long-term commitments with immediate fiscal needs, reflecting a pragmatic approach to debt management.

4. Domestic Financing Reduces Exchange Rate Risks

• Unlike external debt, domestic borrowing eliminates exposure to exchange rate fluctuations, making it a safer option in times of currency volatility.
• The reliance on domestic debt also reflects efforts to utilize internal financial markets, promoting local economic growth.

Implication: The emphasis on domestic debt aligns with sound fiscal management, leveraging local resources while avoiding external currency risks.

5. Debt Sustainability and Fiscal Discipline

• The steady growth of domestic debt (an increase of TZS 546 billion in November 2024) suggests an ongoing need to finance government operations and development projects.
• While the reliance on Treasury Bonds indicates fiscal discipline, rising debt levels demand productive use of borrowed funds to ensure economic returns.

Conclusion:
Tanzania’s domestic debt strategy emphasizes long-term stability, diversified financing, and fiscal flexibility. However, as debt levels grow, effective utilization of funds for development and maintaining debt sustainability will be critical to avoiding financial strain in the future.

Tanzania’s debt profile reflects a balanced approach to managing both external and domestic debt. With a slight reduction in external debt and a growing reliance on domestic borrowing, the country is strategically navigating fiscal pressures. The government's careful mix of external loans and domestic securities, supported by a diverse creditor base, aims to maintain fiscal stability while mitigating risks associated with currency fluctuations and interest payments. This strategic debt management is crucial for sustaining the country’s economic growth and development.

The debt developments in Tanzania, particularly in the context of external and domestic debt, showcase a strategic approach to debt management.

1. External Debt:

• Total external debt has decreased by 1.5%, bringing it to USD 32,976.9 million as of October 2024.
• Monthly changes:
  • External loans disbursed amounted to USD 285.1 million, mainly directed to the central government.
  • External debt service was USD 288.4 million:
    • Principal repayment: USD 200.3 million
    • Interest payments: The remaining balance of USD 88.1 million (288.4M - 200.3M).

2. External Debt Stock by Borrowers:

Central Government:

• Total amount: USD 25,452.9 million (77.2% of total external debt).
• Disbursed Outstanding Debt (DOD): USD 25,208.8 million (76.4%).
• Interest arrears: USD 252.1 million (0.8%).

Private Sector:

• Total amount: USD 7,520.3 million (22.8%).
• DOD: USD 6,191.6 million (18.8%).
• Interest arrears: USD 1,328.7 million (4.0%).

Public Corporations:

• Amount: USD 3.8 million.
• DOD: USD 3.8 million.
• Interest arrears: USD 0.0 million.

3. Domestic Debt:

• Domestic debt increased by TZS 407.48 billion, totaling TZS 33,023.2 billion.
• Main driver: The government's utilization of the overdraft facility.

Breakdown by Instruments:

• Treasury bonds account for 78% of the total domestic debt.
• Government securities represent 84.5% of the total domestic debt (TZS 27,900.1 billion).
• Non-securitized debt makes up 15.5% (TZS 5,123.0 billion).

4. Domestic Debt by Creditor:

• Commercial banks: 28.8% (TZS 9,510.2 billion).
• Bank of Tanzania (BOT): 21.4% (TZS 7,064.7 billion).
• Pension funds: 27.3% (TZS 9,003.3 billion).
• Insurance companies: 5.8% (TZS 1,913.8 billion).
• BOT's special funds: 1.3% (TZS 420.3 billion).
• Others: 15.5% (TZS 5,110.8 billion).

5. Disbursed Outstanding Debt by Currency Composition:

• United States Dollar (USD): 68.0%.
• Euro: 16.2%.
• Chinese Yuan: 6.2%.
• Other currencies: 9.6%.

Key Observations:

1. External Debt:
   • The external debt shows a decreasing trend with a slight reduction of 1.5%.
   • The central government remains the dominant borrower, holding 77.2% of the total external debt.
   • The currency composition of the debt is well-diversified, with USD comprising the largest share at 68.0%.
2. Domestic Debt:
   • The domestic debt is on an increasing trend, mainly driven by the government's overdraft facility.
   • Treasury bonds represent the largest share (78%) in domestic debt.
   • The creditor base is highly diversified, with commercial banks, pension funds, and the Bank of Tanzania being the largest creditors.
3. Overall Debt Management:
   • Strategic mix: Tanzania maintains a balanced approach between external and domestic debt.
   • The currency diversification helps mitigate risks associated with exchange rate fluctuations.
   • Tanzania’s domestic borrowing is supported by a strong institutional framework, including commercial banks, pension funds, and insurance companies.
   • Prudent debt service management is evident, with careful balancing of principal repayments and interest payments.

The debt profile indicates a strategic approach to debt management, with a well-balanced mix of external and domestic debt. The diversification of creditors and currency composition helps manage risks, while prudent debt servicing ensures that the debt remains sustainable. The increasing reliance on domestic debt and the government's use of overdraft facilities should be monitored to ensure continued fiscal stability.

Tanzania's debt developments with valuable insights into the country’s fiscal health and debt management strategy.

1. Decline in External Debt:

• Decrease in External Debt: Tanzania's external debt decreased by 1.5%, indicating a slight reduction in the country’s reliance on foreign borrowing. This could be a result of repayments or a slowdown in new external borrowing. It may also suggest a deliberate effort to manage the debt burden.
• External Debt Service Management: Although the total external debt decreased, the country is still servicing significant debt with monthly repayments (USD 288.4 million), which includes both principal (USD 200.3 million) and interest payments. This shows that while external borrowing is reducing, the debt still needs careful management, particularly regarding interest payments.

2. Dominance of Central Government Borrowing:

• Central Government's Share: The central government accounts for 77.2% of external debt, reflecting the government's dominant role as the primary borrower. This suggests that the government is using external loans for financing projects or covering budget deficits.
• Interest Arrears: The central government has some interest arrears (USD 252.1 million), which could indicate delayed payments, a factor that could affect credit ratings or future borrowing costs.

3. Private Sector Debt and Interest Arrears:

• The private sector holds 22.8% of external debt, and the interest arrears for the private sector (USD 1.3 billion) are relatively high. This could indicate challenges in the private sector's ability to service foreign debt, potentially impacting business operations and investment.

4. Rising Domestic Debt:

• Increased Domestic Debt: Domestic debt rose by TZS 407.48 billion to a total of TZS 33,023.2 billion, indicating that the government is increasingly relying on local sources of financing. This increase is attributed to the government's overdraft facility, which may be a sign of short-term fiscal pressures or a gap in domestic revenue collection.
• Treasury Bonds Dominate: Treasury bonds, which make up 78% of domestic debt, show the government's reliance on long-term debt instruments to finance its budget. Treasury bonds are generally seen as a more stable form of debt because they have predictable repayment schedules.
• Diversified Creditor Base: The domestic debt is held by various creditors, including commercial banks, pension funds, and the Bank of Tanzania. This indicates a broad and strong domestic investor base that is willing to purchase government debt, which can support financial stability.

5. Currency Composition and Risk Management:

• The currency composition of external debt (68% in USD) reflects Tanzania’s vulnerability to exchange rate fluctuations. A heavy reliance on the USD exposes the country to risks from a strengthening or weakening of the dollar against the Tanzanian Shilling.
• Diversified Currency Exposure: The presence of other currencies like the Euro (16.2%) and Chinese Yuan (6.2%) helps mitigate this risk, but the dominance of the USD still signals a potential concern if the exchange rate were to become volatile.

6. Strategic Debt Management Approach:

• Balanced External and Domestic Debt: Tanzania appears to have a strategic mix of external and domestic debt, which helps manage risk. By increasing reliance on domestic debt, the government can reduce exposure to global market fluctuations (e.g., foreign exchange risks).
• Institutional Framework: The strong participation of commercial banks, pension funds, and other institutional investors in the domestic debt market demonstrates confidence in the government's fiscal policies and ensures that the debt is well-supported by domestic capital.

7. Overall Debt Sustainability:

• The analysis suggests that Tanzania is managing its debt carefully, with a mix of external and domestic debt that helps balance foreign exposure and domestic financial sector development.
• While external debt is decreasing, domestic debt is increasing, which may signal short-term pressures. However, the diversity of creditors and instruments (e.g., Treasury bonds) in the domestic debt market provides a buffer.
• The government appears to have a prudent debt service management strategy, balancing principal repayment and interest to ensure continued access to credit.

Conclusion:

The debt developments point to a strategic approach to managing Tanzania’s overall debt profile. However, there are some risks and challenges:

• Domestic debt growth may indicate rising fiscal pressures and reliance on local borrowing.
• External debt servicing remains substantial despite a decrease in the total external debt.
• The currency mix could pose risks to debt sustainability due to exposure to exchange rate fluctuations.

Overall, Tanzania's debt management appears balanced and strategically planned, with strong institutional support for domestic borrowing and an eye on reducing external debt. However, the country must continue to monitor its debt sustainability carefully, particularly regarding domestic borrowing and interest arrears in the private sector.

Tanzania’s outstanding IMF credit of $853.3 million positions it as the third-largest borrower among East African Community (EAC) members, following Kenya ($3.02 billion) and Uganda ($992.8 million). This figure underscores Tanzania’s moderate reliance on IMF resources compared to Kenya’s significantly higher borrowing, which reflects its fiscal challenges. Rwanda and Burundi, with outstanding credits of $476.1 million and $100.6 million respectively, trail behind. Tanzania’s borrowing highlights a balanced approach, addressing financing needs while maintaining debt sustainability in the region.

• Outstanding Credit: $853,270,000 (approximately $853.3 million)
• Rank in East Africa: 3rd largest among East African Community (EAC) members.
• Context: This amount reflects Tanzania's reliance on IMF financing relative to regional peers.

East African Countries Comparison

1. Kenya: $3,022,009,900
   • Holds the highest outstanding IMF credit in East Africa.
   • Recently received an additional disbursement of $455.7 million, further elevating its position.
2. Uganda: $992,750,000
   • Second-highest in the region, with a credit position close to $1 billion.
3. Tanzania: $853,270,000
   • Third-largest, indicating moderate borrowing compared to Kenya and Uganda.
4. Rwanda: $476,141,140
   • Significantly lower than Tanzania but shows active use of IMF facilities.
5. Burundi: $100,600,000
   • The smallest credit position in the EAC, reflecting limited IMF engagement.

Insights

• Kenya's High Credit: Kenya’s large IMF borrowing aligns with its economic challenges, such as fiscal deficits and external imbalances. The additional disbursement highlights its need for ongoing support.
• Tanzania's Moderate Position: Tanzania's IMF credit is substantial but reflects a more conservative borrowing approach compared to Kenya. This aligns with its relatively stable macroeconomic environment in recent years.
• Rwanda and Burundi: Their smaller credit levels could indicate less reliance on IMF resources or limited access due to policy or capacity considerations.

Comparison with Other African Countries

• Key Context: Across Africa, countries like Egypt, Nigeria, and South Africa often have significant IMF credit levels due to their larger economies or ongoing economic reforms.
• Regional Variation: East African countries like Tanzania and Uganda show moderate use of IMF facilities, balancing economic reforms with external support.

The comparison of Tanzania's IMF credit position with other East African countries and its context within Africa highlights the following insights:

1. Economic Management and Policy Approach

• Tanzania's Moderate Position:
  • Tanzania's $853.3 million IMF credit suggests that the country has been relatively prudent in seeking external financing compared to Kenya and Uganda.
  • This aligns with Tanzania's historically cautious borrowing and stable macroeconomic management, focusing on long-term growth and sustainability.
  • The reliance on IMF funds indicates Tanzania is addressing external shocks or developmental financing gaps but is not over-leveraging.

2. Regional Dynamics

• Kenya's Dominance:
  • Kenya’s significantly higher credit position ($3 billion) shows its more immediate financial challenges, possibly driven by larger fiscal deficits, debt servicing pressures, or external imbalances.
  • This reliance might reflect Kenya’s prioritization of aggressive infrastructure development, which requires external support.
• Uganda vs. Tanzania:
  • Uganda's slightly higher credit ($992.8 million) points to slightly higher funding needs, perhaps due to different economic or social priorities.
• Rwanda and Burundi:
  • These countries' lower IMF credits reflect either limited access, smaller economies, or differing economic strategies, particularly Burundi's smaller borrowing capacity.

3. Tanzania's Position as a Balanced Borrower

• Being third in East Africa shows Tanzania strikes a balance between:
  • Using IMF funds to address short-term needs and maintaining sustainable debt levels.
  • Managing economic risks, avoiding excessive dependency, and maintaining room for further borrowing if needed.

4. Implications for Development and Reform

• Tanzania’s borrowing strategy indicates:
  • A focus on maintaining investor confidence and creditworthiness.
  • A potential readiness to address fiscal or external gaps while preserving economic stability.
  • Moderate IMF reliance reflects policy consistency in achieving economic targets, supporting reforms, and mitigating global economic risks like inflation or commodity price volatility.

5. Global and African Position

• In Africa, Tanzania's IMF credit indicates moderate external dependency compared to major borrowers like Kenya, South Africa, or Egypt, suggesting steady progress in economic resilience and diversified funding.

Key Takeaway

Tanzania’s IMF credit position signals cautious borrowing and economic stability compared to its peers, balancing development needs with sustainable debt management. This approach positions Tanzania favorably for long-term growth while maintaining flexibility to handle future challenges.

Balancing Growth Amid Persistent Challenges

The October 2024 IMF report on Sub-Saharan Africa’s economic outlook reveals a steady yet cautious path forward, with growth projected at 3.6% in 2024 and inflation expected to ease from 18.1% to 12.3% by 2025. While fiscal policies have stabilized the region’s debt-to-GDP ratio at 58%, the high cost of debt servicing – consuming over 20% of revenues in many countries – limits resources for development. With rising food prices driving social unrest, and climate shocks intensifying, the report underscores the need for balanced policy adjustments. Sustained progress will depend on targeted reforms, social support mechanisms, and external funding to support economic resilience across diverse economies.

1. Growth and Inflation:
   • Real GDP growth for the region is projected at 3.6% in 2024, with expectations to slightly rise to 4.2% in 2025. Resource-intensive countries grow slower than others, with oil exporters facing the most challenges.
   • Inflation has seen a decline due to policy tightening, with the region's headline inflation forecasted to reduce from 18.1% in 2024 to 12.3% in 2025.
   • Resource-intensive countries like Tanzania are forecasted to grow below the regional average, constrained by tight external financing conditions and structural weaknesses affecting the business environment​.
2. Debt and Fiscal Balance:
   • The median public debt-to-GDP ratio stabilized at 58% in 2024. However, debt service burdens remain high, consuming over 20% of revenues in a quarter of the countries, leading to reduced resources for development spending.
   • For Tanzania, debt sustainability remains a concern as public debt continues to limit fiscal space for growth-stimulating investments​.
   • Fiscal consolidation has been a focus, with a reduction in the fiscal deficit by 1.3 percentage points of GDP across many countries in 2023. More countries are expected to further reduce deficits by 0.4 percentage points in 2024.
   • Tanzania is expected to see additional consolidation in 2024, focusing on expanding tax revenues and controlling expenditures to stabilize the debt level. However, tight fiscal conditions pose challenges for financing social and infrastructure projects essential for sustainable development​

3. External Position:
   • Median current account deficit is projected to narrow by 0.7 percentage points of GDP in 2024, helped by fiscal consolidation and adjustments in exchange rates.
4. Social and Political Pressures:
   • Social unrest is a rising concern due to high poverty, job scarcity, and inflation, especially in countries like Nigeria and Kenya. Food prices have risen sharply, with food price indexes up significantly since 2019.
   • Tanzania, like other countries, faces potential social unrest if economic conditions do not improve, particularly for unemployed youth and low-income households impacted by rising costs. Effective fiscal management and equitable resource allocation are critical to addressing these pressures​
5. Key Risks:
   • Climate risks, social unrest, and global market volatility are major threats. Political fragility, seen in the rising number of coups and conflicts, further complicates policy implementation.
   • Tanzania faces heightened risks from climate-induced events such as droughts, affecting agriculture and food security, and contributing to inflation pressures. The IMF notes that climate adaptation will require significant resources, impacting budget allocation​
   • An IMF model suggests that a 150-basis-point rise in sovereign risk premiums could reduce growth by 0.7 percentage points in 2025–26, worsening investment and growth (AFRMOD model simulation).
   • Debt and Financing: External financing remains tight, with rising interest rates and geopolitical tensions reducing access to affordable debt. Tanzania, with moderate reserves, may experience increased borrowing costs, further stressing its fiscal space.
   • Global Market Risks: Regional exposure to global financial fluctuations adds to uncertainty, especially with tightening US monetary policy potentially increasing debt servicing costs for Tanzania. Additionally, regional conflicts and commodity price fluctuations may destabilize Tanzania's economic outlook​
6. Policy Recommendations:
   • Tanzania’s need for continued fiscal discipline, inflation control, and resilience to social and climate-related pressures to stabilize and stimulate long-term growth in an increasingly challenging environment.
   • Policymakers are advised to focus on stabilizing prices, ensuring debt sustainability, and building social protection frameworks. Measures include broadening tax bases, improving governance, and enhancing social inclusiveness to gain public support for reforms.

These efforts aim to foster resilience and inclusive growth but require balancing economic stabilization with social acceptance amid complex challenges.

The October 2024 Regional Economic Outlook for Sub-Saharan Africa from the IMF provides a mixed view of progress and challenges for economic stability and growth across the region.

1. Economic Progress with Persistent Vulnerabilities:
   • Growth in Sub-Saharan Africa remains steady at 3.6% but lacks momentum. Inflation is coming down in most countries due to stricter monetary policies, yet remains high in oil-dependent and resource-intensive economies.
   • Fiscal efforts have improved debt stability, with debt-to-GDP ratios holding steady around 58%. However, the debt burden still strains public finances, with high debt servicing costs cutting into funds available for development.
2. Social and Political Pressures:
   • The region faces growing social unrest driven by high inflation, especially in food prices, job scarcity, and widespread poverty. These pressures make reform implementation difficult for policymakers, particularly in fragile countries with limited resources.
3. Climate and Global Risks:
   • Climate change impacts, including droughts and floods, severely threaten food security and economic stability. Additionally, global financial market volatility and geopolitical tensions pose risks to financing and growth.
4. Strategic Recommendations:
   • The IMF recommends that policymakers pursue balanced economic policies, carefully manage inflation, and focus on debt sustainability. Building stronger social safety nets and effective communication strategies are critical to maintaining public support for necessary reforms.
5. Path Forward with IMF Support:
   • The IMF emphasizes its commitment to aiding the region through concessional financing and capacity-building initiatives. Given the tough financing environment, it highlights the importance of external support and sustainable development strategies tailored to each country’s specific needs.

In summary, while Sub-Saharan Africa shows resilience in some areas, challenges like high inflation, limited financing, climate impacts, and social unrest highlight the need for carefully coordinated reforms that balance economic stability and social needs.