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.

A Legacy of Collaboration and a Blueprint for the Future

By Dr. Bravious Kahyoza, PhD, Senior Economist at TICGL

Tanzania’s journey with Public-Private Partnerships (PPPs) is a compelling narrative of ambition, resilience, and progress. From visionary reforms to groundbreaking collaborations, the country has redefined how public and private sectors can unite to tackle critical challenges. At its core, this is a story of transformation, driven by innovation and a steadfast belief in the power of partnership to uplift a nation.

The Foundations of PPPs in Tanzania

The foundation for PPPs in Tanzania was laid during the administration of President Benjamin Mkapa, whose foresight underscored the importance of liberalization in achieving sustainable economic growth. Under his leadership, Tanzania embraced reforms that positioned the private sector as an engine of development. Mkapa’s vision was clear: the private sector is not a competitor but a development partner. This belief set the stage for deeper collaborations between the government and private entities in providing critical public services and infrastructure.

Building on this foundation, the government under Prime Minister Mizengo Pinda took decisive steps to institutionalize the PPP framework. In 2010, the Public-Private Partnership Act, Cap. 103 was enacted, establishing the PPP Coordination Unit and the PPP Finance Unit to analyze projects for technical and financial viability, respectively. Pinda championed the legislation, emphasizing the need for a structured system where the government and private sector could collaborate efficiently. However, implementation challenges soon became evident, necessitating further reforms.

Evolution and Reforms of the PPP Framework

By 2014, the government acknowledged these challenges and moved to amend the PPP Act, merging the two units into the PPP Centre, a centralized entity within the Office of the Prime Minister. This reform aimed to streamline decision-making processes and reduce bureaucratic hurdles. Economic experts like Prof. Lucian Msambichaka from the University of Dar es Salaam supported the change, noting that a fragmented approach could not thrive in a fast-paced economic environment. A single institution, he argued, would instill confidence among investors and guide the process more effectively.

Another pivotal reform came in 2018, when the PPP Centre was relocated to the Ministry of Finance and Planning to align its operations more closely with the country’s fiscal policies. Leaders like Prof. Kitila Mkumbo, Minister of Planning and Investment, advocated for the move, believing that integration with the finance ministry would ensure more effective resource mobilization aligned with national priorities.

Current Leadership and Progress

Today, the PPP Centre operates under the Ministry of Finance and Planning, led by David Zacharia Kafulila, a seasoned public administrator appointed as the Centre’s first Executive Director in January 2024. Under his leadership, Tanzania’s PPP agenda has been revitalized, leading to the initiation and acceleration of projects in critical sectors such as energy, transportation, and health. With a results-driven approach, Kafulila emphasizes that partnerships must deliver real outcomes. His leadership has drawn praise from President Samia Suluhu Hassan, who, in a national address, recognized the Centre’s transformation into a model of efficiency and innovation. Projects once stalled are now progressing, instilling a renewed sense of hope for the future.

Challenges and the Road Ahead

Yet, despite the progress, challenges remain. The late Prof. Honest Ngowi from Mzumbe University often highlighted the barriers hindering the full realization of PPPs in Tanzania. These include gaps in the legal and institutional framework, a need for more comprehensive feasibility studies, and improved risk-sharing mechanisms to better attract private-sector investment. As he put it, goodwill alone is not enough—the government must foster an environment where investors feel secure and respected.

The impact of faith-based organizations in sectors such as education, health, and water demonstrates the transformative power of partnerships. Their successes offer proof of concept, yet scaling these models to large infrastructure projects has proven difficult due to complex regulatory and financial dynamics.

Tanzania’s PPP progress has been bolstered by broader economic reforms. Investment as a percentage of GDP increased from 17.6 percent in 1995 to 26.3 percent in 2008, and by 2023, it stood at 40.25 percent—reflecting greater private sector participation. However, access to credit remains low by global standards, limiting the scope of private involvement in high-impact projects. Prof. Ngowi often emphasized the need for expanded access to long-term financing to support truly transformative initiatives.

Foreign Direct Investment has also seen positive growth, rising by 14.7 percent in 2023 to reach $1.65 billion, up from $1.44 billion the year before. This increase was largely driven by a surge in intercompany loans, which accounted for 43.1 percent of total FDI flows, compared to 8.7 percent in 2022. While these figures are promising, they remain modest when compared to global and regional benchmarks. Addressing bottlenecks in infrastructure and refining the regulatory environment will be crucial to attracting even more investment. Prof. Mkumbo has often stressed that without a supportive business environment, Tanzania risks falling behind in the global competition for capital.

A Look at Regional Success Stories

Valuable lessons can be drawn from other African countries that have implemented successful PPP models. South Africa’s Renewable Energy Independent Power Producer Procurement (REIPPP) program has attracted billions in investment by offering clear guidelines, competitive bidding, and consistent government commitment. Kenya’s Nairobi Expressway is another success story, showcasing the value of strategic partnerships that balance investor returns with public benefits.

These examples underline a central truth: effective PPPs depend on transparent processes, strong institutions, and clear policy frameworks that inspire investor confidence while safeguarding public interest.

The Future of PPPs in Tanzania

As Tanzania moves toward realizing its Vision 2025 development agenda, the role of PPPs will only grow more critical. The government recognizes that bridging financial and technical resource gaps will require active participation from the private sector. Kafulila maintains that PPPs are not just a financing mechanism—they are a strategy for delivering better services and spurring economic growth. His balanced approach blends private-sector innovation with public oversight to ensure lasting benefits for all citizens.

The legacy of PPPs in Tanzania reflects decades of deliberate policy choices and courageous leadership—from President Mkapa’s economic liberalization to Prime Minister Pinda’s legal reforms and the insights of economists like Prof. Msambichaka and Prof. Ngowi. Today, that legacy is being shaped further by a new generation of leaders and partners.

With strong leadership, coherent policies, and a shared national vision, Tanzania is well-positioned to unlock the full potential of Public-Private Partnerships—building a future defined by inclusive development, modern infrastructure, and sustained prosperity.

The Roadmap to PPP Development

By Dr. Bravious Kahyoza, PhD, Senior Economist at TICGL

Tanzania’s journey in Public-Private Partnerships (PPPs) began with the National PPP Policy in 2009, which laid the foundation for a structured approach to public-private collaboration.

The Public-Private Partnership Act, CAP 103, was enacted in 2010, establishing a key institution: PPP Coordination Unit under the Ministry of Finance, responsible for receiving, analyzing, and assessing financial feasibility for PPP projects.

Over the years, amendments to the PPP framework have been made to address challenges and enhance efficiency.

In 2014, the Act was amended to establish the PPP Centre as a One-Stop Centre under the Prime Minister’s Office. However, to further consolidate PPP activities, another amendment in 2018 transferred the PPP Centre to the Ministry of Finance and Planning, ensuring that all public-private partnership operations were streamlined under one ministry.

A major turning point came with the 2023 Amendment, which introduced significant reforms to streamline processes, improve governance, and attract investments. The Public-Private Partnership Act of 2023 officially became operational on July 14, 2023, marking a proactive step toward making Tanzania a preferred investment destination.

Key Features of the 2023 PPP Amendment Act

Strengthening Governance and Approval Processes

One of the most notable reforms introduced in the 2023 Amendment Act is the establishment of special arrangements for strategic projects. Under these provisions, any agreement concerning strategic projects must first be vetted by the Attorney General before receiving final approval.

Additionally, the prefeasibility study requirement has been strengthened. Now, every contracting authority must submit a prefeasibility study to relevant ministers as part of each budget cycle to ensure potential PPP projects align with national development goals.

To enhance efficiency, a strict timeline has been introduced for project approvals. The PPP Centre is required to analyze prefeasibility studies, proposal documents, and evaluation reports for bidder selection within thirty working days from the date of submission.

Enhancing the Financing and Procurement Framework

The 2023 Amendment defines public funding in PPP projects as government financial support that constitutes fiscal commitments and liabilities. This ensures clarity in how public resources are allocated in PPP projects.

To improve procurement processes, the Act mandates the establishment of Special Purpose Vehicles (SPVs) by private sector partners before signing any PPP agreement. This measure helps in risk allocation, project financing, and long-term project sustainability.

Moreover, the Act promotes amicable dispute resolution by emphasizing negotiation-based mechanisms for resolving disputes that may arise during PPP project implementation.

Promoting Transparency and Accountability

To ensure continuous monitoring, the new law requires the PPP Centre to consolidate periodic performance reports from all PPP projects and submit them to the PPP Steering Committee before forwarding them to the Minister of Finance.

Another key improvement is the legal primacy of the PPP Act. In case of any conflict between the PPP Act and other laws, the provisions of the PPP Act will take precedence, eliminating ambiguities that could slow down project implementation.

Impact of the 2023 PPP Amendment Act

The amendment of the PPP Act in 2023 is expected to have significant positive impacts on Tanzania’s investment climate and infrastructure development.

One of the most notable benefits is the introduction of investment incentives for private sector investors. These include tax benefits and government guarantees for mining and petroleum projects, along with assistance in securing capital. These measures are designed to attract more private sector participation in strategic projects.

The amendment also enhances efficiency in project implementation by reducing preparation time and optimizing resource utilization. By clarifying the roles of different stakeholders and introducing clear standard operating procedures, the Act ensures that projects move from planning to execution more efficiently.

Furthermore, the Act introduces key definitions that strengthen the overall PPP framework. Concepts such as Special Purpose Vehicles (SPVs), standard documents, and strategic projects are now well-defined, leading to greater transparency, accountability, and better decision-making.

The introduction of dispute resolution mechanisms under the amendment Act strengthens governance and fosters better collaboration between the public and private sectors. By prioritizing negotiation-based resolutions, the law reduces risks associated with legal uncertainties in PPP projects.

Positioning Tanzania as a Competitive Investment Destination

The recent PPP Amendment Act of 2023 marks a major milestone in Tanzania’s journey toward creating a sustainable hub for local and foreign investment. With these legal and regulatory improvements, the government hopes to attract more private sector engagement in critical infrastructure areas and stimulate economic growth.

By enabling investment possibilities, fostering dispute resolution, and providing tax incentives, Tanzania is positioning itself as a regional leader in infrastructure-driven economic growth. The success of these reforms will depend on consistent implementation, policy stability, and continued collaboration between the public and private sectors.

With bold reforms and a strong commitment to transparency, Tanzania is well on its way to unlocking the full potential of Public-Private Partnerships.