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.

In September 2024, Tanzania’s national debt reached USD 45.05 billion, with 73% held in external debt, underscoring the country’s reliance on foreign financing for development. This external debt, totaling USD 32.89 billion, exposes Tanzania to risks from global economic shifts, such as rising interest rates and currency fluctuations. The domestic debt, focused on long-term government securities, reflects a cautious approach to managing short-term financial pressures. As Tanzania strives to balance its funding needs with sustainable debt levels, a diversified financial strategy will be essential to maintain resilience and support continued economic growth.

1. Debt Composition:
   • External Debt: Comprises 73% of the total debt, equating to approximately USD 32.89 billion. This reliance on foreign financing highlights Tanzania's exposure to external economic conditions, currency fluctuations, and interest rates.
   • Domestic Debt: Accounts for the remaining 27%, around TZS 32.6 trillion (roughly USD 12.16 billion). The domestic debt primarily includes long-term government securities such as Treasury bonds, which constituted 78.9% of the domestic debt portfolio.
2. Debt Growth:
   • External debt grew by 0.6% in September, driven by additional external loans primarily for government projects. This slight growth shows moderate increases in borrowing, indicating a cautious approach amid rising global borrowing costs.
   • Domestic debt, in contrast, saw a reduction in short-term instruments like Treasury bills, aligning with a strategy to keep interest expenses in check by favoring longer-term, lower-risk instruments.
3. Debt Servicing and Risks:
   • External Debt Service: In September, the government serviced USD 105.4 million in external debt, including USD 45.9 million for principal repayment and USD 59.5 million for interest. These payments indicate ongoing debt obligations that can strain foreign reserves if external conditions tighten or export earnings decline.
   • Domestic Debt Management: By focusing on long-term securities, the government aims to minimize rollover risks and ensure more predictable repayment schedules. This reduces the potential impact of short-term interest rate volatility.
4. Implications of High External Debt:
   • A high proportion of external debt can expose Tanzania to global economic shifts, such as rising interest rates or currency depreciation, which could make debt repayments more expensive in local currency terms.
   • The substantial external debt load could also limit Tanzania’s ability to borrow further for development if global financial conditions worsen, underscoring the need for diversified funding sources.

In summary, Tanzania’s debt management strategy involves controlled domestic borrowing and careful external debt expansion, yet the high reliance on foreign debt remains a vulnerability. Prudent management of this debt mix will be essential to maintain economic resilience and avoid financial constraints.

Tanzania’s debt profile, with the national debt at USD 45.05 billion and external debt accounting for 73% of this, provides insights into the country’s fiscal strategy and potential risks:

1. Reliance on Foreign Financing:
   • The high proportion of external debt (USD 32.89 billion) reveals Tanzania’s significant reliance on international funding for development and fiscal needs. While this allows the government to fund large-scale projects, it exposes the country to external risks like currency fluctuations and rising global interest rates, which can increase debt servicing costs in the future.
2. Debt Servicing and Foreign Reserve Pressure:
   • With over USD 105 million in debt servicing obligations in a single month, Tanzania must allocate foreign reserves to cover these repayments. If export earnings decline or global financing conditions tighten, maintaining these payments could become challenging, potentially impacting reserves and currency stability.
3. Balanced Approach in Domestic Borrowing:
   • Tanzania’s focus on long-term Treasury bonds for domestic debt (78.9% of domestic debt) reflects a prudent strategy, reducing the need for frequent rollovers and lowering short-term interest rate risks. This approach helps manage cash flow predictably and minimizes immediate repayment pressures, providing a level of financial stability.
4. Implications for Fiscal Flexibility:
   • While Tanzania’s controlled domestic debt growth is financially sound, the high external debt limits fiscal flexibility. In a global downturn, the country could face challenges in accessing affordable funding or may need to divert resources from domestic priorities to service external debt.
5. Need for Diversification:
   • The reliance on foreign debt emphasizes the importance of diversifying funding sources. Increasing domestic revenue, promoting foreign direct investment, or expanding export earnings could provide a buffer, reducing dependency on external loans.

In essence, while Tanzania is managing its debt prudently, particularly on the domestic front, the high reliance on external debt poses a risk if global conditions worsen. Ensuring a balance between funding needs and sustainable debt levels will be crucial for long-term fiscal health and economic stability.

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 External Debt: $32.68 billion USD (Aug 2024).
• Average (2011-2024): $19.47 billion USD.
• Record Low: $2.47 billion USD (Dec 2011).

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

• Significant Growth: Tanzania's external debt has grown from USD 2.47 billion in December 2011 to USD 32.68 billion by August 2024. This nearly 13-fold increase reflects Tanzania's heavy reliance on external financing to fund large-scale infrastructure and industrialization projects.
• Recent Trend: The debt rose from USD 31.99 billion in July 2024 to USD 32.68 billion in August 2024, indicating a rapid, ongoing reliance on external borrowing.
• Debt Average: Over the period from 2011 to 2024, Tanzania’s average debt was USD 19.47 billion, showing that recent years have seen particularly sharp increases in borrowing.

2. Tanzania’s Position in East Africa

• Tanzania is one of the largest economies in East Africa, second only to Kenya in terms of external debt.
• Comparison with Other East African Countries:
  • Kenya leads with an external debt of USD 34.5 billion in June 2024.
  • Tanzania follows with USD 32.68 billion in August 2024.
  • Other countries like Rwanda (USD 6.26 billion in December 2022) and Burundi have significantly lower external debt.
  • Uganda’s external debt, though not provided in the data, is typically lower than Tanzania’s.
• This shows that Tanzania and Kenya, as the region's largest economies, are heavily investing in large-scale projects that require significant external financing. Both countries are competing in terms of infrastructure development and economic growth.

3. Tanzania’s Position in Africa

• Mid-level Debt: In the context of Africa, Tanzania has moderate external debt compared to larger economies like South Africa (USD 163.85 billion) and Egypt (USD 160.61 billion). However, it has higher debt than many smaller African countries.
• Top 10 Ranking: Tanzania ranks 5th among African nations with the highest external debt, ahead of countries like Ghana (USD 31.02 billion) and Zambia (USD 8.02 billion), but well below the continent’s giants such as South Africa and Egypt.

4. Implications for Tanzania

• Ambitious Development Agenda: The sharp rise in debt reflects Tanzania’s commitment to expanding its infrastructure, energy, and industrial base. This external borrowing is crucial for financing large-scale projects like the Standard Gauge Railway (SGR), ports, and energy projects.
• Debt Sustainability Concerns: While external debt has fueled development, managing the rising debt levels is critical. High external debt can lead to increased debt servicing costs, which could limit the government’s ability to fund other important sectors like health and education. If not managed carefully, this could lead to long-term fiscal imbalances.
• Productive Use of Borrowed Funds: The key challenge for Tanzania will be to ensure that the funds borrowed are used effectively to generate economic returns, such as increased production capacity, exports, and jobs. This would help ensure that debt remains sustainable and does not lead to a debt crisis.
• Regional Competition: Tanzania’s increasing external debt mirrors the competition with other East African countries, particularly Kenya, which is also borrowing heavily for development. Both nations are positioning themselves as economic hubs in the region, but the race for infrastructure and economic development could lead to further borrowing.

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.