The relationship between government revenue and borrowing in Tanzania from 2020 to 2025 reveals how fiscal policy has been used strategically to stabilize the economy, finance development, and manage shocks. Over this period, Tanzania’s revenue grew significantly—from TZS 21.81 trillion in 2020 to TZS 31.49 trillion in 2024, representing a 44.4% increase, driven by stronger tax administration, digital systems at TRA, expanding mining exports, and a recovering services sector. The projected TZS 32.77 trillion in 2025 (annualized from January–September data) shows slower growth of 4.1%, reflecting election-year disruptions and agricultural impacts from El Niño. Read More: Tanzania Government Revenue at 87.2% of Target, Spending at 71.9%

Despite this progress, revenue growth alone was insufficient to cover rising expenditures on infrastructure, social services, and economic recovery. As a result, borrowing became a critical fiscal tool, totaling approximately TZS 56.5 trillion between 2020 and 2024. Borrowing peaked in 2021 at 49.2% of revenue due to COVID-19 recovery spending, then stabilized around 33–36% in later years as revenue improved and the economy regained momentum—reaching 5.5% growth in 2024, with 6% projected for 2025.

A statistical analysis shows a moderate positive correlation of 0.63 (63%) between revenue and borrowing from 2020–2025, meaning that about 40% of changes in borrowing are explained by changes in revenue. This indicates that as revenue increases, borrowing capacity strengthens because lenders view rising revenue as a sign of repayment ability. At the same time, borrowing fills revenue gaps to sustain public investment, creating a growth loop where debt-financed projects expand future revenue potential.

This relationship has been central to financing major development priorities. Borrowing funded large-scale infrastructure such as railways, energy projects, and port modernization, which collectively accounted for 60% of development expenditure. These investments helped reduce poverty—from 27% in 2022 to 25% in 2024—and improved human capital outcomes. However, rising domestic borrowing at interest rates of 13–15% poses risks of crowding out private sector credit, while revenue-to-GDP ratios (14–15%) remain below the Sub-Saharan African average (16%), highlighting structural constraints like informality.

Overall, Tanzania’s revenue–borrowing interaction during 2020–2025 shows a carefully managed fiscal balance: borrowing enabled continued development and shock absorption while staying within sustainable debt limits (public debt at 48% of GDP, below the IMF’s 55% benchmark). Strengthening domestic revenue—especially through improved compliance, digital taxation, and property tax reforms—remains essential for reducing borrowing dependence and enhancing long-term economic sustainability.

*2025: Annualized from Jan-Sept data (revenue: 24.58T × 12/9; borrowing: 8.79T × 12/9). GDP projections assume 6% real growth + 3.5% inflation; fiscal deficit per IMF. Sources: Document data; GDP/fiscal metrics from World Bank, Bank of Tanzania, and IMF estimates.

Revenue Composition and Growth Drivers

• Cumulative Growth: 44.4% from 2020-2024, with steady 8-11% YoY increases. Taxes formed ~80% of revenue, boosted by base-broadening (e.g., property and carbon taxes) and ICT investments at the Tanzania Revenue Authority, including the Tanzania Customs Integrated System (TANCIS). Nontax revenues (e.g., SOE dividends, grants) contributed 2-3% of GDP. 2024's 10.7% rise was linked to mining royalties and improved VAT collection efficiency (~40%).
• 2025 Partial Data: The 24.58 trillion TZS for Jan-Sept indicates tempered growth, possibly due to delayed collections from the October 2025 elections and El Niño effects on agriculture. Annualized projections suggest tax-to-GDP at ~15%, but risks include softer global commodity prices.
• Challenges: High informality (>50% of the economy) limits upside; grants declined to 0.3% of GDP after 2023 as donors pivoted to loans.

Borrowing Composition and Sources

• Foreign Borrowing (Cumulative 2020-2024: ~29T, 58%): Focused on development projects (80-85%, e.g., 4.84 trillion TZS in 2024 for ports and rail). Program loans (15-20%) provided budget support. Mostly concessional (grant element >40%) from multilaterals like the World Bank, with low interest (~1.5%). In Jan-Sept 2025, 5.79 trillion TZS leaned toward programs (37%) tied to reforms.
• Domestic Borrowing (Cumulative: ~21.5T, 42%): Through Treasury bills and bonds; it peaked in 2022 (4.69T) amid liquidity strains but fell in 2023 and 2025 with stronger revenues. 2024 saw 4.25 trillion TZS at rates of 13-15%. Domestic debt service rose to 31% of revenue in FY2023/24 and is projected at 34% for FY2024/25.
• Overall Trend: Borrowing fell -23.7% YoY from 2021-2022, then grew modestly (+3.6% in 2023-2024), supporting infrastructure (e.g., Julius Nyerere Hydropower Project, targeting 2.1GW completion by late 2025). 2025 trends mirror this, with foreign outpacing domestic (66:34 split).

The Relationship Between Revenue and Borrowing

This relationship illustrates how Tanzania's government uses borrowing to close budget gaps, enabling development investments without compromising fiscal stability. The data shows a strategic, symbiotic dynamic: borrowing covered 27-49% of revenues, funding development spending (8-10% of GDP) while revenues gradually strengthened to reduce dependency.

1. Deficit Financing Role: Borrowing filled 27-49% of revenue shortfalls, allowing total expenditures of 18-20% of GDP (recurrent: 11%, development: 8%). Absent this, development outlays would have been slashed—as in 2021's 49.2% ratio, which financed stimulus for health and social aid, aiding GDP rebound from 4.8% (2020) to 5.5% (2024). In 2024, the lower 33.5% ratio reflected revenue buoyancy, narrowing the deficit to -2.5% of GDP; 2025 projections hold at -3% amid supplementary spending.
2. Counter-Cyclical Function: Borrowing surged +96.9% from 2020-2021 (vs. +10% revenue growth) during shocks, then stabilized (-14.5 percentage points drop 2021-2022). This buffered volatility, with foreign development loans yielding high multipliers (1.8x GDP impact per IMF estimates) in productive areas like energy, where demand grew 7% YoY in 2024.
3. Sustainability and Risks: The ~35% ratio stabilization post-2021 demonstrates prudence, with public debt at 48% of GDP in 2024 (below thresholds). Debt service remains manageable at ~12% of revenue, but domestic borrowing elevates costs (crowding out private sector; FDI at 1.5% of GDP in 2024). Analyses suggest reaching 16% revenue-to-GDP via reforms could cut borrowing needs to <30%, supporting 7% growth.
4. Equity and Growth Linkages: Borrowing prioritized sectors like health/education (7% of GDP in 2024, +6% YoY), trimming poverty from 27% (2022) to 25% (2024) and improving equity (post-transfer Gini at 0.33). However, inefficiencies (15% spending waste) and regressive subsidies limit poverty reduction to 2-3% annually. Productive debt use has enhanced human capital (HCI score to 0.42 in 2024).

Implications for Tanzania's Economic Development

The revenue-borrowing nexus has been a catalyst for shared growth, positioning Tanzania for middle-income status (projected GDP per capita ~USD 1,400 by 2025 end).

• Positive Enablers: Combined, they fueled an infrastructure surge (60% of development spend), lifting exports to 16% of GDP in 2024 and employment growth (4% in 2023-2024). Debt-financed projects aligned with 6%+ GDP targets, gradually easing poverty through social programs.
• Challenges and Reforms: Revenue weaknesses (tax gap: 6% of GDP) compel borrowing, but high ratios during shocks pushed debt to 48% of GDP, squeezing space amid global tightening. Domestic borrowing crowded out private credit (growth slowed to 15% in 2024 from 20%), impeding diversification (agriculture still 28% of GDP).
• Forward Outlook (2026+): With debt at ~49% of GDP and reserves covering 5 months of imports, sustainability is viable if revenues reach 15.5% of GDP through digital taxation and property reforms. Emphasizing concessional loans for climate-resilient projects could boost growth to 7%, trimming borrowing to <30% of revenue.

In summary, the interplay between revenue and borrowing has enabled growth by financing deficits for development while upholding sustainability. Strengthening domestic revenues is essential to lessen reliance, ensuring long-term fiscal health and equitable progress. For FY2025/26 updates (post-October elections), consult Ministry of Finance or Bank of Tanzania reports.

Correlation Between Government Revenue and Borrowing in Tanzania (2020-2025)

To address the query—"Does what we borrow and collect (revenue) have a correlation? What is the correlation percentage, and what does it mean economically?"—this section analyzes the statistical relationship between total annual revenue and total borrowing using the provided data. A Pearson correlation coefficient was calculated, which measures the linear relationship between the two variables on a scale from -1 (perfect negative) to +1 (perfect positive). The analysis uses full-year data for 2020-2024 and annualized figures for 2025 (based on January-September data multiplied by 12/9 to estimate the full year).

Data Table

The table below presents the key figures in trillions of TZS for readability (original data in millions TZS, divided by 1,000,000). This allows clear visualization of trends alongside the correlation computation.

*2025: Annualized from January-September data. Sources: Provided document; calculations via statistical analysis.

Correlation Analysis

• Does a Correlation Exist? Yes, there is a moderate positive correlation between revenue and borrowing. As revenues increase over time, borrowing tends to rise as well, though not in lockstep.
• Correlation Percentage: The Pearson correlation coefficient is 0.63, equivalent to 63% (rounded to two decimals). This indicates a moderately strong linear relationship—about 40% of the variation in borrowing can be explained by changes in revenue (R² = 0.63² ≈ 0.40).
  • Interpretation: Values above 0.5 suggest a meaningful positive link, but below 0.8-0.9 means other factors (e.g., economic shocks, policy decisions) also influence borrowing.

Economic Meaning

Economically, this 63% correlation highlights a symbiotic but balanced fiscal dynamic in Tanzania's development trajectory:

• Complementary Growth Driver: Higher revenues (from taxes and economic expansion) enable more borrowing capacity without distress, as lenders view stronger collections as a repayment buffer. Conversely, borrowing fills revenue gaps to fund essential investments (e.g., infrastructure, health), boosting GDP growth (5-6% annually) and future revenues in a virtuous cycle. For instance, the 2021 spike (revenue +10%, borrowing +97%) shows borrowing amplifying recovery efforts during low-revenue shocks.
• Sustainability Signal: The moderate strength (not >80%) implies prudent management—borrowing doesn't balloon unchecked with revenues but stabilizes (~35% ratio post-2021), keeping debt at sustainable levels (48% of GDP in 2024). This avoids "debt traps" common in low-income countries, where weak correlations lead to over-reliance (e.g., >50% ratios persisting).
• Development Implications: In Tanzania's context, it supports inclusive growth: Productive borrowing (e.g., foreign loans for projects with 1.5-2x GDP multipliers) enhances revenue potential via job creation and exports, reducing poverty (down ~2% annually). However, pushing the correlation higher through revenue reforms (to 16% of GDP) could lower borrowing needs, freeing space for private investment and accelerating middle-income transition (projected USD 1,400 per capita by 2026).
• Risks if Unaddressed: A weakening correlation (e.g., if revenues stagnate due to informality) could signal fiscal strain, raising costs (domestic rates 13-15%) and crowding out private credit, slowing diversification from agriculture (28% of GDP).

This correlation underscores borrowing as a strategic tool—not a crutch—for sustaining development amid revenue constraints, with ongoing reforms key to strengthening the link for long-term resilience.

Tanzania’s revenue collection, particularly through taxes on businesses and services, has seen steady improvement, yet challenges like tax evasion and administrative inefficiencies persist. The 2024/2025 budget of TZS 49.35 trillion (USD 18.85 billion) delivered 5.5% real GDP growth, collecting TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with domestic revenue at TZS 29.83 trillion (15.0% of GDP). This supported low-income Tanzanians through TZS 708.6 billion in fertilizer subsidies, TZS 444.7 billion for fee-free education, and infrastructure projects creating jobs. The 2025/2026 budget, projected at TZS 56.49 trillion (USD 22.07 billion), an 11.6% increase, targets 6.0% GDP growth with TZS 38.9 trillion in domestic revenue (16.7% of GDP) and introduces tax reforms to boost compliance. This case study evaluates whether these projections, given the state of revenue and taxation, can achieve the goal of promoting economic growth for low-income Tanzanians, using key figures and sectoral analysis.

1. State of Revenue Collection and Taxation in Tanzania

Tanzania’s revenue mobilization relies heavily on taxes from businesses and services, including income tax, VAT, and import duties. The current tax-to-GDP ratio of 14.9% is below the Sub-Saharan Africa average of 18.6%, indicating room for improvement. Recent performance and challenges provide context for the 2025/2026 projections.

2024/2025 Revenue Performance:

• Total Revenue: TZS 45.07 trillion (89.6% of TZS 50.29 trillion target), with TZS 29.83 trillion from domestic sources (15.0% of GDP).
• Tax Revenue: By February 2025, TZS 22.38 trillion was collected, driven by income tax (TZS 1,573.8 billion in January 2025 alone) and import duties (TZS 962.2 billion), reflecting business growth and trade activity.
• Non-Tax Revenue: Increased by 40% to TZS 884.7 billion (July 2024–May 2025), due to dividends and digital systems.
• Achievements: January 2025 collections reached TZS 3,877.4 billion, exceeding targets by 8.6%, indicating improved compliance and economic activity.
• Challenges: TRA faced criticism for malpractices, prompting a presidential commission review. Lower taxes on local goods suggest weaker domestic demand.

Taxation on Businesses and Services:

• Income Tax: Strong collections (TZS 1,573.8 billion in January 2025) reflect business growth, particularly in ICT (13.5% growth projected by 2026) and mining (9.3%).
• VAT and Exemptions: The 2024/2025 budget introduced VAT exemptions for fertilizers and edible oils, benefiting low-income farmers, but repealed exemptions on precious metals to boost revenue.
• Import Duties: Contributed 40% of tax revenue in H1 2024/2025, supporting fiscal stability despite global challenges.
• Reforms: Digital systems and oversight have reduced leakages, but the informal sector (~30% of GDP) and agriculture remain under-taxed.

2025/2026 Revenue Projections:

• Domestic Revenue: TZS 38.9 trillion (16.7% of GDP, up from 15.0%), with TRA targeting TZS 29.17 trillion (13.3% of GDP) from taxes.
• Total Revenue: Expected to exceed TZS 50.29 trillion, financed by TZS 40.47 trillion domestic revenue and TZS 14.95 trillion loans.
• New Taxes: Mandatory travel insurance for visitors, removal of EPZ/SEZ tax holidays, and 20% gold output for local processing aim to boost revenue.
• Goal: Increase tax-to-GDP ratio to 14% by 2050, targeting TZS 350 trillion annually.

Assessment: The 8.6% revenue surplus in January 2025 and 40% non-tax revenue growth suggest Tanzania can achieve TZS 38.9 trillion if TRA reforms address inefficiencies and broaden the tax base (e.g., informal sector). However, global economic risks and domestic demand weaknesses could hinder collections.

2. 2025/2026 Budget Framework and Economic Growth Target

The TZS 56.49 trillion budget, an 11.6% increase from TZS 49.35 trillion in 2024/2025, aims for 6.0% real GDP growth. Key financial and economic strategies include:

• Budget Structure:
  • Recurrent Expenditure: TZS 38.6 trillion (68.3% of budget) for wages, debt servicing, and elections.
  • Development Expenditure: TZS 16.4 trillion (29.0% of budget) for SGR, JNHPP, and social projects.
  • Financing: TZS 38.9 trillion domestic revenue, TZS 16.02 trillion external sources (TZS 1.02 trillion aid, TZS 5.6 trillion concessional loans, TZS 9.4 trillion commercial loans).
• Macroeconomic Targets:
  • GDP growth: 6.0% in 2025, up from 5.5% in 2024.
  • Inflation: 3.0–5.0% to ensure affordability.
  • Domestic revenue: 16.7% of GDP to reduce borrowing reliance.
  • Reserves: ≥4 months of imports (4.4 months in 2024).
• Sectoral Drivers:
  • Agriculture (26.5% of GDP, ~65% employment).
  • Industry (construction 13.2%, mining 9.0%).
  • Services (ICT 13.5%, tourism 7.0% growth projected).

Comparison with 2024/2025:

• 2024/2025 achieved 5.5% growth with TZS 15.75 trillion development spending, despite revenue shortfalls (89.6%).
• 2025/2026’s TZS 16.4 trillion development budget and 16.7% GDP revenue target position it to exceed prior performance if execution is efficient.

Assessment: The budget’s 6.0% growth target is feasible, supported by projections from the IMF (6.0% in 2025), AfDB (6.0%), and local estimates (6.1–6.4% by 2026) (Web ID: 7, 8, 12). Increased domestic revenue (TZS 38.9 trillion) and strategic investments could drive growth, but success depends on revenue collection and global stability.

3. Promoting Economic Growth for Low-Income Tanzanians

The budget aims to uplift low-income Tanzanians (26.4% abject poverty, 8.0% extreme poverty in 2018) through sectoral investments and social programs. Below is an analysis of key measures and their potential impact.

a. Agriculture

Context:

• Contributes 26.5% to GDP, employs ~65% of Tanzanians.
• TZS 708.6 billion in fertilizer subsidies (2021/22–2023/24) reduced costs by 50%, boosting yields.
• VAT exemptions on fertilizers and seeds supported farmers.

2025/2026 Measures:

• Continued subsidies (inferred from prior budgets).
• TADB loans via a ¥22.7 billion Japan agreement for climate-resilient farming.
• Irrigation and value addition to enhance exports (11.6% of GDP in 2024).

Impact:

• Could contribute 1.0–1.5 percentage points to GDP growth (4–6% sectoral growth).
• Subsidies and loans increase incomes for low-income farmers, potentially reducing extreme poverty below 8.0%.
• Exports (6.0% growth projected in 2025) stabilize prices via reserves (USD 5.7 billion in 2024).

b. Industry

Context:

• Construction (13.2%) and mining (9.0%) grew via TZS 1.68 trillion for SGR and TZS 574.8 billion for JNHPP/rural electrification in 2024/2025.
• Mining revenue rose due to gold exports.

2025/2026 Measures:

• TZS 2.75 trillion for transport (SGR, ports) and TZS 2.2 trillion for energy (JNHPP, rural electrification).
• SIDO programs and mining reforms (20% gold for local processing).
• Completion of JNHPP (2,115 MW) to reduce energy costs.

Impact:

• Could contribute 1.5–2.0 percentage points to GDP growth (7–8% sectoral growth).
• Jobs from SGR and JNHPP benefit low-income workers.
• Cheaper energy lowers business costs, reducing prices for consumers.

c. Services

Context:

• Services (~40–50% of GDP) grew via tourism (USD 7.2 billion, 1.4 million visitors) and ICT (12.5% growth) in 2024/2025.
• Exports at 20.3% of GDP narrowed the trade deficit to USD 5,157.2 million.

2025/2026 Measures:

• TZS 359.9 billion for tourism promotion.
• ICT investments (13.5% growth by 2026) via digital infrastructure.
• SGR and Air Tanzania to reduce transport costs.

Impact:

• Could contribute 2.5–3.0 percentage points to GDP growth (6–7% sectoral growth).
• Tourism and ICT jobs are accessible to low-income workers.
• Lower transport costs reduce commodity prices.

d. Social Programs

Context:

• TZS 444.7 billion for fee-free education, TZS 636.0 billion for student loans, and TZS 414.7 billion for healthcare in 2024/2025 improved access.
• PSSN cash transfers reduced child malnutrition.

2025/2026 Measures:

• Sustained or increased education and health funding (e.g., training 28,000 health workers).
• PSSN expansion for vulnerable households.
• TZS 378.7 billion (2024/2025 level) for water projects, inferred to continue.

Impact:

• Enhances skills and health, reducing poverty cycles.
• Cash transfers improve food security for low-income households.

4. Can the Budget Achieve the Goal?

Strengths:

• Revenue Potential: TZS 38.9 trillion (16.7% of GDP) is achievable, given 8.6% surplus in January 2025 and 40% non-tax revenue growth (Web ID: 5, 6). Tax reforms (e.g., gold processing) could broaden the base.
• Economic Growth: 6.0% target aligns with IMF and AfDB projections, supported by TZS 16.4 trillion development spending.
• Low-Income Focus: Subsidies (TZS 708.6 billion historically), education (TZS 444.7 billion), health (TZS 414.7 billion), and energy (TZS 2.2 trillion) directly benefit low-income Tanzanians, potentially reducing extreme poverty below 8.0%.
• Fiscal Stability: Public debt at 46.5% of GDP and reserves at 4.4 months ensure sustainability.

Challenges:

• Revenue Risks: 2024/2025’s 89.6% shortfall (TZS 45.07 trillion vs. TZS 50.29 trillion) and TRA inefficiencies could jeopardize TZS 38.9 trillion.
• Taxation Burden: New taxes (e.g., travel insurance) and EPZ/SEZ changes may strain businesses, reducing job creation.
• External Risks: Currency depreciation (TZS 2,585/USD) and global shocks could raise import costs, affecting low-income consumers.
• Implementation: Delays in SGR or JNHPP could limit economic benefits.

Conclusion

The TZS 56.49 trillion 2025/2026 budget has strong potential to promote economic growth for low-income Tanzanians by achieving 6.0% GDP growth and reducing poverty through targeted investments. However, success hinges on improving revenue collection (TZS 38.9 trillion), addressing TRA inefficiencies, and mitigating external risks. If executed effectively, the budget could surpass the 2024/2025 impact, uplifting low-income Tanzanians through jobs, affordability, and social services.

In April 2025, Tanzania’s government domestic debt reached TZS 34,759.9 billion, a 1.5% increase from TZS 34,255.4 billion in March 2025 and a 9.2% rise from TZS 31,836.5 billion in April 2024, reflecting steady reliance on domestic financing to support fiscal needs. Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) are the largest creditors, while the “Others” category, including individuals and corporates, surged by 47% to TZS 5,996.8 billion, indicating growing public participation.

1. Total Domestic Debt Stock (April 2025)

The total government domestic debt stock represents the amount owed to domestic creditors, primarily through government securities like Treasury bills and bonds, used to finance budget deficits and support fiscal operations.

Key Figures:

• Total Government Domestic Debt: TZS 34,759.9 billion
• Change from March 2025: Increased by 1.5% from TZS 34,255.4 billion (an increase of TZS 504.5 billion).
• Change from April 2024: Increased by 9.2% from TZS 31,836.5 billion (an increase of TZS 2,923.4 billion).

Analysis:

• Month-on-Month Growth: The 1.5% increase from March 2025 (TZS 34,255.4 billion to TZS 34,759.9 billion) reflects moderate growth in domestic borrowing, likely driven by ongoing fiscal needs, such as financing the March 2025 budget deficit of TZS 284.3 billion (previous responses). The Monthey Economic Review indicates high liquidity in the Government Securities Market (e.g., TZS 1,076.7 billion in bond bids, previous responses), supporting the issuance of new securities.
• Year-on-Year Growth: The 9.2% increase from April 2024 (TZS 31,836.5 billion) aligns with TICGL noting a rising domestic debt trend, with domestic debt reaching TZS 34,014.1 billion in February 2025, down slightly from January due to reduced overdraft use. This growth reflects the government’s reliance on domestic financing to support infrastructure and recurrent expenditures, as outlined in the 2024/25 budget of TZS 49.35 trillion.
• Debt Sustainability: The IMF’s Debt Sustainability Analysis (DSA) indicates that Tanzania’s public debt, including domestic debt, remains sustainable at 46.7% of GDP in 2022/23, including domestic arrears. The domestic debt-to-GDP ratio is estimated at approximately 15.9% in 2021/22, suggesting that April 2025’s TZS 34,759.9 billion (roughly USD 12.97 billion at TZS 2,684.41/USD, previous responses) remains manageable given Tanzania’s GDP of USD 79.2 billion in 2024.

Insights:

• The modest 1.5% monthly increase suggests controlled borrowing, consistent with the Monthey Economic Review’s fiscal deficit target below 3% of GDP and TICGL projecting a 2.5% deficit in 2024/25.
• The 9.2% annual increase indicates a strategic use of domestic borrowing to complement external debt (USD 35.51 billion in April 2025, previous responses), reducing reliance on foreign currency risks (USD dominates external debt at 67.4%, previous responses).
• TICGL highlight commercial banks and pension funds as key creditors reflecting a diversified and stable domestic creditor base.

2. Domestic Debt by Creditor Category (April 2025)

This breakdown details the distribution of domestic debt across creditor categories, highlighting the roles of various institutions and investors in financing government operations.

Key Figures:

Analysis:

• Commercial Banks (28.9%, TZS 10,049.9 billion): As the largest creditor group, commercial banks play a pivotal role in financing government debt, primarily through Treasury bills and bonds. Their share is slightly lower than the 33.1% reported in March 2024, reflecting a minor decline in holdings (see comparison below). This aligns with the Monthey Economic Review’s indication of high banking sector liquidity (e.g., TZS 2,611.1 billion in Interbank Cash Market transactions, previous responses), enabling banks to absorb government securities.
• Pension Funds (26.4%, TZS 9,171.1 billion): The second-largest creditor group, pension funds’ significant share reflects their preference for long-term securities like Treasury bonds, consistent with their long-term investment horizons. TICGL note pension funds held 26.7% in March 2024, indicating stable institutional participation.
• Bank of Tanzania (20.5%, TZS 7,119.2 billion): The BoT’s substantial holding likely includes monetary policy instruments (e.g., liquidity management through Treasury bills) and budgetary support via overdraft facilities. The Monthey Economic Review notes the BoT’s role in stabilizing the interbank market rate within 4–8% (previous responses), supporting its debt holdings.
• Others (17.3%, TZS 5,996.8 billion): This category, including public institutions, private companies, and individuals, shows significant growth (see comparison below), indicating deepening financial market participation. TICGL highlight growing investor interest in government securities, likely driven by attractive yields (e.g., T-bill rates at 11.7% in March 2024).
• Insurance Companies (5.3%, TZS 1,858.4 billion) and BoT Special Funds (1.6%, TZS 564.5 billion): These smaller shares reflect niche roles, with insurance companies investing in secure government securities and BoT special funds supporting specific fiscal needs. Their shares are consistent with historical data (9% and 2% in 2019).

Insights:

• The diversified creditor base reduces reliance on any single group, enhancing debt market stability. Commercial banks and pension funds dominate due to their capacity to absorb large volumes of securities, as noted in TICGL.
• The BoT’s 20.5% share reflects its dual role in monetary policy and fiscal support, aligning with the stable Central Bank Rate (CBR) of 6%.
• The significant share of “Others” (17.3%) indicates broadening financial inclusion, as retail and corporate investors increasingly participate in government securities, supported by digital platforms and market reforms.

3. Comparison: April 2024 vs. April 2025

This comparison highlights changes in creditor holdings, providing insights into evolving debt dynamics.

Key Figures:

Analysis:

• Commercial Banks (↓ -1.1%, TZS -107.9 billion): The slight decline from TZS 10,157.8 billion to TZS 10,049.9 billion suggests portfolio rebalancing or increased competition from other creditors. TICGL note a similar trend in February 2025, with domestic debt declining due to reduced overdraft use, possibly reflecting banks’ shift to other investments amid high liquidity (7-day interbank rate within 4–8%).
• Bank of Tanzania (↑ +6.2%, TZS +416.8 billion): The increase from TZS 6,702.4 billion to TZS 7,119.2 billion indicates greater BoT involvement, likely through monetary policy operations or overdraft facilities to support fiscal needs. The Monthey Economic Review’s stable CBR at 6% supports the BoT’s role in liquidity management.
• Pension Funds (↑ +5.0%, TZS +438.1 billion): The rise from TZS 8,733.0 billion to TZS 9,171.1 billion reflects pension funds’ preference for long-term Treasury bonds, driven by yields (e.g., 2–20-year bond yields up 2–2.9% in March 2024). This aligns with their 26.7% share in March 2024.
• Others (↑ +47.0%, TZS +1,908.7 billion): The sharp increase from TZS 4,088.1 billion to TZS 5,996.8 billion signals growing participation from non-traditional investors (e.g., individuals, corporates), likely due to attractive yields and improved access to securities markets.  TICGL note Treasury bonds as the dominant instrument, appealing to retail investors.
• BoT Special Funds (↑ +84.0%, TZS +257.8 billion): The significant rise from TZS 306.7 billion to TZS 564.5 billion suggests increased use of special funds for specific fiscal purposes, though their small share (1.6%) limits their overall impact.
• Insurance Companies (↑ +0.5%, TZS +10.0 billion): The marginal increase from TZS 1,848.4 billion to TZS 1,858.4 billion indicates stable but limited participation, consistent with their 5–9% historical share.

Insights:

• The decline in commercial banks’ holdings (-1.1%) suggests a shift toward other investments or competition from pension funds and “Others,” reflecting a deepening domestic debt market, as noted in TICGL.
• The significant growth in “Others” (+47.0%) indicates financial market development, with retail and corporate investors increasingly absorbing government securities, supported by digital platforms and market reforms.
• The increases in BoT (+6.2%) and pension funds (+5.0%) reflect institutional confidence in government securities, driven by stable macroeconomic conditions (inflation at 3.2%) and attractive yields (T-bill rates at 11.7% in March 2024).

Conclusion

Tanzania’s domestic debt stock in April 2025 reached TZS 34,759.9 billion, up 1.5% from March 2025 and 9.2% from April 2024, reflecting steady reliance on domestic financing to support a TZS 284.3 billion budget deficit (previous responses). Commercial banks (28.9%, TZS 10,049.9 billion) and pension funds (26.4%, TZS 9,171.1 billion) remain the largest creditors, followed by the BoT (20.5%, TZS 7,119.2 billion), indicating a diversified creditor base. The sharp 47% increase in “Others” (TZS 5,996.8 billion) highlights growing public participation, driven by attractive yields and financial market reforms. The domestic debt remains sustainable, with a debt-to-GDP ratio below 55%, supported by robust GDP growth (5.6% in 2024, projected 6% in 2025) and fiscal discipline.

The following table summarizes these key figures.

As Tanzania continues its journey toward economic self-reliance, the performance of the Tanzania Revenue Authority (TRA) has taken center stage in the country’s budget operations. With consistent improvements in tax collection and administrative reforms, TRA is emerging as the main engine of domestic revenue mobilization. But the key question remains: Can TRA revenues fully support Tanzania’s budget and eliminate the fiscal deficit?

TRA’s Strong Performance: Numbers Speak

From July 2024 to March 2025, TRA collected TZS 24.05 trillion, exceeding the target of TZS 23.21 trillion by TZS 0.84 trillion. This represents a performance rate of 103.62% and a 17% increase compared to the same period in 2023/24.

Projection: By June 2025, TRA is expected to collect over TZS 32 trillion, positioning it to potentially cover most of Tanzania’s recurrent budget.

In comparison, Tanzania typically receives about TZS 7–8 trillion annually in foreign aid and loans. TRA’s revenue is now 4–5 times greater, proving the growing power of domestic resource mobilization.

January 2025 Snapshot: TRA’s Role in Budget Execution

A closer look at January 2025 reveals the real weight of TRA revenues:

• Total Government Revenue: TZS 2,697.8 billion
• TRA Tax Revenue (part of above): TZS 2,222.3 billion
• Total Government Expenditure: TZS 3,576.1 billion

➤ Resulting Budget Deficit:

Deficit = Expenditure – Revenue
= TZS 3,576.1B – TZS 2,697.8B
= TZS 878.3 billion

Even though TRA slightly exceeded its tax collection target by 0.3%, it could not fully cover government spending. This left a financing gap of TZS 878.3 billion, highlighting ongoing fiscal pressure.

Can TRA Close the Budget Gap?

TRA’s improved performance is helping reduce the budget deficit. For example:

• In Q3 (Jan–Mar 2025), TRA overcollected by TZS 100 billion.
• If this overperformance continues each quarter, it would amount to TZS 400–500 billion annually.
• This could reduce the budget deficit by 50% or more.

Still, to completely eliminate the deficit, either:

• Expenditure must be reduced, or
• Other revenues (like non-tax income or grants) must fill the remaining gap.

From Deficit to Surplus — What’s Required?

Let’s do the math:

• Annual Government Expenditure Estimate (FY 2024/25): TZS 38–40 trillion
• Projected TRA Revenue: TZS 32 trillion
• Remaining gap: TZS 6–8 trillion

So even with TRA’s strong performance, Tanzania still faces a potential shortfall of TZS 6–8 trillion annually, unless:

• Development expenditure is strategically reduced,
• Non-tax revenues improve (e.g., state dividends, fees),
• Or external financing is maintained temporarily.

Only when total revenue exceeds expenditure will Tanzania begin to see a budget surplus.

Key Takeaways

TRA Is Leading, But Not Alone

The Tanzania Revenue Authority has undeniably become the pillar of fiscal sustainability. Its strong revenue performance is reducing Tanzania’s dependence on foreign aid and increasing its ability to fund development locally.

But as January’s numbers show, TRA alone is not yet enough to balance the budget. A comprehensive approach — combining efficient spending, improved non-tax revenues, and sustained tax reforms — is essential.

With smart fiscal management and continued TRA performance, Tanzania can achieve true budget independence — and perhaps, a future surplus.

Tanzania Budget Operations vs TRA Revenue

Summary Insights from the Table

• TRA is Tanzania’s main source of domestic financing, contributing over 80% of total monthly revenues and consistently exceeding targets.
• Despite this strength, budget deficits persist due to high recurrent and development spending.
• If current TRA performance continues, it could reduce the deficit by half, but a surplus requires more than just tax revenue — it needs:
  • Better non-tax revenue collection
  • Spending controls
  • Efficient use of resources