1. Total Domestic Debt Stock

• Overview: Tanzania’s domestic debt stock represents obligations issued in Tanzania Shillings (TZS), primarily through Treasury bills (T-Bills) and Treasury bonds, to finance budget deficits and support monetary policy objectives. The Bank of Tanzania (BoT) issues these securities, with Treasury bonds dominating due to their longer maturities (2–25 years). Domestic debt is a critical component of Tanzania’s public debt, complementing external debt (USD 35.60 billion in May 2025) and supporting fiscal needs under the Third Five-Year National Development Plan (2021/22–2025/26).
• May 2025 Performance:
  • Total Domestic Debt Stock: TZS 35,201.1 billion (approximately USD 13.04 billion at an exchange rate of ~TZS 2,698/USD, consistent with, noting a 2.6%-shilling depreciation).
  • Context: The domestic debt stock increased from TZS 34,759.9 billion in April 2025 (implied by provided creditor data) to TZS 35,201.1 billion in May 2025, a 1.3% rise (TZS 441.2 billion). This aligns with earlier trends, as September 2024 reported TZS 32.62 trillion, and April 2025 reached TZS 34.75 trillion, reflecting an 8.8% increase from June 2024. The growth is driven by increased Treasury bond issuances (78.9% of domestic debt in September 2024), supporting infrastructure and budget deficits (TZS 743.2 billion in April 2025).
• Economic Drivers:
  • Fiscal Needs: The 2024/25 budget of TZS 49.35 trillion, with a 3% GDP deficit target, relies on domestic borrowing (TZS 6.27 trillion planned for 2025/26) to finance recurrent (61%) and development (39%) spending. High demand for Treasury bonds (e.g., TZS 794 billion in subscriptions for a 25-year bond in May 2025) reflects investor confidence.
  • Monetary Policy: The BoT’s Central Bank Rate (CBR) at 6% and interbank rates near 8% (Document, Page 7) drive high T-Bill yields (8.89%) and bond yields (15.29% for 25-year bonds), attracting institutional investors but crowding out private sector credit (15.1% growth in April 2025, slower than 18.4% a year earlier).
  • Market Dynamics: The shift to market-aligned Treasury bond coupon rates in January 2025 enhances liquidity and price discovery, boosting bond market activity (bond turnover up 592.52% by May 16, 2025).
• Implications: The domestic debt stock (TZS 35,201.1 billion, ~22% of GDP based on 2024 GDP of TZS 156.6 trillion) remains sustainable, with a low risk of distress. However, high yields (15.5% average lending rates) and crowding-out effects may limit private sector growth, particularly for SMEs (15% loan access in 2023). The BoT’s liquidity injections (e.g., reverse repos, gold purchases) aim to ease pressures, but fiscal discipline is needed to manage debt servicing costs (TZS 172.0 billion interest in April 2025).

2. Government Domestic Debt by Creditor Category

• Overview: Domestic debt is held by institutional and individual investors, with commercial banks, pension funds, and the BoT as primary creditors. Treasury bonds (78.9% of domestic debt) are favored for their long-term stability, while T-Bills (8.8% in March 2024) support short-term financing. Creditor composition reflects the banking sector’s role in government financing and the growing participation of non-bank investors.
• May 2025 Performance:
  • Creditor Breakdown:
    • Commercial Banks: TZS 10,138.2 billion (28.8%).
    • Pension Funds: TZS 9,203.9 billion (26.1%).
    • Bank of Tanzania (BoT): TZS 7,158.2 billion (20.3%).
    • Others (incl. public institutions, private companies, individuals): TZS 6,244.5 billion (17.7%).
    • Insurance Companies: TZS 1,840.0 billion (5.2%).
    • BOT Special Funds: TZS 616.3 billion (1.8%).
  • Key Insight: Commercial banks and pension funds hold 54.9% of domestic debt, reflecting their dominant role in financing government activities, consistent with September 2024 (28.9% and 26.4%, respectively).
• Context and Analysis:
  • Commercial Banks (28.8%): Banks hold TZS 10,138.2 billion, down slightly from 29.7% (TZS 9,678.8 billion) in September 2024, but up from 28.9% (TZS 10,049.9 billion) in April 2025. With 33 commercial banks among 45 licensed banks in January 2025, their role reflects strong banking sector assets (TZS 54,263 billion in 2023). High bond yields (15.29% for 25-year bonds) attract banks, but this crowds out private sector lending (15.1% growth in April 2025).
  • Pension Funds (26.1%): Pension funds hold TZS 9,203.9 billion, slightly up from 26.4% (TZS 9,171.1 billion) in April 2025 and 27.6% (TZS 8,991.4 billion) in September 2024. Their long-term investment horizon aligns with Treasury bonds, supporting fiscal stability. Combined pension assets (USD 13 billion in East Africa) are underutilized in private equity, indicating potential for further debt market participation.
  • Bank of Tanzania (20.3%): The BoT’s TZS 7,158.2 billion share (up from 20.5% or TZS 7,119.2 billion in April 2025) reflects its role in monetary policy alignment, holding bonds to regulate money supply. The BoT has no outstanding external debt, focusing on domestic instruments.
  • Others (17.7%): The TZS 6,244.5 billion held by others (public institutions, private companies, individuals) marks a significant rise from 15.2% (TZS 4,956.0 billion) in September 2024, driven by retail investor interest in high-yield bonds (e.g., TZS 794 billion subscriptions in May 2025).
  • Insurance Companies (5.2%): The TZS 1,840.0 billion share, down from 5.8% (TZS 1,904.2 billion) in September 2024, reflects limited insurance sector growth (5% of financial assets). Regulatory constraints limit their bond market participation.
  • BOT Special Funds (1.8%): The TZS 616.3 billion share, up from 1.2% (TZS 389.0 billion) in September 2024, indicates increased use of special funds for targeted financing, though their role remains minor.
• Economic Drivers:
  • Bond Market Boom: Treasury bonds (80% of domestic debt in April 2025) drive creditor participation, with a 25-year bond auction in May 2025 attracting TZS 794 billion in bids. The shift to market-aligned coupon rates in January 2025 enhances investor appeal.
  • Banking Sector Strength: Commercial banks’ 28.8% share reflects their TZS 54,263 billion asset base and 17.4% growth in 2023, though high bond holdings reduce private sector credit availability (15.5% lending rates).
  • Pension and Insurance: Pension funds’ 26.1% share aligns with their USD 13 billion regional asset pool, but low insurance participation (5.2%) reflects shallow non-bank financial markets.
• Implications: The concentration of debt in banks and pension funds (54.9%) ensures stability but risks crowding out private credit, as noted in April 2025 (15.1% credit growth vs. 18.4% prior year). The rise in “Others” (17.7%) diversifies the investor base, reducing rollover risk. However, high yields (8.89% T-Bills, 15.29% bonds) increase debt servicing costs (TZS 5.31 trillion annually at 15.5% rates), straining fiscal space.

3. Comparison with April 2025

• Overview: The month-on-month change in domestic debt by creditor reflects shifting investor dynamics, driven by high-yield bond auctions and monetary policy conditions. The total debt stock rose by TZS 441.2 billion (1.3%), with varying changes across creditor categories.
• Comparison:
  • Commercial Banks: Increased from TZS 10,049.9 billion to TZS 10,138.2 billion (+TZS 88.3 billion, +0.9%).
  • Pension Funds: Increased from TZS 9,171.1 billion to TZS 9,203.9 billion (+TZS 32.8 billion, +0.4%).
  • Bank of Tanzania (BoT): Increased from TZS 7,119.2 billion to TZS 7,158.2 billion (+TZS 39.0 billion, +0.5%).
  • Others: Increased from TZS 5,996.8 billion to TZS 6,244.5 billion (+TZS 247.7 billion, +4.1%).
  • Insurance Companies: Decreased from TZS 1,858.4 billion to TZS 1,840.0 billion (-TZS 18.4 billion, -1.0%).
  • BOT Special Funds: Increased from TZS 564.5 billion to TZS 616.3 billion (+TZS 51.8 billion, +9.2%).
• Context and Analysis:
  • Significant Growth in “Others”: The TZS 247.7 billion increase in “Others” (17.7% share) is the largest, reflecting growing retail and non-bank institutional interest, driven by high bond yields (e.g., TZS 794 billion subscriptions for a 25-year bond). This aligns with bond market turnover rising 592.52% by May 16, 2025, indicating broader market participation.
  • Modest Bank and Pension Growth: Commercial banks (+TZS 88.3 billion) and pension funds (+TZS 32.8 billion) saw modest increases, consistent with their dominant roles (54.9% combined). Banks’ growth reflects strong asset bases (TZS 54,263 billion in 2023), while pension funds’ steady rise aligns with long-term investment strategies.
  • BoT and Special Funds: The BoT’s TZS 39.0 billion increase maintains its 20.3% share, supporting monetary policy (7-day interbank rate at 7.98%, Document, Page 7). The TZS 51.8 billion rise in BOT Special Funds (9.2%) suggests targeted financing, possibly for liquidity management.
  • Insurance Decline: The TZS 18.4 billion decrease in insurance holdings (5.2% share) reflects regulatory limits and a focus on shorter-term assets, as insurance assets remain small compared to pensions.
  • Economic Drivers: The 1.3% debt stock increase (TZS 441.2 billion) is driven by a record TZS 794 billion bond auction in May 2025, with institutional investors (banks, pensions) absorbing most issuances. Tight monetary policy (CBR at 6%) and high interbank rates (7.98%) encourage bond investments over private lending, as noted in April 2025 (15.1% credit growth slowdown).
• Implications: The rise in “Others” (+4.1%) diversifies the creditor base, reducing reliance on banks and pensions, which lowers rollover risk. However, the modest growth in bank holdings (+0.9%) and decline in insurance (-1.0%) suggest liquidity constraints, as banks prioritize bonds over private credit. The BoT’s increased share (20.3%) supports fiscal financing but may strain monetary policy if liquidity tightens further (interbank rates near 8% ceiling).

4. Key Takeaways

• Concentration and Stability: Commercial banks (28.8%) and pension funds (26.1%) dominate, ensuring stable financing but crowding out private credit (15.5% lending rates). The 54.9% combined share aligns with September 2024 (56.1%), reflecting institutional reliance.
• Broadening Investor Base: The significant rise in “Others” (17.7%, +TZS 247.7 billion) indicates growing retail and non-bank participation, driven by high-yield bonds (15.29% for 25-year bonds). This diversification enhances market resilience and aligns with the BoT’s market-aligned coupon rate reform.
• Debt Sustainability: Domestic debt (TZS 35,201.1 billion, ~22% of GDP) remains sustainable, with a low risk of distress. However, high servicing costs (TZS 5.31 trillion annually at 15.5% rates) and crowding-out effects challenge private sector growth. The 2025/26 budget’s TZS 6.27 trillion borrowing plan requires careful management to maintain fiscal space.
• Risks and Opportunities: The increase in “Others” reduces rollover risk, but high bond yields and tight liquidity (interbank rates near 8%) may elevate borrowing costs. The BoT’s liquidity tools (reverse repos, gold purchases) and IMF support (USD 441 million in April 2025) mitigate risks, while bond market reforms enhance efficiency.

Summary Table – May 2025

Additional Insights and Outlook

• Fiscal Context: The domestic debt stock (TZS 35,201.1 billion) supports the 2024/25 budget’s 3% GDP deficit target, financed through bonds (80%) and T-Bills (8.8%). The 1.3% increase from April 2025 reflects strong bond demand, but high yields (15.29%) increase servicing costs, straining fiscal space (TZS 172.0 billion interest in April 2025).
• Market Dynamics: The rise in “Others” (17.7%) aligns with bond market growth (592.52% turnover increase by May 16, 2025), driven by market-aligned coupon rates. This diversification reduces dependence on banks (28.8%) and pensions (26.1%), enhancing resilience.
• Risks: High bond holdings by banks crowd out private credit (15.1% growth), impacting SMEs. Shilling depreciation (2.6%) and tight liquidity (7.98% interbank rate) may elevate costs, requiring BoT interventions (reverse repos).
• Outlook: The 2025/26 budget’s TZS 40.47 trillion revenue target and 6% GDP growth projection rely on sustained domestic borrowing. Continued bond market reforms and IMF support (USD 441 million) will bolster sustainability, but balancing public and private sector financing is critical.

Tanzania Domestic Debt by Creditor - May 2025: Key Figures

Note: USD conversion based on exchange rate of ~TZS 2,698/USD.