The external debt data from the Bank of Tanzania's Monthly Economic Review (September 2025) for end-August 2025 shows a modest 0.6% monthly rise to USD 35,389.3 million, maintaining a sustainable profile at around 50% of GDP amid robust macroeconomic indicators like 6%+ Q3 growth estimates, 3.4% inflation, and TZS appreciation (6.6% in August). This composition—government-dominated, growth-oriented uses, and heavy USD exposure—implies continued fiscal space for infrastructure and social investments, supporting Vision 2050's goals of upper-middle-income status by 2050 through job creation in agriculture, manufacturing, and tourism. However, USD dominance (66.1%) heightens vulnerability to global rate hikes or TZS volatility, despite recent strengthening. As of October 2025, IMF assessments affirm debt indicators remain below thresholds, with positive short-term growth impacts from borrowing, though long-term sustainability hinges on revenue mobilization (taxes at 13.1% of GDP) and export diversification.

These trends align with the document's external sector strength (e.g., gold exports up 35.5% y-o-y) and World Bank projections of sustained 6% growth, financed by FDI and concessional loans.

1. External Debt Stock by Borrower

• Total external debt stock: USD 35,389.3 million (up 0.6% from July 2025).
• By borrower category:
  • Central Government: USD 28,598.9 million (80.8%)
  • Private Sector: USD 6,786.7 million (19.2%)
  • Public Corporations: USD 3.8 million (0.0%)

2. Disbursed Outstanding Debt by Use of Funds (Percentage Share)

• Balance of Payments (BoP) & Budget Support: 22.5%
• Transport & Telecommunication: 20.3%
• Agriculture: 5.2%
• Energy & Mining: 12.9%
• Industries: 3.4%
• Social Welfare & Education: 21.5%
• Finance & Insurance: 4.0%
• Tourism: 0.8%
• Real Estate & Construction: 4.4%
• Other: 5.0%

3. Disbursed Outstanding Debt by Currency Composition (Percentage Share)

• US Dollar (USD): 66.1%
• Euro (EUR): 17.6%
• Chinese Yuan (CNY): 6.4%
• Other currencies: 9.9%

Table 1: External Debt Stock by Borrower (Aug 2025)

Table 2: Disbursed Outstanding Debt by Use of Funds (Aug 2025)

Table 3: Disbursed Outstanding Debt by Currency Composition (Aug 2025)

Implications for Tanzania's Economic Development

1. External Debt Stock by Borrower: Government-Led Borrowing for Public Investments

• Key Observations Recap: Central government holds 80.8% (USD 28,598.9 million), private sector 19.2% (USD 6,786.7 million), with public corporations negligible.
• Implications for Economic Development:
  • Public Sector Leverage for Infrastructure and Inclusion: The government's dominance enables targeted funding for high-multiplier projects, aligning with 20.3% allocation to transport/telecom and 21.5% to social welfare/education, which boosted FY 2024/25 growth to 5.6%. This supports human capital development (e.g., STEM training) and connectivity, critical for Vision 2050's 7% medium-term growth target.
  • Private Sector Growth Catalyst: Rising private share (up from 15-18% historically) reflects deepening financial markets, channeling FDI into mining (12.9% use) and energy, with 16.2% credit growth aiding MSMEs (36% of loans). IMF notes this mix sustains external balances, with current account deficit at 2.6% of GDP.
  • Risks: Heavy public reliance could crowd out private borrowing if global conditions tighten, per Deloitte's 2025 outlook, potentially raising fiscal deficits beyond 3% of GDP.

2. Disbursed Outstanding Debt by Use of Funds: Pro-Growth Allocation with Social Focus

• Key Observations Recap: Top uses: BoP/budget support (22.5%), social welfare/education (21.5%), transport/telecom (20.3%), energy/mining (12.9%); lower in agriculture (5.2%) and tourism (0.8%).
• Implications for Economic Development:
  • Balanced Investment for Structural Transformation: High shares in social/education (21.5%) and transport (20.3%) foster human capital and logistics, key to agriculture's 30% GDP role and manufacturing expansion (3.4% credit growth). This allocation has driven productivity gains, with SECO's 2025 report crediting debt-financed projects for 10-15% infrastructure coverage increase.
  • Sectoral Gaps and Opportunities: Under-allocation to agriculture (5.2%) limits resilience to shocks (e.g., food inflation at 7.7%), but energy/mining (12.9%) bolsters exports (gold at USD 4.32 billion y-o-y). Research indicates positive short-term growth from such debt, potentially adding 0.5-1% to GDP via spillovers.
  • Risks: Low tourism/real estate (0.8%/4.4%) misses diversification potential; Taylor & Francis analysis warns misallocation could raise non-performing loans if returns lag.

3. Disbursed Outstanding Debt by Currency Composition: USD Exposure Amid Diversification Efforts

• Key Observations Recap: USD 66.1%, EUR 17.6%, CNY 6.4%, other 9.9%.
• Implications for Economic Development:
  • Funding Stability from Multilateral Ties: USD/EUR dominance ensures concessional terms (e.g., from IMF/WB), supporting 373.2 billion TZS foreign-financed development in July. CNY rise (6.4%) ties to Belt and Road projects in energy/transport, enhancing infrastructure without immediate fiscal strain.
  • Exchange Rate Resilience: Recent TZS appreciation mitigates USD risks, but 69.8% effective exposure (per TICGL) could amplify costs if reversed, pressuring imports (e.g., oil). IMF projects indicators below thresholds, aiding 6% growth.
  • Risks: Currency mismatches heighten volatility; Deloitte warns of credit rating downgrades if oil/fertilizer prices spike (Chart 1.5), eroding reserves (USD 6.2 billion).

Overall Summary and Forward Outlook

August's external debt dynamics imply a sustainable enabler of Tanzania's development: government-led, productive uses sustain 6% growth and inclusion, while currency risks are buffered by reserves and exports. This reinforces FY 2025/26's 6.2% projection, with debt at 45-50% GDP. As of October 8, 2025, positive FDI trends mitigate vulnerabilities, but boosting non-USD borrowing and agriculture allocation will ensure long-term viability toward 7% growth.