Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

Budget, Government Burden, and PPP Potential

Tanzania’s government, under President Samia Suluhu Hassan, has implemented an ambitious array of public investment projects from 2020 to 2025, spanning agriculture, transport, energy, water, health, education, and other sectors. These projects, detailed in a comprehensive table below, aim to drive inclusive economic growth, enhance infrastructure, and improve social services, aligning with Tanzania’s Development Vision 2025 and the Third Five-Year Development Plan (FYDP III). This cases study evaluates the economic potential of these projects, calculates their total budget, assesses their fiscal burden on the government, and explores how Public-Private Partnerships (PPPs) could mitigate this burden while enhancing outcomes.

Total Budget of Public Investment Projects

Tanzania’s 2020–2025 public investment projects, spanning 25 initiatives across agriculture, transport, energy, water, health, education, social protection, mining, and ICT, have a total budget of TZS 27,737B–29,309B (USD 10.67B–11.27B). Key allocations include agriculture (TZS 900B–1,230B, e.g., TZS 600B–800B for irrigation), transport (TZS 9,730B–10,190B, e.g., TZS 7,500B for SGR), energy (TZS 8,400B–8,500B, e.g., TZS 7,600B for JNHPP), water (TZS 2,320B), health (TZS 300B–450B), education (TZS 1,107.4B–1,217.4B), social protection (TZS 3,640B), mining (TZS 50B–80B), and ICT (TZS 220B–330B). These projects drive economic growth (6% GDP in 2025), create jobs (e.g., 41,117 from new investments), and enhance exports (USD 16.7B in 2025), but strain the TZS 56.49T 2025/26 budget, consuming 9.8–10.4% annually. Public-Private Partnerships could save TZS 6,934B–7,327B, reduce the fiscal deficit from 3% to 2–2.1% of GDP, and boost growth by 0.5–1% through private sector efficiency and investment.

Economic Potential of the Projects

The economic potential of these projects is substantial, addressing critical needs across sectors and fostering inclusive growth. Below are key highlights:

Overall, these projects drive GDP growth (5.5% in 2024, projected 6% in 2025), create jobs (e.g., 41,117 from new investments in 2025), and enhance export revenues (USD 16.7B in 2025). Multiplier effects stimulate related industries, reduce poverty, and improve living standards.

Fiscal Burden on the Government

Tanzania’s 2025/26 national budget is TZS 56.49T, with domestic revenue projected at TZS 31.38T (70.7%) and a fiscal deficit of 3% of GDP (TZS 4.7T). The total project budget (TZS 27,737B–29,309B) spans five years (2020–2025), equating to an annual average of TZS 5,547B–5,862B, or 9.8–10.4% of the 2025/26 budget. This is significant, given that development expenditure in 2025/26 is TZS 757.79B for the Ministry of Finance alone, with total development spending likely around TZS 15T–20T annually.

System: government expenditures absorbed by debt servicing (TZS 8.2T annually). This places a heavy burden on the government, as development projects compete with recurrent expenditures (TZS 19.43T in 2025/26) and debt servicing.

The fiscal burden is substantial, as the government must balance these investments with recurrent costs, debt repayment, and social services, potentially straining fiscal discipline and increasing the deficit if revenues (TZS 26.73T from TRA in 2025/26) fall short.

Impact of Public-Private Partnerships (PPPs)

Implementing these projects through PPPs could significantly alleviate the fiscal burden and enhance efficiency, as outlined in the Public Private Partnership (Amendment) Act No. 4 of 2023 and its regulations. Below, we analyze the potential impacts of PPPs, supported by figures:

Benefits of PPPs

  1. Reduced Fiscal Burden:
    • PPPs shift a portion of the financial burden to private investors, reducing government expenditure. For example, the SGR (TZS 7,500B) could have private partners fund 30–50% (TZS 2,250B–3,750B), significantly lowering the government’s debt-financed share.
    • The JNHPP (TZS 7,600B) could leverage private investment for operations and maintenance, saving an estimated TZS 1,000B–2,000B in government costs over time.
    • The World Bank notes that PPPs in water supply (e.g., USD 650M SRWSSP) have improved service delivery through private management, reducing government operational costs by 20–30%.
  2. Enhanced Efficiency and Innovation:
    • Private sector expertise can accelerate project delivery and improve quality. For instance, port improvements (TZS 500B–700B) under PPPs could reduce ship waiting times further (from 7 days to 5 days), increasing revenue by 10–15% through higher container throughput.
    • ICT projects (TZS 220B–330B) could benefit from private tech firms’ innovation, potentially doubling internet penetration (from 46% to 80%) and boosting digital economy growth by 5–10%.
  3. Attracting Foreign Investment:
    • The PPP Amendment Act offers tax incentives and streamlined processes, attracting foreign direct investment (FDI). In 2025, TIC recorded USD 3.7B in project registrations, a 32% increase from 2024, partly due to PPP reforms. For example, Air Tanzania’s expansion (TZS 200B–300B) could attract private airlines or logistics firms, reducing government funding by 20–40%.
    • Mining projects (TZS 50B–80B) could see increased FDI through PPPs, boosting mineral revenue (10% of GDP in 2024) by an additional 2–3%.
  4. Improved Governance:
    • PPP regulations mandate quarterly implementation reports, enhancing transparency and reducing corruption risks, which historically inflate project costs by 10–20%.

Challenges of PPPs

  1. Regulatory and Transparency Issues:
    • Despite reforms, Tanzania scores low (1.25/5) on regulatory governance, compared to Kenya and Uganda (3.25/5). Inconsistent tax regimes and bureaucratic delays could deter private investors.
    • The Natural Resources and Wealth Act and Mining Laws pose obstacles to foreign investment, potentially limiting PPP participation in mining and energy projects.
  2. Limited Success in Past PPPs:
    • Historically, successful PPPs have been rare due to complex regulations and high financial risks for investors. For example, state-owned enterprises (SOEs) like TANESCO benefit from sovereign credit guarantees, crowding out private competition.
  3. Risk of Indirect Expropriation:
    • Confiscatory tax regimes or regulatory actions could reduce investor confidence, potentially increasing project costs by 5–10% to account for risk premiums.

Hypothetical PPP Scenario

If 50% of the total project budget (TZS 13,868B–14,654B) were financed through PPPs:

Comparison: Government-Funded vs. PPP

Government Budget Impact

The TZS 27,737B–29,309B project cost over five years represents 49–52% of the 2025/26 national budget (TZS 56.49T). This heavy reliance on government funding strains fiscal resources:

PPPs could reduce this burden by shifting 30–50% of costs to private investors, saving TZS 6,934B–7,327B and narrowing the deficit to 2–2.1% of GDP, aligning with fiscal discipline goals. However, regulatory reforms must address transparency and investor confidence to ensure PPP success.

Conclusion

Tanzania’s 2020–2025 public investment projects, with a total budget of TZS 27,737B–29,309B, have significant economic potential, driving GDP growth to 6% in 2025, creating over 41,000 jobs, and boosting exports by 16.8%. Agriculture, transport, energy, and water projects enhance productivity, connectivity, and living standards, with multiplier effects in related industries. However, the fiscal burden is substantial, consuming 9.8–10.4% of the annual budget and risking a wider deficit. PPPs could save TZS 6,934B–7,327B, accelerate growth by 0.5–1%, and create additional jobs, but require stronger regulatory frameworks to overcome historical challenges. By balancing government funding with PPPs, Tanzania can achieve sustainable growth while maintaining fiscal stability, paving the way for Vision 2025’s middle-income status.

Public Investment Projects in Tanzania (2020–2025)

Below is a table summarizing public investment projects implemented across various sectors. The table includes project descriptions, budgets, locations, economic potential, and multiplier effects for citizens.

SectorProject DescriptionBudget (TZS)LocationEconomic PotentialMultiplier Effects
AgricultureIncreased availability of improved seeds by 41.9% (from 50,747 tons in 2021 to 72,031.9 tons in 2024).TZS 100B–150B (estimated, ~10–12% of TZS 1.24T agriculture budget for 2025).Nationwide (TOSCI Seed Quality Control Institute mentioned).Enhances crop yields, improves food security, and increases farmers' incomes through better-quality produce.Stimulates agro-processing industries, boosts local markets, and supports rural economies.
AgricultureIncreased fertilizer availability to boost agricultural productivity.TZS 150B–200B (estimated, ~12–15% of TZS 1.24T agriculture budget for 2025).Nationwide.Improves agricultural output, supports smallholder farmers, and enhances food self-sufficiency.Encourages growth in agribusiness, transport, and retail sectors due to increased agricultural output.
AgricultureExpansion of sugar production (Kilombero factory: +271,000 tons; Mibwaa: 4,700 ha; Kagera: 8,072 ha).TZS 50B–80B (estimated, based on similar agro-industrial projects).Kilombero, Mibwaa, Kagera.Increases domestic sugar supply (from 311,588 tons in 2020 to 392,724 tons in 2024), reducing imports.Creates jobs in sugar processing, supports local farmers, and boosts export potential.
AgricultureIrrigation projects expanded from 13 in 2020 to 780 in 2025, increasing irrigated land from 561,333 ha to 983,466.06 ha.TZS 600B–800B (estimated, ~50–60% of TZS 1.24T agriculture budget, given irrigation’s priority).Nationwide, with major projects using Lake Victoria and Tanganyika water.Enhances agricultural productivity, supports year-round farming, and improves food security.Stimulates agro-industries, creates jobs in irrigation infrastructure, and supports rural development.
CooperativesEstablishment of Cooperative Bank with initial capital of TZS 58B.TZS 58B (stated in document).Nationwide (cooperative societies).Provides affordable credit to cooperative societies, enhancing economic empowerment of members.Boosts cooperative-based businesses, supports small-scale farmers, and stimulates local economies.
FisheriesProvision of 1,636 fish cages and 280 boats, plus 160 boats worth TZS 11.51B, creating 13,180 jobs.TZS 11.51B (for boats, stated in document).Nationwide (coastal and inland fisheries).Increases fish production (from 473,188 tons in 2021 to 543,589.91 tons in 2025), supports livelihoods.Stimulates fish processing, transport, and market chains, boosting coastal and inland economies.
Transport (Roads)Bus Rapid Transit (BRT) Phase 2 (20.3 km), Phase 3 (23.3 km, 80% complete), Phase 4 (30.1 km, 22.3% complete).TZS 1.2T (estimated, based on Phase 1 costs and urban transport budgets).Dar es Salaam (Mbagala to City Center, Gongo la Mboto, Tegeta).Improves urban mobility, reduces transport costs, and enhances access to economic opportunities.Stimulates commerce, reduces congestion-related losses, and supports urban economic growth.
Transport (Roads)Dodoma Outer Ring Road (112 km, 80% complete).TZS 200B–300B (estimated, based on similar road projects in Tanzania).Dodoma.Enhances connectivity in the capital, supports urban development, and facilitates trade.Boosts local businesses, supports construction sector, and improves access to services.
Transport (Roads)TANZAM Highway expansion (Uyole to Songwe Airport, 36 km, 23.5% complete).TZS 80B–120B (estimated, based on highway construction costs).Mbeya.Improves regional connectivity, supports trade, and enhances access to Songwe Airport.Stimulates trade with neighboring countries, supports logistics, and boosts Mbeya’s economy.
Transport (Airports)Nduli Airport Phase 1 completion.TZS 50B–70B (estimated, based on regional airport development costs).Iringa.Enhances air connectivity, supports tourism, and facilitates cargo transport.Boosts tourism-related businesses, supports agricultural exports, and creates jobs in aviation.
Transport (Railways)Standard Gauge Railway (SGR): Mwanza–Isaka (341 km, 63.16% complete), Makutupora–Tabora (384 km, 14.53% complete), Tabora–Isaka (163 km, 6.65% complete), Tabora–Kipoma (500 km, 7.41% complete).TZS 7.5T (estimated, based on reported SGR costs for 2025/26).Mwanza, Isaka, Tabora, Kipoma.Reduces transport costs, enhances trade efficiency, and connects Tanzania to Burundi.Stimulates logistics, trade, and industrial growth along rail corridors; supports job creation.
Transport (Airlines)Air Tanzania (ATCL) expansion with new cargo plane routes to India, Kenya, Dubai, DRC, and planned routes to Nigeria, Mozambique, Oman, Angola.TZS 200B–300B (estimated, based on airline fleet expansion and operations).Nationwide (international routes).Reduces losses for producers, enhances export capacity, and promotes Tanzania globally.Boosts tourism, agriculture exports, and aviation-related industries; creates jobs.
Transport (Ports)Port improvements reducing ship waiting time from 46 days to 7 days, container handling up 35% (from 159,807 to 215,286 containers).TZS 500B–700B (estimated, based on port modernization budgets).Dar es Salaam.Increases port efficiency, reduces trade costs, and boosts revenue collection.Stimulates trade, logistics, and port-related services; supports economic growth in Dar es Salaam.
EnergyJulius Nyerere Hydropower Project (JNHPP, 2,115 MW).TZS 7.6T (reported cost for JNHPP).Nationwide (Coast Region).Increases electricity supply (from 1,601.84 MW in 2020 to 4,031.71 MW in 2025), supports industrial growth.Stimulates manufacturing, reduces energy costs for businesses, and supports rural electrification.
EnergyKinyerezi I Extension (185 MW, natural gas) and Rusumo Project (26.67 MW, shared with Burundi and Rwanda).TZS 500B (Kinyerezi I: ~TZS 400B; Rusumo: ~TZS 100B, estimated based on regional energy projects).Kinyerezi, Rusumo (Kagera River).Enhances energy reliability, supports industrial and household needs.Boosts industrial productivity, supports small businesses, and improves quality of life.
EnergyElectricity transmission lines (e.g., Singida–Arusha–Namanga: 414 km, Geita–Nyakanazi: 144 km).TZS 300B–400B (estimated, based on transmission infrastructure costs).Singida, Arusha, Namanga, Geita, Nyakanazi, Tabora, Urambo.Improves electricity access, connects Kigoma and Katavi to the national grid.Supports industrial growth, reduces energy poverty, and stimulates local economies.
Water2,331 urban and rural water supply projects benefiting 5,985,500 people.TZS 1.3T (stated for 28 urban projects; total estimated at TZS 1.8T including rural).28 urban areas, rural regions (e.g., Arusha, Coast, Dar es Salaam).Improves access to clean water (urban: 84% to 91.6%; rural: 70.1% to 85%), enhances health outcomes.Reduces healthcare costs, boosts productivity, and supports water-related businesses.
WaterArusha water supply project increasing water production from 40M liters to 200M liters daily.TZS 520B (stated in document).Arusha.Enhances water availability, supports urban growth, and improves public health.Stimulates local businesses, supports construction, and improves quality of life.
HealthProcurement of advanced diagnostic equipment (MRI: 7 to 13, CT scans: 13 to 45, Digital X-Ray: 147 to 491, Ultrasound: 476 to 970).TZS 100B–150B (estimated, based on health sector budgets for 2025/26).Nationwide (national and referral hospitals).Improves diagnostic capacity, reduces mortality, and enhances healthcare quality.Supports medical tourism, creates jobs in healthcare, and stimulates medical supply industries.
HealthIncreased availability of medicines and medical supplies from 73% in 2020 to 86.2% in April 2025.TZS 200B–300B (estimated, based on health sector allocations).Nationwide (public health facilities).Enhances healthcare access, reduces treatment costs, and improves patient outcomes.Boosts pharmaceutical supply chains, supports local suppliers, and improves public health.
EducationConstruction of 1,992 teachers’ houses, 638 laboratories, 1,284 latrines, and 1,008 dormitories.TZS 300B–400B (estimated, based on education infrastructure budgets).Nationwide.Improves educational infrastructure, enhances learning environments, and attracts qualified teachers.Stimulates construction sector, supports local economies, and improves educational outcomes.
EducationFree education program expansion (primary to secondary), budget increased from TZS 304B to TZS 787.4B.TZS 787.4B (stated in document).Nationwide.Increases school enrollment (students with loans: 142,170 in 2020 to 436,332 in 2025), enhances literacy.Boosts human capital, supports long-term economic growth, and stimulates education-related industries.
EducationSAMIA Scholarship for 1,343 students in STEM and health fields.TZS 20B–30B (estimated, based on scholarship program costs).Nationwide.Builds skilled workforce in critical sectors, supports innovation and healthcare.Enhances industrial and health sectors, creates high-skill jobs, and supports technological advancement.
Social ProtectionTASAF and other programs (e.g., 10% Halmashauri revenue loans for women, youth, and disabled).TZS 3.64T (stated in document).Nationwide.Empowers vulnerable groups, supports small businesses, and reduces poverty.Stimulates local economies, supports entrepreneurship, and enhances social inclusion.
MiningIncreased mineral trading centers (61 to 109) and markets (41 to 43).TZS 50B–80B (estimated, based on mining sector investments).Dodoma, Dar es Salaam, Geita, Chunya.Increases mineral revenue contribution (6.8% to 10% of GDP), supports small-scale miners.Stimulates mining-related industries, supports local economies, and boosts export revenues.
ICTNational Fiber Optic Network expansion (8,319 km to 13,820 km), communication towers (754 to 9,278).TZS 200B–300B (estimated, based on ICT budget allocations for 2025/26).Nationwide (109 LGAs connected).Enhances connectivity, reduces communication costs, and supports digital economy.Stimulates tech startups, supports e-commerce, and improves access to information and services.
ICTSAMIA Innovation Fund for startups and 464 innovation projects from MAKISATU.TZS 20B–30B (estimated, based on innovation fund allocations).Nationwide.Fosters innovation, supports tech startups, and creates jobs in the digital economy.Stimulates tech industry growth, enhances competitiveness, and attracts investment.

Notes

As of February 2025, Tanzania’s external debt stock reached USD 31.31 billion, reflecting a monthly increase of USD 393.4 million (1.3%). The central government accounts for 79.7% of the total, highlighting its leading role in borrowing to fund infrastructure and social projects. Funds are mainly allocated to transport and telecommunications (21.6%), education and social welfare (16.3%), and energy and mining (13.7%). However, with 65.8% of the debt denominated in US dollars, the country remains exposed to exchange rate volatility, necessitating prudent fiscal and monetary management.

Tanzania’s debt development, Tanzania’s Monthly Economic Review – March 2025, focusing on external debt.

Tanzania Debt Development (as of February 2025)

1. Total External Debt Stock

2. External Debt Stock by Borrower

BorrowerAmount (USD Million)Share (%)
Central Government24,956.679.7%
Private Sector3,405.510.9%
Public Corporations2,950.79.4%

Key Insight:
The Central Government holds the majority share of external debt, nearly 80%, showing that debt is primarily used to finance public infrastructure and development projects.

3. Disbursed Outstanding Debt by User of Funds

SectorShare (%)
Transport & Telecomm21.6%
Social Welfare & Education16.3%
Energy & Mining13.7%
Finance & Insurance12.3%
Agriculture6.2%
OthersRemaining %

Key Insight:
The largest portion of external debt is invested in transport, telecom, education, and energy, which are strategic sectors for long-term development.

4. Debt by Currency Composition

CurrencyShare (%)
US Dollar (USD)65.8%
Euro (EUR)17.5%
Chinese Yuan (CNY)5.2%
Japanese Yen (JPY)5.0%
Others6.5%

Key Insight:
The dominance of the US Dollar (nearly 66%) exposes Tanzania to foreign exchange risk if the dollar strengthens further. However, diversification into other currencies like the Euro, Yuan, and Yen offers some buffer.

Summary:

Tanzania’s external debt development tells us:

What the Figures Tell Us

  1. Heavy Reliance on External Financing
    With USD 31.31 billion in total external debt, Tanzania continues to rely significantly on foreign borrowing, especially from multilateral and bilateral sources, to fund its development agenda.
  2. Government is the Main Borrower
    The central government holds nearly 80% of the external debt. This indicates that most of the borrowing is channeled into large-scale public projects like infrastructure, energy, and social services—reflecting the government's role in driving economic development.
  3. Strategic Allocation of Debt
    A large share of disbursed debt is used in productive sectors:
    • Transport and telecom (21.6%)
    • Social welfare and education (16.3%)
    • Energy and mining (13.7%)
      This shows a development-oriented borrowing strategy, aiming to boost long-term economic productivity.
  4. Vulnerability to Exchange Rate Risk
    Since 65.8% of the debt is denominated in US dollars, any strengthening of the dollar could raise the cost of debt servicing. This makes exchange rate management critical for debt sustainability.
  5. Gradual but Steady Growth in Debt Stock
    The month-on-month increase of USD 393.4 million (1.3%) suggests a controlled growth in borrowing, possibly linked to disbursements for ongoing projects and valuation changes.

🧠 Bottom Line: Tanzania’s external debt is focused on development, government-driven, and largely USD-denominated, which helps fund national priorities but also requires careful debt and currency risk management to remain sustainable.

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