The Tanzania government’s fiscal performance in 2025, as evidenced by April 2025 data and the proposed 2025/26 budget, reflects a commitment to balancing fiscal discipline with development priorities. Domestic revenue collection of TZS 2,544.1 billion in April 2025, with tax revenue at TZS 2,105.3 billion (1.5% above target), indicates robust revenue mobilization (Bank of Tanzania, 2025). However, expenditure of TZS 3,287.3 billion suggests a monthly fiscal deficit. The proposed 2025/26 budget of TZS 56.49 trillion, with a fiscal deficit of 3% of GDP and 31% allocated to development spending, underscores efforts to fund infrastructure and social sectors while adhering to regional fiscal benchmarks. This analysis evaluates whether Tanzania maintains fiscal discipline while addressing development needs, focusing on the sustainability of its fiscal path and the balance between recurrent and development spending.

Tanzania Fiscal Discipline and Development Needs Analysis (2025)

Sustainability of Fiscal Path

Fiscal Discipline

• Revenue Mobilization:
  • April 2025 domestic revenue (TZS 2,544.1 billion) was nearly on target, with tax revenue (TZS 2,105.3 billion) exceeding projections by 1.5%, reflecting improved tax administration and compliance (BoT). The 2025/26 budget projects domestic revenue at TZS 40.47 trillion (71.6% of the budget), with tax revenue at TZS 32.31 trillion. This aligns with a tax-to-GDP ratio of 12.6% (2024/25), though still below the Sub-Saharan average of ~16%.
  • Strong revenue performance reduces reliance on external grants (TZS 1.07 trillion, ~1% of revenue by 2026), signaling greater fiscal self-reliance. However, low domestic tax collection signals weak consumer demand, potentially limiting revenue growth.
• Deficit Management:
  • The monthly fiscal deficit in April 2025 (~TZS 743.2 billion) reflects expenditure (TZS 3,287.3 billion) outpacing revenue (BoT). However, the proposed 2025/26 fiscal deficit of 3% of GDP aligns with the East African Community (EAC) and Southern African Development Community (SADC) benchmarks, indicating disciplined borrowing.
  • Financing through domestic borrowing (TZS 6.27 trillion) and external loans (TZS 8.68 trillion) avoids excessive external debt reliance, with public debt projected to decline from 46.3% of GDP in 2025 to 45% by 2027 under the IMF program (). Domestic debt stood at TZS 34.26 trillion in March 2025, with 29% held by commercial banks.
• Debt Sustainability:
  • Public debt at 46.3% of GDP (2025) is below the SADC threshold of 60%, supported by concessional borrowing and grants. Interest payments (TZS 6.49 trillion in 2025/26) are rising but manageable, reflecting improved debt management.
  • The government’s strategy to prioritize concessional loans and limit non-concessional borrowing mitigates debt distress risks, unlike earlier periods when the deficit reached 7% of GDP in 2022/23.

Balance Between Recurrent and Development Spending

• Recurrent Expenditure (69%):
  • The 2025/26 budget allocates TZS 38.98 trillion (69%) to recurrent spending, including TZS 9.17 trillion for salaries and pensions and TZS 6.49 trillion for interest payments. High recurrent costs, particularly wages (TZS 936.4 billion in January 2025), ensure public sector stability but constrain fiscal space for discretionary spending.
  • The share of “other charges” in recurrent expenditure has declined from 68% (2003/04) to 34% (2020/21), limiting flexibility for productivity-enhancing expenditures. This trend risks undermining operational budgets for infrastructure maintenance.
• Development Expenditure (31%):
  • Development spending of TZS 17.51 trillion (31%) in 2025/26, including TZS 7.72 trillion for capital payments, supports infrastructure (e.g., SGR, hydropower), agriculture, and health. This is a significant increase from TZS 15.96 trillion in 2024/25, aligning with priorities like the Third Five-Year Development Plan (FYDP III) and Vision 2025.
  • However, development budget execution rates have historically lagged at 67% (2017–2021), potentially slowing infrastructure growth. Reduced development spending in some years (e.g., TZS 1,393.3 billion in January 2025) could hinder long-term economic expansion.
• Sustainability Concerns:
  • Positive Trends: The 3% GDP deficit and declining debt-to-GDP ratio (46.3% to 45%) reflect fiscal discipline, supported by stable inflation (3.2% in May 2025) and robust reserves (USD 5,360 million, 4.2 months of import cover) (BoT). Strong revenue collection (99.5% of target) and controlled deficit spending enhance fiscal stability.
  • Challenges: High recurrent spending (69%) limits fiscal space for development projects, risking underinvestment in human capital (e.g., education at 3.3% of GDP, health at 1.2% vs. LMIC averages of 4.4% and 2.3%). Domestic borrowing may crowd out private sector credit, as seen with 29% of domestic debt held by commercial banks. Low budget execution rates and weak consumer demand further threaten development outcomes.

Conclusion

The Tanzania government maintains fiscal discipline through strong revenue mobilization (TZS 2,544.1 billion in April 2025, TZS 40.47 trillion projected for 2025/26), a controlled fiscal deficit (3% of GDP), and a sustainable debt profile (46.3% of GDP). Development spending (31% of the budget) supports critical sectors like infrastructure and agriculture, aligning with Vision 2025 and FYDP III. However, high recurrent expenditure (69%), particularly on salaries and interest, constrains fiscal flexibility, while low budget execution rates and potential crowding-out of private credit pose risks to long-term growth. To enhance sustainability, the government should improve budget execution, rationalize tax expenditures, and prioritize social spending to boost human capital, ensuring a balanced fiscal path that supports inclusive development.

As Tanzania advances toward its Vision 2050 goals, a robust and inclusive tax system is becoming increasingly central to the country’s development strategy. The Tanzania Investment and Consultant Group Ltd. (TICGL), through its recent report “Tanzania’s Tax System and Economic Development (2025–2030)”, sheds light on how the government’s tax reforms are driving economic growth, while also revealing critical systemic challenges that must be addressed.

Economic Progress Anchored in Tax Reform

Tanzania’s economy has shown resilience and promise, with GDP growth projected at 6.0% in 2025 and 7.0% by 2028. Key growth sectors include:

• Manufacturing: 156 projects registered in 2025 worth $3.7 billion, creating 41,117 jobs.
• Agriculture: Boosted by a ¥22.7 billion Japanese loan, the sector employs 65% of the workforce and contributes 26% of GDP.
• Clean energy: Investment commitments of $40 billion (Mission 300 Summit) raised electricity production from 1,602 MW to 3,077 MW by 2025.

Much of this development has been supported by rising tax revenues. In 2024/25, the Tanzania Revenue Authority (TRA) collected TZS 29.41 trillion, including a record TZS 3.587 trillion in December 2024 alone. This revenue funded critical initiatives such as:

• $650 million Sustainable Rural Water Supply Program
• ICT infrastructure in Dodoma and Kigoma
• Education and health investment, currently at 3.3% and 1.2% of GDP, respectively

Key Issues Hindering Fiscal and Inclusive Growth

Despite these gains, the study outlines ten pressing issues that must be tackled to ensure sustainable development:

1. Narrow Tax Base

Only 7% of Tanzania’s population is registered as taxpayers. With the informal sector employing 72% of the workforce, vast economic activity remains untaxed. This limited base restricts the country’s fiscal space and puts pressure on the formal sector.

2. High VAT Refund Arrears

Businesses faced TZS 1.2 trillion in unpaid VAT refunds in 2024. These delays affect cash flows, particularly for exporters and SMEs, and hinder business expansion.

3. Excessive Compliance Costs

Complex procedures and audit burdens increase operating costs by 10–20% for private enterprises. This discourages SMEs from entering or staying in the formal economy.

4. Business-Discouraging Tax Rates

The 30% corporate income tax and 10% withholding tax on retained earnings introduced in 2025 significantly burden SMEs. For example, SMEs (95% of all businesses) reported a 15% drop in reinvestment capacity due to this withholding tax.

5. Rural-Urban Disparities

Access to financial services is 85% in urban areas but just 55% in rural regions. This gap affects tax registration, compliance, and equitable access to public services.

6. Public Debt Pressure

Public debt stood at 45.5% of GDP in 2022/23. The fiscal deficit reached 2.5% of GDP in 2024/25, with borrowing of TZS 6.62 trillion domestically and TZS 2.99 trillion externally, highlighting the need for increased domestic revenue.

7. Inequitable Tax Benefit Distribution

Only 30% of eligible smallholder farmers accessed the tax exemptions meant for agricultural productivity. This shows a gap between policy design and grassroots impact.

8. Digital Divide

Although digital tax platforms improved compliance by 12% (2023–2024), poor digital literacy and infrastructure outside urban areas limit effectiveness.

9. Climate Vulnerability

Tanzania risks losing up to 0.5% of GDP by 2050 due to climate-related disruptions. While green taxes were proposed (e.g., TZS 500 billion carbon tax), implementation is still nascent.

10. Tensions with Private Sector

The private sector perceives some reforms—such as the 10% withholding tax—as hostile to reinvestment. This could dampen momentum in sectors like manufacturing, where private investment is essential.

The Way Forward

The report outlines several reforms to address these issues:

• Expand the tax base: Lowering the VAT registration threshold to TZS 50 million could increase registered taxpayers by 15%, raising TZS 2 trillion more annually.
• Introduce simplified presumptive taxes: This would formalize 10% of the informal sector, adding TZS 1.5 trillion in new revenue per year.
• Automate VAT refunds: Clearing 80% of refund arrears by 2027 could boost business confidence and increase investment by 5%.
• Invest in digital infrastructure: Increasing rural access to tax platforms could reduce evasion by 15%, generating an additional TZS 3 trillion by 2030.
• Sustain green growth: Implementing green taxes to support $227 million in climate adaptation will ensure resilience and help meet Tanzania’s net-zero targets.

Conclusion

Tanzania’s tax system is a cornerstone of its economic transformation agenda. While the country has made impressive strides in revenue mobilization and sectoral development, major structural and operational issues remain. Addressing these through inclusive, technology-driven, and equity-focused reforms is not only vital for achieving Vision 2050 but also for securing a prosperous and resilient future for all Tanzanians.

The Finance Act, 2025, underpins Tanzania’s ambitious TZS 56 trillion budget, aiming to drive economic development through enhanced revenue collection, investment incentives, and sectoral support. With GDP growth projected at 5.5% for 2025 (Bank of Tanzania estimate), the Act introduces measures like a three-year VAT exemption on fertilizers, saving TZS 1.8 billion annually for a TZS 10 billion firm, and a 75% customs duty relief on capital goods, reducing costs by TZS 187.5 million per TZS 1 billion import. However, challenges arise from increased costs, such as a TZS 22,000 per tonne carbon emission tax adding TZS 2.2 billion yearly for a 100,000-tonne emitter, and a 0.5% excise duty hike on telecom services costing TZS 500 million for a TZS 100 billion operator. This analysis evaluates how these provisions shape Tanzania’s economic trajectory, leveraging the TZS 56 trillion budget to foster growth while addressing potential hurdles.

Opportunities for Economic Development

1. Boosting Agricultural Productivity and Exports
   • VAT Exemptions for Agricultural Inputs: The Act exempts locally produced fertilizers from VAT for three years (2025–2027) and refined edible oils from local seeds (Page 105, Section 56). With agriculture contributing 26% to GDP (TZS 47 trillion in 2024, World Bank), these exemptions lower input costs, enhancing productivity.
     • Figure: A fertilizer producer with TZS 10 billion revenue saves TZS 1.8 billion annually (18% VAT), potentially increasing output by 10–15%, boosting agricultural GDP by TZS 4.7–7 trillion over three years.
   • Cashew Export Levy Allocation: All raw cashew export levies fund the Cashewnut Board for four years (Section 25). Cashew exports, valued at TZS 570 billion in 2023/24, could rise by 20% with improved processing, adding TZS 114 billion annually to export revenues.
   • Budget Alignment: The TZS 56 trillion budget allocates TZS 2.5 trillion to agriculture (4.5%, typical share). These incentives amplify budget impacts, supporting food security and export-led growth.
2. Stimulating Industrial Growth
   • VAT and Customs Duty Relief: VAT exemptions for textiles from local cotton (2025) and a 75% customs duty exemption on capital goods (Section 57; Section 19) reduce costs for manufacturers.
     • Figure: A textile firm with TZS 10 billion revenue saves TZS 1.8 billion in VAT, while an investor importing TZS 1 billion in machinery saves TZS 187.5 million. This could increase manufacturing GDP (8% of GDP, TZS 14.5 trillion) by 5%, or TZS 725 billion, in 2025.
   • Excise Duty Protection: Higher duties on imported goods (e.g., TZS 100/kg vs. TZS 50/kg for preserved vegetables) protect local producers.
     • Figure: A local processor producing 1 million kg saves TZS 50 million annually, enhancing competitiveness.
   • Budget Alignment: Industrial development receives TZS 3 trillion (5.4% of budget). Tax relief aligns with this, attracting foreign direct investment (FDI), which was USD 1.34 billion (TZS 3.4 trillion) in 2023.
3. Enhancing Revenue Mobilization
   • Electronic Tax Systems and Compliance: Mandatory electronic tax systems and simplified presumptive taxes for small businesses (Sections 23, 42) formalize the informal sector, which accounts for 30% of GDP (TZS 54 trillion).
     • Figure: Formalizing 10% of informal businesses (TZS 5.4 trillion) at a 3% tax rate could generate TZS 162 billion annually, supporting the TZS 56 trillion budget’s revenue target (TZS 44 trillion domestic revenue, 78%).
   • AIDS and Fuel Levies: New levies, like 0.1% on mineral value (TZS 50 million for TZS 50 billion sales, Section 113A) and TZS 10/liter on fuel (TZS 1 million/month for 100,000 liters, Section 4), bolster public finances.
     • Figure: With 10 billion liters of fuel consumed annually, the fuel levy could raise TZS 100 billion yearly.
   • Budget Alignment: Increased revenues fund infrastructure (TZS 10 trillion, 18% of budget), improving connectivity and economic efficiency.
4. Financial Sector Stability
   • Banking Amendments: The Deposit Insurance Board’s liquidity support (Section 39A) and Bank of Tanzania’s enhanced independence (Sections 5, 9, 12) stabilize the financial sector.
     • Figure: A stable banking sector could boost FDI by 10%, adding TZS 340 billion annually, supporting private sector credit growth (TZS 38 trillion in 2024, 20% increase).
   • Budget Alignment: Financial sector reforms complement TZS 1 trillion allocated to economic services, fostering investor confidence.

Challenges for Economic Development

1. Increased Operational Costs
   • Carbon Emission Tax: A TZS 22,000 per tonne tax on coal/natural gas emissions (Section 126) raises costs for energy-intensive industries like cement.
     • Figure: A factory emitting 100,000 tonnes pays TZS 2.2 billion annually, potentially increasing cement prices by 5–10%, reducing construction sector growth (10% of GDP, TZS 18 trillion) by TZS 900 billion.
   • Excise Duty Hikes: Telecom services (17% to 17.5%) and pay TV (5% to 10%) duties (Section 126) increase costs.
     • Figure: A telecom operator with TZS 100 billion revenue faces TZS 500 million extra, potentially raising consumer prices and slowing ICT growth (5% of GDP, TZS 9 trillion) by TZS 450 billion.
   • Budget Impact: Higher costs strain private sector contributions to the TZS 56 trillion budget, potentially reducing domestic investment.
2. Compliance Burdens
   • Electronic Tax Systems: Mandatory systems (Page 103, Section 42) challenge small businesses with limited technological capacity.
     • Figure: A small retailer with TZS 50 million revenue may spend TZS 1–2 million on systems, reducing profits by 2–4%, impacting 1 million SMEs (30% of GDP).
   • Mandatory Approvals: Fees require ministerial approval (Section 60A), delaying operations.
     • Figure: A logistics firm facing a one-month delay could lose TZS 100 million in revenue, slowing trade (15% of GDP, TZS 27 trillion).
   • Budget Impact: Compliance costs may divert funds from productive investments, challenging the budget’s TZS 14 trillion development expenditure goal.
3. Reduced Consumer Demand
   • Higher Taxes and Levies: Increased excise duties (e.g., alcohol, telecom) and levies (e.g., TZS 500/railway ticket, Section 73A) raise consumer prices.
     • Figure: A 10% price hike on telecom services could reduce subscriptions by 5%, costing TZS 500 billion in sector revenue, lowering consumption (60% of GDP, TZS 108 trillion).
   • Budget Impact: Lower demand could reduce VAT collections (TZS 10 trillion, 18% of budget), straining fiscal targets.
4. Foreign Investment Constraints
   • Non-Citizen Restrictions: The Business Licensing Act limits non-citizens in certain activities (Page 14, Section 14A), potentially deterring FDI.
     • Figure: A 10% FDI drop (TZS 340 billion) could reduce capital inflows, impacting manufacturing and mining (20% of GDP, TZS 36 trillion).
   • Budget Impact: Lower FDI may limit private sector financing for the TZS 56 trillion budget’s infrastructure projects.

Quantitative Impact Summary (2025)

Conclusion

The Finance Act, 2025, aligns with the TZS 56 trillion budget to drive Tanzania’s economic development by incentivizing agriculture (TZS 7 trillion GDP boost over three years), industry (TZS 725 billion in 2025), and revenue collection (TZS 162 billion from informal sector). However, challenges like increased costs (TZS 2.2 billion for cement firms), compliance burdens (TZS 1–2 million per SME), and potential FDI declines (TZS 340 billion) could hinder growth, particularly in ICT and construction. To maximize economic benefits, policymakers should streamline compliance, subsidize SMEs for digital adoption, and balance tax hikes with consumer relief. With strategic implementation, the Act can propel Tanzania toward its 5.5% GDP growth target, leveraging the TZS 56 trillion budget for sustainable development through 2028.

Key Figures: Finance Act, 2025, and Tanzania’s TZS 56 Trillion Budget (2025–2028)

Notes

• Financial Impact (2025): Based on hypothetical scenarios for a single firm or sector, using standard rates (e.g., 18% VAT, 25% customs duty) and sector-specific estimates.
• Projected Impact (2025–2028): Assumes consistent policy application and economic trends (e.g., 5.5% GDP growth, TZS 180 trillion GDP in 2025, Bank of Tanzania).
• Currency: All figures in Tanzanian Shillings (TZS).
• Budget Context: The TZS 56 trillion budget (2025) includes TZS 44 trillion domestic revenue, TZS 10 trillion for infrastructure, and TZS 2.5 trillion for agriculture.

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.