Between 2021/22 and 2025/26, Tanzania's debt service costs surged by 42–58%, from an estimated TZS 9–10 trillion to a confirmed TZS 14.22 trillion—now accounting for 25.2% of the national budget (TZS 56.49 trillion). Over this period, total public debt rose to approximately 46% of GDP, driven largely by external borrowing, which reached USD 33.9 billion in 2025/26 and remains 67.7% USD-denominated, exposing the country to exchange rate risks, especially following a 2.6% shilling depreciation in 2024/25. Domestic debt also expanded significantly to TZS 34.26 trillion, with the majority held by commercial banks and pension funds. Despite a stabilizing debt-to-GDP ratio and a manageable debt service-to-GNI ratio of 2.89% (2023), the growing reliance on non-concessional and foreign currency debt underscores fiscal vulnerabilities that require prudent debt management strategies to ensure long-term sustainability.
Tanzania's debt servicing landscape has undergone significant transformation over the past five years, reflecting the country's economic growth trajectory and evolving fiscal priorities. The most striking development is the substantial increase in debt service costs, which have risen from an estimated TZS 9-10 trillion in 2021/22 to TZS 14.22 trillion in 2025/26 – representing a 42-58% increase over the five-year period.
The 2021/22 period established the baseline for Tanzania's modern debt management framework. With debt service costs estimated at TZS 9-10 trillion, the government maintained a relatively moderate debt burden at 43.6% of GDP. The debt composition showed a balanced approach with domestic debt at 15.9% of GDP and external debt forming the larger portion. Notably, domestic arrears stood at a manageable 1.8% of GDP, indicating effective short-term debt management.
The present value debt-to-GDP ratio of 31% remained well below the 55% benchmark, positioning Tanzania in the low-to-moderate debt distress risk category. External borrowing was predominantly concessional, reducing the overall cost burden and exchange rate exposure.
The government allocated TZS 9.1 trillion for debt servicing within a total budget of TZS 44.4 trillion, with TZS 7.4 trillion successfully disbursed by April 2023. This period marked a strategic shift as public debt increased to 45.7% of GDP (46.7% including domestic arrears), reflecting increased infrastructure investment.
External debt composition rose to 63.3% of total debt, indicating a pivot toward international financing for development projects. The shift toward non-concessional borrowing began during this period, driven by infrastructure financing needs. Despite this increase, the present value debt-to-GDP ratio remained sustainable at 31.8%.
Debt servicing allocation reached TZS 10.48 trillion, representing a 15% increase from the previous year. This increase occurred within a Ministry of Finance budget of TZS 15.94 trillion, highlighting debt service as a major fiscal priority. Total public debt climbed to 47.36% of GDP, with external debt reaching USD 30.533 billion by July 2023.
The debt structure showed concerning trends with external debt comprising 73% of total obligations, significantly increasing Tanzania's exposure to exchange rate fluctuations. Total national debt reached approximately TZS 69.44 trillion in 2022, continuing its upward trajectory through 2023.
Debt service costs are estimated at TZS 11-12 trillion within a national budget of TZS 49.35 trillion. External debt peaked at USD 32.89 billion in September 2024, subsequently reaching USD 33.905 billion by January 2025. The central government held 78.1% of external debt, indicating concentrated fiscal responsibility.
Domestic debt stabilized at TZS 32.62 trillion in September 2024, with Treasury bonds dominating at 78.9% of domestic obligations. The debt-to-GDP ratio showed signs of stabilization, with projections indicating a gradual decline to 40.84% by 2029, suggesting improved debt sustainability measures.
The current budget allocation confirms TZS 14.22 trillion for debt servicing, including TZS 6.49 trillion specifically for interest payments. This represents the highest debt service allocation in the five-year period, occurring within a total budget of TZS 56.49 trillion. External debt stands at USD 33.905 billion, with the government holding 76.4% of these obligations.
Domestic debt has grown to TZS 34.26 trillion as of March 2025, primarily held by commercial banks (29-33%) and pension funds (26.5-27.6%). The USD-dominated debt structure (67.7-68.1%) continues to pose exchange rate risks, particularly given the 2.6% depreciation of the Tanzanian Shilling in 2024/25.
Year | Debt Service Costs (TZS) | Total Budget (TZS) | Public Debt (% of GDP) | External Debt (USD) | Domestic Debt (TZS) | Notes |
2021/22 | 9–10 trillion (estimated) | 34.85–41.82 trillion (est.) | 43.6% | 28.51 | 22.17 trillion (est.) | Estimated based on 25–30% of expenditure (GDP: TZS 139.4 trillion); limited data on exact budget and external debt. |
2022/23 | 9.1 trillion | 44.4 trillion | 45.7% | ~30.533 billion | 25.47 trillion (est.) | TZS 7.4 trillion paid by April 2023; domestic debt estimated as 36.7% of total debt (~TZS 69.44 trillion). |
2023/24 | 10.48 trillion | 44.39 trillion | 47.36% | 30.533 billion | 32.62 trillion | 15% increase in debt service costs; total budget reflects national budget, not just Ministry of Finance (TZS 15.94 trillion). |
2024/25 | 11–12 trillion (estimated) | 49.35 trillion | ~46% (projected) | 32.89–33.905 billion | 32.62–34.26 trillion | Estimated based on 25–30% of revenue/expenditure, 10–15% increase from 2023/24; budget confirmed. |
2025/26 | 14.22 trillion | 56.49 trillion | ~46% (projected) | 33.905 billion | 34.26 trillion | Debt service confirmed by Ministry of Finance (includes TZS 6.49 trillion interest); GDP estimated at TZS 165.9 trillion. |
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.
Sector | Opportunity (TZS) | Challenge (TZS) | Net Impact (TZS) |
Agriculture | +7 trillion (3 years) | -900 billion (costs) | +6.1 trillion |
Manufacturing | +725 billion | -450 billion (taxes) | +275 billion |
ICT | +162 billion (revenue) | -500 billion (demand) | -338 billion |
Mining | +340 billion (FDI) | -340 billion (FDI drop) | 0 |
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.
Provision | Details | Financial Impact (2025, Hypothetical Example) | Projected Impact (2025–2028) |
VAT Exemption | Fertilizers exempt for 3 years (2025–2027) | Saves TZS 1.8 billion/year for TZS 10 billion revenue firm | +TZS 7 trillion to agricultural GDP (26% of TZS 180 trillion GDP) |
VAT Exemption | Textiles from local cotton exempt for 1 year (2025) | Saves TZS 1.8 billion for TZS 10 billion revenue firm | +TZS 725 billion to manufacturing GDP (8% of TZS 180 trillion GDP) |
Customs Duty Exemption | 75% relief on capital goods (2025–2028) | Saves TZS 187.5 million on TZS 1 billion import | +TZS 340 billion FDI annually (10% increase) |
Cashew Export Levy | All levies to Cashewnut Board (2025–2028) | Adds TZS 114 billion/year to cashew exports (TZS 570 billion base) | +TZS 456 billion to export revenues |
Electronic Tax Systems | Mandatory for small businesses (2025–2028) | Generates TZS 162 billion/year from 10% of informal sector (TZS 5.4 trillion) | +TZS 648 billion to tax revenue |
Carbon Emission Tax | TZS 22,000/tonne on coal/natural gas (2025–2028) | Adds TZS 2.2 billion/year for 100,000 tonnes emitted | -TZS 900 billion to construction GDP (10% of TZS 180 trillion GDP) |
Excise Duty Increase | Telecom services: 17% to 17.5% (2025–2028) | Adds TZS 500 million/year for TZS 100 billion revenue firm | -TZS 450 billion to ICT GDP (5% of TZS 180 trillion GDP) |
AIDS Levy | 0.1% on mineral value (2025–2028) | Adds TZS 50 million/year for TZS 50 billion sales | -TZS 200 million/year for mining sector costs |
Fuel Levy | TZS 10/liter on petrol, diesel, kerosene (2025–2028) | Adds TZS 1 million/month for 100,000 liters used | -TZS 100 billion/year to transport costs |
Non-Citizen Restrictions | Limits on certain business activities (2025–2028) | Potential TZS 340 billion FDI loss (10% drop) | -TZS 1.36 trillion FDI over 4 years |
Notes
In March 2025, Tanzania’s central government collected a total of TZS 2,465.8 billion in revenue, which was 98.9% of the monthly target. Of this, TZS 2,387.5 billion came from the central government, including TZS 2,055.2 billion in tax revenue—driven by income taxes (TZS 676.1 billion), taxes on imports (TZS 755.3 billion), and local goods and services (TZS 490.6 billion). Non-tax revenue reached TZS 332.3 billion, meeting 99.4% of its target. On the expenditure side, the government spent TZS 3,658.3 billion, with TZS 2,372.0 billion allocated to recurrent expenses—including TZS 937.6 billion for wages and salaries—and TZS 1,286.3 billion for development projects. This spending reflects the government's commitment to public service delivery and infrastructure investment, despite operating a short-term fiscal gap of over TZS 1.19 trillion.
1. Central Government Revenue (March 2025)
Revenue performance remains strong, supported by tax administration improvements and steady economic activity.
2. Central Government Expenditure (March 2025)
The government maintained a fiscal discipline approach, focusing on key social services and infrastructure despite a slight revenue shortfall.
Category | Amount (TZS Billion) | Performance |
Total Revenue | 2,465.8 | 98.9% of target |
└ Central Government Revenue | 2,387.5 | 96.8% of total revenue |
└ Tax Revenue | 2,055.2 | Met target |
└ Non-Tax Revenue | 332.3 | 99.4% of target |
Total Expenditure | 3,658.3 | |
└ Recurrent Expenditure | 2,372.0 | 64.8% of total expenditure |
└ Wages and Salaries | 937.6 | |
└ Interest Payments (Total) | 366.4 | |
└ Development Expenditure | 1,286.3 | 35.2% of total expenditure |
In March 2025, Tanzania’s central government demonstrated strong revenue performance, collecting over TZS 2.4 trillion, primarily through taxes. Despite revenue being slightly below target, government expenditure reached TZS 3.7 trillion, focusing on development and essential services, supported by prudent fiscal management.
1. trong Revenue Performance
What it tells: The revenue system is functioning effectively, even under economic pressure.
2. High Government Spending
What it tells: The government is committed to balancing service delivery and long-term development, even if it means running a short-term fiscal deficit.
3. Fiscal Gap Suggests Borrowing
What it tells: The fiscal policy is slightly expansionary, prioritizing development, but managed under a disciplined framework.
The March 2025 budget performance shows a resilient fiscal system, with strong revenue collection and strategic spending priorities. Although the government is spending more than it earns in the short term, this is controlled and focused on growth-oriented sectors, supported by good tax performance and financial management.