Tanzania’s significant reliance on International Monetary Fund (IMF) financing, evidenced by its 16.86% share of African disbursements (TZS 0.58 trillion out of TZS 3.46 trillion) between June 30 and July 25, 2025, underscores its strategic use of IMF resources to support economic development. With IMF credit outstanding rising by 18.98% from TZS 3.07 trillion to TZS 3.65 trillion during this period (based on an exchange rate of approximately TZS 2,735 per USD, sourced from recent web data), Tanzania leverages programs like the Extended Credit Facility (ECF) and Resilience and Sustainability Facility (RSF) to address fiscal and developmental challenges. This analysis explores how this reliance shapes Tanzania’s fiscal policy and economic resilience, drawing on IMF data and broader economic insights.

Key Figures

The table below summarizes Tanzania’s key IMF financing metrics as of July 25, 2025, highlighting its position and economic indicators:

Fiscal Policy Impacts

Increased Fiscal Space for Priority Spending

Tanzania’s TZS 0.58 trillion in IMF disbursements provides significant fiscal space to fund priority sectors such as health, education, and infrastructure. The ECF program, with total disbursements reaching approximately TZS 3.42 trillion (USD 1.25 billion) by July 2025, supports social spending while pursuing fiscal consolidation. Recent IMF reviews highlight Tanzania’s efforts to increase funding for health workers, teachers, and social programs, aligning with Vision 2025 goals for poverty reduction and human capital development. For example, a supplementary budget in FY24/25 increased public spending by 0.4% of GDP to clear domestic arrears and enhance education and health initiatives. This financing allows Tanzania to address immediate developmental needs without drastic expenditure cuts or immediate tax hikes.

However, this reliance risks delaying structural fiscal reforms. The temporary pause in fiscal consolidation in FY24/25, as noted by the IMF, reflects a trade-off between short-term spending needs and long-term fiscal discipline. Without sustained efforts to boost domestic revenue (currently at 13% of GDP), Tanzania may face challenges sustaining this level of expenditure once IMF support tapers.

Pressure to Enhance Domestic Revenue Mobilization

Tanzania’s heavy reliance on IMF financing underscores the urgency of strengthening domestic revenue collection to reduce external dependency. The IMF and World Bank note that Tanzania’s tax-to-GDP ratio of 13% in 2024 is below the Sub-Saharan African average of 16%, limiting fiscal autonomy. The ECF includes reforms to expand the tax base, streamline tax policies, and improve revenue administration. For instance, Tanzania is implementing digital tax systems and reducing bureaucratic inefficiencies to boost compliance. The TZS 0.58 trillion disbursement, while critical, may reduce short-term pressure to accelerate these reforms, potentially delaying fiscal self-sufficiency. Strengthening domestic revenue is essential to sustain development gains and reduce reliance on external financing.

Debt Sustainability Concerns

The absence of repayments in July 2025 and the increase in IMF credit to TZS 3.65 trillion raise concerns about long-term debt sustainability. Tanzania’s public debt, at approximately 50% of GDP in 2024, is considered sustainable with a moderate risk of distress, per IMF and World Bank assessments. However, continued reliance on external financing, even if concessional, adds to the debt burden. The IMF’s 2025 Article IV consultation emphasizes resuming fiscal consolidation in FY25/26 to maintain debt sustainability. Risks such as global economic slowdown, commodity price volatility, or reduced donor support could strain Tanzania’s repayment capacity, necessitating prudent fiscal management to balance IMF financing with sustainable debt levels.

Economic Resilience Impacts

1. Support for Macroeconomic Stability

Tanzania’s IMF financing enhances economic resilience by supporting macroeconomic stability. The TZS 0.58 trillion disbursement in July 2025 supports balance of payments stability, easing foreign exchange market pressures and maintaining adequate reserves (USD 5.7 billion, or TZS 15.58 trillion, covering 3.8 months of imports in March 2025). Low inflation (3.3% in March 2025, below the Bank of Tanzania’s 5% target) and projected 6% real GDP growth in 2025 reflect the stabilizing role of IMF funds. These conditions foster investor confidence and support private sector growth, critical for economic resilience.

2. Climate Resilience and Structural Reforms

The RSF, part of Tanzania’s IMF financing, bolsters resilience against climate-related risks, which threaten agriculture and tourism—key economic sectors. The RSF’s USD 55.9 million (TZS 0.15 trillion) disbursed in December 2024 supports reforms for disaster risk management, climate-integrated budgeting, and financial sector supervision for climate risks. Given Tanzania’s vulnerability to floods and droughts, these measures are vital for long-term resilience. Additionally, ECF-supported structural reforms, such as improving the business environment and reducing regulatory barriers, aim to diversify the economy and boost private sector-led growth, further enhancing resilience.

3. Risks from External and Domestic Vulnerabilities

Tanzania’s reliance on IMF financing, with a 16.86% share of African disbursements, exposes it to external and domestic risks. The IMF highlights global risks, including economic slowdown and geoeconomic fragmentation, which could disrupt financing flows. Domestically, the 2025 national elections may delay reforms, as noted in a 2024 IMF working paper, potentially impacting industrial production and increasing borrowing costs. Over-reliance on IMF funds could also strain economic resilience if domestic revenue diversification lags, leaving Tanzania vulnerable to external shocks. Balancing IMF support with domestic reforms is critical to mitigate these risks.

Key Considerations for Tanzania

• Strategic Allocation of Funds: The TZS 0.58 trillion disbursement should prioritize high-impact investments in infrastructure, health, and education to maximize economic returns and align with Vision 2025.
• Governance and Transparency: ECF reforms emphasize improving public financial management and anti-corruption measures to ensure efficient use of IMF funds and build investor confidence.
• Economic Diversification: Reducing reliance on agriculture and tourism through private sector development and ECF-supported regulatory reforms is essential for resilience.
• Climate Adaptation: Continued RSF support is crucial to address climate vulnerabilities, protecting key sectors and sustaining economic growth.

Conclusion

Tanzania’s reliance on IMF financing, with a 16.86% share of African disbursements (TZS 0.58 trillion), significantly influences its fiscal policy and economic resilience. The funds provide fiscal space for critical spending, supporting macroeconomic stability and 6% GDP growth in 2025. However, low domestic revenue (13% of GDP) and rising debt (50% of GDP) highlight the need for stronger revenue mobilization and prudent debt management. The ECF and RSF programs enhance resilience through structural and climate-focused reforms, but risks from global uncertainties and domestic policy delays persist. By strategically leveraging IMF financing, advancing governance, and diversifying its economy, Tanzania can strengthen its fiscal policy and build sustainable economic resilience.

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.

A Legacy of Collaboration and a Blueprint for the Future

By Dr. Bravious Kahyoza, PhD, Senior Economist at TICGL

Tanzania’s journey with Public-Private Partnerships (PPPs) is a compelling narrative of ambition, resilience, and progress. From visionary reforms to groundbreaking collaborations, the country has redefined how public and private sectors can unite to tackle critical challenges. At its core, this is a story of transformation, driven by innovation and a steadfast belief in the power of partnership to uplift a nation.

The Foundations of PPPs in Tanzania

The foundation for PPPs in Tanzania was laid during the administration of President Benjamin Mkapa, whose foresight underscored the importance of liberalization in achieving sustainable economic growth. Under his leadership, Tanzania embraced reforms that positioned the private sector as an engine of development. Mkapa’s vision was clear: the private sector is not a competitor but a development partner. This belief set the stage for deeper collaborations between the government and private entities in providing critical public services and infrastructure.

Building on this foundation, the government under Prime Minister Mizengo Pinda took decisive steps to institutionalize the PPP framework. In 2010, the Public-Private Partnership Act, Cap. 103 was enacted, establishing the PPP Coordination Unit and the PPP Finance Unit to analyze projects for technical and financial viability, respectively. Pinda championed the legislation, emphasizing the need for a structured system where the government and private sector could collaborate efficiently. However, implementation challenges soon became evident, necessitating further reforms.

Evolution and Reforms of the PPP Framework

By 2014, the government acknowledged these challenges and moved to amend the PPP Act, merging the two units into the PPP Centre, a centralized entity within the Office of the Prime Minister. This reform aimed to streamline decision-making processes and reduce bureaucratic hurdles. Economic experts like Prof. Lucian Msambichaka from the University of Dar es Salaam supported the change, noting that a fragmented approach could not thrive in a fast-paced economic environment. A single institution, he argued, would instill confidence among investors and guide the process more effectively.

Another pivotal reform came in 2018, when the PPP Centre was relocated to the Ministry of Finance and Planning to align its operations more closely with the country’s fiscal policies. Leaders like Prof. Kitila Mkumbo, Minister of Planning and Investment, advocated for the move, believing that integration with the finance ministry would ensure more effective resource mobilization aligned with national priorities.

Current Leadership and Progress

Today, the PPP Centre operates under the Ministry of Finance and Planning, led by David Zacharia Kafulila, a seasoned public administrator appointed as the Centre’s first Executive Director in January 2024. Under his leadership, Tanzania’s PPP agenda has been revitalized, leading to the initiation and acceleration of projects in critical sectors such as energy, transportation, and health. With a results-driven approach, Kafulila emphasizes that partnerships must deliver real outcomes. His leadership has drawn praise from President Samia Suluhu Hassan, who, in a national address, recognized the Centre’s transformation into a model of efficiency and innovation. Projects once stalled are now progressing, instilling a renewed sense of hope for the future.

Challenges and the Road Ahead

Yet, despite the progress, challenges remain. The late Prof. Honest Ngowi from Mzumbe University often highlighted the barriers hindering the full realization of PPPs in Tanzania. These include gaps in the legal and institutional framework, a need for more comprehensive feasibility studies, and improved risk-sharing mechanisms to better attract private-sector investment. As he put it, goodwill alone is not enough—the government must foster an environment where investors feel secure and respected.

The impact of faith-based organizations in sectors such as education, health, and water demonstrates the transformative power of partnerships. Their successes offer proof of concept, yet scaling these models to large infrastructure projects has proven difficult due to complex regulatory and financial dynamics.

Tanzania’s PPP progress has been bolstered by broader economic reforms. Investment as a percentage of GDP increased from 17.6 percent in 1995 to 26.3 percent in 2008, and by 2023, it stood at 40.25 percent—reflecting greater private sector participation. However, access to credit remains low by global standards, limiting the scope of private involvement in high-impact projects. Prof. Ngowi often emphasized the need for expanded access to long-term financing to support truly transformative initiatives.

Foreign Direct Investment has also seen positive growth, rising by 14.7 percent in 2023 to reach $1.65 billion, up from $1.44 billion the year before. This increase was largely driven by a surge in intercompany loans, which accounted for 43.1 percent of total FDI flows, compared to 8.7 percent in 2022. While these figures are promising, they remain modest when compared to global and regional benchmarks. Addressing bottlenecks in infrastructure and refining the regulatory environment will be crucial to attracting even more investment. Prof. Mkumbo has often stressed that without a supportive business environment, Tanzania risks falling behind in the global competition for capital.

A Look at Regional Success Stories

Valuable lessons can be drawn from other African countries that have implemented successful PPP models. South Africa’s Renewable Energy Independent Power Producer Procurement (REIPPP) program has attracted billions in investment by offering clear guidelines, competitive bidding, and consistent government commitment. Kenya’s Nairobi Expressway is another success story, showcasing the value of strategic partnerships that balance investor returns with public benefits.

These examples underline a central truth: effective PPPs depend on transparent processes, strong institutions, and clear policy frameworks that inspire investor confidence while safeguarding public interest.

The Future of PPPs in Tanzania

As Tanzania moves toward realizing its Vision 2025 development agenda, the role of PPPs will only grow more critical. The government recognizes that bridging financial and technical resource gaps will require active participation from the private sector. Kafulila maintains that PPPs are not just a financing mechanism—they are a strategy for delivering better services and spurring economic growth. His balanced approach blends private-sector innovation with public oversight to ensure lasting benefits for all citizens.

The legacy of PPPs in Tanzania reflects decades of deliberate policy choices and courageous leadership—from President Mkapa’s economic liberalization to Prime Minister Pinda’s legal reforms and the insights of economists like Prof. Msambichaka and Prof. Ngowi. Today, that legacy is being shaped further by a new generation of leaders and partners.

With strong leadership, coherent policies, and a shared national vision, Tanzania is well-positioned to unlock the full potential of Public-Private Partnerships—building a future defined by inclusive development, modern infrastructure, and sustained prosperity.