The relationship between government revenue and borrowing in Tanzania from 2020 to 2025 reveals how fiscal policy has been used strategically to stabilize the economy, finance development, and manage shocks. Over this period, Tanzania’s revenue grew significantly—from TZS 21.81 trillion in 2020 to TZS 31.49 trillion in 2024, representing a 44.4% increase, driven by stronger tax administration, digital systems at TRA, expanding mining exports, and a recovering services sector. The projected TZS 32.77 trillion in 2025 (annualized from January–September data) shows slower growth of 4.1%, reflecting election-year disruptions and agricultural impacts from El Niño. Read More: Tanzania Government Revenue at 87.2% of Target, Spending at 71.9%

Despite this progress, revenue growth alone was insufficient to cover rising expenditures on infrastructure, social services, and economic recovery. As a result, borrowing became a critical fiscal tool, totaling approximately TZS 56.5 trillion between 2020 and 2024. Borrowing peaked in 2021 at 49.2% of revenue due to COVID-19 recovery spending, then stabilized around 33–36% in later years as revenue improved and the economy regained momentum—reaching 5.5% growth in 2024, with 6% projected for 2025.

A statistical analysis shows a moderate positive correlation of 0.63 (63%) between revenue and borrowing from 2020–2025, meaning that about 40% of changes in borrowing are explained by changes in revenue. This indicates that as revenue increases, borrowing capacity strengthens because lenders view rising revenue as a sign of repayment ability. At the same time, borrowing fills revenue gaps to sustain public investment, creating a growth loop where debt-financed projects expand future revenue potential.

This relationship has been central to financing major development priorities. Borrowing funded large-scale infrastructure such as railways, energy projects, and port modernization, which collectively accounted for 60% of development expenditure. These investments helped reduce poverty—from 27% in 2022 to 25% in 2024—and improved human capital outcomes. However, rising domestic borrowing at interest rates of 13–15% poses risks of crowding out private sector credit, while revenue-to-GDP ratios (14–15%) remain below the Sub-Saharan African average (16%), highlighting structural constraints like informality.

Overall, Tanzania’s revenue–borrowing interaction during 2020–2025 shows a carefully managed fiscal balance: borrowing enabled continued development and shock absorption while staying within sustainable debt limits (public debt at 48% of GDP, below the IMF’s 55% benchmark). Strengthening domestic revenue—especially through improved compliance, digital taxation, and property tax reforms—remains essential for reducing borrowing dependence and enhancing long-term economic sustainability.

*2025: Annualized from Jan-Sept data (revenue: 24.58T × 12/9; borrowing: 8.79T × 12/9). GDP projections assume 6% real growth + 3.5% inflation; fiscal deficit per IMF. Sources: Document data; GDP/fiscal metrics from World Bank, Bank of Tanzania, and IMF estimates.

Revenue Composition and Growth Drivers

• Cumulative Growth: 44.4% from 2020-2024, with steady 8-11% YoY increases. Taxes formed ~80% of revenue, boosted by base-broadening (e.g., property and carbon taxes) and ICT investments at the Tanzania Revenue Authority, including the Tanzania Customs Integrated System (TANCIS). Nontax revenues (e.g., SOE dividends, grants) contributed 2-3% of GDP. 2024's 10.7% rise was linked to mining royalties and improved VAT collection efficiency (~40%).
• 2025 Partial Data: The 24.58 trillion TZS for Jan-Sept indicates tempered growth, possibly due to delayed collections from the October 2025 elections and El Niño effects on agriculture. Annualized projections suggest tax-to-GDP at ~15%, but risks include softer global commodity prices.
• Challenges: High informality (>50% of the economy) limits upside; grants declined to 0.3% of GDP after 2023 as donors pivoted to loans.

Borrowing Composition and Sources

• Foreign Borrowing (Cumulative 2020-2024: ~29T, 58%): Focused on development projects (80-85%, e.g., 4.84 trillion TZS in 2024 for ports and rail). Program loans (15-20%) provided budget support. Mostly concessional (grant element >40%) from multilaterals like the World Bank, with low interest (~1.5%). In Jan-Sept 2025, 5.79 trillion TZS leaned toward programs (37%) tied to reforms.
• Domestic Borrowing (Cumulative: ~21.5T, 42%): Through Treasury bills and bonds; it peaked in 2022 (4.69T) amid liquidity strains but fell in 2023 and 2025 with stronger revenues. 2024 saw 4.25 trillion TZS at rates of 13-15%. Domestic debt service rose to 31% of revenue in FY2023/24 and is projected at 34% for FY2024/25.
• Overall Trend: Borrowing fell -23.7% YoY from 2021-2022, then grew modestly (+3.6% in 2023-2024), supporting infrastructure (e.g., Julius Nyerere Hydropower Project, targeting 2.1GW completion by late 2025). 2025 trends mirror this, with foreign outpacing domestic (66:34 split).

The Relationship Between Revenue and Borrowing

This relationship illustrates how Tanzania's government uses borrowing to close budget gaps, enabling development investments without compromising fiscal stability. The data shows a strategic, symbiotic dynamic: borrowing covered 27-49% of revenues, funding development spending (8-10% of GDP) while revenues gradually strengthened to reduce dependency.

1. Deficit Financing Role: Borrowing filled 27-49% of revenue shortfalls, allowing total expenditures of 18-20% of GDP (recurrent: 11%, development: 8%). Absent this, development outlays would have been slashed—as in 2021's 49.2% ratio, which financed stimulus for health and social aid, aiding GDP rebound from 4.8% (2020) to 5.5% (2024). In 2024, the lower 33.5% ratio reflected revenue buoyancy, narrowing the deficit to -2.5% of GDP; 2025 projections hold at -3% amid supplementary spending.
2. Counter-Cyclical Function: Borrowing surged +96.9% from 2020-2021 (vs. +10% revenue growth) during shocks, then stabilized (-14.5 percentage points drop 2021-2022). This buffered volatility, with foreign development loans yielding high multipliers (1.8x GDP impact per IMF estimates) in productive areas like energy, where demand grew 7% YoY in 2024.
3. Sustainability and Risks: The ~35% ratio stabilization post-2021 demonstrates prudence, with public debt at 48% of GDP in 2024 (below thresholds). Debt service remains manageable at ~12% of revenue, but domestic borrowing elevates costs (crowding out private sector; FDI at 1.5% of GDP in 2024). Analyses suggest reaching 16% revenue-to-GDP via reforms could cut borrowing needs to <30%, supporting 7% growth.
4. Equity and Growth Linkages: Borrowing prioritized sectors like health/education (7% of GDP in 2024, +6% YoY), trimming poverty from 27% (2022) to 25% (2024) and improving equity (post-transfer Gini at 0.33). However, inefficiencies (15% spending waste) and regressive subsidies limit poverty reduction to 2-3% annually. Productive debt use has enhanced human capital (HCI score to 0.42 in 2024).

Implications for Tanzania's Economic Development

The revenue-borrowing nexus has been a catalyst for shared growth, positioning Tanzania for middle-income status (projected GDP per capita ~USD 1,400 by 2025 end).

• Positive Enablers: Combined, they fueled an infrastructure surge (60% of development spend), lifting exports to 16% of GDP in 2024 and employment growth (4% in 2023-2024). Debt-financed projects aligned with 6%+ GDP targets, gradually easing poverty through social programs.
• Challenges and Reforms: Revenue weaknesses (tax gap: 6% of GDP) compel borrowing, but high ratios during shocks pushed debt to 48% of GDP, squeezing space amid global tightening. Domestic borrowing crowded out private credit (growth slowed to 15% in 2024 from 20%), impeding diversification (agriculture still 28% of GDP).
• Forward Outlook (2026+): With debt at ~49% of GDP and reserves covering 5 months of imports, sustainability is viable if revenues reach 15.5% of GDP through digital taxation and property reforms. Emphasizing concessional loans for climate-resilient projects could boost growth to 7%, trimming borrowing to <30% of revenue.

In summary, the interplay between revenue and borrowing has enabled growth by financing deficits for development while upholding sustainability. Strengthening domestic revenues is essential to lessen reliance, ensuring long-term fiscal health and equitable progress. For FY2025/26 updates (post-October elections), consult Ministry of Finance or Bank of Tanzania reports.

Correlation Between Government Revenue and Borrowing in Tanzania (2020-2025)

To address the query—"Does what we borrow and collect (revenue) have a correlation? What is the correlation percentage, and what does it mean economically?"—this section analyzes the statistical relationship between total annual revenue and total borrowing using the provided data. A Pearson correlation coefficient was calculated, which measures the linear relationship between the two variables on a scale from -1 (perfect negative) to +1 (perfect positive). The analysis uses full-year data for 2020-2024 and annualized figures for 2025 (based on January-September data multiplied by 12/9 to estimate the full year).

Data Table

The table below presents the key figures in trillions of TZS for readability (original data in millions TZS, divided by 1,000,000). This allows clear visualization of trends alongside the correlation computation.

*2025: Annualized from January-September data. Sources: Provided document; calculations via statistical analysis.

Correlation Analysis

• Does a Correlation Exist? Yes, there is a moderate positive correlation between revenue and borrowing. As revenues increase over time, borrowing tends to rise as well, though not in lockstep.
• Correlation Percentage: The Pearson correlation coefficient is 0.63, equivalent to 63% (rounded to two decimals). This indicates a moderately strong linear relationship—about 40% of the variation in borrowing can be explained by changes in revenue (R² = 0.63² ≈ 0.40).
  • Interpretation: Values above 0.5 suggest a meaningful positive link, but below 0.8-0.9 means other factors (e.g., economic shocks, policy decisions) also influence borrowing.

Economic Meaning

Economically, this 63% correlation highlights a symbiotic but balanced fiscal dynamic in Tanzania's development trajectory:

• Complementary Growth Driver: Higher revenues (from taxes and economic expansion) enable more borrowing capacity without distress, as lenders view stronger collections as a repayment buffer. Conversely, borrowing fills revenue gaps to fund essential investments (e.g., infrastructure, health), boosting GDP growth (5-6% annually) and future revenues in a virtuous cycle. For instance, the 2021 spike (revenue +10%, borrowing +97%) shows borrowing amplifying recovery efforts during low-revenue shocks.
• Sustainability Signal: The moderate strength (not >80%) implies prudent management—borrowing doesn't balloon unchecked with revenues but stabilizes (~35% ratio post-2021), keeping debt at sustainable levels (48% of GDP in 2024). This avoids "debt traps" common in low-income countries, where weak correlations lead to over-reliance (e.g., >50% ratios persisting).
• Development Implications: In Tanzania's context, it supports inclusive growth: Productive borrowing (e.g., foreign loans for projects with 1.5-2x GDP multipliers) enhances revenue potential via job creation and exports, reducing poverty (down ~2% annually). However, pushing the correlation higher through revenue reforms (to 16% of GDP) could lower borrowing needs, freeing space for private investment and accelerating middle-income transition (projected USD 1,400 per capita by 2026).
• Risks if Unaddressed: A weakening correlation (e.g., if revenues stagnate due to informality) could signal fiscal strain, raising costs (domestic rates 13-15%) and crowding out private credit, slowing diversification from agriculture (28% of GDP).

This correlation underscores borrowing as a strategic tool—not a crutch—for sustaining development amid revenue constraints, with ongoing reforms key to strengthening the link for long-term resilience.