Stability at 41.7% of GDP and a Projected Decline to 40.8%

Tanzania's general government gross debt stands at a moderate 41.7% of GDP (2023), showcasing a prudent approach to borrowing compared to regional peers like Kenya (68.6%) and Uganda (51.1%). While many African nations have seen sharp increases in debt levels, Tanzania has maintained stability by prioritizing strategic investments and domestic resource mobilization. The debt is forecasted to peak at 47.3% in 2024 before declining to 40.8% by 2029, underscoring sustainable fiscal management. This stability enhances investor confidence, ensuring that economic growth is not compromised by excessive debt servicing pressures.

Tanzania's General Government Gross Debt (% of GDP)

Tanzania has demonstrated a relatively stable debt trajectory over the years. Below are key figures:

• 2001: 50.8%
• 2005: 46.1% (sharp decline from early 2000s due to HIPC debt relief programs)
• 2010: 27.6% (lowest point in the two-decade period)
• 2015: 39.5%
• 2020: 41.3%
• 2024 (forecasted): 47.3%
• 2029 (forecasted): 40.8%

Comparison with Kenya and Uganda

Kenya

Kenya's debt level has been consistently higher than Tanzania's over the years, reflecting its aggressive borrowing strategy for infrastructure projects:

• 2001: 41.3%
• 2010: 36.7%
• 2015: 45.8%
• 2020: 68.0%
• 2024 (forecasted): 69.9%
• 2029 (forecasted): 66.1%

Key Insights:

• Kenya’s debt increased sharply after 2013, coinciding with major infrastructure investments like the Standard Gauge Railway.
• By 2020, Kenya’s debt was 26.7 percentage points higher than Tanzania's.

Uganda

Uganda’s debt levels have been consistently lower than Tanzania's until the mid-2010s when it started to rise:

• 2001: 51.4%
• 2010: 18.4%
• 2015: 28.0%
• 2020: 46.3%
• 2024 (forecasted): 51.4%
• 2029 (forecasted): 36.3%

Key Insights:

• Uganda reduced debt significantly in the early 2000s but experienced a resurgence due to investment in energy and oil infrastructure.
• By 2024, Uganda’s debt will exceed Tanzania's, but it is projected to decline sharply afterward.

Regional and Global Context

Sub-Saharan Africa

• 2001: 59.3%
• 2010: 25.4%
• 2020: 56.3%
• 2024 (forecasted): 59.7%

Africa (Region)

• 2001: 63.1%
• 2010: 32.0%
• 2020: 64.6%
• 2024 (forecasted): 66.7%

Key Insights:

• Tanzania’s debt has consistently remained below the regional average.
• The region has seen significant increases in debt levels since 2010, driven by borrowing for development projects and economic shocks like COVID-19.

Tanzania’s Strategic Position

• Debt Sustainability: Tanzania has managed its debt more conservatively than its neighbors, maintaining moderate levels and avoiding spikes seen in Kenya and Uganda.
• Fiscal Discipline: Tanzania's focus on domestic resource mobilization and cautious borrowing supports its fiscal health.
• Future Outlook: While the debt-to-GDP ratio is expected to rise to 47.3% in 2024, it remains sustainable and within international thresholds.

Key Takeaways

1. Tanzania's debt trajectory is stable, peaking at 47.3% in 2024 but projected to decline gradually to 40.8% by 2029.
2. Kenya has significantly higher debt levels, reflecting its infrastructure-driven borrowing strategy.
3. Uganda's debt is rising, projected to exceed Tanzania's by 2024, but it’s forecasted to decline in the long term.
4. Tanzania stands out as fiscally disciplined, with a debt level below Sub-Saharan Africa's and Africa’s regional averages.

The analysis of Tanzania's general government gross debt (% of GDP), compared to its regional peers, tells several key stories about its fiscal management, economic priorities, and potential risks.

1. Fiscal Discipline and Stability

• Tanzania’s debt levels are moderate and have remained relatively stable compared to its neighbors like Kenya and Uganda.
  • This indicates prudent borrowing practices and fiscal discipline.
  • The debt-to-GDP ratio has stayed below international risk thresholds (often cited as 55-60% for emerging economies).
  • Tanzania's focus on mobilizing domestic resources reduces over-reliance on external borrowing.

2. Strategic Approach to Borrowing

• Tanzania has adopted a conservative borrowing strategy, focusing on critical projects while avoiding excessive reliance on external loans.
  • Unlike Kenya, which heavily borrowed for large-scale infrastructure projects like railways and highways, Tanzania’s debt growth has been more measured.
  • This approach ensures that debt servicing does not crowd out essential public investments.

3. Resilience Amid Global Trends

• While Sub-Saharan Africa and global averages for debt-to-GDP ratios have increased sharply since 2010, Tanzania has managed to keep its debt growth moderate.
  • This resilience reflects the country's ability to weather global economic shocks (e.g., COVID-19) and maintain economic growth.
  • Policies promoting self-reliance, such as prioritizing agriculture and industrialization, have helped mitigate external pressures.

4. Comparisons with Kenya and Uganda

Kenya:

• Kenya’s debt-to-GDP ratio is significantly higher, indicating a reliance on borrowing for infrastructure projects and other expenditures.
  • This raises concerns about Kenya’s ability to manage debt sustainably, as evidenced by its rising debt servicing costs.
  • Tanzania’s lower debt reflects its avoidance of similar fiscal risks.

Uganda:

• Uganda’s debt trajectory shows a sharp rise due to investment in energy and oil infrastructure.
  • However, its debt is expected to decline significantly after 2024.
  • Tanzania’s steadier debt management avoids the peaks and troughs seen in Uganda, indicating better planning.

5. Economic Priorities and Challenges

• The moderate debt reflects Tanzania’s focus on long-term economic priorities, such as improving infrastructure, energy access, and agriculture.
• However, the rising trend in debt (forecasted to peak at 47.3% of GDP by 2024) signals emerging challenges, including:
  • Increased borrowing for large projects (e.g., Standard Gauge Railway, Julius Nyerere Hydropower Dam).
  • Servicing debt costs, which could strain public finances if economic growth slows.

6. Tanzania’s Debt Sustainability

• Tanzania's debt remains sustainable, with the trajectory expected to reverse and decline post-2024 (40.8% by 2029).
• Sustainability is supported by:
  • Economic diversification: Reducing dependence on a few sectors (e.g., mining, agriculture).
  • Sound macroeconomic policies: Controlling inflation, fostering stable GDP growth.
  • Infrastructure development: Targeting projects with clear economic returns to boost productivity and revenue generation.

7. Signals to Investors and Stakeholders

• Tanzania’s fiscal stability is an attractive signal to both domestic and international investors.
• It positions Tanzania as a safer investment destination compared to its regional peers.
• However, maintaining this stability will require:
  • Continued transparency in debt management.
  • Focus on revenue generation (tax reforms, enhanced public-private partnerships).
  • Efficient implementation of development projects.

Key Implications for Policy

1. Caution on Future Borrowing: As debt levels approach 50% of GDP, Tanzania must ensure that new borrowing is directed toward high-return projects.
2. Revenue Mobilization: Increasing tax revenue and expanding the tax base are crucial to reducing reliance on borrowing.
3. Debt Management: Transparent reporting and effective repayment strategies are vital for maintaining credibility.

Tanzania’s debt story reflects a measured and sustainable approach to fiscal management, offering lessons for regional peers while highlighting the importance of maintaining growth-oriented policies.