Tanzania’s debt servicing costs relative to GDP have evolved significantly from 2013 to 2024, reflecting the country’s growing debt burden and economic dynamics. Over this period, debt servicing costs rose from an estimated USD 1.36 billion (TZS 3.71 trillion, 3.09% of GDP) in 2013 to USD 2.52 billion (TZS 6.87 trillion, 2.99% of GDP) in 2024, with a peak of USD 3.33 billion (TZS 9.09 trillion, 4.39% of GDP) in 2022. This evolution, driven by a 184% increase in national debt (USD 14.93 billion to USD 42.36 billion), TZS depreciation (8% in 2023/24), and shifts toward higher-cost commercial loans, underscores the fiscal challenges Tanzania faces in balancing debt repayment with economic growth.

Explanation of Figures:

• 2013: Debt servicing cost of USD 1.36 billion (TZS 3.71 trillion) was 3.09% of GDP (USD 44 billion), estimated using 2.5–3.5% of GNI (mid-point).
• 2022: Actual cost of USD 3.33 billion (TZS 9.09 trillion, The Citizen) was 4.39% of GDP (USD 75.94 billion), reflecting a spike due to principal repayments and TZS depreciation.
• 2024: Estimated cost of USD 2.52 billion (TZS 6.87 trillion) was 2.99% of GDP (USD 84.40 billion), showing stabilization with GDP growth.
• Debt Growth: National debt increased from USD 14.93 billion (2013) to USD 42.36 billion (2024), per Statista.
• TZS Depreciation: 8% in 2023/24 (BoT), increasing external debt servicing costs.
• Exchange Rate: 1 TZS = 0.000366972502112619 USD (Statista, October 2024).

Debt Servicing Costs

From the previous analysis, A compiled debt servicing costs for 2013–2021 and 2023–2024, with 2022 as a confirmed data point (TZS 9.09 trillion, USD 3.33 billion). Other years rely on estimates using a debt service-to-GNI ratio of 2.5–3.5% (based on TICGL’s 2.89% for 2023 and IMF’s 5–7% of GDP range). Below are the figures:

Notes:

• 2022 is actual (The Citizen). Others are estimated using 2.5–3.5% of GNI, adjusted to align with 2023’s 2.89% GNI ratio.
• TZS converted using 1 USD = 2,725.3 TZS.

Debt Servicing Cost as % of GDP

Evolution of Debt Service-to-GDP Ratio

• 2013–2021: The ratio remained stable at ~3.0–3.1%, fluctuating slightly due to steady GDP growth (4–6%) and moderate debt service growth (from USD 1.36 billion to USD 2.08 billion). The consistency reflects Tanzania’s reliance on concessional loans with low interest rates (1–2%).
• 2022 Spike: The ratio jumped to 4.39% (USD 3.33 billion ÷ USD 75.94 billion), driven by a significant increase in debt servicing costs (TZS 9.09 trillion). This spike likely reflects principal repayments on maturing loans or higher commercial loan costs (6–7% rates).
• 2023–2024 Decline: The ratio fell to 2.89% (2023) and ~2.99% (2024), aligning with TICGL’s 2.89% GNI ratio and suggesting a return to lower servicing costs, possibly due to debt restructuring or slower principal repayments.

Trend Summary

• Overall Trend: The debt service-to-GDP ratio increased slightly from 3.09% (2013) to 2.99% (2024), with a notable peak at 4.39% in 2022.
• Annual Average: ~3.15% over the period, within IMF’s 5–7% of GDP range for sustainable debt service.

Drivers of Changes in the Ratio

1. Debt Stock Growth:
   • Total national debt grew 184% from USD 14.93 billion (2013) to USD 42.36 billion (2024), per Statista. This increased servicing obligations, especially for external debt (71.3% of total in 2023/24).
   • Impact: Higher debt stock raised absolute servicing costs (e.g., USD 1.36 billion in 2013 to USD 2.52 billion in 2024), but the ratio remained stable due to proportional GDP growth.
2. GDP Growth:
   • GDP grew from USD 44 billion (2013) to USD 84.40 billion (2024), a 92% increase (4–6% annually). Strong GDP growth offset rising debt service costs, keeping the ratio stable except in 2022.
   • Impact: GDP growth of 5–6% annually (IMF) outpaced debt service growth (~4–5% annually, except 2022), stabilizing the ratio around 3%.
3. TZS Depreciation:
   • The TZS depreciated by 8% in 2023/24 and 0.5% in 2023 (per BoT and Statista). This increased the cost of servicing USD-denominated external debt (71.3% of total).
   • Impact: Depreciation likely contributed to the 2022 spike (USD 3.33 billion), as TZS costs for external debt payments rose, pushing the ratio to 4.39%.
4. Debt Composition:
   • External debt (71.3%) includes concessional loans (1–2% rates) and commercial loans (6–7%). Domestic debt (28.7%) carries higher rates (15–19%, per BoT).
   • Impact: The 2022 spike may reflect increased commercial borrowing or principal repayments on post-2015 infrastructure loans (e.g., SGR). The decline in 2023–2024 suggests a shift back to concessional financing.
5. Principal Repayments:
   • The 2022 spike (TZS 9.09 trillion) likely includes significant principal repayments on maturing loans from the mid-2010s infrastructure boom.
   • Impact: Principal repayments temporarily inflated the ratio in 2022, unlike the stable interest-driven costs in other years.
6. Interest Rate Changes:
   • Domestic T-bill rates rose from 5.8% to 11.7% by March 2024 (per X posts). Commercial external loans (6–7%) also increased costs compared to concessional loans.
   • Impact: Higher rates on domestic and commercial debt likely contributed to the 2022 peak and sustained higher costs in 2024.

Explanation with Figures

• Stable Period (2013–2021): The ratio hovered around 3.0–3.1% (e.g., USD 1.36 billion ÷ USD 44 billion = 3.09% in 2013; USD 2.08 billion ÷ USD 69.24 billion = 3.00% in 2021). This stability reflects balanced growth in debt service (USD 1.36 billion to USD 2.08 billion, ~52% increase) and GDP (USD 44 billion to USD 69.24 billion, ~57% increase).
• 2022 Peak: The ratio spiked to 4.39% (USD 3.33 billion ÷ USD 75.94 billion), driven by a 60% jump in servicing costs from 2021’s estimated USD 2.08 billion. TZS 9.09 trillion consumed ~30% of recurrent expenditure (TZS 30.31 trillion, BoT), likely due to principal repayments and TZS depreciation (0.5–8%).
• 2023–2024 Decline: The ratio dropped to 2.89% (USD 2.31 billion ÷ USD 80 billion) in 2023 and ~2.99% (USD 2.52 billion ÷ USD 84.40 billion) in 2024, reflecting lower servicing costs (possibly due to fewer principal repayments) and continued GDP growth (5.5%).
• Key Driver Example: In 2022, external debt (~USD 23.7 billion, 71.3% of USD 33.27 billion) at ~3% average rate cost ~USD 0.71 billion, while domestic debt (~USD 9.5 billion) at ~17% cost ~USD 1.62 billion. TZS depreciation and principal repayments likely added ~USD 1 billion, explaining the spike.

Summary

The proportion of debt servicing costs to GDP in Tanzania evolved from 3.09% in 2013 to 2.99% in 2024, with a peak of 4.39% in 2022. The ratio remained stable at ~3.0–3.1% from 2013–2021 due to balanced GDP and debt service growth, spiked in 2022 due to principal repayments and TZS depreciation, and declined to ~2.9–3.0% in 2023–2024 with GDP growth and fewer repayments. Key drivers include:

• Debt Stock Growth: 184% increase (USD 14.93 billion to USD 42.36 billion).
• TZS Depreciation: 8% in 2023/24, inflating external debt costs.
• Debt Composition: Shift to commercial loans and high domestic rates (15–19%) in 2022.
• GDP Growth: 92% increase (USD 44 billion to USD 84.4 billion), stabilizing the ratio.