Tanzania’s government domestic debt grew by 4.6%, reaching TZS 34,154.9 billion in January 2025, up from TZS 32,649.3 billion in December 2024. Commercial banks remained the largest creditors, holding TZS 9,816.6 billion (28.7%), followed by pension funds at TZS 9,094.6 billion (26.6%). The Bank of Tanzania’s share increased to 20.8% (TZS 7,112.3 billion), reflecting its role in liquidity management. However, insurance companies reduced their holdings to 5.5% (TZS 1,872.6 billion), down by 1.3%, indicating a shift in investment strategies.

1. Tanzania’s Total Government Domestic Debt Increased

• Total domestic debt stock reached TZS 34,154.9 billion in January 2025, up from TZS 32,649.3 billion in December 2024.
• This reflects an increase of TZS 1,505.6 billion (4.6%) in just one month.

What It Means:

✅ The government is increasing domestic borrowing, possibly to finance budget deficits or infrastructure projects.
✅ Higher domestic debt means banks and financial institutions are lending more to the government, which can impact private sector credit availability.

2. Government Domestic Debt by Creditor Category

The main creditors holding Tanzania’s domestic debt are commercial banks, pension funds, the Bank of Tanzania, and insurance companies.

Breakdown of Government Domestic Debt by Creditor (January 2025, TZS Billion)

3. Key Observations on Creditors

Commercial Banks Hold the Largest Share (28.7%)

• Banks remain the biggest lenders to the government, holding TZS 9,816.6 billion (28.7% of total domestic debt).
• This suggests that banks are prioritizing government securities over private sector loans, which could limit access to credit for businesses and households.

Pension Funds Are the Second Largest Holders (26.6%)

• Pension funds hold TZS 9,094.6 billion (26.6%), a 1.2% increase from December 2024.
• This reflects a stable investment strategy, as pension funds prefer long-term government securities for steady returns.

The Bank of Tanzania’s Holdings Increased (20.8%)

• The Bank of Tanzania (BOT) now holds TZS 7,112.3 billion (20.8%), marking a 2.6% rise from December 2024.
• This increase suggests the BOT is helping manage liquidity by holding more government securities.

Insurance Companies and Other Creditors Play a Smaller Role

• Insurance companies’ share declined slightly to 5.5% (TZS 1,872.6 billion), possibly shifting investments to other financial instruments.
• Other creditors, including public institutions, private companies, and individuals, increased their holdings by 3.4%, reaching 16.9% of total debt (TZS 5,782.6 billion).

Summary of Key Trends

Economic Implications of Domestic Debt Trends

🔹 Positive Signs:
✅ Banks, pension funds, and BOT remain reliable sources of government financing, ensuring economic stability.
✅ Higher BOT holdings suggest improved liquidity management, preventing excessive inflation risks.
✅ Pension funds benefit from stable government bond returns, supporting retirees' long-term savings.

🔸 Challenges:
⚠ Banks are prioritizing lending to the government, which could reduce loan availability for businesses.
⚠ Rising domestic debt may lead to higher interest payments, increasing the government’s fiscal burden.
⚠ Lower insurance sector participation suggests shifting investment strategies, which could affect financial market stability.

Key Insights from Tanzania’s Domestic Debt Trends (January 2025)

1. Government is Increasing Domestic Borrowing (+4.6%)

• Total domestic debt increased to TZS 34,154.9 billion, a 4.6% rise from December 2024.
• This means the government is relying more on domestic borrowing, possibly to cover budget deficits and finance public projects.

What It Means:

✅ Government securities remain attractive to investors, ensuring steady domestic financing.
⚠ Higher domestic borrowing could crowd out private sector credit, making loans expensive for businesses.

2. Banks and Pension Funds Are the Biggest Lenders

• Commercial banks hold 28.7% (TZS 9,816.6 billion) of domestic debt, making them the largest government creditors.
• Pension funds hold 26.6% (TZS 9,094.6 billion), a 1.2% increase from December 2024.

What It Means:

✅ Banks prefer lending to the government rather than businesses, as government bonds are safer investments.
✅ Pension funds are increasing investment in government securities, ensuring long-term financial security for retirees.
⚠ Less bank lending to the private sector could slow business expansion and economic diversification.

3. The Bank of Tanzania’s Debt Holdings Have Increased

• The BOT’s holdings increased by 2.6%, reaching 20.8% (TZS 7,112.3 billion).
• This suggests the BOT is helping stabilize the financial system by holding more government securities.

What It Means:

✅ Government borrowing is well-managed with central bank support, avoiding excessive market disruptions.
⚠ Higher BOT debt holdings could mean tighter monetary policy, which may impact interest rates and inflation control.

4. Insurance Companies Reduced Their Holdings

• Insurance companies' share of domestic debt dropped by 1.3% to 5.5% (TZS 1,872.6 billion).
• This could mean they are shifting to other investment opportunities like corporate bonds or equities.

What It Means:

⚠ A decline in insurance sector investment in government debt may indicate concerns over returns or market conditions.
✅ Diversification into other financial assets can help develop broader financial markets.

Overall Economic Implications

🔹 Positive Signs:
✅ Government has access to stable domestic financing, reducing reliance on external debt.
✅ Pension funds and banks continue to invest in government bonds, ensuring financial stability.
✅ BOT intervention helps regulate liquidity, preventing excessive inflation or credit shortages.

🔸 Challenges:
⚠ Heavy government borrowing from banks could reduce private sector lending, slowing economic growth.
⚠ Rising domestic debt means higher future interest payments, increasing fiscal pressure.
⚠ Reduced insurance sector participation suggests changing investment dynamics, which could impact financial market liquidity.