Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

Tanzania’s domestic debt, totaling TZS 33.6 trillion in November 2024
January 14, 2025  
A Strategic Approach to Fiscal Stability Tanzania’s domestic debt, totaling TZS 33.6 trillion in November 2024, reflects a strategic focus on long-term financing through Treasury Bonds, which account for 78.2% of the debt portfolio. With a diverse creditor base led by commercial banks (28.8%), pension funds (26.9%), and the Bank of Tanzania (21%), the government […]

A Strategic Approach to Fiscal Stability

Tanzania’s domestic debt, totaling TZS 33.6 trillion in November 2024, reflects a strategic focus on long-term financing through Treasury Bonds, which account for 78.2% of the debt portfolio. With a diverse creditor base led by commercial banks (28.8%), pension funds (26.9%), and the Bank of Tanzania (21%), the government balances long-term commitments with short-term liquidity needs. This approach minimizes exchange rate risks and supports fiscal stability, underscoring the importance of sustainable debt management for economic growth.

1. Overview of Domestic Debt

As of November 2024, Tanzania’s domestic debt stock amounted to TZS 33,569.2 billion, reflecting an increase of TZS 546 billion from the previous month. This growth was primarily driven by the issuance of new Treasury bonds and bills.

2. Government Domestic Debt by Borrowing Instruments

The distribution of government domestic debt by instruments in November 2024 is as follows:

InstrumentAmount (TZS Billion)Share (%)
Government Securities28,459.284.8%
- Treasury Bonds26,244.778.2%
- Treasury Bills2,027.46.0%
- Government Stocks187.10.6%
Non-Securitized Debt5,110.015.2%
- Overdraft5,091.615.2%
- Other Liabilities*18.40.1%

Key Observations:

  • Treasury Bonds (78.2%) dominate the debt portfolio, reflecting a preference for long-term financing.
  • Non-securitized debt, mainly overdraft facilities (15.2%), complements government borrowing for short-term needs.

3. Government Domestic Debt by Creditor Category

The breakdown of creditors for domestic debt as of November 2024 is as follows:

Creditor CategoryAmount (TZS Billion)Share (%)
Commercial Banks9,679.628.8%
Pension Funds9,015.326.9%
Bank of Tanzania (BOT)7,051.721.0%
Insurance Companies1,921.85.7%
BOT’s Special Funds460.41.4%
Others (e.g., public institutions, private companies, individuals)5,440.416.2%

Key Observations:

  • Commercial Banks (28.8%) are the largest creditors, reflecting their significant role in financing government operations.
  • Pension Funds (26.9%) and Bank of Tanzania (21.0%) also play major roles in providing stable financing to the government.

4. Summary of Figures

CategoryAmount (TZS Billion)Share (%)
Domestic Debt Stock33,569.2100%
- Government Securities28,459.284.8%
- Non-Securitized Debt5,110.015.2%
Major Creditors
- Commercial Banks9,679.628.8%
- Pension Funds9,015.326.9%
- Bank of Tanzania (BOT)7,051.721.0%

Insights:

  1. Long-Term Borrowing: The dominance of Treasury Bonds reflects a strategy to stabilize financing over longer horizons.
  2. Creditor Diversification: The government relies on a balanced mix of creditors, led by commercial banks and pension funds, ensuring stable domestic funding.
  3. Short-Term Financing Needs: Overdrafts and Treasury Bills address immediate liquidity needs, complementing long-term instruments.

Tanzania’s domestic debt portfolio appears strategically managed, emphasizing long-term stability while maintaining access to short-term funds​

The details about Tanzania's domestic debt provide valuable insights into the government’s fiscal strategy and borrowing practices

1. Reliance on Long-Term Borrowing Instruments

  • The dominance of Treasury Bonds (78.2%) shows the government’s preference for long-term financing, which spreads repayment obligations over an extended period and minimizes refinancing risks.
  • The smaller share of Treasury Bills (6.0%) indicates limited use of short-term borrowing, reducing the pressure of frequent rollovers.

Implication: This strategy reflects a focus on financial stability and sustainable debt management, avoiding excessive short-term debt accumulation.

2. Diverse Creditor Base

  • Commercial Banks (28.8%) are the largest creditors, demonstrating the banking sector’s significant role in government financing.
  • Pension Funds (26.9%) and the Bank of Tanzania (21.0%) also contribute substantially, providing stable, long-term financing.
  • The involvement of insurance companies and special funds (7.1%), along with others (16.2%), indicates broader participation, reducing dependency on any single creditor group.

Implication: A diversified creditor base enhances resilience to shocks, ensuring continued access to domestic financing even during economic uncertainties.

3. Use of Non-Securitized Debt

  • Non-securitized debt, primarily overdraft facilities (15.2%), supports the government’s short-term liquidity needs. These facilities complement long-term instruments like Treasury Bonds, ensuring flexibility in managing cash flows.

Implication: The government balances long-term commitments with immediate fiscal needs, reflecting a pragmatic approach to debt management.

4. Domestic Financing Reduces Exchange Rate Risks

  • Unlike external debt, domestic borrowing eliminates exposure to exchange rate fluctuations, making it a safer option in times of currency volatility.
  • The reliance on domestic debt also reflects efforts to utilize internal financial markets, promoting local economic growth.

Implication: The emphasis on domestic debt aligns with sound fiscal management, leveraging local resources while avoiding external currency risks.

5. Debt Sustainability and Fiscal Discipline

  • The steady growth of domestic debt (an increase of TZS 546 billion in November 2024) suggests an ongoing need to finance government operations and development projects.
  • While the reliance on Treasury Bonds indicates fiscal discipline, rising debt levels demand productive use of borrowed funds to ensure economic returns.

Conclusion:
Tanzania’s domestic debt strategy emphasizes long-term stability, diversified financing, and fiscal flexibility. However, as debt levels grow, effective utilization of funds for development and maintaining debt sustainability will be critical to avoiding financial strain in the future.

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