Stable Growth but High USD Exposure

Tanzania’s external debt stock stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from December 2024. The government holds 76.4% (USD 25,896.7 million) of the total debt, while the private sector’s share dropped to 23.6% (USD 8,004.7 million). Most of the debt was allocated to transport & telecommunications (21.0%), budget support (19.9%), and social welfare & education (19.9%). The US dollar remains the dominant borrowing currency (68.1%), increasing vulnerability to exchange rate fluctuations, while the Euro (16.1%) and Chinese Yuan (6.3%) provide some diversification.

1. External Debt Stock by Borrower

Total External Debt Declines Slightly

• Tanzania’s total external debt stock (public and private) stood at USD 33,905.1 million in January 2025, reflecting a 0.5% decline from USD 34,075.5 million in December 2024.
• The central government remains the largest borrower, holding 76.4% (USD 25,896.7 million) of total external debt.
• Private sector debt accounts for 23.6% (USD 8,004.7 million).
• Public corporations’ external debt remained negligible at USD 3.8 million.

Breakdown of External Debt by Borrower (January 2025)

What It Means:

✅ The government remains the largest borrower, funding major national projects.
⚠ Private sector external debt is slightly declining, indicating reduced foreign credit access.
✅ Public corporations have minimal debt exposure, reducing government liability risks.

2. Disbursed Outstanding Debt by Use of Funds (Percentage Share)

Debt Allocation Focuses on Transport, Energy, and Social Services

• The largest share of external debt (21.0%) was used for transport and telecommunications projects, reflecting investment in roads, railways, ports, and digital infrastructure.
• Social welfare and education (19.9%) and budget support (19.9%) were the next largest recipients, showing a focus on social development and government financing.
• Energy and mining received 14.3%, supporting projects like electricity generation and mineral development.
• Finance and insurance sector held 4.1%, helping stabilize the financial system.

Breakdown of External Debt by Use of Funds (January 2025, % Share)

What It Means:

✅ Heavy investment in transport and infrastructure projects, supporting economic expansion.
✅ Education and social welfare receive significant funding, showing a commitment to human capital development.
⚠ Lower funding for industries (4.0%) and tourism (1.6%) may slow manufacturing growth and tourism sector development.

3. Disbursed Outstanding Debt by Currency Composition (Percentage Share)

US Dollar Dominates External Debt Portfolio

• 68.1% of Tanzania’s external debt is in US dollars, making it the most dominant currency.
• Euro-denominated debt accounts for 16.1%, reflecting loans from European institutions.
• Chinese Yuan holds a 6.3% share, highlighting China's role in Tanzania’s financing.
• Other currencies make up 9.4%, including debt in Japanese Yen, British Pound, and Special Drawing Rights (SDRs).

Breakdown of External Debt by Currency (January 2025, % Share)

What It Means:

✅ US Dollar exposure is high (68.1%), making debt repayments vulnerable to exchange rate fluctuations.
⚠ A weaker Tanzanian Shilling could increase repayment costs, as most debt is in foreign currency.
✅ Diversified borrowing in Euros and Yuan helps reduce reliance on USD-based financing.

Summary of Key Trends

Economic Implications of Tanzania’s Debt Trends

🔹 Positive Signs:
✅ Controlled external debt (declined by 0.5%), reducing future repayment risks.
✅ Investment in infrastructure and social services supports long-term development.
✅ Diversification in borrowing currencies (Euro, Yuan) helps manage exchange rate risks.

🔸 Challenges:
⚠ High USD-denominated debt (68.1%) exposes Tanzania to exchange rate volatility.
⚠ Private sector external borrowing is declining, which may slow business expansion.
⚠ Lower funding for industries and tourism could impact long-term diversification efforts.

Key Insights from Tanzania’s Debt Developments (January 2025)

1. Government Continues to Dominate Borrowing

• 76.4% of total external debt (USD 25,896.7 million) belongs to the government, showing its continued reliance on external financing for public projects.
• Private sector debt declined to 23.6% (USD 8,004.7 million), meaning businesses are borrowing less from foreign sources.

What it Means:

✅ Government financing is focused on long-term national development projects like roads, energy, and education.
⚠ Private sector borrowing is shrinking, which may slow business expansion and foreign investment.

2. Debt is Primarily Funding Infrastructure & Social Development

• 21.0% of external debt is invested in transport & telecommunications, showing a focus on infrastructure expansion (roads, ports, railways, ICT).
• 19.9% of debt is used for budget support, meaning the government relies on external financing to cover operational expenses.
• 19.9% is allocated to social welfare & education, ensuring investment in human capital development.

What it Means:

✅ Tanzania is prioritizing economic growth by investing in transport & telecommunications.
✅ Social welfare & education funding supports long-term workforce development.
⚠ High reliance on external budget support (19.9%) could lead to fiscal risks if future financing decreases.

3. Tanzania’s Debt is Highly Exposed to US Dollar Risk

• 68.1% of total external debt is in US dollars, making Tanzania vulnerable to exchange rate fluctuations.
• 16.1% of debt is in Euros, reducing some risk from USD dependency.
• 6.3% is in Chinese Yuan, reflecting China’s growing role in Tanzania’s financial partnerships.

What it Means:

⚠ A weaker Tanzanian Shilling will increase the cost of debt repayments due to heavy USD exposure.
✅ Diversification into Euros & Yuan helps reduce reliance on the US dollar, though the impact is still small.

Overall Economic Implications

🔹 Positive Signs:
✅ Debt levels are stable, with a 0.5% decline in total external debt.
✅ Strong investment in infrastructure & education supports long-term growth.
✅ Some currency diversification helps manage exchange rate risks.

🔸 Challenges:
⚠ High reliance on USD (68.1%) makes Tanzania vulnerable to currency fluctuations.
⚠ Declining private sector borrowing may slow economic diversification and job creation.
⚠ Heavy dependence on external budget support (19.9%) could create fiscal pressures if funding is reduced.