Tanzania's external debt has grown significantly in recent years, reaching USD 32,675.10 million in August 2024. This is a major increase compared to its record low of USD 2,469.70 million in December 2011, and an average of USD 19,468.10 million over the period from 2011 to 2024. The month-on-month increase from USD 31,993.90 million in July to USD 32,675.10 million in August 2024 reflects the country's continued reliance on external financing for development projects and public expenditure.

Key Points:

• Tanzania's External Debt: $32.68 billion USD (Aug 2024).
• Average (2011-2024): $19.47 billion USD.
• Record Low: $2.47 billion USD (Dec 2011).

Tanzania's Position in East Africa and Africa

East Africa: Tanzania is one of the largest economies in East Africa, with a growing external debt that reflects significant investments in infrastructure, energy, and industrialization. The rise in debt is partly due to the country’s need for financing large-scale projects like ports, railways, and energy plants. Among East African countries, Tanzania has one of the highest external debts, but Kenya's debt is also notable, with KES 5.151 trillion (approximately USD 34.5 billion) as of June 2024.

Comparison with East African Countries (Debt in USD):

1. Kenya: $51.51 billion USD (June 2024)
2. Tanzania: $32.68 billion USD (August 2024)
3. Rwanda: $6.26 billion USD (Dec 2022)
4. Burundi: BIF 1,857.79 billion (~USD equivalent lower than Rwanda)

Africa: On the broader African continent, Tanzania's external debt is lower than that of major economies like South Africa and Egypt but higher than many smaller economies. For instance, South Africa had an external debt of USD 163,852 million as of June 2024, while Egypt had USD 160,607 million in March 2024.

Top 10 African Countries with High External Debt (as per recent data)

Here is a list of the top African countries with high external debt (figures are based on the latest available data):

1. South Africa: USD 163,852 million (June 2024)
2. Egypt: USD 160,607 million (March 2024)
3. Nigeria: USD 42,120 million (March 2024)
4. Kenya: KES 5.151 trillion (~USD 34.5 billion) (June 2024)
5. Tanzania: USD 32,675 million (August 2024)
6. Ghana: USD 31,024 million (June 2024)
7. Angola: USD 50,260 million (December 2023)
8. Zambia: USD 8,024 million (December 2023)
9. Zimbabwe: USD 13,325 million (December 2020)
10. Morocco: MAD 676,819 million (~USD 66.7 billion) (December 2022)

Economic Implications for Tanzania

Tanzania’s growing debt is a reflection of its ambitious development agenda, which requires substantial capital. While this external financing is important for infrastructure development and economic growth, managing the debt levels will be crucial to avoid excessive debt servicing costs that could limit fiscal space for other development needs. Tanzania's current external debt positions it among the highly indebted nations in East Africa but is still lower than larger economies like South Africa and Egypt.

Tanzania’s debt management will likely involve focusing on maintaining sustainable debt levels while ensuring that borrowed funds are used productively to generate economic returns. As part of East Africa, Tanzania is competing with countries like Kenya in terms of infrastructure and economic development, which may drive further borrowing for development projects.

Tanzania's external debt highlights key insights about the country’s economic development, debt reliance, and its position within East Africa and the broader African continent:

1. Tanzania’s External Debt Growth

• Significant Growth: Tanzania's external debt has grown from USD 2.47 billion in December 2011 to USD 32.68 billion by August 2024. This nearly 13-fold increase reflects Tanzania's heavy reliance on external financing to fund large-scale infrastructure and industrialization projects.
• Recent Trend: The debt rose from USD 31.99 billion in July 2024 to USD 32.68 billion in August 2024, indicating a rapid, ongoing reliance on external borrowing.
• Debt Average: Over the period from 2011 to 2024, Tanzania’s average debt was USD 19.47 billion, showing that recent years have seen particularly sharp increases in borrowing.

2. Tanzania’s Position in East Africa

• Tanzania is one of the largest economies in East Africa, second only to Kenya in terms of external debt.
• Comparison with Other East African Countries:
  • Kenya leads with an external debt of USD 34.5 billion in June 2024.
  • Tanzania follows with USD 32.68 billion in August 2024.
  • Other countries like Rwanda (USD 6.26 billion in December 2022) and Burundi have significantly lower external debt.
  • Uganda’s external debt, though not provided in the data, is typically lower than Tanzania’s.
• This shows that Tanzania and Kenya, as the region's largest economies, are heavily investing in large-scale projects that require significant external financing. Both countries are competing in terms of infrastructure development and economic growth.

3. Tanzania’s Position in Africa

• Mid-level Debt: In the context of Africa, Tanzania has moderate external debt compared to larger economies like South Africa (USD 163.85 billion) and Egypt (USD 160.61 billion). However, it has higher debt than many smaller African countries.
• Top 10 Ranking: Tanzania ranks 5th among African nations with the highest external debt, ahead of countries like Ghana (USD 31.02 billion) and Zambia (USD 8.02 billion), but well below the continent’s giants such as South Africa and Egypt.

4. Implications for Tanzania

• Ambitious Development Agenda: The sharp rise in debt reflects Tanzania’s commitment to expanding its infrastructure, energy, and industrial base. This external borrowing is crucial for financing large-scale projects like the Standard Gauge Railway (SGR), ports, and energy projects.
• Debt Sustainability Concerns: While external debt has fueled development, managing the rising debt levels is critical. High external debt can lead to increased debt servicing costs, which could limit the government’s ability to fund other important sectors like health and education. If not managed carefully, this could lead to long-term fiscal imbalances.
• Productive Use of Borrowed Funds: The key challenge for Tanzania will be to ensure that the funds borrowed are used effectively to generate economic returns, such as increased production capacity, exports, and jobs. This would help ensure that debt remains sustainable and does not lead to a debt crisis.
• Regional Competition: Tanzania’s increasing external debt mirrors the competition with other East African countries, particularly Kenya, which is also borrowing heavily for development. Both nations are positioning themselves as economic hubs in the region, but the race for infrastructure and economic development could lead to further borrowing.

Conclusion

Tanzania’s external debt reflects its ambitious development plans, but the significant increase in borrowing raises concerns about debt sustainability. As one of the largest economies in East Africa, Tanzania is making important strides in infrastructure and industrialization but must balance borrowing with the productive use of funds to ensure long-term fiscal stability. Compared to other African nations, Tanzania’s debt is significant but still more manageable than the continent’s largest economies like South Africa and Egypt. However, careful debt management will be crucial as the country continues its development journey.