Tanzania has experienced a steady decline in foreign aid, with official development assistance (ODA) dropping from $761 million in 2013 to $389 million in 2024 and further projected to fall to $118 million in 2025. With ODA accounting for 8.55% of the country's Gross National Income (GNI) of $79 billion, this decline signals the need for stronger domestic revenue generation, increased private sector participation, and enhanced public-private partnerships (PPPs). As tax revenue remains at only 11% of GDP, Tanzania must prioritize economic reforms to sustain growth amid shifting donor priorities.

Tanzania has experienced a fluctuating trend in Official Development Assistance (ODA) disbursements, with a peak of $761 million in 2013 followed by a gradual decline to $389 million in 2024 and a further projected drop to $118 million in 2025. This reduction has several critical implications:

1. Reduced Future Aid – Strengthening Domestic Revenue
   • In 2024, ODA accounts for 8.55% of Tanzania’s Gross National Income (GNI), indicating its significance in the economy.
   • Government tax revenue stands at 11% of GDP, which is relatively low compared to regional benchmarks (e.g., Kenya at 16% and South Africa at 25%).
   • With declining aid, Tanzania must improve tax collection efficiency, broaden the tax base, and formalize informal sectors to increase revenue generation.
2. Economic Independence – Strengthening Public Finance Management
   • The country’s GNI per capita is $1,200, showing that despite economic growth, a large portion of the population still has low-income levels.
   • Public debt management and financial discipline will be critical to ensure sustainability while reducing dependence on external funding.
3. Donor Shifts – Strategic Adaptation
   • The World Bank Group remains the top donor ($1.095 billion), followed by the U.S. ($429 million) and the Global Fund ($225 million).
   • The decline in aid could mean donors are shifting priorities, focusing on humanitarian crises or new sectors like climate resilience and digital transformation.
   • Tanzania must align its national development plans with donor interests to maintain strategic funding.
4. Public-Private Partnerships (PPP) – Mobilizing Investments
   • The sharp drop in aid from $647 million in 2023 to $118 million in 2025 suggests a pressing need for alternative financing models.
   • Attracting private sector investments in infrastructure, energy, agriculture, and technology through PPP frameworks can bridge the financing gap.
   • Strengthening investment policies and reducing bureaucratic hurdles will make Tanzania more attractive to investors.

The decline in foreign aid is a wake-up call for Tanzania to enhance tax policies, strengthen financial management, align with shifting donor priorities, and attract private sector investment. By focusing on these areas, Tanzania can transition towards sustainable economic growth and reduce its reliance on foreign assistance.

The declining foreign aid to Tanzania highlights key economic challenges and the urgent need for policy shifts:

1. Foreign Aid is Declining

• Tanzania's ODA disbursements peaked at $761 million in 2013 but have been fluctuating since.
• By 2024, aid dropped to $389 million and is projected to decline further to $118 million in 2025.
• This indicates a long-term reduction in donor dependency, forcing Tanzania to seek alternative funding sources.

2. Tanzania Must Strengthen Domestic Revenue Collection

• Tax revenue as a percentage of GDP is only 11%, much lower than in peer countries (e.g., Kenya ~16%).
• With GNI at $79 billion and GNI per capita at $1,200, the economy is growing, but tax efficiency needs improvement.
• Expanding the tax base and formalizing the informal sector can help replace lost donor funding.

3. Donor Priorities are Shifting

• The World Bank ($1.095 billion) remains the largest donor, followed by the U.S. ($429 million) and Global Fund ($225 million).
• Aid cuts suggest donors are redirecting funds to other priority countries or shifting towards new focus areas like climate resilience, technology, and security.
• Tanzania must align its policies with emerging donor interests to maintain funding for key projects.

4. Public-Private Partnerships (PPP) are Essential

• With aid dropping from $647 million in 2023 to a projected $118 million in 2025, Tanzania must fill the funding gap through private investments.
• Attracting private sector participation in infrastructure, agriculture, and industrialization is crucial for long-term economic sustainability.

5. The Path to Economic Independence

• The decline in aid can push Tanzania towards self-reliance, but it requires stronger fiscal management, industrialization, and investment-friendly policies.
• Strengthening PPP frameworks, improving business environments, and reducing bureaucratic barriers will be key to ensuring sustainable economic growth.

Conclusion

The figures tell us that Tanzania can no longer rely on foreign aid as a major economic driver. The country must boost domestic revenue, attract private investments, and adapt to changing donor priorities to ensure stable and sustainable growth.

Table: Tanzania’s ODA Disbursements (2001-2025)