- Almost half of Tanzania’s FY25/26 national budget is going to debt repayment.
- Tax evasion and administrative inefficiencies which continue to limit the country’s domestic revenue growth.
- Tanzania aims for 6 per cent GDP growth in FY2025/26.
Tanzania national debt is growing and economists are urging tighter fiscal measures to stay safe. This comes as the country tables its national budget at $21.6 billion for the 2025/26 financial year which is an increase of 14.35 per cent from the previous one.
Minister for Finance, Dr. Mwigulu Nchemba, said the government will be keen on driving inclusive economic transformation through domestic resource mobilisation and strategic investments to spur job creation.
Dr. Nchemba detailed that the budget is expected to be financed through domestic revenue amounting to over $15.4 billion, while grants will cover an amount in excess of $385.6 million and loans will cover the other $578 million deficit.
“Out of the expected domestic revenue, tax revenue will amount to $1.2 billion, nontax revenue $231 million and revenue from Local Government Authorities will be 39 million USD. Furthermore, loans include 231 million USD from domestic sources and 347 million USD from external sources,” the Minister outlined.
According to Dr. Nchemba, the government’s expenditure estimates of 2.2 billion USD for the 2025/26 financial year include salaries and pension contributions (Central Government) amounting to 9.17tr/- as well as the procurement of goods and services at 5.58tr/-.
The minister said other expenditures include interest payments on loans totalling 6.49tr/- subsidies to government institutions, public corporations and local government authorities amounting to 347million USD and 308 million USD allocated for capital payments on domestic and foreign debt.
“In the 2025/26 financial year, the government expects to accelerate the growth of real GDP to 6.0 per cent in 2025, up from 5.5 per cent in 2024, to continue containing inflation and ensure it remains in the single-digit range of an average between 3.0 and 5.0 per cent in the medium term,” he detailed.
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Tanzania national budget: Critics and accolades
Local media cited a researcher from the Governance Links Institute, Donald Kasongi, who both offered criticism and praises to the budget. Generally speaking, the researcher said the significance increase in the budget (over 14 per cent); “…indicates that the government has raised the expectations of Tanzanians in financing social development activities in the country.”
However, on the critic side, the researcher was of the view that the minister failed to detail priority areas in the budget saying, “…they are mentioned but not are not clearly outlined. “It would have been better to clearly state our priorities so that we don’t end up trying to do everything everywhere.”
The researcher did praise the fact that the budget does show reduced dependency on external aid, noting that out of the 56tr/-, only 1.4 trillion are allocated as aid from development partners.
“This is a good sign that as a country we are reducing dependency on foreign aid. Even if we don’t receive that aid, we can still cover the shortfall,” the researcher told local media.
As for the national debt, of which 27 per cent of the budget is going to debt repayment, the researcher said this is a cautionary measure, however, he remained reserved as to how the country plans to cope with the ballooning national debt, which is currently munching 40 per cent of the entire national budget.
“Almost half of the budget going to debt servicing is perhaps not a good sign,” the researcher lamented.
Tanzania national debt: Revenue collection and debt servicing
According to the Tanzania Investment and Consultant Group Ltd. (TICGL), an economic research and strategic advisory firm, Tanzania borrows to support development projects. Its external debt has now reached USD 34.1 billion of which 78.3 per cent (USD 26.7 billion) is held by the central government.
However, the firm, like the researcher cautions that; “The external debt, exposes Tanzania to exchange rate risks, amplified by a 2.6 per cent shilling depreciation.”
When you take into consideration the IMF’s global growth forecast of 2.8 per cent for 2025 and rising interest rates, Tanzania is facing increasing external borrowing costs, the firm warns.
“Tanzania’s USD 34.1 billion external debt, with 67.7 per cent of it been in USD, the country faces higher servicing costs amid global tightening,” TICGL further warns.
Tanzania’s debt, is growing and growing fast, at TZS 34.26 trillion domestic debt and USD 34.1 billion in external debt as of March this year, the TICGL cautions that these figures impact growth by constraining fiscal space and diverting resources to servicing costs e.g. USD 1 to 2 billion goes to external debt financing annually.
“A 2.6%-shilling depreciation and high lending rates (15.5 per cent) exacerbate pressures, crowding out private investment,” the firm warns.
TICGL says, while debt fuels infrastructure, however, declining exports (coffee -2 per cent) and global risks (2.8 per cent growth) challenge repayment. The firm urges prudent spending policy (6 per cent CBR, USD 5.7 billion reserves) and as strong as possible revenue growth to mitigate risks, if the country is to achieve its ambitious 5.4 per cent-6 per cent GDP growth, “…but fiscal discipline is crucial,” the firm insists.
To this end, TICGL acknowledges the fact Tanzania’s revenue collection, particularly through taxes on businesses and services, has seen steady improvement, however, it does cite persisting challenges like tax evasion and administrative inefficiencies which continue to limit domestic revenue growth.
It notes that Tanzania’s revenue mobilization relies heavily on taxes from businesses and services, including income tax, VAT, and import duties.
“The current tax-to-GDP ratio of 14.9% is below the Sub-Saharan Africa average of 18.6%, which indicates that the country has very large room for improvement,” the firm advices.
Tanzania’s national debt trend is that the debt is ballooning, is it going out of control or is it manageable? Here is the trend for the last decade according to Focus Economic; “In the year 2024, the public debt in Tanzania was 47.36 per cent, compared to 32.68 per cent in 2013 and 44.85 per cent in 2022. It averaged 40.71 per cent over the last decade.”
So on average, Tanzania’s national debt has been above 40 per cent of the national budget for the last decade and it is growing, potentially reaching half, 50 per cent of its GDP in the years to come. However, sector experts say this is nothing to worry about because; “While this indicates a growing debt burden, it remains below the 55 per cent threshold often cited as a limit for developing countries.”
NB: USD figures approximated and rounded off
