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Public finance

Tanzania's Government Defends Borrowing, Assures Commitment to Fiscal Responsibility

Strategic Insights

— 2 min read

Tanzania's Finance Minister, Dr. Mwigulu Nchemba, has emphasized the government's commitment to responsible fiscal management and debt sustainability, despite rising borrowing levels. The government's Sh56.49 trillion national budget for the 2025/26 financial year has been approved by Parliament, with the minister reassuring that public debt remains sustainable. The Public Debt Stock reached Sh107.70 trillion as of April 2025, with external debt accounting for Sh72.94 trillion and domestic debt for Sh34.76 trillion.

Key Takeaways:

  • The government's public debt stock reached Sh107.70 trillion as of April 2025, with external debt accounting for Sh72.94 trillion and domestic debt for Sh34.76 trillion.
  • The October 2024 Debt Sustainability Analysis (DSA) found that the present value of the public debt to GDP was 40.3 percent, well below the 55 percent international risk threshold.
  • Dr. Nchemba emphasized that the conversation should shift from the volume of debt to how borrowed resources are utilized, and that the government will continue to strengthen domestic revenue mobilization.
  • The government will ensure that commercial loans are directed only towards productive, export-generating projects.
  • Tanzania has maintained strict fiscal discipline and ensured borrowed funds are used transparently, with the private sector also a major borrower and shoulder of repayment obligations.
  • Not all debt is public, and not all borrowed funds are serviced by the government, with the private sector borrowing without government guarantees.
  • The country has been removed from the Financial Action Task Force's grey list of countries under scrutiny for money laundering risks, and Fitch Ratings has reaffirmed Tanzania's B+ credit rating.
  • The government has introduced several tax proposals, including a 10 percent withholding tax on retained earnings, which has sparked criticism from stakeholders.
  • The staff of the Tanzania Private Sector Foundation (TPSF), and the Tanzania Bankers Association have expressed concerns about the tax proposals, arguing that they could discourage businesses from retaining earnings and affect capital formation in key sectors.

Statistics:

  • Public Debt Stock: Sh107.70 trillion (as of April 2025)
  • External Debt: Sh72.94 trillion (as of April 2025)
  • Domestic Debt: Sh34.76 trillion (as of April 2025)
  • Present value of public debt to GDP: 40.3% (October 2024)
  • International risk threshold: 55%
  • Present value of external debt to GDP: 23.6% (October 2024)
  • External debt threshold: 40%
  • Debt-to-export ratio: 123.8% (October 2024)
  • International risk threshold: 180%

Sources:

  • Dr. Mwigulu Nchemba, Minister for Finance
  • October 2024 Debt Sustainability Analysis (DSA)
  • Tanzania Private Sector Foundation (TPSF)
  • Tanzania Bankers Association
  • Financial Action Task Force
  • Fitch Ratings

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