By Business Insider Reporter
Tanzania’s total public debt slightly declined in May 2025, signaling cautious fiscal management as the government balances budgetary needs with debt servicing obligations.
According to the latest Monthly Economic Review (MER), the national debt stock stood at US$ 48.71 billion (nearly TSh 129 trillion) at the end of May 2025 – a marginal decrease of 0.1% from April.
Of this amount, external debt comprised 73.1%, while domestic debt made up the remaining 26.9%.
The report says that external debt – including both public and private sector liabilities – fell by 0.5% month-on-month to US$ 35.6 billion.
Public external debt remains dominant at 76.2% of the total, while private sector debt accounted for the remainder.
“During the month, external loan disbursements reached US$ 98.6 million, while external debt service payments totalled US$ 374.2 million. Of the debt service amount, US$ 267.1 million was for principal repayments, and the remaining balance was interest payments,” the Bank of Tanzania (BoT) notes in the new MER published over the weekend.
Multilateral institutions continue to be Tanzania’s largest external creditors, holding over 53% of the external debt.
The US dollar remained the primary currency of denomination, comprising 67.4% of external obligations, followed by the euro (16.7%) and the Chinese yuan (6.3%).
On the domestic front, debt increased by 1.3% to TSh 35.2 trillion, driven primarily by the issuance of government securities to finance last year’s budget deficit.
In May alone, the government raised TSh 521.5 billion, with Treasury bonds accounting for 80% of that amount.
The funds were earmarked for public investment and recurrent expenditure, in line with the 2024/25 national budget priorities.
Debt service on domestic obligations during the same period stood at TSh372.8 billion, of which TSh253.4 billion was interest payments – a growing burden on government finances.
Commercial banks and pension funds remain the top domestic creditors, holding 28.8% and 26.1% of the government’s domestic debt portfolio, respectively.
The slight decline in total debt reflects a careful attempt to manage liabilities amid increasing fiscal demands. However, the rising cost of debt servicing – especially on the domestic side – poses a challenge to the effective implementation of the 2024/25 government budget.
With external borrowing space constrained by global market conditions and a strong US dollar, Tanzania appears to be leaning more heavily on domestic markets for financing.
This trend, if sustained, could crowd out private sector credit and raise interest rates.
While the government is keeping total debt levels stable, the growing reliance on domestic borrowing and the high cost of servicing both external and internal debt underscore the need for continued fiscal discipline and strategic investment of borrowed funds to stimulate long-term growth. Tabling this year’s budget, Finance Minister Mwigulu Nchemba said debt servicing in fiscal year 2025/26 will about to TSh14.22 trillion, equivalent to roughly 25.2% of the total TSh 56.49 trillion budget.
