Joseph Isangura
Tanzania is investing heavily in key infrastructure projects, including the construction of its standard gauge railway, which has raised concerns about the country’s increasing debt levels.
However, despite the growing borrowing, the country’s debt situation remains relatively stable compared to its neighbors, thanks to a strategic approach to financing.
A significant portion of Tanzania’s external debt comes from multilateral institutions such as the World Bank and the African Development Bank, which offer lower interest rates and longer repayment terms. According to the World Bank’s International Debt Report 2024, about 67% of Tanzania’s external debt is sourced from these institutions, making the debt more manageable. Specifically, the World Bank alone accounts for 47% of the debt.
In contrast, other East African nations like Zambia and Kenya face more severe debt challenges. Zambia had to restructure its debt in 2023, agreeing to a deal that involved $6.3 billion in external debt, including a large portion owed to China. Meanwhile, Kenya’s public debt has soared to 70% of its GDP, a concerning level that raises doubts about the sustainability of its borrowing practices.
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Tanzania’s strategy of borrowing primarily from multilateral lenders has allowed it to fund its ambitious infrastructure projects without putting excessive strain on its economy. The country’s careful approach has earned it a reputation for maintaining sustainable debt, even as it works on modernizing its infrastructure. This strategy seems to be paying off, giving Tanzania the financial flexibility to continue its development plans without the same risks faced by some of its regional peers.
While the growing debt is something to monitor, experts believe that Tanzania’s approach positions it well for the future. By avoiding heavy reliance on high-interest loans from commercial or bilateral sources, the country has managed to keep its borrowing costs low, ensuring that it can continue its development without jeopardizing its long-term fiscal health.
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