President Samia explains rising national debt and govt steps to sustain fiscal stability

“A loan agreement can be signed today, but the funds are only disbursed once project preparations are complete. It only becomes a public debt when the government has actually received the funds, services or materiel stipulated in the contract,” she explained.

By May 2025, Tanzania’s public debt had reached Sh107.7 trillion—comprising Sh72.94 trillion in external debt and Sh34.76 trillion in domestic debt.

“In the sixth phase government, we have signed new loan agreements, but we have also continued to receive disbursements from agreements entered into by past administrations,” she said.

She gave an example of Sh11.3 trillion received as part of loan disbursements from deals signed during previous administrations.

Strengthening US dollar

President Samia pointed out that another factor contributing to the growth of external debt was the strengthening of the US dollar against the Tanzanian shilling.

“In March 2021, the exchange rate was Sh2,298.5 per US dollar. By March 2025, it had reached Sh2,650. This means that when external debt is expressed in shillings, it appears to have increased, even if the dollar value remains constant,” she said, noting that this shift alone had contributed Sh3.9 trillion to the public debt portfolio.

She added that the appreciation of the dollar should not be viewed purely as a negative development.

“It was a necessary response to global economic crises,” she said.

Debt servicing costs have also grown, with repayments increasing from Sh8.22 trillion in the 2020/21 fiscal year to Sh14.20 trillion projected in 2025/26.

“This increase is largely due to the maturing of long-term and commercial loans borrowed by previous administrations,” she said.

President Samia further explained that interest rate volatility in global financial markets—driven by adjustments in US Treasury yields and the lingering effects of the Covid-19 pandemic—had made it more difficult for developing countries, including several in Africa, to meet their debt obligations.

She noted that the rise in Tanzania’s domestic debt was linked to financing development projects and settling maturing government securities held by investors.

Pension funds’ loans

Additionally, the government has recognised certain long-outstanding obligations to pension funds, amounting to Sh2.67 trillion.

These include Sh2.18 trillion owed to the Public Service Social Security Fund (PSSSF) for pre-1999 government employees, Sh400.71 billion owed to the National Social Security Fund (NSSF) in long-term liabilities, and Sh63.52 billion owed to Pension Property Limited—a joint venture between pension funds that financed major government projects, including the Parliament complex in Dodoma and the Nelson Mandela Institute of Science and Technology in Arusha.

“These debts had never been recorded as part of the national debt. By officially recognising them, we are offering relief to the pension funds and ensuring that our retirees receive their entitlements on time,” President Samia said.

She added that the remaining Sh2.2 trillion will be recognised gradually over the next three years, starting in the 2025/26 fiscal year.

This includes Sh630 billion in pre-1999 obligations and Sh180 billion owed to the NHIF for the construction of Benjamin Mkapa Hospital in Dodoma.

“To ensure fiscal sustainability and reduce misinformation, I felt it necessary to explain in detail the composition and drivers of our national debt,” she said.

The President assured Tanzanians that the government remains committed to keeping the debt at sustainable levels.

“We are strengthening domestic revenue collection to reduce reliance on loans for budget implementation. Borrowed funds will continue to be directed to projects that enhance domestic revenue generation and boost exports,” she said.

She stressed that accounting officers must strictly adhere to project preparation requirements before entering into loan agreements, in line with the Government Loans, Guarantees and Grants Act (Cap. 134), and that oversight of loan-funded projects would be intensified to ensure efficiency and impact.

The government has also undertaken efforts to instil fiscal discipline, including cutting unnecessary expenditure, reforming procurement systems, and enhancing public financial audits.

To improve resource allocation, the government reconstituted the Planning Commission to ensure that sectoral plans align with national priorities and available resources.

“These measures are part of our commitment to prudent fiscal management and the long-term sustainability of our economy,” President Samia concluded.