Debt, Climate and the IMF: Can Tanzania Turn Borrowing Into Resilience?
- Derry Thornalley
- 2 days ago
- 6 min read
On paper, Tanzania is one of Africa’s steadier macro stories. Growth is holding around 6%, inflation sits comfortably inside target, and the IMF has just signed off on another review of a twin financing package that blends classic balance-of-payments support with climate-focused funding.
But as 2025 closes, a different narrative is creeping in.
In late November, President Samia Suluhu Hassan warned publicly that “financiers are starting to shut the taps” on Tanzania, days after a disputed election and criticism from international observers over ballot irregularities and violence. She told ministers to brace for difficulty securing external funding and to focus on mobilising more money at home.
Behind the scenes, the numbers show a country that has borrowed heavily in the name of growth and resilience – and now has to prove that debt can genuinely deliver both.
A twin lifeline from the IMF
In June, the IMF Executive Board concluded its 2025 Article IV consultation and completed the fifth review under the Extended Credit Facility (ECF) and the second review under the Resilience and Sustainability Facility (RSF)for Tanzania. The decision unlocked about US$448 million in fresh financing, bringing total disbursements under the twin arrangements to roughly US$1.5 billion.
The Fund’s message was upbeat but conditional:
Real GDP growth is projected at around 6% in 2025, driven by agriculture, tourism, manufacturing and construction.
Headline inflation remains within the Bank of Tanzania’s 3–5% target band, helped by prudent monetary policy and lower global commodity pressures.
The RSF is supporting policy reforms and investments to strengthen climate resilience – from greener public investment planning to risk management in the power and water sectors.
At the same time, a Joint World Bank–IMF Debt Sustainability Analysis classifies Tanzania as at “moderate risk of debt distress” under the low-income framework: public debt is judged sustainable, but buffers are thin and liquidity indicators have weakened.
In other words: there is still space to borrow for development and climate resilience – but not to waste.
A debt profile tilted to the outside world
Recent analysis of official data shows Tanzania’s external public and publicly guaranteed (PPG) debt climbed from US$33.1 billion in November 2024 to US$35.6 billion in May 2025, a 7.4% increase in just six months.
The composition matters:
Multilateral lenders – primarily the World Bank and IMF – account for about 72.5% of PPG external debt, largely on concessional terms.
Commercial borrowing has been rising, making up roughly 30.5% of new disbursements in FY 2022/23, pushing up interest costs.
Those funds have gone into a familiar mix: transport corridors, power projects, telecoms, social sectors and budget support, as Dar es Salaam has tried to close infrastructure gaps while cushioning the economy from global shocks.
Domestically, the Bank of Tanzania has kept policy deliberately supportive. After a July cut, the central bank rate sits at 5.75%, and the October Monetary Policy Report stresses that inflation, at around 3.4%, remains benign.
From a distance, the picture looks balanced: concessional multilaterals at the core of external debt, moderate inflation, and growth robust enough to make the arithmetic work.
Up close, the cracks are more visible.
When financiers “shut the taps”
The first warning sign is how dependent the medium-term plan is on external lenders.
Draft budget frameworks for FY 2025/26 envisage total spending of about TZS 56.5–57 trillion (roughly US$22 billion), up more than 12% from the current year, with major infrastructure schemes at the centre. To fund that, the Treasury expects to borrow around TZS 8.7 trillion externally (≈US$3.6bn) and about TZS 6.3 trillion on the domestic market.
New research suggests that plan is now in jeopardy. Analysts at TICGL warn that Tanzania’s “borrowing dependency” has increased sharply since 2020, and estimate that up to 15–25% of the expected concessional flows in 2025/26 could fail to materialise as some traditional partners scale back or delay commitments.
That is the context for President Hassan’s frank remarks about a “battered image” and lenders turning away after a contested election. Political risk is suddenly part of the funding story.
If external taps tighten, the pressure will fall on domestic balance sheets – banks, pension funds and other institutional investors – to pick up more of the tab. The IMF has already warned, in its regional outlook, that across sub-Saharan Africa heavy domestic borrowing is crowding out private credit and creating dangerous feedback loops between sovereigns and local banks.
Tanzania is not yet in that danger zone, but the direction of travel is uncomfortably familiar.
Climate ambitions meet hard constraints
Layered on top of this macro story is a very real climate vulnerability.
Tanzania’s growth model leans heavily on rain-fed agriculture, hydropower and climate-sensitive sectors like tourism. Droughts, floods and coastal erosion have already imposed large, if often uncounted, costs on infrastructure and livelihoods.
The RSF money is meant to help change that – by financing better climate risk management, greener infrastructure and policies that steer investment toward low-carbon, resilient projects.
But even concessional climate loans and blended-finance structures still show up on the debt ledger. With external stocks rising, concessional flows at risk, and domestic investors being nudged to buy more government paper, the question is whether Tanzania can turn borrowing into genuine resilience – or whether “climate finance” becomes just another label on an already heavy debt load.
Where Verī Platform fits into Tanzania’s funding and climate puzzle
For Tanzanian banks, pension funds, insurers and asset managers, this environment is increasingly complex:
The government needs them to absorb more domestic issuance and support quasi-sovereign projects.
Development partners want to see local co-financing for climate and infrastructure programmes.
Clients and trustees expect prudent diversification, not naked bets on one country’s debt and climate politics.
Regulators and the IMF want clean, transparent data on currency, duration and sector risk.
Verī Platform is designed to sit quietly behind these institutions and help square that circle.
Through Verī, a regulated Tanzanian firm can:
Hold a mix of shilling-denominated government securities, infrastructure-linked instruments and corporate credit, together with regional and global assets – including climate and ESG-aligned funds – all within a single portfolio architecture;
Connect to multiple custodians and market venues, while maintaining a consolidated, client-level ledger that reconciles every position daily;
Produce regulator-ready reports that show exactly how much of a scheme’s assets are tied to Tanzanian sovereign risk, to climate-labelled instruments, or to particular sectors and currencies.
In practice, that might mean a pension fund:
Keeping a core allocation in BoT-listed government bonds and long-term infrastructure issues;
Adding measured exposure to regional green bonds or global climate funds;
Using Verī’s data and modelling to ensure that no single borrower, project or climate theme overwhelms the portfolio.
In a world where the line between “development borrowing” and “debt risk” is getting thinner, that kind of infrastructure is fast becoming part of responsible fiduciary duty.
A narrow window to prove the model
Tanzania is not in crisis. Growth is strong, inflation is low, and the IMF remains firmly in its corner. But the country is entering a narrow window in which it must show that its mix of ECF + RSF support, rising external debt and ambitious climate plans can be turned into visible, resilient development – not just more numbers on a spreadsheet.
If concessional lenders pull back and domestic investors are leaned on too heavily, the very institutions meant to anchor the financial system could become transmission channels for future stress.
If, instead, Tanzania manages to keep borrowing on mostly concessional terms, strengthen governance, and use platforms and policies that tie debt to real resilience, it could yet emerge as a model for how frontier economies finance climate-sensitive growth without tipping into distress.
For now, financiers may be “shutting the taps” a little – but the pipes are still connected. What matters next is how Tanzania chooses to use the water that is left.
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