Tanzania's next budget to rise to Sh55.06 trillion with focus on elections, climate change

Dar es Salaam. The Tanzanian government has proposed an 11.58 percent increase in its 2025/26 budget, projecting a rise from the current Sh49.35 trillion to Sh55.06 trillion.

This budget proposal is detailed in the Budget Framework Document, presented to Parliament on Friday, November 1, 2024, by Finance Minister Dr Mwigulu Nchemba.

According to Dr Nchemba, the next budget will focus on accelerating Tanzania’s economic growth and strengthening critical areas such as infrastructure, social services, and governance reforms, while balancing development and recurrent expenditure.

Infrastructure development remains one of the key priorities for Tanzania, alongside other priorities such as managing climate change, general election preparations, strengthening productive sectors and empowering special groups.

“Our proposed budget represents a significant commitment to long-term sustainable development. With a focus on economic empowerment and social welfare, we will strengthen our foundations and open new opportunities for growth and prosperity,” Dr Nchemba stated.

According to him, Sh38.6 trillion is allocated for recurrent spending, supporting essential services and administrative costs, while Sh16.46 trillion is set for development projects.

The allocation, according to Dr Nchemba, is intended to provide room for impactful investment, especially in priority areas highlighted in the Five-Year National Development Plan.

On infrastructure development, strategic investments are planned for energy, transportation, and industrial growth, which Dr Nchemba described as “pillars of a thriving and competitive economy.”

The minister highlighted key ongoing infrastructure projects such as the Standard Gauge Railway (SGR) and the Julius Nyerere Hydropower Project (JNHPP), which aim to improve connectivity and energy stability across the country.

He said the projects are expected to boost both domestic productivity and regional trade.

Education and healthcare will also receive significant funding to improve service accessibility and quality. The government plans to continue implementing its free education programme, alongside initiatives to build more schools and healthcare facilities in underserved areas.

“The objective is to uplift the quality of life for all Tanzanians by ensuring equal access to essential services,” Dr Nchemba noted.

Furthermore, the budget will address climate resilience and environmental sustainability, with specific allocations aimed at managing the impacts of climate change on food production, infrastructure, and resource conservation.

“We are deeply committed to fostering a balance between development and environmental responsibility, particularly in agriculture and water management,” he added.

Funding sources 

To support the increased budget, the government projects Sh38.96 trillion in domestic revenue, an increase from Sh34.61 trillion in the current year.

Dr Nchemba explained that this will be achieved through improved tax collection systems, stricter controls on tax exemptions, and enhancements in the business climate to attract investment.

In addition to domestic revenue, Tanzania expects Sh1.02 trillion in grants from development partners, Sh5.67 trillion from concessional loans, and Sh9.41 trillion from commercial loans. Dr Nchemba acknowledged the continued support from international partners.

The Parliament’s Budget Committee commended the government for implementing the budget at an average rate of 95.14 percent from 2020/21 to 2023/24, with budget execution reaching an average of 97 percent in two years, 2021/22 and 2023/24.

However, the Committee advised the government to ensure that its plans and budget are primarily funded by domestic revenue rather than relying on loans.

“There is a need for the government to increase its domestic revenue to cover at least 85 percent of the budget. Currently, domestic revenue funds about 70 percent of the budget, with 30 percent coming from loans,” the committee said in its report.

Economic outlook

Despite global economic challenges, Tanzania’s economy is projected to grow at an average rate of 5.8 percent in 2025, increasing to 6.1 percent by 2026.

Dr Nchemba attributed the positive outlook to investments and policy reforms aimed at creating a favourable environment for private sector participation.

The inflation rate, currently between 3 and 5 percent, is expected to remain within the same range, supported by stable food prices, effective monetary policies, and controlled energy costs, Dr Nchemba said, reassuring Tanzanians that price stability would remain a priority.

Dr Nchemba acknowledged that while Tanzania’s economic outlook is positive, the nation faces challenges, including fluctuating global fuel prices and climate risks.

To address the challenges, the budget framework includes measures such as reducing unnecessary imports, promoting local production, and building climate-resilient infrastructure.

“We are adapting our strategies to mitigate external shocks and protect our growth trajectory,” he said.