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

Dar es Salaam. The Tanzanian government has proposed to increase its 2025/26 budget by 11.58 percent, projecting an increase 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 1 November 2024 by the Minister of Finance, 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 Tanzania’s key priorities, along with other priorities such as managing climate change, preparing for general elections, strengthening productive sectors and empowering special groups.

“Our proposed budget represents a significant commitment to long-term sustainable development. By focusing on economic empowerment and social well-being, we will strengthen our foundations and open up new opportunities for growth and prosperity,” said Dr Nchemba.

According to him, Sh38.6 trillion has been allocated for recurrent expenditure, basic services support and administrative expenses, while Sh16.46 trillion has been allocated for development projects.

According to Dr Nchemba, these allocations are intended to provide space for effective investments, especially in the priority areas highlighted in the Five-Year National Development Plan.

In terms of infrastructure development, strategic investments are planned in energy, transport and industrial growth, which Dr Nchemba described as “pillars of a prosperous and competitive economy”.

The minister highlighted key ongoing infrastructure projects such as the Standard Gauge Railway (SGR) and the Julius Nyerere Hydropower Project (JNHPP) that 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 access and quality of services. The government plans to continue the free education program as well as initiatives to build more schools and health facilities in underserved areas.

“The goal is to improve the quality of life of all Tanzanians by ensuring equal access to essential services,” said Dr Nchemba.

In addition, the budget will address climate change 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 striking a balance between development and environmental responsibility, especially in agriculture and water,” he added.

To support the increased budget, the government projects domestic revenue of Sh38.96 trillion, up from the current year’s Sh34.61 trillion.

Dr Nchemba explained that this will be achieved by improving tax collection systems, tightening controls on tax incentives and improving the business climate to attract investment.

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

Parliament’s Budget Committee praised the government for averaging 95.14 percent budget execution between 2020/21 and 2023/24, with budget execution reaching an average of 97 percent over two years, 2021/22 and 2023/24.

However, the committee advised the government to ensure that its plans and budget are primarily financed from internal revenue rather than relying on borrowing.

“The government needs to increase domestic revenue so that it covers at least 85 percent of the budget. Currently, internally generated revenue finances about 70 percent of the budget, of which 30 percent comes from loans,” the committee report said.

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

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

The inflation rate, currently between 3 and 5 percent, is expected to remain in the same range, supported by stable food prices, sound monetary policy and controlled energy costs, Dr Nchemba said, assuring Tanzanians that price stability will remain a priority.

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

To address these challenges, the fiscal 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.