Policy Watch

Debt vs GDP / Bonds vs bills

All Data - Tanzania

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 38.26 44.78 49.02 - - -
Total Outstanding Amount (Billion US$) 3.12 3.68 - - - -
Bonds 1.80 2.00 - - - -
Bills 1.32 1.68 - - - -
Outstanding Amount/GDP (%) 8.16% 8.22% 0.00% - - -

Country Summary

Economic performance has remained stable and strong over the past decade. There was 7% growth in 2014 and preliminary estimates indicate the same growth rate in 2015, driven mainly by the services, industry, construction, and information and communication sectors, each of which grew in double digits. For the medium term, growth is projected to outperform the records of 2014 and 2015, increasing to 7.2%. While other sectors are expected to at least perform at their recent levels, higher growth performance is expected largely from increased industrial activities and investment in infrastructure. The inflation rate in 2014 was 6.1%, and is expected to further reduce to 5.6% in 2015 due to favourable weather conditions that led to a sustained level of agricultural output and prudent fiscal and monetary policy management. The government’s total debt is sustainable at 30.2% of GDP in 2014/15.

On social and human development, there has been an improvement in Tanzania’s Human Development Index value from 0.371 to 0.521 between 1985 and 2014. Between 1980 and 2014, life expectancy at birth increased by 14.5 years, expected years of schooling increased by 3.3 years and infant mortality declined from 68 deaths per 1 000 live births in 2005 to 41 in 2012/13. However, a major area of weakness is poverty reduction where, due to the structure of the Tanzanian economy, high economic growth has not been reflected in a proportional reduction in poverty levels. While the average growth rate has been about 7%, the agriculture sector that employs about 70% of workers has been growing at less than 4%. The latest household budget survey (2011/12) revealed that 28.2% of Tanzanians are poor, with a higher incidence of poverty in rural areas.

The general election of October 2015 led to the emergence of Dr. John Magufuli as the president of the United Republic of Tanzania, with a five-year mandate. The president has unveiled a comprehensive five-year work plan that focuses on addressing land ownership, water, health services, education, agriculture, electricity and justice delivery issues. The plan also focuses on government effectiveness and efficiency, increasing government revenue and combating corruption. Faithful implementation of policies and programmes in these areas outlined by the president will be crucial in addressing Tanzania’s poverty problem in the medium term.

Urbanisation has become a major development challenge in Tanzania. In the city of Dar-es-Salaam and other major cities, unemployment is higher than in the rural areas, basic infrastructure (roads, electricity, water, bus transit, etc.) have become highly insufficient to meet the demands of users and there is inadequate provision of recreational facilities, sewage systems, water drainage channels and environmental protection. Planned residential areas are rare, although land itself is in abundance. Intra-city transportation presents a serious challenge to commuters due to poor road networks and the absence of intra-city mass rail transport systems. A comprehensive and co-ordinated “Urban Development and Management Policy” is under preparation and success in finalising and implementing the policy will be a big achievement for the new government.

Source : African Economic Outlook 2016

Monetary policy & Public debt

Bank of Tanzania’s (BoT) main priorities are to maintain adequate liquidity and ensure stability of prices. The BoT adopted a monetary targeting framework for its monetary policy. At the beginning of each year it sets monetary targets that conform to the overall macroeconomic objectives of the government. The targets that were revise at the beginning of February 2015 are:

  • An Annual growth of average reserve money not in excess of 15%
  • An Annual growth of extended broad money (M3) of 15,8%
  • An Annual growth of private sector credit of 19.5%, adequate for the growth in broad money
  • A coverage of gross official reserves equivalent to 4 months of imports.  

The Monetary Policy Committee (MPC) meets every 6 months and reviews the monetary policy. Liquidity levels are managed by the BoT that uses government securities (open market operations), and foreign exchange for this goal. Further liquidity monitoring is provided through different pricing mechanisms (the Lombard facility and the discount window) and intra-day loans.

The beginning of the year 2015 was marked by excessive liquidity and volatility of the shilling against the US dollar; as a result the Central Bank decided to reinstate the statutory minimum reserve ratio at 10%. The Bank of Tanzania will continue to tighten its monetary policy so as to dampen any inflationary pressures.

The Tanzanian government draws its capacity to borrow from the Bank of Tanzania Act. Two documents provide the general structure for the debt management of Tanzania: the National Debt Strategy of 2002 and the Government Loans, Guarantees and Grants Act No.30 of 1974. For the 6-month period ending September 2014, total stock of debt increased to Tzs 7,481.7 billion. Domestic debt owed to commercial banks was 58.8%, and that to Central Bank decreased to 19.5%.

For the year ending March 2015, total debt increased by 14.4% on a yearly basis to TZs 35,010 billion. Of this amount, 30.8% is domestic debt (Tzs 9,376 billion); on a year basis, the domestic debt increased by 19.7%. A large share of public domestic debt is held in the form of government securities: 82.4% at the end of March 2015; the increase in domestic debt is to be attributed to higher issuance of Treasury securities for budget financing reasons and for the development of the financial markets. Of the amount of domestic debt, Tzs 648.1 billion was short-term.

Market Structure

Market participants


The Bank of Tanzania (BoT) acts as a banker and fiscal agent to the Tanzanian government; it issues Treasury securities on its behalf.

Investor base

For the period ending March 2015, commercial banks were the major investors with 51% of all government securities. They are followed by institutional investors (insurance and pension firms) with 25%, the Bank of Tanzania with 22%. 

Other intermediaries

The BoT has appointed 19 financial institutions as Primary Dealers (PDs).

Instruments issued

Treasury bills, T- bonds, government stock and special bonds are all issued by the BoT.

Treasury Bills

Maturities for T-bills range between 35-d, 91-d, 182-d and 364-days; they are sold every second Wednesday.

Treasury Bonds

Maturities for Treasury bonds range between 2-, 5-, 7- and 10-year; they are issued according to a quarterly calendar and they represent the largest share of government securities sold, which is consistent with the National Debt Strategy aimed at lengthening the maturity profile of the domestic debt. At the end of March 2015, Treasury bonds accounted for 42.7% of all securities. issued ; Treasury bills account for 31.5% while special bonds represented 15.8% and government stock 2%;

With respect to the interest rate type, fixed-rated instruments are much more represented, with 92.7% of all type of rated-instruments issued.

Average time to maturity and yield to maturity

For the period ending March 2015, the average interest rate on government securities was 8%, or a 1% increase on a yearly basis. Most of the government securities (or Tzs 6,852.6billion) will mature in less than 10 years. Weighted average yield on all government securities, disregarding inflation, was 4.3%. 

At the end of March 2015, the yield curve of the government securities is constantly upward sloping, indicating an appetite for higher returns with long-term securities.

Primary and secondary market

Primary Market

Treasury bill auctions are announced four days in advance and auctions are conducted on Wednesdays at 11.00 A.M (GMT+3 hours). Treasury bill announcements are put on the press and on its website. Treasury bonds on the other hand are sold according to a quarterly calendar.

All Tanzanian residents can participate in the auction process. Institutional investors must show a capital of Tzs.100 million and individual investors must pledge a minimum Tzs.5 million. Multiples bids are authorized.

Secondary Market

OTC vs. Exchange listed

Trading is conducted on the Dar Es Salaam Stock Exchange (DSE), which became fully automated in 2006; since July 2013, a Wide Area Network also allows brokers to trade from their offices. Note that secondary trading is done in multiples of Tzs 100,000.

Clearing, settlement and custody

The Central Depository System (CDS) was established in 1999. The obligations of Central Depository with respect to the BoT are contained in the Agreement relating to the Central Depository operations.

Recent Developments

The DSE is moving towards its full demutualization; the project was under study since 2010 and is soon to materialize following discussions in July 2013 at the 22nd meeting of the East Africa Securities Regulatory Association (EASRA).

The Capital Markets and Securities Authority (CMSA) is looking to update the DSE trading rules and has prepared a draft to be submitted for commentary. The Capital Markets and Securities Act (1994) was amended so as to be aligned with IOSCO principles. A law revising the CDS was integrated with the Capital Markets and Commodities Exchanges so as to provide for a legal framework that would ensure proper establishement of a CDS.

The CMSA is looking to update the DSE trading rules and has prepared a draft to be submitted for commentary. The Capital Markets and Securities Act (1994) was amended so as to be aligned with IOSCO principles. A law revising the CDS was integrated with the Capital Markets & Commodity Exchanges so as to provide for a legal framework that would ensure proper establishment of a CDS.

Investor Protection

The DSE manages a Fidelity Fund Account to compensate investors who suffer financial loss arising from fraud, negligence and misappropriation of funds by Licensed Dealing Members (LDMs). The compensation amount is currently limited to TZS 100,000.

Guide to Buying Bonds

Procedures for market participation

All Tanzanian residents can participate in the purchase of government securities. They can do so by either bidding directly (primary market) or by contacting a Primary Dealer (secondary market).


Tax incentives for investors in listed securities in Tanzanian capital markets and designed to promote activities in the DSE market are:

  • An exemption from stamp duty on secondary market trades.
  • An exemption from the 10% capital gain tax on reselling listed securities
  • A reduction from 10 to 5% of the withholding interest income on listed securities.

Tax incentives for issuers are listed in the Capital Markets Authority website.

Securities longer than 3 years (5-, 7- and 10-year) are exempt from tax. All participants exempt from paying withholding tax must provide tax exemption certificates from the Tanzania Revenue Authority (TRA) to the BoT.

Treasury bills are redeemed by the BoT free of tax.

Settlement cycle

The settlement cycle for bonds is T+1.

Market restrictions

Openness to international investors

On September 2014, Tanzania Capital Markets Authority authorized the participation of foreign investors in local capital markets; they are now allowed to purchase up to 40% of risk-free securities and 60% in equities.

Capital controls 

Substantial FX remittances require documentary evidence and the capital account remains subject to exchange controls.

Foreign Exchange restrictions and profit repatriation

The FX market is readily accessible. Under the current exchange control environment, commercial banks are expected to ensure that all relevant documentation is obtained in support of a foreign exchange transaction. However, convertibility on the capital account remains restricted.

Credit rating

Tanzanian government securities were last rated in 2011; Fitch, Moody’s and S&P gave a rating of B to Tanzania’s creditworthiness; no further rating was issued thereafter. In September 2015, Tanzanian authorities started negotiations with Fitch for a sovereign credit rating in preparation of a Eurobond issuance.

List of Primary Dealers

The list of Primary Dealers (PDs) is provided by the BoT and is subject to change. Currently the PDs are:

1.  Akiba Commercial Bank Ltd.

2.   Citibank Tanzania Ltd.

3.  CRDB Bank Ltd.

4.  Diamond Trust Bank Tanzania Ltd.

5.   Eurafrican Bank Tanzania Ltd.

6.  Exim Bank Tanzania Ltd.

7.   Habidd African Bank Ltd.

8.  International Commercial Bank Ltd.

9.  Kenya Commercial Bank Tanzania Ltd.

10. National Bank of Commerce (NBC) - Tanzania Limited

11. National Microfinance Bank (NMB) Ltd.

12. Stanbic Bank Tanzania Ltd.

13. Standard Chartered Bank Ltd.

14. Orbit Securities Co.Ltd.

15. Rasilimali Limited.

16. Solooni Securities ltd.

17. Core Securities Ltd.

18. Tanzania Securities Ltd.

19. Vertex International Securities Ltd.