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

Dar es Salaam. The Tanzanian government is proposing an 11.58 percent increase in the 2025/26 budget, envisaging 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 by the Minister of Finance, Dr Mwigulu Nchemba, on Friday, 1 November 2024.

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

Developing infrastructure remains one of the key priorities for Tanzania, alongside other priorities such as managing climate change, preparations for general elections, strengthening productive sectors and empowering private 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 create new opportunities for growth and prosperity,” said Dr. Nchemba.

According to him, Sh38.6 trillion was earmarked for current expenditure supporting basic services and administrative costs, while Sh16.46 trillion was earmarked for development projects.

According to Dr Nchemba, the allocation aims to provide space for effective investments, especially in priority areas highlighted in the Five Year National Development Plan.

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

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

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

Significant amounts of funding will also be provided to education and health services to increase service accessibility and quality. The government plans to continue implementing the free education program, as well as initiatives to build more schools and healthcare facilities in underserved areas.

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

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

“We are deeply committed to strengthening the balance between development and environmental responsibility, especially in agriculture and water management,” he added.

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

Dr Nchemba explained that this would be achieved through improved tax collection systems, tighter controls on tax exemptions and improvements in the business environment to attract investment.

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

The Parliamentary Budget Committee praised the government for implementing the budget at an average rate of 95.14 percent between 2020/21 and 2023/24; Budget implementation reached an average of 97 percent in two years, 2021/22 and 2023/24.

However, the Committee recommended that the government ensure that its plans and budget are financed primarily by domestic revenues rather than relying on loans.

“The government needs to increase its domestic revenue to cover at least 85 percent of the budget. Currently, domestic revenues finance approximately 70 percent of the budget, with 30 percent coming from loans,” the committee said in its report.

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

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

Dr Nchemba reassured Tanzanians that price stability will remain a priority, stating that the inflation rate, currently between 3 and 5 per cent, is expected to remain in the same range, supported by stable food prices, effective monetary policies and controlled energy costs.

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

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

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