Expectations for investors in 2024/25, role of capital markets

Beatus Mlingi

TANZANIA: AS Tanzania’s 2024/25 national budget of 49.345tri/- is tabled today, investors are keenly observing the economic outlook and capital markets dynamics for the

coming year.

With the internal debt growing from 5.4tri/- to 6.1tri/-, the government’s borrowing strategies and fiscal policies will significantly influence investment opportunities and economic stability.

The government plans to borrow 12.897tri/- from both domestic and external sources to finance the 2024/25 budget deficit, an increase from the 11.895tri/- estimated in 2023/24. This borrowing strategy aims to support economic growth while ensuring debt sustainability, projecting a budget deficit below 3.0 per cent of GDP in the medium term.

Domestic Borrowing

For 2024/25, the government plans to borrow 6.141tri/- from the domestic market, comprising 3.919tri/- for rollover and 2.222tri/- as net domestic financing. The focus is on maintaining domestic borrowing below 1.0 percent of GDP to prevent crowding out the private sector. This strategy should reassure investors about the government’s commitment to fiscal prudence and sustaining private sector growth.

External Borrowing

On the external front, the government intends to borrow 6.156tri/-, which includes 3.601tri/- in concessional loans and 2.555tri/- in non-concessional loans. Over the medium term, the government plans to average external borrowing at 5.791tri/-annually. This balanced approach between concessional and non-concessional loans highlights a cautious yet strategic effort to finance development while managing debt costs effectively.

Economic Outlook and Capital Markets role

With the fixed income market’s recent trend showing a strong preference for long-tenure bonds, constituting over 80 per cent of the total market, investors can expect continued opportunities in the bond market.

The government’s borrowing plans will likely sustain high yields in longterm bonds, making them attractive to investors seeking stable returns. Furthermore, the increased domestic borrowing target indicates a growing opportunity for investors in government securities.

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As the government implements policies to support economic growth and maintain debt sustainability, the capital markets are expected to play a crucial role in providing the necessary liquidity and investment avenues.

In conclusion, the 2025 economic outlook for Tanzania presents a landscape where strategic borrowing and robust fiscal policies create a conducive environment for investors. By leveraging opportunities in the fixed income market and capitalizing on government securities, investors can position themselves advantageously in the evolving Tanzanian economic framework.