As Tanzania pushes aggressively to boost domestic resource mobilisation, the 2025/26 national budget emerges as both a beacon of ambition and a mirror reflecting unfinished battles. While the government’s focus on expanding revenue streams and tightening tax incentive management signals progress, it stops short of confronting the systemic bleed caused by illicit financial flows. This silent drain, through trade misinvoicing, tax avoidance, and corruption, remains the overlooked challenge undermining the country’s fiscal foundations. Without a robust, legally anchored strategy to stem these illicit outflows, the incremental gains from increased domestic revenues risk being overshadowed by billions lost beyond the official books.
On June 12, 2025, the Minister for Finance, Hon. Dr. Mwigulu Lameck Nchemba, presented the national budget speech for the financial year 2025/26 before the Parliament of the United Republic of Tanzania. The budget, estimated at TZS 49.35 trillion, comes at a politically significant moment, marking the final fiscal year of the Sixth Phase Government before the 2025 General Election. The speech outlined economic targets, revenue strategies, and sectoral investments, all underpinned by the administration’s commitment to self-reliance and fiscal discipline.
However, for those of us tracking the systemic challenge of Illicit Financial Flows (IFFs), the question remains: to what extent does this budget reflect a decisive stance against the massive loss of public resources (estimated at over TZS 5 trillion annually) through tax avoidance, misinvoicing, corruption, and regulatory loopholes?
As the Policy Forum's brief “Illicit Financial Flows: A Burden to Tanzania’s National Budget” has highlighted, the country continues to lose billions annually through illicit outflows, with tax incentives alone costing the nation an estimated TZS 1.5 trillion per year, equivalent to nearly 3 percent of GDP. These losses undermine our domestic resource mobilisation capacity and weaken key sectors such as agriculture, health, and education.
One of the few areas in the budget speech that indirectly touches the IFFs agenda is the government’s initiative to regulate tax exemptions through Performance Agreements. The Minister announced that by May 2025, the government had signed 169 agreements with investors who benefit from tax incentives. The goal of these agreements, according to the speech, is to evaluate the efficiency and impact of incentives granted and prevent a culture of dependency on tax relief.
This is a promising step. These agreements, if anchored in transparent criteria, time-bound benchmarks, and public disclosure, could serve as a powerful accountability tool. By ensuring that incentives deliver measurable returns in terms of jobs, technology transfer, and export value, the government can start turning tax expenditure into real development dividends.
However, without a comprehensive legal framework that mandates cost-benefit analysis, regular review, and setting time limits for all exemptions, the risk remains that tax incentives will continue to be abused. It is encouraging that the government recognises the need for performance monitoring, but it must now embed these practices into law, not just policy.
The budget speech allocates substantial resources to the agricultural sector, traditionally one of the hardest hit by underfunding and delayed disbursements. Notably, the government announced that irrigation schemes have expanded from 560,000 hectares in 2021/22 to 960,000 hectares in 2024/25, with over 780 new projects covering more than 500,000 hectares underway.
This expansion is not just about productivity. In the context of IFFs, effective investment in agriculture has a direct impact on domestic resource mobilisation. When farmers are supported with modern infrastructure, such as irrigation, storage facilities, and mechanisation, they are more likely to formalise their operations, contribute to the tax base, and reduce dependency on middlemen who often underreport and under-invoice agricultural exports.
Moreover, mechanised and regulated supply chains reduce opportunities for trade misinvoicing, a major channel for illicit flows. Ensuring these investments are accompanied by traceable value chains, digital payment systems, and access to cooperative banking, as seen with the launch of the Tanzania Cooperative Bank in April 2025, can help reduce the sector’s vulnerability to financial opacity.
The 2025/26 Budget Speech makes important strides toward economic stability and sectoral investment. But in the absence of a clear, coherent strategy to address Illicit Financial Flows, Tanzania risks losing billions in public revenue that could otherwise be channelled to irrigation, classrooms, hospitals, and rural roads.
Fiscal stewardship demands more than revenue growth; it demands confronting theft of public wealth. We call upon the government to take this fight seriously, not only for budgetary sustainability but for social justice, national integrity, and the dignity of every Tanzanian taxpayer.