Tanzania is on the verge of finalising agreements on major investment projects, including a $42 billion liquefied natural gas (LNG) development. The project, led by Equinor and Shell, aims to support industrialisation and establish East Africa as a major energy hub. The LNG development is expected to facilitate the development of 47.13 trillion cubic feet of natural gas reserves. Other partners in the project include ExxonMobil, Pavilion Energy, Medco Energi, and the state-owned Tanzania Petroleum Development Corporation (TPDC).
The LNG agreement was initially expected to be signed before June, but Finance Minister Khamis Mussa Omar said that it is "almost there." Although most of the LNG is expected to be exported, part of the production will be reserved for the domestic market. Equinor and Shell did not respond to requests for comment on the project's progress. The project is a significant step towards achieving Tanzania's energy goals and is expected to have a substantial impact on the country's economy.
In addition to the LNG project, Tanzania is also close to reaching agreements on two critical minerals projects. However, the finance minister declined to provide details on these projects. He did mention that US investors are particularly interested in energy and critical minerals. Tanzania is seeking more international investment in projects capable of generating revenue and financing their own operations.
The government aims to nearly double electricity generation capacity to 8,000 megawatts by 2030. It also plans to increase the share of energy from sources classified as clean, including hydropower, solar, wind, and natural gas, to about 75 percent. To achieve these goals, Tanzania is working to attract foreign investors to its domestic debt market. In July, the country widened foreign investors' access to its domestic bond market.
Tanzania launched a sovereign yield curve in August and introduced reforms aimed at boosting corporate debt issuance. However, the government is still assessing the risks of greater foreign participation. The Bank of Tanzania is studying the experiences of other African countries. The move reflects a broader trend among frontier markets seeking to attract global investors to local-currency debt.
Tanzania currently finances about two-thirds of its Sh62.3 trillion ($23.7 billion) budget through domestic revenue. Official development assistance, which once accounted for 40 percent of the budget, has declined alongside a global reduction in aid. It now represents a "very, very negligible" share. The government is also assessing whether to seek a new International Monetary Fund (IMF) lending programme.
A decision on the IMF programme is expected by June. Tanzania's previous $1.7 billion IMF programme, comprising an Extended Credit Facility and a climate-focused Resilience and Sustainability Facility, ended in July. The government is working to attract foreign investors and boost economic growth through various initiatives, including the LNG project and critical minerals projects.
Key points
- The $42 billion LNG deal is expected to facilitate the development of 47.13 trillion cubic feet of natural gas reserves.
- Tanzania aims to nearly double electricity generation capacity to 8,000 megawatts by 2030.
- The government is assessing whether to seek a new International Monetary Fund (IMF) lending programme.
