DAR ES SALAAM: ECONOMIC and financial analysts have welcomed the Finance Act, 2026 provision allowing the government to obtain temporary advances from the Bank of Tanzania (BoT), describing it as an important economic shock absorber during emergencies.

They said the arrangement reflects a standard fiscal practice adopted in many countries to cushion economies against unforeseen shocks.

Under the Finance Act, 2026, the BoT may grant temporary advances to the government in the event of an unforeseeable or unavoidable occurrence that causes a temporary revenue shortfall.

Such events are limited to disasters as defined under the Disaster Management Act, external economic shocks of exceptional magnitude and impact, as well as states of emergency declared under the Constitution of the United Republic of Tanzania.

Marian University Economist Mr Gilbert Mwabeza told the ‘Daily News’ that the arrangement will enable the government to access timely and affordable financing during emergencies, reducing reliance on expensive external borrowing.

“The arrangement reduces panic and cushions the economy against shocks by allowing the country to access concessional financing that would otherwise be sought from foreign commercial lenders at higher interest rates and under stricter conditions,” he said.

According to Mr Mwabeza, the mechanism will help ensure continuity of economic activities and public services during emergencies while lowering borrowing costs.

“It enables the government to finance urgent needs at softer rates instead of depending on foreign lenders who often charge higher interest rates,” he noted.

He added that uninterrupted financing will help to sustain essential services and stabilise the economy during periods of crisis.

Furthermore, Mr Mwabeza said the arrangement will guarantee continuation of strategic development projects, payment of salaries and implementation of emergency interventions, thereby reducing the severity of economic disruptions.

He observed that obtaining funds from foreign lenders can be time-consuming, especially when immediate intervention is required, whereas central bank financing can provide quicker access to funds.

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Mr Mwabeza cited global economic disruptions, including the Covid-19 pandemic and recent geopolitical tensions, as examples of periods when external financing became more costly and difficult to secure.

With reduced borrowing costs, he said, the government’s borrowing arrangement through the BoT will strengthen the country’s ability to withstand temporary economic shocks.

He, however, urged the government to ensure that funds obtained from the central bank are directed towards productive investments and emergency response measures rather than non-essential expenditure.

“Fiscal discipline remains critical to ensure the intended benefits are achieved while preserving the autonomy of the Bank of Tanzania,” he said.

Mr Mwabeza also noted that the advances are subject to strict conditions, including a repayment period of 180 days, applicable charges and borrowing limits to ensure timely repayment.

The expert, however, stressed the need for the central bank to maintain a careful balance between supporting government financing needs, managing money supply and safeguarding its independence to avoid inflationary pressures.

Meanwhile, economist and investment banker Dr Hildebrand Shayo said the proposal should not be viewed as unusual or inherently risky, noting that similar arrangements exist in both developed and developing countries.

He cited the United Kingdom’s “Ways and Means Facility”, which allows temporary advances between the Treasury and the Bank of England, and India’s “Ways and Means Advances”, through which the Reserve Bank of India provides short-term financing to bridge temporary gaps between government revenues and expenditures.

“The amendment can serve as a fiscal stabilisation tool by preventing disruptions to essential government services, infrastructure projects, salaries and social programmes when revenues temporarily fall short,” Dr Shayo said.

He explained that in a rapidly growing economy such as Tanzania’s, where development spending remains high and revenues can be affected by external shocks, the flexibility would improve cashflow management without immediately resorting to costly commercial borrowing.

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