Kafulila: PPPs key to Tanzania’s economy as US freezes foreign aid

Dar es Salaam. The Public-Private Partnership Centre (PPPC) has called for Tanzania to expand public-private partnerships (PPPs) and enhance domestic tax revenues in response to a potential freeze in US foreign aid.

Following his inauguration on January 20, 2025, US President Donald Trump’s administration announced a halt to foreign aid, primarily administered through the US Agency for International Development (USAID).

The freeze is part of a broader effort to restructure US foreign policy and “use taxpayer dollars wisely to advance American interests.”

This decision has far-reaching implications across Africa, including Tanzania, particularly in vital sectors like health and education.

Vaccination campaigns for polio eradication and HIV/AIDS treatment through the President’s Emergency Plan for AIDS Relief (PEPFAR) have been suspended, jeopardising millions of lives.

In a recent live televised event, the PPPC executive director, Mr David Kafulila, suggested that the negative effects of the US aid freeze could be mitigated through strengthened PPPs and improved domestic revenue collection.

Mr Kafulila emphasised that the US, which controls a quarter of the world’s economy, holds significant sway over global financial institutions such as the World Bank (WB) and the International Monetary Fund (IMF).

Thus, shifts in US economic policy can have profound global repercussions.

He noted that Tanzania’s dependency on foreign aid, particularly US grants, had been decreasing since the early 2000s, and the country must now further reduce this reliance.

Mr Kafulila advocated for expanding PPPs as a means to bridge the funding gap.

“Encouraging more PPPs will attract private capital, reduce reliance on foreign aid, and free up public funds for essential sectors like healthcare, education, and water supply,” he said.

He also highlighted that leveraging PPPs would enable more efficient use of domestic tax revenues.

For instance, private investments in critical infrastructure could reduce the need for US aid previously allocated to healthcare, and education among others.

Increased private sector involvement through the execution of projects could similarly mitigate the potential reduction in World Bank funding due to changes in US policy.

“Once US companies implement investment in partnership with Tanzanian firms, the country’s tax capacity will be enhanced, increasing funding for critical sectors, including health and education,” he said.

“This is especially important when US policy changes could impact how the World Bank responds to funding requests,” he added.

He underscored the importance of Tanzania pursuing economic self-reliance by diversifying income sources and investment opportunities.

This approach, he said, aligns with Tanzania’s National Development Vision 2050, which envisions the private sector as the main driver of the economy.

To achieve this, he pointed to ambitious infrastructure and industrial projects, particularly in the energy sector.

“Tanzania must increase electricity generation to meet the demands of a growing population, from the current 5,000 megawatts to support a projected $700 billion economy by 2050,” Mr Kafulila said.

He emphasised that the targeted economic growth is about one and a half times South Africa’s current economy.

While acknowledging that large-scale projects require substantial investment, Mr Kafulila stated that tax revenues and loans alone would not suffice.

He referenced examples from countries like France, the US, and the UK, where the private sector has led major infrastructure initiatives, with the public sector providing regulatory oversight.

“In the next 25 years, we aim for an 8 percent annual growth rate. The private sector must play a pivotal role in helping us achieve this,” he added.