The government has withdrawn a proposal contained in the Finance Bill 2026 that would have allowed it to receive loans from the Central Bank during unforeseeable or unavoidable events.

The proposal, which was not disclosed during the budget presentation, sparked controversy, as experts and analysts feared it would undermine the rule that bars direct or indirect lending to the government or public authorities, except through an overdraft facility. Analysts also expressed concerns that the measure could create a pathway for money printing.

“Following recommendations from the Standing Committee of Parliament’s Budget Committee, the government has agreed to remove Article Five, which proposed amending Section 69 to specify the conditions under which the Bank may provide short-term loans to the government in the event of emergencies and unforeseen circumstances,” the Minister of Finance told Parliament on June 24, 2026, during the final passage of the Finance Bill.

In its report, the Parliamentary Budget Committee highlighted five reasons for opposing the provision.

“The Committee did not agree with the government’s proposals for the following reasons: First, the amendments would remove the requirement that the central bank must not lend directly, or indirectly, to the government and other public institutions. Second, the amendments would remove the requirement that the government pay interest at the market rate on any loan obtained. Currently, the interest paid is three percent,” Chairperson of the Budget Committee, Mashimba Ndaki said.

The third reason highlighted by the committee was that all matters identified under the interpretation of an ‘unforeseeable or unavoidable event’ in the explanatory memorandum are not materially different from the interpretation of the term ‘disaster’ as provided in the Disaster Management Act.

“Therefore, such expenditures should be financed through the Emergency Fund rather than through borrowing,” the Committee argued.

The committee further noted that Article 140 of the Constitution of the United Republic of Tanzania, when read together with Sections 35 to 39 of the Budget Act, Chapter 439, establishes an Emergency Fund. The purpose of the fund is to enable the President, or a minister designated by the President, to use funds specifically allocated for a particular activity to meet the costs of urgent and emergency situations.

“Fifth, Section 5 of the annual Appropriation Act authorizes the minister responsible for finance to borrow, both domestically and externally, up to the amount of the entire government budget, with repayment guaranteed by the government,” the committee emphasized.

Currently, Section 34(1) of the Bank of Tanzania Act allows the government to receive advances from the Central Bank. These advances must be repaid to the Bank at the market interest rate within 180 days. Such advances are primarily intended to ensure the smooth implementation of the budget, particularly when the government is awaiting expected revenues but needs to continue financing ongoing activities. The Act also stipulates that advances to the government cannot exceed 18 percent of domestic revenue collected in the previous financial year.

In the Finance Bill, the government had also proposed reducing the maximum level of advances from 18 percent to 14 percent of domestic revenue, a move that was widely viewed as fiscally responsible. Many analysts viewed the two proposals as a tug-of-war between fiscal responsibility and fiscal imprudence. However, in the end, both proposals were dropped.