Why setting up Public Investment Fund is a good idea

DAR ES SALAAM: THE Office of the Treasury Registrar (OTR) continues to focus on strengthening the financing framework for Public and Statutory Corporations (PSCs) in line with their evolving capital requirements and the national development agenda under Dira 2050.

In this regard, the Public Investment Bill—expected to be finalised in the 2026/27 financial year—proposes the establishment of a Public Investment Fund as a key policy instrument to strengthen the mobilisation and allocation of capital for strategic investments through PSCs.

The Fund is envisaged to progressively build an investment portfolio of up to USD 10 billion by 2030, depending on implementation pace, capital mobilisation structures, and investment performance. PSCs are expected to operate commercially, expand strategically, and generate returns to the government, while also delivering essential services and supporting industrialisation.

This mandate requires sustained and predictable access to capital to support expansion, modernisation, and improved operational efficiency. In practice, capital mobilisation for PSCs has largely been undertaken through the central government budget framework, which remains an important channel for public investment financing.

However, as development ambitions expand and the investment needs of public entities become more complex, there is an increasing need for complementary financing arrangements that can strengthen predictability and support long-term investment planning.

In 2023, only about six per cent of the total capital requests submitted by PSCs were mobilised. This highlights the need to enhance financing mechanisms and better align investment requirements with available resources across strategic public entities. Within this framework, the Public Investment Fund is expected to play a central role in strengthening capital mobilisation and allocation for strategic investments through PSCs.

As the Minister of State in the President’s Office—Planning and Investment, Prof Kitila Mkumbo explained recently, the initiative forms part of broader reforms aimed at strengthening the performance of public entities, enhancing efficiency, and supporting the implementation of Dira 2050.

The Fund is intended to support capital mobilisation for investments through stateowned entities without jeopardising core revenue streams that go to the Government Consolidated Fund.

This direction aligns with the government’s broader policy agenda under the leadership of President Samia Suluhu Hassan, which emphasises strengthening institutional capacity, improving public investment systems, and enhancing capital mobilisation to support long-term development objectives under Dira 2050.

Treasury Registrar Nehemiah Mchechu has consistently emphasised the importance of strengthening the capital base of PSCs as a foundation for improved performance.

“Adequate and predictable capitalisation remains essential for enabling public entities to expand operations, modernise infrastructure, and respond effectively to emerging economic opportunities,” Mr Mchechu underscored recently.

This perspective reflects a broader shift in how public investment financing is being approached. The introduction of the Fund marks a move towards a more structured and longterm framework. Rather than relying predominantly on annual budget allocations, the government would establish a dedicated mechanism to mobilise and deploy capital for strategic investments through PSCs. In practical terms, this approach introduces a clearer separation between recurrent expenditure and long-term investment.

While the budget continues to support day-to-day government operations and essential public services, the Fund would focus on capital formation—investments that expand productive capacity, strengthen institutional performance, and generate sustainable economic returns over time.

Globally, the use of public investment funds and sovereign investment vehicles has become a defining feature of modern economic transformation strategies. Countries such as Norway, Singapore, the United Arab Emirates,

Saudi Arabia, and China have adopted structured investment institutions to manage and deploy capital in support of long-term national priorities.

Across these experiences, a common approach is evident. These funds are designed not only to invest financial resources, but also to support broader development objectives, including infrastructure expansion, industrial growth, economic diversification, and the strengthening of strategic sectors.

They operate on the basis of clear mandates, disciplined governance frameworks, and long-term investment horizons that help separate investment decisions from shortterm fiscal pressures.

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Taken together, these practices demonstrate how structured investment vehicles can enhance the role of state capital in driving sustainable economic transformation, improving efficiency in capital allocation, and supporting the long-term performance of public and strategic entities.

Within this broader context, the Fund is expected to complement existing financing arrangements by improving predictability, enhancing coordination, and supporting more structured deployment of capital to PSCs, while strengthening alignment between investment decisions and measurable development outcomes.

Experience from different jurisdictions shows that the effectiveness of such funds depends not only on the level of resources available, but also on the discipline applied in project selection, appraisal, and monitoring. Where governance frameworks are strong, these funds have contributed to improved performance of state-owned enterprises and more efficient delivery of public investments.

For Tanzania, the intention is not to replicate external models, but to adapt relevant principles to the local institutional, fiscal, and development context, ensuring alignment with national priorities and the broader objectives of structural transformation under Dira 2050.

Importantly, the Fund is not intended to replace existing financing instruments. Public-private partnerships, blended finance, climate finance, and equity participation will continue to play a role. However, these mechanisms are often project-specific and complex, and cannot on their own meet the recurring and large-scale capital needs of PSCs.

The Public Investment Fund provides a more stable, scalable, and coordinated platform for long-term capital mobilisation. A key advantage of the structure lies in improving investment pipeline discipline. With a dedicated mechanism in place, project preparation, prioritisation, and financing can be better sequenced, reducing delays and strengthening implementation readiness, and enhancing overall efficiency in public investment delivery.

The broader implications are significant. Improved access to structured capital would enable PSCs to expand capacity, enhance efficiency, and increase their contribution to government revenues, while supporting economic diversification through targeted investments in productive sectors and infrastructure.

Equally important is the strategic signal the Fund represents. It reflects continued efforts to evolve the public investment financing architecture in a way that is aligned with long-term development ambitions rather than shortterm budget cycles.

Prepared by the Office of the Treasury Registrar.