By: Ecofin Agency

Tanzania is stepping up its energy transition strategy. Presenting the 2026/2027 budget to Parliament in Dodoma on June 11, Finance Minister Khamis Mussa Omar announced a package of new tax incentives aimed at accelerating the use of natural gas and electric technologies in transport and households.

According to details reported by Daily News, the centerpiece of the package is expanded support for electric vehicles (EVs). The government is reducing import duties on electric vehicles from 25% to 10% and exempting imported EV charging equipment from value-added tax (VAT).

Equipment used to convert gasoline- or diesel-powered vehicles to run on natural gas or electricity will also be exempt from VAT. In addition, the entire compressed natural gas (CNG) value chain will now benefit from the tax exemption, according to The Citizen.

The fiscal measures are accompanied by a new government directive requiring all public institutions to prioritize electric and gas-powered vehicles in their procurement plans. “The goal of this measure is to reduce government expenditure arising from dependence on petroleum fuels imported from abroad,” Omar told Parliament.

A Strategy Introduced in 2025, Accelerated by Rising Fuel Costs

The new measures build on policies introduced in the 2025/2026 budget. Last year, the government exempted from VAT natural gas supplied to distribution stations, cooking gas cylinders, and carbon capture installations.

The closure of the Strait of Hormuz since late February 2026 has driven up fuel prices across global markets, with East Africa among the regions most affected. In Tanzania, the government was forced to subsidize diesel by 535 Tanzanian shillings (about $0.21) per liter in June. The growing strain on public finances has heightened the need to reduce the country’s long-term dependence on imported oil.

Sam Massawe, marketing director at Zera Company, an electric vehicle distributor, welcomed the new measures. He said high import taxes had long been the main obstacle to EV adoption in Tanzania, despite increasing consumer interest in the technology.

For the 2026/2027 fiscal year, Tanzania has proposed a total budget of 62.3 trillion Tanzanian shillings (about $24 billion), with a significant portion earmarked for energy-transition initiatives and measures aimed at reducing government operating costs.