The agreement by the World Bank and IMF makes Tanzania the fourth country of a list of more than 36 to have got to this point.
The relief means that by next fiscal year the east African nation should see its interest payments fall to $116 million a year from $193 million in 1999-2000. By 2010, the World Bank said, the debt repayment should be down to an average of $87 million a year.
Until 2020, debt is forecast to remain below 150% of exports, a key target built into the debt-relief equations. Officials expect Tanzania will see its external debt drop by 54%.
Half the money should come from the Bank, the Fund and other multilateral creditors, with individual countries and commercial groups — as long as they cooperate — absorbing the rest.
The debt relief forms part of the heavily indebted poor countries (HIPC) initiative, of which Tanzania now becomes the fourth beneficiary after Mozambique, Bolivia and Uganda.