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Government Advised on Borrowing by IMF if debt not managed right might lose Credibility.

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by nngu007, Mar 22, 2011.

  1. nngu007

    nngu007 JF-Expert Member

    Mar 22, 2011
    Joined: Aug 2, 2010
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    THE International Monetary Fund (IMF) has advised the government to borrow only on reasonable terms and ensure repayment is consistent.
    This was said over the weekend by IMF Mission Chief for Tanzania, Ms Martine Guerguil in a statement. She said that the country's desire to access international capital markets to finance infrastructure spending should be approached with maximum caution.
    "If borrowing is not consistent with a debt management strategy, the country might lose credibility", she said.

    She said that it will be vital to strengthen the government's capacity in two areas, namely enhancement of external debt management and improvement in the selection, implementation and monitoring of investment projects to ensure the projects are implemented.
    The IMF advice has come at a time when the total debt has ballooned to 10.86 billion US dollars (about 16.29trn/) as of last November. The government is also set to issue Eurobond in the first half of this year.
    The Minister for Finance and Economic Affairs, Mr Mustafa Mkulo, has been quoted as saying that the country's intention to issue the Euro bond is well on track.
    According to the minister, financial experts are still working on the country's sovereign debt rating; a necessary step before it is issued. However, economists argue that whether or not the debt has been serviced, the government needs to concentrate on financing the social programmes like education.
    "Should the government set aside the money today to service the debt, the situation could be worse and it will reduce its ability to provide better public services", a senior lecturer at Mzumbe University's Dar es Salaam Business School, Dr Honest Ngowi said over the weekend.
    He admitted that debt servicing must be honoured as any failure will lead to blacklisting which may have a negative impact on the plans to issue Euro bond. He said that the immediate problem if the debt is not serviced could put the country at odds by exceeding the GDP.
    "This is like living beyond one's income", he said
  2. K

    Kamundu JF-Expert Member

    Mar 24, 2011
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    Bonds are better than IMF!! for two reasons
    1. They have low interest rate
    2. They can be long term.

    But you need to know in bonds you have two different payment

    Coupon Rate: This is a cash flow you pay mostly every year to investors
    Interest rate: This is interest on loan.

    The goverment should be able to pay coupon rate every year.
  3. The Finest

    The Finest JF-Expert Member

    Mar 24, 2011
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    Tatizo wanakopa hela halafu wanaenda ku-invest kwenye project ambazo outcome yake inakuwa ni ya kubahatisha, the project will last for two years and thereafter they will tell you there was shortage of funds for the project huku kumbe hela iliishaliwa na wajanja