Echoes of 1990s debt-swap in new scandal at Tanzania central bank


BAK

JF-Expert Member
Joined
Feb 11, 2007
Messages
80,439
Likes
117,238
Points
280

BAK

JF-Expert Member
Joined Feb 11, 2007
80,439 117,238 280
Echoes of 1990s debt-swap in new scandal at Tanzania central bank

By JOSEPH MWAMUNYANGE

The scope of the probe into the looting of billions of dollars from the Bank Tanzania that was recently announced by Finance Minister Zakia Megji may be expanded to include the abuses of the controversial Debt Conversion Programme of the 1990s.

In that programme — which involved investors buying the country’s foreign currency debt at a discount and accepting payment in local currency that was then supposed to be invested in projects in priority areas — it is suspected that unscrupulous businessmen incorporated fake companies to access the facility and beat the guidelines that were set by the Central Bank.

Last month, Mrs Meghji told The EastAfrican that the government would float an international tender for auditors of repute to investigate the curRent fraud at the central bank involving the management of the Commercial Debt Account.

In another inquiry, carried out in September last year, a reputable international audit firm wrote to the BoT governor questioning the over $120 million that was paid to several companies in Tanzania under the Commercial Debt Programme. One company was paid about $40 million. The claims and payments were made between May 2005 and March 2006.

The audit firm advised the BoT governor to hire a forensic expert to assist in investigations into the alleged forgery. Instead, the BoT disputed the report and terminated the services of the audit firm.

For two weeks, efforts to get the names of directors or shareholders of the companies from the Business Registration and Licensing Authority (BRELA) proved fruitless because the files couldn’t be traced.

A source from the Treasury told The EastAfrican, “If the auditors expected to be engaged by the government do not move in fast enough, there is a possibility that they will find some important documents missing.”

The 1990s scam involving the Debt Conversion Programme (DCP, 1990-94) had dramatic repercussions. Augustine Mrema, (then minister for Labour and Youth) was fired for “spilling the beans” in parliament over the DCP money, while a Treasury Permanent Secretary also lost his job “in the public interest” over the scandal.

Mr Mrema was sacked by the then president Ali Hassan Mwinyi for what was described as “collective responsibility” following his revelations in parliament that he was blocked from investigating the DCP funds.

The DCP was created by Tanzania to sell government debt at a discounted rate. One objective was to encourage investments in priority areas chosen by the government. They included agriculture, tourism, industry, commerce and transportation and would have involved local and foreign investors creating jobs. The other reason was for the government to reduce its local and foreign debt stocks, which had reached alarming proportions. In summary, the DCP enabled an investor to purchase foreign debts at a discounted rate. The Bank of Tanzania would then make available to the investor local currency to the full amount of the debt redeemed.

But some of the funds were repatriated abroad instead of being invested.

The Debt Conversion Programme (DCP) was established in 1990 but only became operational in January 1991; by 1993, the government had halted the whole programme after discovering that it was “distorting the economy” instead of bringing about economic development, as the government had expected.

In the two and half years that the programme was operational, some 82 companies were given permits to buy debt. The government paid the firms Tsh50.877 billion in local currency, equivalent to 18.02 per cent of the government’s recurrent budget for 1992/93.

“The government was forced to print money worth Tsh 48 billion to cover the deficit. A simple analysis showed that 15 companies were given Tsh 1 billion each, while 13 others were allocated between Tsh500 million and Tsh1 billion each; and 54 companies got Tsh500 million,” said the 1994 Parliamentary Report.

A quick analysis showed that 45 per cent of the money was paid to just 4 companies. These were Deco Arts (Tsh3.054 billion), Hotel Sea Cliff (Tsh1.786 billion), M.M. Motors (Tsh1.619 billion) and M.M. Garage (Tsh522.128 million), totalling some Tsh6.982 billion. All four were associated with one businessman.
 

nash2010

JF-Expert Member
Joined
Jun 18, 2010
Messages
630
Likes
78
Points
45

nash2010

JF-Expert Member
Joined Jun 18, 2010
630 78 45
A quick analysis showed that 45 per cent of the money was paid to just 4 companies. These were Deco Arts (Tsh3.054 billion), Hotel Sea Cliff (Tsh1.786 billion), M.M. Motors (Tsh1.619 billion) and M.M. Garage (Tsh522.128 million), totalling some Tsh6.982 billion. All four were associated with one businessman.[/COLOR][/SIZE][/FONT]
aise kumbe wameanza kuzichota kitambo
 

Forum statistics

Threads 1,204,498
Members 457,348
Posts 28,161,012