Tanzania's debt surging, but government says it’s still sustainable
By BEATRICE MATERU More by this Author
- Despite the increase, the Ministry of Finance says that the debt is still sustainable.
- For the year 2020/2021, the indicative debt burden threshold in Tanzania is 55 percent with the ratio of present value of debt to GDP standing at 16.8 percent, slightly higher than the 16.3 percent achieved in 2019/2020.
- Tanzania’s administration has been in the spotlight due to its high borrowing.
According to the latest Bank of Tanzania monthly economic review for December 2020, external debt stock was $23.8 billion at the end of November 2020, representing an increase of $145.5 million from October 2020 and $1,496.1 million from November 2019.
By the end of October 2020, external debt stood at $23.668 billion: In October 2019, debt from external borrowing was $22.317 billion.
Despite the increase, Ministry of Finance spokesperson Benny Mwaipaja told The EastAfrican that the debt is still sustainable and "indicatives show the present value of public debt-to-GDP ratio remains favourable”.
ThresholdFor the year 2020/2021, the indicative debt burden threshold in Tanzania is 55 percent with the ratio of present value of debt to GDP standing at 16.8 percent, slightly higher than the 16.3 percent achieved in 2019/2020.
“This debt sustainability analysis indicates that Tanzania remains at low risk of external debt distress,” said Mr Mwaipaja.
He added that in order to maintain the low-risk level, the government is limiting borrowing for development projects.
BoT said the central government continued to account for the largest share of total external debt at 77.3 per cent, followed by the private sector at 22.4 per cent, and public corporations at 0.2 per cent.
“Since most loans are for 20 years and onwards, we invest in strategic projects that in addition to providing services to the people will also have economic benefits in the short, medium and long term,” Mr Mwaipaja said.
He cited some of the ongoing strategic projects as the standard gauge railway, aviation, electricity, road and bridge infrastructure as well as projects in education and health sectors.
The central bank's latest monthly review report shows transport and telecommunication has the largest share of disbursed outstanding external debt (27.2 percent), followed by social welfare and education (18.1 percent), energy and mining (14.4 per cent) and budgeting support (12.6 percent).
Tourism takes the least at 0.9 percent, which is same as in October 2020.
Domestic borrowing also increased by $117.4 million to $6.8 billion as of the year ending November 2020, compared with the year ending October 2020.
BoT said this was on account of utilisation of its overdraft facility. The central bank said debt of longer-term maturity, that is Treasury bonds and stocks, sustained dominance in the composition of domestic debt stock, accounting for 86.1 per cent.
Government securities issued for budgetary operations amounted to $145.9 million (Tshs 340.2 billion) in November 2020, of which Treasury bonds were $100.2 million (Tshs 233.6 billion) and $45.7 million (Tshs 106.6 billion) was in Treasury bills.
Tanzania’s administration has been in the spotlight due to its high borrowing.
However Mr Mwaipja said,“We are fine. Borrowing, both external and internal, is done carefully. There are committees to advise and analyse all loans carefully. There is a lot of oversight.”
Source: The East African