Tanzania not at risk of debt distress, says central bank boss

Monday January 03 2022
Tanzania railway.

Tanzania will seek more concessional loans to fund strategic projects like the railway. PHOTO | FILE


Debate over national debt continued to rage, with the governor of the Bank of Tanzania (BoT), Prof Florens Luoga, saying the loans were sustainable and that there was room for more borrowing.

According to the central bank, Tanzania’s national debt stock swelled by $5.3 billion, reaching $35.76 billion in the year to October 31, 2021.

Prof Luoga, who was speaking in a Clouds Radio broadcast, said Tanzania can borrow up to 70 percent of its GDP, while it only reached 27.9 percent in 2020.

“So far, Tanzania has not touched the threshold of debt distress. We are still in the green,” said Prof Luoga.

He said a sustainability study was carried out in November and while results are not yet out, he expected the debt not to have exceeded 28.5 percent of GDP.

“This means that we have not reached even half of the 70 percent threshold,” Prof Luoga told the station.


Debt resilience

The governor noted that Tanzania ranked 109th out of 170 among highly indebted countries globally.

“We are not borrowing for food but we are doing so for projects that will continue to produce; and because they continue to produce means our debt resilience will continue to be better as income increases,” he said.

The debate began on December 28 following comments from Tanzania Speaker of the National Assembly Job Ndugai, who expressed worries about the borrowing trend under President Samia Suluhu Hassan.

He suggested that the country should rely on internal revenue collections, like the mobile money levies introduced this year, to finance development projects.

“Is there any pride in taking around a beggar’s bowl? When we borrow we applaud. We have resorted to borrowing every day. There will come a day when this country will be sold off and people will continue to be happy instead of being sad,” Mr Ndugai said.

Concessional loans

On Tuesday, President Samia said her government would not be discouraged from borrowing and would seek more concessional loans to fund strategic projects, including construction of the standard gauge railway.

Analysts say borrowing is inevitable but the money should be channelled to productive projects.

“To meet flagship projects and other social sector needs, the government should prioritise concessional financing in order to ensure that projects financed have a large impact on growth and exports,” said Dr Felician Mutasa, a researcher from the Open University of Tanzania.

The Tanzania Coalition on Debt and Development urged the government to empower Parliament to decide on which loans will be accepted and which will be rejected, hence improving on transparency and accountability in debt contracting.

He said the national debt has for long been managed in accordance with existing laws that give the finance minister responsibility to decide on borrowing in consultation with the National Debt Management Committee (NDMC).

“By using Parliament we would as it is an easier way for people to have the right information to hold the government to account,” he said.

He also noted that strategies to reverse the growing tendency to borrow must be properly managed to prevent the situation from getting out of hand - as is the case in some countries in Africa.

reminded that having graduated to a low middle income country, Tanzania will now have very little opportunities to access concessional loans.

Dr Kavishe Yusuf, a development expert said, “Every five years we elect a president, if we do not put in place good policies to control the decisions of one person, the heavy debt burden will fall on future generations.”

“We must ensure that the money we receive goes to the very projects targeted and not otherwise if we are to see the value of our borrowing,” he added.