Ndugai apologises to Samia over comment on Tanzania's external borrowing

Monday January 03 2022
Tanzania's National Assembly Speaker Job Ndugai and President Samia Suluhu Hassan.

Tanzania's National Assembly Speaker Job Ndugai and President Samia Suluhu Hassan at a past meeting. The speaker has apologised to the president over remarks he made about the country's borrowing. PHOTO | FILE | NMG


Tanzania's National Assembly Speaker Job Ndugai on Monday apologised for his recent remarks on Tanzania’s borrowing from external sources.

Speaking at a public rally in his Kongwa constituency in Dodoma on December 27, Ndugai said that Tanzania should stop accepting loans from external lenders and instead expand its domestic revenue streams to pay for development projects.  

Ndugai came under attack from within the ruling CCM party for saying the country was in danger of being auctioned off if its external debt burden continued to grow.

At a press conference in the capital Dodoma on Monday, he said, however, that his comments were misinterpreted.

He said he was only answering critics of Parliament's endorsement of a mobile money transfer levy last year that remains highly unpopular among users.

“It was just a call to Tanzanians to accept taxes, levies and such government charges as a necessary part of increasing internal government revenues to help cover costs for social services such as health, education and the like,” he said.


Ndugai's remarks last week drew response from President Samia Suluhu Hassan who, a day later, said her administration would not be discouraged from prioritising external loans over domestic taxes to complete key infrastructural projects such as the Standard Gauge Railway and the Julius Nyerere Hydropower projects.

Speaking after the signing of a new $1.93 billion deal with Turkish contractors Yapi Merkezi for another phase of the ongoing SGR project, the president said:

“There are people who thought these projects would ground to a halt so they would have something to say. That’s not going to happen. There is no country anywhere that doesn't borrow - even the so-called developed countries have bigger loan debts than ours. We will borrow, borrow and borrow in order to finish the projects we have started.

“That way we will be able to complete these projects much sooner and start making money off them to pay off whatever loans we incur. If we were to depend on our own internal revenues, how long would that take?”

Ndugai had asserted that external borrowing for development was not “sustainable” and recommended that alternative means be used to raise funds to finance infrastructure investments. “Higher domestic taxes and expanding the internal revenue tax base is much more preferable,” he said last week.

The House Speaker appeared to be supporting the position adopted by Samia's predecessor John Magufuli, whose five-and-a-half-year tenure was marked by frequent public claims that his government was paying for most if not all infrastructure projects and other social development initiatives out of its own pocket.

These claims were underscored by often high-handed domestic tax collection methods coupled with tough austerity measures designed to rein in the government’s recurrent expenditure.

However, Ndugai said the video clip of his remarks, which went viral on social media leading to a huge political backlash, was edited to misrepresent his comments.

He added that he did not intend to “disrespect” President Samia’s administration.

“That clip was smartly edited to convey a different message and soil my relationship with the presidency. Social media has become a very powerful tool these days; it can create agendas out of nothing. People are now using it to attack the current administration and drag the Speaker into it,” he said.

“But for all those whom I may have wronged by my remarks, I apologise wholeheartedly,” he added.

According to Ndugai, fences have already started being mended after President Samia accepted an invitation to be chief guest at a National Prayer Breakfast organised by the Speaker’s Office in Dodoma on January 29 ahead of the first parliamentary session of 2022 that will be held on February 1.

Tanzania's national debt stood at $35.7 billion in November 2021, according to the Bank of Tanzania. The country has so far secured about $3 billion in loans from various external sources since President Samia took office following Magufuli's death in March 2021.

The latest loan was a $567.25 million package from the International Monetary Fund that included $372.4 million at zero interest rate. According to the IMF, this was due to Tanzania's “new eligibility to borrow from the Fund fully on concessional terms.”

Tanzania has also said it will borrow at least $2.34 billion from foreign sources in support of its proposed 2022/2023 budget of $17.1 billion. About $1.32 billion will be funded through direct concessional loans and grants from development partners under the traditional General Budget Support (GBS) arrangement, and another $1.04 billion is expected to come from project-specific commercial loans from international lenders.

The government will also borrow $2.32 billion from the domestic market towards ensuring at least $12.4 billion internal financing of its 2022/2023 budget.

About 29 percent of the total budget ($4.62 billion) has been tentatively allocated for government debt repayment. According to Finance Minister Mwigulu Nchemba, the 2022/2023 budget will include external and domestic debt repayment among its priorities.

Despite the mounting external debt, Tanzania has remained the only country in the East African region to maintain a low risk of debt distress since 2013, according to AfDB's regional economic outlook for 2021.

The AfDB report relegated both Kenya and Ethiopia from low to high risk and Uganda from low to moderate risk. Rwanda maintained a moderate risk rating over the same period while South Sudan dropped from moderate to high risk alongside Burundi. Djibouti remained high risk as Somalia, Eritrea and Sudan were all placed in the critical debt distress category.