IS TANZANIA DEBT STRETCHED BEYOND LIMITS?

By Our Correspondent, Dodoma TANZANIA

Tanzania has started the New Year with a national debt of 54.84 trillion shillings ($23.77 billion) as of November 30, 2019. This is due to a shortfall in revenue collection coupled with low external financing exacerbating pressure on an economy that is expected to expand by 7.1 per cent by June.

However, the Minister for Finance and Planning, Phillip Mpango, is optimistic that the debt is sustainable.

“All ratios are below international thresholds. The ongoing debt assessment shows the country can continue to borrow locally and abroad to finance its development activities and pay off matured loans using its internal and external revenue," he said in a state of the economy address on December 31.

According to Mpango, the increase in debt is attributed to two factors: The matured interest loans of previous contracts and new loan disbursements to finance the standard gauge railway and airports, construction of electrical plants and implementation of water projects.

“Most of the debts we are currently paying are dated 40 years back. In 2019/2020, the government intends to increase and strengthen domestic resource mobilisation aiming at financing government operations including paying debts and ensuring funds mobilised are spent as intended on projects that in turn will transform the country economically,” Mpango said.

The country’s external debt stands at 40.39 trillion shillings ($17.50 billion) while domestic debt is at 14.44 trillion shillings ($6.25 billion) as of November 30, 2019.

According to the central bank, transport and telecommunication were the major beneficiaries, accounting for 26.8 per cent of the debt, followed by social welfare and education, energy and mining, and balance of payments and budgetary support.

Meanwhile, revenue collection was slightly below target in the first five months of the 2019/2020 financial year at 8.50 trillion shillings ($3.7 billion) against a target of 9.01 trillion shillings ($3.9 billion) during the period.

“Despite the fact that domestic revenue collection has generally increased compared with past years, the amount collected is less than the targeted amount mainly because of tax evasion,” said Mpango.

The World Bank previously noted that the missed revenue targets imply serious weakness in revenue forecasting, and advised the country to improve its revenue and tax collection forecast and intensify mobilisation of domestic revenue to finance investments.

The World Bank predicted that the country’s economy is likely to expand by 5.8 per cent at the close of 2019.

Several projects are still ongoing such as the construction of the standard gauge railway, hydroelectric power project at Rufiji River at 1.44 trillion shillings, and 788.80 billion shillings for water and rural electricity projects.

The government expects to attain real GDP growth of 7.1 per cent by the end of the 2019/2020 financial year.

The country’s external debt stands at 40.39 trillion shillings ($17.50 billion) while domestic debt is at 14.44 trillion shillings ($6.25 billion) as of November 30, 2019.

According to the central bank, transport and telecommunication were the major beneficiaries, accounting for 26.8 per cent of the debt, followed by social welfare and education, energy and mining, and balance of payments and budgetary support.

Meanwhile, revenue collection was slightly below target in the first five months of the financial year 2019/2020 at 8.50 trillion shillings ($3.7 billion) against a target of 9.01 trillion shillings ($3.9 billion) during the period.