TANZANIA is among
three countries in sub -Saharan Africa which are classified as either ‘in debt
distress’ or at high risk of falling into ‘debt distress’, according to Oxford
University lecturer, Christopher Adam.
Professor Adam said this week in Dar es Salaam at a
public lecture entitled “Is Africa Facing a New Debt Crisis? The event was
organised by the Institute of Finance Management.
He said other countries are Senegal and Uganda and
those at high debt distress were Cameroon, Ethiopia and Zambia while Gambia,
Mozambique and South Sudan were in distress.
The don named some countries including Tanzania has
put much focus on domestic borrowing, in deed it is good decision because it
goes directly to build infrastructures that will give returns,” he said.
“However, on doing so it must ensure that domestic
borrowing does not crowd out financing for private sector projects which is one
of the engines of the county economy, ” he advised.
Oxford University lecturer, Prof. Christopher Adam |
The don said countries must borrow due to some
differences in some of public infrastructures designed to boost growth and the
trade balance.
Others are sums involved are too great to be met
solely from taxation – could be infrastructure projects (standard gauge
railway) or ‘human capital’ investment in schools and hospitals.
Another factor was new resource discovery that
requires exploratory investment.
He detailed that what matters is not the
absolute amount of debt but its level relative to the income of the country
(GDP) and whether the economy as a whole can generate the resources to service
the debt.
According to him, the difference is between the
total cost of imports (used in consumption and investment) and all other
sources of financing such as exports, aid flows, remittances and reserves.
Adam said further that it order to re-stabilize (or
reduce) external debt-to-GDP, the country’s GDP growth must increase.
Moreover, the cost of borrowing must fall and/or
and the trade balance needs to increase meaning there must be more exports
compared to imports.
For his part, Mohamed Suleiman from the IFM who was
the chairman, said the public lecture was part of the institute’s role to
conduct public lectures to share experiences and knowledge.
“It is not the first time, the institute had
conducted such a public lecture, adding that more such lectures will come,” he
said.
“An over-reliance on commercial public debt exposes
sovereign balance sheets to greater rollover and exchange rate risks. Also, an
increase in debt from domestic creditors could crowd out financing for private
sector projects,” according International Monetary Fund.
So far Kenya, Uganda and Tanzania are among the top
50 countries in the world that are highly indebted to China, according to
US-based research firm Brookings Institution. The Guardian
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