DAR ES SALAAM, Tanzania
Tanzania has applauded an initiative by the Chinese government to write off a series of interest-free loans to African countries, saying if Tanzania is among the beneficiaries, then money freed by debt relief, will be routed to the country’s development.
Tanzania president, Samia
Hassan (L) in a discussion with Minister for Finance and Planning,
Mwigulu Nchemba |
Announcing the initiative,
Chinese Foreign minister Wang Yi said his country would forgive 23 matured
interest-free loans for 17 African nations, though Yi neither disclosed the
nominated countries nor criteria in which countries are to be chosen.
Responding to a query by The
Citizen on whether Tanzania was among the benefited countries, Japhet Justine,
Commissioner responsible for Sovereign Debt Management at the Ministry of
Finance and Planning said: “It is a good move for the indebted countries, we
are yet to be informed.”
Justine, who was responding on
behalf of Mwigulu Nchemba, the Minister for Finance and Planning, explained
that the initiative was commendable, and that he will confirm the matter with
his colleague at the Tanzania-China desk, for more details.
“Tanzania has been doing well
in servicing its external debt, committed to improving revenue collection,
public spending, transparency in public accounts and a stronger anti-corruption
framework, therefore, to encourage such moves, Beijing should consider Tanzania
on its list,” he appealed.
It is said that Beijing made
the announcement of the new debt relief plan on August 18 during the Forum on
China-Africa Cooperation as it seeks to boost ties with its African allies.
According to the Central Bank
(BoT) – Monthly Economic Review (MER) for July this year, it is suggested that,
as of April 2022, the national debt had reached $29,184 million out of which
32.21 percent represented the external debt.
On the other hand, the review
indicated that by June this year, the disbursed outstanding debt by currency
composition is estimated at Chinese Yuan 1,462.6 million (equivalent to
Sh498.64 billion) which is 5.8 percent share of the external debt.
ALSO READ: Tanzania may join Kenya in missing out on China debt relief plan
Moreover, MER disclosed that
in 2021, the country’s risk of external debt distress had increased to
moderate, mainly owing to the adverse effects of the COVID-19 pandemic on
exports which weakened Tanzania’s ability to service its external debt.
According to the review, the
multilateral institutions and commercial creditors have been identified as the
main lenders, accounting for 80.4 percent of external debt.
Consequently, the government
plans to spend an estimated $3,900 million on external debt servicing during
the current fiscal year, this is up from $1,431.2 million allocated in the
previous financial year.
But on the other hand, in the
financial year 2020/21, Tanzania benefited from the Debt Service Suspension
Initiative (DSSI) to the tune of $102 million of which China was part of the
initiative.
According to the IMF, China is
now the largest official bilateral creditor in more than half of the Debt
Service Suspension Initiative (DSSI) countries and will, therefore, play a key
role in debt restructuring for those economies.
Beijing has enhanced its
engagement with Africa through cooperation in infrastructure development and
clean energy. In East Africa, China financed or built-up 50 percent of the
construction projects in the region in 2021.
President Xi Jinping has
proposed the Global Development Initiative and announced that China will
upgrade the South-South Cooperation Assistance Fund to a Global Development and
South-South Cooperation Fund and further replenish the Fund.
China has started developing a
pool of global development projects with a keen interest on African countries
with prospective projects. The Forum on China-Africa Cooperation (FOCAC)
mechanism has travelled a journey of over two decades playing a positive role
in charting the right course for international cooperation with Africa.
In his speech when presenting
government estimates on revenue and expenditure for the financial year 2022/23,
Nchemba analysed the country’s external debt sustainability saying the public
debt stock as of April 2022 was 69.44 trillion shillings equivalent to 14.4
percent increase as compared to 60.72 trillion shillings in April 2021.
According to him, the said
amount includes domestic debt of Sh22.37 trillion equivalent to 32.2 percent of
the debt stock and external public debt was Sh47.07 trillion, equivalent to
67.8 percent of the debt stock.
Adding: “The stated amount for
external public debt, covering external non-concessional loans amounting to
14.27 trillion shillings equivalent to 30.3 percent of the debt stock. This
means that a large portion of the external public debt is concessional.”
Furthermore, the minister
responsible with finance and planning said: “The government conducted the Debt
Sustainability Analysis (DSA), which revealed that debt burden indicators are
within sustainability thresholds that are internationally acceptable during
short, medium and long term.”
According to him, the analysis
revealed that: the present value of public debt to GDP was 31.0 percent which
is less than a threshold of 55.0 percent and while, the present value of
external debt to GDP was 18.8 percent as compared to the established benchmark
of 40.0 percent, the current value of external debt to export was 142.4 percent
as compared to the cut-off threshold of 180 percent. – The Citizen
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