Tanzania’s debt is growing, but the government says it is still sustainable

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By BEATRICE MATERU

Tanzania’s national debt, which currently stands at Tsh 71.4 trillion ($30.63 billion), is growing, and the central bank says the depreciation of the dollar against other currencies, in which the debt is denominated, is to blame, especially the special drawing rights (SDR).

According to the Bank of Tanzania’s latest Monthly Economic Review for December 2020, external debt stock was $23.8 billion at the end of November 2020, an increase of $145.5 million from October 2020 and of $1,496.1 million compared to November 2019.

At the end of October 2020, the external debt amounted to 23.668 billion dollars: in October 2019, the debt of external borrowings was 22.317 billion dollars.

Despite the increase, finance ministry spokesman Benny Mwaipaja said East Africa that the debt is still sustainable and that “the indicators show that the present value of the ratio of public debt to GDP remains favorable”.

Threshold

For the year 2020/2021, the indicative debt burden threshold in Tanzania is 55%, with the present value of debt-to-GDP ratio at 16.8%, slightly higher than the 16.3% reached in 2019/2020.

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“This debt sustainability analysis indicates that Tanzania remains at low risk of external debt distress,” Mr. Mwaipaja said.

He added that in order to keep the level of risk low, the government limits borrowing for development projects.

The BoT said the central government continued to account for the largest share of total external debt at 77.3%, followed by the private sector at 22.4% and state-owned enterprises at 0.2%.

“Since most loans are granted for 20 years and more, we invest in strategic projects which, in addition to providing services to the population, will also have economic benefits in the short, medium and long term,” said Mr Mwaipaja.

He cited some of the ongoing strategic projects like standard gauge railway infrastructure, aviation, power, roads and bridges as well as projects in the education and health sectors.

The central bank’s latest monthly review report shows that transport and telecommunications account for the largest share of the stock of disbursed external debt (27.2%), followed by social protection and education ( 18.1%), energy and mining (14.4%) and budget support (12.6%). ).

Tourism takes the least at 0.9%, which is the same as October 2020.

Domestic borrowing also increased by $117.4 million to $6.8 billion for the year ending November 2020, compared to the year ending October 2020.

BoT said this was due to the use of its overdraft facility. The central bank said longer-term debt, ie treasury bills and equities, sustainably dominated the composition of outstanding domestic debt, accounting for 86.1%.

Government securities issued for budgetary operations amounted to $145.9 million (Tsh 340.2 billion) in November 2020, including $100.2 million of treasury bills (Tsh 233.6 billion) and 45.7 million dollars (106.6 billion Tsh) in treasury bills.

The Tanzanian administration has been under the spotlight due to its high borrowing.

However, Mr Mwaipja said: “We are fine. Borrowings, both external and internal, are done with care. There are committees to advise and carefully analyze all loans. There is a lot of control. »

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