Tanzania's national debt crosses $19 billion mark

The debt-per-person ratio now stands at over 900,000/- for every man, woman and child in the country

 Tanzania’s national public debt has continued to rise at a steady pace over the past several years, reaching $19.4 billion (around 42.3 trillion/-) by the end of 2015. Foreign debt increased by more than $1 billion in just one year, according to newly released government figures.

 

With the country’s population estimated at 47 million, this means the debt-per-person ratio currently stands at over $412 (around 900,000/-) as a result of government spending on borrowed cash.

Official data shows that the debt has been on an upward annual trajectory since the year 2008, with no sign of respite.

 

It reached $19.405bn at the end of December 2015, out of which $15.408bn spelled the external debt and the domestic debt ballooned to 8.597 trillion/-, according to latest Bank of Tanzania (BoT) reports.

 

Comparatively, the total external debt stock amounted to $14.126bn at the end of December 2014, an increase of $931.2 million from the amount recorded at the end of December 2013.

On the other hand, the stock of the government’s domestic debt increased to 7.481 trillion/- at the end of 2014, from 6.043trn/- recorded at the end of December 2013. 

 

The International Monetary Fund (IMF) has already warned Tanzania to keep its burgeoning public debt in check and set a cumulative external commercial borrowing ceiling of $2.4 billion with the government for the period from July 2014 to June 2016.

 

Despite the burden, the government maintains that the national debt is still sustainable and plans to continue borrowing money from external and domestic sources to finance its development projects, which include construction of a standard gauge railway, new roads and flyovers, power stations and construction of a mega port at Bagamoyo.

 

“The recent debt sustainability analysis indicates that as at the end of June 2015, the net present value of external debt to GDP (gross domestic product) was 20 per cent, well below the international threshold of 50 per cent, implying that Tanzania’s external debt is sustainable,” the BoT said.

 

WHAT COULD YOU BUY WITH TANZANIA’S DEBT?

The outstanding public debt is enough to cover the government’s annual total budget for almost two years.

 

The debt could pay for close to 20,000 kilometres of new tarmac roads, hence doubling the nation’s current network of major roads.

The 42.3 trillion/- national debt could also construct 200 state-of-the-art hospitals with the capacity of 300 beds each at a cost of 200bn/- per hospital, according to estimates.

 

The national debt came under the spotlight last week when President John Magufuli ordered the BoT to suspend payments amounting to 925.6 billion/- meant to settle outstanding government debts pending a proper verification of the amounts.

 

Magufuli issued the directive to central bank governor Prof. Benno Ndulu during an impromptu visit to the BoT headquarters in Dar es Salaam.

 

The president also ordered that the external debt management department should be returned to the BoT from the finance ministry in order to keep closer tabs on the national debt.

According to Haji Semboja, an economics professor at the University of Dar es Salaam (UDSM), the rising national debt is a long-standing problem for Tanzania and it remains a struggle to keep it at controllable levels.

 

“If we cross certain indicators such as the national debt being equivalent to over 70 per cent of the GDP (gross domestic product), then we are in trouble as a nation,” Semboja said.

 

Current government and IMF estimates put the national debt - as a proportion of the national economic output or GDP - at 41.3 percent in the 2012/13 fiscal year, up from 38 per cent in 2011/12.

 

Official projections are that the debt will further grow to 42.7 percent of the GDP in 2015/16, 43.8 percent in 2016/17 and 44 percent in 2017/18.

 

Although the debt has not reached alarming levels, the government still has a challenge to ensure the money it borrows is invested in development projects, Semboja said.

 

Opposition ACT Wazalendo party leader Zitto Kabwe  voiced his own concerns about the burgeoning public debt in a statement last week, noting that the government spends around 2.2 trillion/- each year to service the debt.

 

“The budget for servicing the national debt is bigger than the (annual) budget of any government ministry in Tanzania,” Kabwe remarked.