The government did not borrow much at the start of the current financial year, but that was not enough to stop national liabilities swelling to a staggering Sh30 trillion at the end of July, further complicating an already distressed financial position.
The public debt was about Sh27 trillion at the end of last year, which means it has ballooned by about Sh3 trillion in less than a year. Official figures show that most of it has been incurred by the government, and state officials are spending sleepless nights trying to figure out how to deal with it.
The Bank of Tanzania (BoT) says the national debt has not reached alarming levels. But The Citizen on Saturday has reliably learnt that staff are burning the midnight oil daily to come up with strategies to convince lenders to reschedule part of it or even cancel it altogether.
“The total external debt stock as at July 2014 stood at $14,052.3 million (about Sh23.24 trillion) and government domestic debt stood at Sh6,760.9 billion,” the BoT chief economist and top policy researcher, Dr Joseph Masawe, said this week. “While this level of debt appears high, our debt level is quite sustainable,” he said.
Analyst Eric Mwakibete concurs. The biggest problem might not even lie in the ballooning of the public debt itself, but in the lack of mechanisms to stop the executive incurring more debt. Mr Mwakibete adds: “As things stand now, the government isn’t restricted by any other organ or authority in its borrowing and bad spending habits. It is not accountable to fully justify some of that debt. There is no debt ceiling. And the public largely loses track of that growing debt.”
The International Monetary Fund (IMF) is also not too worried by the swelling of the debt but calls for prudence in spending so the situation does not get out of control.
The IMF conservatively estimates that the public debt will rise to about Sh33.8 trillion by mid-2016. It could soar to nearly Sh42 trillion during 2017/18 if the borrowing appetite, which has mostly been caused by failure to generate enough revenue, continues unabated.
“Tanzania remains at low risk of external debt distress,” the IMF says in its July country report. “The public debt outlook is sustainable, assuming that economic growth remains strong and that the fiscal deficit gradually declines to 4–4.5 per cent of GDP over the medium term.”
Fiscal experts have decried the trend for quite some time. They have warned that if the borrowing spree is not contained or better managed, the debt stress that had eased tremendously eight or so years ago will hit new heights in the not very distant future.
Unless conditions are created now to ensure there is enough money to pay the debts when they fall due, they argue, future generations will suffer most from the consequences of the current borrowing. Experts and activists are worried because considerable amounts of the credit is invested in recurrent expenditure. To make it worse, the debts are short-term and obtained from local commercial banks, which makes them more expensive.
“That calls for the contracted loans to be put in development investment instead of using the money on recurrent spending like paying salaries, buying diesel guzzling four-wheelers and similar luxuries,” says activist Jimmy Luhende of Mwanza.
Mr Mwakibete wants mechanisms put in place to check borrowing, including Parliament being notified every quarter of a financial year about our indebtedness. But assistant lecturer Saumu Jumanne of the Dar es Salaam University College of Education says she is not concerned so much about the size of the debt as how the money borrowed is spent.
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