By The Citizen Reporters

Dar es Salaam. Tanzania’s total national debt stock has reached $10.8 billion (Sh15 trillion), and experts caution about a looming crisis.

The debt increased by about $4 billion between 2007 and 2010, from $6.1 billion in June 2007 to $10.2 billion in June 2010, according to the Bank of Tanzania.  By October 2010 it stood at $10.8 billion.

The BoT says 84 per cent of the total debt stock is owed by the government and public corporations. This is equivalent to $9.1 billion (Sh12.7 trillion). The remaining 16 per cent ($1.7 billion) is owed to the private sector.

The debt is higher than the Sh11.6 trillion national Budget for the 2010/11 financial year. It also means that if shared out equally to the over 40 million Tanzanians, each would owe about $214 (Sh375,000).

Reacting to the rising debt, experts said that if the country kept borrowing at the current rate it risked falling into a debt crisis, as has happened in some Eurozone countries, including Greece.

“Despite possible justifications, having a debt higher than revenue means living beyond one's means. This could pose a problem for the economy in future, especially if it keeps increasing,” Prof Humphrey Moshi, an economics lecturer at the University of Dar es Salaam, said.

Dr Honest Ngowi, a lecturer at Mzumbe Univerity’s Dar es Salaam Business School, was concerned that the rising debt was not supported by increasing revenues from various government sources.

This could raise the country’s risk level and affect its creditworthiness. “What worries me is that taxpayers are the ones who suffer the consequences of such a big debt. The government must make sure that it controls the debt otherwise the country could follow in the footsteps of Greece and become bankrupt,” Dr Ngowi said.

He noted that there was a need for a credit auditing agency to control the country’s debt. Prof Marjorie Mbilinyi, of the Tanzania Gender Networking Programme (TGNP), said the cause of the debt should be looked into.

“One major explanation of high debt is the inflated size of the government and the budget that goes with it; and the kind of expenditures that this government makes, often in conflict with the priorities of the majority of Tanzanians, and marginalised women, in particular,” she said.

She added that after the October 31 elections, President Jakaya Kikwete had an opportunity with his advisers to take immediate measures to reduce the size of the Cabinet, as many activists and other concerned citizens continually recommended during the first five years of his leadership.

Tanzania received debt relief amounting to $3 billion in 2001 thorough the Heavily Indebted Poor Countries (HIPC) Initiative.

Coupled with improved revenue collections and reduced government expenditure, the total debt stock decreased from $10 billion in 2006 to $6 billion in 2007. But as revenue started falling due to the power crisis of 2006 the debt stock started increasing from $7.5 billion in 2008 to the current levels.

The Research and Poverty Alleviation (Repoa) executive director, Prof Samuel Wangwe, said the ballooning debt was excusable if the money was spent wisely.

 “The issue here is how the money is being used. If the debt is being used effectively in development projects and if the economy keeps growing then there is no problem,” Prof Wangwe said.

He said had the economy been posting negative growth, while the debt keeps increasing then that would have been a cause for alarm.

But Prof Ibrahim Lipumba, a seasoned economist and chairman of the Civic United Front (CUF), said the government was still unable to prudently and sustainably manage public funds. And this makes the government’s high borrowing a problem.  

 “I am concerned that despite the big debt the government still wants to float a Eurobond to borrow a further $1.5 billion. This will put the country in a difficult situation,” said Prof Lipumba.

The acting secretary-general of the Trade Union Congress of Tanzania (Tucta), Mr Nicholas Mgaya, said it was disheartening that the government currently borrows at the rate of 40 per cent of its budget annually but also misappropriates public funds at the rate of 30 per cent a year, as indicated by the controller and auditor general (CAG) reports.

“The government debt will continue to increase because of poor fund management,” said Mr Mgaya.
(Reported by Frank Kimboy, Florence Mugarula and Victor Karega)

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