Limit financing of national debt, government challenged

Dar es Salaam. Parliament’s Budget Committee yesterday asked the government to set a national debt financing ceiling and align it with domestic revenue collections.

The proposal follows concerns that continuous borrowing could lead to all locally-sourced funds being spent on debt servicing.

Finance and Planning minister Philip Mpango said earlier in the year that the government would spend Sh10 trillion on debt servicing during the 2018/19 financial year.

Tanzania Revenue Authority (TRA) collected a total of Sh15.5 trillion in 2017/18. This means that out of every Sh100 that TRA collects in tax revenue, at least Sh64.5 is spent on debt servicing.

Presenting the Budget Committee’s views on the National Development Plan for 2019/20, committee chairman George Simbachawene said if left unchecked, the debt could gobble up all funds from domestic sources.

The national debt jumped to $23.2 billion (Sh52.4 trillion) in the year ending June 2018 compared to $21.6 billion (Sh48.8 trillion) during the previous corresponding period.

“The government says the debt is sustainable, but in our opinion it’s time we set a cap on repayment of the national debt so that we can figure out its economic and budgetary impact,” he said. Earlier, Dr Mpango said the government had set its 2019/20 budget at Sh33.5 trillion compared to Sh32.47 trillion for 2018/19 as it seeks to grow the economy by 7.3 per cent in the next fiscal year.

He told the House that some Sh13.55 trillion would be spent on development projects in 2019/20 – a 9.45 per cent increase from what was planned for development expenditure in 2018/19.

Recurrent expenditure will consume a total of Sh19.95 trillion. Out of the money, a total of Sh7.55 trillion will be spent on paying civil servants’ salaries.

Debt financing will go down slightly in 2019/20, with Dr Mpango projecting that Sh8.62 trillion would be spent on debt repayment during the next financial year.

A total of Sh4.9 trillion will be set aside as subsidies and to pay for various products and services.

Dr Mpango said the money for financing the budget would be sourced both locally and internationally through effective implementation of monetary and fiscal policies. He added that tax revenue was set to hit 12.7 per cent of GDP compared to the current year’s forecast of 12.5 per cent.

“In order to attain the objectives and targets of the plan, the government will put in place a number of initiatives, including improving business environment and strengthening the tax collection system,” said Dr Mpango.

He said under implementation of the blueprint passed by the Cabinet in May with a view to addressing challenges that businesses were grappling with, Tanzania will have new businesses that will pay tax.

The government’s focus is also on the construction and rehabilitation of supportive infrastructure, including energy and transport. The government plans to continue with the revival of the national carrier ATCL and construction and improvement of railways, roads, bridges, airports and ports.

“The government will continue to undertake various initiatives to improve the participation of the private sector in economic ventures through public private partnership.” Projections indicate that the inflation rate will be 5 per cent in 2019/20.

Also, grants and soft loans are expected to go down from Sh3.38 trillion in 2019/20 to Sh3.28 trillion in 2021/22. Domestic and foreign debt, including rollover, is forecast to decrease from Sh6.9 trillion to Sh6.8 trillion.