Where the lion’s share of Tanzania's external loans goes

Dar es Salaam. Tanzania’s transport and telecommunication are the largest recipients of funds from loans from external sources as experts describe it as reflection of accelerated government effort to improve infrastructure.

The two sectors together received $5.48 billion – representing a 26 percent of the external debt stock in the year to November 2019 – up from $4.28 billion during the previous year, according to the Bank of Tanzania’s latest monthly report.

Review of recent documents from the central bank indicates that transport and telecommunication dominated the use of the funds emanating from the external debt since 2014 but social welfare and education has so risen in the last two years and become second to replace budget support and energy and mining.

Tanzania is also implementing free education policy with the Minister in the President’s Office (Regional Administration and Local Government) Selemani Jafo saying recently that the government has spent Sh968 billion in the last four years.

“That means transport infrastructure like railways, roads, airports and of course the planes are still the priority of the government,” said a University of Dar es Salaam economics lecturer, Dr Abel Kinyondo.

“The emergence of social welfare and education is also a reflection of construction of massive dispensaries, health centres and extension of social protection programmes financed through the loans from the World Bank,” he said.

In 2000, the government of Tanzania, with support from the World Bank, created the Tanzania Social Action Fund (Tasaf) as part of a broader strategy to reduce poverty by stimulating local economies. Among other activities, Tasaf has funded community-run projects to build health clinics and schools, giving communities experience managing funds, hiring contractors, and monitoring projects.

Last year, the World Bank approved $450 million International Development Association (IDA) credit for the second Tasaf project which targets to improve livelihood of more than five million Tanzanians.

“All these loans for infrastructure development and social services improvement are good and important since they will empower people to work better. They will have good results. However, we need to have limits so that we do what we need the most,” added Dr Kinyondo.

Tanzania’s external debt stock - comprising of public and private sector – increased by 6.5 percent to $22.28 billion in the year ending November 30, 2019, according to the Bank of Tanzania’s monthly economic review for December.

The central government remained the main borrower, accounting for 78.8 percent of external debt stock while the private sector accounting for 20.8 per cent. Public corporations take the remaining 0.4 percent.

Other activities

Apart from transport and communication which increased its shareholding in the external debt stock from 22.4 per cent in 2018 to 26.6 per cent, social welfare and education also increased from 15.7 percent to 16.7 percent in the same period.

However, the actual amount went to social welfare and education increased from $3.0 billion to $3.45 billion.

The third major beneficiary was energy and mining although its share of the stock reduced from 15.7 percent to 14.8 percent. The actual amount slightly increased from $2.99 billion to $3.0 billion.

The amount spent on balance of payment and budget support remained the same at $2.7 billion for the last two years but the share slowed from 14.4 percent to 13.6 percent.

Other activities and their share percentage for the year ending November 2019 in brackets include agriculture (6.3 percent), real estate and construction (5.3 percent), finance and insurance (4.9 percent), industries (3.1 percent), tourism (0.8 percent) and others (7.8 percent).

In terms of creditors, the debt owed to multilateral institutions continued to account for the largest share, at 45.9 percent followed by debt from commercial sources at 34.9 percent.