Be wary of non-concessional loans, budget committee tells the government

Dodoma. Parliamentary budget committee on Saturday, February 2, 2019 cautioned the government against falling into a debt trap, saying non-concessional loan that it (government) opted for, isn’t healthy for the country’s development.

Reports show that, faced with their own debt and political problems donors have become less keen to provide grants.

However, the committee’s chairman George Simbachawene said it was not healthy for the government to opt for non-concessional loans.

The debt burden of the country was likely to increase as the hard terms on non-concessional borrowing entails higher interest rate.

 Until November 2018, the National debt, which the government said is sustainable, amounted to Sh61.8 trillion.

Mr Simbachawene said the government has opted for non concessional loans due to hardship in availability of concessional loans.

“The increase of concessional loan would bring no good, but rather exacerbate debt sustainability problem,” cautioned the government.

He warned that continuous borrowing in form of non concessional loan could lead to the lion's share of locally sourced funds to be spent for servicing the debt.

As it happens, it would affect the government's ability to finance development projects using locally sourced funds.

Last year, Finance and Planning minister Philip Mpango said in 2018/19 financial year that the government would spend Sh10 trillion of Sh22 trillion locally sourced funds on financing the debt.

During the period  under review, some Sh32.5 trillion is set to be garnered and spent with the Tanzania Revenue Authority (TRA) facing a daunting tax of collecting Sh18 trillion.