Experts react to Ndugai's remarks on borrowing

Dar es Salaam. Economists yesterday reacted to Speaker of the National Assembly Job Ndugai’s concerns on the growing national debt, arguing the country cannot rely the mechanism to tryly support its grand strategic infrastructure projects.

He instead suggested increased internal revenue collections through various charges like ones on mobile money charges.

Countering his argument, the experts noted that excessive charges could lead to high inflation and so economic hardships for Tanzanians.

Mr Ndugai’s concerns went viral yesterday after a video showing him criticising the government borrowing trend, saying it was unhealthy.

He cited an example of Sh1.3 trillion grant [sic] which he said had contributed to the swelling of the national debt. The Speaker said the same government was financing school and health infrastructure projects using the country’s own charges and levies.

“Is it proper for us Tanzanians to continue borrowing and increasing the national debt which currently stands at about Sh70 trillion or are we going to agree to carry the burden ourselves?” he wondered.

“Should we continue borrowing and singing praises once we get the loans or should we continue charging levies whether the people are ready or not but the end goal being we build our own infrastructure using our own money?” he questioned.

Adding a bit of politics, Mr Ndugai wondered whether come the year 2025, Tanzanians would still decide to go leaders that were in favour of borrowing or those that want to use domestic revenues for projects.

Reacting, University of Dar es Salaam economist Abel Kinyondo said public finance did not work the way the Speaker had put it, because the government had several options including internal revenues, taxes, charges as well as concessional loans and grants to finance its projects.

“Going for loans is not a problem especially if it’s taken through legitimate procedures. All governments globally--in developed and developing countries--do borrow for strategic projects and Tanzania is no exception,” said Dr Kinyondo.

According to him, Tanzania cannot afford to see borrowing to service its strategic projects as a problem; it can only be a problem if the borrowing was for recurrent expenditure.

Explaining, he said borrowing for projects like the standard gauge railway was an investment with benefits that outweighed the repayment pains.

“If we rely on charges and levies, it will be an additional burden to the people that will remove money from the circulation and hurt the economy,” he said.

He stressed that money gleaned from charges and levies was very minimal and could not afford to fund the grand strategic projects.

For his part, independent economist Christopher Makombe said charges and levies alone cannot support big infrastructure projects.

According to him, putting up excessive charges on the people could lead to high inflation and economic hardships for the people. “The government should continue borrowing from international markets where the repayment period is long term and interest rates affordable,” he said.

Renowned economist Samuel Wangwe said what was important was to ensure that the loans were sustainable. “It’s imperative the government expertly analyzed to understand whether Tanzanians were ready to see projects go at a snail pace if financed through charges and levies and also to know whether the money could complete the projects on time or not,” said Prof Wangwe.

President Samia Suluhu Hassan yesterday stressed that Tanzania will continue borrowing for strategic projects.

“When you borrow, you quickly implement the development projects compared with using little money we have. We must continue borrowing,” she said after witnessing the signing of a contract to build a section of the standard gauge railway.