What government is doing to ensure national debt sustainability

BoT Governor Emmanuel Tutuba.

What you need to know:

  • The government says it is taking measures to spur the recovery of tourism and other economic activities, and revitalise the country's ability to services its debts

Dar es Salaam. The government said yesterday that it was taking several measures in efforts to ensure Tanzania’s debt remained sustainable.

Treasury permanent secretary Emmanuel Tutuba told The Citizen that with the ongoing Covid-19 vaccinations, the government remained optimistic that the tourism sector and other economic activities were on the right track to recovery.

This, he said, that would bring new vigour in the country’s debt repayment ability and thus bringing it back to moderate levels.

The World Bank said in its 17th Tanzania Economic Update, that a joint IMF-World Bank Debt Sustainability Analysis (DSA) that was conducted in September 2021, concluded that Tanzania’s risk of external debt distress had increased from low to moderate.

This, the World Bank said, primarily reflected the collapse of tourism exports during the Covid-19 pandemic in a context of increased non-concessional borrowing and rising debt service.

“The results of the analysis underscore the importance of boosting revenue mobilisation and maximising concessional borrowing.

In its 17th Tanzania Economic Update, the World Bank issued several recommendations for Tanzania to do in order to ensure that the debt distress level did not rise to high distress levels. The measures include: improving public investment management and proceeding only with investment projects that offered clear socioeconomic payoffs and enhancing the coverage and transparency of public-sector debt statistics among others.

Mr Tutuba said with the ongoing nationwide Covid-19 jab programme, the situation today was significantly better than at a time like this last year.

“Vaccines have boosted hopes for recovery of the tourism sector and other economic activities,” he said.

In its January 2022 Monthly Economic Review, the Bank of Tanzania said the country’s tourism sector – which was seriously affected by travel restrictions – was on the right track to recovery.

Tourist arrivals jumped by 48 percent to 918,603 for the entire 2021 calendar year. As a result, earnings from hospitality rose to a 12-month high of $1.396 billion from $714.5 million recorded in the corresponding period in 2020.

A rise in these receipts coupled with an increase in exports of manufactured goods – particularly sisal, tobacco, horticultural and fish products – boosted the performance of Tanzania’s external sectors, with total exports of goods and services increasing to $9.81 billion in the year ending December 2021 from $8.55 billion in 2020.

Mr Tutuba said in efforts to improve the balance of payment, the government was also working hard to cut imports and create an environment that would see the rise in exports of products like minerals and traditional goods.

Economists remained optimistic that with the ongoing efforts of improving the business climate, it was a matter of time before the economic growth rate – currently being projected to hover around the region of 4.5 percent and 5.5 percent in 2022 – comes back to its usual six percent in the near future.

“President Samia Suluhu Hassan understands that we are an interconnected world and there is a comparative advantage that we can enjoy for being part of it. It is my view that the future remains bright,” said University of Dar es Salaam Economics professor Humphrey Moshi.

The coming of more investors, along with the ongoing implementation of mega infrastructure projects, will result in the broadening of the tax base and thus allowing the country to collect enough to service its debts and for future development endeavours.

The country, he said, should come up with measures that will ensure that it cushions the economy against the negative impacts of the ongoing Russia-Ukraine war.

Another economist, Dr Donath Olomi said: “We need to scale up the use of PPP (Public-Private Partnership) arrangement instead of too much reliance on loans.