No need to uneasiness over the country’s debt

TANZANIA has continued in a right path economically, with percentage of growth going up year in year out.

Growth was driven by agriculture and services on the supply side and final consumption and investment on the demand side.

GDP growth was projected at 5.0 per cent and 5.6 per cent in 2022 and 2023, due to improved performance in tourism, the reopening of trade corridors and accelerated rollout of vaccines.

The major downside risks relate to new Covid-19 variants and associated disruptions to economic activity, but have since been mitigated by increased public awareness and uptake of vaccines.

The World Bank (WB) was quoted yesterday saying that Tanzania’s total debt, which entails public and guaranteed private sector, remains relatively low as a share of GDP.

WB report on Tanzania Economic Update Clean Water, Bright Future: The Transformative Impact of Investing in WASH (Water Supply, Sanitation and Hygiene) 2022 showed that Tanzania was at ‘moderate risk’ of external debt distress.

The report quoted the latest joint IMF-World Bank Debt Sustainability Analysis that found that the country’s debt was projected to rise from 39.7 per cent of GDP in 2021/22 to 42.4 per cent in 2022/23.

The government should be acknowledged for being able to maintain good policies and implement the election manifesto for development of its people.

Foreign borrowing has two potential benefits for a developing country. It can promote growth, and it can help an economy to adjust to internal and external shocks. There is no need to worry for the debt, although there are some people who use social networks to instill fear on people about the debt and unfounded risks regarding the debt.

Developing countries, including Tanzania can and actually have, obtained the benefits of capital inflows while taking reasonable precautions to avoid debt-servicing difficulties.

The extent to which a country should borrow from abroad depends on the external environment that it faces in world trade and capital markets, its natural and human resources and its economic and political structures. The debt service ratio has traditionally been regarded as a good guide to a country’s debt problem.

As the WB noted, the total debt increase to the financing needs of large development projects, which pushed the domestic debt stock to 10.9 billion US dollars, though remains modest at 29 per cent of total public debt and mostly, consists of government bonds, which accounts for 80 per cent.

Between August 2021 and August 2022, the public external debt stock rose by 0.6 per cent to 21.5 billion US dollars, while the private external debt stock rose by 30.6 per cent to 6.0 billion US dollars.

Multilateral creditors, bilateral creditors and export credits compose almost 70 per cent of the external debt, while commercial loans account for the remaining 29 per cent. The government should be supported in its policies and implementation of its strategies for development of the country and prosperity of its people.