Magufuli says Tanzania will continue borrowing despite high debt concerns

pic magufuli

Tanzania's President John Magufuli. FILE PHOTO | NMG

Tanzania will keep borrowing to finance its mega infrastructure projects, President John Magufuli has declared, dismissing arguments that the national debt would soon be unmanageable.

“Tanzania still has room for further borrowing…What matters are the projects into which we invest the borrowed money,” Dr Magufuli said.

He was responding to some issues raised by the Controller and Auditor General (CAG) Prof Mussa Assad who cautioned that the skyrocketing national debt would soon be out of hand.

Presenting the audit report for the 2016/17 financial year, Prof Assad said the liability – which stood at TSh41 trillion (KSh1.8 trillion) during the 2015/16 financial year - rose to TSh46 trillion (KSh2 trillion) as of 2016/17 financial year.

This, he said, was raising doubts that the debt was increasing speedily and that if left unchecked, it would see Tanzania plunging into a debt stress.

But in a rejoinder, the head of state said Tanzania’s debt, measured by all sustainability factors, remained very sustainable and that the country still had room for further borrowing.

“I know of countries which have debts of more than three times of our gross domestic product (GDP),” he said, insisting that the most important thing is the management of the borrowed money and specific projects into which the money is injected.

Prof Delfin Rwegasira of the University of Dar es Salaam shared President Magufuli’s sentiments, insisting that the national debt was still sustainable.

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Debt sustainability

He said the sustainability of the national debt was being analysed by the International Monetary Fund (IMF) in close cooperation with the Bank of Tanzania (BoT) and the ministry of Finance and Planning through the Debt Sustainability Analysis (DSA).

“As far as I know the latest figures that we have from the IMF are that Tanzania’s debt is very sustainable and the President was right,” Prof Rwegasira told The Citizen by phone. Some of the factors being used in the DSA include the debt as a percentage of the country’s GDP and the country’s ability to repay the loan.

The IMF is expected to conduct another DSA for Tanzania this year, but a similar exercise, conducted in 2016, showed that Tanzania’s risk of debt distress was low compared to benchmark level of 56 per cent of GDP.

The Finance and Planning minister, Dr Phillip Mpango said last November that Tanzania’s debt was barely 31.2 per cent of the country’s GDP as of July 2017.

Speaking on Wednesday President Magufuli said since the borrowed money was being invested in construction of mega infrastructure projects like standard gauge railway line and electricity generation like the Stiegler’s Gorge, it would only result into boosting the country’s ability to repay.

“In fact, some lenders are now offering even better terms….They have started coming back after realising that we are serious about implementing the projects with our own funds,” said Dr Magufuli.

He said the country already had enough funds for the Standard Gauge Railway line and the Stiegler’s Gorge projects and that the loans being entered into will only boost the available resources.