Manage domestic debt to stimulate growth

The CRDB Bank managing director, Dr Charles Kimei, speaks during a press conference at which he announced an increase in pretax profit to Sh108 billion in Dar es Salaam yesterday. With him is a Finance analyst, Prof Mohammed Warsame (centre) and a CRDB board member, Mr Ally Laay. PHOTO | FIDELIS  

News that the domestic debt stock is growing should be a cause for concern. Though nobody is asked to donate money for servicing such debts, the fact is, a swelling domestic debt has far-reaching and cross-cutting ramifications on the productive sector.

Recent data shows that the national debt has been increasing and for the year ending December 2012, it surged by 15.2 per cent to Sh21.03 trillion from Sh18.26 trillion in 2011.Out of the total national debt, the domestic debt was Sh5.1 trillion which also increased from Sh4.4 trillion a year before.

According to the Bank of Tanzania, the reasons for the growing domestic debt were mainly the issuance of government securities – Treasury bills and bonds - that outweighed maturing obligations as well as securitisation of an overhang of net domestic financing held at the Bank of Tanzania.

Treasury bills and bonds are risk-free debt instruments issued by the government through the central bank in exchange for lending it money and the main lenders are commercial banks and pension funds. They account for about 95 per cent of the domestic debt stock.

So, mounting domestic debt means that commercial banks are lending a lot of money to the government and affect the credit extended to the private sector in the form of personal loans, credit to agriculture, trade, manufacturing, transport, construction, hotels etc. For instance, as the domestic debt increased in the year ending December 2012, the credit to private sector also shrank to Sh1.3 trillion from Sh1.6 trillion a year before.

This represents a slowdown in the growth of private sector credit to 18.2 per cent from 27.2 percent recorded in 2011.

It means major economic activities mentioned earlier had no access to credit. It is with that note; we think that the government should control the rise of the domestic debt for the interest of the economy which is largely driven by small and medium-sized companies from the private sector.

Education should benefit us

Quality education is the pillar of national development, for it is through education that the nation obtains skilled manpower to serve in various economic sectors. It is through quality education Tanzania will be able to create a strong economy which can spur development and enable the country to adapt to changing market and technological conditions regionally and globally. It is thus important to ensure that pupils attend classes without fail and teachers do what is expected of them.

The Education ministry should ensure that children get proper education instead of leaving individual schools to start special schedules as is the case at Lukonga Primary School in Kilolo District, where pupils attend classes in shifts owing to a shortage of classrooms. The school does not have enough classrooms to accommodate pupils from nursery to Standard Five.

The school also does not have teachers’ houses, forcing them to walk about ten kilometres to and from school daily.

It will not be asking too much of the ministry and other education stakeholders to address these obstacles that hinder learning. It is issues such as these that are relatively easy to tackle that eventually lead to painfully poor performances in national examinations. A case in point is last year’s Form Four examination in which over 60 per cent of the candidates failed.