CONTROLLER and Auditor General (CAG) yesterday warned the government against escalating national debt, cautioning that the 41tri/- liability could double in the next five years.
The CAG, Professor Mussa Assad, said the
public debt has soared in recent years, attributing the rise to
increased borrowing to fund the national budget and development projects
that are necessary to improve the country’s economy.
“At the current 20 per cent growth rate
of the public debt, it is likely to double in five years,” cautioned
Prof Assad yesterday soon after his audit report for the 2015/16 fiscal
year was tabled in Parliament.
The CAG argued that the continuous
upward growth in the public debt could lead the country to unsustainable
debt burden in the long-run and called for the government to device
measures to retard the debt growth. He proposed increased revenue
collections from domestic sources and improved capacity to service
future debt obligations.
“The government should avoid extremely
high interest loans and at the same time attain relatively high growth
rates compared to historical averages,” Prof Assad recommended, saying
the government should also consider retiring a proportion of maturing
debt, instead of continuously rolling over the amount at maturity.
According to Prof Assad, the proportion of commercial credits and
export- import credits moved from nine and three per cent to 15 and 16
per cent, respectively in 2015/16 as compared to the 2011/12 financial
year.
“In absolute terms, external debt rose
by 140 per cent from 12.4tri/- in 2011/12 to 29.8tri/- in 2015/16. Such a
sharp increase is explained by the contraction of concessional loans
from the multilateral/international organisations and bilateral
creditors,” noted Prof Assad.
While international organisations
claimed 66 per cent of the External Debt Stock as of June 30, 2012, the
figure dropped to 56 per cent at the end of 2015/16 financial year, the
CAG report showed.
The proportion of bilateral credit as
well declined from 22 per cent to 13 over the same period, with Prof
Assad noting that the trend was compelling the government to go for
non-concessional loans, as the only available alternatives, to finance
the national budget.
The CAG also raised concerns over the
high debt service cost in relation to the government’s internal revenue
collections, revealing that over 3.85tri/- was used to service the debt,
including principal repayments, interest and other payments,
only this year. “With such significant
proportion of resources being directed to debt servicing, the government
will continue to rely on borrowings to fund the national budget and
development projects,” warned Prof Assad. He said the reliance was
raising domestic and external non-concessional borrowings, including
commercial credits and export-import credits in the public debt
portfolio, especially when internal revenues are not seriously
mobilised.
The CAG advised: “Although
non-concessional debts are expensive and domestic borrowings less risky
in terms of vulnerability to unfavourable movements in foreign exchange
rate, there is still a need to strike a balance between the two.”
On domestic debt portfolio, Prof Assad
said the total debt was 11.9tri/-, out of which 1.44tri/-, which rose to
1.45tri/- in 2015, were government securities held by the central bank
under long term basis.
“This is contrary to the requirements of
the Bank of Tanzania (BoT) Act, 2006,” noted Prof Assad. He explained
that the BoT Act provides for the bank to purchase, hold and sell
Treasury Bills, negotiable stocks, bonds or similar debt obligations or
other securities issued by the government which shall bear interest at
the market rate as determined by the bank and which matures not later
than twelve months from the date of issue.
“I call on the government to prepare a
workable plan to phase out existing long term liabilities with the BoT,”
he said, adding that the government should also abandon long term
borrowings from the central bank to adhere to both BoT Act and East
African Monetary Union Protocol
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