East Africa's debt rises by $10b, stoking fears over repayment

East Africa’s debt rose by over $10.4 billion last year, as countries ramped up spending on key infrastructure projects. SOURCE | RESPECTIVE COUNTRIES CENTRAL BANK DATA  

In Summary

• Countries ramped up spending on key infrastructure projects, amid concerns about repayment capability.
• Kenya led its EAC peers in the debt accumulation, packing up $7 billion, while Tanzania took up $2.05 billion.
• In Uganda, the government has revealed that its national debt has nearly trebled in the past three years to more than 50 per cent of GDP.

By ALLAN OLINGO
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The region’s debt rose by over $10.4 billion last year, as countries ramped up spending on key infrastructure projects, amid concerns about repayment capability.

Kenya led its EAC peers in the debt accumulation, packing up $7 billion, while Tanzania took up $2.05 billion. However, both governments have assured their citizens that things are under control.

Tanzania’s President John Magufuli on Monday said the government was far from debt distress. He was responding to a warning by the controller and Auditor-General against over-borrowing.

“The skyrocketing national debt is a source of concern. This rise in debt, if left unchecked, would go out of hand, plunging us into debt distress,” Prof Mussa Assad had warned.

But President Magufuli is confident that the projects his administration is undertaking will generate enough revenues to repay the debts.

“We still have room for further borrowing…. The most important thing is how we will manage these borrowed funds to ensure that the projects they are invested in are able to generate enough to repay the debt,” the president said.

Tanzania’s debt stock

Tanzania’s external debt stock stood at $19.41 billion at the end of January, an increase of $67.7 million from December 2017.

The increase was mainly on account of new disbursements. In January alone, Tanzania paid out $200 million in interest out of the outstanding $1.05 billion.

Dar es Salaam also recorded a $2.6 billion cumulative debt fall due during the year ending January 2018, out of $2.199 billion that was rolled over, and the balance was paid out of government resources.

Data from the Bank of Tanzania shows that the country’s stock of domestic debt, including overdraft, rose to $6.1 billion at the end of January, an increase of $778.4 million from the end of January 2017.

Most of the outstanding domestic debt stock was long-term, in the form of bonds and stocks. This portion accounted for 67.5 per cent of the stock, higher than 67.1 per cent and 66 per cent of the debt stock at the end of December 2017 and January 2018.

“This development augurs well with the medium- term debt management strategy, which entails lengthening maturity profile of domestic debt in the endeavour to mitigate refinancing risk,” BoT said.