Dar es Salaam. As debate on the national debt rages on, the government has urged Tanzanians to consider three key issues relating to the matter.
They are the significance of loans, how the money is used to finance projects, and the value for money of the projects.
Finance and Planning minister Mwigulu Nchemba made the remarks yesterday following concerns about the ballooning in the last six years of the national debt, which currently stands at Sh78 trillion.
Speaking when briefing the media on the development of the finance sector in the past 60 years, Dr Nchemba said to a large extent borrowed funds were used to implement major strategic and development projects.
“So, when people speak of the national debt, they should also think about what has actually been done. For instance, we borrowed a significant sum from social security funds to build the University of Dodoma, a big institution accommodating over 40,000 higher learning students,” he said.
“People should also assess the sectors that these borrowed funds go to. Are they worth it? A project such as the standard gauge railway cannot be financed by our monthly tax collections alone. It would take years to complete.
“You should also not use this topic to paint a bad picture about a certain regime, because some of these loans take time to mature. For example, some loan applications from the 4th phase administration matured in the 5th phase. The same has also happened during this phase,” he added.
The debate on the rising national debt resurfaced on Monday during debate in Parliament on the national development plan for the year 2022/2023, when Mtama MP Nape Nnauye called for a special audit of the national debt accounts.
“There should be transparency on where the money was borrowed, how it was used, its value and the projects we were told are being implemented using the cash,” he said.
Prominent opposition politician and leader of ACT-Wazalendo party Zitto Kabwe supported Mr Nnauye’s suggestion, saying that because the previous administration told the public that projects were implemented by domestic funds, then why is there a surge in the debt?
Yesterday after Dr Nchemba revealed how the government spent the loan funds, Mr Kabwe said if the funds were used for development purposes, then there would be no hurdles to the Controller Auditor General (CAG) auditing the accounts.
“Mr Minister, explanations are okay. But, let him ask the CAG to conduct a special audit on the national debt so that the public can know exactly where, when, how and for what we took all these loans,” he told The Citizen.
Mr Kabwe also said that the proposed audit is significant because there is now huge pressure on debt servicing with nearly 50 percent of the monthly revenues collected being used to service both domestic and external loans.
However, according to the minister’s statements, the government has been maintaining the national debt at resilient levels - and, at the same time, reducing dependency on grants and loans.
Dr Nchemba also highlighted the government’s efforts to transform the key economic sectors so as to increase productivity and spur economic growth.
This, he said, would help Tanzania improve in its status from a low-middle income country to an upper-middle income country.
“Targets will be in sectors such as agriculture where use of improved seeds, fertilisers, machinery and advanced farming techniques is promoted - and also in business, private sector and entrepreneurship,” he said.
Banking industry
On this key segment of the finance sector, the minister said that, regardless of the major development made in the banking sector during the past 60 years, access to credit facilities is still a challenge.
“Financial services have been widespread, with the presence of physical branches, agency banking, and mobile banking even in remote areas. However, more efforts are needed to facilitate credit access, especially for the productive sectors of the economy,” Dr Nchemba said.
According to the Bank of Tanzania (BoT), personal loans continued to account for the largest share (nearly 20 percent) of credit extended to the private sector, followed by trade, manufacturing and agriculture.
The minister said that “the government plans to transform the sector and make sure that more loans are extended to other sectors, which would eventually translate into economic growth by multiplier effect.”
In September 2021, BoT stated that private sector credit’s annual growth slightly improved to 4.6 percent, up from 3.2 percent in the preceding month.
The improvement - according to the central bank - was the result of the measures rolled out by BoT in July 2021, as well as recovery of the economy from the Covid-19 pandemic.
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