TANZANIA: TANZANIA is one of the few countries in Africa with high credit ratings that help in accessing credit from global financial markets and attracting foreign investments.
The Deputy Permanent Secretary in the Ministry of Finance Mr Elijah Mwandumbya said on Wednesday that the country’s good credit rating has been provided by the international credit rating agencies of Moody’s and Fitch.
“We are grateful that Tanzania is one of the few countries that is creditworthy and can continue enjoying access to credit from global lenders,” Mwandumbya said.
The Deputy PS who represented the Finance Minister, Dr Mwigulu Nchemba, was speaking during the 56th session of the Economic Commission for Africa and Conference of African Ministers of Finance, Planning and Economic Development taking place in Zimbabwe.
Moody’s credit rating for Tanzania was last set at B2 with a positive outlook, while Fitch’s credit rating was last reported at B+ with stable outlook last year.
Fitch Ratings affirmed Tanzania’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Stable Outlook in December last year reflecting the country’s relatively strong macroeconomic performance with high real GDP growth, low inflation and a moderate level of debt, underpinned by increased reform momentum backed by an IMF programme.
Fitch expected real GDP growth to rise to 5.0 per cent in 2023 and 5.5 per cent in 2024, from 4.7 per cent in 2022, supported by increased agriculture, mining and tourism activity, as well as infrastructure investment.
In the long term, real GDP growth will benefit from the development of offshore gas fields and LNG production. The Bank of Tanzania estimates the growth rate to reach around 5 per cent in 2023, despite external shocks characterised by high inflation, geopolitical tension, tightened financial conditions and climate-related challenges.
Credit ratings are also essential for lenders, borrowing companies, and entities considering investments in equity shares or bonds of borrowing firms.
In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the creditworthiness of Tanzania thus having a big impact on the country’s borrowing costs.
According to Bank of Tanzania (BoT)’s monthly economic review for January this year the national debt comprising public (domestic and external) and private sector external debt, amounted to 41,782.6 million US dollars an increase of 0.73 per cent from the level recorded at the end of December last year.
The external debt stock including public and private recorded a monthly increase of 0.3 per cent to 29,541.7 million US dollars at the end of December last year.
Of this amount, the external debt owed to the central government was 22,550.9 million US dollars accounting for 76.3 per cent of the external debt stock. The external debt disbursements during the month under review amounted to 96.0 million US dollars and were mainly to the central government.
The total external debt service payments amounted to 54.6 million US dollars. The deputy PS noted that debt burdens of many African countries were growing due to an increase in global exchange rates and interest rates, a situation which lowers the value of local currencies.
“Initially, the growth of debt was in line with borrowing but now it is clear that there is another reason that contributed to the increase in the debt level including the great changes in global exchange rates and interest, thus making African countries to find an alternative way to solve that challenge,” he said.
In addition, he said the depreciation of the local currency against the US dollar in African countries was leading in high interest rates thus affecting debt servicing.
Meanwhile, he said Finance Ministers for African countries have agreed to ensure they collect and utilise existing resources effectively as well as maximising the use of technology to boost tax revenue collection.
The deputy PS remarked on the same day after the end of the 56thsession of United Nations Economic Commission for Africa (UNECA).
“We (Ministers) have agreed with a common voice to ensure that we improve the laws, regulations and management of our revenue collection institutions to ensure that we increase more revenue from our sources, since access to external resources through loans and aid has been a big challenge,” Mwandumbya stated.
He added that during the meeting various strategies have been put in place that will help build the capacity of existing institutions in African countries to have a strong ability to achieve the goals of the respective countries.
The 56th session of the Economic Commission for Africa was opened by President of Zimbabwe Emmerson Mnangagwa last Sunday who also called upon for innovative, green investment strategies to foster Africa’s economic growth.
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