4 June 2012

Tanzania: Nation's External Debt Now At U.S.$9,788 Million

Dar es Salaam — The external debt stock in Tanzania has doubled to $9,788.7 m (Tsh15.6t) when compared to the $4,456m (Tsh 7.12t) recorded soon after implementation of Multilateral Debt Relief Initiative (MDRI) mid 2006.

"The increase in the period under review has partly been due to accumulation of interest arrears on unserviced bilateral debt," The Bank of Tanzania (BoT) report on Monthly Economic Review for March this year has revealed.

The BoT report said out of external debt stock 85.2 % was disbursed outstanding debt (DOD) and 14.8 % interest arrears.

According to the report, the ratios to GDP of a total external debt and public guaranteed debt made to rise to 40.9 % and 33.4 % from 31.1 % and 23.8 % respectively. The central bank report shows an increase of $ 73.7 m (Tsh 117.9b) which is equivalent to 0.8% and $820m (Tsh1.31t) (9.1) to the total external debt over the amount recorded at the end of January this year and the corresponding period in 2011.

Interest arrears are due to unserviced bilateral debt mainly from Iran, Iraq and Japan, which are yet to provide relief, and unreported, interest payments on private sector debt. Other countries for which debt is not serviced include Brazil, Angola, Zambia, China, India, Egypt and Unit Arab Emirates.

The currency composition of outstanding external debt shows that Special Drawing Rights (SDR) was leading currency accounting for 49 % of external debt.

However, after decomposition of SDR and Africa Unit of Account (AUA) into their basket currencies USD became predominant currency at 50.4 % followed by Euro which accounted for 25.1 %.

As of February 2012, external debt disbursed amounted to $ 62.8m (Tsh 100.5 b), while external debt service amounted to $ 9.7 m (Tsh 15.5b) of which $ 3.1 m (Tsh4.9b) was principal and $ 6.6 m (Tsh10.56b) interest payments.

The amount of debt serviced was about 1.6 % from export of goods and services. The BoT report also showed that, the stock of domestic debt declining slightly by $5.62 m (Tsh 8.9b) to $2.58 b (Tsh 4.09 t) due to small issuance of Treasury bills compared to matured obligations.

Government bonds continued to be predominant instruments in domestic debt portfolio, accounting for 73.3 % followed by Treasury bills with commercial banks remaining leading investors holding 46.7 % followed by BoT and Pension funds.

Analysis of domestic debt holding by tenure showed that commercial banks dominated in both long term and short term debts accounting for 41.2 % and 68.9 % respectively. The supremacy of commercial banks in long term debt, in particular, is a reflection of narrow investor base.

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