27 December 2012

Tanzania: No Panic As Local Debt Hits Sh20 Trillion

Photo: futuradosmil/Flickr
Tanzania Currency: Government cautioned against borrowing from local commercial banks.

THE national debt exceeded 20trillion at the end of October this year but Finance Minister Dr William Mgimwa says there is no reason to panic since the bigger portion of the money has been invested in energy and water projects.

Dr Mgimwa told 'Daily News' in a telephone interview that during the past one year the government invested heavily in infrastructure in order to increase productivity and stimulate the economy.

"It should be noted that it was during the period that we received a loan of about one trillion shillings from China to construct a natural gas pipeline from Mtwara to Dar es Salaam," he explained.

Adding: "Once the project is completed we will be able to generate more power and at lower cost. Generating power using heavy furnace oil is about 40 US dollar cents per kilowatt while with natural gas it is just 10 cents."

The multi-million project, envisaged to be completed within the next 18 months, is expected to address shortages of electricity in the country. "We also received 178.2 million dollars recently for implementation of a water project in Ruvu and thus there is no need to worry on the size of the loans.

We should focus on the changes that they will bring about," the minister said. The monthly economic review for November issued by the Bank of Tanzania (BoT) recently showed that the national external debt stock at the end of October, this year, stood at 10.5 billion dollars (approximately 15.7trl).

It said the amount was an increase of 27.1 million dollars and 456.1 million dollars over the amount recorded at the end of September and corresponding period in 2011 respectively. The central bank attributed the month- to-month increase to new disbursements.

Out of the external debt stock 85.7 per cent was disbursed outstanding debt and 14.3 per cent was interest arrears. During October this year, new loans worth 40.3 million dollars were contracted and recorded through which external debt disbursements amounted to 39.1 million dollars and of which 38.3 million dollars was received by the government.

External debt service during the month amounted to 19.7 million dollars, out of which 11.2 million dollars was principal repayments and 8.4 million dollars interest payment. On the other hand, the central bank indicated in the monthly economic report that the stock of domestic debt had increased by 513bn/- to 5.13trl/- at the end of October 2012 compared to 4,624.7 billion registered at the end of the preceding month.

The increase was mainly on account of conversion of short term advances that had accumulated to 469.5bn/- into a special bond, the bank explained. On annual basis, domestic debt stock increased by 1.05trl/- from 4.08trl/- recorded in the corresponding period last year. Domestic debt issued during the month amounted to 134.7bn/- , out of which, 48.7bn/- was treasury bills and 86bn/- treasury bonds.

Copyright © 2012 Tanzania Daily News. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.