ECONOMIC experts and other development stakeholders in the country have allayed public fears over the surging national debt saying that, there was nothing good or bad with the debt if the government took the loans and invested in various development projects that leads to economic stability. Speaking in an exclusive interview in different times this week in Dar es Salaam, they have noted that, if the government took the loan for consumptive expenditure which could not give a return to compensate the expense of national productive capacity, then that could lead to economic instability. “Taking loans is not a problem but to have an extravagant use of the money loaned is when the country might get into troubles” says Dr. Cyril Chami, former Minister for Trade and Industries adding that, in order to boost economy the government must invest in sustainable projects which are economically viable. Dr. Cyril who is an economist by profession is on the view of the fact that, as much as the nation continues borrowing money from outside financial sources, it has to make sure that it invests sustainably in projects which in return could enable the government earns money to pay the loan back. “If the borrowed monies have been invested in development expenditures the worries should be reduced compared to a scenario in which they are invested in recurrent expenditures’, he said. The former is expenditure on things like social and economic infrastructure that are likely to last long and be enjoyed by at least the next generation. The latter is investment on things like wages, salaries and consumables that do not benefit the coming generations as such. He targeted areas of investment potentials as infrastructure in roads, railways and energy sectors noting that, these are the key areas of economic development. However, he said that, the cheap availability of energy such as electricity would help boost industrial production whereas roads and railways would facilitate the communication and transportation of finished goods. Commenting over the matter, John Cheyo, an MP for Bariadi East under the ticket of UDP party has described a national debt on two aspects. He said that, the internal debt always disturbs national budget as there are numerous ministerial operational costs which are not recorded properly and on time, and instead these emerge later when the budget is passed. After that, it becomes difficult to find a possible solution unless the government has to borrow money to cover the gap. In view of this, he suggests that every ministry should list down own debts of the previous year prior to the preparations of the budget sessions in order to know how much has to be paid. According to him, the increased national debt often leads to economic instability in the country and this trend largely depends on the poor administration, a situation which he noted would lead the government to collapse if immediate measures are not taken to avoid the impending situation. “If it is necessary to borrow the money to cater for transportation infrastructure, energy, education and health so as to place a firm foundation of the economy”, he said adding that, this would later facilitate economic dynamism which helps the government to collect more revenues. However, he is on the view of the fact that, the government as a whole should change a mindset and direct the loaned money for investments where it think that is economically viable in terms of tax collection and where the infrastructures of the area concerned would stimulate all means of productions. “The national debt will only make sense if the money that is borrowed and thereby causing the swelling is used strategically”, he said adding that, part of the strategy would have been to use more of the borrowed money for development rather than for recurrent expenditure. Other worries on the swelling national debt include its sustainability. One wonders whether the country is able to pay when debt obligations mature. There are many and far-reaching negative implications if the country defaults on its debt obligations.
Former Minmister for Trade and Industries Dr. Cyril Chami.
Cornered for comment, an MP for Kigoma North constituency on CHADEMA ticket, who is also chairman of the Parliamentary Parastatal Organizations Accounts Committee (POAC), Zitto Kabwe, on Wednesday this week reiterated his call over the national debt and told The Guardian in an exclusive interview that, it’s upon the government to review its accounting transactions to verify their authenticity. “I have been calling for a special audit work to overlook at the matter but it’s very disappointing to note that, the Ministry of Finance has done nothing”, he said adding that, the national debt is a serious matter for it seems that, the government is spending more than what it earns. However, he noted that, giving an example of this year’s budget whereby the government estimates amounted to Sh. 15 trillions, the government set aside Sh. 1.9 trillion to repay its debt as this is the largest item which has to be given first priority followed by other things such as education, construction, health and other social facilities. However, the Minister for Finance, Dr. William Mgimwa was on Wednesday this week countered as saying that, the country was still creditworthy and that the country’s borrowing was still within acceptable matrices internationally. According to him, the levels of budget expenditure as well as domestic and external borrowing were at required levels according to conditions of the International Monetary Fund (IMF). “So far there are no signals to worry about for both external and domestic debts as all these comply with the IFM conditions that the government agreed upon. Making a justification he said that, Tanzania’s external debt stock stood at $ 10.59 billion as at the end of November 2012. This is an increase of $ 89.9 million and $ 582.1 million are the amount recorded at the end of the preceding month and corresponding period in 2011 respectively according to Bank of Tanzania. Borrowing is caused by the fact that expenditure is far more than revenues. In order to fill the revenue gap, the government has to borrow and therefore national debt becomes a normal matter as the goods and services are provided to the people. However, the cause of the fiscal deficit is what makes it necessary to borrow include low revenue collection for various genuine and none-genuine reasons. The national debt is also caused by bad expenditure of the collected revenues A fortnight ago, a Non-Governmental Organization (NGOs), known as Tanzania Coalition on Debt and Development (TCDD) warned the government over the rapid increase of national debt which it said threatened the national economic stability. According to the NGO, the current national debt now stands at Sh., 22 trillion out of which the external debt stood at $ 10.5 billion (15.9 trillion) and internal debt is $ 3.2 billion (5.1 trillion). The NGO claimed that it was no longer sustainable. The surging of the national debt means that, is likely to cause damage on the development. It means that since Tanzania has a population of 44.9 million people this means that, in average proportions every citizen in the country is owned to approximately Sh. 500,000. TCDD Executive Director Hebron Mwakaganda noted that the internal debt was increasing rapidly because the government has started borrowing from local commercial banks which changed higher interest rates all for paying salaries.
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