Exchange rate balloons national debt up

Dr Masawe speaking in one of the money-market seminars
Bank of Tanzania (BoT) has said the national debt is sustainable despite ballooning to 12.53billion US dollar, pushing up mainly by exchange rate fluctuations.

In October, the national debt stock increased by 186.4million US dollar (298.24bn/) in a single month, blaming exchange rate fluctuating and new disbursements.

BoT data show that national debt stock ballooned to 12.53bilion US dollar (20.05trn/-) in last October alone when the exchange rate reached historical higher level of 1,840/- per greenback.

However, the central bank said, despite the number to look huge, the debt is sustainable while is only 15 per cent of the Gross Domestic Product (GDP) net present value.

BoT’s Director of Economic Research and Policy Dr Joe Masawe told the Daily News that the debt sustainability analysis shows the government borrowing level is far from the threshold pegging against the GDP.

“The debt is very sustainable because we are far from debt to GDP threshold which is 50 per cent,” Dr Masawe said yesterday over the phone.

The Director added that the low-level does not mean the country will continue to borrow blindly but carefully to only projects which are viable with good rate of returns to social welfare.

 “IMF has permitted us to borrow form non-concessional sources as our debt is still sustainable, but fund will be directed to the projects that have good returns,” Dr Masawe said.

Economists are not against borrowing as long as the fund is investment wisely in development projects like hospitals, schools and infrastructure rather than in recurrent expenditures.

If the national debt were to be distributed to fairly among Tanzanians, each would have to pay the lenders some 455,555/-.

According to BoT last November’s Monthly Economic Review, out of the total debt stock, external debt accounted for 80.2 per cent while domestic debt accounted for 19.8 percent.

During the period under corresponding, external debt stock increased by 152.7 million US Dollar (244.32bn/-) to 10.05 billion US dollar (16.08trn/-), with disbursed outstanding debt accounting for 82.2 per cent and the balance was interest arrears.

The stock of domestic debt stood at 4.12trn/-, an increase of 111.6bn/- over the amount registered at the end of previous month. Government bonds continue to account for the largest share of domestic debt followed by Treasury bills

Commercial banks remained the leading investors in government securities, holding about 48 per cent of total domestic debt.

Other investors in government securities include BoT that accounted for 24.9 per cent, pension funds holding 17.5 per cent, insurance 5.4 per cent, non-bank financial institutions 2.2 per cent, BoT Special Funds (1.3 percent), Other Official Entities (OOE) 0.6 per cent, and private sector 0.4 percent.

Source: The Daily News reported by Abduel Elinaza
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