Hebron Mwakagenda, TCDD Executive Director
Following a vast increase of internal debts which stands at 6.8 trillion, the Tanzania Coalition on Debt and Development (TCDD) has alerted the government over the negative impact of the debt to the society.
The Tanzania Coalition on Debt and Development (TCDD) told media in Dar es Salaam yesterday that the internal debt has rapidly increased at high percentage of 470 from Sh. 811.18 billion in September 2002 up to Sh. 4624.78 billion in September 2012.
The current national debt is Sh 27.04 trillions of which the external debt is sh 20.23 trillion and internal debt is sh.6.81 trillion.
The ‘2013 Internal debt research’ launched by TCDD in Dar es Salaam yesterday states that although the external debt is big compared to internal debt the internal debt has a maximum cost to the government in terms of its interest liabilities.
The report shows that the interest in internal debt is much higher compared to external obligations, while the duration period of internal debt is short.
TCDD is a coalition of civil society organizations (CSOs) dedicated to undertake advocacy activities on policy, budget, debt cancellation, poverty eradication and sustainable human development.
TCDD Executive Director Hebron Mwakagenda explained that the internal debt is rapidly increasing because the government has started to take loans from local commercial banks which have high interestcharges, with some of the money used for paying civil servants’ salaries.
Most of the burden of those payments is placed on the national budget, which is an indicator that the burden of internal debt is heavy compared to external debts.
Institutions holding the internal debt are banks which up to September 2012 held 73 per cent of all internal debt, with commercial banks possessing 52 per cent of the debt and the Bank of Tanzania (BoT) 21 per cent.
TCDD also alerted the government over the huge increase of borrowing from the public organizations which at the end the load of debt is taken by the government.
Statistics show that in 2009/10 there was much increase of borrowing from public organizations, believed to be caused by the global economic crisis.
The report warned that there are dangerous signs that indicate the increase of internal debts due to the failure of public organization in respecting the cost procedures which the government incurs due to interests of the debt they hold.
TCDD proposed that the new constitution should put a debt ceiling and should indicate amount limitation for the government to borrow, and that the borrowing permission should come from Parliament.
In the past Tanzania had accumulated large debts which forced the country to seek debt cancellation, “thus it is sad to see current debts are bigger than the level for which debt relief was sought,” the director intoned.
Historically, from 2002 to 2012, the country’s government debt to GDP averaged 50.94 percent, reaching an all time high of 66.6 percent in December 2002, and a record low of 35 percent in December 2008.
As of June 30, 2012, the total outstanding public debt stock was Sh16, 975.9 billion, comprising Sh12, 430.068 billion (73 per cent) external and Sh4, 545.9 billion (27 per cent) domestic debts.
Generally, government debt as percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting the country’s borrowing costs and government bond yields, the NGO noted.
SOURCE: THE GUARDIAN
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