Govt debunks fears of national debt disaster

DAR ES SALAAM: TANZANIA is comparatively at a lower risk of debt distress than many other countries in the world, despite domestic concerns on the rising debt, stakeholders have said.

Speaking during the symposium on Public-Private Partnerships (PPPs) aimed at advancing the goals of Tanzania’s Vision 2050 held at the University of Dar es Salaam (UDSM), the Executive Director of PPP Centre, Mr David Kafulila said debt sustainability assessments using various benchmarks show that Tanzania’s national debt is still sustainable.

Mr Kafulila noted that the global debt has been on an upward trend in recent years due to the Covid-19 pandemic and other shocks to the world economy.

“Covid-19 disrupted global supply chains and created the need for more loans to rescue many countries,” he said in the dialogue attended by public-private sector actors and members of the academia.

“It’s important to understand that the global economy is debt financed. Global credit rating agencies have ranked Tanzania’s credit rating the highest in East Africa and better than many countries in sub-Saharan Africa, making it increasingly attractive for loans,” Mr Kafulila added.

He further said that alternative infrastructure financing models, such as PPP, will be used by the government to cut reliance on tax revenue and loans to finance development projects.

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Mr Kafulila stressed that Tanzania has a more favourable debt-to-GDP ratio, a financial metric that compares a country’s public debt to its gross domestic product, indicating the nation’s ability to repay its debts.

Citing the International Monetary Fund (IMF) report of October 2024, Mr Kafulila noted that most global economies are debt-driven, with the average public debt standing at over 90 per cent of national Gross Domestic Product (GDP).

He said while in Africa public debt average over 67 per cent, Tanzania’s debt-to-GDP ratio stands at a comparatively sustainable 47 per cent, lower than Kenya (70 per cent), Rwanda (71 per cent), Malawi (84 per cent) and Ghana (90 per cent).

“This shows the urgent need for changes and investment that cannot be met by taxation or borrowing alone. We need alternative financing, massive investment to be able to build the nation, and PPP is the solution,” he noted.

Former UDSM Vice-Chancellor, Professor Rwekaza Mukandala described PPPs as a proven approach for developing countries to promote sustainable development, economic growth and improved social services.

“A PPP is like a double-edged sword, it can bring great results if used wisely, but it must be managed carefully to protect public interest,” said Prof Mukandala.

He reiterated that the main objective of the forum was to build strategic awareness around the value of public-private collaboration in implementing Vision 2050.

An economist at the UDSM, Professor Abel Kinyondo pointed out that one of the main challenges in PPPs is the difference in priorities between the public and private sectors.

“The private sector aims to maximise profits, while the government focuses on delivering efficient services to its citizens,” he said.

He added that PPP will succeed only if there is transparency and good governance. He urged those entrusted with government to be true patriots, insisting that PPP does not automatically bring benefits without good governance.

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Dr Kafigi Jeje from the Institute of Accountancy Arusha (IAA) encouraged Local Government Authorities (LGAs) to adopt PPP models by designing projects suitable for collaboration. He noted that such initiatives can ease pressure on the national government and improve service delivery at the grassroots level.

He called on the PPP Centre to increase education and awareness efforts so that councils and municipalities can effectively leverage their available resources, including land, to form partnerships that generate income and reduce reliance on the central government.

Citing the President’s Office, Regional Administrative and Local Government (PO-RALG) 2025/26 budget, Dr Jeje noted that the government has allocated 6.1tri/- for salaries and 2.484tri/- for development expenditures. In contrast, he highlighted that local governments collectively generated only 1.5tri/- in the 2023/24 fiscal year.

“If councils and municipalities are empowered with the right knowledge and skills to utilise PPPs, they can significantly lessen their dependence on the central government,” he said.