‘Loans, grants crucial in bankrolling projects’

DODOMA: FINANCE Minister Dr Mwigulu Nchemba on Thursday issued a thorough analysis of the public debt, which currently stands at 91.71tri/-, saying the debt remains sustainable in the short, medium and long term.

Tabling the government budget for 2024/2025 financial year, Dr Nchemba said out of 91.71 tri/-, external debt is 60.954tri/- and domestic debt is 30.754tri/-, noting that loans have significantly facilitated the execution of development project across various sectors in the country.

“The Debt Sustainability Analysis (DSA) conducted in December 2023 revealed that, the debt is sustainable in the short, medium and long term,” stressed Dr Nchemba.

According to the finance minister, the analysis indicators show that the present value of government debt to GDP ratios is 35.6 per cent compared to the threshold of 55 per cent.

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“The present value of external debt to GDP ratios is 19.0 per cent compared to the threshold of 40 per cent; and the present value of external debt to exports is 113.2 per cent compared to the threshold of 180 per cent,” the minister revealed. The minister mentioned several factors that led to the increase of public debt, which includes received funds from both old and new loans.

“These funds have been directed towards development projects beneficial to our nation, including the construction of roads, modern railways, airports, electricity, education and health infrastructure,” Dr Nchemba noted.

According to the minister, from April 1, 2021, to March 31, 2024, the government received a net inflow of about 17.218tri/-, and that the depreciation of the Tanzanian Shilling against the US Dollar is attributed to the increase in external debt.

“From March 31, 2021 to March 31, 2024, the value of the shilling against one dollar depreciated from 2,309.96 shillings to 2,569.66 shillings, a decrease of 11.24 per cent.

This resulted to an increase in external debt by 5.429tri/-.” The minister said further that the increase in domestic debt was also caused by the issuance of special bonds worth 2.177tri/- in the financial year 2021/2022 to service the Public Service Social Security Fund (PSSSF) debt relating to contributions of employees who were in service before 1999.

“It is important to understand the reasons for debt increase before judging or spreading fear,” the minister appealed, saying the government would continue to take deliberate measures to ensure that the loans contracted are used for the intended purposes and benefit our nation. “These measures align with our efforts to repay debts on time, placing us in a sound financial position and maintaining our international credibility,” he said.

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The minister issued the breakdown of development projects implemented through 17.218tri/- that was borrowed from external sources to finance strategic development projects, including construction of the Standard Gauge Railway (SGR) in various lots, as well as procurement of train wagons and electric locomotive engines.

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