Tanzania's external debt doubles

Tanzania's external debt doubles

The Bank of Tanzania (BoT) monthly economic review for March, this year, shows that the ratio of the debt to Gross Domestic Product (GDP) rose to 40.9  per cent from 31.1 per cent. It said the ratio of public guaranteed debt to GDP was also up to 33.4 per cent from 23.8 per cent.

The bank report shows an increase of 73.7 million US dollars (0.8 per cent) and 820 million US dollars (9.1 per cent) to the total external debt over the amount recorded at the end of January, this year and the corresponding period in 2011.
 "The increase over the period under review has, however, partly been due to accumulation of interest arrears on unserviced bilateral debt," stated the report.
Interest arrears are due to unserviced bilateral debt mainly from Iran, Iraq and Japan, which are yet to provide relief and unreported, interest payments on private sector debt. Other countries for which debt is not serviced include Brazil, Angola, Zambia, China, India, Egypt and United Arab Emirates.

The currency composition of outstanding external debt shows that Special Drawing Rights (SDR) was leading currency accounting for 49 per cent of external debt. However, after decomposition of SDR and Africa Unit of Account (AUA) into their basket currencies USD became predominant currency at 50.4 per cent followed by Euro which accounted for 25.1 per cent.
As of February 2012, external debt disbursed amounted to 62.8 million US dollars (about 100.5bn/-), while external debt service amounted to 9.7 million US dollars (about 15.5bn/-) of which 3.1 million US dollars (about 4.9bn/-) was principal and 6.6 million US dollars (about 10.6bn/-) interest payments. The amount of debt serviced was around 1.6 per cent of export of goods and services.

The BoT report also show the stock of domestic debt declining slightly by 8.9bn/- to 4.09tr/- due to small issuance of Treasury bills compared to matured obligations. Government bonds continued to be predominant instruments in domestic debt portfolio, accounting for 73.3 per cent followed by Treasury bills with commercial banks remaining leading investors holding 46.7 per cent followed by BoT and pension funds.

Analysis of domestic debt holding by tenure shows that commercial banks dominated in both long term and short term debts accounting for 41.2 per cent and 68.9 per cent respectively. The supremacy of commercial banks in long term debt, in particular, is a reflection of narrow investor base. Domestic debt issued during the month amounted to 142.9bn/-, out of which 97.9bn/-  was Treasury bills and 45bn/- Treasury bonds.

The cumulative domestic debt issued for financing purposes in financial year 2011/12 stood at 770.5bn/-, being 530.4bn/- Treasury bills and 240.1bn/- Treasury bonds. A total of 169.4bn/- was due for payment, out of which principal amounting to 141.4bn/- was rolled over while interest amounting to 27.9bn paid out of government resources.

The cumulative actual debt payments in the financial year 2011/12 reached 1.002tr/-, of which 771.3bn/-, equivalent to about 16.9 per cent of domestic revenue, was principal repayments and 231.4bn/- which is 5.1 per cent of domestic revenue.

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