WB: Dar’s debt distress moderate

THE World Bank (WB) said on Monday that Tanzania’s total debt, which entails public and guaranteed private sector, remains relatively low as a share of GDP.

WB report on Tanzania Economic Update Clean Water, Bright Future: The Transformative Impact of Investing in WASH (Water Supply, Sanitation and Hygiene) 2022 showed that Tanzania was at ‘moderate risk’ of external debt distress.

The report quoted the latest joint IMF-World Bank Debt Sustainability Analysis that found that the country’s debt was projected to rise from 39.7 per cent of GDP in 2021/22 to 42.4 per cent in 2022/23.

“Tanzania was at moderate risk of external debt distress and moderate risk of overall public debt distress, with some space to absorb shocks.

“(The analysis) recommended that the authorities strive to maximise concessional financing, while also boosting domestic revenue mobilisation and prioritising projects that deliver high socioeconomic returns,” WB report said.

The report attributed the total debt increase to the financing needs of large development projects, which pushed the domestic debt stock to 10.9 billion US dollars, though remains modest at 29 per cent of total public debt and mostly, consists of government bonds, which accounts for 80 per cent.

“The composition of external borrowing has shifted with multilateral and bilateral loans and export credits increasing, while commercial loans declined,” the report said.

About 69 per cent of the country’s external debt was held in a single currency, US dollars, while 15 per cent is in euros, 6.0 per cent in Yuan and the rest in other currencies.

Despite the relatively low level of the debt stock, debt service consumed almost 37 per cent of domestic revenue in 2021/22, with interest payments alone equal to almost 2 per cent of GDP.

According to WB, Tanzania’s 2021 GDP was 67.8 billion US dollars, while its per capita income was about 1,136 US dollars.

Between August 2021 and August 2022, the public external debt stock rose by 0.6 per cent to 21.5 billion US dollars, while the private external debt stock rose by 30.6 per cent to 6.0 billion US dollars.

Multilateral creditors, bilateral creditors and export credits compose almost 70 per cent of the external debt, while commercial loans account for the remaining 29 per cent.

Additionally, between August 2021 and August 2022, debt from multilateral creditors increased by 6.4 per cent, the bilateral debt stock declined by 6.8 per cent and export credits spiked by 78.0 per cent, while commercial loans fell by 12.0 per cent.

Also, about 67 per cent of public external loans target energy, transportation, social services or direct budget support.

The WB said the GDP growth projections are heading in the right direction though vulnerable to global economic headwinds.

“As the ongoing recovery bolsters domestic revenues, the fiscal deficit is projected to narrow slightly to 2.9 per cent of GDP in 2022.

“While the government’s pandemic-response measures are winding down, the ongoing fuel and fertiliser subsidy programme and increased hiring in the education and health sectors are expected to keep recurrent expenditures high at about 11 per cent of GDP in 2022,” WB warned adding “Meanwhile, rebounding economic activity will continue to boost tax revenue”.

The GDP growth rate was expected to accelerate marginally from 4.6 per cent last year to 5.3 per cent this year.

The country GDP grew by 5.2 per cent in the first three quarters of last year portraying a strong performance of attaining the projection of 2022 based on the quarter four happenings.