Experts propose ways to maintain debt sustainability

Dar es Salaam. Economists have proposed fostering a conducive business environment and proactively attracting both foreign and domestic investment as credible ways to sustain Tanzania's debt stability.

The International Monetary Fund (IMF) listed Tanzania among the 10 least indebted African countries with a debt-to-gross domestic product (GDP) ratio of 41.8 percent.

The relatively low ratio indicates a balanced monetary approach, contributing to economic stability and resilience.

Other countries with low debt-to-GDP ratios in include Nigeria (41.3 percent), Guinea (31.5 percent), Equatorial Guinea (33.7 percent), Ethiopia (31.2 percent) and the DRC (11.1 percent). Others are the Comoros (36.9 percent), Chad (38.7 percent), Cameroon (39.6 percent) and Botswana (18.1 percent).

Economists said the IMF report indicated Tanzania's economy is progressing well; however, they advised the government to focus on areas such as agriculture, the adoption of technologies, and the continued effective implementation of fiscal and monetary policies, which will assist the country in reducing its debt.

"The government should actively attract both Foreign Direct Investment (FDI) and domestic investment to broaden the scope of revenue collection, which can stimulate the economy and ultimately reduce the reliance on expensive borrowing,” said the University of Dar es Salaam economics lecturer, Dr Wilhelm Ngasamiaku.

He emphasised the importance of the government maintaining prudent fiscal and monetary policies, which would contribute to effective tax collection and prevent excessive expenditures, reducing the necessity for expensive borrowing to implement mega projects.

He said the government needs to sustain a conducive and enabling environment for businesses to encourage entrepreneurs to invest substantial capital and ultimately expand the tax base within the country.

Dr Ngasamiaku said Tanzania's low debt-to-GDP ratio is something positive, as many projects are funded by loans.

On the other hand, an economist from Mzumbe University, Dr Daudi Ndaki, advised the government to leverage the use of natural resources to diversify the economy and reduce reliance on borrowing to fund development projects.

He said the modernization of agriculture is another crucial aspect, saying that adapting to new technologies can enhance productivity.

"The government should continue creating a friendly and enabling environment for business. This will attract more FDI and expand tax collection. By doing so, the government can reduce its dependence on borrowing and increase its reliance on domestic funds,” he said.

He also urged investing in the education and health sectors, asserting that such investments would increase confidence among investors.

The University of Dar es Salaam economics lecturer, Prof Jehovaness Aikaeli, said the government should rationalise public expenditure and decide what to finance to reduce borrowing and therefore sustain the national debt.

"Borrowing is not a bad thing, but it should not exceed the GDP. The government must be selective on major projects; some should be postponed to avoid seeking loans all the time," he said.

He added that the government should continue to maintain expenditure discipline in the public sector and not exceed the budget.

He added that improving the manufacturing sector will widen tax collection and reduce imports.

The Ministry of Finance deputy permanent secretary for economic management, Mr Elijah Mwandumbya, emphasised the importance of effectively implementing the country's policies to lead to positive credit outcomes.

Mr Mwandumbya noted that the government has consistently grown in local revenue collection over the past few years.

"This upward trend aids in sustaining the national debt, as a portion of the generated funds is allocated to repay borrowed debts,” he said.

"For many years, Tanzania has maintained loan discipline, ensuring that loans for the implementation of strategic projects are executed and yielding visible results for the public. This commitment contributes to the stability of the national debt,” he added.