Finance Minister Mwigulu Nchemba engages in a serious discussion with President Samia Suluhu Hassan in Dar es Salaam recently. Photo: File
By Adonis Byemelwa
Tanzania’s national debt reached a staggering $44.89 billion at the end of August 2024, reflecting a 1.7% increase from the previous month, according to the Bank of Tanzania. External debt alone accounted for $32.67 billion, a rise of 2.1%, with the central government being the primary borrower. Disbursed external loans during the month amounted to $433 million, while debt service payments totaled $30.6 million, mainly for principal and interest repayments.
Multilateral institutions continue to dominate Tanzania’s external debt portfolio, with the government owing 76.9% of the debt to such entities. Transportation and telecommunications activities held the largest share of disbursed debt, at 21.3%. In terms of currency, the US dollar dominates the debt composition, making up 67.9% of external obligations.
On the domestic front, the debt stock rose to Sh 32.7 trillion driven by new issuances of Treasury bonds. Treasury bonds accounted for 77.7% of the domestic debt, with commercial banks and social security schemes remaining the largest creditors. The government raised Sh 755.6 billion from the domestic market in August 2024, mostly through Treasury bonds, to support budget financing.
Meanwhile, public outrage has been brewing over what some see as reckless government spending. On June 21, Anatropia Theonest, a fiery Special Seats MP from Karagwe District, publicly lambasted the Ministry of Finance for prioritizing unnecessary recurrent expenditures over crucial development projects. Her criticism has sparked a heated debate, with many Tanzanians taking to social media to praise her courage.
Despite her precarious position within her party, Theonest has become a voice for fiscal responsibility, calling out the ministry for spending large sums on vehicles for district councils, expenditures she believes add little value to the country.
“We are spending billions to buy vehicles that benefit other economies while neglecting essential development projects,” she remarked, pointing to an $880 billion expenditure on vehicles that, she argues, do not justify their costs.
Ms. Theonest called for a radical reallocation of the budget, proposing that 68% be devoted to development and only 32% to recurrent expenses. She was particularly critical of the purchase of luxury V8 vehicles for government officials, warning that such practices could lead to economic collapse.
Her concerns are echoed by the fact that in recent years, budget allocations have consistently prioritized the purchase of vehicles over development. For instance, the 2019-2020 budget set aside Sh 54.48 billion for vehicles, while Sh 29.83 billion was allocated in 2020-2021 for the same purpose. The trend has continued with even larger allocations, raising serious questions about the government’s fiscal priorities.
The scale of vehicle-related expenditures, which amounted to Sh 558.4 billion annually for purchase, fuel, and maintenance, is alarming. While Finance Minister Mwigulu Nchemba acknowledged the issue, his proposal to lend government vehicles to officials, who would bear maintenance costs, has done little to stem public frustration. His proposal excluded key sectors, including security and defense, further fueling skepticism about the government’s willingness to cut wasteful spending.
This outcry comes against the backdrop of Tanzania's ballooning national debt, which soared to Sh 91.7 trillion by March 2024, up from Sh 77 trillion the previous year. Minister of Planning and Investment, Professor Kitila Mkumbo, attributed the rise to ongoing borrowing for large-scale infrastructure projects, such as roads, railways, and airports.
However, critics argue that while these projects are important, the debt burden is unsustainable, especially when paired with a lack of tangible improvement in the quality of life for ordinary Tanzanians.
In just three years, President Samia Suluhu Hassan’s administration has borrowed almost Sh 30 trillion, surpassing the combined borrowing of her five predecessors, who collectively took out Sh 60 trillion in loans. According to a Tanzanian diaspora member in the US, who requested anonymity, "People's lives remain unchanged despite the massive borrowing, and the numerous taxes and levies only exacerbate the situation."
These concerns echo the words of former Speaker of the National Assembly, Job Ndugai, who warned that the nation could be “auctioned” if the government continued its borrowing spree. His remarks, which triggered a political storm, eventually forced him to resign.
Since then, Ndugai has largely remained on the sidelines, a stark reminder of the risks of speaking out against entrenched government policies. Despite his forced apology to the ruling party, his claims resonate, as Tanzania faces growing concerns about its debt sustainability and rising corruption scandals.
Prime Minister Kassim Majaliwa has made strides in battling corruption, but the fight remains an uphill one. Across the continent, countries like Zambia and Ghana have similarly struggled under the weight of unsustainable debt.
Ghana, for instance, recently underwent a debt restructuring process as it grappled with its financial crisis. The parallels between these nations underscore a broader trend: many African economies are walking a tightrope between development ambitions and crippling debt.
To avoid the growing debt trap, Tanzania and other African nations must shift their focus from external borrowing to more sustainable financial strategies. One critical move would be boosting domestic revenue through diversified sectors like agriculture, mining, and manufacturing while encouraging local entrepreneurship.
Enhanced efficiency in tax collection, curbing corruption, and reducing tax evasion are key steps toward financial independence. Instead of heavily relying on loans for infrastructure projects, the government should explore public-private partnerships (PPPs) to attract foreign investments without increasing the debt burden.
Zambian economist Dambisa Moyo, in her influential book Dead Aid, has long emphasized the need for African countries to focus on self-sufficiency rather than dependence on aid and external loans. Moyo argues, "Debt should not be a strategy, but a tool used sparingly." She points out that reckless borrowing without a clear repayment plan leads to perpetual cycles of poverty.
Echoing this sentiment, Nobel laureate Joseph Stiglitz has stressed the importance of good governance, transparency, and strategic investment in education and technology to create long-term economic stability.
For Tanzania, strategic reforms could include tightening fiscal discipline, fostering innovation, and developing robust local industries that add value to the country's resources. By adopting these measures, the country can avoid the path of debt restructuring faced by countries like Zambia and Ghana, which struggled to service their growing debts. This approach would not only stabilize the economy but also create a foundation for future growth, reducing the reliance on external funding that has led to unsustainable debt levels across Africa.
