Thu, September 11, 2025
Wed, September 10, 2025
Tue, September 9, 2025
Mon, September 8, 2025

Aspects of public debt sustainability

  Copy link into your clipboard //business-finance.news-articles.net/content/2025/09/11/aspects-of-public-debt-sustainability.html
  Print publication without navigation Published in Business and Finance on by The Citizen
          🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source

Understanding Tanzania’s Public Debt Landscape: A Closer Look at Sustainability Challenges and Policy Implications

In a comprehensive op‑ed published by The Citizen, a leading Tanzanian newspaper, experts dissect the country’s public debt profile and outline the key factors that determine whether debt remains a manageable tool for development or turns into a financial liability that threatens growth and stability. Drawing on recent data from the International Monetary Fund (IMF), the World Bank, and the Tanzania National Bureau of Statistics, the article provides a nuanced assessment of debt sustainability, its drivers, and the policy levers that could help steer the economy toward a more resilient future.


1. The Current Debt Snapshot

The piece begins by laying out the latest figures for Tanzania’s gross public debt, which sits at roughly 63 % of GDP. While this ratio is below many international benchmarks that flag “high‑risk” debt (typically 70 %–80 % of GDP), the analysis warns that the raw number masks deeper vulnerabilities.

  • External vs. Domestic Debt: Over 70 % of the debt is external, predominantly in US dollars and other foreign currencies. This exposes the government to exchange‑rate risk, especially since Tanzania’s local currency, the shilling, has experienced intermittent depreciation.
  • Debt Maturity Profile: A large share of external borrowing is long‑dated, with maturities extending beyond 10 years. While this allows the country to space out repayments, it also increases the risk of a debt “squeeze” if future interest rates rise or the fiscal position deteriorates.
  • Concentration of Lenders: The analysis highlights that a handful of institutions—particularly the African Development Bank (AfDB) and the European Investment Bank (EIB)—account for a significant portion of external debt. This concentration means that changes in a single lender’s policy can have outsized effects.

2. Debt Sustainability Indicators

Beyond the headline debt ratio, the op‑ed examines several technical indicators that feed into the IMF’s Debt Sustainability Analysis (DSA) framework.

  1. Debt Service Coverage Ratio (DSCR): This ratio measures the government's ability to meet interest and principal payments from its fiscal surplus. Tanzania’s DSCR has hovered around 0.5 in recent years—meaning that only half of the fiscal surplus is available to service debt—highlighting a potential shortfall.
  2. Fiscal Space: The author explains that fiscal space is the margin left after essential spending (health, education, public security) for new debt. Currently, the government is pushing fiscal space to the limit, especially with ambitious investment plans for infrastructure and social services.
  3. Growth Projections: Growth has been a stabilizing factor—Tanzania’s GDP has averaged 6–7 % over the past decade. However, the article notes that a slowdown, even if modest, could shift the debt dynamics quickly due to the compounding effect of higher debt-to-GDP ratios.

3. Drivers of Debt Accumulation

The op‑ed identifies three primary reasons behind Tanzania’s rising debt levels:

  • Infrastructure Deficits: The country’s infrastructure—roads, ports, energy grids—lags behind regional peers, prompting large-scale borrowing for projects like the Standard Gauge Railway and the Trans–East Africa Coastal Highway.
  • Fiscal Deficits: Persistent budget deficits have forced the government to finance shortfalls via new borrowing. The piece highlights the challenge of balancing the need for stimulus with the risk of increasing debt.
  • Exchange‑Rate Volatility: Fluctuations in the shilling’s value have inflated the real cost of servicing external debt denominated in foreign currencies, effectively raising the debt burden.

4. Policy Recommendations

While acknowledging that debt is an essential tool for development, the article calls for a disciplined approach to borrowing. The recommendations can be grouped into short‑term, medium‑term, and long‑term strategies.

Short‑Term (1–2 Years)

  • Enhance Debt Transparency: Publish a detailed debt ledger that includes maturity, interest rates, and covenants. This would improve market confidence and facilitate better decision‑making.
  • Hedge Currency Risk: Use financial instruments to lock in exchange rates for critical external borrowings, thereby reducing the volatility in debt servicing costs.

Medium‑Term (3–5 Years)

  • Diversify the Lender Base: Engage with a broader spectrum of institutions—such as the Asian Development Bank or bilateral partners—to reduce concentration risk.
  • Improve Revenue Collection: Tighten tax administration and broaden the tax base. A robust domestic revenue stream would lessen reliance on external borrowing.

Long‑Term (5+ Years)

  • Structural Reforms: Undertake reforms that promote higher productivity—education, technology adoption, and regulatory simplification—to ensure that debt-funded projects generate returns that outpace debt costs.
  • Sustainable Investment Prioritization: Adopt a value‑for‑money framework to evaluate infrastructure projects. This includes rigorous cost‑benefit analysis and alignment with long‑term economic plans.

5. Lessons from Regional Peers

To contextualize Tanzania’s situation, the author draws parallels with Kenya, Rwanda, and Uganda. All three countries have managed to keep debt‑to‑GDP ratios below 60 % by focusing on high‑yield projects and maintaining disciplined fiscal policies. The article urges Tanzania to adopt similar strategies, especially in the domain of public‑private partnerships (PPPs), which have proven effective in distributing risk and leveraging private capital.


6. The Human Element

Beyond the numbers, the op‑ed highlights the tangible impact of debt on citizens. High debt servicing costs crowd out spending on health and education, perpetuating a cycle of underinvestment in human capital. The article argues that maintaining debt at sustainable levels is not only an economic imperative but also a moral one, ensuring that future generations are not saddled with obligations that hinder progress.


7. Conclusion

The op‑ed ends on a sober note: Tanzania’s public debt sits in a precarious yet manageable position, contingent on prudent policy choices. The country’s leaders must strike a balance between leveraging debt for growth and ensuring that fiscal health is preserved. By adopting transparent practices, diversifying borrowing sources, and investing in high‑impact infrastructure, Tanzania can maintain debt sustainability while propelling the nation toward inclusive, long‑term prosperity.

In sum, the article offers a roadmap that blends rigorous data analysis with pragmatic policy prescriptions—an essential guide for policymakers, investors, and citizens alike who are invested in Tanzania’s economic future.


Read the Full The Citizen Article at:
[ https://www.thecitizen.co.tz/tanzania/oped/aspects-of-public-debt-sustainability-5189132 ]