Hassan Magulumali
The government has been advised to keep its external debt servicing below the current ceiling of 11.1 percent and prevent it from reaching the critical 15 percent threshold of the gross domestic product (GDP).
This recommendation was issued by the National Assembly’s Budget Committee, which warned that surpassing this limit could endanger economic stability and development.
Oran Njeza, chairman of the Budget Committee and member of parliament for Mbeya Rural, voiced this concern during his presentation on the proposed national development plan for 2025/26.
He emphasized the need for strict fiscal measures to manage debt levels effectively and protect Tanzania’s long-term economic health.
According to Treasury reports cited by Njeza, Tanzania’s external debt had reached 64.93 trillion Tanzanian shillings (Tsh) by June 2024, contributing significantly to the total government debt, which stood at 96.88 trillion Tsh.
This figure represents a notable increase of 18.18 percent from the previous year, where the debt amounted to 81.98 trillion Tsh in June 2023.
The increase—an additional 14.90 trillion Tsh—highlights the government’s expanding fiscal commitments, with the domestic debt currently at 31.9 trillion Tsh.
While the rise in debt has sparked concerns, the Budget Committee’s analysis has affirmed that government debt remains sustainable over the short, medium, and long term.
Nonetheless, Njeza underscored the importance of keeping debt servicing costs manageable to avoid straining public finances and crowding out critical development spending.
“The government must exercise caution and ensure that our debt does not exceed prudent limits, as this could have far-reaching consequences for our economy,” he said.
Njeza pointed out that excessive debt servicing can limit the government’s ability to allocate funds to essential sectors like health, education, and infrastructure development.
Read More:Government Urged to Control External Debt Levels
He stressed the need for increased revenue collection and efficiency in public spending to prevent over-reliance on borrowing.
The committee further recommended that the government enhance its debt management strategy by strengthening fiscal policies and seeking concessional loans over expensive commercial debt options.
It also urged a focus on financing projects that directly stimulate economic growth, thereby increasing the country’s ability to repay debts in the long term.
The government has been making strides in tax collection and streamlining expenditures, yet rising debt levels indicate the need for sustained efforts.
By maintaining debt within sustainable limits, the committee argues, Tanzania can preserve its financial stability and ensure that future generations are not burdened by excessive debt repayments.
As the government prepares its next national development plan, these recommendations will likely play a crucial role in shaping fiscal policy and guiding economic priorities for 2025/26.
