When Tanzania launched its Standard Gauge Railway in 2018, the government boasted to the world that it was using its internal revenues.
Truthful by then Government had secured several commercial loans, specifically from Standard Chartered as well as Credit Suisse AG and others to finance the project.
Today, Tanzania has signed an agreement for the sixth lot of the Standard Gauge Railway which will run from Tabora to Kigoma costing a total of USD 2.21 Billion, making the total investment of the SGR about USD 10.04 Billion.
Tanzania’s President took a moment to explain the financing of the project, “all of this project [worth] USD 10 billion is implemented through loans” she explained. “So, those who say that this administration is borrowing heavily, should also know that it is an administration that is building the entire SGR railway line”.
Recently there has been an increasing discussion regarding public debt after the recent report that it has reached Shs. 71 Trillion in September 2022, a 13 percent increase from last year.
The swelling of public debt comes amidst the government’s facing several challenges including the reduction of its foreign exchange reserves caused by a huge import bill as the result of the Russia-Ukrain war.
In September 2022, while export of goods and services had a modest increase to USD 3.4 billion from USD 2.7 billion. Import of goods and services has increased by 69 percent to USD 5 billion between July 2022 and September 2022, from 2.9 billion recorded in 2021.
This means more of Tanzania’s tax revenue is used to purchase foreign currencies to meet its obligation, including debt servicing and paying for large project contractors who received payment in foreign currencies.
President Samia has also taken a moment to explain some of the cash challenges the country is facing,
“For Example this month there were rumors that there was a money challenge in the government, yes there is no money” explains Samia as she look irritated by the rumors. “There is no money because the disbursement loans were delayed, but second there were two loans that had matured at the same time we had to pay all at once”
“Moreover, there were [payment] certificates for big projects which we had to settle” clarified Samia while emphasizing the importance of meeting obligations for the preservation of the country’s dignity.
In alleviating the situation President Samia has called for a push in tax collection, “But I must say this, these loans must be paid, so those who are collecting revenue on behalf of the government they should buckle up, when we say we have borrowed more we should also know that we are paying more”.
President Samia’s call comes the same day as Ghana is announcing defaulting on its USD 28.4 billion loans following its increasing balance of payment deficit.
According to Reuters, in September 2022, Ghana recorded a deficit of more than USD 3.4 billion from a surplus of USD 1.6 Billion last year. In September 2022, Tanzania recorded a current account deficit of USD 1.7 Billion, an increase from the USD 331.03 million deficit last year.
One Response
Who is going to repay the debt? SSH tells TRA to collect more taxation but how? The biggest tax evasion is done by tycoons. Yet TRA gives them awards as “best tax payers” It is a joke.
Recently TRA ordered all street vendors to pay VAT. Immediately SSH over ruled TRA. And so I go to Kariakoo and buy 20,000 radio from a vendor. He runs and brings it from the go-down owned by a tycoon.
And so the end result is that tax is paid mainly by teachers, nurses, secretaries, security guards etc through PAYE. In fact after PAYE they pay again when collecting their salary from the bank. This is the levy TOZO through which govt collects billions from digital transactions.
The debt will therefore be repaid through PAYE and TOZO while millions of private business owners avoid and evade taxed by billions. For them no VAT and no income tax. Very unfortunate