National debts are overwhelming the economies of the East African Community (EAC) member countries even as they are yet to recover fully from the impacts of Covid-19 pandemic.
While Kenya is planning to enact a law on debt ceiling, Tanzania intends to borrow a whopping $2.34 billion to finance the $18.1 billion budget for 2022/23. National debts, which is money owed to the country by domestic and foreign lenders, now account for a significant portion of the gross domestic product (GDP) of the six EAC countries.
Kenya has the highest ratio of national debt to its GDP, estimated to be 64.2 percent in September 2021 compared to Tanzania’s present value of public debt to GDP which was at 31.0 percent in April 2022, less than a threshold of 55.0 percent. This is as the government (Tanzania) plans to borrow at least $2.34 billion from foreign financiers to finance its budget for the coming financial year. According to Finance and Planning minister Mwigulu Nchemba, the national debt has reached Sh69.44 trillion this April from Sh60.72 trillion in 2021.
He told Parliament in Dodoma last week that the government borrowed Sh8.7 trillion in the past year which is equivalent to 14.4 percent increase. The increase in national debt is largely attributed to the receipt of soft loans for financing development projects and release of special bonds worth Sh2.18 trillion for the funding of the Public Service Social Security Fund (PSSSF).
Although rising national debt has been a matter of concern, the Tanzania government maintains that it was still “sustainable in the short, medium and long run based on the international measures”.
National debts are there because governments the world over do borrow because of inadequacy of revenue from their own sources like tax to finance public goods and services.