The government has already reached a decision to establish a full fledged Public Debt Unit that will be charged with administering the national debt, Deputy Minister for Finance Gregory Teu has exclusively told The Guardian on Sunday.
The deputy minister was reacting to a question put to him on the sidelines of the Parliamentary meeting going on in Dodoma late last week with regard to reports that the public debt (national debt) jumped from Sh10.5 trillion in 2009/2010 to Sh14.4 trillion in 2010/2011.
The National Audit Office of Tanzania (NAOT) under Controller and Auditor General Ludovick Utouh on Thursday issued several financial government annual audit reports for the year that ended on June 31, 2011 in which it has been revealed that the national debt soared during the year.
According to CAG Utouh , the debt increased by Sh3.9 trillion, equivalent to 38 percent, mainly due to borrowing from banks, especially the central bank (BoT).
“It has been decided that a full fledged Public Debt Unit be established to deal only with matters pertaining to the public debt ,” Teu told The Guardian On Sunday on Thursday morning, asking this reporter to see him in the later hours for more and precise details.
Borrowing is either internal or external, where the government takes into account various factors in seeking foreign borrowing in particular.
“Borrowing could be fueled by failure by development partners to honour their pledges of issuing soft loans to beef up the budget, compelling the government to look for alternatives to fill the gap,” he stated.
He said that the government faces problems regarding funds allocated for local government authorities because development partners fail to issue soft loans as agreed or as promised.
The chairman of the Parliamentary Public Accounts Committee (PAC), John Cheyo (UDP- Bariadi East) earlier told The Guardian On Sunday that he was concerned by the rising public debt while the financial situation on the ground was worsening.
“I am personally surprised by the fact that the public debt keeps soaring while implementation of development projects in various parts of the county has stalled due to lack of funds. Now, the question here is that ‘where is the money going’? queried Cheyo.
Former Bank of Tanzania (BoT) economist who is now MP for Kalenga, Dr William Mgimwa said the public debt can soar if the government makes a commitment of servicing the debt stock while its sources of revenue are limited.
“If you are servicing your debt stock while your sources of revenue are limited you are likely to borrow to honour the commitment,” he said.
According to Dr Mgimwa, the government can borrow to finance some development projects whose original funds could not be raised for whatever reason. Giving an example, Dr Mgimwa said the government has in this financial year been forced to raise money amounting to over Sh 500 billion to finance road projects committed in 2010/2011 financial year.
Overspending is a major factor that can bring about borrowing, he said, noting that revenue collections under the Tanzania Revenue Authority (TRA) is equivalent to 101 percent of estimates, in which case over-expenditure is to blame for the fiscal imbalances.
Failure by development partners to honour their financial pledges is also a factor, Dr Mgimwa added. Giving an example, the former BoT economist said until February this year development partners had honoured their pledges by only 27 per cent for 2011/2012 fiscal year.
Presenting the report in Dodoma on Thursday, CAG Utouh called for deliberate efforts to reduce the public debt.
CAG: How the public exchequer loses money
Mishandling of payments for the maintenance of government vehicles, payment of salaries to ghost workers and ineligible officers, effecting payments to undelivered goods and services and allowances have been cited by Controller and Auditor General Ludovick Utouh as among the means through which the central government loses billions of shillings annually.
According to the audited report of the Central Government for 2010/2011 in which Ministries, Departments, Agencies and the office of Regional Administrative Secretariats ( MDAs&RAS) are covered the entities have been employing the above mentioned strategies to swindle the public huge sums of cash.
The report shows that MDS & RAS in the year under review spent Sh 77.318 million for motor vehicle repair works without routing to the Tanzania Electrical, Mechanical and Services Agency (TEMESA) or using private dealers who should have been authorised by the agency.
Private dealers given the task of maintaining government vehicles must first be authorised by TEMESA upon submission of documentary evidence to confirm their competencies and capacities in the particular field, on the basis of regulations.
During the year of under review, a test check revealed that five MDAs & RAS paid a total of Sh77,318,833 to private authorised garages in respect of the cost of repairing motor vehicles without routing their requests through the agency.
Institutions flouting regulations on motor vehicle maintenance authorisation include the Commission for Human Rights and Good Governance (Sh 16,110,643), the Law Reform Commission (Sh13,554,201), RAS Mara (Sh6,927,000), RAS Shinyanga (Sh6,569797) and RAS Morogoro (Sh34,157,192).
According to the report, audits of payroll carried out during the year disclosed that seven MDAs & RAS paid a total of Sh142,715,827.99 (Sh142.715 million) as salaries to retirees, absconders and illegible officers who were no longer in employment.
The breakdown of entities lists the High Court (Sh18.018 million in faulty payments), district and primary courts (Sh56.705million), the National Assembly (Sh11.078 million), the Ministry of Industries and Trade (Sh27.099 million), the Ministry of Lands (8.596 million), the Ministry of Energy and Minerals (Sh8.177million) and the Ministry of Information, Culture and Sports (Sh13.040 million).
Worse, the report shows that there were payments amounting to Sh8.076 billion made without proper documentation contrary to Section 95 (4) of the Public Finance (Regulations) Act of 2001 (Revised 2004).
There were also payments amounting to Sh31.027 billion made in advance to various suppliers during the year. However, the report states that audit inspection done noted that, the goods paid for, were not delivered at all.
According to the report, the Ministry of Defence and National Service topped the list by paying Sh30.865 billion for undelivered goods followed by the Ministry of Water and Irrigation that paid Sh 132.598 million for the same non-delivered goods.
The office of RAS Singida was also in the list by paying Sh19 million while the Ministry of Livestock and Fisheries Development paid Sh 9 million. The Office of RAS Manyara paid Sh 1.280 million.
During the same financial year (2010/2011) three MDAs incurred payment amounting to Sh1.471 billion that lacked relevant and sufficient information to establish their validity. The CAG treated the payments as ‘questionable costs.’
What is appalling in the report is that during the 2010/2011 fiscal year the government spent Sh 811.796 billion in allowances only.
The CAG stated that the government can substantially enhance salaries received by its employees by restricting personal allowance payments. He said this can be done by consolidating such allowances into actual salaries.