Issues of the country’s rising national debt have been stirred once again, as the Tanzania Coalition on Debt and Development (TCDD), a shadowy think-tank of recent notoriety, updated its past intervention on the rising debt and what it means for the country’s fiscal and budgetary stability in future.
At that time, there were some responses to what TCDD said, including a general line of defense that if the cash commercially borrowed is used in construction of infrastructure it would repay itself and thus no crisis was likely to occur. There are difficulties with that suggestion as well, as the rate of interest on debt and incremental earnings in national income by road building cannot always be tallied; other factors come in.
In its more recent intervention, TCDD noted that in the past there was a debt pile-up which made the country seek ‘forgiveness,’ or more correctly, debt cancellation, and appears to suggest that this is where we are heading.
The point that did not come out in that regard is that debt cancellation did not just arise from the fact that we had large debts, as Greece for instance isn’t having its debts ‘cancelled’ but rescheduled while other countries collect funds to repay maturing bond-holders or those with Treasury bills.
It means a sort of debt relief scenario can be imagined in future but it will have its costs and mitigations, for that matter involving slashing government funds for inefficient state companies, a key reason for borrowing.
What surprises observers is the tone of the TCDD intervention, that each Tanzanian for instance has a debt of 450,000/- on his or her head, and seeking to make a big issue out of this matter, more or less as a wise or prudent outlook, than policy failure as such.
At the same time there is a suggestion, often repeated from various quarters, that the government is not collecting taxes as much as it should, that it has too many exemptions, which forces it to borrow because it cannot confront stakeholders. Yet TCDD as a lobby are close enough to the churches, whose reaction to a remark by then Finance Minister Mustafa Mkulo in his June 2009 Budget Speech to cut church exemptions sparked near revolt, shift to opposition.
In the past, Mwalimu Nyerere was also on record as suggesting that exemptions were little more than acts of corruption, ‘viserikali corrupt havitozi kodi,’ by which he meant exemptions other than those he would have himself allowed.
Mwalimu would not tax public companies like TANESCO, TTCL, NIC, TRL etc otherwise they would have been forced to become efficient entities, nor indeed tax church imports, but would rile if mining companies got tax exemptions, or those building posh tourist hotels.
It is a matter of sentiments and objectives of policy, if one wishes to invite investors or is satisfied with shortages, as it was the case before; hence tax exemptions aren’t a light subject tied to fighting corruption, definitely not.
The real criticism that TCDD is leaving out is failure to pursue economic reform to make the country more capable of generating revenue, as weaknesses for instance in health and education funding are glaring, which also touches off corruption in service delivery.
The TCDD criticism is a budgetary criticism where everyone intervening wishes his or her sector to be funded, so that the economy improves, or to remove glaring inequities as in health or education. Still, TCDD should remember that of late IMF, which knows a few things about debts, said Tanzania has ample room to borrow, viz., even with scant reform.