Tanzania’s request to the International Monetary Fund to provide it with a $372.4 million loan to support COVID-19 pandemic relief measures has been approved.
The loan will be issued through the Washington-based lender’s Rapid Credit Facility (RCF), and is part of a $567.25 million package released in September under a blended RCF/Rapid Financing Instrument (RFI) programme.
In a statement, the IMF said the RCF disbursement will “help address Tanzania’s urgent balance of payment needs arising from the COVID-19 pandemic and provide it with concessional resources needed to take measures to mitigate the severe socio-economic impact of the pandemic.”
The loan will draw no interest after the lender was satisfied with the government’s expenditure plans for the money.
In June, Tanzania’s Finance Minister Mwigulu Nchemba announced that the government had entered negotiations with the IMF for the provision of a $571 million Rapid Credit Facility (RCF) loan.
“President Samia met Ms Kristalina Georgieva – Executive Director of the International Monetary Fund (IMF) with a view to strengthening relations on economic and social issues including the issue of strategies to address the impact of COVID-19,” he said.
However, the piling of more debt is causing jitters in the East African nation.
Despite making fame for its frugality during the era of former President John Pombe Magufuli, Tanzania’s total national debt currently stands at $33.88 billion. According to the Bank of Tanzania’s (BoT) latest report, the national debt went up $182.3 million as at the end of August compared to July, and up $3.87 million from August 2020.
The country’s external debt accounted for 76.6% of the stock at $25.95 billion, an increase of $2.54 billion from August. Tanzania’s external debt service payments were also high, amounting to $27.8 million in August 2021, of which $18 million was spent on principal payments and the rest on repaying accumulating interest, according to the central bank.
During the financial year 2019/20, domestic revenues were only 14.7% of GDP against expenditure of 16.4%, a stark warning of the soaring debt levels that could be too much too bear for the country.
“Interest payments on debt accrued have been increasing in nominal terms. As a percentage of domestic revenue it has also been increasing over time from eight percent in 2013/14 to 13.1 percent in 2019/20,” said Dr Felician Mutasa, a researcher from the Open University of Tanzania.
Tanzania has also indicated it will borrow at least $2.34 billion from foreign lenders to finance its proposed 2022/2023 budget of $17.1 billion.