Tanzania formulates a debt management strategy

Tanzania is one of the MEFMI member countries that prepares and updates a medium term debt management strategy annually. An in-country workshop to prepare a debt management strategy was held from 11 to 22 March 2019 at the Bank of Tanzania office in Dodoma, Tanzania.

The workshop was held against a backdrop of the significant change in the development financing in most developing countries over the past decade. Specifically, there has been a decline in both foreign grants and highly concessional loans. Consequently, governments are increasingly borrowing from emerging creditors on semi-concessional terms and tapping on the international capital market through Eurobonds to fund their huge infrastructure needs.

Tanzania has not been spared from these developments. Implementation of the Five-Year Development Plan (FYDP II) requires large financial resources which are not readily available from concessional sources. Consequently, there has been an increase in non-concessional borrowing by the Government of Tanzania to finance development projects.  This financing presents new cost and risks to the government budget. For example, non-concessional financing attracts high interest rates while their maturities are much shorter than the traditional financing instruments, leading to high cost of debt service.  In this regard, the Ministry of Finance organised a workshop to design a strategy to guide debt management operations in the short to medium term.

The main objectives of the workshop were to: (a) build the capacity of the Ministry of Finance and Bank of Tanzania officials on the use of the IMF/World MTDS analytical tool to develop a debt management strategy; and, (b) formulate a medium term debt management strategy for the medium term.

Participants in the workshop were drawn from the relevant departments in the Ministry of Finance and Planning (namely policy Analysis, Accountant General, External Finance, Public Private Partnerships, Budgets), Bank of Tanzania and the Zanzibar Planning Commission. A total of 35 officials participated in the workshop, of which 14 were female, representing 40 percent of the total participants.

The workshop was facilitated by MEFMI resource persons, namely: Messrs Michael Tukacungurwa, a MEFMI Graduate Fellow from the Bank of Uganda; Lekinyi Mollel, a MEFMI Accredited Fellow from the Bank of Tanzania; and Ms Josephine Tito a MEFMI Programme Manager.

The main outputs of the workshop were a draft medium debt management strategy and enhanced capacity of the officials to use the IMF/World Bank MTDS analytical tool to prepare a debt management strategy.