International Monetary Fund (IMF) says Tanzania and other sub-Saharan African (SSA) countries can and should continue borrowing to finance their infrastructure development but must ensure financed projects must have real value for money and a justifiable economical backing.
These were the thoughts of IMF Director for African Department, Antoinette Sayeh, expressed when she visited Dar es Salaam. “Tanzania’s debt is still sustainable but we advise the government to make sure that its investment in infrastructure presents real value for money. If infrastructure in agriculture is improved, it will benefit more people as it will also lead to growth in the sector,” she said.
She was optimistic about the country’s sustained economic growth which is currently above that of the SSA by 5 percent saying such levels of growth was good for further development and reduction of poverty.
She also stressed the need for governments to “borrow wisely,” by which term she meant that the governments carefully their lenders in order to avoid paying exorbitant interest rates; this advice is very much called-for especially with the discovery of huge reserves of natural gas which would necessitate the development of specific infrastructure in order to tap.
Professor Adolph Mkenda, Deputy Permanent Secretary at Tanzanian Ministry of Finance, in line with Ms Sayeh’s advice said; “As government we make sure that infrastructure projects financed by public money are of good quality.” He revealed that many international lenders had suddenly appeared with funds following the discovery of natural gas in the country, and that the government was pursuing an approach consistent with public procurement regulations ensuring, overall, that there is real value for money in all undertaken infrastructure projects.
However, the economic “go-slow” in the more developed regions has impacted on lending rates and countries like Tanzania which rely heavily on external sources for funding may soon be affected. Dr Charles Kimei, Managing Director at the CRDB Bank Plc, expressed these concerns saying; “As a bank, we are now facing an increasing global restrictions when we want to borrow to external sources.”
He also warned that these emerging problems with interest rates may affect the government’s planned sovereign bond.
The Regional Economic Outlook for SSA, whose 2014 second half was launched by Ms Sayeh, suggests that overall growth in the region is expected to remain at 5 percent this year and 5.75 percent next year being sustained by continuous infrastructure development, a thriving services sector and significant agricultural production.
“This overall positive outlook is, however, overshadowed by the dire situation in Guinea, Liberia and Sierra Leone where the Ebola virus is exacting heavy human and economic toll,” the report reads.
By Emmanuel Iruobe
