ACT-Wazalendo Shadow Minister of Finance, Planning, and Social Welfare of the party, Kizza Mayeye. Photo” courtesy
Outrage Erupts Over Government’s Sh90 Trillion Debt, New Taxes Burden Citizens
By Adonis Byemelwa
The government’s relentless borrowing for various development projects has ignited widespread debate over the burgeoning national debt. Critics argue that these loans are the primary drivers behind the high taxes currently facing public scrutiny.
With the government’s debt now reportedly exceeding Sh90 trillion, the ACT-Wazalendo party has criticized the 2024/2025 budget, labeling it as primarily dedicated to debt repayment and administrative costs, causing hardship for ordinary citizens.
Speaking to the press on June 22, 2024, the party’s Shadow Minister for Finance, Planning, and Social Security, Kizza Mayeye, highlighted that despite substantial budget allocations for debt repayment, the government continues to borrow, further burdening the citizens.
Mayeye stated that as of April 2024, the national debt had reached Sh91.7 trillion, compared to Sh82.5 trillion in April 2023, marking an increase of Sh10.94 trillion, or 15%. “This unprecedented increase since our country’s independence includes Sh27.18 trillion borrowed, encompassing Sh17.7 trillion in principal and Sh9.48 trillion in interest,” he noted.
He expressed concern that this trend threatens the country’s development, and self-sufficiency, and leads to an economy driven by debt. “The major consequence of this unchecked borrowing is the escalating cost of debt repayment, as reflected in this year’s budget. Debt service costs have risen by 25.3%, while our internal revenue collection capacity has only increased by 13.4%,” he said.
Mayeye added that as a result, citizens are facing higher taxes, levies, and charges on essential services like electricity, education, healthcare, and water, as well as taxes on agricultural products to meet debt obligations.
However, addressing the recent debate on the national debt, the Commissioner for Public Debt Management at the Ministry of Finance, Japhet Justin, explained that debt growth is guided by economic objectives.
“There are targets presented to Parliament; for instance, we project borrowing a certain amount for the coming year. Therefore, the recently presented budget outlines expected revenues and expenditures for the fiscal year,” he clarified.
He stated that borrowing is regulated by the law on loans and debts, and the procedures are carried out based on legal principles. Thirty percent of the budget will depend on loans and aid.
The government’s budget proposals indicate that for the next fiscal year, a significant portion of the planned Sh49.3 trillion expenditure will come from domestic revenue, with Sh33.25 trillion from tax and non-tax revenues.
Another substantial revenue source will be commercial loans from domestic and international markets, amounting to Sh9.6 trillion, while grants and concessional loans from development partners will contribute Sh5.1 trillion.
Thus, while the government will rely on taxpayers for more than two-thirds (Sh33.25 trillion) of the budget, nearly one-third (Sh14.7 trillion) will be dependent on borrowing and aid to implement the budget.
Discussing the budget’s reliance on loans and aid, Senior Manager at Ernst & Young (EY), Fredy Rugangila, noted that the economy’s small size necessitates external sources. During a recent budget analysis by EY, Rugangila said external sources are unavoidable due to insufficient internal revenues and warned that global challenges could impact these sources.
“Our budget indeed relies heavily on borrowed and aid funds because our country is still developing. We have not yet reached the capacity for self-sufficiency, so reliance on external sources is inevitable; our internal revenues are not enough,” Rugangila stated.
Amid the national debt discussions, the International Monetary Fund (IMF) has granted Tanzania over USD 935.6 million (Sh2.46 trillion), with USD 149.4 million (Sh394.4 billion) earmarked to support the government’s budget. According to a June 21 statement from the Ministry of Finance, USD 786.2 million (Sh2.07 trillion) will finance a 23-month plan to address climate change impacts through the ‘Resilient and Sustainable Fund’ (RSF).
The IMF’s Executive Board reached this decision after completing the third review of the Extended Credit Facility (ECF) program on June 20, 2024. The ECF facilitates concessional loans to strengthen Tanzania’s economy through productive sectors and social services.
In July 2022, the IMF approved USD 1.1 billion (Sh2.8 trillion) for Tanzania. The IMF has extended the ECF implementation period by six months until May 2026, allowing ample time to achieve the program’s primary goals.
The RSF reforms aim to enhance climate change policy coordination, disaster risk management, climate policy integration into budget and investment planning, and financial sector climate risk oversight.
After receiving the loan, Finance Minister Dr. Mwigulu Nchemba expressed gratitude to the IMF for approving the government’s request following thorough and beneficial discussions for Tanzania.
According to the Ministry, Dr. Mwigulu stated that this move would significantly support the government’s budget implementation by investing these funds in productive sectors and addressing climate change impacts. He assured that the funds would be properly managed to ensure their intended benefits for the citizens and the national economy as a whole.
