THE UNITED REPUBLIC OF TANZANIA
THE UPDATED DEBT SUSTAINABILITY
ANALYSIS
PREPARED BY
TANZANIA DEBT SUSTAINABILITY TECHNICAL TEAM
APRIL 2005
ACRONYMS AND ABBREVIATIONS
ADF
ADB
AfDB
AGOA
AIDS
BOT
BWI
CIDA
DANIDA
DBR
DOD
DRI
DSA
EAC
FDI
GDP
African Development Fund
African Development Bank
African Development Bank and Fund
Africa Growth and Opportunity Act
Acquired Immune Deficiency Syndrome
Bank of Tanzania
Breton Woods Institutions
Canadian International Development Agency
Danish International Development Authority
Domestic Budget Revenue
Disbursed Outstanding Debt
Debt Relief International
Debt Sustainability Analysis
East African Community
Foreign Direct Investment
Gross Domestic Product
GOT
Government of Tanzania
HBS
HIPCs
Household Budget Survey
Highly Indebted Poor Countries
HIV
Human Immune Virus
IBRD
IDA
IMF
LDCs
MDF
MEFMI
International Bank for Reconstruction and Development
International Development Assistance
International Monetary Fund
Least Developed Countries
Multilateral Debt Relief Fund
Macroeconomic and Financial Management Institute of
Eastern and
Southern Africa
Ministry of Finance
MOF
ii
MTEF
NGOs
NORAD
NPV
ODA
PC
POPP
PRSP
SADC
SDR
SIDA
TDS
TZS
UK
UNDP
UNFPA
UNICEF
USA
USD
VPO
XGS
Medium Term Expenditure Framework
Non Governmental Organization
Norway Agency for Development
Net Present Value
Official Development Assistance
Paris Club
President’s Office – Planning and Privatization
Poverty Reduction Strategy Paper
Southern Africa Development Community
Special Drawing Rights
Swedish International Development Agency
Total Debt Service
Tanzanian Shilling
United Kingdom
United Nations Development Programe
United Nations Population Fund
United Nations Children’s Fund
United States of America
United States Dollar
Vice President’s Office
Export of Goods and Services
iii
ACRONYMS AND ABBREVIATIONS ........................................................................ ii
EXECUTIVE SUMMARY ...................................................................................... vii
The National Debt .................................................................................................. vii
External Debt .......................................................................................................... viii
Domestic Debt ........................................................................................................ viii
ENHANCED HIGHLY INDEBTED POOR COUNTRIES (HIPC) INITIATIVE
FOR TANZANIA ........................................................................................................... viii
Delivery Of Debt Relief .......................................................................................... ix
Multilateral Institutions........................................................................................ ix
The UK Initiative...................................................................................................... ix
Paris Club Bilateral Creditors ............................................................................... x
External Debt............................................................................................................. x
Domestic Debt ........................................................................................................... x
ANALYSIS OF RESULTS ............................................................................................ xii
External Debt Results ........................................................................................... xii
Domestic Debt Results ......................................................................................... xii
RECOMMENDATIONS ............................................................................................... xiii
External Debt .......................................................................................................... xiii
Domestic Debt ........................................................................................................ xiii
1.0
1.1
INTRODUCTION ................................................................................................ 1
An Overview of the Workshop .............................................................. 1
1.2 An overview of Tanzania’s economy ......................................................... 2
2.0
2.1
TANZANIA DEBT PORTFOLIO REVIEW ..................................................... 3
The National Debt...................................................................................... 3
2.2
External Debt ............................................................................................. 3
2.2.1 External Debt Stock........................................................................................ 3
2.2.2 External Debt Arrears .................................................................................... 4
2.2.3
Profile of Disbursed Outstanding Debt (DOD) ...................................... 5
2.2.3.1 Disbursed Outstanding Debt by Creditor Category ........................... 5
2.2.3.2 Disbursed Outstanding Debt (DOD) by Borrower Category ............. 5
2.2.3.3 Disbursed Outstanding Debt (DOD) by Use of Fund ......................... 6
2.2.3.5 Maturity Structure of External Debt ..................................................... 7
2.2.3.6 Average Terms of New Commitments ................................................. 8
iv
2.2.4 New Commitments and Disbursements ...................................................... 8
2.2.4.1 New Commitments.................................................................................. 8
2.2.4.2 Loan Disbursements ............................................................................... 9
2.2.5 External Debt Service .................................................................................. 10
2.3
Domestic Debt .......................................................................................... 10
2.3.1
Domestic Debt Profile ............................................................................. 11
2.3.1.1 Domestic Debt by Instruments ............................................................... 12
2.3.1.2 Government Securities by maturity ........................................................ 13
2.3.1.4 Government Securities by Holder Category ...................................... 14
2.3.2 Domestic Debt Service................................................................................. 15
3.0 ENHANCED HIGHLY INDEBTED POOR COUNTRIES (HIPC)
INITIATIVE ................................................................................................................... 16
3.1 The Debt Sustainability Analysis............................................................... 16
3.2 Delivery Of Debt Relief As At December 2004 ..................................... 17
3.2.1
Multilateral Debt Relief .......................................................................... 17
3.2.2
Bilateral Paris Club HIPC Debt Relief .................................................. 18
3.2.3
Bilateral Non – Paris Club HIPC Relief ................................................. 19
3.2.4
Debt Relief from UK’s Multilateral Debt Relief Initiative: ................. 20
4.0
2005 DEBT SUSTAINABILITY ANALYSIS ............................................... 21
4.1
Underlying Strategy Assumptions ..................................................... 21
4.1.1 External Debt Scenarios Assumptions ....................................................... 21
4.1.2 Domestic Debt Scenario Assumptions. ..................................................... 24
4.1.3 External Financing ........................................................................................ 27
4.1.4 Macro-Economic Scenarios ..................................................................... 29
4.1.4.1 Outlook of the Macroeconomic Scenarios Assumptions...................... 29
5.0 ANALYSIS OF RESULTS UNDER ALTERNATIVE SCENARIOS .............. 35
5.1
External Debt Sustainability Analysis .............................................. 36
5.1.2 Sensitivity Analysis ....................................................................................... 38
5.2 Domestic Debt Sustainability Analysis ................................................... 39
6.0
RECOMMENDATIONS .................................................................................... 45
6.1
External Debt ............................................................................................ 45
6.2
Domestic Debt .......................................................................................... 45
ATTACHMENT A: SELECTED ECONOMIC INDICATORS .................................... 46
ATTACHMENT B: CIRR/DISCOUNT RATE ASSUMPTIONS USED ................... 47
ATTACHMENT E: COMPLETION POINT DSA (NPV/XGS) .................................... 50
ATTACHMENT F:
UPDATED SCENARIO COMBINATIONS (NPV/XGS) ........ 50
ATTACHMENT G: MACROECONOMIC SCENARIOS ............................................. 51
v
ATTACHMENT H: NATIONAL BUDGET ................................................................... 52
ATTACHMENT I: BALANCE OF PAYMENTS .......................................................... 53
ATTACHMENT J: SELECTED INDICATORS ........................................................... 54
ATTACHMENT K: THE TANZANIA NATIONAL DEBT SUSTAINABILITY
ANALYSIS (DSA) TEAM. ........................................................................................... 55
vi
EXECUTIVE SUMMARY
Since reaching the HIPC Completion Point in 2001, Tanzania has undertaken two
Debt Sustainability Analysis, one in 2002 and the other in 2003. This is part of
her Debt Management policy objective to conduct an overall assessment of the
debt structure on an annual basis, and to evaluate its sustainability and
performance to evaluate performance under the HIPC Debt Relief Initiative.
The Debt Sustainability Analysis (DSA) conducted in April to May 2005 is based
on Tanzania’s outstanding external and domestic debt as of end December 2004.
The macroeconomic data reflect the national accounts and balance of payments
statistics consistent with the projected medium-term macroeconomic framework
under the three-year IMF Supported Poverty Reduction and Growth Facility
(PRGF) Programme beginning in fiscal year 2004/05.
The National Debt
Total national debt stock, as at end December 2004 stood at USD 10.1 billion of
which, USD 8.5 billion is external debt and USD 1.6 billion is domestic debt. The
total national debt increased from USD 9.0 billion in December 2000 to USD 10.1
billion as at end-December 2004. The increase in domestic debt is mainly
attributed to increases in borrowing through securities for liquidity management,
settlement of parastatal debt, claims and budget financing, while foreign
disbursements, exchange rate fluctuations and accumulation of non-Paris Club
and commercial payment arrears contributed to the increase in external debt.
vii
External Debt
Total public and private external debt stock as at end December 2004 stood at
USD 8.5 billion. The debt stock represents an increase of about 6.1 percent,
compared to USD 8.1 billion registered in 1999. Despite the debt relief so far,
the debt stock has increased due to structural adjustment policies that requires
external finances, mainly sourced as loans from multilateral institutions that are
offering concessional loans. At the same time, disbursements, exchange rates
fluctuation and accumulation of interest arrears on non Paris Club Bilateral and
on commercial debt, also contributed to the increase in the debt stock.
During the period 2000 and 2001, there was a substantial decrease in the total
debt stock from USD 7.9 billion in 2000 to USD 6.9 billion in 2001, being a
decrease of 12.7 percent. The reduction was due to debt cancellations under PC
VII arrangements.
Domestic Debt
Total domestic debt stock, owed by the United Republic of Tanzania (URT) stood
at TZS 1,623.80 billion as at the end of December 2004, representing an
increase of TZS 365.94 billion or 22.54 percent when compared to TZS 1,257.86
billion recorded at the end of December 2003. The rise is mainly attributed to
government financing, monetary policy and development of capital markets.
ENHANCED HIGHLY INDEBTED POOR COUNTRIES (HIPC) INITIATIVE
FOR TANZANIA
DECISION POINT DSA
The Debt Sustainability Analysis (DSA) conducted jointly by the Government and
IMF showed that Tanzania’s external public and publicly guaranteed debt
position, as at end June 1999 was USD 6.38 billion. The DSA results indicated
viii
that the NPV of external debt to export ratio before debt relief was 397.1
percent, and it falls to 324.4 percent when traditional Paris Club debt relief
arrangement are applied, implying that even after full application of traditional
debt relief mechanism1, Tanzania’s external debt position would remain
unsustainable. There was therefore a need for further debt relief. When the
debt is treated under Enhanced HIPC Initiative, the NPV of debt to exports ratio
declined to 150 percent in 1998/1999, 125.5 percent in 2001/02 and further to
82.5 percent in 2004/05. These are sustainable levels. However, the analysis also
indicated that, the Debt Relief required to reduce external debt to sustainability
level was USD 2,026 million in Net Present Value (NPV) approximately USD 3,000
million in nominal terms. HIPC Initiatives were designed to meet that
requirement.
Delivery Of Debt Relief
Multilateral Institutions
As at end December 2004, Tanzania received a total debt relief amounting to
USD 331.0 million from multilateral institutions.
The UK Initiative
The United Kingdom begun making payments for 10 percent of Tanzania’s debt
service to IDA and AfDB for loans contracted before 1st January 2004 and after
multilateral HIPC Relief. The payments cover the debt service falling due from
January 1st 2005 onwards. The cumulative payments from 2005 through 2015 by
UK are expected to total USD 74 Million.
1
If the debt was rescheduled under Paris Club Naples Terms (67 percent stock cancellation) by the end of
June 1999.
ix
Paris Club Bilateral Creditors
Until December 2004, Tanzania had concluded bilateral agreements with
governments of Austria, Belgium, Canada, France, Germany, Italy, Norway, the
Netherlands, United Kingdom, USA, Russia and Japan, leading to cancellation of
debts worth USD 858.7 million under Paris Club VII arrangement.
Non - Paris Club Bilateral Creditors
Total debt relief received from this creditors as at end December 2004,
amounted to USD 72.5 million. This relief came from Bulgaria, India and China.
Kuwait has offered debt relief by rescheduling debt worth USD 31.8 million.
THE CURRENT DEBT SUSTAINABILITY ANALYSIS ASSUMPTIONS
External Debt
In analyzing external debt, two strategies have been used, the first one assumes
that maximum debt relief is to be provided by all creditors as set out in
Tanzania’s Decision Point Document of April, 2000.
It is also assumed that
additional debt relief will come from UK Initiatives of 2004 to complement IDA
and AfDB debt relief. The second strategy assumes that, debt relief is delivered
as per current trend whereby other creditors are not delivering at all.
Domestic Debt
Three domestic debt strategies have been developed for analysis of domestic
debt. The first one assumes the current policy on domestic debt whereby the
Government
is
currently
borrowing
in
order
to
repay
maturing
obligations,(Rolling over policy). The second one analyses the impact of
lengthening the maturity structure of the domestic debt portfolio and the
introduction of bonds for market development. The last one considers pessimistic
x
situation in which the economy is not doing well, with high inflation rate,
declining revenue collection and low market absorption.
External Financing
The current DSA assumes that the new inflows for budget financing will be
bridged by both loans and grants at varying degrees and proportions. On the
side of grants, the figures will be those generated under macro projections. As
regards to Loan financing, the two scenarios are considered;
1. The current level and proportions of loans and grants will be maintained in
the year 2005 and gradually start to decline in successive years. Loans will
be those with Grant Element of 50% and above.
2. In another case, the financing will be such that inflows will constitute less
new grants accompanied by new borrowing from less concessional
sources of finance with Grant Element of 35% or less.
Macroeconomic Projections
The macro economic projections are based on three fundamental assumptions,
one – the projections are broadly kept in line with programme agreed with IMF.
The second assumption considers that, the economy will be characterized by
favourable domestic environment for production and investment, as well as a
favourable external environment as evidenced by accelerated real growth, rising
revenue and higher government expenditures, especially on infrastructure and
continued support of development partners. The third assumption assumes that,
the economy is characterized by less favourable domestic and trade
environment; sluggish infrastructure improvement effort; and scaled back
support by development partners, together with less buoyant domestic revenues
xi
ANALYSIS OF RESULTS
External Debt Results
Under the HIPC Initiative Tanzania qualified for debt relief under export window
whereby NPV/XGS should not exceed 150 percent.
If maximum debt relief is received as envisaged in the Enhanced HIPC Initiative,
Tanzania will attain the sustainability threshold by 2006 when the ratio of Net
Present Value of Debt to Exports (NPV/XGS) falls to 141.9 percent. The ratio
declines further, to 102.2 percent by 2010 and to 74.5 percent in 2014.
In a more realistic situation where it is no longer assumed that all non Paris Club
creditors will provide full HIPC debt relief, Tanzania will reach sustainability
threshold by 2007 when the NPV/XGS ratio moves down to 147.2 percent. The
NPV/XGS ratio under this scenario shows a declining trend from 173.4 percent in
the year 2005 to 82.4 percent in the year 2014. This scenario shows that, nondelivery of HIPC relief from the expected non Paris Club bilateral and commercial
creditors, will lead to a delay of one year for Tanzania’s debt to be sustainable.
Domestic Debt Results
Unlike external debt, there is no international consensus over what should be the
appropriate threshold or benchmarks that can be used to test the sustainability
of domestic debt. However, according to MEFMI/DRI, domestic debt is
considered unsustainable if the ratio of present value of domestic debt to budget
revenue (solvency) exceeds 127 percent or the ratio of total domestic debt
service to budget revenue (liquidity) exceeds 66 percent.
(a)
Solvency Ratio:
Analysis of solvency indicates that, Tanzania domestic debt is sustainable.
xii
(b) Liquidity Ratio.
Under baseline scenario the TDS/DBR ratio is projected at 56.1 percent in the
year 2005, showing that Tanzania is just sustainable. In the long run analysis
the ratio declines to 13.7 percent in year 2010 and 8.9 percent in year 2014.
The lower ratios trend is also observed in both optimistic and pessimistic
scenarios. The ratio in the pessimistic scenario is lower at 49.0 percent compared
to 50.1 percent in the optimistic scenario due to the fact that the pessimistic
scenario assumes accumulation of arrears.
RECOMMENDATIONS
External Debt
The HIPC Initiative has significant achievements to Tanzania. The debts have
been reduced to levels whereby now the country is able to service maturing
debts. It is important that the country adheres to prudent debt management and
ensures it does not over borrow and return to the debt trap. Priority should be
given to loans with softer and very concessional terms offered by Multilateral and
Bilateral creditors.
Domestic Debt
It is important to note that while domestic debt stock represents less than 20%
of total public debt (external & domestic debt) its debt service payment is twice
higher than external debt service. This calls for the need of close monitoring of
the accumulation of the domestic debt and its cost in order to come out with less
expensive debts.
xiii
1.0
INTRODUCTION
1.1
An Overview of the Workshop
This Report is the outcome of the Post HIPC Debt Sustainability Analysis Workshop for
Tanzania held at the White sands Hotel Dar es Salaam from 25 th April to 4th May, 2005.
The Report builds on the DSA of November 2003 as revised in April 2004.
Since reaching the HIPC Completion Point in 2001, Tanzania has undertaken two Debt
Sustainability Analysis, one in 2002 and the other in 2003. This is part of its policy
objective in Debt Management of making an overall assessment of the debt situation on an
annual basis and to evaluate performance under the HIPC Debt Relief Initiative.
The Workshop was organized with facilitation from Mrs. Alice Konga of the Macroeconomic
and Financial Management Institute of Eastern and Southern Africa (MEFMI) and
supervision of Mr. Michel Vougeis an expert in Debt Strategy Analysis from Debt Relief
International (DRI). It drew participants from the Ministry of Finance in Policy Analysis
and Debt, External Finance, Treasury Registrar, Stock Verification and Accountant General
Department. Others were from Debt Management Department, Monetary and Financial
Affairs Department, Trade Finance and Investment Policies and Domestic Markets
Department of the Bank of Tanzania and officials from the President’s Office Planning and
Privatisation.
This paper presents an updated Debt Sustainability Analysis (DSA) based on Tanzania’s
outstanding external and domestic debt as of end December 2004. The macroeconomic
data reflect the national accounts and balance of payments statistics updated by the
Financial
Programming
Team
and
consistent
with
the
projected
medium-term
macroeconomic framework under the three-year arrangement IMF Supported Poverty
Reduction and Growth Facility (PRGF) beginning in fiscal year 2004/05.
1
1.2 An overview of Tanzania’s economy
Tanzania’s macroeconomic indicators have improved significantly in the past five years.
The growth rate of real GDP accelerated from 4.8 percent in 2000 to 6.7 percent in 2004,
the highest in the past two decades. Inflation has been consistently declining from 5.5
percent in 2000 to 4.0 percent by end December 2004. These developments have been
associated with the macroeconomic reforms spearheaded by the government, which have
increased efficiency and productivity in the economy. There has also been substantial
improvement in the external sector as reflected in the increase of official reserves from
around 4.9 months of imports of goods and services at the end of 2000 to around 7.0
months at the end of 2004. Domestic revenue collection also increased significantly during
the past five years from about TZS 858 billion in 2000 to TZS 1,459.3 billion in December
2004. The budget deficit ratio to GDP (excluding grants) rose from 5.1 percent in 2000 to
11.1 percent in 2004, reflecting an even more pronounced expenditure effort. With the
increase in grants, the deficit including grants rose only half as much, from 2.2 percent to
5.2 per cent. It is worth noting that, despite the impressive performance in revenue
collection, the revenue to GDP ratio remains low at 13.1 percent in 2004.
2
2.0
TANZANIA DEBT PORTFOLIO REVIEW
2.1
The National Debt
Total national debt stock, as at end December 2004 stood at USD10.1 billion of which,
USD 8.5 billion is external and USD 1.6 billion is Domestic. The total national debt
(external and domestic) increased from USD 9.0 billion in December 2000 to USD 10.1
billion as at end-December 2004.
The gradual increase in debt is mainly attributed by
increase in borrowing through securities for liquidity management, settlement of parastatal
debt, claims and budget financing on part of domestic component.
On other hand,
disbursements, exchange rate fluctuations and accumulation of arrears contributed the
increase in external debt.
Table 1: Trend of National Debt 2000 – 2004
Growth of National Debt
Total National Debt
External Debt Stock
Domestic Debt Stock
2.2
2000
9.0
7.9
1.1
2001
7.8
6.9
0.9
2002
8.4
7.5
0.9
2003
9.1
8.2
0.9
Billion USD
2004
10.1
8.5
1.6
External Debt
2.2.1 External Debt Stock
Total public and private external debt stock as at end December 2004 stood at USD 8.5
billion of which USD7.08 billion is DOD and USD 1.46 billion is interest arrears. The debt
stock represents an increase of about 6.1 percent, from USD 8.1 billion registered in 1999
when compared with the debt stock of USD 8.5 billion registered at end-December 2004
(Chart 1). Despite the debt relief so far, the debt stock has increased due to structural
adjustment policies that required bulk of external finances, which is sourced from external
sources. Most of these finances were borrowing from the multilateral institutions that are
offering concessional loans. On the other hand disbursements, exchange rates fluctuation
3
an accumulation of interest arrears on non Paris Club Bilateral and commercial debt also
contributed to the increase in debt stock.
Chart 1: Trend of Tanzania’s External Debt Stock
(Billions of USD)
1.01
1.34
1.06
1.46
1.24
1.08
7.04
6.81
5.79
1999
2000
2001
6.81
7.08
2003
2004
6.30
2002
Disbursed Outanding Debt
Interest
During the period 2000 and 2001, there was a substantial decrease in the total debt stock
from USD 7.9 billion in 2000 to USD 6.9 billion in 2001, being a decrease of 12.7 percent.
The reduction was mainly due to debt cancellations under PC VII arrangements.
2.2.2 External Debt Arrears
Total arrears as at end 2004 amounted to USD 2,629.6 million out of which
USD 1,168.1 million are principal arrears and USD 1,461.5 million are interest arrears.
Total arrears increased from USD 1,905.2 million in 1999 to USD 2,629.6 million in 2004,
being an increase of about 38.0 percent
Analysis of arrears by creditor category indicates that bilateral creditors are holding arrears
amounting to USD 1,698.4 million in 2004 followed by commercial creditors with an
amount of USD 544.7 million. Export creditors holding USD 356.5 million and lastly other
multilaterals such as EADB, IFC, etc are holding USD 30 million.
4
Arrears by borrower category shows that the Central Government is the major holder with
arrears amounting to USD 1,727.3 million followed by private sector with USD 544.7
million and lastly the Public Corporation with an amount of USD 357.6 million.
2.2.3 Profile of Disbursed Outstanding Debt (DOD)
2.2.3.1 Disbursed Outstanding Debt by Creditor Category
At the end of 2004, the profile of DOD by creditor category shows that 67.6 and 22.8
percent of the debt is owed to multilateral and bilateral creditors respectively, while debt
owed to commercial and export creditors was 9.6 percent. Further analysis shows that the
share of bilateral debt is declining due to debt cancellations under the Enhanced HIPC
Debt Relief Initiative.
However, the share multilateral debt is increasing because of
Government policy of borrowing concessional loans, which are offered by these
institutions.
Table 2: Disbursed Outstanding Debt by Creditor Category (%)
1999
2000
2001
2002
2003
2004
Bilateral
39.6
35.9
25.3
25.2
23.2
22.8
Multilateral
52.7
54.3
63.0
63.5
66.8
67.6
Commercial/Export Credit
7.7
9.8
11.7
11.3
10.0
9.6
100.0
100.0
100.0
100.0
100.0
100.0
TOTAL
2.2.3.2 Disbursed Outstanding Debt (DOD) by Borrower Category
Analysis of DOD by borrower category shows that as at end December 2004, the Central
Government is the largest borrower, with 85.1 percent of the DOD, followed by Public
Corporations with 7.9 percent of the total and lastly the Private Sector with 7.0 percent of
the total debt (Table 3).
5
Table 3: Disbursed Outstanding Debt by Borrower Category %
1999
2000
2001
2002
2003
2004
Central Government
87.3
85.1
82.3
82.3
84.7
85.1
Public Corporations
7.1
7.2
8.4
8.5
8.0
7.9
Private
5.6
7.6
9.3
9.1
7.4
7.0
TOTAL
100
100
100
100
100
100
2.2.3.3 Disbursed Outstanding Debt (DOD) by Use of Fund
Analysis of debt by use of funds indicates that at the end of 2004, 19.8 percent of the
DOD was disbursed in the form of Balance of Payments Support, compared to 27.3 percent
during 1999. The agricultural sector accounted for 16.0 percent, while 14.4 percent was
channeled to Energy and Mining Sector. The rest of the DOD was channeled to other
sectors of the economy as shown in table 3.
Table 3: Disbursed Outstanding Debt by Use of Fund (% of DOD)
Sector
1999
2004
Balance of Payment Support
27.3
19.8
Energy & Mining
14.3
14.4
Agriculture
14.7
16.0
General
12.9
16.2
Ground and Air Transport
10.1
10.4
Industrial Development
5.7
6.0
Health and Social Welfare
2.7
4.2
Telecommunication
2.8
3.4
Finance, Insurance, etc
2.0
1.2
Education & Training
1.8
4.0
Maritime Transport
1.4
1.1
Tourism & Hotel Industry
1.3
1.2
Rail Transport
1.1
1.1
Others
1.8
1.0
6
2.2.3.4 Disbursed Outstanding Debt (DOD) by Currency Composition
External debt in terms of currency composition weighs in favour of the Special Drawing
Right (SDR). The share of SDR has increased from 37.4 percent in 1999 to 51.9 percent in
2004. The dominance of SDR in the currency composition of Tanzania’s external debt
reveals that the Government has been borrowing more from multilateral institutions
lending in SDR such as IDA, IMF and IFAD that offers highly concessional loans. The US
Dollar is the second largest currency, accounting for 29.6 percent in 1999 and dropped to
25.6 percent in year 2004. The Japanese Yen is the third largest currency, accounting for
about 13.2 percent. Other currencies accounted for 18.2 percent in 1999, and fell to 9.3
percent in 2004 (Chart 2).
Chart 2: Trend of DOD by Currency Composition (%).
60.0
50.0
Pe
rc 40.0
en 30.0
ta
ge 20.0
SDR
USD
JPK
Others
10.0
0.0
1999
2000
2001
2002
2003
2004
Years
2.2.3.5 Maturity Structure of External Debt
Loans with Maturity of 15 years and above, mostly from multilateral and bilateral creditors
accounted for 83.6 percent of the total DOD. Loans with maturity between 10 – 15 years
accounted for 11.4 percent, while loans with maturities between 5 - 10 years account for
2.5 per cent of the DOD while loans with maturities between 1 – 5 years accounted for 2.6
7
percent of DOD.
The maturity structure reveals that the Government is the largest
borrower because it borrows concessional loans with longer maturities (Table 4).
Table 4: Maturity Structure of External Debt as at End - December 2004
Year
Amount (Million USD)
% Of Total DOD
1–5
167.60
2.6
5 – 10
161.70
2.5
10 - 15
745.90
11.4
15 and above
5,491.00
83.6
2.2.3.6 Average Terms of New Commitments
Analysis of average terms of new commitments shows that interest rates dropped from 1.4
percent in 1999 to 0.7 percent in the year 2004. The grant element increased from 60.7
percent in the year 1999 to 81.8 percent in the year 2004 (Refer Table 5 below).
Table 5: Average Terms of New Commitments
1999
2000
2001
2002
2003
2004
Interest (%)
1.4
1.2
0.8
0.9
0.8
0.7
Maturity (Years)
34.8
26.9
43.3
29.4
36.3
39.8
Grace Period (Years)
8.0
10.9
9.3
8.8
9.2
10.2
Grant Element (%)
60.7
62.8
74.4
51.5
74.9
81.8
2.2.4 New Commitments and Disbursements
2.2.4.1 New Commitments
New loans committed and recorded for the year 2004 amounted to USD 514.2 million. The
Government contracted 72.4 percent of the total loans while the rest were contracted by
the private sector.
8
It can be noted in Table 6 that from 1999 to 2004, the average public borrowings stood at
USD 346.9 Million, while in the Completion Point Document, the average borrowing was
projected at USD 413.8 Million. This indicates that in average Tanzania borrowings are
below Completion Point Document because of grants the country is receiving.
Table 6: Comparison between New Commitments and Projections in
the CP Document
Million USD
1999
2000
2001
2002
2003
2004
Average
Actual New Borrowings
Central Government
182.2
435.2
276.2
292.2
315.4
372.4
312.3
Public Corporation
0.0
180.9
0.0
0.0
26.9
0.0
34.6
Sub Total (Public)
182.2
616.0
276.2
292.2
342.4
372.4
346.9
Private Sector
30.9
163.0
66.6
63.3
12.8
141.8
79.7
Grand Total
213.1
779.1
342.8
355.5
355.2
514.2
426.6
319.3
440.4
418.1
417.3
418.4
413.8
Projections as per CP Documents
469.3
2.2.4.2 Loan Disbursements
Disbursements recorded during the year 2004 amounted to USD 147.1 million. The
government received 85.0 percent of the total amount while the rest was received by the
private sector. This amount is lower by 59.5 percent when compared to USD 363.0
received during 1999.
Table 7: Disbursements
Million USD
1999
2000
2001
2002
2003
2004
Total Disbursements
363.0
481.7
245.4
374.1
436.0
147.1
Government
268.2
281.2
150.9
257.9
416.9
125.1
Public Corporation
72.6
53.0
48.2
51.7
4.5
4.2
Private
22.1
147.6
46.2
64.6
14.7
17.9
9
2.2.5 External Debt Service
Total debt service declined from USD 229.7 million at end-December 1999, to USD 101.5
million at end-December 2002, as a result of Enhanced HIPC Debt Relief, and
accumulation of arrears to Non-Paris Club bilateral and commercial creditors. However,
debt service reached the level of USD 238.1 million in 2003 before dropping to USD 149.9
million in 2004. Out of the total debt service for the year 2004, USD 126.3 million was
made to multilateral creditors, while USD 4.1 million and USD 19.5 million were payments
to bilateral and commercial creditors respectively (Tables 8).
Table 8: Actual Debt Service: 1999 – 2004
Million USD
Creditor category
1999
2000
2001
2002
2003
2004
Multilateral
112.4
93.3
48.7
48.2
154.2
126.3
Bilateral
90.6
60.6
46.4
13.9
14.6
4.1
Commercial/Export Credit
26.8
14.7
25.1
39.4
69.2
19.5
229.7
168.6
120.2
101.5
238.1
149.9
Total
2.3
Domestic Debt
Domestic debt is composed of securities (marketable and non-marketable) debts that
arose as a result of implementation of parastatals divestiture policy and various claims on
Government by both the private sector and public institutions. Marketable securities
comprise of 35, 91, 182 and 364 days Treasury bills as well as 2, 5, 7 and 10-year bonds.
Non- marketable securities include Government stocks, re-capitalization bonds, and special
bonds. The Government since 1997 has been implementing the rollover policy for
Government securities. The 35 days and 91 days Treasury bills are issued for monetary
policy purposes, while most of the 182 and 364 days Treasury bills are issued as financing
papers. The 2, 5, 7, and 10 years bonds are issued also for financing purposes.
10
2.3.1 Domestic Debt Profile
Total domestic debt stock, owed by the United Republic of Tanzania (URT) stood at TZS
1,623.80 billion as at the end of December 2004, representing an increase of TZS 365.94
billion or 22.54 percent when compared to TZS 1,257.86 billion recorded at the end of
December 2003. The rise is mainly attributed to government financing, monetary policy
and development of capital markets.
Table 9:
1
Composition of Public Domestic Debt (In billion TZS)
Securities
Dec
Dec
Dec
Dec
Dec
2000
2001
2002
2003
2004
% of Total Absolute
973.44
1,241.33 1,438.62
166.17
170.02
267.61
247.92
253.16
52.2
136.21
149.62
338.7
480.13
218.37
306.23
417.23
586.62
230.75
227.8
126.31
475.46
382.93
1.28
change
Change
2004
2003
2003
-2004
-2004
197.29
15.89
733.29
45.16
146.67
25.00
122.5
121.25
7.47
-1.25
-0.09
429.9
532.21
584.08
35.97
51.87
3.61
-
-
-
-
-
-
-
707.49
610.73
556.21
654.71
705.33
43.44
50.62
7.73
16.28
15.41
30.94
16.53
185.18
11.4
Sale Agreement
1.75
0.94
-
-
-
-
-
-
Tax Certificate
0.06
0.06
0.06
0.06
0.06
-
-
-
Duty Draw Back
0.04
0.04
0.04
0.04
0.04
-
-
-
-
-
16.47
16.47
16.47
1.01
-
-
14.47
14.41
14.41
-
52.87
3.26
52.87
3.68
Govt. Guarantees
-
-
-
-
60.89
3.75
60.89
4.23
CompensationClaims
-
-
-
-
18.19
1.12
18.19
1.26
Direct Claims
-
-
-
-
19.48
1.2
19.48
1.35
Privatization
-
-
-
-
17.04
1.05
17.04
1.18
Recapitalization
-
-
-
-
0.14
0.01
0.14
0.01
1,257.86 1,623.80
100
365.94
22.54
BOT
916.96
debt Dec
88.60
Treasury Bills
925.86
%
Liquidity
Papers
Sub Total
Government Stocks
Government Bonds
Promissory Note
Sub Total
2
Other Govt. Debts
NSSF-Mabibo
Parastatal debt
Total Debt
942.14
932.37 1,004.38
11
168.65 1,020.27
2.3.1.1 Domestic Debt by Instruments
Analysis of domestic debt by instruments shows that, Securities (Treasury bills and BOT
liquidity papers) constitutes the largest proportion with 45.16 percent of the total debt
followed by Government bonds with 36.0 percent, other government debts are third with
11.40 percent and lastly, Government stocks with 7.47 percent. When compared to
December 2003, the position for December 2004 shows that Securities have increased
substantially by 25.0 percent from TZS 586.6 billion to 733.3 billion. Government bonds
increased by 3.61 percent from TZS 532.2 billion in year 2003 to TZS 584.1 billion in year
2004. Government stocks decreased by 0.09 percent while other government debts
increased by 11.72 percent from TZS 16.5 billion to TZS 185.2 billion.
The substantial increase noted in Securities was due to implementation of monetary policy
and redemption of government stocks. The increase in government bonds was due to new
issues for settlement of parastatals debt, financing of debt swap arrangement and
compensation claims.
Other domestic debts have increased tremendously from 16.57 billion in December 2003 to
185.18 billion in December 2004. The increase was due to inclusion of non - previously
recorded debts (Government guarantees, compensation claims, privatization, direct claims,
parastatal debt and re-capitalization). It is worthy noting that other domestic debts are
indicative numbers, the confirmation of the same is subject to auditing and verification.
12
Chart 3: Decomposition of Domestic Debt Composition as at 31st December
2004.
Other Gvt.Debt
11%
Securities 45%
Government
Bonds
36%
Government
Stocks
8%
2.3.1.2 Government Securities by maturity
Maturity profile of government securities shows that, the share of securities maturing in
less than 3 years ranked the first.
The instruments with maturities above 3 years but not
exceeding 5 years ranked the second. Maturities of over 5 years but less than 10 years
constituting of stocks and long-term bonds ranked the third. While those with maturities
of more than 10 years ranked fourth. Table 14 below summarizes maturities profile.
Table 10: Government Securities by Maturities
MATURITIES
2004
…<=3 Years
45.72%
Over 3 Yrs but <= 5 yrs
22.24%
Over 5 Yrs but <= 10 yrs
17.38%
Over 10 Years
14.65%
TOTAL
100.00%
13
Chart 4:
Government Securities by Maturities
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
<=3 Years
Over 3 Yrs but Over 5 Yrs but Over 10 Years
<= 5 yrs
<= 10 yrs
2.3.1.4 Government Securities by Holder Category
Analysis of Government Securities by Holder Category show that Commercial Banks are
leading creditors, followed by Pension Funds. Bank of Tanzania is third while Insurance
Funds are fourth.
Non-Bank Financial Institutions and Private Sector share the last
position. (Chart 5).
Chart 5:
Public Domestic Debt by Holder Category (Government Securities)
Insurance Funds
2.6%
Private Sectors
2.1%
Bank of Tanzania
21.4%
Pension funds
35.5%
Commercial Banks
36.5%
Non Bank Fin.Insts
1.9%
14
2.3.2 Domestic Debt Service
Total amount of TZS 281,078.29 million being principal plus interest was due for payment
as at 31st December 2004. Out of it TZS 230,013.37 million or 81.83 percent represented
principal amount that was rolled over while interest to the tune of TZS 51,064.92 million
was paid out of the Government revenue.
Table 11:
Domestic Debt service as at December 2004
(Million TZS)
TREASURY
BILLS
TREASURY
BONDS
SPECIAL
BONDS
STOCKS
OTHERS
TOTAL
PRINCIPAL
Budget
0
0
0
0
11,075.03
Rolled over
178,409.04
49,231.40
2,372.93
0
0
Sub-Total
178,409.04
49,231.40
2,372.93
0
11,075.03
Govt. Budget
9,587.39
9,110.34
11,763.47
8,902.70
625.99
Sub-Total
9,587.39
9,110.34
11,763.47
8,902.70
625.99
9,587.39
178,409.04
9,110.34
49,231.40
11,763.47
2,372.93
8,902.70
0
11,701.02
0
51,064.92
187,996.43
58,341.74
14,136.40
9,902.70
11,701.02
281,078.29
66.88
20.76
5.03
3.17
4.16
100
INTEREST
TOTAL
Budget
Rolled over
230,013.37
Grand-Total
TOTAL IN %
Further analysis of debt service payments show that at the end of December 2004, 66.88
percent of the amount was spent on Treasury bills, 20.76 percent on Treasury bonds, 5.03
percent on Special bonds, 4.16 percent on others and remaining utilized 3.17 percent on
stocks.
15
3.0 ENHANCED HIGHLY INDEBTED POOR COUNTRIES (HIPC) INITIATIVE
3.1 The Debt Sustainability Analysis
The Debt Sustainability Analysis (DSA) conducted jointly by the Government and IMF
showed that Tanzania’s external public and publicly guaranteed debt position, as at end
June 1999 was USD 6.38 billion. The DSA results indicated that the NPV of external debt to
export ratio before debt relief was 397.1 percent. The same would have fallen to 324.4
percent implying that even after full application of traditional debt relief mechanism2,
Tanzania’s external debt position would remain unsustainable, hence the need for further
debt relief.
Accordingly, if the debt were treated under Enhanced HIPC Initiative, the NPV of debt to
exports ratio would have declined to 150 percent in 1998/1999, 125.5 percent in 2001/02
and further to 82.5 percent in 2004/05 (Table 12).
Table 12: Net Present Value of External debt to Export of Goods and Services (NPV/XGS).
1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05
1 Before Debt Relief
397.1
413.3
402.1
368.9
337.8
307.2
284.8
324.4
346.9
346
325.3
302.4
279
261.5
150.0
165.4
177.9
174.9
166.3
160.8
157.6
2
After Traditional Relief Mechanism
3 After enhanced HIPC Initiative3
Source: Tanzania Decision Point Document
As a result of the Debt Sustainability Analysis, the Boards of World Bank and IMF approved
the Decision Point (i.e. the time when the country is declared eligible for debt relief) for
Tanzania on April 4, 2000 under Enhanced HIPC Initiative. Debt Relief required to reduce
external debt to export ratio was calculated as USD 2,026 million in Net Present Value
(NPV) approximately USD 3,000 million in nominal terms.
2
If the debt was rescheduled under Paris Club Naples Terms by the end of June 1999
The NPV of debt for 1999/2000 and 2000/01 shows the impact of all interim relief and relief to be delivered after the
Completion Point
3
16
The DSA done at Completion Point (i.e. the time at when the relief is delivered) by the
Government in collaboration with the IMF indicated that Tanzania’s external public and
publicly guaranteed debt position at June 30th 2001 was USD 5,717.0 million.
According to DSA results, the NPV of debt-to-export ratio for end-June 2001 was 137
percent well below 172 percent projected at Decision Point. The debt indicators showed
that debt relief provided under the Enhanced HIPC Initiative would have reduced
Tanzania’s public and publicly guaranteed external debt to sustainable levels. The NPV of
debt-to-export would have remained well below the Enhanced HIPC Initiative sustainability
target of 150 percent throughout the projection horizon. The fall in the ratio was due to
revised information on the debt stock, macroeconomic and debt projections, and changes
in discount rates and exchange rates. The ratio could further declined to 105 percent after
taking into account pledges of additional assistance from Paris Club bilateral creditors
beyond the Enhanced HIPC Initiative.
Table 13 Completion Point DSA; The Net Present Value of External debt to Export of Goods
and Services (NPV/XGS)
Year
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
After
Enhanced
HIPC 136.6
130.8
135.2
137.1
135.2
132.8
130.6
128.2
126.3
124.1
122.3
Beyond
HIPC
Assistance 104.9
104.4
110.5
114.9
115.8
116.0
116.3
115.9
115.8
115.0
114.3
3.2 Delivery Of Debt Relief As At December 2004
3.2.1 Multilateral Debt Relief
As at end December 2004, Tanzania received a total of USD 331.0 million as HIPC debt
relief from multilateral institutions. Out of this, USD 205.1 million came from International
Development Association (IDA), USD 65.6 million from International Monetary Fund (IMF),
USD 37.2 million from African Development Bank (ADB), USD 8.3 million from European
Investment Bank (EIB), USD 8.0 million from the International fund for Agricultural
development (IFAD), USD 5.5 million from Norwegian Trust Fund (NORTF) and USD 0.11
17
million from Nordic Development Fund (NODF). EADB has offered debt relief by canceling
debt worth USD 1.3 million.
Table 14: Multilateral Debt Relief June 1999 – December 2004
Million USD
1999
2000
2001
2002
2003
2004
TOTAL
IDA
0.0
30.1
38.6
43.1
45.9
47.4
205.1
AfDB
0.0
4.5
9.6
3.4
9.6
10.1
37.2
IMF
0.0
6.3
17.6
23.4
7.2
11.1
65.6
IFAD
0.0
0.0
0.0
6.2
0.9
1.0
8.0
NORTF
0.0
0.0
0.0
1.2
1.4
2.9
5.5
NODF
0.0
0.0
0.0
0.0
0.0
0.1
0.1
EIB
0.0
0.0
0.0
0.0
5.4
2.9
8.3
EADB
0.0
0.0
0.0
0.0
0.0
1.3
1.3
TOTAL
0.0
40.9
65.8
77.3
70.4
75.4
331.0
3.2.2 Bilateral Paris Club HIPC Debt Relief
Until December 2004, Tanzania had concluded bilateral agreements with governments of
Austria, Belgium, Canada, France, Germany, Italy, Norway, the Netherlands, United
Kingdom, USA, Russia and Japan, leading to cancellation of debts worth USD 858.7 million
under Paris Club VII arrangement (Table 15). Efforts are under way to have the remaining
bilateral agreements signed with Brazil and other Japanese agencies namely EID/MITI and
Japanese Food Agency.
18
Table 15:
Status of PC VII Implementation
Creditor
Amount Cancelled (In USD)
Remarks
Austria
31,288,564.7
Beyond HIPC
Belgium
74,294,335.1
Up to 90% Cancellation
Canada
31,085,847.0
Up to 90% Cancellation*
France
89,948,544.8
Beyond HIPC
Germany
60,850,832.1
Beyond HIPC
Italy
132,000,000.0
Beyond HIPC
Norway
11,055,493.1
Beyond HIPC
The Netherlands
99,105,877.4
Beyond HIPC
United Kingdom
129,220,781.5
Beyond HIPC
United States
21,330,000.0
Beyond HIPC
Russia
69,569,474.0
Up to 90% Cancellation
Japan
108,900,452.4
Partial Relief
Total
858,650,202.0
*
Canada has announced that it will cancel her remaining debt, however, the agreement to that
effect has not been executed.
3.2.3
Bilateral Non – Paris Club HIPC Relief
Total debt relief received from this category as at end December 2004, amounted to USD
72.5 million. Bulgaria, India and Kuwait are the only countries that have offered debt relief
in line with the HIPC framework. Bulgaria has offered debt relief by canceling debts
amounting to USD 15.1 million.
India has offered debt relief by canceling all her
intergovernmental loans amounting to USD 19.7 million. Kuwait has offered debt relief by
rescheduling debts amounting to USD 31.8 million. China has offered debt relief outside
the HIPC framework by canceling debts worth USD 37.7 million (Table 16). Dialogue has
been initiated with Abu Dhabi Fund, Libya, Hungary, Algeria and Iran but no firm
commitment has been made so far.
19
Table 16: Debt Relief from Non – Paris Club Bilateral Creditors
Million USD
Creditor
Amount of Relief
Remarks
Bulgaria
15.1
Cancellation
India
19.7
Cancellation
Kuwait
31.8
Rescheduling
China
37.7
Cancellation
3.2.4 Debt Relief from UK’s Multilateral Debt Relief Initiative:
The United Kingdom begun making payments for 10 percent of Tanzania’s debt service to
IDA and AfDB for loans contracted before 1st January 2004 and after multilateral HIPC
Relief. The payments cover the debt service falling due from January 1 st 2005 onwards.
The cumulative payments from 2005 through 2015 by UK are expected to total USD 74
Million.
20
4.0
2005 DEBT SUSTAINABILITY ANALYSIS
4.1
Underlying Strategy Assumptions
4.1.1 External Debt Scenarios Assumptions
(i)`Scenario One: Maximum HIPC (E1).
This strategy assumes that maximum debt relief is to be provided by all creditors as set
out in Tanzania’s Completion Point Document of November 8, 2001. It is also assumed
that additional debt relief will come from UK Initiatives of 2004 to complement IDA and
AfDB debt relief.
The main categories of debts and the debt relief operations applied to each category are
shown below.
Table 17:
Categories of Debt Relief
Debt Category
Treatment
Paris Club
Implementing PC VII Agreement
Non Paris Club Bilateral

Applying Comparable Treatment to PC
on pre-cut off date debt
Commercial
Multilateral

Pay post-cut off date debt

Buyback the eligible debt at IDA terms

Pay (Others)

HIPC Relief (promised)

UK Initiative
Detailed Assumptions for Maximum HIPC
Paris Club
All concessional (ODA) pre-cut-off date loans are treated on Cologne Stock Terms (90
percent cancellation) plus additional cancellation for all creditors.
21
Equally all Non-
concessional (Non-ODA) pre-cut-off date loans are treated on comparable terms to
concessional (ODA) pre-cut-off date loans.
All creditors are assumed to cancel 100 percent of post cut off date (ODA) loans.
However, it is assumed that some creditors will cancel 100 percent of post-cut-off NonODA loans.
Non-Paris Club Bilateral
All creditors are assumed to offer Paris Club comparable terms on all pre-cut off date
concessional (ODA) loans. These creditors are also assumed to offer Cologne Stock 90
percent plus 6 percent on Non-concessional (Non ODA) loans, which are pre-cut off date
loans. Tanzania is assumed to pay all post cut off date loans as they fall due.
Commercial
Tanzania is assumed to buyback (eligible debt) at IDA terms ie. 12 cts on a dollar of
principal amount. Other commercial debts are assumed to be paid when they fall due.
Multilateral
Multilateral creditors are assumed to offer HIPC relief with maximum front-loading as set
out on Completion Point Document, for example IDA agreed to offer debt service reduction
for a period of 20 years. It is also assumed that UK will pay 10 percent of HIPC’s debt
service payments to IDA and AfDB on all debts incurred before January 1, 2004.
(ii)
Scenario Two:
Realistic HIPC (E2)
In this strategy it is considered that all creditors as per latest position offer the HIPC relief
realistically.
22
Paris Club
In realistic HIPC all creditors have offered relief beyond HIPC Cologne Stock Terms (90
percent cancellation) except Belgium, Canada and Russia. Japan has offered partial relief
below Cologne Stock terms because some of Japanese agencies have not yet offered any
debt relief. Brazil has not offered any debt relief.
Non-Paris Club Bilateral
For non Paris Club Bilateral Creditors, only Bulgaria, India and Kuwait have offered debt
relief in line with the HIPC framework. Kuwait has offered debt relief by rescheduling her
eligible debts at concessional terms. China has offered debt relief outside the HIPC
framework by canceling some of her debts, which represents 22.87 percent of her debt at
Completion Point.
Multilateral
Tanzania is receiving HIPC debt relief from International Development Association, African
development Bank (ADB), IMF, European Investment Bank (EIB) and Nordic Development
Fund (NODF). However, under this scenario, EADB has offered debt relief by offering its
share of HIPC delivery.
UK Initiatives
The UK Government has proposed to pay 10 percent of HIPC debt service payments to
IDA and AfDB on all debt incurred before 1 January 2004. The debt service relief will be
on payments due, after HIPC relief but as of 1 January 2005.
Commercial
On case-by-case basis certain commercial debts are being paid. The Government
accumulates arrears on other commercial debts.
23
4.1.2 Domestic Debt Scenario Assumptions.
Three domestic debt scenarios have been developed on the basis of types of instruments,
purpose of debt, and creditor category. The overall objective of these scenarios is to
develop a sustainable domestic debt strategy for Tanzania.
(i)
Scenario I: Baseline
This scenario implements the current policy on domestic debt of the government. The
Government is currently borrowing in order to repay maturing obligations. This scenario
implements the current strategy of rolling over marketable instrument at market price.
This involves:

Roll over all Treasury bills on maturity.

Roll over all tradable bonds on maturity.

Refinance debt service through the re-capitalization Bonds and other special bonds
through 2, 5, or 10-year bonds.

Refinance debt service with Government stocks of 2, 5, 7 and 10-year bonds.

Pay the privatization debts as budgeted.

Pay the re-capitalization shares to Tanzania Standard Newspaper in 2005 as
committed.

Pay and/or securitize through 2-year bonds all claims on government.

The Government guaranteed debts are maintained in arrears.

The Government maintains its policy of not borrowing internally for gap filling.
(ii)
Scenario II: Optimistic
The objective of this scenario is to analyze the impact of lengthening the maturity
structure of the domestic debt portfolio and introduction of bonds for market development.
This scenario supports the government policy of rollover.
Therefore, in this scenario it is assumed that:
24

Domestic debt borrowing will be kept in abeyance while the existing debt will be
refinanced through issuance of long-term bonds in order to lengthen the yield curve
and promote market development.

The Treasury bills will be rolled over at lower yields on assumption that the
economic growth will improve and therefore the inflation rate will go down. The
government will pay the interest cost on financing papers while the Bank of
Tanzania will pay interest cost on liquidity papers.

Bonds are issued through the auction system. In order to promote market
development, 80% of these bonds will be rolled over while 20% of maturing bonds
will be restructured into 5, 10 and 15-year bonds. These bonds will be restructured
as follows: 20% of the 2, 5, 7, 10 and 15 year bonds will be restructured into 5, 7,
10 an 15 year bonds respectively.

Re-capitalization and special bonds will be rescheduled into 15 and 20-year bonds in
order to spread and lengthen the maturity profile.

Considering that 94% of the government stocks are held by BOT, the two parties
namely, the Government and the Bank of Tanzania will negotiate and reschedule
the debt into 15 and 20 year bonds at an agreed interest rate.

The government will pay privatization debts in order to avoid court proceedings that
might end up into costly court awards.

In order to enhance the capital base or net worth of the Tanzania Standard
Newspaper the government will have to buy the additional re-capitalization shares.

Some of the government claims such as Compensation, Duty Drawback Scheme,
Tax Reserve Certificates and NSSF Mabibo Hostel will be paid according to
agreements.
25

The indirect and direct claims like utility bills will be securitised over a period of 4
years into 10 year and 15 year bonds at prevailing market rates.

The Government will pay the guaranteed debts in order to maintain credibility.
(iii)
Scenario III: Pessimistic
This scenario was developed under the assumption that, the economy is not doing well,
with high inflation rate, declining revenue collection and low market absorption capacity.
With this in mind, the following assumptions have been made:
Rollover of treasury bills at a higher cost in line with high inflation rate.

All tradable bonds will be rolled over at higher interest rates.

Re-capitalization Bonds will be re-financed using the 2 and 5-year bonds at higher
interest rate since it is assumed that market preference will move towards the short
end of the yield curve and thus long term bonds will not be attractive.

The external to domestic debt Swap bonds will be re-financed using the 2 and 5year bonds.

Government Stocks held by the Bank of Tanzania will be rescheduled into 5 and 10
years bonds at negotiable rate.

Privatization Debts will be held until the economic situation improves.

Re-capitalization shares will be delayed until the financial status stabilizes.

No action will be taken regarding Compensation claims, Duty Drawback Scheme,
Tax Reserve Certificate, Guarantees, and Parastatal indirect debts since there are no
resources.
26

NSSF - Mabibo Hostel Agreement will be re-structured into 10 years bond at a
higher interest rate in order to maintain the government’s credit worthiness.

Direct claims, which are basically utility bills, will be swapped with tax obligations
over a period of 4 years.
4.1.3 External Financing
Underlying Assumptions
The current DSA assumes that the new inflows for budget financing will be bridged by
both loans and grants at varying degrees and proportions. On the side of grants, the
figures will be those generated under macro projections. As regards to Loan financing, the
two scenarios are considered for inclusion:
3. The current level and proportions of loans and grants will be maintained in the year
2005 and gradually start to decline in successive years. Loans will be those with
Grant Element of 50% and above.
4. In another case, the financing will be such that inflows will constitute less new
grants accompanied by new borrowing from less concessional sources of finance at
Grant Element of 35% or less.
Further to the above, budget bridging will be done mainly from external sources. The
grants will finance 70% while loans will cover the remaining 30%. Similarly, the gap filling
for BoP will be financed along the same lines.
27
Detailed Scenarios
From the above, two scenarios are considered for inclusion in the current DSA.
(i)
Scenario 1: Maintain the current level of loans inflows at concessional
level with Grant Element between 35% and 50%.
This scenario is optimistic and is currently used to acquire loans. As such, NDS execution
managed to partially borrow at the recommended threshold. Apart from IDA and ADF that
lend at Grant Element above 50%, the majority of remaining loans have Grant Element
below 50% and under very exceptional cases few have Grant Element below 35%. In this
regard, maintaining the current level of budget financing at the level of 41% for both loans
and grants means that the level of borrowing will have loans with Grant Element ranging
between 40 and 80%.
Under this scenario, the new loan inflows are expected from multilateral institutions (IDA,
ADF, BADEA, EADB, EIB, IFAD, IFC, IMF, NDF, NORSAD Fund, PTA Bank and OPEC) which
offers concessional loans. These institutions will offer around 92% of the total financing
requirements, while around 8% will be from bilateral sources.
(ii)
Scenario 2: The inflows will be such that less of grants and more of
loans with concessionality of around 35% Grant Element or less.
Under this scenario, it is assumed that, the sustainability of the country will be highly
improved hence exposing the country to finance its requirement through expensive
borrowing, as grants will gradually be phased out. This entails that if the magnitude of
budget financing will be maintained, grants will be gradually replaced by loans, which may
be obtained from IDA & ADF and from non concessional sources. Consequently, the
proportion of less concessional financing sources of the Loans will increase.
As regards to budget gap filling, it still remains that bridging will be done by both domestic
and external sources. Externally, the grants will finance 70% while loans will cover 30%.
Similarly, the gap filling for Balance of Payments will be done along the same lines.
28
4.1.4 Macro-Economic Scenarios
4.1.4.1 Outlook of the Macroeconomic Scenarios Assumptions
The macro economic projections are based on three fundamental assumptions:
Baseline Assumptions; where projections are broadly kept in line with programme
agreed with IMF: i.e. Continued fiscal discipline and macro - stability in a moderately more
dynamic economy; an increasing government expenditure effort continues to be supported
by development partners, and financed by higher revenue yield.
Optimistic Assumptions; characterized by favourable domestic environment for
production and investment, as well as a favourable external environment; accelerated
infrastructure improvement effort is successful as evidenced by accelerated real growth,
rising revenue and higher government expenditures, especially on infrastructure and
continued support of development partners.
Pessimistic Assumptions; characterized by less favourable domestic and trade
environment; sluggish infrastructure improvement effort; and scaled back support by
development partners, together with less buoyant domestic revenues
(i)
Baseline Scenario
In the medium term, the real GDP growth rate is projected to average around 7 percent
while in the long-term the rate is projected to be around 8 percent. Inflation is assumed to
stay at 4 percent while revenue to GDP ratio rises moderately, averaging 15 ½
percent in the medium term and 18 percent thereafter. The Foreign aid is expected
to be sustained through the medium term, with some scaling back in the outer years, as
the buoyant domestic revenues fill the gap. The expenditure effort rises in the medium
term – with the increase concentrated in development expenditure, particularly
infrastructure improvement – with some modest easing back in the outer years.
29
(ii)
Optimistic Scenario
The combination of favorable domestic and external conditions, together with a successful
accelerated infrastructure improvement effort, and maturing financial markets coalesce to
set the stage for a more dynamic, self-supportive macroeconomic environment. It is
characterized by accelerated real growth and investment and a burgeoning revenue ratio.
This combines with even greater donor support to finance an even more ambitious
expenditure effort, further strengthening the vitrous cycle of economic growth, growing
government resources and private and public sector investments. The process is supported
further as more and more of the informal sector gets formalized. The higher revenue
obtained will increase government expenditure particularly on development projects. The
improved infrastructure will yield higher GDP and export growth.
(iii)
Pessimistic Scenario
In a counter scenario, the combination of less favorable domestic and external market
conditions, a less successful implementation of the NSGRP and infrastructure improvement
strategy results in more muted real growth, revenue buoyancy, and donor enthusiasm. In
turn, this constrains the level of financing of government expenditure (especially on capital
formation). Expenditure does not adjust enough to match the decline in revenue, grants
and foreign financing thus causing the government to increase deficit financing through
domestic bank borrowing. This result also in higher money supply growth and inflation,
which further dampens real GDP growth. Whereas a TZS is fairly stable in the previous
scenarios, in this scenario a more pronounced depreciation is observed.
30
(i) The Baseline Scenario
This scenario keeps projections broadly in line with the programme agreed with IMF
in medium term:

The average real GDP growth rate for 2005 – 2008 is projected to be 6.9
percent and thereafter to average 7.6 percent from 2009 – 2020. It
reaches 8 ½ percent by the end of the period.

Investment to GDP ratio is projected to increase to an average of 24.5
percent to GNDI in the medium term before easing marginally to an
average of 24.4 percent.

The average growth rate of USD value of exports of goods and services is
projected to be 11.8 percent for 2005 – 2008 and to slow down to 10.9
percent in 2009-2020.

The average growth rate of USD value of imports of goods and services is
projected at 11.8 percent in medium term and 10.9 percent in the longterm.

Foreign exchange reserves as months of imports are projected to average
7.7 in 2005-2008 and 6.7 thereafter.

Domestic budget revenue as a percentage of GDP is forecasted to average
15.3 percent in 2005-2008 and to increase to 17.6 percent in the longterm. The ratio is projected to reach 18 ½ percent by the end of the
period.

Expenditure/GDP ratio is projected to reach 27 percent in the medium
term and to rise further to 28.2 percent in the outer years.
31

The Government Grants/GDP ratio in 2005-2008 is projected to reach 7.7
percent and to ease back slightly to 7.2 percent in 2009-2020.

Budget deficit (excluding grant) is forecast to increase to 11.7 percent in
the medium term, and then to decrease slightly, averaging 10.7 percent,
in the longer term.

The exchange rate during the projection period will depreciate at an
annual rate of 1.5 percent through the medium and long term, reflecting
the assumption of slightly higher domestic inflation than that of trading
partners.
32
(ii) Optimistic scenario
This scenario assumes a more buoyant economic environment, reflecting in part the
benefits of a concentrated effort to improve the country’s infrastructure, and the
resulting buoyancy of the domestic revenue yield. There is a dynamic foreign sector, and
higher import elasticity.

Real GDP growth is projected at 7.1 percent during 2005 – 2008 and to rise
further to an average of 8.7 percent in outer years. It surpasses 10 percent by
the end of the period.

Export growth is projected to average 13.4 percent in the 2005 – 2008 period,
and 12.2 percent in the 2009 – 2020.

Domestic budget revenue as a percentage of GDP is expected to be 15.3 percent
in 2005 – 2008, rising to 19.5 percent for 2009 – 2020.

The government grants to GDP ratio is projected to average 7.9 percent in 2005 –
2008 periods and to ease back to 7.5 percent thereafter.

Foreign exchange reserves are expected to cover 7.6 months of imports of goods
and services during the programme period 2005 – 2008 and to decline to an
average of 6.6 months of imports for the outer years.

The import growth is expected to average 10.3 percent in 2005 – 2008 and 12.2
percent in the outer years. Import elasticity is projected at 1.6 for 2005 – 2008
and at 1.08 in the outer years.

The expenditure to GDP ratio is programmed to average of 27.3 percent during
the programme period 2005 – 2008 and 30.8 percent for the outer years.

Grants average 7.9 percent of GDP in the medium term and 7.5 percent in the
outer years.

The deficit including grants is roughly in line with the baseline scenario both in
the
medium
and
in
the
longer
macroeconomic policy objectives.
33
term,
and
it is consistent with
(iii) Pessimistic scenario
This scenario depicts a decidedly less dynamic economic environment, a less successful
implementation of the infrastructure enhancement initiative, lower revenue buoyancy
and a reduced grant/aid contribution from the donor community during the review
period.

The real GDP growth rate is projected at 6.3 percent during the medium term
and to slow down to an average of 5.8 percent in outer years.

The nominal export growth (USD) is projected to be at an average of 10.1
percent during the period between 2005 and 2008 and to slow down to an
average of 7.9 percent in the long-term.

Foreign exchange reserves as months of imports are projected to decline to 7.7
months in 2005-2008 and to decline further for 5.1 months in the outer years.

Domestic budget revenue as a percentage of GDP is expected to be 14.3 percent
in 2005 – 2008 and to increase modestly thereafter, to an average of 15.4
percent during the 2009 – 2020 periods.

The expenditure-to-GDP ratio is expected to average 25.6 percent during 2005 –
2008 and to slow down gradually thereafter averaging 24.1 percent for the outer
years.
 Foreign grants to GDP ratio is forecast to decline to 7.3 percent in 2005 – 2008
and to decrease noticeable to 4.9 percent of GDP in the outer years.
 Inflation rate remains on target in the medium term at 4.1 percent, but is
expected to increase significantly, to 10.9 percent in the outer years. This reflects
the combined effects of efforts to sustain the expenditure effort in the face of
less robust domestic revenue growth and lower donor grants, resulting in a
pickup in domestic financing and more rapid money growth.
34
5.0 ANALYSIS OF RESULTS UNDER ALTERNATIVE SCENARIOS
The tests of sustainability of Tanzania’s external and domestic debt after the HIPC
completion point is based on the analysis of five global scenarios, each encompassing four
key sets of assumptions regarding:
1. External debt relief scenarios (E1 & E2);
2. Domestic Debt scenarios (D1, D2 & D3);
3. New foreign financing strategies (F1 & F2); and
4. Alternative macroeconomic assumptions (M1, M2 & M3).
The scenarios pick alternative combinations of assumptions for each of the four elements,
and can be characterized as follows:

Global Scenario I (E1D1F1M1): labeled as “Updated HIPC” tries to assess debt
sustainability ratios wherein the HIPC relief (and net new concessional financing)
assumptions set out at the time of HIPC completion point are retained in the context of
a credible macroeconomic environment. In this scenario, where none of the budgetary
deficit is financed using new domestic borrowing and the term structure of domestic
debt is held stable. The intention behind this scenario is to see how the ratios for the
2005-2015 period are different from the projections prepared 5 years ago: is Tanzania
closer to or further away from the established sustainability goals that were set back
then; are prospects more or less favorable and what are the changes attributable to.

Global Scenario II (E2D1F1M1): is labeled as the “most realistic” in that it retains the
assumptions from the previous scenario with the exception of debt relief where terms
for debt relief of non-Paris Club creditors are only half as generous as envisaged in the
full HIPC relief scenario; however, development partners remain supportive in the form
of grants and generally highly concessional net new foreign financing

Global Scenario III (E2D2F1M2): labeled the “optimistic” scenario is based on a more
robust macroeconomic environment, stronger real growth, and more buoyant domestic
revenue yield, and exports. The more realistic debt relief assumption and the optimistic
foreign financing assumption of Scenario II are retained. While it is assumed that no
new domestic financing will be forthcoming, the Government successfully and costeffectively extends the maturity structure of domestic debt.
35

Global Scenario IV (E2D3F1M3), the “pessimistic” scenario retains the pessimistic
macroeconomic assumptions together with the more realistic debt relief assumptions.
In that environment, real growth is lackluster, as are export growth and domestic
revenue growth; sticky expenditures and lower grants imply a greater need for
domestic financing, with the foreseeable implications on money growth and inflation.
Highly concessional foreign financing assumptions are retained in this scenario.

Global Scenario V (E2D1F2M1) picks up the same assumptions as in base case
Scenario II above with the exception of the less attractive foreign financing
assumptions, wherein a greater portion of development partners’ effort is in the form of
financing rather than grants, and this financing encompasses less concessional terms
than under Scenario II.
The sustainability of external and domestic debt is analyzed in turn.
5.1
External Debt Sustainability Analysis

Under the HIPC Initiative a country’s debt is classified as unsustainable
and eligible for HIPC debt relief on the following criteria among others:

The ratio of the Present Value of Debt to Exports of Goods and Services (NPV/XGS)
exceeding 150%, and

The ratio of the Present Value of Debt to Domestic Budget Revenues (NPV/DBR)
exceeding 250%.
In addition, it is intended that the debt relief provided under the HIPC Initiative should be
sufficient to alleviate the claim of external debt service on available budget resources, and
on foreign exchange earnings, and in particular, to bring down the ratio of Total Debt
Service to Exports of Goods and Services (TDS/XGS) below 15%.
36
Although there is no formal benchmark for assessing the burden of debt service on the
budget, some independent analysis has shown that the critical level for the ratio of debt
service to budget revenue is 12% with an increasing risk that countries with ratios above
this level may face payment arrears.
Table 18: External Debt Ratios (NPV/XGS)
Strategy
2005
2006
2007
2008
2010
2014
I
153.0
142.0
131.6
120.6
99.4
72.3
II
173.4
159.7
147.4
134.8
110.8
79.9
III
171.8
156.8
142.8
128.8
103.2
71.8
IV
172.9
160.4
150.2
140.5
121.4
95.8
V
178.9
165.5
153.6
142.0
120.0
90.6
As shown in Table 18, on the basis of the analysis of NPV/XGS ratio, the 150%
sustainability threshold is reached within a two-year interval under all global scenarios
except Scenario V (E2D1F2M1).
Global Scenario 1 (E1D1M1F1), wherein maximum relief is received as envisaged in the
Enhanced HIPC Initiative, shows that Tanzania will attain the sustainability threshold by
2006 as the ratio of Net Present Value of Debt to Exports (NPV/XGS) falls to 141.9 percent.
The ratio declines further, to 102.2 percent by 2010 and to 74.5 percent in 2014.
The difference between Strategy 1 results and the IMF’s results in Completion point
document reflects new information on debt stock at end-December 2004 (IMF’s debt stock
was as at June 30 1999). Other reasons include differences in macro economic
assumptions and new financing, debt projections, changes in discount and exchange rates.
However, a more realistic scenario (Strategy 2:E2D1M1F1), similar to the first global
scenario with the exception that it is no longer assumed that all non Paris Club creditors
will provide full HIPC debt relief, shows that Tanzania will reach sustainability threshold by
2007 as the NPV/XGS ratio moves down to 147.2 percent. The NPV/XGS ratio under this
scenario shows a declining trend from 173.4 percent in the year 2005 towards 82.4
37
percent in the year 2014. This scenario shows that Tanzania will delay to be sustainable
for one year due to cost of non delivery of HIPC relief from the expected non Paris Club
creditors as compared to Strategy 1. If Tanzania had received maximum relief from these
creditors, sustainability would have been attained in the year 2006 at 141.9 percent. The
nominal value of debt relief required to attain sustainability at (150 percent is USD 209.6
million). Tanzania therefore would require to step-up its efforts to obtain this relief by
requesting for more cancellation and broadening its menu of options for relief delivery.
Table 19. External Liquidity Ratios (TDS/XGS)
Strategy
2005
2006
2007
2008
2010
2014
I
4.9
5.1
5.3
5.1
3.8
2.4
II
4.9
5.4
5.5
5.3
4.0
2.5
III
4.8
5.2
5.3
5.0
3.7
2.2
IV
4.9
5.5
5.8
5.7
4.5
3.0
V
5.1
5.5
5.7
5.5
5.8
3.8
By the measure, liquidity analysis as done using the ratio of Total Debt Service to Total
Exports of Goods and Services (TDS/XGS) Tanzania is shown not to be expected to
experience any liquidity problems in the medium and long term under any of the five
global scenarios, in the context of the unifying assumption that multilateral institutions
continues to deliver debt relief. This is illustrated by the fact that under all strategies, ratio
values remain below the threshold figure of 15 percent (Table above).
5.1.2 Sensitivity Analysis
This part examines the sensitivity of the aforementioned external debt sustainability ratios
to changes in the macroeconomic environment in case of surplus/shortfall in export
earnings and budget revenue and its implication on debt sustainability.
Analysis shows that when making comparison between the realistic scenario (Strategy
2:E2D1M1F1) and optimistic scenario (Strategy 3:E2D2M2F1), ratios in Tanzania 3 are
better than in Tanzania 2. Although sustainability is attained in the same year 2007 where
38
ratios are 147.2 percent and 142.9 percent respectively but ratios in Tanzania 3 are better
than Tanzania 2 due to better economic performance.
On the other hand, when comparing the realistic scenario (Strategy 2:E2D1M1F1) with
pessimistic macro scenario (Strategy 4:E2D3M3F1) there is a delay in attaining
sustainability until the year 2008 due to poor economic performance. However under
pessimistic macro scenario, ratios expected are higher than in the realistic scenario i.e.
141.1 percent and 135.5 percent respectively in the year 2008. Nevertheless Tanzania’s
external debt remains sustainable thereafter. This is due to combined impacts of HIPC
relief and implementation of policy of borrowing concessional loans with grant element of
at least 50 percent.
When the realistic scenario (Strategy 2:E2D1M1F1) is compared with the scenario under
which there is higher cost of borrowing (Strategy 5:E2D1M1F2) sustainability will be
delayed until 2008 where the ratio is 142.7 percent. In this scenario the ratios has
worsened compared to Strategy 2. Nevertheless the external debt remains below the
HIPC threshold due to the export growth assumptions.
As in previous scenario Tanzania’s external debt can be considered sustainable when fiscal
ratios are analysed below the threshold of 250 percent.
5.2 Domestic Debt Sustainability Analysis
Unlike external debt, there is no international consensus over what should be appropriate
threshold figures or benchmarks that can be used to test the sustainability of domestic
debt.
However, according to MEFMI/DRI, domestic debt is considered unsustainable if:

The ratio of present value of domestic debt to budget revenue (solvency) exceeds
127 percent;

The ratio of total domestic service to budget revenue (liquidity) exceeds 66 percent.
A study of HIPC countries conducted by DRI showed a tendency for countries where
external debt ratios were above benchmark, to have accumulated domestic arrears and to
39
have experienced domestic debt service problems and thus could be considered to have
unsustainable domestic debt. Conversely, countries with domestic debt ratios below the
benchmark did not accumulate these types of arrears and were servicing their debt as
scheduled, indicating their debt was sustainable. For countries whose indebtedness ratios
are within the benchmark, their domestic debt could be considered potentially
unsustainable.
Ratio
Indicator
NPV/DBR
88% - 127%
TDS/DBR
28% - 63%
INT/DBR
(c)
4.6% - 6.8%
Solvency Ratio:
The Net Present Value of domestic debt to Domestic Budget Revenue (NPV/DBR),
measures today’s cost of domestic debt compared to Government’s ability to repay
from budget revenue. This preliminary analysis of this ratio for the three strategies
would indicate that Tanzania domestic debt could be considered sustainable.
Under baseline scenario, this ratio is 87.1% in year 2005 and shows a declining trend to
41.3 percent in year 2010 and 24.4 percent in year 2014 as the growth rate of the
projected budget revenues is greater than the increase of the present value as the country
continues to implement its current policy of not borrowing in the local capital market to
finance its budget deficit.
Both alternative scenarios follow the same declining trend as the previous one. Under the
optimistic scenario the NPV/DBR ratio is 115.3 percent in year 2005, and 99.1 percent in
year 2006, which is just sustainable and highly sustainable in the long run as the ratios
decline to 51.3 percent and 27.1 percent in year 2010 and 2014 respectively.
The
NPV/DBR ratio in the pessimistic scenario is 95.0 percent in year 2005, which is within
sustainable levels.
The ratio decline further to 85.9 percent, 51.3 percent and 29.2
percent in year 2006, 2010 and 2014 respectively.
40
The NPV/DBR ratio in the optimistic scenario (E2D2F1M2) is higher than the baseline
ratios mainly caused by the restructuring of domestic arrears into long-term bonds,
whereas in the baseline scenario the debt is being paid hence the decline of the present
value of the country’s domestic debt.
Likewise, in the optimistic scenario PV of the debt is higher than in the pessimistic scenario
due to the increase of the present value from the securitization of some of the domestic
arrears, and the lengthening of the maturities of the domestic debt portfolio caused by the
difference between the interest rate and the discount rate (16% vs. 10% or the weighed
average of the yields of the various debt instruments).
The strategy built in the Optimistic scenario (E2D2F1M2) would enable the country to
lower the increasing rollover risks, lengthening the maturity structure and further develop
the domestic capital market, while at the same time reduce the debt service burden on the
budget. Particularly, a change of policy from servicing BOT debt through the issuance of
marketable instruments would help reduce the rollover risk inherent to the current policy.
Long-term instrument could be offered to BOT at a negotiated interest rate to replace the
current government rollover policy. The new instrument should provide sufficient resources
to BOT in order to maintain its monetary policy while at the same time reduce the cost on
the government budget.
41
Table 20: Domestic Debt Repayment Profile.
(Million TZS)
Instrument
2005
2006
2007
2008
2009
2010
Treasury Bills
733,287
733,287
733,287
733,287
733,287
733,287
2 Year Bond
42,390
8,745
42,390
8,745
42,390
8,745
5 Year Bond
-
-
36,208
52,229
11,548
-
7 Year Bond
-
-
-
-
25,200
43,407
10 Year Bond
-
-
-
-
-
-
775,677
742,032
811,884
794,261
812,425
785,438
674
637
688
664
670
638
7,758
749
-
3,339
52,139
0
51,004
14,483
2,373
70,259
-
20,509
58,762
15,232
2,373
73,598
52,139
20,510
51
13
2
62
43
17
834,438
757,264
814,257
867,859
864,564
805,948
726
650
690
726
713
654
Sub total
Million USD
Stocks
Special
Bonds
Sub total
Million
USD
Grand
Total (Shs)
Million
USD
The above trend of maturity profile imply that the country will need to rollover in the
market about USD 725 million in 2005 out of which USD 51 million are new instruments to
service non marketable instruments and USD 674 million are rolled over tradable
instruments. In 2006, the country will rollover USD 637.02 million and issue USD 13 million
of new bonds, while in 2007, it will have to rollover at the most USD 688 million and issue
USD 2 million of new marketable financial instruments. This illustrates the impact of the
current policy and the ever-increasing rollover risk facing the country while operating in a
nascent capital market characterized as being illiquid. Hence, one major consequence
would be the ever-increasing cost (reflected through higher interest rates and yields) and
shorter maturities acceptable by the market.
42
Table 21:
NPV/DBR Ratios.
Scenarios
2005
2006
2010
2014
87.1
74.0
41.3
24.4
Optimistic (E2D2F1M2)
115.3
99.1
51.3
27.1
Pessimistic (E2D3F1M3)
95.0
85.9
51.3
29.2
Baseline (E1D1F1M1)
(d) Liquidity Ratio.
This ratio measures the Government’s ability to finance current debt service from domestic
sources.
The TDS/DBR ratio shows that under baseline scenario (E1D1F1M1) the ratio is 56.1
percent in year 2005 showing that Tanzania is just sustainable. In the long run the ratio
declines to 13.7 percent in year 2010 and 8.9 percent in year 2014. The lower ratios trend
is also observed in both optimistic and pessimistic scenarios (E2D3F1M3). The ratio in
the pessimistic scenario is lower at 49.0 percent compared to 50.1 percent in the optimistic
scenario due to the fact that the pessimistic scenario (E2D3F1M3) assumes accumulation
of arrears. This indicates that the country should not face liquidity problems in the long
run. As total debt service includes the implicit principal payments of a rolling over, the
ratio over estimates the burden on the budget. Nevertheless, the ratio indicates the real
cost on the budget if a country is unable to rollover its debt.
Under the baseline scenario (E1D1F1M1), this ratio is much higher when compared with
the other ones due to repayment of the arrears. This indicates the need to elaborate a
comprehensive strategy to deal with domestic arrears, as the budget might not be able to
absorb the cost of implementing the current policy if all creditors were to come to settle
their claims.
43
Table 22:
TDS/DBR Ratios.
Scenarios
2005
2006
2010
2014
Baseline (E1D1F1M1)
56.1
23.0
13.7
8.9
Optimistic (E2D2F1M2)
50.1
22.0
12.5
7.4
Pessimistic (E2D3F1M3)
49.0
23.8
15.6
10.7
It is important to note that, whereas domestic debt stock represents less than 20 percent
of total public debt, its debt service payments is twice higher on average than external
debt. A comparison of external debt and domestic debt TDS/DBR ratios shows domestic
debt service ratio averages 24.9 percent during five years period, whereas it is only
10.5percent for external debt.
This points out to the need of closely monitoring the evolution of domestic debt and its
cost, continuing the current policy of not borrowing in the local capital market to finance
the budget deficit, and the need to further elaborate this preliminary analysis.
The INT/DBR ratio in the baseline scenario (E1D1F1M1) is 6.0 percent in year 2005 and
5.2 percent % in year 2006, which would indicate that the country should be able to
service interest as scheduled. The ratio declines to 3.0 percent and 2.1 percent in year
2010 and 2014 respectively, while it behaves in the same manner under the two
alternative scenarios. However, in year 2006 the optimistic scenario (E2D2F1M2) ratio is
4.3 percent, which is greater than 3.7 percent of pessimistic scenario (E2D3F1M3) due to
the assumption that the authority could swap tax obligation against its stocks of arrears
with certain creditors over a certain period of time.
Table 23:
INT/DBR Ratios.
SCENARIOS
2005
2006
2010
2014
Baseline (E1D1F1M1)
6.0
5.2
3.0
2.1
Optimistic (E2D2F1M2)
4.3
4.3
2.7
1.7
Pessimistic (E2D3F1M3)
4.1
3.7
2.5
1.5
44
6.0
RECOMMENDATIONS
6.1
External Debt
The HIPC Initiative has significant achievements to Tanzania. The Initiatives have helped
poor countries including Tanzania to reduce debt service and to direct the debt relief
savings to financing priority sectors including health, education, water, sanitation and rural
roads. The debts have been reduced to levels whereby now the country is able to service
maturing debts. It is important that the country adheres to prudent debt management and
ensures it does not over borrow and return to the debt trap. Priority should be given to
loans with softer and very concessional terms offered by Multilateral and Bilateral
creditors. These loans should be directed to projects, which are net savers of foreign
exchange or those that have been overriding fiscal and social benefits.
To further
consolidate benefits of the HIPC Initiatives, new financings including grants should be
directed towards increasing the country’s productive capacity and contribute in the poverty
reduction efforts.
6.2
Domestic Debt
There is a need to further analyze the current roll over policy to avoid the Government
inability to service its debt in case the market absorption capacity fails in future.
Government should study the feasibility of restructuring Government stocks and special
bonds by issuing longer-term instrument at negotiable rate instead of its current practice
of paying through 2-year bonds. Rescheduling into long-term instrument will lengthen
maturity profile and consequently reduce pressure on the Government Budget.
It is important to note that while domestic debt stock represents less than 20% of total
public debt (external & domestic debt) its debt payment is twice higher than external debt
service. This calls for the need of close monitoring of the evolution of the domestic debt
and its cost in order to come out with less expensive debts. The current practice of paying
arrears on ad hoc basis need to be reviewed as the budget might not be able to
accommodate the debt burden if all creditors claim. As a first step, a comprehensive
identification and verification/audit of contingent liabilities and claims on Government
needs to be undertaken followed by a decision to issue long term bonds to cover the
arrears through negotiations with respective creditors. Alternatively, the Government
should prepare a repayment schedule that will be included in the budget over a number of
years.
45
ATTACHMENT A: SELECTED ECONOMIC INDICATORS
Real GDP Growth rate (factor cost)
Revenue to GDP ratio
23.0%
11.0%
21.0%
10.0%
19.0%
9.0%
17.0%
15.0%
8.0%
13.0%
7.0%
11.0%
9.0%
6.0%
7.0%
5.0%
Optimistic
Baseline
Pessimistic
Optimistic
Government Expenditure to GDP ratio
Baseline
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
20
19
20
17
20
15
20
13
20
11
20
09
20
07
20
05
20
03
20
01
5.0%
Pessimistic
Ratio of Credit to Private Sector to Total Credit
35.0%
130.0%
33.0%
120.0%
31.0%
110.0%
29.0%
27.0%
100.0%
25.0%
90.0%
23.0%
21.0%
80.0%
19.0%
70.0%
17.0%
2017
2018
2017
2018
2019
2017
2018
2019
2019
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2016
Pessimistic
Optimistic
Inflation
Pessimistic
Baseline
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2004
2003
2001
2019
2018
2017
2016
2015
2014
2013
2012
15.0%
2011
15.0%
2010
17.0%
2009
17.0%
2008
19.0%
2007
19.0%
2006
21.0%
2005
23.0%
21.0%
2004
23.0%
2003
25.0%
2002
25.0%
2001
Baseline
Investment to GNDI Ratio
27.0%
2002
Exports of Goods and Services to GDP Ratio
Baseline
2006
Optimistic
2016
Pessimistic
27.0%
Optimistic
2005
2004
2003
2002
2001
2019
2018
2017
2016
2015
2014
2013
2012
2011
Baseline
2005
Optimistic
2010
2009
2008
2007
2006
2005
2004
2003
2002
60.0%
2001
15.0%
Pessimistic
TZS/USD Exchange Rate
16.0%
3,300.0
14.0%
2,800.0
12.0%
10.0%
2,300.0
8.0%
1,800.0
6.0%
4.0%
1,300.0
2.0%
Optimistic
Baseline
Pessimistic
Optimistic
46
Baseline
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
800.0
2001
0.0%
Pessimistic
ATTACHMENT B: CIRR/DISCOUNT RATE ASSUMPTIONS USED
2004
2004
2003
2004
CIRR Rates
Xrates for PV
Xrates
Xrates
Arab Emirate Dinnar
4.64
0.2723
0.2720
0.2723
African Development Fund
4.64
1.5478
1.2960
1.5478
Austria Shilling
4.82
0.0652
0.0830
0.0652
African Units of Accounts
4.64
1.5478
1.4020
1.5478
Belgium Convertible Franc
4.82
0.0223
0.0280
0.0223
Bulgarian Leva
4.64
0.6407
0.4340
0.6407
Canadian Dollar
5.36
0.8305
0.7420
0.8305
CFA Franc
0.00
0.0000
-
0.0000
Swiss Franc
3.48
0.8829
0.7310
0.8829
Chinese Yuan
5.03
0.1237
0.1690
0.1237
Deutsche Mark
4.82
0.4590
0.5810
0.4590
Danish Kroner
4.94
0.1831
0.1530
0.1831
Domestic currency
4.64
0.0010
0.0010
0.0010
Spanish Pesata
4.82
0.0054
0.0070
0.0054
European Currency Unit
4.82
1.3621
1.1360
1.3621
Finish Mark
4.82
0.1510
0.1910
0.1510
French Franc
4.82
0.1369
0.1730
0.1369
Fund Unit of Account
4.64
1.5478
1.4020
1.5478
Great Britain Sterling
6.01
1.9266
1.6530
1.9266
Hungarian Forint
4.82
0.0055
0.0050
0.0055
Irish Pound
4.85
1.3694
1.4430
1.3694
Indian Rupee
4.64
0.0229
0.0220
0.0229
Iraq Dinnar
4.64
1.4846
3.2150
1.4846
Thousand of Italian Lira
4.82
0.4637
0.0010
0.4637
Thousand of Japanese Yen
2.15
9.7473
0.0080
9.7473
Kenya Shillings
4.64
0.0131
0.0130
0.0131
Kuwait Dinnar
4.64
3.3929
3.3350
3.3929
Luxemburg Franc
4.82
0.0336
0.0280
0.0336
World Bank Pooled Currency
4.64
0.0000
-
0.0000
Netherlands Gilder
4.82
0.4074
0.5160
0.4074
Norwegian Kronar
4.70
0.1654
0.1370
0.1654
PTA Unit of Account
4.64
1.5677
1.4020
1.5677
Portuguese Escudor
4.82
0.0039
0.0060
0.0039
Saudi Arabia Riyal
4.64
0.2667
0.2670
0.2667
Swedish Kronar
5.38
0.1510
0.1240
0.1510
Special Drawing Rights
4.64
1.5478
1.4020
1.5478
Russian Rouble
5.03
3.0369
1.5360
3.0369
Tanzanian Shillings External
4.64
0.0010
0.0010
0.0010
United States Dollar
5.03
1.0000
1.0000
1.0000
Zambian Kwacha
4.64
0.0002
0.0000
0.0002
Zimbabwean Dollar
4.64
0.0002
0.0010
0.0002
47
Attachment C: Global External Debt Scenarios
DEBT RELIEF
Implementing Maximum HIPC
Implementing Realistic HIPC
Cologne ODA + additional cancellation for all
creditors
Cologne 90% + additional cancellation for
some creditors
Cologne ODA + additional cancellation for all
creditors
Cologne 90% + additional cancellation for
some creditors
All creditors to cancel 100%
All creditors to cancel 100%
Some creditors to cancel 100%
Some creditors to cancel 100%
BILATERAL
Paris Club
Pre-Cutoff Date
Concessional (ODA)
Non-concessional (Non-ODA)
Post-Cut-off Date -ODA
Post-Cutoff- Non ODA
Non-Paris Club
ATTACHMENT A: GLOBAL DEBT SCENARIO
Pre-Cutoff Date
Concessional (ODA)
Non-concessional (Non-ODA)
Post-Cut-off Date
Cologne ODA comparable terms
Case by case negotiations
Cologne 96%
Case by case/Accumulation of arrears
Pay
Pay
Buyback at IDA terms (eligible debt)
25% IDA buyback
Pay (Others-Post 1993)
Pay
HIPC relief with maximum front-loading
HIPC Relief with maximum front-loading
Commercial
Multilateral
48
ATTACHMENT D: GLOBAL DOMESTIC DEBT SCENARIOS
CODES
LOAN TYPE
TREASURY BILLS
BASELINE
RESTRUCTURING/OPTIMISTIC
PESSMISTIC
TBL35
TBL91
TBL182
TBL364
35 days
Rollover
Rollover at a lower interest rate
Rollover at higher interest rate
91 days
182 days
364 days
BONDS
Rollover
Rollover
Rollover
Rollover at a lower interest rate
Rollover at a lower interest rate
Rollover at a lower interest rate
Rollover at higher interest rate
Rollover at higher interest rate
Rollover at higher interest rate
2 Year
Rollover
5 Year
Rollover
7 Year
Rollover
10 Year
Rollover
TBOND2
TBOND5
TBOND7
TBOND10
RECBOND
OTHBOND
Recapitalization Bonds
Other Bonds
Refinance with 2, 5, 7, or 10 year
bonds
Refinance with 2, 5, 7, or 10 year
bonds
80% rollover 20% restructure into 5year bond
80% rollover 20% restructuring into
10 year bonds
80% rollover 20% restructuring into
15 year bonds
80% rollover 20% restructuring into
15 year bonds
Reschedule 50% into 15 yrs bond and
50% into 20 yrs bond
Reschedule 50% into 15 yrs bond and
50% into 20 yrs bond
Refinance with 2, 5, 7, or 10 year
bonds
Pay
Pay in 2005
Reschedule 50% into 15 yrs bond and
50% into 20 yrs bond
Pay
Pay
Rollover at higher interest rate
Rollover at higher interest rate
Rollover at higher interest rate
Rollover at higher interest rate
Refinance 50% with 50% with 5 year bonds at a higher intere
Refinance 50% with 2 year bond and 50% with 5 year bonds
STOCKS
GSTOCK
PRDEBT
RECSHAR
COMCLM
DUTYCLM
TAXCLM
MABHOST
PARCLM
DIRCLM
Government Stocks
PRIVATISATION DEBTS
RECAPITALIZATION(SHARES)
CLAIMS ON GOVERNMENT
Duty Drawback Scheme
Tax Reserve Certificate
NSSF - Mabibo Hostel Agreement
Pay 30% and Securitize 70%
through 2 years bond
Pay on ad hoc basis
Pay on ad hoc basis
Pay
Parastatal/indirect
Pay on ad hoc
Direct claims
Pay
Compensation
Pay
Pay
Pay
Pay
Securitize over 4 years into 10 year
bonds market rate
Securitize into 15 years bonds at
market rate
Reschedule 50% into 5 yrs bond and 50% into 10 yrs bond
No restructuring
Delay participation
No restructuring
No action
No action
Restructure into 10 year bond at a higher rate
No restructuring
Swap utility bills with tax obligations over 4 years
OTHER LOANS
GUARLN
Guarantees
In arrears
Pay 20% Restructure 80% into 15
years bond
No payment
GAP FILLING
Treasury bills
Bonds
No gap filling
No gap filling
No gap filling
No gap filling
No gap filling
No gap filling
49
ATTACHMENT E: COMPLETION POINT DSA (NPV/XGS)
Year
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
After
Enhanced
HIPC 136.6
130.8
135.2
137.1
135.2
132.8
130.6
128.2
126.3
124.1
122.3
Beyond
HIPC
Assistance 104.9
104.4
110.5
114.9
115.8
116.0
116.3
115.9
115.8
115.0
114.3
ATTACHMENT F: UPDATED SCENARIO COMBINATIONS (NPV/XGS)
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
SCENARIO
1
Maximum HIPC with Base case Macro
and Cossesional borrowing
E1D1M1F1
161.1
153.0
142.0
131.6
120.6
109.4
99.4
91.1
84.1
77.9
72.3
2
Realistic with Base case Macros
E2D1M1F1
185.0
173.4
159.7
147.4
134.8
122.1
110.8
101.3
93.4
86.3
79.9
3
Realistic with Pessimistic Macros
Maximum HIPC with Pessimistic
Macros
Realistic HIPC with Alternative
Borrowing Cost
E2D1M1F1
185.0
171.8
156.8
142.8
128.8
115.1
103.2
93.5
85.5
78.3
71.8
E2D3F1M3
185.2
172.9
160.4
150.2
140.5
130.7
121.4
113.7
107.1
101.2
95.4
E2D1F2M1
185.0
178.9
165.5
153.6
142.0
130.6
120.0
111.1
103.7
96.9
90.6
4
5
50
ATTACHMENT G: MACROECONOMIC SCENARIOS
VARIABLE
National account indicators
SCENARIO 1:
BASELINE
SCENARIO 2: OPTIMISTIC
SCENARIO 3: PESSIMISTIC
2001-04
2005-08
2009-20
2001-04
2005-08
2009-20
2001-04
2005-08
2009-20
6.1%
6.9%
7.6%
6.1%
7.1%
8.7%
6.1%
6.3%
5.8%
17.6%
24.1%
24.3%
17.6%
24.7%
25.6%
17.6%
23.4%
20.0%
Export of goods and services (USD value growth)
14.0%
12.3%
11.1%
14.0%
14.0%
12.7%
14.0%
10.6%
8.3%
Imports of goods and services (USD value growth)
Real GDP growth rate
Investment to GDP ratio
Balance of payments
12.6%
10.1%
11.3%
12.6%
10.5%
12.7%
12.6%
9.3%
9.1%
Import elasticity
1.6
1.1
1.09
1.6
1.1
1.11
1.6
1.1
1.06
Foreign exchange reserves (months of imports)
8.1
7.7
7.8
8.1
7.6
8.0
8.1
7.7
5.7
Domestic budget revenue (% of GDP)
12.4%
14.9%
17.6%
12.4%
14.9%
19.5%
12.4%
13.9%
15.4%
Expenditures/GDP
19.3%
26.4%
28.1%
19.3%
26.8%
30.7%
19.3%
25.1%
24.0%
5.5%
7.6%
7.1%
5.5%
7.8%
7.4%
5.5%
7.2%
4.8%
Deficit excluding grants (ratio to GDP)
-6.9%
-11.5%
-10.6%
-6.9%
-11.8%
-11.3%
-6.9%
-11.2%
-8.6%
Deficit including grants (ratio to GDP)
-1.4%
-3.9%
-3.5%
-1.4%
-4.0%
-3.8%
-1.4%
-4.0%
-3.8%
4.1%
4.0%
4.1%
4.0%
4.1%
10.9%
1024.3
1184.8
1325.3
1024.3
1181.9
1318.9
1024.3
1194.3
1938.6
9.2%
1.5%
1.5%
9.2%
1.4%
1.5%
9.2%
1.9%
8.4%
Government budget
Grants/GDP
Underlying assumptions
Inflation rate
Exchange rate
Depreciation of the Shilling
51
ATTACHMENT H: NATIONAL BUDGET
Annex 7
Tanzania - Strategy II - E2D1F1M1 - Realistic HIPC - Base case
(in Millions of USD)
2004.0
2005.0
2006.0
2007.0
2008.0
2009.0
2010.0
2011.0
2012.0
2013.0
2014.0
A. Total Revenue and Grants
1. Total domestic revenue
2. Grants
2127.6
1467.3
660.3
2963.3
1656.0
1307.3
3079.1
1928.2
1150.8
3524.2
2247.2
1277.0
4039.7
2560.4
1479.3
4581.9
2890.4
1691.5
5127.1
3227.9
1899.2
5697.9
3606.7
2091.2
6309.1
4032.2
2276.9
6985.0
4510.6
2474.4
7737.1
5048.7
2688.4
B. Total Expenditure
1. Recurrent expenditures
a. Non-interest expenditures
b. Interest expenditures
i. Interest payments on existing debt
ii. Interest payments on new debt
2. Capital expenditures
2666.7
1833.5
1787.8
45.7
45.7
0.0
833.2
3206.4
1994.0
1838.7
155.3
111.8
43.5
1212.4
3532.3
2232.4
2074.2
158.1
109.3
48.9
1300.0
3798.2
2377.0
2213.4
163.6
107.6
56.0
1421.2
4202.8
2656.4
2491.3
165.1
110.5
54.6
1546.4
4703.4
2990.6
2825.1
165.5
106.9
58.6
1712.8
5245.4
3321.9
3164.2
157.7
101.1
56.5
1923.6
5827.2
3699.8
3537.5
162.3
101.5
60.8
2127.5
6448.0
4113.5
3952.0
161.5
102.4
59.1
2334.4
7149.3
4585.8
4417.9
167.9
104.2
63.6
2563.6
7924.3
5106.8
4941.7
165.2
102.9
62.2
2817.5
C. Other Budget Flows (net)
-59.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
D. Overall Fiscal Balance
598.5
243.1
453.2
274.0
163.1
121.5
118.3
129.4
138.8
164.4
187.3
E. Financing
1. External financing
2. Domestic financing
63.6
63.6
0.0
221.6
682.6
-461.0
435.8
435.8
0.0
257.2
277.4
-20.1
147.0
147.0
0.0
105.9
105.9
0.0
103.5
103.5
0.0
115.3
115.3
0.0
125.3
133.2
-7.9
151.4
151.4
0.0
174.9
174.9
0.0
52
ATTACHMENT I: BALANCE OF PAYMENTS
Annex 9
Tanzania - Strategy II - E2D1F1M1 - Realistic HIPC - Base
(in Millions of USD)
2004
A. Exports of goods and services
2176.8
Imports of goods and services
3237.4
Resource balance
-1060.6
B. Net Factor Income
4.0
1. Factor Service Receipts
79.5
2. Factor Service Payments
75.5
a. Total Interest Due /1
48.0
b. Other Factor Payments
27.5
C. Net Current Transfers
4.3
1. Private Transfer Receipts
68.9
2. Private Transfer Payments
64.6
D. Current Account Balance:
1. Before Official Transfers
-1052.3
2. Official Transfers (Grants and Other)
879.2
3. After Official Transfers
-173.1
E. Long-term Capital Inflows
199.3
1. Net Foreign Direct Investment
257.2
2. Net Long-term Borrowing /2
63.5
a. Disbursements
150.0
b. Repayments Due /1
86.5
3. Other Net LT Flows
-121.4
F. Debt Service Relief
0.0
1. Principal Payments /3
0.0
2. Interest Payments /3
0.0
G. Total Other Items (net):
34.8
H. Change in Net Reserves (- = increase)
-61.1
1. Net Credit from IMF
-42.6
2. Other changes in reserves
-18.5
case
2005
2544.5
3666.7
-1122.2
-35.6
77.6
113.2
78.9
34.4
5.4
72.0
66.6
2006
2798.2
3971.2
-1173.1
-23.3
84.8
108.1
73.2
34.9
5.4
73.1
67.6
2007
3077.7
4309.5
-1231.9
-20.4
90.0
110.4
75.0
35.4
5.5
74.2
68.7
2008
3454.2
4761.2
-1307.0
-13.8
99.2
112.9
74.7
38.2
6.0
80.1
74.1
2009
3876.0
5307.8
-1431.9
-5.5
110.9
116.4
73.6
42.8
6.7
89.6
82.9
2010
4285.4
5886.5
-1601.1
2.4
121.9
119.5
72.5
47.0
7.3
98.4
91.1
2011
4741.8
6532.9
-1791.2
10.7
134.1
123.4
71.7
51.7
8.1
108.3
100.2
2012
5250.8
7255.7
-2004.9
19.8
147.6
127.8
70.9
56.9
8.9
119.2
110.3
2013
5819.0
8064.3
-2245.3
29.6
162.6
133.0
70.3
62.7
9.8
131.3
121.5
2014
6453.7
8969.7
-2516.0
40.2
179.2
139.0
69.9
69.1
10.8
144.7
133.9
-1152.5
1307.3
154.9
785.7
271.5
596.0
734.7
138.8
-81.8
135.9
96.1
39.8
-880.1
-196.4
-34.9
-161.5
-1191.0
1150.8
-40.1
603.1
280.9
373.8
502.3
128.5
-51.6
103.8
74.3
29.4
-418.0
-248.7
-44.2
-204.5
-1246.7
1277.0
30.3
445.3
290.7
210.4
352.5
142.1
-55.8
107.7
79.4
28.3
-289.8
-293.5
-56.9
-236.6
-1314.8
1479.3
164.5
315.1
316.8
59.7
220.7
161.0
-61.4
111.9
84.8
27.1
-500.9
-90.7
-60.0
-30.7
-1430.6
1691.5
260.9
304.2
354.3
18.5
180.0
161.5
-68.7
109.1
82.9
26.1
-486.7
-187.5
-49.9
-137.6
-1591.4
1899.2
307.9
323.5
389.4
9.5
184.9
175.3
-75.4
112.8
87.8
25.0
-334.3
-409.8
-35.9
-374.0
-1772.4
2091.2
318.8
364.2
428.3
18.9
205.7
186.8
-83.0
114.0
90.2
23.8
-331.9
-465.0
-25.4
-439.6
-1976.2
2276.9
300.7
412.9
471.4
32.8
228.0
195.2
-91.3
117.0
94.2
22.8
-302.6
-528.0
-14.5
-513.5
-2206.0
2474.4
268.4
468.3
519.3
49.6
250.2
200.5
-100.6
117.4
95.6
21.8
-254.4
-599.7
-5.7
-594.0
-2465.0
2688.4
223.4
533.3
572.5
71.7
273.7
202.0
-110.9
119.0
98.1
20.9
-194.1
-681.6
-5.7
-675.9
53
ATTACHMENT J: SELECTED INDICATORS
Annex 10
Scenario I: Baseline
TABLE 1. SELECTED INDICATORS
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Real GDP growth at factor cost
4.7%
4.8%
5.8%
6.2%
5.7%
6.7%
6.7%
6.7%
6.9%
7.1%
7.2%
7.2%
7.3%
7.4%
7.5%
7.6%
Real GDP growth at market price
3.7%
5.6%
6.2%
6.3%
6.1%
6.8%
7.5%
7.2%
7.2%
7.4%
7.5%
7.4%
7.5%
7.6%
7.7%
7.8%
Nominal GDP growth at factor cost
16.6%
12.2%
13.7%
14.1%
12.8%
15.0%
11.5%
11.0%
11.2%
11.4%
11.4%
11.5%
11.6%
11.7%
11.8%
11.9%
Nominal GDP growth at market price
16.6%
12.2%
13.7%
14.1%
12.8%
15.0%
11.5%
11.0%
11.2%
11.4%
11.4%
11.5%
11.6%
11.7%
11.8%
11.9%
Final consumption to GNDI ratio
94.3%
88.2%
88.1%
83.7%
85.5%
85.9%
80.1%
80.6%
80.3%
80.2%
80.1%
79.9%
80.1%
80.5%
80.9%
81.3%
Investment to GNDI ratio
Prices
15.1%
17.1%
16.4%
18.4%
17.6%
18.1%
24.7%
24.2%
24.0%
23.7%
23.9%
24.4%
24.6%
24.5%
24.5%
24.4%
7.8%
6.0%
5.2%
-54.2%
3.6%
4.1%
4.5%
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
Revenue to GDP ratio
11.2%
11.8%
11.8%
11.9%
12.6%
13.1%
13.7%
14.6%
15.4%
16.0%
16.4%
16.6%
16.9%
17.1%
17.3%
17.6%
Total expenditure to GDP ratio
17.0%
16.9%
15.9%
16.4%
20.4%
24.2%
26.5%
26.7%
26.2%
26.4%
26.9%
27.4%
27.7%
27.9%
28.0%
28.2%
Current expenditure to GDP ratio
12.0%
13.0%
12.4%
13.0%
14.5%
16.8%
16.5%
16.9%
16.4%
16.7%
17.2%
17.5%
17.7%
18.0%
18.2%
18.4%
Development expenditure to GDP ratio
5.1%
3.9%
3.5%
3.4%
5.9%
7.4%
10.1%
9.8%
9.8%
9.6%
9.7%
9.9%
9.9%
9.9%
9.8%
9.8%
Domestic bank borrowing to GDP ratio
0.6%
-0.8%
0.5%
0.8%
-3.4%
-0.4%
2.0%
1.5%
0.1%
-0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
M3 growth rate
18.6%
14.8%
17.1%
25.1%
16.6%
19.3%
26.4%
25.1%
19.9%
18.6%
16.9%
15.0%
13.9%
14.0%
14.1%
14.2%
M2 growth rate
15.0%
12.5%
12.8%
22.2%
14.1%
19.3%
27.2%
25.9%
19.9%
19.4%
18.1%
16.2%
14.7%
14.8%
14.9%
14.9%
Growth rate of credit to private sector
26.0%
10.3%
21.1%
41.4%
43.2%
29.7%
52.9%
45.0%
31.1%
35.7%
23.3%
13.9%
12.4%
12.6%
12.7%
12.8%
1.4%
0.1%
-1.8%
0.3%
-2.2%
-1.7%
0.4%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
-0.1%
4.91
4.80
4.66
4.25
4.11
3.96
3.50
3.10
2.88
2.70
2.57
2.50
2.45
2.40
2.35
2.30
NATIONAL ACCOUNTS
CPI inflation pav
GOVERNENMENT
MONEY
Lending to government to GDP ratio
M3 Velocity (GDPfc)
BALANCE OF PAYMENTS
Exports of goods to GDP ratio
6.4%
7.3%
8.2%
9.2%
11.1%
11.7%
12.9%
13.0%
13.1%
13.3%
13.6%
13.7%
13.7%
13.8%
13.8%
13.9%
Exports of goods and services to GDP ratio
13.4%
14.2%
15.4%
16.1%
17.7%
19.4%
21.1%
21.1%
21.1%
21.6%
22.0%
22.1%
22.2%
22.3%
22.4%
22.5%
Imports of goods to GDP ratio
16.5%
15.1%
16.5%
15.4%
19.1%
20.1%
20.8%
20.5%
20.2%
20.2%
20.5%
20.7%
20.9%
21.2%
21.4%
21.7%
Imports of goods and services to GDP ratio
25.7%
22.6%
23.3%
22.2%
26.6%
28.9%
30.4%
30.0%
29.6%
29.7%
30.1%
30.3%
30.5%
30.8%
31.0%
31.2%
4.5
5.7
6.6
8.5
9.1
8.1
7.6
7.7
8.0
7.4
7.1
7.2
7.4
7.5
7.7
7.8
Reserves months of imports (projected)
54
ATTACHMENT K: THE TANZANIA NATIONAL DEBT SUSTAINABILITY
ANALYSIS (DSA) TEAM.
I:
OVERALL COORDINATOR:
MR. MUGISHA G. KAMUGISHA - MOF
II:
FACILITATOR:
MR. SINGI R. MADATA - MOF
III:
CONSULTANTS:
(i)
MRS ALICE KONGA:
(ii)
MR. MICHEL VOUGEOIS:
MEFMI
DRI
TASK MANAGER
ABBAS BERYA
Bank of Tanzania
GROUP TEAMS
(i) Debt Data Group
(a) External Debt Sub Group
1.
Samwel Maki
-
Bank of Tanzania (MEFMI Fellow)
2.
Emelda Msaki
-
Bank of Tanzania
3.
Susan Kabogo
-
Ministry of Finance
4.
Chelaus Rutachururwa
-
Ministry of Finance
(b) Domestic Debt Sub Group
5.
John Mavura
-
Ministry of Finance
6.
Francis Chachah
-
Ministry of Finance
7.
Venance Malipesa
-
Ministry of Finance
8.
Melania Kahisa
-
Ministry of Finance
9.
Tiba Kisonga
-
Ministry of Finance
-
Bank of Tanzania
10. Andrea Chaula
(ii) Debt Management Group
(a) External Debt Sub Group
11.
Abbas Berya
-
Bank of Tanzania
12.
Imani Mwakosya
-
Bank of Tanzania
55
13.
Grace Mosha
-
POPP
14.
Singi Madata
-
Ministry of Finance
15.
Abraham Mrindoko
-
Bank of Tanzania
(b)
Domestic Debt Sub Group
16.
Hellen Saria
-
Ministry of Finance
17.
Judith Ndissi
-
Bank of Tanzania
18.
Esta Komu
-
Bank of Tanzania
19.
Felix Mlay
-
Ministry of Finance
20.
Irene Kasambala
-
Ministry of Finance
21.
Wilson Mgonja
-
Ministry of Finance
22.
Mwibohe Rububura
-
Bank of Tanzania
(iii)
Macro Group
23. Juvenal Lema
-
POPP
24. Michael Mario
-
Ministry of Finance
25. Johnson Nyella
-
Bank of Tanzania
26. Neema Moshy
-
Bank of Tanzania
(iv) External Financing Group
27.
Alfred Mapunda
-
Ministry of Finance
28.
Mark Temu
-
Ministry of Finance
29.
Abubakar Ibrahim
-
Ministry of Finance
30.
Alfred Misana
-
Ministry of Finance
(v) Support Team
(31)
Fidelis Mnyanyi
-
Bank of Tanzania
(32)
Victor Bwemero
-
Ministry of Finance
(33)
Jacob Kassema
-
Ministry of Finance
(34)
Jane Mohamed
-
Bank of Tanzania
(35)
David Emmanuel
-
Ministry of Finance
(35)
Florence Chale
-
Bank of Tanzania
56