National Debt of Tanzania

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As is the case for many countries, National Debt is one of the contributors to Tanzania’s poverty. National debt can be defined as the “Total outstanding borrowings of a central government comprising of internal (owing to national creditors) and external (owing to foreign creditors) debt incurred in financing its expenditure.” (BusinessDictionary, 2013), and the financial obligations that entail when a country borrows money can prevent the country from prospering, seeing as profits have to go to pay off debt.

As of 2013, Tanzania’s national debt was approximately $11.2 billion dollars, 32.1% of Tanzania’s GDP. Although this figure in itself is not greatly alarming, the overall financial situation of the country makes it eligible for receiving public debt relief from the Highly Indebted Poor Countries (HIPC) initiative, where struggling countries can receive assistance from the International Monetary Fund and the World Bank. During the early 1970’s Tanzania experienced numerous setbacks, and the Government deemed it necessary to borrow large sums of money in hopes of spurring economic growth. Between 1986 and 1997, Tanzania’s debt rose from $4.9 to a startling 7.9 billion.

In 2013, a case study of Tanzania regarding the “Impact of External Debt on Economic Growth” was carried out. Using data collected from the Bank of Tanzania, this study investigated to what extent national debt affected the economic growth of Tanzania. The results of this study showed that the high interest payments of Tanzania’s debt significantly impacted Tanzania’s financial situation.

Tanzania’s Finance Minister William Mgimwa on the other hand, claims that these loans can be invested in such a way that there will be a bettering of Tanzania’s infrastructure, which in turn will increase productivity and stimulate the economy.

Overview of Tanzania's national debt
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Comparing Tanzania’s figures to Norway, where the National Debt is approximately 55% of the countries’ GDP, Tanzania has significantly less national debt. Still, this is much less of a problem for Norway than for Tanzania. This is due to the overall financial situation of Norway, which is much better than that of Tanzania. For one, Norway has great sums of money stashed away in financial reserves. Norway has also experienced high prices for their natural resources. Øystein Thøgersen, professor at Norges Handelshøyskole, stated in an interview with Dagens Næringsliv that «“Norway is in the world’s luckiest position. We had great fortune because our products have had an incredible price development. Given the way the world is screwed together these days, Norway is in a totally unique position compared to other countries.” This, in addition to Norway’s general infrastructure, puts Norway in a much stronger and more stable position than Tanzania.

Comparison of Norwa's and Tanzania's national debt
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Overview of Norway's national debt
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