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Tanzania Applies for Sh1.3trillion Loan to Fight Covid-19 Effects

The finance minister has said the national debt that increased by 2.35 per cent during the last twelve months is sustainable.

17 JUNE 2021

The Citizen (Dar es Salaam)

By The Citizen Reporter

Dar es Salaam — The government has officially applied for a $571 million (about Sh1.3 trillion) loan from the International Monetary Fund (IMF) to help in tackling economic challenges of the Covid-19 pandemic.

Finance Minister Mwigulu Nchemba confirmed to The Citizen yesterday that the application had been lodged, promising to issue a detailed account of it at a later day.

"We have submitted the application within the specified time. But I will provide detailed information in the near future," he said in Dodoma shortly after yesterday's morning parliamentary session.

Tuesday, June 15, was the deadline by which to apply for the funds.

Tabling the government's Sh36.3 trillion 2021/22 budget in Parliament on June 10, 2021, Dr Nchemba told the House that the requested funds were a low-interest loan aimed at tackling the social and economic impacts of the Covid-19 pandemic.

IMF officials in Dar es Salaam and Washington have since been quoted by Reuters as confirming about the existence of talks with the government - noting, however, that Tanzania would have to provide information on Covid-19.

"When applying for pandemic-related emergency financing, evidence of the pandemic has to be available to substantiate the claim," the IMF's resident representative, Jens Reinke, told Reuters.

The government has not published data on coronavirus infections since May last year.

The fifth-phase administration of the late former President John Magufuli was at some point denying existence of Covid-19 in the country.

By borrowing on low-interest to tackle the adverse social and economic impacts of Covid-19, the Samia Suluhu Hassan-led sixth-phase government is signaling a complete shift in its handling of the pandemic from what the country used to do in the past.

When he addressed defence and security chiefs from Chato, Geita, in April 2020, the late President Magufuli called upon international financial institutions to consider extending debt relief to poor countries so that they can use the funds in their fight against Covid-19.

He said Tanzania was spending about Sh700 billion per month on debt repayment.

"Out of the money, between Sh200 billion and Sh330 billion goes to the World Bank alone... Since the World Bank has shown its concern and willingness to help us out of this pandemic, allow me to request that that help should come in form of a relief on repayment of existing debts or at least its interest," he said.

He said once granted, the relief would help poor countries to spend part of their revenue collections in their fight against Covid-19.

"I would request fellow African countries that our rich brothers should consider a debt relief for us instead of getting us into a new burden of loans for which they will demand interest. It would make economic sense if the loan was reflected in debt relief. That, I think, would be a good gesture for these financial institutions towards poor countries," said Dr Mafuguli.

The Covid-19 pandemic notwithstanding, Tanzania's economy expanded at the rate of 4.8 percent last year. But this rate was lower than the government's projection growth rate of 5.5 percent.

Dr Nchemba told the Parliament last week that, in 2021, the economy is projected to expand by 5.6 percent.