Debt Relief for Tanzania: An opportunity for a better future

The Tanzanian Government has committed itself to a long-term strategy aimed at eradicating poverty by 2025. Sectoral plans have been drawn up aimed at achieving progress towards universal primary education and the expansion of basic health services. Encouraging as such moves are, they are unlikely to succeed unless Tanzania's creditors act swiftly to reduce the country's massive debt burden. In the present financial year over one-third of budgetary expenditure will be allocated to external debt servicing, dwarfing the resources available for investment in human development. On a per capita basis, this means that Tanzania has been spending:

• Nine times as much on debt servicing as on basic health
• Four times as much on debt as on primary education

Oxfam International believes that such skewed spending patterns are inconsistent with sustained recovery and human development in Tanzania. Translated into human terms, excessive repayments to the external creditors means schools without desks, pencils, books and - in many cases - roofs; it means health centres without essential drugs; and it means women having to walk over three hours to collect water. It is unacceptable for debt servicing to absorb resources to the detriment of the social investments needed to enhance human welfare, sustain growth and, equally importantly, to convert growth into poverty reduction. Debt reduction is an imperative for national development in Tanzania, as underlined by the country's debt indicators. The ratio of debt stock to exports is currently 406 per cent, or double the sustainability threshold set under the Highly Indebted poor Country (HIPC) debt initiative. The debt service ratio is 35 per cent (compared to a HIPC threshold range of 20-25 per cent), and the ratio of debt stock to budget revenue is 673 per cent (compared to a HIPC ceiling of 280 per cent). Unsustainable debt now represents a major threat to Tanzania's economic reform efforts, as well as a drain on the resources needed for social sector investment. [author]