Debt and MDGs
The loan contraction process in Africa: making loans work for the poor; the case of Tanzania
To aid Tanzania's poor, international debt must be dropped
Authors:
B. E. Kaiza
Publisher:
African Forum and Network on Debt and Development , 2004
This paper examines how external loans can be better utilised in order to benefit the poor. The study sought to identify existing bottlenecks that continue to perpetuate the debt crisis within the institutional and legislative framework of Tanzania. The overall objective of this study was to ensure that the loans taken by the poor countries are legitimate and serve the basic functions of poverty reduction and development.
The authors main point is that a commitment from the international community to help Tanzania fulfill its Millennium Development Goals can only be shown by cancelling the country’s external debt burden. The authors conclude with several policy recommendations, including:
- a shift in policy emphasis on external public borrowing from financing of budget deficit, in which a good portion of foreign public loan is expended for recurrent expenditure, towards expanding the development budget, the multiplier effect of which is significant for debt servicing/loan repayment (through GDP growth) and thus for reducing poverty
- the government should establish benchmark priorities for which external public borrowing shall be acceptable. Benchmark priorities must be specific in terms of both type of goods and services for which to engage public borrowing and ceilings for the amount of money that may be borrowed and repaid annually
- the government should conform to the UNITAR best practices model with respect to the institutional and legal framework for external public borrowing, so as to share borrowing powers equally between the Executive and the Legislature
- the Government uses all available diplomatic resources to convince other debt ridden, poor countries to establish a Debt cartel for negotiating debt relief, instead facing multilateral and bilateral donors individually
- additional ODA grants are very much needed is Tanzania is to attain the MDGs by 2015. An increase of ODA to the promised 0.7% of GDP by developed countries could make a difference
