The
state power utility firm, Tanzania Electric Company (Tanesco), which
has accumulated huge debts is mounting risks to the government, in terms
of managing the rising national debt stock and subsequent debt
payments’ demand.
Reading
the fourth Economic Update prepared by the World Bank, lead Economist
of Burundi, Tanzania and Uganda, Mr Jacques Morisset, said that Tanesco
has already accumulated $260 million (Sh416 billion) that has to be
shouldered by the government.
Mr
Morisset said, the government has to rethink incurring more debts
because it has big commitment to pay debts incurred by Tanesco apart
from the debts arising from financing infrastructure development.
He
also said the government will have to decide between either increasing
the power tariff or budget reallocation involving expenditure cuts in
other economic sectors.
“Decisive
actions will be needed to close Tanesco’s projected financial gap,
which will grow in approximately $250 million in 2013. The required
actions will involve politically contentious measures such as tariffs
increase or budget reallocations involving significant expenditure cuts
in other areas,” reads part of the report circulated in the World Bank’s
meeting held in Dar es Salaam recently.
According
to the World Bank’s lead economist, alternatively these actions may
involve non-concessional borrowing at high future cost, which needs
government rethinking. “The size of Tanesco deficit is itself sensitive
to a number of factors outside government control, including hydrology
conditions and world oil prices. A combination of bad luck or delay in
the implementation of Tanesco action plan would add significant risk to
the government’s fiscal accounts,” World Bank report further reads.
Apart
from Tanesco’s huge debt, the World Bank report has shown other risks
associated with rising debt services’ payments as short term risk
relating to implementation of projects under Big Results Now (BRN) and
shortfalls in revenue collection.
The
World Bank has also enlisted the third risk as accumulation of
government payment arrears relating to the pension sector and the
management of contingent liabilities from the parastatals.
The
manager for World Bank projects in Africa, Mr Albert Zeufact also
cautioned that the tendency of most African countries in continuing to
meet the cost of running inefficient parastatals leads to unnecessary
debts.
“What
is important is to make sure that when government borrows for huge
public investment it targets the most productive ventures that can give
positive returns,” said Mr Zeufack.