The government is in deep negotiations with lending financial institutions as it was fighting to borrow funds for 2016/17 national budget.

It said high costs of borrowing, hard loan conditions set by lenders and donors were some of the challenges faced by the government as it tries to get funds for the first five month of implementing its 2016/17 budget.

However, the government expressed its hope that it was expecting to complete talks with the African Development Bank (AfDB) between last month and March, 2017 on the possibility to get grants and soft loans.

The Minister for Finance and Planning, Dr Philip Mpango, disclosed the situation in Dar es Salaam on Friday while briefing reporters on the current economic status and projection for 2017.

“The government was expecting to borrow a commercial loan worth 2.1tril/- to finance various development projects but due to high borrowing costs it was not through with it,” said Dr Mpango Dr Mpango further said the government was also in talks with the World Bank, the European Union, Kuwait, Abu Dhabi and the Organization of Petroleum Exporting countries (Opec).

According to the Minister, high costs of borrowing were contributed by economic crisis in Europe, which led to an increase of an average interest rate to 9 per cent from 6 per cent in the prior years.

Due to that he said, the government postponed to seek for grants in some of the countries instead it turned to China, India, South Korea, and Japan. He also put to light that they were also holding talks with Bank of United Kingdom to borrow 300 million USD.

Expounding further, he said, under the period of review, it was expected that development partners were expected to contribute 2.8tril/- to the government budget but so far only 603.9bn/- equivalent to 21.5 per cent of the target has been realised. International development partners pledged to offer 3.6tril/- to the government.

Dr Mpango said between July and November a total of 287.5bn/- in grants was released equals to 28.4 per cent of the target which was 1.1tril/-.

“36.1bn/- was disbursed by European Union (EU) for the general budget support while 58.4bn/- was disbursed for basket fund equivalent to 61 per cent of the target of 95.5bn/-,” he noted.

On grants disbursed for development projects he said it was 193.1bn/- equivalent to 21 per cent of the 917.1bn/- target that was expected to be disbursed during the period.

Moreover, Dr Mpango said the public debt has increased to 21,087.9 million USD at the end of October, 2016 from 19,861.1 million USD in December, 2015.

He said the total external debt stock as of October, 2016 stood at 16,407.6 million USD an increase of 3.4 per cent or equivalent to 77.8 per cent of the public debt from 15,863.9 million USD in December, 2015.

Government domestic debt increased up to 10,089.3bn/- in October, 2016 from 8,597bn/- December, 2015.

Source: The Exchange