Sunday, 24 March 2013

Revealed: The Sh17 trillion 2013/14 budget and how it affects Tanzanians

Dar es Salaam
Fiscal experts argue Mgimwa’s latest budget is overly-dependent on external aid which they say, casts doubt on how serious Tanzanian authorities are to claw out of poverty and promote growth. PHOTO | FILE
By Constantine Sebastian
The Citizen Reporter
 The government has tentatively pegged this year’s budget at Sh16 .7 trillion but the figure Treasury chief William Mgimwa (pictured) will present in Parliament when he tables the estimates in June could be even higher, The Citizen on Sunday can authoritatively report today.Fiscal experts say the real budget could climb by nearly Sh2 trillion to Sh18 trillion, in order to accommodate contingencies emerging from the on-going 2013/14 budget-making process that began late last year.“In the guidelines for the preparation of the 2012/13 budget, the government had set a resource ceiling of Sh13.37 trillion but the figure increased to Sh15.19 trillion when the budget was presented in Parliament,” noted a tax expert.Seeking anonymity because his employer restricts unauthorised disclosure of information to the media, he said the increment last time was nearly Sh2 trillion, hence the possibility of it being more than Sh16 trillion this year. 

Treasury documents show that the provisional figure for the 2011/12 budget was Sh11.97 trillion but it rose to Sh13.52 trillion when then Finance minister Mustafa Mkulo tabled the estimates for Parliament approval.At Sh16.71 trillion as provided in the Budget Frame for 2013/14 – 2015/16, this year’s budget will be Sh1.52 trillion more, over the one Mr Mgimwa presented on June 14, 2012. Economist Honest Ngowi of Mzumbe University Business School says a Sh19-20 trillion budget can also not be ruled out.“Sh16 trillion is not big money when we consider the many expenditure gaps in Tanzania. In real terms, Sh1.52 trillion is not a great increment over last year’s budget when we factor in the volatile exchange rate. What may help is that inflation today is lower than that of June 2012,” he said.According to Treasury sources, this year’s budget will seek to achieve among other things, the aspirations of the Five Year Development Plan (FYDP) 2011/12 – 2015/16 and Mkukuta II. 

It will be based on the revised budget cycle and the government’s medium term goals that targets, among other things, growth of 9.1 per cent by 2017 and decrease in the unemployment rate from the current 11.7 per cent to a single digit.The new budget cycle will enable approval of the government budget before the end of each financial year. Under this arrangement, all the discussions and approval of the various fiscal plans and budgets will be concluded by Parliament by June 30.“The new budget cycle that will enable approval of the budget by the Parliament before the end of each financial year is a very good move.”“It potentially allows for more scrutiny by MPs rather than just rubber stamping it. It also allows for early release of funds at the start of every financial year,” Dr Ngowi said.During 2013/14, domestic resources are projected at about Sh10.73 trillion, of which taxes will contribute some Sh9.55 trillion. The remaining balance of nearly Sh1.2 trillion will come from non-tax revenue and Local Government Authorities’ own sources, which are Sh756.4 billion and Sh425 billion, respectively. 

The ministry of Finance says tax policies and administrative interventions to realise these numbers will include a gradual reduction of tax exemptions. That is trimming them from the current level of 3.8 per cent of GDP to one per cent of total national output.Like last year, the government will in the next financial year be unable to finance its recurrent expenditure by using domestic revenue collections to the tune of around 22 per cent. Dr Ngowi argues that it is fiscally not prudent and bad economics for a government to fail to maintain itself using own resources.“Development partners will continue to contribute to government budget in form of grants and concessional loans, whereby a total of Sh2.63 trillion is expected.The government intends to borrow Sh3.34 trillion from both domestic and external sources,” Treasury notes in the budget guidelines document.The decrease in donor funding by about Sh520 billion from the current financial year level of Sh3.15 trillion is a sign of the government’s endeavour to reduce dependence on aid. 

However, fiscal experts say external financing of the budget is still huge, casting doubt on the seriousness of the authorities to promote economic growth and fight poverty.Professional services firm Auditax International says the tendency to peg a significant part of the development expenditure budget on uncertain donor money is unhealthy and a development financing risk.Development activist Jackson Mollel said borrowing is not bad but the government should make sure that the national debt is sustainable and the loans are used in development rather than recurrent expenditure.Recurrent expenditure has been pegged at about Sh11.32 trillion, of which some Sh4.25 trillion has been allocated for wages and salaries. Development expenditure will be nearly Sh5.4 trillion, of which locally financed expenditure will be Sh3.59 trillion.Foreign funding of development projects has been budgeted at Sh1.79 trillion compared to Sh2.31 trillion in the current financial year. Although the tentative development budget is 32 per cent of the provisional estimates, the government says it will strive to make it 35 per cent as stipulated in the FYDP.Dr Ngowi said that there are many negative development implications when the lion’s share of the budget goes to recurrent spending instead of investing in social and economic projects. That approach, he argues, can never support inclusive growth.

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