TANZANIA’S TSH22.5 TRILLION ($10.9 billion) budget will largely be financed from local sources and commercial loans as the government strives to reduce dependency on foreign aid.

Tabling the 2015/16 budget in Dodoma on Thursday, Finance Minister Saada Mkuya said donor aid will account for only 10 per cent of this year’s financing.

The minister outlined new measures and several fiscal reforms to reduce donor funding to 6.5 per cent, which include signing performance contracts with senior managers of the Tanzania Revenue Authority and local government authorities (LGAs) to promote effective revenue collection.

Ms Mkuya said the government will stop doing business with contractors, suppliers and service providers who do not use electronic fiscal devices.

“The electronic system must be used in issuing receipts for charges, fines, fees and all other payments made to the central government, LGAs and government agencies.

These include payments for court fines, traffic fines, national parks entry fees and licence fees for natural resources harvesting,” she said.

Ms Mkuya said Tanzania has the potential and capacity to finance its spending without asking for financial support. In recent years, the government has faced serious difficulties in implementing its budgets due to aid unpredictability and donors’ failure to honour their pledges in time.

“Through the application of existing and new measures, the government plans to collect Tsh22.49 trillion ($10.88 billion) in 2015/16. Total grants and concessional loans will be Tsh2.32 trillion ($1.12 billion), equivalent to 10 per cent of the total budget,” the minister told parliament.

She said that, to finance the fiscal deficit, the government intends to borrow Tsh6.175 trillion ($2.98 billion) from both domestic and external sources.

The government’s fiscal policies and targets for 2015/16 include increasing domestic revenue collections to 14.8 per cent of GDP, and tax revenues to 13.1 per cent of the national output. Government spending is targeted at 20.6 per cent of GDP and the budget deficit, including grants, will be 4.2 per cent of GDP.

Support withheld

During 2014/15, aid accounted for 14.8 per cent of the Tsh19.8 trillion ($9.58 billion) budget, but most of it was not provided as major donors withheld budget support due to governance concerns.

Out of the Tsh2.94 trillion ($1.42 billion) aid promised to the government, budget support amounted to Tsh922.2 billion ($446.3 million), but only 44 per cent had been disbursed by April this year. The head of the Budget Support Development Partners’ group, EU ambassador Filiberto Sebregondi, told The EastAfrican that their financing this time will be $300 million.

“Our partnership with the government continues, as reflected in this year’s budget. It is a responsible budget because it contains measures to address governance issues and sets realistic revenue targets,” Mr Sebregondi said.

Apart from budget support, foreign aid is used to finance development projects, which suffered severely in the current financial year. To avoid that, the government will borrow nearly Tsh3 trillion ($1.45 billion) from local and external sources to implement development projects in 2015/16.