$14b draft budget leaves Tanzania in a fix

Saturday March 17 2018

A natural gas well site. Tanzania plans to

A natural gas well site. Tanzania plans to develop major infrastructure projects in the 2018/19 financial year. PHOTO | AFP 

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Tanzania is planning to spend Tsh32.5 trillion ($14.3 billion) in the next financial year, even as it struggles to meet its revenue targets in the current one, amid shrinking sources including donor support.

The current financial year’s budget is Tsh31.7 trillion ($14 billion).

The government has lined up major infrastructure projects that it hopes to implement in the 2018/19 financial year in order to spur economic growth.

But questions are now being raised on whether the government will realise its expenditure goals following failure to achieve its revenue collection targets.  

During a budget ceiling session with MPs last week, the minister for Finance and Planning, Dr Phillip Mpango said poor tax collection was caused by tough conditions imposed by foreign lenders and a change in policies governing foreign assistance.

Revenue collection in the 2016/7 financial year reached Tsh20.64 trillion ($8.98 billion) against a target of Tsh27.42 trillion ($13.26), according to an overview by Hanif Habib and Co certified public accountants. That was a performance rate of 75 per cent.


In the current financial year, the government expects a performance rate of 85 per cent but will still face a Tsh14.3 billion ($6.3 million) shortfall.

The government had hoped to significantly increase domestic revenue collections and reduce dependence on budget support.

Instead, it is now counting on the Development Co-operation Framework (DCF) which is expected to revive poor relationship between the government and development partners. The framework was mediated by former AfDB president Donald Kaberuka who led the government and development partners in addressing the constraints affecting development co-operation.

“The government will continue to improve relationships with the development partners using the DCF with the aim of increasing investment, production, jobs and subsequently revenue collection,” said Dr Mpango.

Revenue collection

Despite donors not meeting their commitments last financial year, the government expects to raise Tsh2,676.6 billion ($1.1 billion) from development partners which is equivalent to eight per cent of the proposed budget total funding.

At 6.8 per cent economic growth registered by September 2017, Dr Mpango said Tanzania’s economy is growing faster than any of its East African member states. The mining sector contributed the highest to growth at 20.3 per cent despite government introducing major policy changes in the sector.

The government said that water distribution in urban areas increased to an average of 79 per cent, electricity to 67.5 per cent and that 3,306 industries had been built.

Domestic revenue increased to Tsh1.3 trillion ($574 million) on average per month from Tsh850 billion ($375,266,000) in 2015.

The government further said that the focus of 2018/2019 budget will be on the Rufiji hydropower project on which it has already spent Tsh3.2 billion ($1,412,760) for feasibility studies, standard gauge railway project whose implementation is expected to reach 15 per cent by June, and reforming its national carrier for which the government has already paid Tsh7.85 billion ($3,465,690) for purchasing new aircrafts.

However, these same projects were highlighted in the 2017/2018 budget estimation except the construction of the liquefied natural gas plant.