FISCAL POLICY ANALYSIS AND STRATEGY The reflection of the Budget

2010/11

By

Prof(Dr) Handley M. Mafwenga,

(PhD, MBA, MSc, PGDTM,ADTM)

THE UNITED REPUBLIC OF TANZANIA

MINISTRY OF FINANCE AND ECONOMIC AFFAIRS

STRUCTURE

Introduction

Fiscal Strategic Measures of the

Government

Government Finances

Conclusion

INTRODUCTION

With regard to fiscal operations, the government has over

the time managed to increase domestic resource

mobilization efforts, while maintain expenditures within

budget limits. Domestic revenue increased from 10.8 per

cent of GDP in 2002/03 to 15.8 per cent of GDP in

2008/09, while expenditure increased from 17.6 per cent

of GDP to 25.3 per cent of GDP over the same period.

During, the period, the Government restrained from

domestic bank borrowing as a way of encouraging more

financial resources to the private sector, and also to

reduce pressure on domestic prices. Meanwhile, financial

sector remains solid, with credit to the private sector

increasing from an average of less than 6 per cent of GDP

in 2002 to an average of 19 per cent of GDP in 2009.

FISCAL STRATEGIC MEASURES OF THE

GOVERNMENT

Improvement of the tax administration system including identification of new sources of revenue;

Strengthening management and control of revenue collection from various sources;

Reduction of tax exemptions in order to increase revenue collection;

Allocation of financial resources for the implementation of Kilimo Kwanza and allocation of more funds for MKUKUTA II implementation;

Allocation of funds for; (1) Land survey and Land use planning (2) 2012 population and human settlement census and (3) October General Election;

Strengthen good governance and accountability;

Improve remuneration for civil servants and employment creation;

Improve and expand essential infrastructure services, including roads, railways, ports, airports, and electricity projects;

FISCAL STRATEGIC MEASURES OF THE

GOVERNMENT

Acceleration of the process of introducing National Identity Cards

Harmonize monetary and fiscal policies in order to control inflation and interest rates and enhance access to credit by the private sector;

Strengthen the Local Government Authorities to manage financial and human resources for efficient implementation of the Decentralization by Devolution (D by D) policy;

Protecting achievements in education and health sectors;

Continue improving conducive environment for attracting local and foreign investment t; and

Mobilize both concessional and commercial loans in order to enable the Government finance large infrastructure projects including

involving the private sector through PPP arrangement.

GOVERNMENT FINANCES

The analysis of Government finances summarized below is based on the likely outturn for 2009/10 and the budget for 20010/11.

This incorporates various fiscal developments encountered

during the year ending June 2010. and the impacts of the global

financial and economic crisis especially on Government revenue.

Revenue Collection

In the 2010/11 Government Plans to collect domestic revenue

amounting to TZS 6,003.59 billion equivalent to 17.3 per cent of

GDP compared with 16.4 per cent of GDP in 2009/10. Tax

revenue contributes 5,652.59 billion and non-tax revenue

contributes 351.0 billion. Revenue collection from LGAs is

estimated at TZS 172.582 billion and TZS 30.0 billion will be

gained from shares in NBC limited.

GOVERNMENT FINANCES

REVENUE STRATEGIES

1. Strengthen tax collection system using banking system

where possible;

2. Improve services in the tourism industry, in particular

grading hotels in accordance with the international

standards;

3. Enforce implementation of Finance Act, that requires

parastatals and other public institutions to remit

surplus funds to Treasury;

4. Widening the tax base by registering new taxpayers and

sustaining macroeconomic stability;

5. Monitor closely the implementation of TRAs Third Five

Year Corporate Plan etc

GOVERNMENT FINANCES

GRANTS AND LOANS

The Government intends to have grants and

concessional loans from Development Partners of

TZS 821.645 billion as GBS compared to TZS

1,307.707 billion expected to be received by the

end of year 2010. Another mobilization from

Development Partners include TZS 2,452.908

billion for financing development projects and

programmes.

GOVERNMENT FINANCES

EXPENDITURE STRATEGIES

The Government expenditure policies will focus on improving the management of public funds, increasing efficiency in the use and management of public funds with particular emphasis on areas that have potential for accelerating economic growth and reduction of income poverty. The Government has allocated sufficient funds to ensure that the General Elections are held as planned.

Priority Sectors in the budget include;

Modernize agriculture to realize high productivity;

strengthen extension services and research on production of better livestock breeds;

Strengthen and developing irrigation schemes in order to attain the aspirations of Kilimo Kwanza, including construction of rain water harvesting dams to increase irrigation capacity;

GOVERNMENT FINANCES

To increase water supply in urban and rural areas;

To establish national centers for land survey and

mapping and implementation of national land use plans;

To accelerate implementation of the national identity

card projects;

To protect and sustain achievements attained in

education and health sectors;

To allocate more resources for construction and

rehabilitation of transport infrastructure, especially

roads and railways; to strengthen road infrastructure in

Dar-Es-salaam City so as to reduce traffic congestions;

rehabilitation of airports to make Tanzania a regional

and international commercial hub for air transport

services;

GOVERNMENT FINANCES

Enhance impetus in the production of energy and

implementation of various projects in collaboration with

the private sector in order to increase energy

generation;

To promote small and medium scale businesses in order

to increase quality and value addition by investing in

agro-processing industries, storage facilities and

incubator sites; and

To establish the Agricultural Bank, strengthening TIB

and Tanzania Women Bank and accelerating financial

leasing services and complete the establishment of the

Tanzania Mortgage Refinance Company (TMRC)

SECTORAL ALLOCATION OF THE 2010/11 BUDGET

1,096.60

666.9

1,743.90

963

347.30

285.5

1,505.10

903.8

2,045.30

1,205.90

397.60

327.20

37.3

35.5

17.2

25.2

14.5

14.6

0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00

Infrastructure

Agriculture

Education

Health

Water

Energy

Amount in Billion TZS

P

r

i

o

r

i

t

y

S

e

c

t

o

r

s

Sectoral Allocation of the 2010/11 Budget

Percentage Increase

2010/11

2009/10

AMENDMENTS

VAT ACT, CAP 148

In line with Kilimo Kwanza the VAT Act, Cap 148 have exempted transportation (intra-transport) of agricultural

products e.g. sugar cane, sisal and tea plantations from

farm to the processing industry and on machines and

equipment used in the collection, transportation and

processing of milk products. Other exemption include;

1. Animal feeds or seed cake;

2. Agricultural implements e.g. combine harvesters, pick-up

balers etc;

3. Breeding services through artificial animal insemination;

and

4. Supply of packaging materials for fruit juices and milka

products in order to reduce production costs and improve

quality of goods produced by local processors.

AMENDMENTS

VAT Special relief has been granted to the following;

1. Green houses to growers in order to promote

horticulture farming;

2. Supply of goods and services to the organized farms and

farms under registered cooperatives unions for the

purpose of building of farm infrastructures in the farms

such as irrigation canal, construction of networks,

godowns and similar storage facilities;

3. Supply of building materials and construction services

to EPZ;

AMENDMENTS

Income Tax Act, Cap 332

1. Introduce ring fencing within the mining areas;

2. Reduce Individual Income Tax rate from 15% to 14%;

3. Extend the application of withholding taxes on goods

and services to non-TIN holders supplying goods and

services to all taxpayer

Other amendments have been made in Excise

(Management and Tariff) Act; Local Government

Finance Act; Motor Vehicles (Tax and Registration and

Transfer) Act; Road Traffic Act; Cashewnut Industry

Act; The Gaming Act; and EAC Customs Management

ct, 2004

CONCLUSION

The Budget is a continuation of Government efforts in

pursuing the objectives of MKUKUTA, Millennium

Development Goals and the Development Vision 2025. it

is essential to utilize emerging opportunities in engaging

in income generating activities. The improvement in

agriculture, livestock and industrial sectors as well as

agro-business have the potential to contribute to GDP

and employment creation.

The budget will focus on the land development and

connecting the country with network of roads, railways,

communication and energy infrastructures.

THANK YOU FOR

YOUR KIND

ATTENTION