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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