SPEECH BY THE MINISTER FOR FINANCE
HON. DR. WILLIAM AUGUSTAO MGIMWA (MP.),
INTRODUCING TO THE NATIONAL ASSEMBLY, THE ESTIMATES OF GOVERNMENT REVENUE AND EXPENDITURE
FOR THE FISCAL YEAR 2012/2013
Madam Speaker, I beg to move that this esteemed House now resolves to debate and approve Government proposals for Revenue and Expenditure estimates for Fiscal Year 2012/13. Together with this speech, there are four volumes of books which provide detailed explanation of the budget estimates: volume one presents revenue estimates; volume two describes recurrent expenditure estimates for Ministries, and Government independent Departments while volume three provides recurrent expenditure estimates for Regions and Local Government Authorities, and volume four presents development expenditure estimates for Ministries, Government independent Departments, Regions and Local Government Authorities. In addition, there is a Finance Bill of the year 2012 which is part of this budget.
Madam Speaker, allow me at the outset, to take this opportunity to express my sincere gratitude to His Excellency Dr. Jakaya Mrisho Kikwete, the President of the United Republic of Tanzania for having confidence in me by appointing me to be the Minister for Finance. I commit to undertake the responsibilities conferred on me with full dedication and faithfulness.
Madam Speaker, I wish to congratulate the following for having been appointed by His Excellency the President to be Ministers as follows: Hon. Prof. Sospeter Mwijarubi Muhongo (MP), Hon. Eng. Christopher Kajoro Chiza (MP), Hon. Dr. Harrison George Mwakyembe (MP), Hon. Dr. Fenella Ephraim Mukangara (MP), Hon. Amb. Khamis Sued Kagasheki (MP), and Hon. Dr. Abdallah Omari Kigoda (MP). Further, I would like to congratulate the following for being appointed to be Deputy Ministers in various Ministries: Hon. Janet Zebedayo Mbene (MP), Hon. Saada Mkuya Salum (MP), Hon. Dr. Seif Suleiman Rashid (MP), Hon. George Boniface Simbachawene (MP), Hon. January Yusuf Makamba (MP), Hon. Dr. Charles John Tizeba (MP), Hon. Amos Gabriel Makalla (MP), Hon. Angela Jasmine Kairuki (MP), Hon. Stephen Julius Maselle (MP) and Hon. Eng. Dr. Binilith Satano Mahenge (MP). I also congratulate Hon. James Mbatia (MP) for being appointed by His Excellency the President to be a Member of Parliament.
Madam Speaker, Further, I wish to congratulate Hon. Alhaji Adam Kimbisa (MP), Hon. Shy Rose Banji (MP), Hon. Abdulah Alli Hassan Mwinyi (MP), Hon. Charles Makongoro Nyerere (MP), Hon. Dr. Twaha Issa Taslima (MP), Hon. Nderkindo Perpetua Kessy (MP), Hon. Bernard Musomi Murunya (MP), Hon. Anjela Charles Kizigha (MP) and Hon. Maryam Ussi Yahaya (MP) who have been elected to represent us in the East African Legislative Assembly. It is my belief that they will ably represent us for the benefit of our nation.
Madam Speaker, the preparation of this budget involved various stakeholders and Institutions. I would like to thank those who have contributed in one way or another to the successful preparation of this budget. I would like in a special way to thank the Parliamentary Finance and Economic Affairs Committee under the chairmanship of Hon. Andrew John Chenge, Member of Parliament for Bariadi West, together with other Parliamentary Sectoral Committees of for their constructive advice during the scrutinization of the proposals of this budget. Likewise, I thank all Honorable Members of Parliament for their advice and recommendations that have been taken into consideration in this budget.
Madam Speaker, I am grateful to Hon. Stephen Wasira (MP), Minister of State in the President’s Office, responsible for Co-ordination for his cooperation during the preparation of this budget. Further, I would like to thank the Deputy Ministers for Finance, Hon. Janet Zebedayo Mbene (MP) and Hon. Saada Mkuya Salum (MP) for their support. I thank the Permanent Secretary, Mr. Ramadhani M. Khijjah, Deputy Permanent Secretaries, Mr. Laston T. Msongole, Dr. Servacius B. Likwelile and Mrs. Elizabeth Nyambibo for their immense contribution in the preparation of this budget. Moreover, I would like to thank Prof. Benno Ndulu, Governor of the Bank of Tanzania; Dr. Phillip Mpango, Executive Secretary in the President's Office - Planning Commission; Mr. Harry Kitilya, Commissioner General of the Tanzania Revenue Authority and Dr. Albina Chuwa, Director General of the National Bureau of Statistics. I would also like to thank the Attorney General’s Office for the timely preparation of the 2012 Finance Bill and various related documents which are integral part of this budget.
Madam Speaker, I would like to express my gratitude to the Heads of Departments and the Heads of Institutions that are under the Ministry of Finance and all members of staff of the Ministry of Finance for their cooperation. I would also like to thank the Government Printer for the timely publication of this budget. Finally, I am indebted to the experts and all those who made professional proposals regarding policies, strategies and tax related measures which, to a large extent, have been taken on board in the preparation of this budget.
Madam Speaker, Tanzania was the host of the 2012 Annual Meetings of the Board of Governors of the African Development Bank which took place from 28th May – 2nd June 2012 and were officially opened by His Excellency Dr. Jakaya Mrisho Kikwete, the President of the United Republic of Tanzania. The Meetings were held successfully at the Arusha International Conference Center and were attended by 2,350 delegates from within and outside Tanzania. The meetings provided an opportunity for marketing Tanzania’s economic potentials. Moreover, local participants from the private sector had the opportunity of getting a better understanding of the operations of the AfDB and how to access financing facilities of the AfDB Bank. I would like to urge the private sector to make good use of the opportunities offered by the African Development Bank.
Madam Speaker, the 2012/13 budget aims at addressing the economic challenges facing the economy, including; increasing the opportunities for economic growth, increase availability of food in the country, reducing inflation and strengthening revenue collection and management of expenditure, employment creation especially for the youth, investing in energy infrastructure specifically construction of the gas pipeline from Mtwara to Dar es Salaam, roads, ports and railways in order to reduce the cost of doing business and increase productivity; as well as payment of domestic and external debts.
REVIEW OF FISCAL POLICY IMPLEMENTATION FOR 2011/12
Madam Speaker, the budget frame for 2011/12 was a continuation of Government efforts to achieve the objectives of the Tanzania Development Vision 2025. Moreover, the budget emphasis was on the implementation of priorities of the first Five Year Development Plan (2011 – 2015/16); The National Strategy for Growth and Reduction Poverty Phase II (MKUKUTA II); The Millennium Development Goals (MDGs) 2015; the Joint Assistance Strategy for Tanzania (JAST); National Debt Strategy; together with strengthening Tax Administration and the National Debt Strategy and Public Expenditure Management.
Madam Speaker, the basis and objectives of the budget for year 2011/12 aimed at achieving the Government’s goals of addressing the challenges of mitigating the high cost of living for citizens; continued with efforts to strengthen domestic revenue collection mechanism; creating conducive investment climate for attracting local and foreign investments; to develop the private sector in order to widen the tax base; to finalize the preparations of the national identity cards project; to allocate resources and implement projects in areas that stimulate economic growth.
Madam Speaker, other areas that were taken into consideration in the 2011/12 budget included the need to: implement specific plans and strategies that foster economic growth; mobilization of concessional and non-concessional loans; speeding-up the implementation of Public Private Partnership Act to widen opportunities for executing development projects; Housing and Population Census 2012; establishment of postal codes and address system and the implementation of Formalization of the Informal Sector Programme popularly known as MKURABITA; ensure that revenues from retention schemes are collected accordingly and remitted to the Consolidated Fund Services (CFS); as well as sustaining the achievements in the social sectors, particularly education and health which have experienced great expansion and improvement of services.
Measures for Implementation of the Budget for year 2012/13
Mitigation of High Cost of Living
Madam Speaker, in the implementation of the Budget for year 2011/12, the Government took various measures aimed at addressing the challenges facing citizens with a view to mitigating high cost of living caused by the increase of price of goods and services. Measures taken included revising the calculation methods of prices for petroleum products and publishing monthly indicative prices; including introduction of the bulk procurement system for petroleum products. These measures have reduced the pace of increase in prices of petroleum products in the country.
Madam Speaker, the Government spent shillings 296 billion to implement the Emergency Power Plan to address the problem of shortage of electricity by using leased power generating plants. Also, the Government spent United States Dollars (US Dollars) 183 million to finance the construction of a 100 MW power generating plant in Dar es Salaam and a 60 MW plant in Mwanza. Construction of the Dar es Salaam plant has been completed; and is being tested at the moment. The Mwanza plant is still under construction.
Madam Speaker, the Government spent shillings 27 billion to finance the purchase and distribution of 120,000 tons of maize to the market in order to mitigate food shortages in some areas. Moreover, the Government issued permits for importation of 200,000 tons of sugar without paying import duty in order to address the shortage of sugar and price increases. Furthermore, the Government raised the interest rate charged by the Central Bank to financial institutions from 7.58 percent to 12.58 percent. In addition, the Government raised the rate of deposits which the commercial Banks are obliged to keep with the Central Bank from 20 percent to 30 percent. These measures have helped to control inflation.
Economic Empowerment and Employment Creation
Madam Speaker, in order to address the problem of unemployment, the Government has taken various measures to create employment.
These measures include improving the policy and legal environment to facilitate the growth of private sector, to expand financial services, including recapitalization of the Tanzania Investment Bank, Tanzania Women’s Bank, Tanzania Postal Bank, and Twiga BankCorp; and facilitating the establishing the Mortgage and Lease Financing Company. Other measures taken included implementation of construction of infrastructure projects, specifically roads, electricity, agriculture and telecommunication and to empower people through various empowerment programmes. Moreover, several other institutions contributed to employment creation. These include TASAF, SELF, Small Industries Development Organization (SIDO), Community Banks and Guarantee Schemes managed by the Bank of Tanzania. In the year 2011/12, the Government employed 25,000 primary and secondary school teachers, 4,499 agricultural and livestock extension officers and 4,499 medical specialists in the health sector.
Madam Speaker, the Government continued with efforts to reduce the bureaucracy in clearance of goods from the port by introducing an electronic system for submission of relevant import documents prior to the arrival of goods. This arrangement is aimed at reducing congestion of cargo and loss of documents and has resulted in significant reduction in time spent as well as importation and exportation costs. The Government has also reduced the number of road blocks within the country from 50 to 15, with the exception of weighbridge and customs transit points.
Improving Domestic Revenue Collection System Revenue Policies
Madam Speaker, in the year 2011/12, the Government continued with reforms in the system for collecting domestic revenues from tax and non tax sources by taking administrative and policy measures, including changing tax rates and amending tax laws.
Madam Speaker, the Government amended the Value Added Tax Act, CAP 148 in order to improve productivity in agriculture, livestock, trade and tourism sectors. The amendments included exempting Value Added Tax (VAT) on spare parts for agricultural implements and machinery, poultry feeds, yarn for weaving fishnets; along with introduction of tax refunds on goods bought locally by departing non-residents.
Madam Speaker, the Government abolished exemption of Value Added Tax on sale and lease of residential houses owned by National Housing Corporation (NHC) and tax relief on Non Governmental Organizations except for equipments donated to orphanage centres and schools.
Madam Speaker, the Government also amended the Income Tax Act, CAP 332 by abolishing the withholding tax on transportation of fish exports. This was done to encourage use of transportation services for fish products originating from within the country instead of doing so through neighbouring countries. Moreover, amendments were made to The Excise (Management and Tariff) Act, CAP 147 by reducing excise duty on Heavy Fuel Oils (HFO) used by industrial plants and machinery in order to reduce the production costs.
Madam Speaker, the Roads and Fuels Tolls Act, CAP 220 was amended by granting exemption of toll imposed on fuel on bunkering services and other equipments used in the exploration of gas and petroleum in order to reduce the costs. Moreover, the East African Community Customs Management Act 2004, was amended following the ratification by Ministers for Finance of Member States to make various amendments with a view to develop the industrial, transportation, livestock, trade and tourism sectors. In addition, the amendments were also aimed at improving community health and to strengthen protection and safety of citizen and their properties.
Madam Speaker, other measures taken included motivating and ensuring that Electronic Fiscal Devices are used effectively, strengthening administration of tax blocks, increasing the number of tax payers service and payment centres, updating tax payment systems, improving the valuation system and strengthening tax audit on tax payers accounts.
Trend of Revenue Collections
Madam Speaker, in the financial year 2011/12, the Government planned to raise funds amounting to shillings 13,525.9 billion from different sources and spend the same amount for recurrent and development expenditures. The revenue sources were as follows: domestic revenue was estimated to reach shillings 6,775.9 billion; revenue from Local Governments was estimated to reach shillings 350.5 billion; budget support grants and loans for development project and sector basket funds was estimated to reach shillings 3,054.1 billion; domestic and foreign non-concessional loans were estimated at shillings 1,664.9 billion; the rollover of matured treasury bills and bonds was estimated at shillings 810.9 billion.
Madam Speaker, with regard to domestic revenues, including revenues from Local Authorities, the collection up to April 2012 reached shillings 5, 684.5 billion. This amount is equivalent to 80 percent of estimates of collecting shillings 7,126.4 billion for year 2011/12.
Madam Speaker, collection from taxes reached shillings 5,227.5 billion equivalent to 84 percent of the target of collecting shillings 6,228.5 billion. On the basis of tax revenue collection trends during the first ten months of year 2011/12, by the end of year 2011/12 the Government expects to collect a total of shillings 6,307.8 and hence meeting the target.
Madam Speaker, non-tax revenue reached shillings 451.6 billion which is 83 percent of the annual target to collect 547.1. Based on this trend, the Government is optimistic to meet the planned target by June, 2012.
Madam Speaker, revenue from Local Governments reached shillings 143 billion, equivalent to 40.8 percent of the target to collect shillings 350.5 billion per annum. Up to June 2012, the Government expects to collect a total of shillings 200 billion from this source, which is 57 percent of the annual target. The target is not likely to be achieved because of the delays in starting the implementation of the imposition of business licence fees.
Madam Speaker, in the period between July 2011 and April 2012, the Government borrowed shillings 526 billion to pay for the rollover of matured treasury bonds which is 64 percent of the annual target of borrowing shillings 819.1 billion. Moreover, the Government planned to borrow shillings 393.4 billion, equivalent to one percent of Gross Domestic Product (GDP) to finance development projects. Up to April, 2012 the Government had borrowed shillings 232.6, equivalent to 59 percent of annual estimates.
External Non Concessional Loans
Madam Speaker, in year 201/12 the Government estimated to raise United States Dollars (US Dollars) 822 million, equivalent to shillings 1,271.6 billion from non-concessional loans. During the period between July 2011 and April 2012, the Government signed a loan agreement for US Dollars 320 million with Standard Bank of South Africa. Up to March 2012, a total of US Dollars 229 million had been spent on payment of roads construction arrears for financial year 2010/11. Moreover, the Government signed a loan agreement worth Euros 61 million with HSBC Bank to finance the power generation plant with capacity of 60 Megawatts (MW) at Nyakato Mwanza. The Government has also signed a loan agreement worth US Dollars 350 million with Credit Suisse Bank of United Kingdom. US Dollars 200 million was received in early June 2012. The balance of US Dollars 150 million will be made available for spending in Financial year 2012/13.
Madam Speaker, the Government has secured a Consultant who will advise the country in the preparations for Sovereign Credit Rating. These preparations will enable the country to be evaluated and are expected to be completed by early 2013. The completion of this exercise is expected to boost confidence of Lenders and hence enable the Government to access loans with less stringent conditionalities and on a timely basis.
Madam Speaker, in the year 2011/12, the Government continued to implement expenditure policies based upon availability of domestic revenues, grants together with domestic and external loans. Moreover, the Government continued to improve management and control of public funds, including controls in the payments of salaries, expenditure in development projects and subsidy on agricultural inputs, public procurement and to continue controlling the accumulation of arrears. The Government has prepared a strategy for paying and controlling debts arising from accumulation of arrears for employees; contractors; suppliers; and other debts. The debts will be paid after verification by the Internal Auditor General.
The Public Financial Management Reform Programme
Madam Speaker, the Government continued with implementation of the Public Financial Management Reform Programme (PFMRP) in the Central and Local Governments. In the implementation of the Programme, the Government has installed the IFMS system in 133 Local Government Authorities. Moreover, the Government conducted training on the interbank settlement system to employees in the Accounting cadres from 20 Regions, Sub-Treasuries, Office of the Parliament, Prime Minister’s Office – Regional Administration and Local Government (PMO – RALG) and the Office of Registrar of Co-operatives. Also the Government conducted training to Accountants from Ministries, Independent Departments and 32 Embassies on the preparation of Government’s financial statements in accordance with International Public Sector Accounting Standards (IPAS) on accrual basis.
Madam Speaker, as a result of these reforms, the financial management in Ministries, Independent Departments, Region, Institutions and Local Governments Authorities has continued to improve. This situation manifests itself in the report of the Controller and Auditor General for the year 2010/11, in which unqualified audit reports for Ministries, Independent Department and Regional Secretariat has improved from 71 percent to 85 percent. While the qualified report have dropped 64 percent in year 2009/10 to 56 percent in year 2011/12.
Madam Speaker, For our Diplomatic Missions abroad, unqualified Audit reports have increased from 71 percent in 2009/10 to 85 percent in 2010/11 and there were no qualified reports in 2010/11. In the Local Authorities, unqualified audit reports have increased from 49 percent in 2009/10 to 54 percent in 2010/11 and qualified reports decreased from 64 percent in 2009/10 to 56 percent in 2010/11.
Madam Speaker, in the year 2011/12, the Government opened six bank accounts for each Local Authority for their operations. These accounts are for revenues; deposits; recurrent expenditure; salaries; development; and Road Fund. The aim of this measure is to reduce operational costs, unnecessary bureaucracy in use of funds, difficulties in reporting, accumulation of unspent funds and control of unauthorized expenditures.
Trends in Expenditure
Madam Speaker, on the side of expenditure in the year 2011/12, the Government estimated to spend a total of shillings 13,525.9 billion; shillings 8,600.3 billion were allocated for recurrent expenditure and shillings 4924.6 billion for development expenditure.
Madam Speaker, during the period between July, 2011 to April 2012, recurrent expenditure reached shillings 7,349.8 billion, equivalent to 85. 5 percent of the annual estimates as per exchequer releases. Out of that amount, payment of salaries to Government employees, Regional Secretariats, Local Government Authorities, Public institutions and Parastatals was shillings 2,760.5 billion equivalent to 84.4 percent of the annual target of shillings 3,270.3 billion. Interest payment on domestic and external loans was shillings 308.7 billion per annum. The payment of external loans was shillings 57.3 billion equivalent to 85.7 percent of annual estimates. The Government spent shillings 526 billion on paying for matured short term treasury bonds and bills. The Government has continued to accord priority to repayment of debts to avoid accumulation of interest.
Madam Speaker, Other Charges for Ministries, Independent Government Department and Agencies, Regions and Local Authorities reached shillings 2,384.9 billion which is 72.8 percent of annual estimates of shillings 3,275.1 billion. Out of Other Charges, shillings 284.1 billion was spent on higher education loans which is 89 percent of the annual budget of shillings 317.4 billion. This benefited 93,176 students. Furthermore, the Government paid a total of shillings 44.0 billion as claims for primary and secondary school teachers as verified by the Internal Auditors General.
Madam Speaker, regarding development expenditure, shillings 2,657.2 were spent on financing development projects compared with annual estimates of shillings 4,924.6 billion. Local funds were shillings 1,201.6 billion compared with annual estimates of shillings 1,871.5 billion equivalent to 64.2 percents. This shortfall is a result of delays in securing on time external non concessional loans. A total of shillings 663.8 billion was spent to finance infrastructural projects, out of which shillings 296 billion was spent on electricity projects and shillings 367.8 billion was spent on roads projects. The component of development expenditure that was financed by foreign funds was shillings 1,450.4 or 47 percent of the annual target of shillings 3,054.1 billion.
National Identity Cards and Physical Addresses
Madam Speaker, the Government has continued with its plan to implement the National Identity project, which among other things, will help in making available various services including financial services. The project is being implemented in tandem with the introduction of physical addresses. Such Identities will be issued for Zanzibar and Dar es Salaam region in the first quarter of 2012/13.
Population and Housing Census and Poverty Survey
Madam Speaker, recognizing the importance of Population and Housing Census, the Government continued to fund the preparation stage, whose implementation has reached 95 percent. Up to now, the Government has already spent Tshs. 23.6 billion on the preparations. The Census is planned to take place on 26 August 2012. Also, the Government will continue to fund the Household Income and Expenditure Survey. The Survey started in October 2011 and is expected to end in September 2012, and the report is expected in July 2013. This survey will give a clear picture of the status of poverty, especially income poverty from the year 2007 to 2012. This will assist in identifying the income poverty trend and the reasons for such trend.
National Strategy for Growth and Reduction of Poverty-MKUKUTA II
Madam Speaker, During 2011/12, the Government continued with the implementation of MKUKUTA II, which focuses on three clusters: Growth for Reduction of Income Poverty, Quality of Life and Social well-being, and Governance and Acountability in line with the Millennium Development Goals 2015. Various sectors through their policies, strategies and programmes contribute towards the achevement of desired outcomes. Thus, the implementation of MKUKUTA II reqquires the collaboration of different sectors both at the planning and implementation stages.
Madam Speaker, MKUKUTA provides a coordination framework for rallying Government and other stakeholders efforts in the fight against poverty. Poverty is multidimensional, covering both income and non-income dimensions. It is true that income poverty has been declining marginally, However, the Government is taking various measures to reverse the situation, including creating enabling environment for people’s engagement in production activities as well as investing in education, health, infrastructure, and financial sector.
Madam Speaker, overall, the economic performance is relatively positive, showing resilience amidst the global economic shocks. During 2011, the Tanzania economy recorded a growth rate of 6.4 percent compared with 7.0 recorded in 2010. Per capita income increased to 869,436 compared with shs. 770,464 in 2010. On average, the increase in per capita income has improved purchasing power of people in particular the poor, as a result, access and ownership of assets such as quality houses, mobile phones, motorcycles, and bicycles has increased significantly.
Madam Speaker, During the period under review, the Government continued with the implementation of various programmes with the view to improving the quality of life and social well being of Tanzanians. The implementation of these programmes has shown positive results in the the sectors of education, health and water. In the education sector, the enrollment and completion rates have imporved significantly at all levels of education. For instance, the net enrolment rate for primary and secondary schools were 94 and 35 percent in 2011 respectively. Similarly, maternal and child care services have improved as DHS 2010 shows, due to the implementation of the National Road Map to Accelerate Reduction of Maternal, Newborn and Child Deaths in Tanzania (“One Plan”) launched in 2008. Access to clean and safe drinking water in the country has been improving too, due to the implementation of the Water Sector Development Programme launched in 2007.
Madam Speaker, in order to improve good governance and accountability, the government, has consitently taken various measures including, among others, streghthening the legal sector by empoying magistrates at primary courts, strengthening legal systems as well as raising public awareness about human rights isssues and the participation in the African Peer Review Mechamism. The government continued also to strengthen public financial management systems, including strengthening the capacities of Audit Offices at Ministries, Regional secretariats and Local Government Authorities.
Madam Speaker, the Government continued to implement various reforms in the financial sector to ensure that the sector effectively contributes to economic and social activities as well as economic growth. These reforms have resulted into impressive performance including, increased number of banks to 49 in April 2011 from 43 the previous year, increased number of simcards registered for banking to 21,184,808 in 2011from 10,663,623 in 2010, and Microfinance institutions increased to 150 in 2011.
Madam Speaker, the Government continued to extend credits through agricultural window at the Tanzania Investment Bank (TIB). By March 2012, a total of 81 loans worth shs. 22.9 billion were extended, out of which, 42 loans were extended to SACCOS and 32 loans to companies, and 7 loans to micro finance institutions. Credits extended to microfinancing institutions and SACCOS benfited rural small farmers.
Madam speaker, the Government continued with the implementation of the Cooperative Reforms Programme in order to strengthen and empower cooperatives to expand financial services and reach out, in particular to rural areas. Until 2011, the number of SACCOS has increased to 5,346 from 5,314 in 2010, while membership has grown by 6.7 percent, reaching 970,665 from 917, 889 in 2010. Shares,savings and deposits by members have also increased to shillings 399.0 billion in 2011 from shillings 236.8 billion in 2010. Credits extended to members increased too, reaching shillings 627.2 billion in 2011 from shillings 539.2 billion equivalent to an increase of 16.3 percent.
Madam speaker, credits to private sector increased to 23.3 percent compared to 21.9 percent in 2010. This increase goes hand in hand with the increase in domestic financial assets and fall in foreign financial assets in banks. The credits to private sector were distributed to various sectors, including personal loans 21.9 percent, commercial loans 19.9 percent, manufacturing 11.9 percent, agriculture 11.8 percent and transport and communication 7.9 percent.
Madam Speaker, in order to improve access to credits, the Government has recruited a consultant to advise in establishing a Credit Reference Bureau and Credit Reference Data bank in order to expand credit availability. The consultant has started with the installation of equipments and training of potential users. This is all aimed at improving the environment for availability of medium to long term credits for housing, agricultural development, and investment. Regulations for development financing banks have been prepared and gazetted in Government Gazette of March 2012.
Madam Speaker, During 2011/12, the Government continued with reforms of the National Social Security systems by evaluating the funds investments, life of funds, as well as preparing guidelines for investments. The Government has also reviewed the acts for the Social Security Regulatory Authorities and social security acts for the purpose of strengthening supervision of the sector.
Madam Speaker, this august House passed the Public Private Partnership (PPP) Act No. 18 of 2010 so as to provide room for the private sector to invest in public infrastructures and operate them with a view to provide public services at reasonable cost, at the same time addressing peoples’ economic and social needs. During the 2011/12 the government has established PPP desks in each public institution and has issued operational guidelines for the appraisal of PPP Projects. In addition, the government has identified pipeline projects that will be subjected to pre-feasibility appraisals with a view to identify the most suitable projects that can be implemented using the PPP arrangement.
Madam Speaker, the implementation of public – private partnership in our country is guided by two legislative instruments – the PPP Act No. 18 of 2010 and the Public Procurement Act (PPA) No. 6 of 2004 as amended in 2011. The later law was amended so as to incorporate provisions that provide guidance for public institutions to procure private investors who are willing to enter into partnership with the public institutions. The government is in the final stage of approving PPA Regulations whose issuance completes the legislative framework required to implement public-private partnerships in the country. The government will ensure that there is compliance with all legislative and regulatory requirements in approving and supervising PPP projects.
Madam Speaker, during the 2012/13 the government will conduct training and capacity building to all employees involved in implementing the PPP program. In addition, the government will select from the pipeline list, few PPP projects to be implemented as learning examples. The government will begin the process by carrying out pre-feasibility study of construction projects in road, railways, ports, airports, water, and office accommodation.
Madam Speaker, I would like to take this opportunity to encourage ministries, independent departments, local government authorities, executive agencies, and public corporations to seize this opportunity to enter into partnerships with the private sector in the construction of infrastructure projects in line with the legislative and regulatory framework.
Madam Speaker, given its commitment to the development of key infrastructure, the Government continues to raise domestic and external loans for financing of development projects. As a result by March 2012, National Debt Stock comprising of External and domestic debt reached Shillings 20,276.6 billion compared with Shilling 17,578.9 billion, at end March, 2011 equivalent to 15.4 percent increase. Out of the National Debt Stock, Shilling 15,306.9 billion is External debt stock and Domestic debt was Shilling 4,969.7 billion. The External debt stock comprised of public debt of Shilling 12,342.5 billion and the Private Debt amounting to Shilling 2,964 billion. The new loan resources mobilized from concessional and non-concessional sources for infrastructures development in the country and interest in arrears to Non- Paris Club Creditors which have not concluded bilateral agreements for debt relief are major attributes for the increase of External debt stock. During the period under reference, Public domestic debt stock increased by 10.5 percent from Shilling 4,496.5 billion as at March, 2011 to Shilling 4,969.7 billion as at March, 2012. The increase in domestic debt stocks is attributed to the rising need for new domestic loans to finance the prioritized development expenditures, issuance of the Treasury Bills and Bonds for liquidity management and developing the domestic financial Market.
Madam Speaker, considering the need for prudent management of Public Debt, in February, 2012 the Government conducted a Debt Sustainability Analysis (DSA) which includes guarantees issued to Ministries, Independent Departments and Agencies (MDAs), Parastatals and Public Enterprises. The results of DSA exercise indicate that, the Public debt is sustainable.
MANAGEMENT OF PARASTATAL ORGANIZATIONS
Madam Speaker, in ensuring that Government Institutions, Agencies and Parastatals are properly discharging their obligations, the Government issued Circular No. 1 of year 2012 instructing Parent Ministries, Boards of Directors to enter into Performance Contracts, with effect from January 2012. Moreover, Management Audit was carried out in some Public Institutions and Parastarals in order to assess the compliance with rules and regulations, legislations; and various Directives; issued by the Government which include accountability and Good Governance, financial management and recruitment procedures. This exercise is continuous and is aimed at improving the operations of Parastatals and Public Institutions. Furthermore, the Government has verified 170 privatized Parastatals. Out of which, 41 were making profits, 66 making losses and 63 were under receivership. The loss making Parastatals, will be placed under receivership with the aim of scrutinizing and proposing measures to be taken including liquidating some of them.
THE BUDGET FOR 2012/2013
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