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Experts cast doubt on Tanzania budget

Discussion in 'International Forum' started by Smatta, Jun 14, 2010.

  1. Smatta

    Smatta JF-Expert Member

    Jun 14, 2010
    Joined: Nov 5, 2008
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    Minister for Finance and Economic Affairs, Mr Mustafa Mkulo, displays his budget briefcase before presenting the 2010/2011 budget at the parliamentary ground in Dodoma Tanzania. Photo/LEONARD MAGOMBA


    Tanzania's 2010/2011 budget is too ambitious, experts said on Sunday, doubting how the Government will realise a financial plan ballooned by TSh2.1 trillion, compared to 2009/2010. This, at a time of dwindling domestic revenues and uncertain donor funding.

    They expressed doubts in the realisation of the TSh11.6 trillion plan, at a time when donors have withheld $220 million (about TSh297 billion) in general budget support and against a backdrop of an 8 per cent domestic revenue underperformance in 2009/2010.

    "The targets are ambitious," said Mr David Tarimo at a post-budget seminar that PricewaterhouseCoopers (PwC) organised for its clients in Dar es Salaam on Sunday. During 2009/2010 financial year, Tanzania planned to collect domestic revenues to the tune of TSh5.096 trillion.

    However, the target is likely to be missed and the shortfall is projected at about eight per cent, translating into TSh407.68 billion. Collecting domestic revenues to the tune of TSh6.003 trillion, as envisaged in the government budget unveiled on Thursday, may therefore remain a far-fetched dream, experts say.

    Experts also fear that increased government borrowing from commercial sources will stifle growth of the private sector at a time when the economy is at its nascent stage of recovering from the global financial and economic crisis.

    "In a situation where donors have withheld their funds and where domestic revenues have not been that good, the government may borrow locally, a step that will adversely affect the private sector," Mr Onesmo Shuma, the PwC director of advisory services, said at the same seminar.

    Already, overall, lending to private sector is not quite impressive as banks have taken a precautionary attitude towards lending as a result of the global financial and economic crisis. Lending slowed down to an annual growth rate of 10.8 per cent in March 2010, compared with a growth rate of 35.9 per cent registered in the corresponding period in 2009, said Mr Shuma.

    It is also feared that increased government borrowing will create competition between the government and productive sector, making lending expensive and exacerbating the rising national debt. There are also those who see the budget numbers as cheating, if issues of inflation and depreciation of the local currency against the United States dollar is put into consideration.

    In June last year, the value of the Tanzanian Shilling against the US dollar was TSh1,250 but today, one needs an average of TSh1,400 to get a single greenback, making the proclaimed increase almost meaningless.

    "The depreciation of the local currency, coupled with the risen inflation rate means that the local currency's purchasing power has gone down… ironically, meaning that today's TSh11 trillion budget could have lesser purchasing power than last year's TSh9 trillion," the Karatu Member of Parliament, Dr Wilbroad Slaa told The Citizen on phone from Dodoma.

    Ernst and Young senior manager for tax advisor services, Mr Viann Komba, said the country needs to embark on a rational, rather than clinging on a traditional budget. According to him, a traditional budget is one in which the same commodities are slapped with tax increments each year. In Tanzania's case, whenever a budget is tabled, it is obvious that beer, soft drinks and cigarettes will be slapped with tax increment," he noted, adding:

    "In case TBL (Tanzania Breweries Ltd) closes down for three consecutive months, the economy risks suffering a lot... There should be tangible strategies to formalise businesses which are not taxed to broaden tax base."