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Tanzania budget shortfall alarms IMF
Tanzania bank notes. The government's budgetary operations recorded a deficit of $522 million between July and October 2013. PHOTO|FILE
By The Citizen
Posted Friday, February 28 2014 at 12:02
In Summary
The International Monetary Fund (IMF) has sounded the alarm over the huge government budget deficit, currently standing at over $522 million.
A visiting IMF delegation that assessed the country's fiscal environment said it was concerned about the government's failure to align it expenditure with revenue.
In a report released after consultations with treasury chiefs, IMF team leader Paolo Mauro advised the government to make realistic revenue assumptions.
Already in its third quota of the current financial year, Tanzania's budget deficit is$522 million, according to the latest Monthly Economic Review (MER) report by the Bank of Tanzania (BoT) released in December 2013.
According to the IMF, revenue shortfalls and subsequent expenditure compression experienced during the current fiscal year reinforce the importance of making realistic revenue assumptions during the upcoming budget cycle.
Experts agree that such shortfalls are the result of the government's tendency to rely on tax revenues at the expense of non-tax revenue.
READ: Dar breaches IMF benchmark in bid to plug deficit
"The government puts too high revenue targets and at the end fail to meet the goal," says Dr Haji Semboja, a senior economics lecturer at the University of Dar es Salaam.
"This is because of concentrating on taxing formal sources alone and forgetting informal and other sources that could provide enough revenue." But Bank of Tanzania Governor Benno Ndulu told The Citizen that the government revenue estimates are real and it is only that some tax measures were not rolled out as expected.
According to Prof Ndulu, the current shortfall is the result of faltering in implementing the new tax measures. He added: "In the past three years, our revenue collection has been very good. In 2010/2011, we exceeded the target and in the following two financial years we recorded between 97 per cent to to 98 per cent revenue achievement. This tells us that the revenue targets are not far-fetched."
One of the problematic tax revenue uptakes was the Sim Card tax that met stiff opposition from the public and mobile companies and had to be scrapped.
The IMF expects the upcoming mid-year budget review to reduce expenditure allocations to align with available resources.
Dr Semboja feels, though, that the same Bretton woods institutions--the IMF and the WB--cannot escape blame. It is advice in the past from the same institutions, he said, that led to poor investment and fiscal policies that affected economic productivity and the government's self-sufficiency.
"The government has been relying on borrowing to finance part of its budget but these borrowed funds are not invested to generate profits, hence the government continues to rely on borrowing because it does not have development projects that generate revenue," said Dr Semboja.
According to an IMF delegation that visited Tanzania from February 12 to 25 this year, the expenditure arrears have risen considerably, especially for road projects.
http://www.theeastafrican.co.ke/bus.../2560/2225628/-/item/1/-/f4flqaz/-/index.html
Tanzania bank notes. The government's budgetary operations recorded a deficit of $522 million between July and October 2013. PHOTO|FILE
By The Citizen
Posted Friday, February 28 2014 at 12:02
In Summary
- Experts agree that such shortfalls were the result of the government's tendency to rely on tax revenues at the expense of non-tax revenue.
The International Monetary Fund (IMF) has sounded the alarm over the huge government budget deficit, currently standing at over $522 million.
A visiting IMF delegation that assessed the country's fiscal environment said it was concerned about the government's failure to align it expenditure with revenue.
In a report released after consultations with treasury chiefs, IMF team leader Paolo Mauro advised the government to make realistic revenue assumptions.
Already in its third quota of the current financial year, Tanzania's budget deficit is$522 million, according to the latest Monthly Economic Review (MER) report by the Bank of Tanzania (BoT) released in December 2013.
According to the IMF, revenue shortfalls and subsequent expenditure compression experienced during the current fiscal year reinforce the importance of making realistic revenue assumptions during the upcoming budget cycle.
Experts agree that such shortfalls are the result of the government's tendency to rely on tax revenues at the expense of non-tax revenue.
READ: Dar breaches IMF benchmark in bid to plug deficit
"The government puts too high revenue targets and at the end fail to meet the goal," says Dr Haji Semboja, a senior economics lecturer at the University of Dar es Salaam.
"This is because of concentrating on taxing formal sources alone and forgetting informal and other sources that could provide enough revenue." But Bank of Tanzania Governor Benno Ndulu told The Citizen that the government revenue estimates are real and it is only that some tax measures were not rolled out as expected.
According to Prof Ndulu, the current shortfall is the result of faltering in implementing the new tax measures. He added: "In the past three years, our revenue collection has been very good. In 2010/2011, we exceeded the target and in the following two financial years we recorded between 97 per cent to to 98 per cent revenue achievement. This tells us that the revenue targets are not far-fetched."
One of the problematic tax revenue uptakes was the Sim Card tax that met stiff opposition from the public and mobile companies and had to be scrapped.
The IMF expects the upcoming mid-year budget review to reduce expenditure allocations to align with available resources.
Dr Semboja feels, though, that the same Bretton woods institutions--the IMF and the WB--cannot escape blame. It is advice in the past from the same institutions, he said, that led to poor investment and fiscal policies that affected economic productivity and the government's self-sufficiency.
"The government has been relying on borrowing to finance part of its budget but these borrowed funds are not invested to generate profits, hence the government continues to rely on borrowing because it does not have development projects that generate revenue," said Dr Semboja.
According to an IMF delegation that visited Tanzania from February 12 to 25 this year, the expenditure arrears have risen considerably, especially for road projects.
http://www.theeastafrican.co.ke/bus.../2560/2225628/-/item/1/-/f4flqaz/-/index.html