NAVIGATING FISCAL WATERS: Current budget implications for 2024/2025 financial year

DODOMA: AS Tanzania prepares for the presentation of the 2024/2025 budget to be tabled in the National Assembly in Dodoma today, a review of the past fiscal year’s activities provides valuable insights into the government’s financial management and strategic initiatives.

The Minister for Finance Dr Mwigulu Nchemba, led the comprehensive 2023/2024 budget process which was strategically segmented into four detailed volumes to foster sustainable development and manage the nation’s finances effectively.

Structure of the 2023/2024 budget The 2023/2024 budget was meticulously organised into distinct sections, each targeting key areas of economic management.

The revenue estimates section detailed the government’s diverse revenue streams, including both domestic taxes—such as VAT, income tax, and excise duties—and non-tax revenues.

This section also covered expected international grants and loans, crucial for understanding the broader fiscal planning context.

Recurrent expenditures for ministries and government agencies covered the operational costs necessary for the daily functions of government operations, outlining expenditures on salaries, administrative expenses, and other operational costs.

Another critical section of the budget addressed the financial needs at the regional and local government levels, focusing on ensuring effective governance and service delivery through adequate funding for infrastructure, wages, and administrative costs.

Significant attention was also paid to development expenditures, with substantial investments in infrastructure projects like roads, bridges, schools, and healthcare facilities aimed at boosting economic growth and improving Tanzanians’ quality of life.

Detailed revenue plans for 2023/2024 review

As Tanzania gears up for the presentation of its 2024/2025 budget, a reflective look at the previous fiscal year’s revenue plans is essential.

The government had set a target to collect 44.39tri/- in revenue for the fiscal year 2023/2024, indicating a concerted effort to bolster fiscal stability and reduce reliance on external aid.

The com- position of this revenue was strategically diversified to enhance the resilience of the national economy.

Analysis of the 2023/2024 revenue composition

Domestic revenue was projected to contribute a substantial 31.38tri/-, showcasing the government’s drive to harness internal resources.

This was supported by significant income from various taxes: Customs and Excise Duty was expected to generate 1.91tri/-, Value Added Tax (VAT) on domestic and imported goods aimed to bring in approximately 7.71tri/-, and Income Tax was forecasted to contribute 8.52tri/-.

Other taxes were projected to account for an additional 5.13tri/-. Further- more, non-tax revenues were anticipated to add 4.66tri/-, derived from contributions, dividends from public corporations, and fees collected by various ministries and regional administrations.

In addition to these internal sources, external funding was also a critical component of the revenue strategy. The government expected to receive 2.18tri/- in grants and concessional loans from development partners, with project-specific grants and loans projected to bring in an extra 3.15tri/-.

To further support its fiscal framework, the government planned to secure 1.90tri/- in domestic commercial loans and 2.10tri/- in foreign commercial loans. Legislative support and expectations for implementation .

The revenue projections were underpinned by the Finance Bill of 2023, which proposed key amendments to tax laws aimed at enhancing revenue collection and ensuring compliance.

These changes were expected to streamline tax administration processes, close loopholes, and improve enforcement measures, thereby increas- ing government revenue ef- ficiency.

The Appropriations Bill of 2023 complemented these efforts by authorising the withdrawal of funds from the Consolidated Fund, ensuring that revenues were effectively allocated across various sectors in line with national development priorities.

Critical expectations for the 2024/2025 budget

As we approach the unveiling of the 2024/2025 bud- get, it is critical to reflect on these past strategies to gauge what might be expected in the upcoming fiscal announcement.

This year’s focus on enhancing internal revenue generation, coupled with strategic external borrowing, sets a clear precedent for a continued emphasis on fiscal self-reliance and prudent debt management.

Stakeholders should anticipate further refinements in tax collection mechanisms and possibly new initiatives aimed at increasing the efficiency of public spending.

Moreover, the government’s commitment to aligning revenue strategies with broader economic goals suggests that the upcoming budget could introduce innovative fiscal policies to drive growth in key sectors such as technology, manufacturing, and services, fostering sustainable economic development.

Detailed expenditure plans for 2023/2024

Building on the anticipation of today’s unveiling of the 2024/2025 budget, it’s important to reflect on the expenditure strategies from the previous fiscal year.

For fiscal year 2023/2024, the government allocated a ro- bust 26.48tri/- for recurrent expenditures.

This significant investment was pivotal for ensuring the smooth and ef- ficient operation of govern- ment services across various sectors.

Overview of 2023/2024 expenditure allocations

The funds were strategically distributed to cover operational costs across ministries, independent departments, and government agencies. This ensured the uninterrupted functioning of government services, which is fundamental to maintaining public trust and ensuring effective administration.

A significant portion of these expenditures was al- located to salaries and wages, reflecting the government’s commitment to ensuring fair compensation for its public servants and maintaining a motivated workforce. Beyond personnel costs, substantial funds were also earmarked for the maintenance and repair of government facilities and infrastructure.

This is essential not only for the longevity of physical assets but also for ensuring that these facilities remain safe and functional for public use.

Additionally, the budget addressed sector-specific needs by allocating funds for critical areas such as health- care, education, security, and infrastructure development, which are vital for the overall well-being and security of the nation.

Recurrent expenditure for Regional and Local Authorities (LGAs)The government’s expenditure plan also detailed significant investments in regional secretariats and local government authorities.

By enhancing operational efficiency at regional and local levels, the plan aimed to bring government services closer to the citizens, thus improving service delivery and responsiveness.

This included allocations for salaries and wages of local government employees, maintenance and repairs of local infrastructure, and operational costs essential for the daily functions of these local bodies.

Setting the stage for the 2024/2025 budget Reflecting on last year’s expenditure plans set the stage for tabling the budget today, providing a benchmark for evaluating the new fiscal strategies for 2024/2025.

This review equips stake- holders to assess how past priorities align with current fiscal plans, anticipating continued or increased funding for essential services, particularly in sectors like digital infrastructure and public health.

As we await the unveiling of the government’s financial plans, insights from last year highlight the need for both continuity and adaptation in fiscal policies to address Tanzania’s immediate needs and long-term development goals.

Insights from the 2022/2023 Audit Report

Complementing these fiscal plans, the Controller and Auditor General (CAG) re- leased an audit report for the fiscal year 2022/2023, which revealed critical insights into the financial management practices of the previous year.

The audit highlighted significant underutilisation of allocated funds, with only 4.19tri/- spent out of a total 6.50tri/- received. This underutilisation raises concerns about the efficiency of project implementation and financial management across sectors.

The report also identified several issues in procurement and contract management, including 1.78bn/- worth of works executed without formal contracts.

Furthermore, the audit uncovered unpaid compensation amounting to 13.69bn/- for affected persons across six projects, underscoring non-compliance with legal requirements for compensation which could potentially escalate project costs.

Forward-looking strategies

As Tanzania looks ahead, the integration of detailed revenue and expenditure plans with insights from the audit report is crucial for ad- dressing past inefficiencies and ensuring a more robust fiscal framework.

The government’s commitment to improving financial management practices, enhancing procurement processes, and ensuring compliance with legal and regulatory frame- works is essential for fostering greater accountability and transparency in the utilization of public resources.

The strategic objectives outlined in the revenue and expenditure plans for 2023/2024 reflect a comprehensive approach to fostering economic growth, enhancing infrastructure, improving social services, and promoting regional development.

These efforts are designed to create a conducive environment for socio-economic development and improve the quality of life for all Tanzanians, setting the stage for a prosperous and equitable future.

What stakeholders should expect Stakeholders should anticipate a budget that further commits to enhancing financial practices and refining procurement processes.

The government’s recent efforts to ensure compliance with legal frameworks and bolster transparency are expected to continue, reflecting an ongoing dedication to accountability.

This commitment is likely to manifest in strengthened measures to prevent the mismanagement of funds and to address the issues of contract irregularities and unpaid compensations highlighted in the previous audits.

Additionally, the upcoming budget is expected to prioritise sustained economic growth, with potential in- creased investments in infra- structure and social services.

These areas have been foundational to Tanzania’s recent developmental strides and are likely to receive continued focus to ensure that the growth remains inclusive and beneficial across all sectors of society.

Critical considerations to avoid

However, stakeholders should remain vigilant and critical of potential over- sights. One key area to watch is the actual application of budget allocations.

While the government may outline significant funds for development and social welfare, the real test will be in the effective and timely utilisation of these funds—addressing the previously noted issue of underutilisation.

Furthermore, stakeholders should scrutinize the government’s borrowing strategy. While external and domestic borrowing can provide nsary capital for development projects, there is a fine line between strategic borrowing and accruing unsustainable debt.

Stakeholders should be cautious of any signs that the government might be over- leveraging, which could compromise fiscal stability in the long run.

Moving forward with caution

Echoing the timeless wisdom that “We do not inherit the earth from our ancestors; we borrow it from our children,” it becomes imperative for stakeholders to critically evaluate the upcoming bud- get.

This balanced approach involves acknowledging the progress in fiscal management while scrutinizing areas of past shortcomings. Such a strategy ensures that stake- holders are not only well- informed but also proactively advocate for a budget that adheres to transparency, ac- countability, and fiscal prudence.

This vigilant engagement is vital to guarantee that Tanzania’s developmental policies remain aligned with the long-term well-being of its citizens and the broader economic stability of the nation.

  • Kelvin Msangi is an Operation Director at Tanzania Music Rights Society. He is reached through email; kelvinmsangi@protonmail. com, mobile; 0655963224

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