MINISTER of State, President’s Office, Finance and Planning Dr Saada Mkuya Salum on Thursday unveiled Zanzibar’s 2.84tri/- national budget, which seeks to stimulate economic growth and improve infrastructure to attract investors.
Under the proposals, the government intends to establish Zanzibar Investment Bank (ZIB) to avail credit facilities to small and medium entrepreneurs, Dr Mkuya told the House of Representatives, arguing that the envisaged bank will help to create jobs and increase government taxes.
“The main challenge in Zanzibar is availability of capital for investment in various projects…the government has decided to embark on preparations for establishment of the investment bank to satisfy the needs for capitals in the country,” Dr Mkuya told the house.
Minister Mkuya named the priority areas in the envisaged budget as financing of strategic projects on progress, improvement of social services, intensification of the blue economy, strict management of public resources, payment of Federal Bank of Middle East’s depositors and payment of social pension to senior citizens.
Under the 2,840bn/- budget estimates for the 2023/2024 financial year, the government intends to spend 373.5bn/- in construction of 782.1-kilometre trunk, urban, rural and feeder roads in the country.
Minister Mkuya further said the government has allocated 338.8bn/- for improvement of social services, citing massive repairs of Mnazi Mmoja National Referral Hospital; construction of doctors’ houses; educational transformation programme; and construction of sports complexes, among other projects.
Determined to pursue the blue economy, the government will invest 23.5bn/- to enhance and improve sustainable uses of the ocean through empowerment of entrepreneurs in value addition. Construction of Mangapwani fishing port and construction of modern fish markets and auction centres at Kama and Fungurefu in Unguja as well as Wete and Mkoani in Pemba are high on the-to-do list.
The minister named improvement of ports and airports in Unguja and Pemba to provide decent services to wananchi and tourists as the focus areas of the budget.
She announced measures to control tourism revenues, saying the current tourist arrivals hardly reflect the government earnings. Giving example, the minister said during the July 2021-June 2022 period, the tourism revenues to the government systems were only 69.89bn/-, which dropped to 51.32bn/- in the July 2022 to March 2023 period.
“The government will sustain efforts to introduce appropriate policies and strategies, including operational systems to ensure strong correlation between an increase in tourist arrivals and government revenues from tourism activities,” Dr Mkuya said in 67-page budget speech.
Moving his first budget since she assumed office in March last year, Dr Mkuya raised infrastructure levy on foreigners from one US dollar to five dollars for guests in five and four-star hotels; four dollars for three and two-star hotels; and two dollars for one-star and unclassified facilities, including home stays.
The minister has as well increased Value Added Tax (VAT) registration threshold from the current 50m/- to 100m/-, saying the 50m/- threshold doesn’t reflect the real status of Zanzibar economy.
The government has scrapped VAT on affordable housing schemes to encourage more wananchi to buy houses and improve human settlements in the country, the minister said. The VAT relief also covers importers of aircraft, aircraft engines and spare parts as well as domestic maintenance services to reduce airline operational costs in the country.
The government has as well abolished VAT on importation of green houses and related accessories to encourage more investments in modern farming to increase production, reduce food imports and suppress inflation. The relief also extended renewable energy to encourage investment in alternative sources of energy.
The minister further announced adjustments on skills development levy (SDL), which has dropped to four from five percent to encourage voluntary tax payment and increase government revenues. The government has also raised the threshold for SDL payment five from four employees.
Dr Mkuya pledged to plug all government revenue leakages and get rid of tax exemptions, which are not productive to the country.
She asked the house to approve the 2,840.85bn/- budget, including 1,318.86bn/- for recurrent and 1,521.99bn/- development expenditures. Development partners are expected to inject 628.8bn/-, with 527.55bn/- and 101.25bn/- coming in the form of loans and grants, respectively. The minister put the budget dependence at 3.6 per cent, which she however described as bearable.