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Thursday, April 7, 2016

Govt to double development spending, cut aid dependence

  • PRESIDENT John Magufuli's fifth phase government is set to make history by doubling development spending in its maiden budget for fiscal year 2016/17 for the first time in recent memory, while at the same time cutting its dependence on foreign aid.

The Minister for Finance and Planning, Philip Mpango, yesterday outlined government plans to spend a total of 29.539 trillion/- in its coming annual budget, of which 11.82trn/- will be allocated to development projects - an unprecedented 40.02 per cent of the total budget.
Up to 75 per cent of the funds to be set aside for development expenditure will be financed by domestic sources, thanks to a marked improvement in the government’s tax collection efforts through the Tanzania Revenue Authority (TRA), plus a raft of ongoing public cost-cutting measures.
In previous budgets, less than 20 per cent of funds required for development expenditure came from domestic sources, meaning that the financing of key development projects was overwhelmingly dependent on foreign donor financing.
The size of the proposed budget for fiscal year 2016/17 is 31.3 per cent bigger than the 2015/16 total budget of 22.49trn/-. 
In that current budget ending on June 30 this year, former president Jakaya Kikwete's administration allocated just 26 per cent of the total funds (5.9trn/-) to development expenditure.
The rest – 16.6trn/- - went to recurrent spending, a figure which sees a slight rise to around 17.719trn/- in the coming budget, finance minister Mpango said in a presentation to members of parliament in Dar es Salaam.
Mpango explained that 8.7trn/- of the 2016/17 budget allocated for development projects will be funded by internal sources and the remaining 3.11trn/- by external sources.
He said the unreliability of funds promised by donors was one of the major reasons behind the government’s decision to significantly reduce its traditional dependence on foreign aid as a source of finance for development projects.
According to the finance minister, the upcoming budget will focus on infrastructure projects, industrializing the economy, and improving the education, health and water sectors.
It will also see an increase in government spending by more than 7trn/-, compared to the previous budget.
A total of 18.463trn/- (62.5 per cent of the whole budget) is to be financed by revenue collections from internal resources, while the government plans to raise 3.6trn/- , or 12 per cent of the budget, from foreign concessional loans and grants.
Mpango said the government was confident to get enough funds to cover the budget by further expanding its tax collection net and ensuring that all Tanzanians pay tax, while also creating new revenue sources.
He said the plan was to continue cutting dependence on foreign assistance like the 1trn/- package pledged by the US Millennium Challenge Compact (MCC) for rural electrification, but which has now been cancelled.
“It is important to be independent in budget funding and thus avoid the risks of trying to implement development plans that are overly dependent on foreign aid which is unpredictable,” Mpango said.
He disclosed that as part of its plan to boost revenue collection, the state intends to formalise all informal businesses and include them in its official taxing system.
“The use of electronic fiscal devices (EFDs) will be enhanced in order to seal loopholes for revenue leakages,” the minister added.
The government will also increase its efforts to revive and improve the country’s industrial sector as a means of catapulting national development, Mpango said.
Priority industries he cited include the proposed Engaruka soda ash factory, the General Tyre factory revival program, and the improvement of various earmarked small industries in Morogoro, Mbeya, Mwanza and Dar es Salaam.

/IPPMEDIA

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