Annual pay rises ‘possible despite struggling entities’

Dar es Salaam. Analysts says it is possible for the government to sustain its annual salary increment scheme, despite the financial hole left by loss-making parastatals.

With the promise to restore annual salary increments, the government’s wage bill is expected to increase by a staggering Sh1.051 trillion to reach Sh10.882 trillion in the 2023/24 fiscal year if the budget framework has anything to go by.

This is a 10.7 percent increase from the Sh9.83 trillion of the current financial year.

At the same time, a large number of its 298 commercial and service provision parastatals lack adequate capital to operate and make profits.

Treasury registrar Nehemiah Mchechu during his meeting with chairpersons and heads of various government and public institutions recently revealed that nearly Sh1.1 trillion is needed to support these institutions.

Controller and Auditor General (CAG) Charles Kichere had also in his report released last month revealed that the operations of 16 government entities rely on loans because they have low capital compared to their actual needs.

Data from the government also showed that the number of government entities and agencies, and public institutions that issued dividends to the government decreased to 150 in the 2021/22 Financial Year compared to the preceding year’s 218.

“Some institutions are not contributing, this is unacceptable. You need to be proactive,” Mr Mchechu told the heads of government institutions late last month.

Despite the financial holes from parastatals, stakeholders who spoke with The Citizen yesterday still believe that the annual increments can be sustained.

A senior economist, Prof Humphrey Moshi, said the government can scale up the revenue collections through tax incentives to encourage businesses and individuals to responsibly pay taxes.

He said widening the tax base would stimulate economic growth and eventually, livelihood through sustained salaries and wages schemes.

“But this must go hand in hand with improved operational efficiency. Let’s create returns (profits) in our parastatals, maintain discipline and respect in professional space,” Prof Moshi said.

According to the Tanzania Revenue Authority (TRA) by December 2022, monthly tax collection has hit Sh2.77 trillion, the highest monthly collection recorded since the authority was formed in 1996.

Opposition politician Zitto Kabwe said during a social media morning show that Tanzania can foot its domestic wage bill.

“I think we can meet our wage bill requirement with the domestic collection, the only challenges Tanzania faces has always been on financing development which is where we borrow externally.

“Still, there is a need to expand our tax revenue collections so that we can have enough to fund the developmental projects,” Mr Kabwe said.

Dr Mwinuka Lutengano of the University of Dodoma (UDOM) said the government's decision to restore annual salary increments also aligns with the cost-of-living adjustment to keep up with the rising inflation.

“It was a mandatory procedure, and I believe that by the time they decided to reinstate it, the government had already evaluated the necessary structures to make it last,” he said.

Dr Lutengano also agrees that the government would need to reevaluate the parastatals and reforms like inviting private sector capital and joint ventures.