Economic stimulus at the core of Tanzania’s Budget

Dar es Salaam. The government will take several measures in 2024/25 to stimulate domestic production, boost exports and prop up shilling against the US dollar.

Presenting the government’s Sh49.35 trillion Budget for next financial year in Parliament in Dodoma on Thursday, Finance minister Mwigulu Nchemba said the government will also put emphasis on tax payment.

 In line with Tanzania’s Third Five-Year National Development Plan – which covers the period from 2021/22 to 2025/26 – Dr Nchemba said the 2024/25 Budget will seek to stimulate a competitive and inclusive economy; strengthen production capacity in industries and service delivery; promote trade and investment; stimulate human development and develop human resources.

“Some specific areas that will be prioritised include: completing flagship and strategic projects; strengthening productive sectors; enhancing human resources, especially in social service; increasing the use of ICT and improving the business environment and private sector investment,” he said.

Other key areas in the implementation of the 2024/25 Budget include funding payment of public servant salaries; servicing the government debt; financing the 2024 local government elections; preparing for the 2025 General Election; preparing for the National Development Vision 2050 and preparing for the 2027 Africa Cup of Nations (Afcon) football tournament, including construction and renovation of stadiums.

Dr Nchemba said the plans for the next financial year will influence growth in sectors such as industry, agriculture, minerals, tourism, livestock farming and fishing, electricity, transportation and social sectors namely education and health.

“The ultimate objective of this measure is to increase economic growth and employment with a view to improving the living standards of people.”

In an analysis conducted by The Citizen, the Budget indicated a direction toward creating a more resilient and self-sufficient economy, by supporting local industries and addressing foreign currency challenges.

Supporting local industries

As part of the strategy to support local industries, the government plans to impose a 0 percent value added tax (VAT) on several domestically produced goods over the next year.

These include fertilisers, textile products made from locally grown cotton and edible oils produced from locally-sourced seeds.

According to Dr Nchemba, this tax relief is expected to enhance the competitiveness of local products and encourage further investment in these sectors.

In addition, the government is mandating that mining license holders and mineral traders allocate a portion of their minerals for processing, refining, and selling within the country.

“The amount to be allocated will be determined by the minister responsible for mining in 2019’s regulation, with an initial requirement that 20 percent of the gold produced in the country be set aside,” Dr Nchemba said.

The government will now also start charging Tourist Business License fees in local shillings, instead of using dollars, paid by an agent of the mountain climbing from $2,000 per annum to Sh3 million per annum.

“These measures intend to simplify the payments of tourism fees, reducing operational costs, attracting investment in the tourist industry,” Dr Nchemba said.

He added that overall, the government has been taking measures to remove or reduce massive fees and levies but still there are challenges for regulatory institutions whose fees and levies are detrimental to investment and business environment as they perform their functions uncoordinated.

“The government will establish a single window payment system and instil collective inspections exercise so as to minimize business interruptions without compromising their regulatory roles.”

In the area of stimulating investment in production under duty remission procedures, the government has proposed the removal of customs duties by zero from 25 percent per year in electric batteries (lithium-ion electric accumulators) used by manufacturers or car and motorcycle assemblers in the country.

Dr Nchemba said the goal was to provide relief as well as stimulate investment in production or the integration of cars and motorcycles in this country to facilitate access to the final product at a cheap price.

Also, the government proposed the grant duty remission, zero percent instead of 10 percent for one year on unassembled television (CKD). “The measure aims at promoting an assembling scheme in the country by reducing the cost of assembling to ensure the availability of the products at competitive prices as well as employment creation.”

On the other hand, EAC partner states agreed to grant duty remission at a duty rate of zero percent on various inputs used in the assembling or manufacturing of mobile phones.

Addressing dollar shortage

To tackle the issue of foreign currency reserves and mitigate the shortage of US dollars, the government has introduced a 0 percent VAT on gold sold to the Bank of Tanzania.

This move is designed to stimulate the growth of domestic gold refining industries, as the central bank purchases gold only after it has been refined by these local industries.

 “This measure also aims to stimulate the growth of domestic gold refining industries, as the Bank of Tanzania purchases gold only after it has been refined by these industries,” Dr Nchemba said.

Furthermore, the government will apply a 0 percent VAT on gold sold to domestic gold refineries, ensuring that more of the value chain benefits remain within the country.

The minister also revealed that the government has approved the national strategy which aims to strengthen access to foreign currency.

The strategy will be strengthening production and increasing the value addition of goods and services for export; producing import substitution products to reduce the use of foreign currency; and improving the investment environment to attract foreign investors and the private sector.

Controlling imports

The government had also proposed to amend the Import Control Act, CAP 276 by introducing an Industrial Development Levy on selected imported goods.

These include 10 percent on wire rods and beer, introducing a 5 percent levy on non-alcoholic beer, 5 percent on energy drinks and 10 percent on organic surface-active agents - detergents and 10 percent on liquid.

Dr Nchemba also proposed increasing customs levy at the rate of 35 percent instead of 10 percent in float, toughened, and multiple-walled insulating units of glass.

“This measure is intended to protect domestic glass manufacturers and promote the competitiveness of domestic products with similar products imported from the rest of the world.”

On the other hand, the government has increased 35 percent and applied a duty rate of 25 percent or $300/MT whichever is higher for one year on flat-rolled products of iron or non-84 alloy steel.

“This measure aims at protecting local manufacturers against undervaluation of imports as well as increase government revenue,” Dr Nchemba added.

Strategic projects

 To ensure that execution of Tanzania’s flagship and strategic projects are implemented uninterruptedly, Dr Nchemba said it was about time every citizen regarded tax payment as a vital undertaking.

He said Tanzania was currently implementing major strategic projects at a faster rate than any other country in the African region. The projects include the standard gauge railway (SGR) which has been completed for the two slots between Dar es Salaam and Dodoma and the Julius Nyerere Hydropower Project (JNHPP), which will generate a total of 2,115 MW among others.

Tanzania’s education, he said, was undergoing significant curriculum changes while the implementation of the fee-free education and subsidy programme at all levels for a larger number of students was also in place. The country, he said, was also preparing for Universal Health Coverage through the enactment of the National Health Insurance Act No. 13 of 2023, which is the largest healthcare programme in our country's history. Besides, Tanzania was also implementing a large-scale programme of electricity generation and distribution projects nationwide, and we are constructing urban roads and opening up many rural roads more than ever before in the country's history.

  “This indicates significant progress that Tanzania has made in implementing important projects and development strategies. It's something every Tanzanian should be proud of, and we should not underestimate ourselves, but rather recognize that we all have a role to play in completing these endeavours.”

This gives each taxpayer the responsibility to fulfil their duty by paying taxes as it's their taxes that will make all of these achievements possible,” he said.