Tanzania's new Sh41 trillion budget focuses on strategic projects

Dar es Salaam. The government yesterday explained factors behind the rise of 2022/23 Financial Year budget by 8.1 percent, saying it was a deliberate move aimed at pushing investment in strategic projects.

The increment will fund stimulation of economic growth in areas of agriculture, fisheries, forestry, livestock, minerals and development of infrastructure projects.

Speaking recently, President Samia Suluhu Hassan said the government was planning in the next budget to go big in irrigation agriculture. Other areas are salaries to public servants, servicing the national debt, improving the country’s electronic procurement system (TANePS) in procurement of commodities and funding services and construction activities.

The country’s budget is expected to reach Sh41.06 trillion, Sh3.08 trillion up from Sh37.98 trillion approved as the 2021/22 Financial Year budget.

Tabling the 2022/23 budget forecast before Parliamentary Budget Committee in Dodoma yesterday, Finance and Planning minister Mwigulu Nchemba said the budget preparation has been done on the basis of five key assumptions.

He named the assumptions as increased private sector participation in development activities, persisting tolerance to natural calamities and impacts of the ongoing Russian invasion of Ukraine.

Other assumptions are continuing food sufficiency and the presence of peace, safety, unity and tranquility.

“Domestic revenue is expected to be Sh28.698 trillion about 69.9 percent of the budget. Sh4.16 trillion is forecasted to increase through aid and soft loans from development partners which equals to 10.1 percent of the budget,” said Dr Nchemba who doubles as Iramba West Constituency MP.

During the 2022/23 FY, Dr Nchemba said the government was expected to secure Sh5.35 loan from domestic market of which Sh3.30 trillion would be used for servicing matured government bonds and another Sh2.05 trillion for funding development projects.

He said the government will also secure Sh2.86 trillion loan from foreign markets on business conditions to fund execution of development projects.

“The government forecasts to spend Sh41.06 trillion in the 2022/23 FY. Sh25.54 trillion will be directed for recurrent expenditures which is about 62.2 percent of the budget and Sh11.31 trillion for servicing the national debt and other costs related to the consolidated fund,” he said.

Dr Nchemba said Sh9.74 trillion would be used for salaries including implementing upgrading proposals and new recruitments of government workers.

He said Sh4.49 trillion would be allocated for other charges (OC) and that expenditures to fund development projects would be Sh15.52 trillion which is equivalent to 37.8 percent of the total budget.

“Of the total amount intended for development projects, Sh12.12 trillion equals to 78.1 percent will be sourced internally, while the remaining Sh3.40 trillion will come from development partners,” he said.

Russia/Ukraine war

Economic sanctions imposed on Russia will significantly affect Tanzania’s economy if the war will take long, according to Dr Nchemba, noting that the gas supply will seriously affect the country that is a major gas supplier in the world by 40 percent.

“The price of energy is expected to adversely rise and therefore affect the Tanzania economy. Also, interests and bond prices in the international market, the price of gold and agricultural produce, services and raw material imported from abroad as well as aid and soft loans from development partners will also be affected,” he said.

“The suspension of Russia to use the banking communication system in financial transactions will adversely affect trade with other countries, tourism, education and servicing diplomatic offices in the country as well as increasing the inflation rate,” he added.

The 2021/22 situation

Dr Nchemba told the Budget Committee that Sh21.72 trillion was collected between July 2021 and January 2022, out of Sh22,52 trillion target, which is equal to 96.4 percent.

He said failure to reach domestic collection targets was attributed to the decline in price of commodities both domestically and internationally due to the global outbreak of Covid-19, tax evasion, decline in revenue sources due to mushrooming online businesses.

According to him, Sh3.16 trillion was received from development partners between July 2021 and January 2022 which is equivalent to 118 percent of the target to collect Sh2.68 trillion. Furthermore, he said the money include Sh1.31 trillion soft loan dished by the International Monetary Fund (IMF) for Covid-19 Response Facility (CRF), noting that meeting contractual obligations during implementation of projects was behind the achievements.

Inflation

Dr Nchemba said inflation reached an average of four percent between July 2021 and January 2022, attributing the situation to factors beyond the government’s control.

For example, he said the price of crude oil products reached $87.4 per barrel on January 31, 2022 compared to US $72.6 per barrel on July 1, 2021, insisting that the situation will continue due to the ongoing war between Russia and Ukraine