JK: Why govt faces serious cash crisis

The government of Tanzania is so overwhelmed by debts that it has experienced serious financial difficulties in the recent past, President Jakaya Kikwete said yesterday. He did not give details, only pointing out that most had been cleared.

Almost all government departments received less than their budgetary allocations for the first half of the 2011/12 financial year, the President declared in Dar es Salaam.

“The first six months of this financial year have been very tricky as the government embarked on clearing its huge debts,” he said at a ceremony to mark Law Day, “forcing the Treasury to disburse very little money to other departments.”

But he was quick to pledge that the government will start honouring the outstanding allocations promptly.

He was speaking in response to a statement issued by the Chief Justice, Mr Mohamed Chande Othman, who said the judiciary had run out of money as the government had failed to disburse its full allocation.

The CJ said the judiciary received only Sh6.32 billion between July and December last year instead of Sh10 billion set aside for the institution for the first half of the 2011/12 fiscal year. At least Sh20 billion was allocated to the judiciary fund for the entire fiscal year.

“This budgetary constraint derails judicial activities and in turn, affects provision of justice to the public,” said the CJ.

President Kikwete pledged that the government would ensure that the judiciary received its due share of the budget in future. There have been growing signs that state coffers are running dry, putting the government in an awkward position as it battles to meet its financial obligations.

The liquidity problem has seen delays in payment of civil servants’ salaries, disbursement of subsidies to political parties and payments for a wide range of services, including money meant for projects and the local government.

Finance minister Mustafa Mkulo, who initially denied suggestions that the government was broke, recently put the situation down to poor collection of non-tax revenue and delays in the release of donor funds.

The state is said to have been grappling with a budget deficit of over Sh210 billion in the past six months.

However, Shadow Finance minister Zitto Kabwe told The Citizen on Saturday that the deficit peaked at over Sh600 billion and eased only when donors released some funds.  Local revenue collection, which had been affected due to power rationing, also improved.

In an official communication to the IMF, the minister made a commitment to cut down on certain expenditure and review some of its projects to plug the gap in the short term. 

On Thursday, the minister for Regional Administration and Local Government, Mr George Mukuchika, told Parliament that local authorities had been greatly affected by lack of and delays in releasing the cash. The situation was so bad, the minister revealed, that some services at the councils had ground to a halt and some of them could not even hold meetings.
Source: The Citizen,www.thecitizen.co.tz, reported by Polycarp Machira
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