Tanzania in 214bn/- half year budget deficit

Mr Mkulo
The government has recorded a budget deficit of about 214bn/- in the first six months of this financial year partly due to failure of donors to meet their commitments.

Finance and Economic Affairs minister Mustafa Mkulo said in a speech at the Annual National Policy Dialogue meeting over the weekend that the deficit was also because of shortfall of collection for non-tax and local government authorities’ revenue.

The government spent about 6.05trn/- between July and December 2011 out of total revenue of 5.83bn/- from both domestic, aid and commercial loans, according to Mr Mkulo.In a quick reaction, shadow minister for Finance Zitto Kabwe said the deficit was less than what it had been in the first four months as donors have started releasing some funds.

Mr Kabwe told The Citizen in a telephone interview yesterday that by October 2011 the deficit was 690bn/-, and government reached a stage in which it could not pay salaries.

“Now the government can pay salaries because domestic revenue collections have improved; the only problem has remained in development projects,” Mr Kabwe said.

In order to reduce the deficit, the government has announced that it plans to reduce spending by more than 500bn/- this financial year in anticipation of low aid commitment from donors.

According to Mr Mkulo, failure by donors to meet their obligations resulted into a hole of 640bn/-between July and December 2011. In fact donors, who are supposed to offload funds to the government at the beginning of the financial year, according to some agreement with the government, only remitted 1.32trn/- in the first six months out of the promise of remitting 3.92trn/- for the financial year 2011/12. This was equivalent to meeting obligations by 34 per cent.

“The Eurozone crisis is partly to blame for failure by donors to honour their commitments,” he said, adding that failure by government officials to present projects implementation reports to donors in time has also led to reluctance by donors.

According to figures released by Mr Mkulo, donors had only released about 382.5bn/-  out of 2.36trn/-promised for development projects, which was equivalent with 16 per cent of the total commitment.

The government collected only 66 per cent of targeted non-tax revenue for the first six months. It had planned to collect about 247.6bn/- but ended up collecting 172.1bn/-.

The reason for failure to meet the target was technical problems caused by “lack of integrated and interfaced systems,” in government departments according to Mr Mkulo.

Local government authorities revenue collections were short by 21.2bn/- due to delay in charging business licence fees, which were re-introduced by the government in the last budget. When contacted for comment yesterday on how the government financed the deficit Mr Mkulo decline to comment citing wrong timing by the reporter.

“You should have asked me soon after I had finished delivering the speech last weekend. I am now in Dodoma and I do not have the speech in hand to crosscheck what you are asking me,” Mr Mkulo.

In his speech, Mr Mkulo said that during the first six month of this financial year, the government managed to collect 3.472trn/-, which is 99 per cent of the target in the first half of the year.
However, the average revenue collection has increased to 289.4bn/- per month from 230bn/- collected in the preceding year.

The tax revenue collection amounted to 3.145trn/- as compared to 2.555trn/- that was collected in the similar period of the last budget, which is about 101 per cent of the target set in the first half.

“The good trend in tax revenue collection has been triggered by administrative measures taken by the tax collector (Tanzania Revenue Authority) to get revenue including the introduction of the Electronic fiscal devices to the registered businesses,” the minister said in the Macro-economic Indicators report issued last week.

Non-tax revenue amounted to 172bn/-, which is 69 per cent of the 247.6bn/- target. However, the minister said that a poor performance of this type of revenue collection was partly caused by lack of integrated and interfaced systems for controlling revenue collection.

Revenue from Local Government (LGAs own source) stood at 154bn/-  in the first six months, which is 88 per cent of 175.2bn/- of the projected amount in the period under review.

From July to December, 2011, grants and loans of General Basket Support (GBS) amounted to 610.1bn/-, which is 70 per cent of Sh869.4 bn/- that was expected to come from the development partners this financial year. However, there have been several challenges in coordinating the grants and loans in the GBS arrangement, the minister said.
Source: The Citizen,www.thecitizen.co.tz, reported by By Al-amani Mutarubukwa

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