Experts put more pressure on Mgimwa’s Budget

Dr Mgimwa.
Economists have raised concern over what they have described as “insufficient amount of money” set aside for development expenditure in the 2012/13 Budget, warning that it may grossly affect the country’s economic growth.

The Finance minister, Dr William Mgimwa, presented before the parliamentary committee on Finance preliminary estimates showing that the proportion of the development budget would decline to 30 per cent in the 2012/13 fiscal year, down from the 38 per cent that was allocated in 2011/12.

But members of the committee rejected the estimates. They demanded that money for development expenditure should be increased to at least 35 per cent of the total Budget, otherwise they would reject it in total. The 2012 Budget is scheduled for tabling in Parliament this week.

Speaking with The Citizen in separate interviews yesterday, experts said the reduction is unhealthy to the country’s economy that requires a more vibrant infrastructure to grow. Cutting down on development budget proportion is mainly occasioned by poor remittance and reduction of pledges of aid from donors.

Due to economic difficulties in Europe and North America, donors have been reducing their pledges. In the 2011/12 Budget, they offered 869.4bn/-, but for this year’s, they have promised only 776bn/-.

The rate of disbursement is another problem. In the first half of 2011/12, donors remitted only 382.5bn/- out of the 2.4tr/- they had pledged for development budget. The disbursement was equivalent to 16 per cent. To avoid these problems, experts said the government should widen its domestic sources of income, which would help in financing development expenditure.

“I think the problem is on financing. Some 70 per cent of our development expenditure is externally financed by donors; so when they reduce their support, we are forced to change our estimates,” says Prof Ammon Mbele of the University of Dar es Salaam’s Economics Department.

The economics lecturer advises the government to re-strategise in collecting revenues especially from the mining sector to avoid foreign dependence.

“Reducing development budget allocation will hurt the economic growth,” he adds.
Even as the development expenditure proportion is lower than that of 2011/12, the government aims at attaining an economic growth rate of 6.8 per cent up from 6.4 per cent in the outgoing financial year. However, the planned growth rate may face a challenge as key sectors of the economy are getting minimal allocations.

Dr Honest Ngowi, an economics lecturer at Mzumbe University Business School, says the government was supposed to increase the development budget proportion and invest heavily in the key economic sectors especially building infrastructures in order to stimulate economic growth.

“Ours is a poor man’s Budget. The national debt is increasing and then you have a development that is poorly considered,”  says the economist, adding: “This can imply that the government is borrowing for recurrent expenditure, which is not good.”

His word to the government is: reduce unnecessary expenditures like buying expensive cars for public officials and widen the tax base to increase domestic revenue that will finance domestic projects and push the economy. Tanzania’s economy is constrained by various domestic and external factors.

Prof Humphrey Moshi of the University of Dar es Salaam says lowering the percentage of money going to development is a bad sign with regards to the country’s economy.

 “The government should reduce unnecessary expenditures and cut down on importation of things that are locally available to minimise recurrent spending. Our economy is perpetually affected by its dependence on rain, it is bogged down by the high inflation rate. All these issues should be addressed,” says Prof Moshi.

The reduction of the money meant for development comes about five months after the government announced it would cut down spending by 755bn/- in this financial year in its ambitious austerity move to reduce the widening budget deficit caused by low aid inflows from donors, partly due to Eurozone credit problems.

Tanzania will also receive less aid in 2012/13 as development partners intend to give the country US$495 million (776bn/-) in budget support, which is 93.4bn/- less than the amount remitted during the about-to-end financial year.

The drop in aid cash announced early last month probably affected the planning of the 2012/13 Budget, which is donor dependent by about 30 per cent.
Source: The Citizen,, reported by By Alawi Masare

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