Legislators Celebrate and approve Sh 49.35 trillion Budget for the 2024/2025 Fiscal Year in Parliament. Photo: Courtesy
Tanzania’s Fiscal Future: LHRC Challenges Budget Priorities Amid Economic Recovery Plans
By Adonis Byemelwa
The Legal and Human Rights Centre (LHRC) recently issued a sharp critique of Tanzania’s proposed 2024/25 budget, highlighting what it perceives as a significant gap between government spending priorities and the urgent needs of the populace.
Speaking at a press briefing in Dar es Salaam on June 26, 2024, Lawyer Fulgence Massawe, LHRC’s Director of Advocacy and Reforms, expressed deep concerns over the allocation of funds in the upcoming budget.
“Seventy percent of this budget is earmarked for regular expenditures that do not directly benefit the ordinary citizen,” Massawe asserted. He emphasized that only 30 percent of the budget is allocated to development projects, suggesting a disproportionate focus on maintaining bureaucratic functions, including salaries and debt repayments, at the expense of investments in critical infrastructure, social services, and economic growth initiatives.
The LHRC’s criticism extended to what it viewed as unnecessary luxuries and inefficiencies within the government. Massawe pointed out concerns such as the procurement of luxury vehicles and the continued operational costs associated with maintaining dual governmental capitals in Dar es Salaam and Dodoma. “Government officials spending most of their time in Dar es Salaam instead of Dodoma leads to redundant expenses, further straining the budget,” he elaborated.
Moreover, LHRC called for a reconsideration of the size and efficiency of the government, questioning the necessity of certain governmental positions and layers within ministries. “The proliferation of leadership positions within ministries, including ministers, deputy ministers, permanent secretaries, and deputy permanent secretaries, contributes to inflated costs without necessarily improving service delivery,” Massawe argued.
The LHRC’s assessment underscores broader concerns about fiscal discipline and the effective use of public funds to foster sustainable development. As Tanzanians eagerly await the details of the 2024/25 budget presentation by Dr. Mwigulu Lameck Nchemba, Minister for Finance, there is heightened anticipation and scrutiny regarding the government’s fiscal strategy and its potential impact on economic growth and social welfare.
Reflecting on the previous year’s budget amendments offers insights into Tanzania’s fiscal policy landscape. Presented on June 15, 2023, under the theme “Accelerating Economic Recovery, Climate Change Adaptation, and Enhancing Productive Sectors for Improved Livelihood,” the 2023/24 budget introduced several key fiscal measures aimed at stimulating economic growth and addressing pressing national challenges.
One significant amendment involved revising penalties for Electronic Fiscal Devices (EFD) non-compliance to Sh3.0 million or 20% of the evaded tax, whichever is higher. This measure aimed to enhance tax compliance and streamline revenue collection processes.
As well, exemptions were introduced for local share issuance and transfer transactions from specific provisions of the Income Tax Act, facilitating smoother financial transactions within the country.
The LHRC’s criticism extended to what it viewed as unnecessary luxuries and inefficiencies within the government. Photo: Courtesy
The budget also included adjustments to tax rates, such as reducing the tax on gross gaming revenue from 25% to 18% for operations involving forty machines and introducing income tax exemptions for internal restructuring in mining firms through framework agreements. These measures aimed to incentivize business activities and promote investment in key sectors.
In terms of indirect taxes, the budget raised the VAT registration threshold from Sh100 million to Sh200 million, easing the tax burden on small and medium-sized enterprises (SMEs) and supporting their growth. Similarly, the Skills Development Levy (SDL) was reduced from 4.0% to 3.5%, aiming to lower the cost of labor and enhance workforce development initiatives.
The 2023/24 budget set ambitious macroeconomic targets, including a projected real GDP growth of 5.2%, inflation control within a single-digit range of 3.0% to 7.0%, and annual domestic revenue collection growth of 14.9%.
These targets were complemented by efforts to maintain a budget deficit of less than 3.0% of GDP and ensure foreign reserves sufficient to cover at least four months of importation, aiming for economic stability and resilience.
Beyond tax measures, the budget’s policy reforms encompassed regulatory changes aimed at promoting sector-specific growth and enhancing operational efficiencies. For instance, amendments to the Value Added Tax (VAT) Act included extending VAT deferment on capital goods to locally manufactured items and introducing zero-rating for textile products made from locally produced cotton and fertilizer. These reforms supported domestic industries, promoted local production, and stimulated economic diversification.
Besides, amendments to the Excise (Management and Tariff) Act focused on adjusting specific duty rates and exemptions, reflecting targeted interventions to optimize revenue collection while supporting strategic sectors such as renewable energy and sustainable transportation.
Despite these efforts, challenges persist, as highlighted by the LHRC’s recent critique of the 2024/25 budget proposal. Issues such as fiscal deficits, bureaucratic inefficiencies, and the impact of government expenditures on development priorities remain critical concerns.
The need for greater transparency, accountability, and strategic fiscal management is evident to ensure that budget allocations align with national development goals and effectively address socio-economic challenges.
As Tanzania prepares for the presentation of the 2024/25 budget, stakeholders across various sectors are keenly awaiting updates on fiscal policies, development priorities, and resource allocations. The budget is expected to outline the government’s strategies for economic recovery, sectoral revitalization, and social welfare enhancement in the post-pandemic era.
Key areas of interest include measures to support small and medium-sized enterprises (SMEs), promote sustainable agriculture, enhance healthcare infrastructure, and accelerate digital transformation initiatives. Additionally, there is anticipation regarding reforms to improve governance, streamline public service delivery, and reduce bureaucratic inefficiencies that hinder economic progress.
While Tanzania has made strides in fiscal policy reforms and economic management, challenges persist in aligning budget priorities with citizen needs and development imperatives. The LHRC’s critique provides a crucial perspective on the necessity for prudent fiscal management, transparency in government expenditures, and prioritization of investments that yield inclusive and sustainable development outcomes.
The upcoming 2024/25 budget presentation presents an opportunity for the Tanzanian government to address these concerns, reaffirm its commitment to economic recovery and social welfare, and demonstrate responsiveness to the evolving needs of its citizens. As the nation navigates through fiscal challenges and opportunities, collaborative efforts between government, civil society, and private sector stakeholders will be essential in shaping a resilient and prosperous future for all Tanzanians.
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