Finance Minister Dr. Mwigulu Lameck Nchemba .Photo:File
Tanzania’s Bold Fiscal Plan: Paving the Path to Growth Despite Challenges
By Adonis Byemelwa
Today, Tanzania stands at the threshold of economic transformation as Finance Minister Dr. Mwigulu Nchemba unveils a bold budget of Sh49.35 trillion for the fiscal year 2024/25 in parliament. Surpassing last year’s allocation of Sh44.39 trillion, this budget signifies Tanzania’s resolute commitment to propelling forward key economic sectors essential for sustainable growth and national development.
Dr. Nchemba, who also serves as a Member of Parliament for Iramba West, has outlined plans to allocate Sh18.287 trillion to his ministry, emphasizing a strategic focus on stimulating the productive sector. This allocation aims to enhance the production of goods and services while improving efficiency across key industries, which are essential for foreign exchange earnings and economic stability.
Economists, business leaders, and citizens have expressed high expectations for a budget that not only supports existing sectors but also attracts foreign investments necessary for economic diversification and resilience. Mr. Novatus Kaijage, a financial analyst, highlighted the need for targeted policies to further boost sectors such as tourism, which has shown promising growth trends.
The tourism sector has been a standout performer, contributing significantly to service receipts totaling $6.618 billion in the year ending April 2024, up from $5.267 billion the previous year. Tanzania’s earnings from tourism alone reached $3.58 billion during the same period, reflecting its crucial role in bolstering the country’s foreign exchange reserves.
“Increasing travel receipts are supported by the recovery observed in the tourism industry, with tourist arrivals increasing by 21.8 percent to 1,938,875,” according to the Bank of Tanzania’s Monthly Economic Review for May 2024.
Mr. Kaijage emphasized the importance of enhancing policies to support sectors like tourism further. “By emphasizing investment in these sectors, we can also help exports grow and reduce the use of dollars on imports,” he noted.
Despite a reduction in the budget allocation for the Ministry of Natural Resources and Tourism for the upcoming fiscal year, experts believe that strategic incentives can amplify the sector’s contribution to national economic growth. The government plans to spend Sh348.125 billion on this ministry, 46.5 percent less than the Sh654.6 billion approved for the current fiscal year (2023/24).
The budget reflects a proactive stance towards boosting agricultural productivity, with allocations for the Ministry of Agriculture and Livestock and Fisheries witnessing substantial increases. The Ministry of Livestock and Fisheries, for instance, will see an 85 percent rise in its development budget, signaling an effort to enhance domestic production and reduce reliance on imports.
Ms. Christen Tripet, a specialist in economics from the Glasgow University Business School, stressed the need for comprehensive fiscal measures to promote export diversification and strengthen forex reserves. “The focus on the productive sector would help Tanzania raise its exports and reduce the dollar shortage that the country has been grappling with,” she explained.
Mr. Akida Mnyenyelwa, from the Confederation of Tanzania Industries, advocated for measures to protect local manufacturers from excessive competition posed by imports. He called for tax reforms that incentivize local production and reduce dependency on imported goods, thereby fostering job creation and revenue generation within the country.
“Raising taxes on imports would increase sales by local manufacturers, create jobs, and generate more revenues for the government,” Mr. Mnyenyelwa highlighted.
The Tanzania Business Community emphasized the importance of attracting substantial foreign investments capable of creating sustainable jobs and promoting regional exports. They proposed an increase in the minimum investment threshold for foreign investors, aimed at encouraging larger investments that contribute significantly to economic development.
“The government needs to raise the minimum investment threshold amount that a foreign investor could be allowed to bring into the country,” Mr. Riziki Ngaga, the secretary for the Tanzania Business Community, suggested. “This will enable the country to attract fewer but more substantial investments in industries that create jobs and enable Tanzania to sell products to neighboring countries, thereby increasing foreign exchange,” he added.
Despite recent challenges such as currency fluctuations and inflationary pressures, Tanzania remains focused on stabilizing its economy through prudent fiscal policies and strategic partnerships. Mr. Beatus Mlingi, a research and analytics manager at Vertex International Securities Ltd, underscored the importance of building foreign exchange reserves and promoting export diversification to mitigate economic volatility.
“Building up foreign exchange reserves is one approach to stabilizing the shilling, which can be achieved by securing external financing or encouraging foreign direct investment (FDI),” Mr. Mlingi explained.
Looking ahead, the Tanzanian government is poised to implement a budget that not only addresses immediate economic challenges but also lays the groundwork for sustainable growth and resilience. By prioritizing sectors critical to economic diversification and stability, Tanzania aims to enhance its competitiveness regionally and globally, positioning itself as a hub for investment and economic opportunity.
With Finance Minister Dr. Nchemba’s forthcoming budgetary unveilings today, Tanzania anticipates a strategic roadmap shaping its economic trajectory through 2024/25 and beyond. Emphasizing productivity, investment attraction, and bolstered export competitiveness, Tanzania positions itself resiliently amidst global economic uncertainties.
However, the misallocation of substantial funds towards governmental expenditures rather than development initiatives could stifle growth potential. Such fiscal mismanagement risks exacerbating debt burdens, undermining the country’s vast resource potential.
Tanzania must allocate its budget wisely, prioritizing sustainable development and economic diversification to unlock its full economic potential and navigate global economic uncertainties,” asserts Sima Katanga from Guangzhou University, China.
