June 23, 2007

Budget to give priority to key sectors in war against poverty, says minister

Tanzania will spend more on key sectors of the economy to alleviate poverty. Finance Minister Zakia Meghji said that despite achievements in economic growth, revenue collection and provision of social services, particularly education and health, the country continues to face challenges. These include power and infrastructure, both of which are essential for economic growth. "The main areas to be targeted in the Tsh 6.066 trillion ($6 billion) budget are Education Tsh1.0 trillion ($900 billion) equal to 18 per cent of the budget; infrastructure Tsh777.2 billion ($720 million) equivalent to 12.8 per cent; Health, Tsh589 billion ($530 million); agriculture Tsh379.5 billion ($350 million) and water Tsh309 billion ($290 million)," Meghji said. She noted, however, that upgrading the country's infrastructure to the desirable level was way beyond the government's means.
In principle, the budget emphasises the need to increase investment as a basis for sustainable poverty reduction. But although costing of the country's poverty eradication programme, Mukakakati was Kupunguza Umaskini na Kukuza Uchumi Tanzania (Mkukuta), has not been completed, indications are that it will require more funds than the government can raise.
The programme for strengthening extension of services will require an estimated Tsh193 billion ($180 million) in three years while total budgetary resource requirements stand at more than Tsh12.0 trillion ($11.5 billion), going by the requirements of government departments and local authorities. This is double the amount of finances available. "Under the circumstances, we cannot avoid setting and respecting priorities. It is also not realistic to think that domestic resources are sufficient for the implementation of Mkukuta in the foreseeable future," said Mrs Meghji.
The agricultural sector has been allocated shillings 379.578 billion ($350 million), which accounts for 6.3 percent of the budget, while roads will receive Tsh777.2 billion ($720 million). Notably, the budget has taken into account the needs for hiring new staff in the sectors of education and health. Another area the government will give priority is the ongoing national identity card project. An office has been found for the project's co-ordinator and funds allocated for hiring key staff, buying office equipment and rehabilitating the building. The project, which is co-ordinated by the Immigration Department, aims at facilitating tax collection and accessing bank credit, as well as in the war against crime.
In the 2007/2008 budget, the government has allocated more funds to the priority areas in order to expedite the implementation of Mkukuta and the 2005 elections manifesto of 2005. "In this regard," Meghji said, "The budget takes into consideration the need to increase resources to the growth sectors as a basis for accelerating wealth creation and a better life for every Tanzanian." However, she noted, the government would require help from the private sector to implement Mkukuta, adding that microfinance institutions could also help improve Tanzanians' living standards by increasing lending to local entrepreneurs.
In the Tanzania's budget for the 2007/2008 financial year has received a boost after the World Bank (WB) agreed to commit US$190 million in funding. The boost came two days after the British government through its development agency-the Department for International Development (DFID) provided Tanzania with $239 for the same budget. Gary Mgonja, the finance ministry permanent secretary said that the money would be disbursed before September that year and the $241 million was the biggest contribution to the National Strategy for Growth and Reduction of Poverty-MKUKUTA. The WB has supported many other projects in Tanzania but the recent funding was the biggest amount provided for such a project. According to available information, development partners fund around 80% the country's development budget and 40% of the recurrent budget. The General Budget Support (GBS) has increased from $277 million in 2002/03 to $600 million this year. The World Bank will also provide additional $42 million for another project in Zanzibar, whose financial agreements would be the single largest package to be received by the Isles government.
Despite of the positive remarks by the government and World Bank, critical voices on the budget are to be heard in several Tanzanian comments and newspaper articles. The Arusha Times, for example, comments on the budget as follows: “What the government has viewed as a budget that will accelerate economic growth and improve living standards of the people, a cross-section of Arusha residents has termed it ‘unfriendly to the poor.’ The fact that the 2007/08 budget had drastically hiked taxes on fuel means that it had triggered inflation that would backfire on the lower class faces, it further comments. Most of the interviewed residents are worried that the poor will carry the burden of the budget which has raised petroleum products levy, hiked motor vehicle licence fees tenfold and doubled road toll. The government has ‘proposed’ to increase fuel levy paid by road users from the current Sh.100 per litre to Sh.200 per litre of petrol and diesel. The fear is widespread that hiking oil prices and transportation costs will adversely affect the agricultural sector thus raising prices of foodstuffs mostly to the peril of the poor urban consumers."
Samuel Olodi, a teacher at Nduruma secondary school complained: "We have no option but to blame our representatives (MPs), for this budget which has nothing in it to make life easier for Tanzanians. Simply raising fuel taxes each year." He cautioned that not only will the proposed budget going to stifle growth of many sectors of the economy due to high cost of doing business but would also lead to environmental degradation through deforestation.
The Agricultural Council of Tanzania (ACT) furthermore has said the percentage of the national budget set for agriculture was very little considering that the sector is the backbone of the national economy. During 2006/07 financial year the government allocated 5.9 per cent of the budget for the agricultural sector and for 2007/08 the allocation only rose to 6.2 per cent of the budget. ACT's chairperson, Elias Mshiu noted that the increase in taxes and petroleum products will affect access to agricultural inputs and raise running costs thus discouraging many farmers. He advised that the government should bring to zero value added tax on diesel and other petroleum products used to run agricultural machinery, if mechanized and scientific farming is to be realized. (East African, Nairobi / Arusha Times, Arusha)

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