Tanzania’s 2024/25 Budget: A Glitzy Reveal, Grand Show! But What’s the Plan?

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The Tanzanian budget is officially out, sadly it will be remembered for the pomp and how many times the president’s name was mentioned in it, some counted up to 40 times, but not for groundbreaking policy initiatives! The UK Finance Minister was humble enough when he walked alone to present a budget of about 1.6 trillion dollars but our Finance Minister capitalized that as an opportunity to showboat a budget of 15 billion dollars!

The number of cars and escorts that swished him and his entourage into the Bunge buildings reminded us of a precursor in the minister’s inauguration of his 2030 presidential campaign that our finance minister seems to be polishing himself for.

Despite those inimical distractions, I will piece together what this budget is all about in a few words. So, brace yourself for this bumpy ride which is by no means exhaustive.

The Budget in a Nutshell

Macro-Economic Policy Targets:

The GDP growth rate target is 5.4% in 2024 (up from 5.1% in 2023). Efforts to control inflation rate within the range of 3.0-5.0%. Domestic revenue is expected to be around 15.8% of GDP in 2024/25. Tax revenue will be 12.9% of GDP. Maintenance of budget deficit not to exceed 3.0% of GDP. Foreign exchange reserves to cover at least four months of imports.

Key Projects and Achievements:

In the Transport Sector.

Completion of Standard Gauge Railway (SGR) projects, improvement of port infrastructure, and development of air transport infrastructure including new airports and acquiring new aircraft for ATCL.

Read Related: Tanzania’s National Debt: Analyzing Contrarian Perspectives and Economic Realities

Energy Sector: Near completion of the Julius Nyerere Hydropower Project, solar power plant projects, and construction of power transmission lines.

Water Sector: Completion of several water projects to improve access in urban and rural areas, with significant progress in many others.

Agriculture Sector: Expansion of irrigation schemes, increased food reserve capacity, and improvement in seed certification.

Health Sector: Construction of new healthcare centres, investment in diagnostic equipment, and enhancement of the Medical Store.

Education Sector: Reforms and significant investment in primary, secondary, and higher education, including the construction of new schools and vocational training centres.

Public Finance Management: Continued enforcement of discipline in the use of public funds, adherence to relevant laws, and implementation of internal and external audit recommendations. Emphasis on virtual meetings and paperless policy to reduce expenditure.

Financial Sector Development: Increase in users of formal financial services to 76%. Measures to address high-interest loans and improve financial literacy. Implementation of the Tanzania Instant Payments System (TIPS) to facilitate digital transactions.

Government Debt: As of March 2024, the public debt stands at 91,708.28 billion shillings, with external debt at 60,954.31 billion shillings and domestic debt at 30,753.97 billion shillings. Debt remains sustainable according to the Debt Sustainability Analysis (DSA).

Foreign Currency Availability: Measures to address the shortage of foreign currency, including promoting exports and reducing imports. Directives for all domestic transactions to be conducted in Tanzanian shillings to combat dollarization.

Key Numbers and Highlights: The GDP Growth Rate Target is expected to average around 5.4% in 2024. Inflation Rate to stick around 3.0-5.0%. Domestic Revenue to GDP is about 15.8%. Tax Revenue to GDP 12.9%. Budget Deficit not exceeding 3.0% of GDP. Foreign Exchange Reserves can sustain us for at least four months of imports.

Public Debt (March 2024) stands at 91,708.28 billion shillings (External: 60,954.31 billion, Domestic: 30,753.97 billion). Water Access (December 2023) benefited 79.6% in rural areas and 90% of the population in urban areas.

Also, read: A Comprehensive Review of Tanzania’s Ministry of Minerals 2024-25 Budget Execution

Healthcare Centers jumped from 11,040 in 2022/23 to 12,266 in 2023/24. Education Sector Investment razed 1.29 trillion shillings for various improvements and constructions. In the financial sector, it was noted that 76% of Tanzanians use formal financial services.

Budgetary Policy Initiatives Re-examined

If you take the clutter out, you can see the government budget was geared, as usual, to squeeze money from the common ‘mwananchi’ to fund loftier programs like restoring road networks damaged by El Niño rains, completing the Nyerere hydroelectric power plant, extending the SGR project, and reviving the National Health Insurance Fund (NHIF).

There were the usual defences of borrowing in the budget, which has gained momentum recently. Nothing concrete was mentioned about attracting foreign investors. It seems some benefit from keeping tax relations with foreign investors in a state of “mutual ambiguity.”

Our national debt stands at around Tshs 91 trillion and counting. Interestingly, the military has VAT exemptions, seemingly taking money from one pocket to put it in another. Government services, being non-commercial, should ideally be exempt from taxes, but this idea appears ill-suited for now.

Curiously, the government remains tight-lipped about how and why our national debt has been soaring. Sharing yearly debt increases would be mutually beneficial, but withholding this information raises suspicions that much of the debt was accumulated recently.

Henceforth, we do not want to be associated with reckless borrowing. What we overlook is the inconvenient truth that for every dollar we borrow, we are technically selling our natural resources cheaply to foreigners. No wonder we stand little chance of overcoming poverty. National debts amount to auctioning the future of the subsequent generations.

That, on its own, would not be a problem until they see we have bequeathed nothing tangible to them from heavy borrowing! Are we sadists by design? The next generation will respond to that query with a sour taste in its mouth.

The budget was silent on the debt burden. How much money is spent to service interest payments on those loans? We have a government whose criteria for assessing debt burden is based on a metric that has nothing to do directly with the payment of debts: the GDP. According to government-provided data, the ratio of local tax contributions to the GDP stands at 15.8%.

Clearly, it is counterproductive to apply the GDP as a yardstick to assess our ability to meet debt repayment obligations. Tax contributions as a percentage of the GDP indicate the limits of the government to tap money from the elusive informal sector, and that is significant.

Unlike in developed nations, in 2023, the United States had a tax-to-GDP ratio of 27.7% compared to the OECD average of 34.0%. In 2021, the United States was ranked 32nd out of the 38 OECD countries in terms of the tax-to-GDP ratio.

The Tanzanian tax-to-GDP ratio slightly decreased by 0.8% from 12.2% in 2019/20 to 11.4% in 2020/21. This, however, remains below the average ratio of 11.6% achieved during the period under review. Hence, the projected tax revenue ratio to GDP of 12.9% for 2024 seems reasonable, albeit it leaves us with unanswered questions.

Don’t miss: Tanzania’s Economic Resilience: A Decade in Review of Growth and Challenges

What the budget hides from us are key indicators such as the cost of servicing interest payments and how it compares to money set aside for education and health. This is critical information because, without it, we are unlikely to appreciate how the country is faring in servicing debt obligations.

If the money spent on servicing interest payments on national debt is more than the money budgeted for education and health, then that debt ought to be regarded as unbearable. Hence, debt ceilings that require parliamentary consideration and approval should be legislated urgently.

Another matter the budget has shown is that the fundamentals of the economy are wobbling, as seen in the increasing tax burden to fund NHIF. This indicates that interest payment obligations are now burdensome to the nation, nibbling at money that would have ordinarily been secured from the budget itself without frantic hikes in additional taxes.

Another reason to discourage borrowing more is that much of the money does not achieve its intended purpose. Infrastructure is often shoddy and overvalued, with at least a third of the funds being stolen, reducing the cost-benefit ratio without lessening the burden.

In this era of high inflation due to global conflicts and budget overspending, borrowing costs are excessively high due to artificially high interest rates aimed at controlling inflation.

While a reasonable person would avoid such loans, governments often don’t. Countries like Ghana, Argentina, Sri Lanka, and Singapore, which rushed to build modern infrastructure, faced bankruptcy and reduced sovereignty due to harsh conditions imposed by creditors.

There was a concerted effort in the budget to penalize greener technologies, such as domestically produced natural gas, on tenuous grounds of equity. Is there any “equitable distribution” between foreign exchange-gobbling fossil fuels we import and pay through the roof for, versus our own natural gas?

Fossil fuels are major pollutants, while natural gas is not, and equating them to safeguard an egalitarian society sounds hollow and counterproductive. It sends the message that policymakers see no difference between these energy sources, which is regrettable and unacceptable.

The long-term goal should be to create conducive conditions to phase out fossil fuels, which are major pollutants. Is this not our priority anymore? Tshs 382 per kilo! The clean energy sector’s least worry should be compared with the relics of fossil fuels.

Looking back at the budget, there’s a visceral feeling that old habits die hard even when the guards at the Treasury alternate places! The rhetoric and diatribe may sound like a “pastoral cadence” laced with accolades heavily loaded with lofty political, hopeful statements for the future, but the anticipated substance is still conspicuously lacking!

The author is a Development Administration specialist in Tanzania with over 30 years of practical experience, and has been penning down a number of articles in local printing and digital newspapers for some time now.

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