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Commentary

Significant
revenue shortfall Overall review of the Finance Ministers speech
for 2009/2010 and
ambitious revenue As a pre-election Budget speech, it Identified priority areas of
forecast for was no surprise to hear the infrastructure, agriculture,
2010/2011 Minister start by listing the education, health, water, and
Governments achievements in the energy have all been allocated
past five years - including the more significantly increased expenditure
Expenditure than doubling (in shilling terms) of budgets. Also listed as a priority
control and domestic revenue collections, area (and mentioned twice during
commercial which over the period have the speech) was a commitment to
borrowing to
balance the books increased from 12.5% to 16.4% of the accelerated implementation of
GDP. For 2010/11 the the national identity card project
Government plans to collect 17.3% something to be welcomed given
of GDP. that the additional financial
Agriculture is once transparency it should bring is
again a key focus
Kilimo Kwanza! However, the Government is faced likely to encourage greater tax
with challenges in relation to compliance. In the interim, one
revenue generation as collections move to expand the collection
this year are about 8% below base is to reintroduce the 2%
Introduction of budget in addition, General withholding tax on goods and
ring fencing of
mines
Budget Support from donors will services to apply to any payments
be significantly lower next year. made to a person not holding a
Indeed, when set against the taxpayer identification number
forecast Tshs 4,688bn revenue businesses making such payments
8% increase in collection for 2009/10, the question will however be concerned that this
specific excise
tariffs on alcohol,
arises as to whether forecast will simply increase their
tobacco, 2010/11 revenues of Tshs 6,003bn administrative load.
carbonated drinks are not too ambitious.
In the absence of any immediate
2009/10 2010/11 Increase significant expansion of the tax
No change on fuel Tshs'bn Tshs'bn base, the books are to be
taxes but rise in balanced by greater control of

motor vehicle expenditure and by resorting to
registration and Budget 5,096.02 6,003.59 18%
Anticipated
commercial borrowing.
annual licence
fees shortfall
(8%) (407.68) Measures to improve control of
Revised public expenditure include the
forecast 4,688.34 6,003.59 28%
planned adoption of prepaid
service delivery systems for
Tanzania Budget Review: Commentary 1
telephones and electricity, reduced base implying a trend to
and better coordinated increased local taxes.
procurement of Government
vehicles, fixed housing allowance For industry there are a number of
amounts (instead of a percentage positive measures including: a
of salary), substantial reduction reduction in excise duty on heavy
and better control of expenditure fuel oil (HFO) with the intention to
on allowances, and better control eliminate this duty over three
in relation to issuance of years; the reduction of customs
Government guarantees for loans duty on various industrial inputs;
to public institutions. increased duty to protect
manufacturers of certain cables
Although the Minister stated that and conductors; and measures to
commercial loans will only be encourage local processing of
raised to finance priority cashew nuts, edible oil, fruits and
infrastructure projects rather than milk. The local cement industry
recurrent expenditures, the sums has argued that its viability is
involved (Tshs 1,331bn new under threat from unfair
borrowing to be raised from both competition from subsidized and
domestic and external financial untaxed or under-taxed imports
markets) are significant (80% of which apparently enter
especially bearing in mind that Tanzania through Zanzibar).
significant amounts (Tshs 797bn) Against this background, the
also need to be mobilized to Minister announced a one year
finance maturing government extension of the 25% customs duty
securities. The private sector will on imported cement and in the
be concerned as to the extent to meantime a study is to be carried
which this will crowd them out of out on production capacity,
access to finance either due to demand and price.
consequent reduced availability or
affordability and are likely to For employers, especially in
argue that this will work against the sectors with large numbers of
Ministers commitment to improve employees (such as agriculture
the business environment to and industry), there will be
support private sector growth. disappointment that there is no
reduction in the 6% tax on jobs,
For agriculture, several additional namely skills and development
VAT and customs duty reliefs were levy.
introduced. However, of significant
concern for the sector is the To encourage investment there is
Ministers statement that produce reinstatement of VAT relief on
cess is "to be charged between 3% deemed capital goods but with
and 5% of farm gate price [to new controls (including a list of
allow] the Local Government such goods that is to be agreed by
Authorities to impose rates based a technical committee) to avoid
on the available resources abuse of the facility. The supply of
representing an apparent reversal building materials and construction
of the commitment given last year services to EPZ developers will
to reduce produce cess with effect also be eligible for relief from VAT.
from this year to 3% (from 5%).
This reversal is however consistent For mining, there is yet a further
with the Ministers reference this reversal to the 1997 mining regime
year to plans to enable local this time by way of the
authorities to broaden their tax introduction of ring fencing of
Tanzania Budget Review: Commentary 2
mines, so that losses from one Excise duties on non-petroleum
mine cannot be offset for tax products (alcohol, tobacco and
purposes against profits from carbonated drinks) have been
another mine. However, of greater increased by 8% - something that
concern to the sector will be the was expected as the consistent
lack of any specific mention of the practice in recent years has been
reinstatement of VAT special relief to adjust these fixed Tshs amounts
for the sector. Anecdotal evidence for inflation.
indicates that following the
abolition of this relief last year, and In real (inflationary adjusted)
the consequent need for mining terms, there is an effective income
companies to pay VAT on inputs tax increase for most individuals as
and then reclaim refunds, unpaid there has been no adjustment to
refunds from Government have income tax thresholds, which were
ballooned threatening the viability last increased in July 2008.
of this key sector. Instead, in a change that is more
political than practical, there is a
Long suffering commuters in Dar reduction of the lowest tax rate to
es Salaam will have been happy to 14% from 15%. If there was a real
hear the Minister state that the intention to reduce the tax burden
Government is currently in any meaningful manner, then it
undertaking rehabilitation and would have been more appropriate
expansion of roads and related to reduce the rate to 10% (an
infrastructure in the city in order to easier percentage to calculate, and
ensure that the Dar es Salaam consistent with the lowest rate
Rapid Bus Transport project starts applicable in Kenya and Uganda),
as soon as possible. Against this especially given the lack of
background, a customs duty adjustment to the tax thresholds.
exemption is introduced for buses As it is, the 1% reduction looks
to be imported for the project. more like a gimmick.
Further good news on the
transport side is that there was no Overall, this Budget sees little
increase in the fixed Tshs taxes on dramatic change unsurprising
fuel - in effect meaning that in hard with an election round the corner.
currency terms these taxes have
decreased. Given the revenue This publication including the accompanying
shortfall and the significance of newsletters are provided by
PricewaterhouseCoopers Limited for information
fuel taxes to the overall revenue
only and do not constitute the provision of
pot, as well as bearing in mind that professional advice of any kind. The
the last increase in fuel taxes was information provided herein should not be used
in July 2007, this lack of as a substitute for consultation with professional
adjustment is perhaps surprising. advisers. Before making any decisions or
taking any action, you should consult a
On the other hand, against the
professional adviser who has been provided
background of an impending with all the pertinent facts relevant to your
election, perhaps it is no surprise. particular situation. No responsibility for loss
However, it is not all good news for occasioned to any person acting or refraining
vehicle owners, as vehicle from action as a result as a result of any
registration and vehicle licence material in the publication including the
accompanying newsletters can be accepted by
fees are being increased, and
the author, copyright owner or publisher.
vehicles over 10 years old will no
longer be eligible for tax
exemptions.

Tanzania Budget Review: Commentary 3


Tax Changes

2% withholding
Highlights based on the Finance Ministers speech
tax on all
payments to Income Tax Ring fencing of mining tax
non-TIN holders
losses
Withholding tax on goods
and services It will now not be possible to utilise
Marginal tax rate mining losses from one mine
for lowest Withholding tax at a rate of 2% against taxable income of another
income band for which is currently applicable to mine of the same company. The
individuals payments for goods and services intention is to have each mine
reduced to 14% by the Government to suppliers taxed separately. This change is
without a (business) Taxpayer likely to trigger a number of
Mining ring-
Identification Number (TIN) has complications, for example how
fencing
now been extended to cover will shared deductible expenses be
payments by all taxpayers. This allocated? In addition, what
change intends to encourage exactly is a mine as mining
Several VAT voluntary registration for TIN and companies may have several pits
exemptions, capture income that currently falls within one mining area or which in
zero-rating and outside the tax net. However, it isolation are not economic to run.
special reliefs for will also increase the
the agricultural administrative burden for Value Added Tax
sector
taxpayers.
From an economic efficiency
Changes in Personal Tax perspective, a moderate VAT rate
Produce cess rates with a broad consumption base
cap not reduced and few exemptions is always
The marginal tax rate for preferred to a high rate with many
individuals has been reduced from exemptions.
15% to 14% on the lowest tax
Inflationary To all intents and purposes,
band (monthly income from TShs
adjustment to exempting an item will only be
excise duty on 100,000 to TShs 360,000).
Assuming this lowest tax band advantageous to a purchaser if no
alcohol, beer
and cigarettes remains unchanged, the change VAT costs were incurred in the
will result in a maximum tax saving production of that item. Where
of Tshs 2,600 per month for the VAT has been incurred then it can
individual. not be recovered and is often
Increase in passed to the consumer making
motor vehicle the item more expensive.
registration and
annual licence
fees 1
Tanzania Budget Review: Tax Changes
Unfortunately we seem to keep on applicable on importation. This
increasing the number of kind of listing is novel and is
exemptions and this year is no probably aimed at reducing
exception. abuse.

Changes to support Animal feed or seed cake


Agriculture (locally known as Mashudu).
The aim is to promote
Consistent with the Governments livestock farming and enable
prioritisation of agriculture (kilimo the oil seed farmers to receive
kwanza) most of the changes better prices for their products.
made to the VAT Act are with the
aim of giving assistance to this Agricultural implements i.e.
sector. The proposed changes combine harvesters, pick-up
range form from exemptions to balers, hay making machinery
zero-rating and special reliefs. and mowers used in
agricultural production and
New exemptions livestock. While the Minister
implies that this is a new
The following new exemptions exemption, most of these
have been introduced: items are already exempt
under item 13 of the Second
Transportation of some Schedule to the VAT Act.
agricultural products (for
example, sugar cane, sisal Airfreight charges for
and tea) plantations from the transportation of flowers. This
farm to the processing is aimed at promoting
location. This will be horticulture farming. In the
applicable to organised absence of VAT embedded
farming only. The aim of this costs to the airfreight
amendment is to reduce the companies, this will be a good
VAT burden on agricultural move as currently all
companies. However international airlines are
exempting transportation will required to charge VAT on the
have a minimal effect as the transportation of exported
transporters will now not be flowers.
able to claim the VAT on their
inputs (e.g. repairs, spare Breeding services through
parts etc) and will simply add artificial insemination.
this to the charge to the
farming entity. A better Supply of packaging materials
approach would have been to for fruit juices and milk
zero-rate this supply. products. This is aimed at the
manufacturing sector which
Machines and equipment used supports the agricultural
in the collection, transportation sector. The minister in his
and processing of milk speech said the measure is
products. This is an extension intended to reduce production
of the exemptions introduced costs and improve the quality
last year for this sector and of goods produced by local
the aim is to promote processors. However once
investment in the dairy sub- again a better approach would
sector and improve farmers have been to zero-rate these.
income. These items have
been specifically listed
together with their HS codes

Tanzania Budget Review: Tax Changes 2


against abuse. However, we
Special relief hope the TRA will come up
with a directive on how this
The following additions have been relief should apply.
made to an already long special
relief list! Supply of building materials
and construction services to
Reinstatement of special relief EPZ developers.
on deemed capital goods. In
the past, goods imported by Zero-rated supplies
investors registered under the
Tanzania Investment Act for a The supply of locally produced
specific investment project edible oil using local oil seeds will
could be deemed as capital be zero-rated effective 1 July.
goods and therefore entitled to
VAT special relief. However Taxes on Motor Vehicles and
this was removed in last years Fuel taxes
budget, citing abuse as the
reason. The removal brought No increase on motor vehicle
about fiscal instability and fuel taxes
caused uproar in many
sectors, especially where Since 2007 the Government has
investment projects were refrained from increasing excise
underway. In his speech, the duty as well as road and fuel toll
Minister stated that to avoid on fuel used by motor vehicles.
abuse, the government will
form a technical committee Ordinarily with duties calculated on
under the TRA to oversee its a per unit basis, one would have
implementation with the expected the Minister to increase
approach being to prepare a these to reflect inflation and even
list of the goods involved and more so given that these rates
make them available to the have been static since 2007. In
beneficiaries. (It is not clear addition, given the need for road
whether this reinstatement infrastructure investment, there
applies only to VAT or also was in fact a case for an increase
extends to customs duty). in the road toll so as to generate
additional funds to be used on
Supply of equipment to a road infrastructure.
registered veterinary
practitioner. This was exempt However, given that this is an
from VAT in the past and now election year it appears the
is being moved to the special Minister did not want to risk the
relief category. wrath of the wananchi in Tanzania
not least, the daladala drivers
Importation by or supply of who keep threatening to go on
green houses to growers. The strike!
aim is to boost the horticulture
farming sector. Registration fee

Supply of goods and services The registration fee for new motor
to organised farms and farms vehicles has increased as follows:
under registered cooperative
unions for the purpose of Tshs 45,000 for motor cycles
building of farm infrastructure. (currently Tshs 35,000)
We foresee some difficulties in
relation to controlling this relief

Tanzania Budget Review: Tax Changes 3


Tshs 150,000 for motor cars Excise Duty
(currently Tshs 120,000)
Reduction of Excise Duty on
Annual road licence fee HFO with complete removal
in three years
The Minister has also proposed to
increase the annual road licence The excise duty rate on Heavy
fee paid on motor vehicles as Fuel Oil (HFO) is to be reduced
shown in the table below: from Tshs 97 to Tshs 80 per litre.
The Minister states that the aim of
Engine Old New this proposal is to promote
Capacity Rate Rate industrial growth, create
cc Tshs Tshs employment and generate
revenue. The intention is to
0 - 500 30,000 50,000 progressively eliminate this duty
over a period of three years
501 1500 50,000 100,000
Beverages
1501 2500 100,000 150,000 Excise duty on beverages has
been increased in line with
Exceeding 150,000 200,000 average inflation (8%).
2,500
Goods Old New
Rate Rate
Given that these rates were not Tshs Tshs
adjusted last year, and the license Per ltr Per ltr
fees were in fact decreased in Carbonated 58 63
2008, the increase is probably soft drinks
justified. However it is not clear Clear beer 209 226
why smaller cars (501 to 1,500cc) (unmalted
which use less fuel and are more barley)
environmentally friendly, should Malt Beer 354 382
have a disproportionate increase in
Wine with 1,132 1,223
the annual motor vehicle licence
more than
fee from Tshs 50,000 to Tshs 25% imported
100,000 (i.e. a 100% increase) grapes
while the increase for cars over
Spirits 1,678 1,812
2,501cc is only 33.3%.

Abolition of exemption on
motor vehicles aged more
than 10 years

The Minister has proposed to


completely abolish tax exemptions
on motor vehicles aged more than
10 years. This is with the aim of
discouraging the dumping of old
vehicles into Tanzania and
protection of the environment. A
commendable move!

Tanzania Budget Review: Tax Changes 4


Cigarettes Cables of copper wire from
10% to harmonise with
Similar to beverages, the rates for other cable products
cigarettes have also been already attracting a duty
increased by 8%. rate of 25%.

Goods Old Rate New Rate 2. Reduced 0% duty rate on the


Tshs Tshs following items:
Cigarettes 5,749 per 6,209 per
without filter, thousand thousand Driers under HS Code
containing cigarettes cigarettes 3211.00.00- from 10%
more than
75% Petroleum coke not calcined
domestic - from 10%
tobacco
Stamping foils- from 10%
Cigarettes 13,564 14,649
with filter, per mil per mil Pigments dispersed in non
containing aqueous media, in liquid
more than
or paste form, of a kind
75%
domestic
used in the manufacture
tobacco of paints from 10%.
Other 24,633 26,604 Flat-rolled products of iron
cigarettes not per mil per mil on non alloy steel coated
mentioned or plated with tin of a
above
thickness of 0.5mm or
Cut rag/filler 12,441 13,436 more from 25%.
per kg per kg
Flat-rolled products of iron
Excise duty on cigars remains at and/or non alloy steel, of
30%. width of less than 600mm-
from 10%.
Customs Duty
Tractors.
A council of Finance Ministers from Lamps and bulbs made from
the East African Countries have LED technology.
agreed to pass various changes to
the East African Community 3. Grant duty remission on/to
Common External Tariff (CET) and the following:
Customs Management Act 2004.
Textile coated with gum
From the Ministers speech, the used in manufacturing of
proposed changes were aimed at outer book covers.
promoting growth in important
sectors like agriculture industry Looped pile fabrics of gum
and transport. With that view in boot manufacturing.
mind, the Ministers have proposed Motor vehicle assemblers.
the following changes:
4. Stay of application of duty for
1. Increased 25% import duty the following items:
rate on the following items:
Apply import duty rate of
Bare aluminium conductors 10% rather than 35% on
and cables from 10% to wheat grain for one year
protect producers in the as production of wheat
region against unfair grain in the region does
competition.

Tanzania Budget Review: Tax Changes 5


not satisfy market resources. This will be a
demand. disappointment for farmers
if they remember the
Extend for one year the commitment given by the
application of 10% duty Minister in last years
rate (rather than 25%) on budget to cap produce cess
trucks of carrying capacity at 3%.
of 5 tonnes.
Exempt persons above 60
Extend for one year the duty
years of age and disabled
remission on trucks of
persons with no reliable
carrying capacity of over
source of income from
20 tonnes (from 25%)
payment of property tax.
Extend for one year the However, this exemption is
exemption of import duty subject to conditions as it
on buses to be imported does not apply to more
in Tanzania under the Dar than one residential
es Salaam Rapid building and the exemption
Transport Project. has to be approved after
recommendations from the
Extend for one year the Local Government
application of a 25% rate Authority on the status of
on imported cement with the individual to be
a proposal that a study exempted.
should be carried out on
the production capacity, Other tax changes
demand and price
competitiveness before Export levy on raw cashew
setting the appropriate nuts increased from 10% to
rate. 15% of FoB value or US$
160/MT, whichever is higher.
Restriction of exemption on
This is to encourage local
importation of motor
value addition.
vehicles by a returning
resident to once every
four years. Increase in gaming taxes as
follows
Extend for one year the CET o Tshs 32,000 on slot
rate of 35% or US$ 0.20 machines (previously
per Kg on mitumba and Tshs 16,000); and
prohibition on importation o Imposing a new gaming tax
of used underwear. of 13% of gross gaming
revenue on sites
Local Government Finance containing 40 or more
Act machines.

The Minister proposed the


following amendments under the
Local Government Finance Act:

Produce Cess to be
chargeable between 3 and
5 percent of farm gate
price. The Local
Government Authorities will
be allowed to impose rates
based on the available
Tanzania Budget Review: Tax Changes 6
The Economy
Economic growth
of 6% compared Highlights based on speeches by the Minister of
7.4% in 2008.
Finance and Economic Affairs on 10 June 2010.
Past Performance 2009/10 collection some challenges remain.
These include:
The economy of Tanzania is
estimated to have attained real GDP Inadequate domestic revenue to
Headline inflation
growth of 6% during year 2009 finance Government programmes,
rate was 9.4%.
compared with the growth rate of 7.4% particularly infrastructure projects
attained in year 2008. The rate of social services; and agriculture;
growth has gone down significantly
compared to recent levels. However, Existence of a large informal
the actual growth is slightly above the sector which is not adequately
By March 2010, revised growth figure of 5.5%. Per integrated in the formal economy,
domestic revenue capita income increased by 10% to hence contributing minimally to
collection for Tshs 628,258. domestic revenue;
2009/10 was
Tshs3,490.3 billion The growth momentum is based on
Slow pace of implementation of
out of Tshs 4688.3 increased economic activities in
billion, implying a development projects due to
communication, gas and electricity,
deficit of Tshs insufficient knowledge of public
manufacturing, construction and
331.1 billion. procurement procedures and
transportation.
delays in disbursement of funds;
The average annual headline inflation
was 9.4%. In 2009/10, the The use of Integrated Financial
Government planned to collect Tshs Management System (IFMS) has
5,096 billion in domestic revenue, not yet been rolled out to all Local
Per capita income equal to 16.1% of GDP. However, due Government Councils in the
increased to Tshs to the global financial crisis, revenue country.
628,258 in 2009
collection by the end of June 2010 is
from Tshs 628,259
in 2008, equivalent expected to fall short of this target. Budget Objectives 2009/10
to an increase of Total domestic revenue collected to
10%. end of March 2010 was Tshs 3,490.3 The 2010/11 budget takes into
billion, which represents a shortfall of account the objectives of the National
Tshs 331.1 billion, compared to the Development Vision 2025, MKUKUTA
target for the period. For 2010/11 II, the Millennium Development Goals
domestic revenue collection has been (MDGs), the National Debt Strategy,
projected at Tshs 6,003.6 billion and priorities outlined in the budget
equivalent to 17.3% of GDP. guidelines 2010/11 2012/13. The
budget also takes due account of the
Challenges ahead objectives of the Joint Assistance
Strategy for Tanzania (JAST).
Despite some achievements in
economic growth and revenue

Tanzania Budget Review: The Economy 1


The 2010/11 Budget In total, the budget revenues will be as
Framework follows:
Tshs bn
The 2010/11 budget sets out the
following targets: Domestic Revenue 6,003
Grants and Loans 3,275
GDP growth rate of 7% and 7.1% Domestic borrowing 1,331
for 2010 and 2011 respectively; LGA collections 173
Domestic borrowing (Roll over) 798
Reduce inflation rate to 8% by end Privatisation Proceeds 30
of June 2010. In addition, reduce Total Revenue 11,610
the rate to 5% by June 2011;
In meeting the 2009/10 budget,
Maintain annual growth rate of M3 alternative financing sources were
and M2 at 20 % each by end of explored including borrowing from the
June 2010; domestic financial markets. It was
envisaged that recurrent expenditure
To increase domestic revenue will be fully funded by domestic
from 16.1% (estimated) of GDP in revenue. However, the revenue target
2009/10 to 17.3% of GDP in was not achieved due to shortfalls in a
2010/11; number of taxes, including the excise
duty due to decrease in production of
Maintain market-determined taxable products such as cigarettes,
realistic exchange rate, with Bank beer and soft drinks. By March 2010 a
of Tanzanias interventions total of Tshs 424.4 billion worth of
exclusively limited to smoothing bonds were sold in the domestic
wide fluctuation and/or liquidity market.
management purposes; Donor dependency is expected to
decline for the upcoming year with a
To improve the investment climate
decrease in budgeted revenue from
in the country;
grants and loans to comprise 28% of
To place greater emphasis on the total annual budget of 2010/11
expanding the agriculture sector (compared to 33% for the 2009/10
and achieving food security; budget).

Maintain adequate official foreign Expenditure


reserves sufficient to cover a
minimum of five months worth of The Government is proposing to
imports of tradable goods and spend Tshs 11,610 billion in 2010/11
non-factor services. as follows:
Tshs bn
Recurrent 7,791
Revenue Development 3,819
The budget policy measures on Total Expenditure 11,610
revenue are focused on domestic Government expenditure in 2010/2011
revenue collection. For 20010/11 will focus on:
domestic revenue collection is
projected at Tshs 6,003.6 billion Ensuring that the National
representing an increase of 9% on the elections planned for October
2009/10 target. The specific details of 2010 take place as scheduled;
the revenue enhancing measures are
set out in our highlights of tax Improving infrastructure;
changes.
Improving productivity in the
agriculture and livestock sectors;

Increasing access to clean and


safe water;

Strengthening and developing


water irrigation schemes;

Tanzania Budget Review: The Economy 2


Protecting and sustaining precautionary attitude to lending in the
achievements attained in the wake of the global financial crisis.
health and education sectors;
Interest rates on government
Increasing energy generation and securities (in particular treasury bills)
distribution capacities in registered historical low rates of 4.15
collaboration with the private percent in March 2010, far below the
sector; 13.33% in March 2009. The record
high demand at Tshs 1,228.2 billion in
Promoting small and medium March 2010 against Tshs 360 billion
scale businesses to increase that was offered by the Bank of
quality and value addition, Tanzania was substantially higher
specifically in the agriculture than Tshs 728.6 billion recorded in the
sector; preceding month and four times the
amount registered in a similar period
Accelerating the implementation of in the previous year. This
the national identity card project; development is a reflection of the easy
monetary stance pursued by the Bank
Establishing the Agriculture Bank, of Tanzania, coupled with a
accelerating the implementation of precautionary lending attitude on the
agricultural leasing services and part of the commercial banks.
completing the establishment of
the Tanzania Mortgage Refinance Balance of Trade
Company (TMRC).
The current account deficit narrowed
The expenditure budget has been
to US$ 2,266.5 million by the end of
allocated in the following manner for
March 2010, from US$ 2,928.7 million
key areas:
registered in the corresponding period
18% on the education; a year earlier. This was primarily due
to an increase in exports coupled with
13% on infrastructure; a decline in imports. This development
contributed to an improvement in the
10% on the health; overall balance of payments surplus of
US$475 million, compared with a
8% on the agriculture; deficit of US$78.9 million in the same
3% on the water; period last year.

3% on energy and minerals. On an annual basis, imports of goods


and services amounted to US$
7,777.4 million in April 2010 compared
Credit and Money Supply with US$ 8,124.1 million in the
previous year. The value of goods
For the period ending March 2010, import dropped to US$ 6,083.5 million
extended broad money supply (M3) compared with US$ 6,464.2 million
registered an annual growth rate of recorded during the year ending
19% compared to only 14% in March March 2009. This was largely
2009. Similarly, M2 registered a attributed to a decline in the value of
23.5% annual growth in March 2010 imported oil, fertilisers and industrial
compared to 18.4% in March 2009. raw materials. The decline in the value
Growth in money supply was a result of oil imports was caused by the fall in
of an increase in both net foreign and world market prices.
domestic assets. This development
mirrors the slowdown in the expansion In addition, there was a small increase
of credit to the private sector. Private (2%) in service receipts in 2009 due to
sector lending has registered a slow- increase in payments for travel, other
down to an annual growth rate of business and construction services.
10.8% in March 2010 compared with a
growth rate of 35.9% registered in the Despite the deficit, foreign reserves
corresponding period in 2009. The increased to US$ 3,498.2 million in
slower growth of credit to the private March 2010, from US$ 2,701.2 million
sector is an indication of the banks in March 2009. The reserves position

Tanzania Budget Review: The Economy 3


was enough to cover 5.4 months of sector to the national GDP for 2009
imports of goods and services. was 8.6%; marking an increase of 1%
on 2008. The increase was attributed
Sector policies and to increased production of products
programmes to support such as Konyagi (liquor), corrugated
budget initiatives iron sheets, chibuku brew and wheat
flour.
Agriculture, Livestock, Construction
Forestry and Hunting
In 2009, the construction sector grew
Economic activities in the above areas at a rate of 7.5% compared to 10.5%
grew by 3.2% in 2009 compared to in 2008. This was driven by the
4.6% in the previous year. The decline construction of roads and bridges,
in growth was due to the lack of ample residential and non-residential
rainfall and droughts in the Northern buildings and land developments. The
part of the country. This led to poor sectors contribution to the national
harvests and lack of feed and water GDP in 2009 was 7.9% compared to
for livestock. 7.7% in 2008.
This will significantly affect the extent Recognising the importance of
to which poverty reduction and food infrastructure for economic growth, the
security targets can be met. Government has continued to place
considerable focus on construction in
Fishing the upcoming year. As part of this
commitment the Government has
Fishing activities shrank by 2.7% in allocated 13% of the 2010/2011
2009 compared to 5% growth the expenditure budget to infrastructure.
previous year. This was attributed to
continued use of crude fishing tools, Services
damage to fisheries natural habitat,
and enhanced competition in the
Communications
European market from China and
Vietnam. However, overall The communication sub-sector grew
contribution of fishing to total GDP by 21.9% in 2009 compared to 20.5%
increased to 1.4% in 2009 compared in 2008, outpacing all other economic
to 1.2% in 2008. activities. This was due to increased
investment in the sector and an overall
Industry and construction increase in subscription rates
particularly with respect to mobile
Mining and quarrying
phones. Despite the stated growth, the
Mining activities continued a sub-sectors contribution to GDP for
downward trend. In 2009, the sector 2009 was 2.1% compared to 2.5% in
registered a significant fall in growth 2008, marking a decline in GDP
from 2.5% in 2008 to an all time low of contribution by 0.4%.
1.2% in 2009. The sector contribution
Transport
to the GDP also declined from 3.4% in
2008 to 3.3% in 2009. This was Transport services grew by 6.0%
primarily due to a significant reduction compared to 6.9% the previous year.
in the prices of Tanzanite and This was as a direct result of poor
diamonds in the world markets and infrastructure and lack of
low production volumes of gold from transportation means (such as planes
the Tulawaka and Resolute mines, and railway carriages) for passengers
following the lowering of the ore and cargo. This particularly affected
grade. This situation is mainly the state-run Air Tanzania Corporation
attributed to the global financial crisis. (ATC) and Tanzania Railways
Corporation (TRC). However, the sub-
Manufacturing sectors contribution to GDP grew
from 4.2% in 2008 to 5.2% in 2009.
The manufacturing sector grew by
8.0% in 2009 compared to 9.9% in Increased priority will be placed on
2008. The contribution of this sub- improving transport infrastructure in

Tanzania Budget Review: The Economy 4


addition to creating incentives to
attract private sector investment. Conclusion
Electricity and gas With the significant reduction in donor
support, the implementation of the
In 2009, the energy and gas sector 2010/11 budget will require that the
grew by 8.4% compared to 5.4% in Government raises more funds
2008. The increase was due to through improved mobilisation of
increased production of gas, electricity domestic resources and both
and coal. The total contribution of this concessional and commercial loans.
sub-sector to the GDP remained at the
2008 rate of 1.7%. The Government will look to raise
revenues through: enhancement of
Cross-cutting issues the agriculture sector through kilimo
kwanza; investing in infrastructure;
Aside from the sectoral activities, the land developments; improved
Government also plans to undertake production in the energy sector;
significant steps to address several development and enhancement of
cross-cutting issues that impact on the industry; and implementation of the
economy. These include: national identification scheme. In
addition, the planned sale of some of
Acceleration of the process of the Governments shares in NBC
introducing National Identity Limited will also contribute to raising
Cards; approximately Tshs 30 billion.

To strengthen public financial Overall, the Government is moving in


management through making the right direction by investing in areas
several amendments to Article that will pave the way to sustainable
348 of the Public Finance Act; development. However, the success
depends on our capacity to drive
Taking further measures in these policies at the implementation
improving employees welfare; level. In addition, the dependency on
grants and loans may further
Continue with implementation of exacerbate our inability to adequately
programmes in developing insulate against the onset of the
agriculture, livestock and fishing. effects of the global economic crisis.

Implementing the Second Strategy The current budget deficit and inability
for Preventing HIV/AIDS Infections to meet revenue collection targets,
in 2008 2012; coupled with a significant reduction in
donor funding for budget support,
To improve management and implies that the Government will have
control of public expenditure. This to increase their efforts in sustainable
will be done through putting internal revenue mobilisation.
different controls in different areas
such as control of procurement
and use of government vehicles
etc;

Developing programmes for


empowering women economically,
and strengthening gender focal
points at all levels;

Continuing to implement the


National Environment
Conservation Policy and its
strategies.

Tanzania Budget Review: The Economy 5

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