REVENUE

72.The fiscal policies for 2002/03 aimed at implementing the poverty reduction programme and promoting development in the country. On the basis  of that policy thrust, the government budget for 2002/03, targeted to raise domestic revenue to shs. 1,172,297 million, equivalent to 12.3 percent of GDP, compared to 12.2 percent of GDP during 2001/02. Tax revenue was estimated at shs. 1,066,899 million and non-tax revenue was estimated at shs. 105,398 million. Grants and loans including proceeds from the HIPC debt relief were estimated to amount to shs. 890,739 million.

 

Domestic Revenue

73.Actual domestic revenue collections for the period July – December 2002, amounted to shs. 594,843 million, compared to an estimate of shs. 559,018 million, exceeding the estimates for the period by 6.0 percent. That level of actual collections is equivalent to 50.7 percent of the total domestic revenue estimates for 2002/03. Out of the total amount collected, shs. 545,389 million was tax revenue, equivalent to 7.0  percent above the estimates of shs. 510,259 million, while non-tax revenue amounted to shs. 49,454 million, equivalent to 1.0  percent above the estimates of shs. 48,759 million for the period.

 

74.The trend of domestic revenue during July – December 2002 was satisfactory, mainly on account of improved performance in income tax collection and VAT on domestic goods and services. Improved tax collections were attributed to reforms in tax system and improved tax administration. However, unsatisfactory revenue collections in custom duties and excise duty, recorded during July – December 2002, were due to the decline in the volume of imported goods. Revenue collections from non-tax sources were satisfactory, following enhanced efficiency in revenue collections in some ministries, government departments and regions.

 

75.By end of March 2003, total domestic revenue for 2002/03, was shs. 901,855 million, equivalent to 76.9 percent of the estimate for the financial year. On the basis of that performance, it is expected that the planned target for the fiscal year ending June 2003, will be attained and likely to surpass the estimates. Domestic revenue is expected to amount to shs. 1,183,743 million, equivalent to 1.0  percent over the estimates for the fiscal year. At that level, the government will have collected the equivalent of 12.5 percent of GDP, exceeding to the planned target of 12.3 percent for the fiscal year.

 

Foreign Grants and Loans

76.During the period July – December 2002, the first half of the fiscal year 2002/03, inflows of foreign grants and loans including HIPC debt relief, amounted to shs. 270, 449  million. Out of that amount, foreign grants were shs. 216,732 million and external loans amounted to shs. 59,297 million. Total debt relief under HIPC initiative amounted to shs. 31,508 million. Foreign grants and loans for the development budget amounted to shs. 82,502 million during the same period. However,  disbursements of foreign funds committed by development partners was not satisfactory, amounting to only 46.0 percent of the target for the period.

 

77. By end March 2003, inflows of foreign grants and loans, including HIPC debt relief, amounted to shs. 459,759 million; out of which, shs. 303,323 million were foreign grants and shs. 156,436 million were foreign loans for programme assistance and projects. Foreign debt relief for the period amounted to shs. 44,173 million. On the basis of that performance, foreign inflows including the HIPC debt relief is expected to amount to shs. 710,911 million by the end of June 2003.

 

Domestic Loans

78.               During the period July-December 2002, the government planned to borrow shs. 20,451 million from domestic banks and non-bank financial institutions.   However, during that period, the government borrowed shs. 7,500 million from non-bank financial institutions. However, the government made debt repayments to domestic banks during the period amounting to shs. 1,054 million, due to lower government actual expenditure outturn than planned. Nonetheless, for the period ending June 2003, the government is expected to have borrowed shs. 30,655 million from domestic banks and non-banks.

 

EXPENDITURE

79.               The government expenditure policies for fiscal year 2002/03; focused on government financial management, supervision and enforcement of expenditure discipline in order to achieve the national objectives for promoting economic growth and poverty reduction. Accordingly, the government planned to spend a total amount of shs. 2,106,291 million, equivalent to 23.4 percent of GDP. Out of that amount shs. 1,386,163 million was earmarked for recurrent expenditure and shs. 720,128 million was for development expenditures. The distribution of recurrent expenditure was as follows: shs. 263,202 million, equivalent to 19.0 percent of total expenditure was for servicing the public debt; shs. 411,490 million, equivalent to 29.7 percent of total recurrent expenditure was allocated to wages and salaries; allocations to priority sectors as defined in the Poverty Reduction Strategy, were allocated shs. 278,546 million, equivalent to 20.1 percent of total recurrent expenditure; and other charges were allocated shs. 432,925 million, or 31.2 percent of total recurrent expenditure.

 

80.                Total government expenditure during the first half of the fiscal year 2002/03, amounted to shs. 737,719 million, equivalent to 68.0 percent of estimates for the period, of shs. 1,078,871 million, or 35.0 percent of total budgeted expenditure for the fiscal year 2002/03. During the period, recurrent expenditure amounted to shs. 621,036 million, equivalent to 87.0 percent of the budget estimates of shs. 718,808 million, while expenditure on development projects amounted to shs. 116,683 million, or 33.0 percent of the planned target of shs. 360,064 million. Out of the recurrent expenditure, for the period, shs. 102,228 million was for servicing public debt, both domestic and external, (including principal and interest). During the period, the government spent shs. 199,706 million on wages and salaries and shs. 159,364 million on priority sectors. Overall, actual recurrent expenditure levels were below the planned estimates due to failure or delays in the procurement of goods and services by some government departments on account of slow adaptation to the new Public Procurement Act 2001 and shortfalls in foreign funds disbursements.

 

81.               The planned target for development expenditures were not attained, amounting to only 33.0 percent of the budget estimates for the period, due to shortfalls in both local and foreign funds, and lack of comprehensive information on of disbursements of foreign funds that are made directly to donor-funded projects that operate outside the Exchequer. The budget deficit after foreign grant during the period July – December 2002 amounted to shs. 73,868 million, equivalent to 37.0 percent over the planned estimates.

 

82.               By end of March 2003, total expenditure amounted to shs. 1,223,173 million, equivalent to 58.1 percent of the budget estimates for the financial year. On the basis of such performance, total expenditure is expected to amount to shs. 1,844,160 million or 87.6 percent of the budget estimates for the fiscal year 2002/03 by end  June 2003.

 

83.               In view of the fact that expenditure policies during the fiscal year 2002/03 focused on promoting economic growth and poverty reduction, the government increased budgetary allocations to priority sectors as defined in the Poverty Reduction Strategy (health, education, rural roads, water and good governance). Accordingly, the government has been releasing funds to ministries and independent departments within the priority sectors on a quarterly basis.

 

84.         Budgetary allocations to the health sector increased to 7.0 percent in 2002/03 from 6.0 percent in 2001/02. The allocation to the education sector increased to 19.2 percent in 2002/03, from 14.8 percent in 2001/02. For agriculture sector  including, forestry, fishing and hunting sector, the budgetary allocation was increased to 3.0 percent in 2002/03 from 2.8 percent in 2001/02. The allocation to agriculture and agricultural research was 94.1 percent of the total allocation to the sector. The allocation to the mining, manufacturing and construction sectors combined, increased to 4.0 percent in 2002/03 from 2.9 percent in 2001/02, mainly on account of increased new construction projects. The allocation to the construction development projects alone amounted to 82.9 percent of the total budget allocated to the sector. The allocation to the transportation and communication sector increased to 6.9 percent in 2002/03 from 6.5 percent in 2001/02.

 

85.               The allocation to the public services, public order and safety, and others decreased from 22.3, 4.8 and  24.2 percent in 2001/02 to 19.2, 4.4 and 20.4 percent, in 2002/03, respectively. The allocation to social and economic services (trade, tourism,  labour services etc) increased to 3.2 percent in 2002/03 from 2.6 percent in 2001/02. The allocation to the social security and welfare and services sector decreased from 1.9 percent 2001/02 to 1.7 percent in 2002/03. The allocation to defense affairs and services sector, decreased to 6.8 percent in 2002/03 from 8.0 percent in 2001/02. The allocation to the fuel and energy, and other community services was maintained at 0.1 and 0.2 percent respectively.

 

NATIONAL DEBT

86.               With the objective of strengthening national debt management, the government launched a National Debt Strategy in August 2002. The major objective of the National Debt Strategy is to ensure that the national debt, including both external and domestic, is sustainable and contribute to the expansion of the Dar-es Salaam Stock Exchange (DSE) activities. During the implementation of the Strategy, conversion of un-securitized domestic liabilities into marketable securities was done. The 5 and 7-year Treasury bonds were launched and listed on the Dar es Salaam Stock Exchange, followed by the launch of 10-year Treasury bonds in October 2002.

 

87.               The national debt as at end – December 2002, amounted to US $ 8.8 billion (equivalent to shs. 8,005 billion), compared to US $ 8.4 billion (equivalent to shs. 7,296.9 billion) registered at the end of December 2001.  This implies that the national debt increased by 4.8  percent, compared to the period ending December 2001.  Out of that amount, US $ 1.5 billion was domestic debt, equivalent to 17.7 percent of the total national debt and US $ 7.3 billion, equivalent to 82.3 percent was external debt.

 

External debt

88.               By end of December 2002, external debt amounted to US $ 7.33 billion.  Out of that amount, US $ 6.75 billion was government debt and public corporations, and US $ 0.58 billion was private debt. The external debt increased by US $ 0.24 billion, or 3.4 percent from US $ 7.09 billion at end – December 2001. The increase in the external debt is accounted for by the increase in loans to the government disbursed by multilateral and bilateral donors and the depreciation in the Tanzania shilling against the Dollar. The total external debt to the government and public corporations, including interest of US $ 0.74 billion as at end – December, 2002, amounted to US $ 6.75 billion.  Out of that amount, 55.5 percent of total external debt was owed to multilateral creditors, 39.1 percent to bilateral creditors and the remaining 5.4 percent was owed to commercial and private creditors.  However, the central government was the largest borrower, accounting for as much as US $ 6.41 billion, equivalent to 87.4 percent of the total external debt, while Public Corporations and private sector borrowed 4.7 and 7.9 percent, respectively.  However, for the period ending December 2002, US $ 5.9 billion and of US $ 0.2 billion was disbursed outstanding debt to the government and public corporations, respectively.  The remaining amount of US $ 0.4 billion and US $ 0.2 billion was committed un-disbursed debt to the government and public corporations, respectively.

 

89.               For the period ending December 2002,   24.6 percent of the external debt had been disbursed in the form of balance of payment support while the transport and telecommunication sector received 16.1 percent, agriculture sector received 14.5 percent, and energy and mining sector received 12.7 percent.  The industrial sector received 5.1 percent of total external debt while education, insurance and tourism received 3.0, 1.1 and 0.6 percent respectively. The remaining 22.3 percent of the total external debt went to other sectors.

 

Domestic debt

90.               Total domestic stock as at end of December 2002, amounted to US $ 1.5 billion, (equivalent to shs. 1,413.7 billion), being an increase of 11.5 percent, compared to US $ 1.3 billion (equivalent to shs. 1,267.6 billion) registered in the period ending December 2001.  The increase in the domestic debt was accounted for by increased sales of government securities and loans by commercial banks to the government.  Out of the total domestic debt stock, government securities constituted 58.3 percent, including Treasury bills of 35, 91,182 and 364 days, respectively, 2 and 5 – years Treasury bonds, long term Treasury bonds (7 to 10 – years) and special bonds.  The remaining 41.2 percent, of the domestic debt, constituted debts of privatised parastatals,  Bank of Tanzania, commercial banks and non-securitized debts.

 

91.                With regard to government domestic creditors, the commercial banks and non-bank financial institutions were the main creditors, by holding US $ 0.42 billion (equivalent to shs. 408.6 billion), being 49.6 percent of the total government debt stock.  The Bank of Tanzania is owed US $ 0.21 billion (equivalent shs. 200.9 billion), which constitutes 24.4 percent of the total public debt stock.  Credit from investment institutions contributed to US $ 0.212 billion (equivalent shs. 2,006.9 billion) or 25.1 percent of total domestic debt stock and US $ 0.01 billion (equivalent to shs. 7.1 billion) of the total domestic debt was owed to insurance companies and parastatals.

Table No.25

Table No.26