A BUDGET SUMMARY

(The budget speech was delivered to the National Assembly on 8th. June, 1984, by the Minister for Finance, Ndugu Cleopa Msuya)

The news from Tanzania continues to give cause for considerable concern and anxiety. The last year has seen a further decline in the standard of living. Income per head at 1966 prices fell from shs.665 in 1980 to an estimated shs.589 in 1983. The gross domestic product at constant 1966 prices likewise fell from shs.12,035 in 1980 to shs.11,671 in 1983. Tb balance the recurrent budget it was necessary in 1983-84 to borrow from the bank a record sum of shs.3,120 million, with all its inflationary implications, an amount equal to about 7% of GDP at current prices. The production of export crops has continued to be sluggish and to remain well below the levels of the last decade. By April, 1984, the crop authorities had accumulated debts to the National Bank of Commerce of shs.5,OOO million. Adverse weather conditions and a rapidly growing population have imposed on Tanzania the need to import food in the last three years and the prospects for the 1984 crop remain serious. An acute shortage of food is reported in Shinyanga and Mwanza Regions, while in Tanga, Kilimanjaro, Arusha and Mara Regions the long rains were four weeks late following the failure of the previous short rains. There is thus a danger that Regions which normally have a food surplus will become net importers of food.

In the face of this very grave situation the Government has adopted further drastic measures in an attempt to arrest the decline. First, the currency has been devalued by 26% in an attempt to bring it more into line with market realities. The dollar is now equivalent to shs.11 in place of the previous rate of shs.12.6 and the pound sterling exchanged at the end of June for about shs.22.5. Tb mitigate the effect on urban wage earners the minimum wage has been increased by 35% to shs.810 and the tax threshold has been raised accordingly. There have been corresponding increases on a diminishing scale in Government salaries falling to 15% for those receiving more than shs.4,OOO per month. Parastatal salaries are to be adjusted accordingly.

Secondly, various steps have been taken in an attempt to increase the output both of food and of export crops and also to expand certain industries, tourism and the exploitation of natural resources. Producer prices for farmers are to be increased by 46-55% according to crop. This will serve both to offset increased costs of production, including the effects of devaluation, and also to increase incentives. The accumulated debts of the crop authorities will be taken over and funded by the Government over a period of 6-8 years, leaving the new Cooperative Unions to take over crop marketing and movement on a fully commercial basis without the constraint of inherited debts. New facilities are being developed by the National Bank of Commerce, the Tanzania Investment Bank and the Tanzania Rural Development Bank in support of small scale projects in agriculture and industry, the development of local raw material supplies and the promotion of projects in the agricultural and irrigation sectors respectively.

Thirdly, a concerted attack is being made on cost reduction and inefficiency both in Government and in the parastatals, following the reports of two special enquiries, to be supervised by Ndugu Amir H. Jamal, Minister in the Office of the President. A streamlining of Government, involving the reduction of 22 Ministries to 15, is expected to yield savings of shs.40 million. A resolute attack on transport costs will be accompanied by measures to reduce the misuse of official transport facilities for private purposes. New procedures will be introduced to ensure that payment vouchers and local purchase orders are only effective with the approval of vote holders and when funds are available.

Except in key categories – teachers, medical personnel and agricultural Experts – new Government recruitment will be restricted or arrested, as in the previous year.

Fourthly, various steps are being taken to increase revenues. Notable among them is the imposition of a boarding charge in secondary schools of shs. 1,500 per pupil and a charge for lunches in secondary day schools of shs.350 per pupil. The trend in secondary education is towards the expansion of day schools. In addition, the abolition of the sembe subsidy and the subsidies on fertilisers and insecticides will yield substantial economies. The airport service charge is to be increased from shs.40 to shs.125 and foreigners will be expected to pay the equivalent of 10 dollars in foreign currency for trips abroad. Sales taxes on a number of items, including petrol, will be increased.

The measures now taken seem to provide somewhat greater freedom for market influences and a recognition of the contribution of local initiative and of the private sector. At the same time, in line with basic Government policy, the burdens imposed are widely distributed and care is taken to safeguard the poorest sections of the community. A central theme is the reduction of wasteful and unproductive expenditure. Nevertheless, some further fall in the general standard of living seems inescapable.

The Government has not given up hope of reaching an accord with the IMF. It is, however, good to learn that Denmark has decided to maintain its support in 1984 to the tune of £15.2 million, though with a shift of emphasis towards productive activities at the expense of infrastructure; and that Sweden has approved a programme for 1983-84 and 1984-85 totalling £64.4 million for the two years, including a valuable allocation of £11.9 million for import support in 1984-85.

Inevitably there is grumbling and the alternative market remains unquenchably active. But the general state of morale appears to remain remarkably buoyant. There is an assumption in this country- even in high quarters- that the Tanzanians have brought their troubles upon themselves. Such an unqualified judgment would be grossly unfair. Certainly there have been serious mistakes- the manner of implementation of the villagisation programme is an example- and certainly the remarkable speed of progress in the social sector has outdistanced the diminished resources required to sustain it. But by far the most important cause of the nation’s difficulties is the hostile world economic climate. Tanzania alone cannot change these external influences and is compelled to adjust to them. In the middle seventies it successfully came to terms with the first oil price rise. But the second round of increased oil prices combined with high world interest rates and the effects of the recession have created conditions too adverse for an easy escape for Tanzania’s frail and diminutive economy. The Government is making strenuous efforts, but there has never been a time when external help of the right kind was more needed.

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