The Citizen (November 8th) reported that Tanzania lost at least $33 million (about TShs 40 billion) in uncollected non-tax forest revenue in the fiscal year 2006/07 as a result of the shortage of staff and supporting resources for the collection and prevention of illegal logging. The Head of Cooperation at the Finnish Embassy told a recent general budget review meeting in Dar es Salaam that the low rates of investment and expenditure on forest revenue collection and forest law enforcement also limited the revenue collection from forestry.

The non-tax revenue in forestry consists of registration fees, forest royalty fees, export permits, and penalties for forest law violations.

In royalties of timber sales alone, which account for about 93% of all forestry revenue collected, the Government loses around $23.8 million (TShs32 billion) annually.
Development partners urged the Government to put its house in order and strengthen its revenue collection mechanisms. They said it is incomprehensible that Tanzania should fail to collect so much revenue and still continue to depend on foreign aid to fund its budget.

The Ministry of Natural Resources and Tourism budget was cut by 13.8% for 2007/08 which has directly affected the ministry’s ability to effectively manage the forest resources and the revenue collection.
However, although the forest sector’s contribution to revenue collection increased from TShs 4 billion in 2001 to about TShs 15.2 billion in 2006, Government expenditure on forest activities particularly in relation to revenue collection decreased (Thank you Jerry Jones for sending this – Editor)

In her 2007/2008 budget statement in June, Finance Minister Mrs Zakhia Meghji stated that she would not borrow from the domestic market this year through Treasury bill and government bonds. The East African described this as the most ambitious fiscal target by a finance minister in years. She must have felt under some pressure to do this because large government deficits make it difficult for the private sector to obtain credit and contribute to inflation. Interest rates on Treasury bills are 16% in Tanzania compared with 12% in Uganda and 6% in Kenya. In the previous year the Government took TShs 35.92bn from the Bank of Tanzania.

Mrs Meghji indicated that next year’s revenue should be enough to enable the government not to borrow locally as weather forecasts appeared encouraging. She will be relying on considerable support from the donor community however to do this. Some 42% of the budget would come from donors – up 3% on 2006/2007.

Many of the other measures she announced attracted strong criticism especially a proposed increase of almost 9% on diesel and petrol and also more tax on kerosene which would have seriously affected the poor. Some opposition MP’s described the budget as the worst since independence. Eventually, under heavy pressure from MP’s, she deleted the kerosene tax increase from the budget, and reduced the proposed increase in vehicle licenses for smaller vehicles and increased them for luxury cars.
Priorities for expenditure were: education (18%), roads (12.8%), health (10%) and water (5.1%). She was criticised by MP’s for allocating only 6.2% to the agricultural sector.

Funds were also provided for the identity card scheme which is aimed at facilitating tax collection, accessing bank credit and to help in the war against crime. Income tax for low income earners was reduced from 18.5% to 15%. The budget also had a ‘green’ element. Tariffs for low energy consuming bulbs and solar energy panels were zero rated.
In summary, the Government expects to spend TShs 6.06 trillion, an increase of TShs 1.20tn on the previous year.
Meghji praised the efforts being made in revenue collection and estimated that GDP would grow at 7.3% this year.

Tanzania no longer needs financial support from the International Monetary Fund according to IMF Deputy Managing Director Murilo Portugal quoted in the Guardian. He said that Tanzania had achieved strong growth and low inflation through macroeconomic policies in the past few years. He added that the external position had strengthened in recent years, and debt relief had reduced Tanzania’s external debt burden. He said the role of the Fund now would be to continue supporting Tanzania’s development of a sound macroeconomic policy framework and to encourage reforms in areas that are critical to securing higher and more sustainable growth. Much remained to be done for Tanzania to make greater inroads in reducing poverty and raising living standards especially in creating a business environment conducive to private investment. Continue reading →

The Tanzania Investment Centre has been named the world’s best Investment Promotion Agency (IPA) of the year 2007 by the World Association of Investment Promotion Agencies (WAIPA) during an investment conference in Geneva. WAIPA is under the UN Conference on Trade and Development (UNCTAD). More than 200 WAIPA members had competed for the award. Other winners were: ‘Invest in Portugal’ and South Korea’s ‘Trade IPA’. Continue reading →

Different views
The East African (October 30) compared the different views on the economy which had been expressed by President Kikwete and Bank of Tanzania (BoT) Governor Daudi Balali. Kikwete was quoted as saying on October 2 that the economy was upbeat, the budgetary performance undisturbed, and – despite the power crisis – the economy was stable and on course. Continue reading →

(Exchange rates: £1 = 2,426 TShs, 1US$ = 1,244 TShs on August 6th 2006 )

The economy recorded a lacklustre performance for the year 2005. Though there was an increase in value of exports by 13.8% to $1,676.3 million this was matched by a similar increase in value of imports to $ 2,661 million leaving a trade deficit of $985 million equivalent to 5.8% of GDP. There was a 10.8% decrease in foreign reserves to $2,048 m which is equivalent to 6.4 months of imports as opposed to the targeted 7 months. This may have contributed to the 3.6% depreciation of the shilling to an average of TShs 1,128.8 to the dollar. Continue reading →

Exchange rates: 1 £ = TShs 2,124 1 US$ = TShs 1,216

The onset of the fourth government in the history of Tanzania came without the usual stories of inheriting empty coffers which is a very good sign of things to come. The market welcomed the new government enthusiastically with the CRDB Bank announcing a record profit of TShs 4bn. However, the value of the Shilling has been falling while headline inflation continued on an upward trend to 5.4% in February 06 from 4.5% in September ‘05. Continue reading →

By Joseph Kilasara

Tanzania has come of age with the onset of the fourth phase government as we like to call it. The third phase government of Mr Mkapa has made tremendous achievements in addressing the macroeconomics fundamentals of the economy with the exception of unemployment which remains astronomically high.

At the start of Mkapa’s government in 1995, the economy was in a dire state with inflation hovering around 29% and growing; the currency was depreciating daily; foreign donors had deserted the country; tax evasion and corruption, both high level and petty, was seen as a norm; and, as the government was not collecting revenue, salaries were extremely meagre and frequently delayed. For some time the economic and business environment was all but chaotic and the government had lost its credibility and was becoming more of a joke. Continue reading →

In an effort to boost the capacity of local microfinance institutions the Governor of the Central Bank of Tanzania, David Balali, has launched the ‘The Financial Sector Deepening Trust (FSDT)’. The objectives of the fund are to support any organization that contributes to realizing the objectives of the government’s ‘Poverty Reduction Strategy Plan (PRSP).’ The Trust’s investments will include research and development of financial markets, products and services, training, capacity building, strengthening smaller financial institutions as well as developing regulatory and supervisory frameworks – The Guardian.

The Guardian has also reported some good news for coffee farmers in Kilimanjaro thanks to the introduction of the Tanzania Kilimanjaro brand initiated by a company called Peet’s Coffee & Tea. The coffee is being marketed as a single origin coffee in the US as the result of a project funded by USAID, the Swiss State Secretariat for Economic Affairs, Farm Africa and other private donors.

Creditors have been closing in on the once high-flying flag of the road transport sector – The Scandinavian Express Services Limited – which operates throughout East Africa with its luxury buses. The liquidation bid has been filed in the High Court by Shell Tanzania seeking to recover about Tzs 1.5bn in unpaid oil supplies. This petition was immediately followed by those of several major local banks leaving the future of the company in a gloomy state. Nevertheless, this could in a way be a blessing in disguise to the credit market in general as it will instill a much needed debt-repayment culture.

Exchange rate: 1US$ = Tzs 1,136

At the G8 summit in Scotland in July President Mkapa received assurances that in view of its impressive record in economic management, poverty reduction, good governance and good use of aid and previous debt relief, Tanzania can expect to receive a significant share of the new resources being added to the aid programme. The actual amount will be worked out by the boards of the IMF, the World Bank, and the African Development Bank over the next few months. The President said that to him, debt relief was the most assured form of development assistance as it freed revenues in his government’s budget to help in poverty reduction. Continue reading →