Budget Working Group Pre-Budget Statement:Call For An Equitable And Just Budget

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As the Minister for Finance tables the National Budget for Financial Year 2012/13 in Parliament tomorrow, we, members of the Policy Forum Budget Working Group, representing over 100 different Civil Society Organisations working together to increase informed civil society participation in policy making, would like to make our contribution to this key process.

The national budget will be tabled against the backdrop of continued high inflation that has caused hardships to many households during the past financial year. High costs of living characterized by rises in food and fuel prices and high interest rates has left poor citizens eager for policy decisions that will help tackle these crises. Recognising that poverty has multiple causes and steps to tackle it require numerous efforts, we put forward our key policy messages as follows:

  
Fair distribution of resources

We urge the Government to ensure a fair distribution of resources across the country. In 2004, the Government committed to utilize a resource allocation formula that takes four differently weighted factors into account. For example, 70% of the health grants are distributed according to the districts’ population. Because poor people tend to require health services more frequently than their more fortunate fellow citizens, 10% of the grants are distributed with respect to the districts’ poverty count. The formula also recognizes higher operational costs in rural areas and the districts’ burden of diseases by allocating 10% of the grants with respect to the mileage of medical vehicles and 10% according to the districts’ under-five mortality. However, the allocation formula is not yet being applied.

To promote social justice, we urge the Government to consistently apply the allocation formula for the disbursement of the health block grant and the health basket fund from the beginning of the next fiscal year.

Improving the quality of education through better school inspections

With respect to the education sector, the current status of school inspections is not satisfactory at all. School inspection is vital for the improvement the provision of good quality of education. In 2010/2011, only 5,789 schools out of 46,439 were inspected. In 2011/2012 only 3,935 out of 20, 368 schools were inspected. The current annual average inspection rate is approximately 20% which means that the government would need about five years to complete the inspection of all schools in Tanzania. School inspection could be one of the ways government determines, for example, why the form four pass rate in recent years has not exceeded 50 per cent or how and why a standard seven pupil who cannot read and write is able to pass the primary school leaving examination and to qualify for entry into secondary school. It is for this reason that we urge the government to consider increasing resource allocation to the school inspectorate department so that more schools can be inspected.

Effective use of resources in the agriculture sector

We also urge Government to ensure the effective use of resources in the agriculture sector. Agriculture is the main source of employment and livelihood for more than 75% of the population and contributes about 25% of GDP. In Tanzania, the majority of the population lives in rural areas where poverty levels are high compared to urban and peri-urban areas. Despite the fact that the sector budget increasing from 52 billion Tanzania shillings (FY 2001/02) to 926 billion Tanzania shillings (FY 2011/12), the sector’s annual growth has stalled at 4%. Three main issues are outstanding in this regard: 
• First is that there is poor planning and allocation. The recurrent expenditure takes a significant portion of the budget as compared to the development component.
• Secondly, there is poor resource utilisation as consistently raised in audit queries by the Controller and Auditor General for most of Local Government Authorities. Fund misuse has contributed to delays in fund transfers by development partners over a number of years.
• The third issue is that there is weak supervision of project implementation from both central and local levels resulting in poor results. 
We urge the government to address these concerns in the 2012/13 budget so as to realize the expected outcomes as outlined in the Kilimo Kwanza Resolve.

Allocation to key sectors

To enhance development in the sectors above, we urge the government to follow-up on its budget allocation commitment made under the General Budget Support (GBS) framework of allocating 58.7% (or approximately Tshs 8,831.9 billion) as share of the total actual expenditure in the education, health, water, agriculture, roads and energy sectors. These are key sectors upon which the daily lives of citizens depend but we urge the government to apportion substantially towards the development components and reduce emphasis on wages and allowances.

Honouring the commitment to reduce tax exemptions

The government of Tanzania is providing a wide range of tax incentives to businesses to attract greater levels of Foreign Direct Investments (FDIs) into the country. Tax incentives are leading to very large revenue losses and may not necessarily be needed to attract and retain FDIs. In 2009/10, Tanzania collected Tshs 4.45 trillion in taxes. The taxes collected amounted to 14.6% of Gross Domestic Product in 2009/10, yet the IMF estimates that Tanzania has potential to collect taxes amounting to 20.9% of GDP.

The government, however, has committed to reducing the ratio of tax exemptions as a share of Gross Domestic Product to 1.9% in 2012 followed by reducing it to 1.6% and 1.2% in 2013 and 2014 respectively. This move will enable government to boost domestic revenue and gradually move towards lesser dependence on aid.

The policy issues we raise here, however, require a great deal of commitment to address. The health and education systems and agriculture sector in Tanzania cannot be allowed to continue to fail. A healthy, well-fed society that is educated and skilled is vital for growth of the country’s economy. It is for this reason we urge government to consider these modest recommendations as we work together to make policies work for people in Tanzania.