The Bank of Tanzania (BoT) has conceded that the country’s continued dependence on foreign aid is holding back implementation of the government budget, and said there was need to act decisively.
BoT Governor Professor Benno Ndulu yesterday said in an address to the local media: “We need to reduce our dependence on foreign aid and loans.”
However, he was quick to point out that the country had since made commendable efforts to lessen such dependency, arguing that “Tanzania does not operate in isolation from the rest of the world.”
Prof. Ndullu was responding to questions on why the government had failed to fulfill its budgetary commitments at a time when domestic revenue collection had well beyond annual targets by 3 to 4 percent.
He noted: “Last financial year the government received only 72 percent of anticipated foreign financing … we had expected that some Sh2 trillion would come in … but in the end we got only Sh1.7 … we had to bridge this kind of a deficit with domestic revenues … thus affecting government ability to honour its budgetary allocations.”
The BoT boss added that received less than 63 percent of the projected loans from domestic markets during the 2911/12 financial year, a fact that increased its budget deficit.
However, Prof. Ndulu said he was encouraged that the government was able to raise up to 4 percent of its recurrent expenditure locally, which he described as “a new phenomenon for the first time in the past four years.”
“For the financial year ending June 30, 2012 the allocation for recurrent expenditure was Sh6.9 trillion … but the domestic revenue collection was Sh7.2 trillion,” he noted.
He also disclosed that while the country agreed with the World Bank and International Monetary Fund (IMF) that its budget deficit should exceed 6.8 percent of the GDP (Gross Domestic Product), the government had in fact managed to keep it as low as 4.4 percent.
The BoT boss also said that all grants for the 2011/2012 fiscal year constituted 21 percent of the entire national budget, while grants and loans from the World Bank and African Development Bank (AfDB) constituted 32 percent of the total budget.
“ This is a step forward … in the past 10 years we have relied on foreign aid for up to 45 percent of our budget … I’m not an expert on budget but rather an economist a monetary policy man … however, we have deemed it important to give this analysis and we expect a full report will be ready sometimes in September.”
Prof. Ndulu says the statistics shows that there is still optimism the set target of 6.8 percent annual economic growth for 2012 calendar year would be met – based on statistics for the first quarter which show that growth was recorded at 7.1 percent last March …. the second highest among East African Community member countries behind Rwanda’s 7.7 percent and well above 3 percent for both Kenya and Uganda.
The Governor said there was clear improvement on the economic growth since the growth recorded for the 2011 first quarter stood at 5.1 percent.
The Central Bank boss noted that statistics gathered in July show that inflation stood at 15.7 percent compared to 19.8 percent in December 2011.
“ … it is clear that prices are considerably going down compared to previous months especially food items and energy related commodities such as fuel … we have not reached where we want to be but it is not true that nothing has been done to tame inflation,” he argued, adding that “inflation due to monetary policy stood at 8.8 percent but that inflation due to food and energy is the one causing problem and we can’t control this ” he said.
Shilling against Greenback
The BoT head says he was optimistic that the value of the Tanzania Shilling US Dollar had been stable for the past eight months, during which it remained between 1573 to 1590 compared to the highest exchange rate of 1825 to 1840 in September, 2011.
He noted: “These are available official statistics, there might be other available figures … we we meet every morning and there are clear improvements, it is important that since 2007 to-date the world has gone through unprecedented economic crises.”