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Public expenditure must be controlled
2007-03-30 08:48:49
By Editor
Evidence keeps mounting on growing deficit spending by the government, and it is real cause for concern.
Reports by the Bank of Tanzania are full of accounts that clearly show that deficit spending is slowly but surely becoming an acceptable trend rather than taboo in managing public finance.
Between September and December last year, for instance, government spending suffered a deficit amounting to a monstrous 367.9bn/-, up from the 341.1bn/- budget shortfall witnessed between July and September 2006. These figures exclude donor budget support inputs.
Deficit spending at any level, whether household, corporate or public, always means having outlays outstripping incoming revenues.
It is a development that makes it necessary for those concerned to take the trouble of searching for additional resources to make up for the shortfall.
Governments often borrow from the public through the sale of Treasury bills and bonds or from the central bank - which then serves in a way as the bank of last resort.
And should it so happen that the worst comes to the worst, the recourse of choice would be directing the central bank to print more money in line with spending objectives.
But all these actions are undesirable, that is unless they are warranted by other redeeming factors.
The protracted pumping of more money into the economy without assurance that the measure would expand productive capacity has traditionally proved to be misdirected intervention leading to economic suicide.
It becomes all the more dangerous when deficit spending is in the form of recurrent expenditure such as travel and subsistence allowances to senior government and other public officials.
During the first half of fiscal year 2006/7, public expenditure on activities that could be safely done away with rose by a whole 25 per cent.
This trend was risky because it disregarded the expenditure barometer defined by the National Strategy for Growth and Poverty Reduction to the effect that public spending would not rise beyond 6 per cent between 2005 and 2010.
It is true that we had had to deal with contingencies like acute food shortages, floods that destroyed infrastructure and displaced people, rift valley fever and acute power supply.
Official accounts claim that even these largely unforeseen disasters were handled through budgetary reallocations, without much support from fresh funds.
But budgetary reallocation has little or no effect on total spending because it is mainly just a question of snatching a defined amount from, say, the fisheries department and allocating it to the fight against RVF.
Reports from Parliamentary Committee on Finance and Economic Affairs show that spending by bureaucrats was rising fast, and so there was a need to exercise restraint.
The biggest worry appears to be the possibility of slipping into an excessive public spending that may fuel inflation back to the much-dreaded two-digit level.
People suffered immensely during implementation of economic reforms that led to the currently manageable single-digit inflation.
Controlling public expenditure is a must because it would be calamitous reverting to the dark old days.
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