Tanzania hikes budget, eyes infrastructure, education

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Tanzania will raise spending by 22 percent in 2010/11 to 11.6 trillion Tanzania shillings, with 28 percent of it from foreign loans and aid, Finance Minister Mustafa Mkulo says. The government put priority on education, infrastructure and health care, which wil take up 4.753 trillion shillings of spending, compared with 3.80 trillion shillings in 2009/10.

Mkulo said the budget will also take into account upcoming presidential and presidential elections in the last quarter f the year, Reuters reports. In 2009/10 (July-June), the government put total spending at 9.51 trillion shillings and was revised to 9.53 trillion in a supplementary budget in February. “Government expenditure in 2010/11 is planned to be 11.6 trillion shillings for both recurrent and development expenditure,” said Mkulo.

Legislators questioned the discrepancy in the budget figures. Mkulo initially announced total spending of 11.1 trillion shillings, but later in his speech it would be 11.6 trillion. He did not give any explanations. “The minister first said government spending will be 11.1 trillion then he pulled the 11.6 trillion figures from a hat,” John Cheyo, chairman of the Parliamentary Public Accounts Committee, told Reuters. “Who is writing these speeches? These are issues which I think the minister will have to explain.”

Tanzania, with a population of 41.9 million, is among African’s highest per capita aid recipients. It said foreign aid and loans will stand at 3.27 trillion shillings, or 28 percent of the budget, compared with 33 percent in 2009/10. The country’s economic growth came in at 6 percent in 2009, beating a forecast for 5.0-5.5 percent, helped by among others telecoms, which grew at 22 percent. The government expects output to grow by 7 percent in 2010. Mkulo said the government planned to collect 6 trillion shillings in domestic revenues, up from an estimated 4.69 trillion shillings in 2009/10.



The government also plans to borrow 2.1 trillion shillings from domestic and external sources, with 1.3 trillion shillings going to infrastructure projects. “I would like to emphasise that commercial loans are only intended for financing priority infrastructure projects,” Mkulo said. He said that the government will sell some shares in National Bank of Commerce to raise 30 billion shillings. Analysts questioned the rational behind the borrowing, especially from local markets.
“By borrowing so much from the local banking system, the government is going to inflate this economy,” said Edwin Mtei, a former central bank governor. Mkulo said the government will borrow 797.6 billion shillings to pay for maturing government securities in 2010/2011. The government also plans to amend income tax laws to restrict mining companies from using losses from one mine against the taxable income of another mine while calculating taxes. “This measure will ensure that each mine is taxed separately and will apply to all mining companies,” Mkulo said.