An Accountant Budget?

An Accountant Budget?

Marjorie Mbilinyi

Principal Policy Analyst

TGNP Mtandao

Given the economic and financial crisis facing Tanzania, this is a disappointing budget. The budget’s main focus is on technical administrative measures to be taken to strengthen financial management of revenue and expenditure, which in themselves have much to offer. However declining revenues, high trade deficits and high under/unemployment require more than technical and financial measures to tighten up data collection and tax payment.

Tax and non-tax revenues, especially domestic, depend upon having a strong economic base with horizontal and vertical linkages such that all major resources are mobilized to generate wealth and income within the domestic economy. This base requires the rapid expansion of manufacturing industry which uses local goods and services, including agriculture products, and can absorb the growing surplus population of young women and men in the rural areas in dignified employment. As more people are employed and/or self-employed, their purchasing power will increase, providing a steadily growing domestic market for Tanzanian producers [small and large] in both the rural and urban areas.

For this to happen, the government needs to develop specific measures to support and protect ‘home’ industry, including the commodities produced by small and large scale agriculture producers as well as micro small and large non-agriculture enterprises. The same framework is needed to plan further development of natural gas and oil industry, ensuring that there is public ownership and control of exploration and production, and adequate and robust support for in-country enterprises. This will not happen automatically nor naturally; as several commentators have observed recently, government intervention and support is needed on behalf of all sectors of our economy. 

The present budget, in contrast, does not address these and other issues. Instead, it appears to be responding to concerns of ‘development partners’ [multilateral and bilateral] over the lack of strong and accountable mechanisms of financial management, quality control, and continued corruption, especially in energy, natural resources and construction spheres. Hence the extensive attention to improved measures to oversee and regulate financial systems, procurement, and quality control over implementation – with a focus on construction and other areas of consultancy contracts. An accountant budget par excellence. However important these may be, they do not provide the framework for economic development; nor address the other major issue raised in present development discourse – that of jobless growth and growing inequality between the rich and the poor, the urban and the rural areas, men and women, and the ‘time bomb’ of masses of unemployed youth.

Moreover, the budget perpetuates the idea that the private sector is THE engine of growth, if left unhindered by state regulations and controls. Is it not time for the government authorities and their economist advisors to ask why, after 20 years of creating an enabling environment for ‘investment’, the results are so dismal, even for local commercial enterprises, let alone the poor majority?

The pro-globalisation outlook of the budget is especially worrying, as it suggests the government is contemplating even higher levels of borrowing and debt. For example, the government states its commitment to the Policy Support Instrument  (PSI) of IMF, and is entering its third plan in July this year [para 84-85]. The PSI is an essential instrument, according to the budget speech, in order to assure both capitalist investors and development partners that the government’s policy and strategy framework is sound – ie conducive for capitalist development. According to the speech, the government has also taken additional steps by appointing an International Legal Adviser and identifying an appropriate Company to be a Rating Agency so as to validate the country’s credit worthiness [86]. This step, it argues, is essential not only to enable the government to be able to access more commercial loans, but also private companies and institutions to access capital markets; and make investment in the private sector easier. To quote, “Aidha, zoezi hili ni muhimu katika kuiweka nchi kwenye ramani ya dunia hususan kiuchumi na kutambulika zaidi kwa wawekezaji.” [This exercise is essential to put the country on the global map especially economically and to get more recognition by investors – my translation]. Needless to say, the investors referred to are foreign, multinational corporations; the aim is to be increasingly integrated [globalised as in colonized?] into the global capitalist system – there is no concept of panAfrican integration and solidarity, beyond the usual mention of regional agreements and trade/other ties.

The budget speech goes out of its way to try to assure Members of Parliament that the present level of debt is sustainable. By March 2014, national debt combining that of government and external debt of the private sector had reached a total of Tshs 30.56 trillion, compared to Tshs 23.67 trillion a year ago – the majority or Tshs 26.83 being government debt. A growing portion of this debt is to private commercial banks and financial institutions within and outside of Tanzania – meaning high interest rates and shorter repayment timeframes. An entire section is focused on trying to prove that this debt is sustainable, according to international indicators [40-42]. You can flag a dead horse as much as you want – this debt is enormous, much bigger than the entire budget; a growing portion of recurrent expenditure is now devoted to debt servicing, thus robbing present and future generations of vital resources needed to provide both economic and social services. The recent alarm raised over escalating debt by the IMF suggests that there are competing interpretations of the situation, even among financial and economic experts. As in the past, a growing number of civil society activists are demanding that Parliament have an oversight role to approve largescale loans.

The same goes for the new measures to regulate and reduce tax exemptions, and to enhance openness and accountability about them [9-10]. The government’s commitment to make quarterly reports about tax exemptions on the Finance Ministry’s website; and to make an annual report on all tax exemptions to Parliament is laudable but not enough. Civil society activists are calling for Parliamentary oversight over major tax exemptions –ie the power to say ‘no’, to reject specific largescale tax exemptions. Otherwise ‘the opportunity to discuss and give your ideas’ about tax exemptions is mere window dressing.

Who are the main beneficiaries of this budget? The government is quite open: the commercial private sector is the engine of growth and its partner in development. The privileged role of largescale producers in agriculture and extractive industry is highlighted throughout the budget, along with largescale financial institutions. The majority of people who depend on smallscale production and trade are marginalized in this budget, destined to wait for whatever trickles down from the capital and primitive accumulation of the largescale corporate enterprises.