Austerity Measures Need a Fresh Look

Finance Minister Mustafa Mkullo

Mobhare Matinyi, The Citizen, Friday, 13 January 2012

The recently announced austerity measures by the government of the United Republic of Tanzania deserve a fresh look if the nation seriously wants to escape the impending economic onslaught. The government ought to go back to the drawing board now, not later. According to the press, Finance Minister Mustafa Mkulo informed the International Monetary Fund (IMF) last December that the government would cut spending by a total of Sh755 billion to reduce the fiscal deficit from 7.2 per cent of Gross Domestic Product (GDP) to 6.6 per cent. Interestingly, no strategy for increasing revenue was articulated. Mkulo promised the IMF, teasingly dubbed as the International Ministry of Finance, that the government would cut the development budget in infrastructure projects by Sh157 billion, and further cut down the recurrent budget in areas such as extra duty allowances, training, travel, office running costs, vehicle operating costs and allocations to agencies, boards, and local governments. That approach didn’t get support from some economists including the Governor of the Bank of Tanzania, Professor Benno Ndulu, who was quoted last week advising that the development budget should be sustained or even increased to reduce inflation and stimulate economic growth. Currently, inflation stands at 19.2 per cent. The same views were echoed this week by the opposition Shadow Minister for Finance, Zitto Kabwe, who added that reducing spending in development projects will hurt the employment rate, and even affect future government revenue sighting as an example, the rehabilitation of the central railway line. Obviously, increasing spending in development projects may require more borrowing, which in turn will affect the economy and increase the national debt, but this could be a necessary evil if the government runs out of options. Luckily though, we still have other means. So, what should the next move be? As Kabwe suggested, cut more recurrent expenditure including the staggering Sh360 billion in allowances although total budgeted allowances come close to Sh900 billion. Kabwe also noted that, if the government implements the new mining act on loyalties, the revenue could go up to Sh203 billion from the current Sh99 billion. The lawmaker wondered what the government was waiting for. Now, forget whatever Mkulo told the IMF; can’t we really come up with another strategy? How about getting into details such as preventing all ministers, not only from traveling first class on airlines, but also from traveling with their personal assistants? Yes, we love our ministers and other senior officials as well but can’t they help us? Please! Consider the following: when a minister travels from Dar es Salaam to Washington DC, the government pays up to $20,000 for his/her first class ticket while an assistant’s business class ticket costs around $10,000. Shockingly, economy class costs roughly $2,000. So we pay $30,000 for two persons to fly to Washington instead of $4,000. If the Swedish ambassador can fly economy class, why can’t our officials do the same? Again, Tanzanians pay billions to have their MPs meet in the de jure capital city, Dodoma. However, most of the MPs reside in the de facto capital city, Dar es Salaam, and that situation justifies per diem payments and huge fuel allowances. Additionally, MPs pay themselves sitting allowances, which have now gone up from Sh70,000 to Sh200,000. Can’t the government stop them from meeting in Dodoma at least for six months? Moreover, ministries and their agencies spend billions of shillings annually just to send their officials to Dodoma for various reasons during Bunge sessions. For example, according to the parliamentary commission that investigated the recent scandal at the Ministry of Energy and Minerals, Sh207 million was allocated for the 2011/12 budget presentation but yet the ministry collected and spent Sh418 million. Now, how much do all ministries spend annually? Truly, if Bunge stops meeting in Dodoma billions will be saved instantly. Our Bunge can meet at the Diamond Jubilee Hall in Dar es Salaam, reduce the number of days by extending working hours from 7:30 am to 11:30 pm, and forgo those outrageous sitting allowances. But have we exhausted all opportunities for tax collection to boost government revenue? Just imagine independent agencies like the Energy and Water Utilities Regulatory Authority (Ewura) pay each board member Sh500,000 as daily sitting allowance when they convene; but do they pay income taxes? How many agencies and parastatals like Tanzania National Parks (Tanapa) do we have? Some lucky Tanzanians own huge mansions and luxury cars with no explanation of where they fell from. Let them pay taxes appropriately for the income they spent on acquiring this wealth or else lose it. Literally, the nation is at war and unless we take things seriously, we will see fire in a short while. We cannot maintain a business-as-usual attitude and expect miracles to happen. Our donors are going bankrupt, let us wake up!

Mobhare Matinyi, The Citizen, Friday, 13 January 2012

The recently announced austerity measures by the government of the United Republic of Tanzania deserve a fresh look if the nation seriously wants to escape the impending economic onslaught. The government ought to go back to the drawing board now, not later.

According to the press, Finance Minister Mustafa Mkulo informed the International Monetary Fund (IMF) last December that the government would cut spending by a total of Sh755 billion to reduce the fiscal deficit from 7.2 per cent of Gross Domestic Product (GDP) to 6.6 per cent. Interestingly, no strategy for increasing revenue was articulated.

Mkulo promised the IMF, teasingly dubbed as the International Ministry of Finance, that the government would cut the development budget in infrastructure projects by Sh157 billion, and further cut down the recurrent budget in areas such as extra duty allowances, training, travel, office running costs, vehicle operating costs and allocations to agencies, boards, and local governments.

That approach didn’t get support from some economists including the Governor of the Bank of Tanzania, Professor Benno Ndulu, who was quoted last week advising that the development budget should be sustained or even increased to reduce inflation and stimulate economic growth. Currently, inflation stands at 19.2 per cent.

The same views were echoed this week by the opposition Shadow Minister for Finance, Zitto Kabwe, who added that reducing spending in development projects will hurt the employment rate, and even affect future government revenue sighting as an example, the rehabilitation of the central railway line.

Obviously, increasing spending in development projects may require more borrowing, which in turn will affect the economy and increase the national debt, but this could be a necessary evil if the government runs out of options. Luckily though, we still have other means.

So, what should the next move be? As Kabwe suggested, cut more recurrent expenditure including the staggering Sh360 billion in allowances although total budgeted allowances come close to Sh900 billion.

Kabwe also noted that, if the government implements the new mining act on loyalties, the revenue could go up to Sh203 billion from the current Sh99 billion. The lawmaker wondered what the government was waiting for.

Now, forget whatever Mkulo told the IMF; can’t we really come up with another strategy? How about getting into details such as preventing all ministers, not only from traveling first class on airlines, but also from traveling with their personal assistants? Yes, we love our ministers and other senior officials as well but can’t they help us? Please!

Consider the following: when a minister travels from Dar es Salaam to Washington DC, the government pays up to $20,000 for his/her first class ticket while an assistant’s business class ticket costs around $10,000. Shockingly, economy class costs roughly $2,000. So we pay $30,000 for two persons to fly to Washington instead of $4,000. If the Swedish ambassador can fly economy class, why can’t our officials do the same?

Again, Tanzanians pay billions to have their MPs meet in the de jure capital city, Dodoma. However, most of the MPs reside in the de facto capital city, Dar es Salaam, and that situation justifies per diem payments and huge fuel allowances.

Additionally, MPs pay themselves sitting allowances, which have now gone up from Sh70,000 to Sh200,000. Can’t the government stop them from meeting in Dodoma at least for six months?

Moreover, ministries and their agencies spend billions of shillings annually just to send their officials to Dodoma for various reasons during Bunge sessions. For example, according to the parliamentary commission that investigated the recent scandal at the Ministry of Energy and Minerals, Sh207 million was allocated for the 2011/12 budget presentation but yet the ministry collected and spent Sh418 million. Now, how much do all ministries spend annually?

Truly, if Bunge stops meeting in Dodoma billions will be saved instantly. Our Bunge can meet at the Diamond Jubilee Hall in Dar es Salaam, reduce the number of days by extending working hours from 7:30 am to 11:30 pm, and forgo those outrageous sitting allowances.

But have we exhausted all opportunities for tax collection to boost government revenue? Just imagine independent agencies like the Energy and Water Utilities Regulatory Authority (Ewura) pay each board member Sh500,000 as daily sitting allowance when they convene; but do they pay income taxes? How many agencies and parastatals like Tanzania National Parks (Tanapa) do we have?

Some lucky Tanzanians own huge mansions and luxury cars with no explanation of where they fell from. Let them pay taxes appropriately for the income they spent on acquiring this wealth or else lose it.

Literally, the nation is at war and unless we take things seriously, we will see fire in a short while. We cannot maintain a business-as-usual attitude and expect miracles to happen. Our donors are going bankrupt, let us wake up!