- JAFFAR MJASIRI
SOME economists have cautioned on the benefits of austerity measures being enforced by the government, calling for proper monitoring of the cost-cutting drive to ensure broader national goals are not compromised.
Professor of Economics Mzumbe
University, Honest Ngowi told the’Sunday News’ that despite the good
intention of the government to cut down unnecessary spending the
measures have to some extent adversely affected a number of businesses.
He advised that austerity measures should be taken cautiously with the
vision to attain national goals.
“Such measures should not be taken for
the sake of taking austerity measures just to please the president,
ministers and regional and district bosses,” he cautioned. President
John Magufuli has implemented a series of austerity steps since he was
sworn in on November 5, including cancelling Independence Day (December
9) festivities and restricting foreign travel by public officials.
As part of belt-tightening measures the
State House early last month announced that officials will not be
allowed to send out the usual government printed Christmas and New Year
greeting cards. It said: “The funds set aside for the cards should be
used to pay off debts that government ministries, departments and
institutions owe citizens and other creditors for goods and services
rendered or should be directed towards other priority areas."
Since November 5, the presidency has
issued a raft of instructions to curb government spending, winning
praise from citizens, local and foreign institutions including the
International Monetary Fund (IMF).
There has for long been widespread
concern about officials who are said to have abused office, engaged in
grand corruption, profligate spending and outright theft.
Prof Ngowi, however, cautions that some
local institutions have already been affected, due to the austerity
measures introduced by the government. “I have not done any research on
the performance of such entities in the market, but there are media
reports that have indicated that hotels, airlines and others have
experienced slowdown in their businesses,” he explained.
He also said that some institutions
organising conferences abroad may hesitate inviting Tanzanian
participants due to fear of travel restrictions. “An institution in
Zimbabwe that trains on microeconomic development issues has experienced
low participation of Tanzanians. I am afraid this might stop
institutions inviting Tanzanians,” he explained.
“Some government employees probably feel
stressful to apply for such trips because of the cumbersome process of
acquiring permit to travel abroad,” he said.
In the same context the philosophical
foundation of Adam Smith, an authority in austerity measures, explains
that in economics, austerity is a policy of deficit-cutting, lower
spending, and a reduction in the amount of benefits and public services
provided. “Austerity is a state of reduced spending and increased
frugality in the financial sector.
Austerity measures generally refer to
the measures taken by governments to reduce expenditures in an attempt
to curb budget deficits,” says the Adam Smith Institute on its website.
While on the other hand the contemporary
Keynesian economists argue that budget deficits are appropriate when an
economy is in recession, to reduce unemployment and help spur GDP
growth.
According to them, an economy, one
person’s spending is another person’s income. In other words, analysts
argue that if everyone is trying to reduce their spending, the economy
can be trapped in what economists call the paradox of thrift worsening
the recession as GDP falls.
In another development, an independent
economist who preferred anonymity commended the government on the
measures taken so far to reorganise the economy. He described the
measures taken by the government as a step in the right direction. He
said: “Government expenditure should be able to push the economy
. Where the expenditure is realistic it
does have impact to the economy by creating demand.” He was optimistic
that this shift of government spending directed to the regions and
districts will definitely stimulate and accelerate economy.
Another government employee based in Dar
es Salaam working in one of the local banks, Mr Steven Kibo, said
employees should team up to demand for salary increase and reduction of
income tax, instead of focusing on allowances.
A survey conducted by this paper in the
three Municipal Councils namely Ilala, Kinondoni and Temeke indicated
that supermarkets have been running smoothly despite the austerity
measures. A sales clerk at the Game Shopping centre in Mlimani City, Mr
Juma Hassan, said that sales were running smoothly, except that in the
month of January most families reduced spending for their domestic
consumption.
One of the shoppers who was at Nakumatt,
Ms Husna Juma, told this reporter that in January mostfamilies were
tightening belts because of some overhead costs such as school fees and
other back to school requirements.
But recent reports show that some
airlines, hotels had their business plummet. It is understood that the
government spending has shifted to regions and districts.
Such places have now created demand and
the suppliers have reasons to increase production. Some hotels including
New Africa Hotel, Holiday Inn, Kilimanjaro Kempinsky Hotel declined to
respond to the survey, saying they were avoiding to be the centre of
political debate on public spending. Meanwhile, some showrooms selling
vehicles attributed reduction of sales to inflation, saying that the
economic crunch has turned away many customers, adding that the shift in
expenditure could also have contributed to the slowdown in sells.
“The depreciation of shilling affects
the price pegged on the vehicle since those who have saved for the
purchase because of the crunch have to top up what they have to make the
purchase,” said a prospective customer, Christopher Masanja who was at
the showroom conducting market survey.
Another businessman, who identified
himself as Khamisi Nassor, running one of the showrooms in Kariakoo
complained that the increase in vehicle import levy to five million
shillings this year, from four million last year, has affected the price
tool, deterring customers from making purchases because of increase in
prices. Some teachers who spoke to this paper said that they praised the
shift in expenditure from unnecessary spending, while giving priority
to education and health sectors.
“We all know that teachers were not
paid, as well as deficiency of doctors in regions and districts. The
government is getting rid of unnecessary demands and expenses and
improving the provision of basic services such as health and education,”
said a secondary school teacher, Mr Joseph Anthony in Temeke.
IMF recently commended Tanzania for
instituting costcutting measures, saying it also welcomed adjustment of
the 2015/16 budget to prevent building up of arrears.
The Breton Woods institution welcomed
the austerity measures by the government as a necessary measure to
contain accumulation of arrears, cautioning, however, that
implementation of the 2015/16 budget faced challenges arising from
possible shortfalls in financing and revenue and unbudgeted expenditures
carried forward from 2014/15.
“Against this backdrop, early action to
adjust the budget is welcome and will help prevent further arrears
accumulation,” IMF Deputy Managing Director and Acting Chair, Mr
Mitsuhiro Furusawa, said in a statement after completion of the Third
Review of Tanzania’s economic performance under the programme supported
by the Policy Support Instrument (PSI).
IMF said macro-economic performance
remained strong and medium-term prospects are favourable although there
were mixed performance on implementation of programmes under the Policy
Support Instrument (PSI), which slowed ahead of the October 2015
elections.
Recently the World Bank has commended
President John Magufuli’s austerity measures including his efforts to
increase internal revenue collection, cut unnecessary government
expenditures and what the global financial authority described as “his
determination to improve the people’s welfare.”
World Bank Country Director for
Tanzania, Burundi, Malawi and Somalia Bella Bird made these remarks when
she paid the courtesy call on President Magufuli at the State House in
Dar es Salaam
No comments:
Post a Comment