TANZANIA should focus on mobilising domestic resources to implement its industrialisation agenda in the light of dwindling donor aid and increasing risks of over borrowing from local and external financial institutions, a University don has suggested.
Prof. Humphrey Moshi of the University
of Dar es Salaam said in a note sent to the ‘Daily News’ on Monday that
the government should diversify sources for financing by expanding the
tax base to boost revenue collection.
The financial resources needed for the
country’s transformation and industrialisation are enormous given the
huge deficit in infrastructure, energy and human development, which are
key ingredients for industrialisation, he said.
According to him, the quest for solution
for resource requirements for achieving the industrialization agenda
has to be guided by a number of principles including the fact that
traditional sources of development finance (ODA and FD1) remain
inadequate and unreliable and therefore, diversification of sources of
finance becomes a must.
Over borrowing from either domestic or
external financial institutions has to be avoided as a way of ensuring
the private sector is not crowded-out and the next generations are not
overburdened by debt servicing obligations, he said.
The scholar said there is huge domestic
resource mobilization potential which needs effective exploitation but
admits the levels of mobilization have been low due to low public and
private savings rates, poor interest rate management, narrow tax base
and a huge informal sector.
Other factors for low levels of domestic
mobilization are corruption, tax evasion, over generous concessions to
foreign companies and deficiencies in the growth and development of
financial systems.
Tendency for banks to discriminate
against individual and small businesses in favours of big corporations
in specific sectors and the infancy of the capital market are also some
of the factors for low levels of domestic mobilisation, he said.
He called on the government to expand
the tax bases by speeding-up the formalization of the informal sector
and reduce tax exemptions or tax holidays for foreign investors so as to
scale up domestic mobilization.
The government should curb smuggling of
natural resources, including poaching and design and implement
appropriate policies to encourage the development of innovative
financial services for low-income populations, he said.
The government should also reduce excess
liquidity in financial institutions and improve access and cost of
credit to micro, small and medium enterprises, he said.
The government should also address the
challenges inherent in establishing a well functioning capital market
and take steps to establish the regulatory and legal framework for using
capital markets as means of mobilizing resources for productive
investments, he said.
The government should also adopt
strategies that will enable better utilization of public-private
partnerships sovereign wealth funds and Diaspora bonds, while enhancing
the capacity of government in dealing with the private sector to achieve
win-win outcomes.
Speaking at Africa 2016 Forum in Egypt
last month, the president of the African Development Bank (AfDB),
Akinwumi Adesina, implored African Head of States to Africa to tap into
and securitize remittances for development, which combined with domestic
taxes, could help Africa fund its own development programmes. “Africa
must not fall again into the debt trap.
To avoid it, there is need to urgently
focus on macroeconomic stabilization and fiscal consolidation, and
rapidly diversify African economies, broaden the export market
destinations, and expand the export mix.
And most importantly, Africa must shift
its focus to domestic resource mobilization for capital formation for
sustained growth,” he said
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