Where Sh3 trillion additional Budget financing will go

 

Finance and Planning minister Mwigulu Nchemba,  pesents the 2023/24 Budget Framework to MPs in Dodoma yesterday. PHOTO | COURTESY

By The Citizen Reporter

Media/news company

Mwananchi Communication Limmited

Summary

·         The 2023/24 Budget Framework points to the government’s intention to further improve civil servants’ salaries – with the wage bill expected to increase by more than Sh1 trillion – and up its

debt servicing tempo in the next financial year

Dar es Salaam. The government plans to raise its recurrent expenditure by double-digits in the next financial year as it seeks to maintain the trend of bettering civil servants’ salaries and up its debt servicing tempo.

Presenting the 2023/24 Budget Framework to MPs in Dodoma yesterday, Finance and Planning minister Mwigulu Nchemba said the government expects to collect and spend Sh44.388 trillion in the forthcoming financial year.

This in an increase of Sh2.907 trillion, or seven percent, on the current financial year’s Sh41.48 trillion budget.

A breakdown of Dr Nchemba’s figures shows that development expenditure will rise by a measly one percent from Sh15 trillion in 2022/23 to Sh15.156 trillion in 2023/24.

On the other hand, recurrent expenditure is to increase by Sh2.758 trillion, or 10.4 percent, to Sh29.232 trillion from Sh26.475 trillion currently.

“The recurrent budget includes Sh12.77 trillion for servicing of government debt and other charges in the consolidated fund,” Dr Nchemba told MPs during a meeting chaired by Prime Minister Kassim Majaliwa.

This represents a 12.9 percent, or Sh1.46 trillion, increase on the Sh11.308 trillion set aside for servicing of government debt in 2022/23.

The government’s wage bill will increase by a staggering Sh1.051 trillion to reach Sh10.882 trillion in 2023/24, according to the framework.

This is a 10.7 percent increase from the Sh9.83 trillion budgeted in the current financial year.

“Some Sh10.882 trillion will be spent as civil servants’ salaries and also on promotions and new jobs,” Dr Nchemba said.

Although still significant, Other Charges, otherwise known as OC, will rise by Sh242.972 billion, or 4.6 percent, to Sh5.578 trillion.

Analysts say the decision to increase spending on recurrent costs shows that the government is aware of the rising cost of living and that it is taking measures to make life bearable for civil servants.

“In my view, the decision to increase the wage bill by more than Sh1 trillion shows that the government is compensating for inflation, interest rates and salaries for new employees,” said an economist from the University of Dar es Salaam, Prof Abel Kinyondo.

He commended the decision to increase the next Budget modestly, saying the planned figures were both realistic and attainable.

“However, financial discipline is what will put us in a position to say whether the increase will eventually make economic sense or not,” Prof Kinyondo told The Citizen by phone.

“We need to avoid overspending that will end up causing a budget deficit and debts.”

An economist from Mzumbe University, Dr Daud Ndaki, shared similar sentiments and commended the government’s decision to increase the recurrent budget, saying those who would be promoted would be assured of receiving their rightful salaries.

“This will boost morale and productivity in economic activities,” he said.

Dr Nchemba defended the meagre increase in the development budget, saying it was in line with the government’s long-term plan from 2011/12 to 2025/26, which requires it (development expenditure) to be around 30 to 40 percent of the total budget.

The rise in recurrent expenditure, in comparison with the development budget, said Dr Nchemba, was partly due to completion of development projects which now require more funds to manage them.

“There are some development projects, particularly in social services, that have been completed and now, they need recurrent funds to run them.”

The government, said Dr Nchemba, would maintain the tempo of investing in mega projects, including the ongoing construction of the standard gauge railway (SGR) and the 2,115MW Julius Nyerere Hydropower Project.

Considerable funds will also be injected into further improvement of Air Tanzania Company Limited, the Liquefied Natural Gas (LNG) project, the twin Mchuchuma Coal and Liganga Iron Ore projects as well as Ruhudi Hydropower project in Njombe.

“Besides, the government will start making preparations for next year’s (2024) local government polls and the 2025 General Election as well as the new national development vision for the year 2050,” said Dr Nchemba.

Out of the Sh44.388 trillion that is expected to be collected and spent, Sh31.381 trillion will be sourced locally, with the Tanzania Revenue Authority (TRA) being tasked to raise its collections by 13 percent to reach Sh26.725 trillion during the coming fiscal year from Sh23.653 trillion in the current fiscal year.

The government will collect Sh5.466 trillion in grants and concessional loans from development partners while Sh5.466 trillion will be sourced as loans from domestic financiers. Another Sh2.1 trillion more will be borrowed from foreign sources on commercial terms.

Additional reporting by Alex Malanga