Table 1 provides general economic background information and Table 2 summarises Government of Tanzania’s (GOT) fiscal performance over the last four years.
Table 1 : Tanzania, Selected Economic Indicators
2008 2009 2010 2011 2012
Total Population, millions 39.5 40.7 41.9 44.5 43.6
% growth 3 3 6 1
National Income and prices
GDP per Capita (TZS
000S,2001 prices) 376 386 401 415 439
GDP current prices (TZS
blns) 24,754 28,213 32,293 37,533 44,718
GDP, annual real growth,% 7.4% 6.0% 7.1% 6.4% 6.9%
CPI Inflation (annual
average) 10.3% 12.1% 7.6% 12.6% 16%
Monetary sector
% growth in M3 19.8% 17.7% 25.4% 18.2% 13.1%
External sector (US $ millions)
Current account balance -1,703 -1,810 -1960 -3,992 -3,658
% of GDP -7 -6 -6 -11 -8
Gross official reserves of
BoT 2,930 3,553 3,948 3,761 4,069
Months of imports coverage 4.3 5.7 5.4 3.7 3.8
GoT external debt, % GDP 26 29.4 33.8 40.1
Sources: Economic Survey, 2011 (Planning Commission); Background to the Budget & Medium Term Framework, 2012/13-2014/15 (MoF); Budget Speech, 2012/13 budget; IMF Article IV Consultation Report, May 2011; and IMF Fifth Review Under Policy Support Instrument (PSI), January 2013.
Table 2: GoT fiscal performance
TZS billions Actual Actual Actual Actual Budget
2008/09 2009/10 2010/11 2011/12 2012/13 Revenues + External Grants 5,633 6,067 7,363 9,055 11,086 Revenues 4,293 4,662 5,736 7,200 9,077 External Grants 1,340 1,405 1,627 1,855 2,009
Recurrent expenditure 4,682 5,700 6,690 6,989 9,212
Non-interest 4,439 5,451 6,337 6,553 8,535
Personnel emoluments (PE) 1,609 1,723 2,346 2,722 3,147
TZS billions Actual Actual Actual Actual Budget 2008/09 2009/10 2010/11 2011/12 2012/13 Other recurrent expenditure 2,830 3,728 3,991 3,831 5,388
Interest 243 249 353 436 677
Development expenditure 2,226 2,611 2,749 3,778 4,528
Total expenditure 6,908 8,311 9,439 10,767 13,740 Adjustment to cash basis 60 167 (247) (382)
Overall Balance (1,215) (2,077) (2,323) (2,094) (2,654) Financing 1,215 2,077 2,323 2,094 2,654
Net external 956 1,380 1,077 1,735 3,558
Net domestic 259 697 1,246 359 (904)
GDP, TZS billions 26,497 30,253 34,913 41,120 48,385 Domestic revenue, % GDP 16.2 15.4 16.4 17.5 18.8 Total expenditure, % GDP 26.1 27.5 27.0 26.2 28.4 Overall balance, % GDP -4.6 -6.9 -6.7 -5.1 -5.5
PE, % expenditure.1/ 23.3 20.7 24.9 25.3 22.9
Non-PE recurr. expend. % ex. 41.0 44.9 42.3 35.6 39.2 Interest expenditure, % ex. 3.5 3.0 3.7 4.0 4.9 Develop. expenditure, % ex. 32.2 31.4 29.1 35.1 33.0 Public debt as % of GDP 39.3 33.8 38.7 38.5 44.8
1/ PE=Personnel Emoluments
Sources: Annual Budget Speeches and IMF Fifth Review Under Policy Support Instrument (PSI), January 2013, Table 2A.
Tables 1-2 indicate that, notwithstanding the impacts of the global financial crisis and increasing global food and fuel prices, the economy has performed well. Real GDP growth averaged 6.8 percent during 2008/09-2011/12, enabling per capita income growth of over 3 percent a year, the driving forces being the industry, construction and services sector, including a 56 percent increase in public spending with strong orientation to basic public services and infrastructure provision. Inflation (CPI) averaged 11.8 percent, the high rate due to rapid money supply growth and increasing global food and petroleum prices, the latter feeding through into higher power prices due to a drought-induced fall in hydro-generation capacity.1 Although the inflation rate is double that of Kenya’s and Uganda’s, the rate has declined over the last year, reflecting prudent monetary policy and falling food prices.
The current account deficit widened sharply in 2010/11, due to the increase in public spending and a sharp rise in fuel imports for power generation. International reserves fell in terms of months of imports coverage, but the fall would have been higher if domestic revenues and external budget financing had not risen sharply over the last few years.
1 The Budget Background and Medium Term Framework contains much useful information on the factors influencing
The overall fiscal balance averaged 5.8 percent of GDP during 2008/09-2011/12 and is projected to fall gradually over the medium term (aided by increasing efficiency in revenue administration), but fiscal risk is not absent. The public debt/GDP ratio is projected to increase sharply to 44.8 percent of GDP in 2012/13 due to a planned increase in external borrowing, but the medium term scenario agreed between GoT and IMF through the PSI indicates a stabilisation at around this figure.2 Much of the debt is on concessional terms (the PSI agreement with IMF places limits on borrowing on non-concessional terms, with such borrowing restricted to financing infrastructure investment projects only).
The main risk is the financial plight of TANESCO, which, if not resolved, could put a big hole in GoT’s budget (see PI-9 in Section 3). Other risks are large build-ups of expenditure arrears, much of these emanating from road construction projects, (see PI-4 in Section 3), the potential for pension arrears as future pension liabilities are under-funded, low cost natural gas-driven power generation not materialising in 2014, causing high cost oil imports to continue with possible adverse impacts on economic growth and therefore revenue growth, the possibility of future commodity price shocks, possible fiscal expansion policy with elections on the horizon, a continuing high level of tax exemptions and possible contingent liabilities arising from PPP arrangements currently being negotiated by GoT with private sector companies.3
Economic classification of the budget
Table 2 shows the broad economic classification of the budget in terms of total expenditure.
Personnel emoluments averaged about 24 percent of total expenditure during 2008/09-2011/12 with no noticeable trends. Non-wage recurrent expenditure (excluding interest payments) averaged 41 percent of total expenditure. The proportion dropped sharply to 35 percent in 2011/12 through cutting of non-priority expenditure as part of the fiscal tightening programme under the PSI (the fiscal deficit fell sharply in terms of GDP) while at the same time allocating more resources to development expenditure, which increased to 35 percent of GDP in 2011/12 from 29 percent of GDP in 2010/11. Non-wage recurrent expenditure includes transfers, which are not explicitly identified in the budget documentation.
Capital and recurrent expenditure are not accurately captured in the budget documentation.
Some of the recurrent expenditure shown in the budget documentation is in fact capital expenditure, while a significant portion of development expenditure is in fact recurrent expenditure, not capital expenditure. The switch to GFS 2001 in 2009 enables the correct differentiation in principle between recurrent and capital expenditure, but in practice this differentiation has yet to be explicitly made in the budget documentation.
2 Tables 2a and 2b of the 5th review of PSI, January 2013 (posted on www.imf.org).
3 The World Bank has conducted Public Expenditure Reviews of tax exemptions and PPPs.
Table 3 shows trends in the functional classification of GoT expenditure.
Table 3: Functional classification of GoT budgets
Function, % total expenditure 2008/09 2009/10 2010/11 2011/12 2012/13
Administration 26.5 22.6 23.5 23.3 21.8
Defense & Security 7.4 7.9 7.3 6.9 7.5
Economic Services 16.5 11.6 12.7 16.1 13.7
Productive Services 3.8 4.4 3.8 3.2 3.6
Social Services 36.4 37.5 37.6 36.3 35.3
Stat. expend: (mainly debt service) 9.4 16.0 15.1 14.1 18.1
Total 100 100 100 100 100
Source: Annual BBMTFs
Table 3 shows a gradually increasing proportion of debt service to total expenditure, a decreasing proportion allocated to economic services and a roughly constant proportion allocated to Social Services, Defence & Security and Productive Services.