nngu007
JF-Expert Member
- Aug 2, 2010
- 15,860
- 5,801
Thu Jul 9, 2015 11:16am GMT
By Fumbuka Ng'wanakilala
DAR ES SALAAM, July 9 (Reuters) - Tanzania must boost its revenue collection to bolster its strained finances and fund infrastructure projects following a decline in aid inflows, the World Bank said in a report on Thursday.
A revenue shortfall amid a slowdown in financial assistance to one of Africa's biggest per capita aid recipients has left the country strapped for cash.
"The primary threat to Tanzania's economy comes ... from domestic issues. In particular, low levels of revenue, lower than anticipated aid inflows and the accumulation of arrears with contractors and pension funds have disturbing implications for Tanzania's fiscal stability," the World Bank said in its latest economic update report.
"The government has had to respond through significant cuts in expenditure ... This has made it difficult for the government to implement its ambitious investment plans, despite the urgent need for investments in infrastructure and social services."
Tanzania, like its neighbour Kenya, wants to capitalise on a long coastline and upgrade existing rickety railways and roads to serve growing economies in the land-locked heart of Africa from Uganda on its north border to Malawi in the south.
East Africa's second-biggest economy collects around $6 billion in tax revenues per year, equivalent to around 12 percent of its gross domestic product (GDP).
"This covers approximately three quarters of the government's expenses. This is insufficient, particularly when other sources of funding, such as foreign inflows, are declining, or limited, such as borrowing and private sector finance," said the bank.
The World Bank said Tanzania could boost government revenue collection by reforming its tax system to make it affordable, fair and transparent.
"The government has accumulated massive arrears over the past few years... The plan is to pay those arrears through the issuance of domestic bonds," it said.
"This will clarify the situation but contribute to a large increase in the government's debt-service, from 14 percent of domestic revenues in 2014/15 to over 22 percent in 2015/16 onwards. This extra burden on the government's finances calls for a close monitoring of the fiscal situation."
The fiscal deficit is projected to reach around 4.2 percent of GDP in 2015/16 and decline to 3.5 percent of GDP in 2016/17, at which levels debt and debt servicing will remain sustainable, said the bank.
The World Bank said despite fiscal challenges, the Tanzanian economy remains on a positive trajectory, with high growth and low inflation.
Tanzania's economy grew at 7 percent last year, driven by construction, transport and financial services sectors and is expected to maintain the same growth this year.
(Reporting by Fumbuka Ng'wanakilala; Editing by George Obulutsa)
© Thomson Reuters 2015 All rights reserved
By Fumbuka Ng'wanakilala
DAR ES SALAAM, July 9 (Reuters) - Tanzania must boost its revenue collection to bolster its strained finances and fund infrastructure projects following a decline in aid inflows, the World Bank said in a report on Thursday.
A revenue shortfall amid a slowdown in financial assistance to one of Africa's biggest per capita aid recipients has left the country strapped for cash.
"The primary threat to Tanzania's economy comes ... from domestic issues. In particular, low levels of revenue, lower than anticipated aid inflows and the accumulation of arrears with contractors and pension funds have disturbing implications for Tanzania's fiscal stability," the World Bank said in its latest economic update report.
"The government has had to respond through significant cuts in expenditure ... This has made it difficult for the government to implement its ambitious investment plans, despite the urgent need for investments in infrastructure and social services."
Tanzania, like its neighbour Kenya, wants to capitalise on a long coastline and upgrade existing rickety railways and roads to serve growing economies in the land-locked heart of Africa from Uganda on its north border to Malawi in the south.
East Africa's second-biggest economy collects around $6 billion in tax revenues per year, equivalent to around 12 percent of its gross domestic product (GDP).
"This covers approximately three quarters of the government's expenses. This is insufficient, particularly when other sources of funding, such as foreign inflows, are declining, or limited, such as borrowing and private sector finance," said the bank.
The World Bank said Tanzania could boost government revenue collection by reforming its tax system to make it affordable, fair and transparent.
"The government has accumulated massive arrears over the past few years... The plan is to pay those arrears through the issuance of domestic bonds," it said.
"This will clarify the situation but contribute to a large increase in the government's debt-service, from 14 percent of domestic revenues in 2014/15 to over 22 percent in 2015/16 onwards. This extra burden on the government's finances calls for a close monitoring of the fiscal situation."
The fiscal deficit is projected to reach around 4.2 percent of GDP in 2015/16 and decline to 3.5 percent of GDP in 2016/17, at which levels debt and debt servicing will remain sustainable, said the bank.
The World Bank said despite fiscal challenges, the Tanzanian economy remains on a positive trajectory, with high growth and low inflation.
Tanzania's economy grew at 7 percent last year, driven by construction, transport and financial services sectors and is expected to maintain the same growth this year.
(Reporting by Fumbuka Ng'wanakilala; Editing by George Obulutsa)
© Thomson Reuters 2015 All rights reserved
