Thursday, June 15, 2006

Why I hate the June budgeting...

Every June, the Tanzanian parliament unveils its budget for the next fiscal year. We all know that is the most awaited time by most Tanzanians. The main reason behind such a heightened expectation is due to the fact that the budget sets up the tone for what Tanzanians' lives would be like for the next 12 months. The Minister of Finance's budget not only highlights certain areas that will be heavily taxed, but also unearths "exciting" news such as salary and wage increases. As long as I can remember, this has been the tradition.

The problem, in my view, is that the tradition has crippled the Tanzanian economy. I know that my view could heavily receive madongo, but let me try to explain:

1. Setting up economic strategies and fiscal policies on an annual basis (every June) leads the country to become more reactive as opposed to being proactive in setting up its economic priorities. Increasing or decreasing tax rates on certain tax bases should be done in order to achieve a wider economic vision other than just meeting short-term revenue goals. Who knows what the Tanzanian broader fiscal policy is? Probably a few of us do, because the government keeps changing its priorities every year!

2. Furthermore, the practice of setting up fiscal policies on short-term basis creates a sense of uncertainty to the business community. For instance, how would a beer manufacture project its profitability for the next five years if excise tax on beer keeps on changing every June? How could a regular mwananchi plan and budget for the life expenditures while they don't know for sure how much money they would be paying for one trip of daladala in the next 9 months (we all know a 10% increase in wages only results in 20% commodity price increase)?

What I would suggest:

1. Set up a broader, articulated fiscal and economic policy that is widely known. Stick by it unless global economic realities forces you to change it or you find something better.

2. Set up spending priorities, so that wananchi will know which areas are given tight focus for the next 5-10 years. Articulate the reasons for setting up those spending priorities (most likely to meet the set economic goals and social goals).

3. Utilize the June time to ONLY evaluate last year's budget - whether it achieved its objectives and to identify reasons for failure - and to ascertain that the planned spending for the coming year meets the broader fiscal and economic policy and appropriation priorities. Use this time also to evaluate economic policies and government strategies - both long- and short-term in meeting economic goals.

A budget is just a prepared document to articulate the sources of funds and how those funds are going to be spent. Given that fact, it is not worth it to see a mbunge pulling a shilling from a budget eti kwa sababu Wizara haijajenga barabara kwenda kwenye jimbo lake. Well, the problem is that the esteemed MP is left in the dark as to what the spending priorities are (which is kosa lao wenyewe, wangeibana Serikali kuweka bayana maeneo ya matumizi yanayopewa kipaumbele ili kukuza uchumi na maendeleo ya jamii). If they had known, they would have been in a position to understand that building a road going towards the MP's village is not in list of prioritized spending for the next 20 years....

But that is the way it is in Bongoland sometimes, isn't it?


mwandani said...

"How could a regular mwananchi plan and budget for the life expenditures while they don't know for sure how much money they would be paying for one trip of daladala in the next 9 months"

Regular mwananchi can plan - or spend rather - up to the 15th of each month when the dough runs out. To have a plan for the 9 months ahead... the majority of us simply cant.

Jaduong Metty said...


I agree with your point of view, for it captures other realities that we can dig into.

My point was rather intended to point out inconsistency in our tax philosophy (or lack of it). Life in Bongo doesn't have to change every least that's my point of view. Even if someone can't plan for the 15th of each month, give them consistency, not life that changes with every budget in June with a change in tax philosophy.

mwandani said...

I got your point, I was just trying to highlight the reality in Bongo.

I agree with you 100%. I think everyone loves to live in a stable, consistent and rather predictable environment... financially as well.

Again as majority of us are - we probably haven't heard of 'tax philosophy' in Bongo. I for one can't even recall its translation - or such an idea in kiswahili. If our government has such a philosophy then wananchi are kept in the dark about it.

Thanks for your illuminating articles. I'll read more about tax philosophy.