Dar es Salaam. The International Monetary Fund said it was working with the government to review this year’s budget performance following the decision by donors to withhold $558 million (nearly Sh1 trillion) in aid due to corruption concerns in the power sector.
The government reached out to IMF at a meeting in Washington two weeks ago, expressing fear about serious disruption in government functions as 12 key donor countries, including the World Bank, held back on General Budget Support over Independent Power Limited (IPTL) sale scandal.
Ms Antoinette Sayeh, director for African department at IMF said they are looking at additional adjustments that will be needed “including some revenue actions to fill the gap left by the donor funding.”
The donors would not release their pledges for the 2014/15 budget until the government releases the findings of the Controller and Auditor General (CAG’s) investigation into the controversial payment of Sh201 billion held in the escrow account in the Bank of Tanzania to IPTL.
Tanzania is not low but compared to other countries, it can do better on the revenue to Gross Domestic Product (GDP) ratios…… so some actions on revenues will be needed in any case,” she said in response to media questions at a press conference yesterday.
Ms Sayeh was in Dar es Salaam to launch the Regional Economic Outlook for Sub-Sahara Africa. Yesterday, economic experts told The Citizen that possible revenue measures that the government can take would include cutting extensively on unnecessary government spending or even borrowing more from commercial sources to fill the financial gap.
“At this stage of the budget cycle the option would be to relocate funds to expenditure that is absolutely vital although prioritising government needs can be a very challenging task here,” said Prof Samuel Wangwe, executive director of Repoa Policy Research for Development.
Supplementary budget
While still early to speculate, in times of a budget crisis, the state could table in Parliament a bill for a supplementary budget to fix a crippling budget hole.
But permanent secretary in the Ministry of Finance Servacius Likwelile was quoted by Bloomberg last week as saying that the government may also opt to borrow more from both domestic and commercial sources to fund its Sh19.8 trillion budget estimates.
He said the government has borrowing arrangement with the Bank of Tanzania. The central bank borrows on behalf of the government through both Treasury bills and bonds to finance the Budget.
Last week, the BoT offered Sh42 billion for sale in the 15-year Treasury bond and managed to get Sh31.575 billion as market analysts cite liquidity problem in the market. The government is also in plan to raise $700 million through its maiden Eurobond to finance infrastructure projects including roads, ports and the railways.
Currently, it’s working with the rating agencies to obtain sovereign credit rating for the delayed and on-and-off foreign bond.
Finance Minister Saada Mkuya Salum announced in June that the government had restarted the rating process that delayed the issuance of the facility. The government expects results of the credit rating by the end of the year to proceed with the Eurobond offering.
Regional economy
In the released Regional Economic Outlook for Sub-Sahara Africa, IMF projected the region to grow at about 5 per cent in 2014, the same as last year.
Solid growth is projected to continue in the lion’s share of the region’s countries, driven by sustained infrastructure investment, buoyant services sectors, and strong agricultural production, even as oil-related activities provide less support. Tanzania is projected to grow at 7.2 per cent in 2014.
However, the economies are facing downside risks of Ebola outbreak in West Africa and insecurity situations.
The Citizen
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