By Al-amani Mutarubukwa
The Citizen Reporter
Dar es Salaam. The government has recorded a budget deficit of about Sh214 billion in the first six months of this financial year partly due to failure of donors to meet their commitments.Finance and Economic Affairs minister Mustafa Mkulo said in a speech at the Annual National Policy Dialogue meeting over the weekend that the deficit was also because of shortfall of collection for non-tax and local government authorities revenue.

The government spent about Sh6.05 trillion between July and December 2011 out of total revenue of Sh5.83 from both domestic, aid and commercial loans, according to Mr Mkulo.In a quick reaction, shadow minister for Finance Zitto Kabwe said the deficit was less than what it had been in the first four months as donors have started releasing some funds.

Mr Kabwe told The Citizen in a telephone interview yesterday that by October 2011 the deficit was Sh690 billion, and government reached a stage in which it could not pay salaries.“Now the government can pay salaries because domestic revenue collections have improved; the only problem has remained in development projects,” Mr Kabwe said.In order to reduce the deficit, the government has announced that it plans to reduce spending by more than Sh500 billion this financial year in anticipation of low aid commitment from donors.

According to Mr Mkulo, failure by donors to meet their obligations resulted into a hole of Sh640 billion between July and December 2011. In fact donors, who are supposed to offload funds to the government at the beginning of the financial year, according to some agreement with the government, only remitted Sh1.32 trillion in the first six months out of the promise of remitting Sh3.92 trillion for the financial year 2011/12. This was equivalent to meeting obligations by 34 per cent.

“The Eurozone crisis is partly to blame for failure by donors to honour their commitments,” he said, adding that failure by government officials to present projects implementation reports to donors in time has also led to reluctance by donors. According to figures released by Mr Mkulo, donors had only released about Sh382.5 billion out of Sh2.36 trillion promised for development projects, which was equivalent with 16 per cent of the total commitment.

The government collected only 66 per cent of targeted non-tax revenue for the first six months. It had planned to collect about Sh247.6 billion but ended up collecting Sh172.1 billion. The reason for failure to meet the target was technical problems caused by “lack of integrated and interfaced systems,” in government departments according to Mr Mkulo.

Local government authorities revenue collections were short by Sh21.2 billion due to delay in charging business licence fees, which were re-introduced by the government in the last budget. When contacted for comment yesterday on how the government financed the deficit Mr Mkulo decline to comment citing wrong timing by the reporter.

“You should have asked me soon after I had finished delivering the speech last weekend. I am now in Dodoma and I do not have the speech in hand to crosscheck what you are asking me,” Mr Mkulo.

In his speech, Mr Mkulo said that during the first six month of this financial year, the government managed to collect Sh3.472 trillion, which is 99 per cent of the target in the first half of the year.
However, the average revenue collection has increased to Sh289.4 billion per month from Sh230 billion collected in the preceding year.

The tax revenue collection amounted to Sh3.145 trillion as compared to Sh2.555 trillion that was collected in the similar period of the last budget, which is about 101 per cent of the target set in the first half.

“The good trend in tax revenue collection has been triggered by administrative measures taken by the tax collector (Tanzania Revenue Authority) to get revenue including the introduction of the Electronic fiscal devices to the registered businesses,” the minister said in the Macro-economic Indicators report issued last week.

Non-tax revenue amounted to Sh172, which is 69 per cent of the Sh247.6 billion target.However, the minister said that a poor performance of this type of revenue collection was partly caused by lack of integrated and interfaced systems for controlling revenue collection.

Revenue from Local Government (LGAs own source) stood at Sh154 billion in the first six months, which is 88 per cent of Sh175.2 billion of the projected amount in the period under review.

From July to December, 2011, grants and loans of General Basket Support (GBS) amounted to 610.1 billion, which is 70 per cent of Sh869.4 billion that was expected to come from the development partners this financial year.However, there have been several challenges in coordinating the grants and loans in the GBS arrangement, the minister said.

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