People-centred budget should be major focus

Thursday June 11 2015

Finance Minister Saada Mkuya

Finance Minister Saada Mkuya 

Considerable attention will today be turned to Dodoma where Finance Minister Saada Mkuya is scheduled to table proposals for the national budget in Parliament –the last for the current Fourth Phase government of President Jakaya Kikwete.

She will do so against the backdrop of a growing gap between the poor and the rich. Urban centres have recorded some progress while millions in the countryside are languishing in abject poverty.

This is partly borne out by the latest Africa Economic Outlook report, which notes that belts of economic prosperity in the East African region are concentrated around the capital cities — Nairobi, Kigali, Kampala, Dar es Salaam and Bujumbura.

This, put simply, means that capital cities continue to attract more private and public investment, including soft and hard infrastructure, while rural areas are literally starved of these and other key drivers of the economy. Income disparities between rural and urban areas are inevitably widened.

Ms Mkuya’s budget speech will make sense only if it will address factors like the consistently weakening shilling against major international currencies, surging government spending, narrow tax base, higher unemployment rates, sluggish growth in agriculture and poor exports.

The drop in global oil prices to a record low of $45 a barrel at the beginning of this year should have translated into benefits on the local market, but these have been frozen by a weaker shilling and the recovery of oil prices over the past two months.


Dependent on imports

For an economy heavily dependent on imports, the weaker local currency means higher costs of importation of goods and resultant higher prices of various commodities, and a bigger burden for the common man as the end user.

Tax increases would only deepen the burden, since taxpayers would pass the cost on to their consumers. Since our economy is very fragile, we don’t expect further tax increases.

Our earnest hope is that, the thrust of Ms Mkuya’s presentation will be a people-centred budget—one that aims at reducing the cost of living as well as fuelling growth, especially for the ordinary folks in the rural areas. For this to happen, the government should embark on austerity measures to cut unnecessary spending, suspend unjustifiable tax exemptions, and above all ensure that there’s equitable sharing of economic growth.

It’s pointless, indeed, to claim that we have recorded economic growth, if the prosperity that this is meant to represent isn’t felt by the majority in the country. It’s also not fair to increase taxes to fund unjustifiable expenditure. What our policy makers need to understand is that before embarking on any adventure to raise taxes, the government should take stern austerity measures to cut spending.

The fact need not be belaboured, indeed, that, increasing taxes without reducing expenditure cannot – can never – yield economic prosperity for this nation. The government needs to operate within its means —meaning that, expenditure shouldn’t exceed revenues—as has become a familiar trend.

Plus, if the government still subscribes to the belief that agriculture is the backbone of the economy, it should allocate enough funds to the sector, to stimulate growth.