On June 14, 2024, Dr. Mwigulu Lameck Nchemba Madelu, Tanzania’s Minister for Finance, delivered the anticipated national budget for the fiscal year 2024/2025 to the National Assembly. This year’s budget, amounting to TZS 49.35 trillion (USD 18.85 billion), represents an 11.2% increase compared to the previous year, largely due to the depreciation of the Tanzanian shilling, rising interest rates, and the maturation of loans.
Key Highlights of the 2024/2025 Budget
The budget emphasizes several critical areas, including:
- New Employment Opportunities
- Debt Repayment
- Local Government Elections
- Preparations for the 2025 General Elections
- 2027 African Cup of Nations (AFCON) Projects, which include significant construction and rehabilitation of stadiums.
Economic Themes and Goals
The 2024/2025 budget is the fourth in the rollout of the Third Five-Year National Development Plan (2021/22 – 2025/26), themed “Realising Competitiveness and Industrialization for Human Development.” Key priorities of this plan include:
- Fostering an inclusive and competitive economy
- Deepening industrialization and enhancing service provision
- Promoting investment and trade
- Focusing on human and skills development
Additionally, the budget aligns with the East African Community’s theme of “Sustainable Economic Transformation through Fiscal Consolidation and Investment in Climate Change Mitigation and Adaptation for Improved Livelihoods.”
Macro-economic Policy Targets
The government’s macro-economic targets for 2024/25 include:
- Accelerating GDP growth to 5.4% from 5.1% in 2023.
- Maintaining inflation within a single-digit range of 3.0-5.0%.
- Increasing domestic revenue to 15.8% of GDP from 15.4% in 2023/24.
- Raising tax revenue to 12.9% of GDP, up from 12.6% in the previous fiscal year.
- Keeping the budget deficit (including grants) at or below 3.0% of GDP.
- Ensuring foreign exchange reserves cover at least four months of imports.
Budget Assumptions
The macro-economic targets are based on several assumptions:
- Enhanced private sector engagement in investment and business activities
- Continued resilience against disasters, including droughts, floods, and pandemics
- Strengthened global economic stability
- Improved food security
- Sustained peace and security within Tanzania and its neighboring countries
Budget Priorities
Key budget priorities include:
- Completion of Strategic Projects: Notable projects include the Julius Nyerere Hydroelectric Power Project (2,115 MW), Standard Gauge Railway (SGR), East African Crude Oil Pipeline (EACOP), and various hydropower projects.
- Strengthening Production Sectors
- Enhancing Human Capital Development
- Increasing ICT Utilization
- Improving the Business Environment
Significant allocations are also earmarked for wages, debt servicing, local government elections, and preparations for future national events.
Revenue Generation and Financing
The government intends to generate TZS 34.61 trillion in domestic revenues, which constitutes 70.1% of the total budget and 15.7% of GDP. The Tanzania Revenue Authority is expected to collect TZS 29.41 trillion, with non-tax revenue projected at TZS 3.84 trillion from ministries and TZS 1.36 trillion from local government authorities. Additionally, development partners are expected to contribute TZS 5.13 trillion through grants and concessional loans.
The financing strategy includes:
- Borrowing TZS 6.62 trillion from the domestic market
- Sourcing TZS 2.99 trillion from external commercial loans
To bolster the domestic capital market, the government plans to continue issuing benchmark bonds and open the market to investors from the East African Community and Southern African Development Community.
Proposed Tax Reforms
The budget introduces several significant tax reforms aimed at fostering business growth. Key changes include:
Value Added Tax (VAT) Adjustments
- VAT exemptions for the supply and importation of vehicles and machinery for the Tanzania People’s Defence Force.
- VAT exemptions on water treatment chemicals and certain agricultural implements.
- Zero-rating for gold supplied to the Central Bank of Tanzania and local refineries.
These measures are expected to increase government revenues by TZS 22.39 billion.
Income Tax Reforms
- Exemptions for charitable institutions in health and environmental conservation.
- Reduced tax burdens for tea processing companies facing losses.
- New withholding taxes for digital content creators and agricultural produce.
These income tax measures are projected to raise revenues by TZS 31.74 billion