Tanzania budget spending seen flat in 2015/16

NAIROBI (Reuters) – Tanzania’s government budget is expected to stay unchanged in 2015/16 from projections of the current fiscal year due to a sharp fall in financial aid flows to east Africa’s second-biggest economy, according to a budget guidelines document.Donors have withheld more than three-quarters of $558 million of promised budget support to one of Africa’s biggest per capita aid recipients in the current fiscal year 2014/15 following allegations of high-level graft in the country’s energy sector.Tanzania plans to spend 19.853 trillion shillings ($10.77 billion) in its upcoming 2015/16 financial year that starts in July, unchanged from estimates of the current budget, according to a new fiscal guidelines document seen by Reuters on Tuesday.Although the overall level of spending is flat, development expenditure is expected to decline 26 percent to 4.78 trillion shillings in 2015/16 from an estimated 6.47 trillion shillings in the current budget.Recurrent expenditure is seen rising to 15.06 trillion shillings from 13.38 trillion shillings previously largely due to increased government spending for presidential and parliamentary elections expected in October.Total expenditure is estimated to be 20.7 percent of GDP in 2015/16.To offset reduced donor funding, the government plans to boost domestic revenue collection to 14.68 trillion shillings from an estimated 12.17 trillion shillings previously.”The government intends to borrow 4.22 trillion shillings from both domestic and external sources,” said the budget guidelines document.”The government will borrow 1.37 trillion shillings from external non-concessional sources. The funds will be raised through issuance of a eurobond and other modalities including tapping into syndicated loans and export credit agencies.”The budget guidelines did not say how much the bond would be worth, but the country had in the past said it planned to raise up to $1 billion, but this was delayed as it sought a credit rating.While the 2014/15 budget allocated 922.16 billion shillings for programme loans and grants, the government said it would not make any provisions for financial aid in its future budgets until actual disbursements are made due to the unpredictability of donor fund flows.”The challenge that the government faced in accessing general budget support (GBS) funds in the first two quarters of the 2014/15 budget has cast a shadow on the realism of projecting GBS funds into the budget,” said the guidelines.”To minimize crowding out the private sector, in the year 2015/16 net domestic financing is fixed at 1 percent of the GDP which is equivalent to 959.58 billion shillings, consistent with the PSI benchmark.”Tanzania’s final 2015/16 budget proposals are scheduled to be approved by parliament in June.($1 = 1,843.0000 Tanzanian shillings)