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Key Messages on Expenditure Strategy and Budgeting Challenges in Tanzania 2007

This document outlines the key challenges faced by Tanzania's medium- and long-term expenditure strategies. It highlights issues such as rising aggregate expenditures, high aid dependency, and the need for sustainable strategic choices to promote growth and reduce poverty. Despite government reforms aimed at improving strategic planning and budgeting, the current systems have not effectively delivered transparency or accountability. Observations from the budget cycle reveal unrealistic budget requests and a lack of alignment with strategic priorities. Recommendations for enhancing expenditure reporting and budget transparency are also provided.

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Key Messages on Expenditure Strategy and Budgeting Challenges in Tanzania 2007

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  1. MKUKUTA/PER Consultations 2007 Key messages from PEFAR 2007 25 May

  2. PEFAR Main Messages • Challenges for medium & long term expenditure strategy due to: • Rising aggregate expenditure; • High aid dependency, constraints on absorption • Strategic choices on expenditure for sustained growth & poverty reduction • BUT GoT’s reform of strategic allocation systems has not yet delivered: • An effective instrument for strategic planning and budgeting; or • A transparent framework for dialogue and accountability

  3. Medium Term Budget Strategy:Key Challenges • Sustainability • Aggregate & recurrent expenditure continue to rise (28% GDP) • High aid dependency • Need for medium & long term strategy to address major increase in external financing • ⇧ from 6% to 12% of GDP over past 5 years • Effective absorption of aid • Requires making critical strategic choices on expenditure composition

  4. Domestic revenue, expenditure & Net external financing

  5. Key challenges (continued) • Appropriate balance between development/recurrent expenditures • Translating the MKUKUTA growth objectives into specific growth promoting expenditure • Develop medium term strategy on wage bill, underpinning public service reform and better service delivery

  6. Addressing these challenges will need more than good macroeconomic management. It will need….. • Careful steering of the composition of public expenditure • Broad based public debate on the important national choices ahead …….so how effective and transparent are the Government’s tools for steering public expenditure ?

  7. Observations on the current budget cycle….. • Highly unrealistic MDA budget requests • On average, 150% above available resources • Not linked to previous year’s decision on MTEF year 2 • Budget Guidelines “Priority Investments” weakly aligned with Sector Plans • Key strategic decisions poorly reflected in the MDA initial submissions • In part due to excessive detail which absorbs scarce planning capacity

  8. Observations on the current budget cycle (2) • Late release of Budget Guidelines results in a lack of early consistent policy direction • Discrepancies between BG and MTEF • e.g.: Implementation of consolidation of allowances in wage bill • No reporting on actual expenditure by main MKUKUTA categories (objective, target, activity) in the last three years

  9. 6 things which undermine a robust and transparent MTEF….. • Absence of clear Cabinet/political decision on strategic priorities early in the cycle • MDAs begin detailed budget submissions without guidance on resource constraints and strategic priorities • Excessively detailed budget classification for early submissions • Uncertainty on external financing within the resource envelope • Lack of a clear, user friendly published summary of the MTEF as a base for accountability • Lack of reporting on MKUKUTA/MTEF actual expenditure

  10. MKUKUTA Expenditure Reporting Issue: • Lack of reporting on expenditure by main MKUKUTA objectives and targets • Despite use of SBAS since 04/05; and • Government’s commitment to such reporting at the GBS Annual Review Oct 06 Next Steps: • Analysis of reports to be carried out prior to next GBS annual review • Review of classification structure

  11. Budget Transparency • Lack of clear user-friendly published summary of MTEF as a base for accountability • Better accessibility to budget planning/execution documents • For LGAs, difficulty in tracking funds due to various funding channels

  12. Budget Transparency?

  13. PEFAR Main Messages • Challenges for medium & long term expenditure strategy due to: • Rising aggregate expenditure; • High aid dependency, constraints on absorption • Strategic choices on expenditure for sustained growth & poverty reduction • BUT GoT’s reform of strategic allocation systems has not yet delivered: • An effective instrument for strategic planning and budgeting; or • A transparent framework for dialogue and accountability

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